Annual Financial Statements for the year ended 30 June 2021 0 - Book - Page 143
Derivative financial instruments and hedging activities
The group is exposed to market risks from changes in interest rates, foreign exchange rates and commodity prices. The group
uses derivative instruments to hedge its exposure to these risks.
All derivative financial instruments are initially recognised at fair value and are subsequently stated at fair value at the reporting
date. Attributable transaction costs are recognised in the income statement when incurred. Resulting gains or losses on
derivative instruments, excluding designated and effective hedging instruments, are recognised in the income statement.
To the extent that a derivative instrument has a maturity period of longer than one year, the fair value of these instruments will
be reflected as a non-current asset or liability.
SASOL LIMITED GROUP
CONSOLIDATED FINANCIAL STATEMENTS
Accounting policies:
Hedge accounting
Where a derivative instrument is designated as a cash flow hedge of an asset, liability or highly probable forecast transaction
that could affect the income statement, the effective part of any gain or loss arising on the derivative instrument is recognised as
other comprehensive income and is classified as a cash flow hedge accounting reserve until the underlying transaction occurs. The
ineffective part of any gain or loss is recognised in the income statement. If the hedging instrument no longer meets the criteria
for cash flow hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is
discontinued prospectively.
If the forecast transaction results in the recognition of a non-financial asset or non-financial liability, the associated gain or
loss is transferred from the cash flow hedge accounting reserve, as other comprehensive income, to the underlying asset or
liability on the transaction date. If the forecast transaction is no longer expected to occur, then the cumulative balance in other
comprehensive income is recognised immediately in the income statement as reclassification adjustments. Other cash flow hedge
gains or losses are recognised in the income statement at the same time as the hedged transaction occurs.
Economic hedges
OTHER
SASOL LIMITED COMPANY
When derivative instruments, including forward exchange contracts, are entered into as fair value hedges, no hedge accounting is
applied. All gains and losses on fair value hedges are recognised in the income statement.
NOTES TO THE FINANCIAL STATEMENTS
The group continues to apply the hedge accounting requirements of IAS 39 ‘Financial Instruments: Recognition and
Measurement’.
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Sasol Annual Financial Statements 2021