Net finance costs

12 Months Ended

Jun. 30, 2018

19 Net finance costs


	2018			2017			2016
	US$M			US$M			US$M
Financial expenses
Interest on bank loans, overdrafts and all other borrowings		1,168			1,130			969
Interest capitalised at 4.24% (2017: 3.25%; 2016: 2.61%) ⁽¹⁾		(139	)		(113	)		(123	)
Discounting on provisions and other liabilities		414			450			304
Fair value change on hedged loans		(265	)		(1,185	)		1,444
Fair value change on hedging derivatives		329			1,244			(1,448	)
Exchange variations on net debt		(19	)		(23	)		(24	)
Other financial expenses		79			57			28

		1,567			1,560			1,150

Financial income
Interest income		(322	)		(143	)		(137	)

Net finance costs		1,245			1,417			1,013

⁽¹⁾

Interest has been capitalised at the rate of interest applicable to the specific borrowings financing the assets under construction or, where financed through general borrowings, at a capitalisation rate representing the average interest rate on such borrowings. Tax relief for capitalised interest is approximately US$42 million (2017: US$34 million; 2016: US$37 million).

Recognition and measurement

Interest income is accrued using the effective interest rate method. Finance costs are expensed as incurred, except where they relate to the financing of construction or development of qualifying assets.