122 Consolidated  Notes to the  Financial  Statements Note 52 – Financial instruments (continued) (c) Financial risk management (d) Significant accounting policies (e) Interest rate risk management Interest rate swap contracts – cash fl ow hedges The fair value of interest rate swaps at the end of the reporting period is determined by discounting the future cash flows using the yield  curves at the end of the reporting period and the credit risk inherent in the contract, and is disclosed below. The average interest rate is  based on the outstanding balances at the end of the reporting period. Under interest rate swap contracts, the consolidated entity agrees with other parties to exchange, at specified intervals, the difference  between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the consolidated  entity to mitigate the risk of changing interest rates on the cash flow exposures on the variable rate debt held. At the end of the reporting period, the consolidated entity had the following financial assets and liabilities exposed to floating interest  rate risk: The consolidated entity regularly analyses its interest rate exposure, by taking into consideration forecast debt positions, refi n a n c i n g , renewals of existing positions, alternative financing, hedging positions and the mix of fixed and floating interest rates. The consolidated entity is exposed to interest rate risk as it borrows funds at both fixed and floating interest rates. The risk is managed by  maintaining an appropriate mix between fixed and floating rate borrowings, and by the use of interest rate swap contracts or other hedging  instruments. Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the  basis on which income and expenses are recognised, in respect of each class of financial asset and financial liability are disclosed in Note 1 to  the financial statements. The consolidated entity has written policies covering specific areas, such as interest rate risk, foreign currency risk, energy price risk, credit  risk, liquidity risk, and the use of derivative and non-derivative financial instruments. Compliance with policies and exposure limits is  reviewed on a continuous basis. Financial risk management is carried out by Corporate Treasury for interest rate risk, foreign currency risk and liquidity risk in accordance with  the Board-approved Treasury Policy. Risk management activities in respect of energy price risk associated with the purchase and/or sale of  electricity, gas and environmental products are undertaken by Merchant Energy in accordance with the Board-approved Wholesale Energy  Risk Management Policy. Finance, Corporate Treasury and Merchant Energy identify, evaluate and hedge the financial risks in close  cooperation with the consolidated entity’s business units. The Board of Directors has overall responsibility for the establishment and oversight of the risk management policy and framework. The  Board has established the Audit and Risk Management Committee, which is responsible for approving the consolidated entity’s risk  management policy and framework for identifying, assessing and managing risk. The Committee is also responsible for reviewing and  updating the risk profile, monitoring the effectiveness of the risk management framework and reviewing at least annually the  implementation of the risk management policy and framework. The Committee reports regularly to the Board of Directors on its activities. The consolidated entity’s activities expose it to a variety of financial risks, including market risk (interest rate risk, foreign currency risk and  energy price risk), credit risk and liquidity risk. The consolidated entity’s overall risk management program focuses on the unpredictability of  markets and seeks to manage the impact of these risks on the consolidated entity’s financial performance. The consolidated entity uses a  range of derivative financial instruments to hedge these risk exposures. 2011 2010 Floating rate instruments  $m $m Financial assets Cash and cash equivalents  753.1 480.4 753.1 480.4 Financial liabilities Bank loans  886.7 886.7 USD senior notes (after effect of cross currency swaps)  337.8 – Other loans  – 3.5 Interest rate swap contracts  (510.0) (370.0) 714.5 520.2