Notes to the accounts
24 Financial instruments
All financial assets and liabilities are held at amortised cost with the exception of financial derivatives which are held at fair value.
Details of the group’s financial instruments, used to manage the financial risks as identified in note 23, are as follows:
2010 2010 2009 2009
Assets Liabilities Assets Liabilities
Fair value of derivative financial instruments £m £m £m £m
Interest rate swap – fair value hedge 12.7 – 15.4 –
Currency derivatives 0.9 2.4 8.0 –
13.6 2.4 23.4 –
The fair value of the financial instruments held by the Partnership are classified as level 2 under the IFRS 7 fair value hierarchy as all significant inputs to the valuation model used are based on observable market data.
Fair value losses on derivative financial instruments £m £m
Loss recorded in income statement 0.2 0.6
The fair values of the group’s bonds and preference stock, which have been determined by reference to market price quotations, are shown below. For cash and other financial liabilities, book values approximate to fair value.
Bonds 771.3 409.4
Preference stock 3.3 3.2
25 Retirement benefit obligations
The principal pension scheme operated by the Partnership is a defined benefit scheme, providing benefits based on final pensionable pay. The assets of this scheme are held in a separate, trustee administered fund.
The fund was last valued by an independent professionally qualified actuary as at 31 March 2007 using the projected unit method. The assumptions which have the most significant effect on the results of the valuation are the mortality assumption and the relative rate of return on the investments of the fund compared with increases in pay and pensions. In respect of mortality, the assumptions reflected the results of a study of mortality of scheme members, which led to the adoption of the “00” series standard tables, together with medium cohort improvement factors with a year of use in 2007, adjusted by half a year. The resultant life expectancies are an average of 26.0 years for a 60 year old man, and 28.4 years for a 60 year old woman. In respect of investment returns, it was assumed that, on average, the annual return on investments would exceed increases in pay and pensions by 2.5% and 3.5% respectively. The market value of the assets of the fund as at 31 March 2007 was £1,843m. The actuarial valuation of these assets showed that they were sufficient to cover 97% of the benefits which had accrued to members.