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Derivatives and hedging activities
12 Months Ended
Dec. 31, 2013
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and hedging activities
Derivatives and hedging activities
 
Cash flow hedges of interest rate risk

As of December 31, 2013 and 2012, OEH had the following outstanding interest rate derivatives stated at their notional amounts in local currency that were designated as cash flow hedges of interest rate risk:
 
 
2013
 
2012
December 31,
 
’000
 
’000
 
 
 
 
 
Interest Rate Swaps
 
137,469

 
142,094

Interest Rate Swaps
 
$
63,700

 
$
104,259


 
Non-designated hedges of interest rate risk
 
Derivatives not designated as hedges are used to manage OEH’s exposure to interest rate movements but do not meet the strict hedge accounting requirements prescribed in the authoritative accounting guidance.  As of December 31, 2013, OEH had interest rate options with a fair value of $2,000 (2012 - $6,000) and a notional amount of €73,344,000 and $59,080,000 (2012 - €76,469,000 and $53,760,000) that were non-designated hedges of OEH’s exposure to interest rate risk.

The table below presents the fair value of OEH’s derivative financial instruments and their classification as of December 31, 2013 and 2012:
 
 
 
 
Fair value as of
 
Fair value as of
 
 
 
 
December 31, 2013
 
December 31, 2012
 
 
Balance sheet location
 
$’000
 
$’000
Derivatives designated in a cash flow hedging relationship:
 
 
 
 

 
 

Interest Rate Swaps
 
Accrued liabilities
 
(3,012
)
 
(3,858
)
Interest Rate Swaps
 
Other liabilities
 
(1,878
)
 
(5,021
)
 
 
 
 
 
 
 
Total
 
 
 
(4,890
)
 
(8,879
)
 
 
 
 
 
 
 
Derivatives not designated as hedging instruments:
 
 
 
 

 
 

Interest Rate Options
 
Other Assets
 
2

 
6

Interest Rate Swaps
 
Accrued liabilities
 

 

Interest Rate Swaps
 
Other liabilities
 

 

 
 
 
 
 
 
 
Total
 
 
 
2

 
6



Offsetting

There was no offsetting within derivative assets or derivative liabilities at December 31, 2013 and 2012. However, these derivatives are subject to master netting arrangements.

Other comprehensive income

Information concerning the movements in other comprehensive income for cash flow hedges of interest rate risk is shown in Note
21. At December 31, 2013, the amount accounted for in other comprehensive income/(loss) which is expected to be reclassified
to interest expense in the next 12 months is $3,003,000. Movement in other comprehensive income/(loss) for net investment hedges recorded through foreign currency translation adjustments for the year ended December 31, 2013 was a $1,016,000 loss (2012 - $806,000 loss; 2011 - $2,748,000 gain).

Derivative movements not included in other comprehensive income for the years ended December 31, 2013, 2012 and 2011 were as follows:
 
 
2013
 
2012
 
2011
Year ended December 31,
 
$’000
 
$’000
 
$’000
 
 
 
 
 
 
 
Amount of gain/(loss) recognized in interest expense for the ineffective portion of derivatives
 
(37
)
 
218

 
(353
)
 
 
 
 
 
 
 
Amount of gain/(loss) recognized in interest expense for derivatives not designated as hedging instruments
 
(4
)
 
(54
)
 
484


 
Credit-risk-related contingent features
 
OEH has agreements with some of its derivative counterparties that contain provisions under which, if OEH defaults on the debt associated with the hedging instrument, OEH could also be declared in default in respect of its derivative obligations.
 
As of December 31, 2013, the fair value of derivatives in a net liability position, which included accrued interest and an adjustment for non-performance risk, related to these agreements was $4,890,000 (2012 - $8,879,000). If OEH breached any of the provisions, it would be required to settle its obligations under the agreements at their termination value of $4,899,000 (2012 - $8,946,000).

Non-derivative financial instruments — net investment hedges
 
OEH uses certain of its debt denominated in foreign currency to hedge portions of its net investments in foreign operations against adverse movements in exchange rates. OEH’s designates its euro-denominated indebtedness as a net investment hedge of long-term investments in its euro-functional subsidiaries.  These contracts are included in non-derivative hedging instruments. The fair value of non-derivative hedging instruments was $26,249,000 at December 31, 2013 (2012 - $44,166,000), both being liabilities of OEH.