Amended Fonterra Financial Statements

Financial Statements
For the year ended 31 July 2022
Fonterra Co-operative Group Limited
Pūrongo pūtea
Te Mātāpuna

Contents
INCOME STATEMENT03
STATEMENT OF COMPREHENSIVE INCOME04
STATEMENT OF FINANCIAL POSITION05
STATEMENT OF CHANGES IN EQUITY06
CASH FLOW STATEMENT07
BASIS OF PREPARATION08
NOTES TO THE FINANCIAL STATEMENTS10
INDEPENDENT AUDITOR’S REPORT69
IMAGE:
Henry & Andrew, Canterbury
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CONTENTS
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS

Income Statement
FOR THE YEAR ENDED 31 JULY 2022
GROUP $ MILLION
NOTES31 JULY 202231 JULY 2021
1

Continuing operations
Revenue from sale of goods322,953 20,565
Cost of goods sold4(19,737)( 17, 5 81)
Gross profit3,216 2,984
Other operating income141 129
Selling and marketing expenses(581)(574)
Distribution expenses(516)(476)
Administrative expenses(831)(816)
Other operating expenses(415)(365)
Share of profit of equity accounted investees10 5
Profit before net finance costs and tax from continuing
operations

61,024 887
Finance income14 9
Finance costs(208)(261)
Net finance costs10(194)(252)
Profit before tax from continuing operations830635
Tax expense21(169)(103)
Profit after tax from continuing operations661532
Discontinued operations
(Loss)/profit after tax from discontinued operations2(78)67
Profit after tax583599
GROUP $ MILLION
NOTES31 JULY 202231 JULY 2021
1

Profit after tax is attributable to:
Profit attributable to equity holders of the Co-operative584578
(Loss)/profit attributable to non-controlling interests(1)21
Profit after tax583599
Earnings per share:
Basic and diluted earnings per share from continuing operations50.38 0.31
Basic and diluted (loss)/earnings per share from discontinued
operations

5(0.02)0.05
Basic and diluted earnings per share50.36 0.36
1 Comparative information includes re-presentations for consistency with the current period. Re-presentations have had no impact on the totals or sub-totals presented in the Income Statement.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
03
CONTENTS

Statement of Comprehensive Income
FOR THE YEAR ENDED 31 JULY 2022
GROUP $ MILLION
31 JULY 202231 JULY 2021
Profit after tax583 599
Items that may be reclassified subsequently to the Income Statement:
Cash flow hedges and other costs of hedging, net of tax(320)(127)
Net investment hedges and translation of foreign operations, net of tax103 (112)
Foreign currency translation reserve gains transferred to the Income Statement(1)(14)
Other movements in reserves4 (3)
Total items that may be reclassified subsequently to the Income Statement(214)(256)
Items that will not be reclassified subsequently to the Income Statement:
Net fair value gains on investments in shares16 5
Foreign currency translation losses attributable to non-controlling interests(8)–
Other movements in reserves16 (2)
Total items that will not be reclassified subsequently to the Income Statement24 3
Total other comprehensive expense(190)(253)
Total comprehensive income393 346
Total comprehensive income is attributable to:
Equity holders of the Co-operative 394 327
Non-controlling interests(1)19
Total comprehensive income393 346
Total comprehensive income arises from:
Continuing operations461 297
Discontinued operations(68)49
Total comprehensive income393 346
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
04
CONTENTS

GROUP $ MILLION
NOTES31 JULY 202231 JULY 2021
1
ASSETS
Current assets
Cash and cash equivalents288985
Trade and other receivables 122,4821,802
Inventories135,0073,766
Intangible assets187847
Tax receivable6431
Derivative financial instruments 230249
Other current assets10795
Assets held for sale2473462
Total current assets8,7297, 437
Non-current assets
Property, plant and equipment166,0675,979
Right-of-use assets17398486
Equity accounted investments 11391
Intangible assets182,2162,195
Deferred tax assets21551460
Derivative financial instruments434437
Long-term advances154163
Other non-current assets 11993
Total non-current assets10,0529,904
Total assets18,78117, 3 41
GROUP $ MILLION
NOTES31 JULY 202231 JULY 2021
1
LIABILITIES
Current liabilities
Bank overdraft3120
Borrowings9356818
Trade and other payables 142,4032,208
Owing to suppliers152,1191,825
Tax payable10787
Derivative financial instruments73384
Provisions227072
Other current liabilities7157
Liabilities held for sale2628542
Total current liabilities 6,5185,713
Non-current liabilities
Borrowings94,9004,254
Derivative financial instruments 313359
Provisions227982
Deferred tax liabilities215025
Other non-current liabilities1539
Total non-current liabilities 5,3574,759
Total liabilities11,87510,472
Net assets6,9066,869
EQUITY
Subscribed equity75,891 5,892
Retained earnings1,611 1,350
Foreign currency translation reserve20(253)(355)
Hedge reserves20(346)(26)
Other reserves30 2
Total equity attributable to equity holders of the Co-operative6,933 6,863
Non-controlling interests(27)6
Total equity6,906 6,869
Statement of Financial Position
AS AT 31 JULY 2022
1 Comparative information includes re-presentations for consistency with the current period.
The Board approved and authorised for issue these Financial Statements on 21 September 2022.
For and on behalf of the Board:
PETER MCBRIDE BRUCE HASSALL
Chairman Director
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
05
CONTENTS

Statement of Changes in Equity
FOR THE YEAR ENDED 31 JULY 2022
GROUP $ MILLION
ATTRIBUTABLE TO EQUITY HOLDERS OF THE CO-OPERATIVE
SUBSCRIBED EQUITYRETAINED EARNINGS
FOREIGN CURRENCY
TRANSLATION
RESERVEHEDGE RESERVESOTHER RESERVESTOTAL
NON-CONTROLLING
INTERESTS
TOTAL
EQUITY
As at 1 August 20215,892 1,350 (355)(26)2 6,863 6 6,869
Profit after tax–584 –––584 (1)583
Other comprehensive income/(expense)––102 (320)28 (190)–(190)
Total comprehensive income/(expense)–584 102 (320)28 394 (1)393
Transactions with equity holders in their capacity as equity holders:
Dividends paid to equity holders of the Co-operative (refer to Note 8)–(323)–––(323)–(323)
Share buyback (refer to Note 7)(1)––––(1)–(1)
Dividends paid to non-controlling interests––––––(32)(32)
As at 31 July 20225,891 1,611 (253)(346)30 6,933 (27)6,906
As at 1 August 20205,887933(229)101–6,692116,703
Profit after tax–578–––57821599
Other comprehensive (expense)/income ––(126)(127)2(251)(2)(253)
Total comprehensive income/(expense) –578(126)(127)232719346
Transactions with equity holders in their capacity as equity holders:
Dividends paid to equity holders of the Co-operative (refer to Note 8)–(161)–––(161)–(161)
Equity instruments issued (refer to Note 7)5––––5–5
Dividends paid to non-controlling interests––––––(24)(24)
As at 31 July 20215,8921,350(355)(26)26,86366,869
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
06
CONTENTS

The Cash Flow Statement presents total Group cash flows from continuing and discontinued operations.
GROUP $ MILLION
NOTES31 JULY 202231 JULY 2021
Cash flows from operating activities
Profit before net finance costs and tax from continuing operations1,024 887
(Loss)/profit before net finance costs and tax from discontinued
operations(48)72
Total Group profit before net finance costs and tax976 959
Adjustments for:
–Depreciation and amortisation635 642
–Foreign exchange losses/(gains)309 (136)
–Gain on sale of Global Dairy Trade(42)–
–Gain on sale of Ying and Yutian China farms2–(32)
–Gain on sale of investment in Falcon China Farms JV–(40)
–Loss on sale of investment in Beingmate–49
–China Farms impairment reversal2–(23)
–Brazil consumer and foodservice business impairment257 39
–Other (7)(9)
Total adjustments952 490
(Increase)/decrease in working capital:
–Trade and other receivables(821)11
–Inventories(1,222)(556)
–Trade and other payables 201 199
–Owing to suppliers293 238
–Other movements (49)(63)
Total increase in working capital(1,598)(171)
Net cash flows from operations330 1,278
Net taxes paid(137)(84)
Net cash flows from operating activities193 1,194
Cash Flow Statement
FOR THE YEAR ENDED 31 JULY 2022
GROUP $ MILLION
NOTES31 JULY 202231 JULY 2021
Cash flows from investing activities
Cash was provided from:
–Proceeds from sale of businesses26 638
–Proceeds from disposal of property, plant and equipment17 9
–Proceeds from sale of livestock2 25
–Proceeds from sale of investments–110
Cash was applied to:
–Acquisition of property, plant and equipment (480)(441)
–Acquisition of livestock (including rearing costs)(4)(28)
–Acquisition of intangible assets(72)(80)
–Other cash outflows(6)(10)
Net cash flows from investing activities(517)223
Cash flows from financing activities
Cash was provided from:
–Proceeds from borrowings3,919 2,402
–Interest received15 10
–Other cash inflows–27
Cash was applied to:
–Interest paid(297)(308)
–Repayment of borrowings(3,634)(3,142)
–Dividends paid to equity holders of the Co-operative(323)(157)
–Dividends paid to non-controlling interests(32)(24)
–Share buyback(1)–
Net cash flows from financing activities(353)(1,192)
Net (decrease)/increase in cash(677)225
Opening cash982 780
Effect of exchange rate changes(24)(23)
Closing cash281 982
Reconciliation of closing cash to the Statement of Financial
Position
Cash and cash equivalents288 985
Bank overdraft(31)(20)
Cash balances included in assets and liabilities held for sale224 17
Closing cash281 982
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
07
CONTENTS

Basis of Preparation
FOR THE YEAR ENDED 31 JULY 2022
a) About Fonterra
Fonterra Co-operative Group Limited (Fonterra, the Company or the Co-operative) is a multinational dairy
co-operative. Fonterra is primarily involved in the collection, manufacture and sale of milk and milk-derived
products through its Ingredients, Consumer and Foodservice channels.
Fonterra is incorporated and domiciled in New Zealand. Fonterra is registered under the Companies Act 1993 and
the Co-operative Companies Act 1996, and is an FMC Reporting Entity under the Financial Markets Conduct Act
2013. Fonterra is also required to comply with the Dairy Industry Restructuring Act 2001 (DIRA).
b) Basis of preparation
These Financial Statements comprise Fonterra and its subsidiaries (together referred to as the Group) and the
Group’s interests in its equity accounted investments.
These Financial Statements:
–comply with International Financial Reporting Standards (IFRS);
–comply with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS);
–have been prepared in accordance with Generally Accepted Accounting Practice applicable to for-profit entities;
–have been prepared on a historical cost basis except where otherwise stated. Assets and liabilities measured at
fair value are summarised in Note 25 Fair value measurement; and
–are presented in New Zealand dollars ($ or NZD), which is Fonterra’s functional currency, and rounded to the
nearest million, except where otherwise stated.
Re-presentations
Income Statement
Certain comparative period information has been re-presented for consistency with the current year presentation.
Re-presentations have had no impact on the totals or sub-totals presented in the Income Statement.
Balance Sheet
During the year the Group reassessed the current/non-current classification of emissions units held for
compliance purposes. Emissions units held for compliance purposes expected to be surrendered within twelve
months are classified as current intangible assets. Previously the Group presented all emissions units held for
compliance purposes as non-current intangible assets. Comparative year information has been re-presented for
consistency with the current year presentation.
c) Basis of consolidation
In preparing these Financial Statements, subsidiaries are consolidated from the date the Group gains control until
the date on which control ceases. The Group’s share of results of equity accounted investments are included in
the Financial Statements from the date that significant influence or joint control commences, until the date that
significant influence or joint control ceases. All intercompany transactions are eliminated.
Translation of the Financial Statements into NZD
The assets and liabilities of Group companies whose functional currency is not NZD are translated into NZD
at the year-end exchange rate. The revenue and expenses of these companies are translated into NZD at
rates approximating those at the dates of the transactions. Exchange differences arising on this translation
that are attributable to equity holders of the Co-operative are recognised in the foreign currency translation
reserve (FCTR). On disposal or partial disposal of an entity, the related exchange differences that were recorded
in equity are recognised in the Income Statement as part of the gain or loss on disposal.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
08
CONTENTS

d) Material accounting policies
Accounting policies which are considered material to an understanding of the Financial Statements are
provided throughout the notes in green shading.
New and amended International Financial Reporting Standards
No new or amended standards and interpretations that became effective for the year ended 31 July 2022 have
had a material impact to the Group.
Accounting standards issued but not yet effective
NZ IFRS 17 Insurance Contracts (effective 1 August 2023) replaces the current guidance NZ IFRS 4 Insurance
Contracts. The new standard provides a comprehensive accounting model, which applies to all types of insurance
contracts regardless of the type of entity that issues them. Management is continuing to assess the effect of
applying NZ IFRS 17.
There are no other new or amended standards that are issued but not yet effective that are expected to have a
material impact to the Group.
e) Significant judgements and estimates
In the preparation of these Financial Statements, a number of judgements and estimates have been made.
Accordingly, actual outcomes may differ to these estimates.
Information about judgements, estimates and assumptions which are considered material to an
understanding of the Financial Statements are provided in the following notes in grey shading.
NOTEITEM INVOLVING SIGNIFICANT JUDGEMENT OR ESTIMATION
Note 2Divestments –Determining if a disposal group is held for sale
–Fair value measurement of assets and liabilities held for sale
Note 3Revenue from sale of goods –Revenue recognition for transactions involving distributors
Note 16Property, plant and equipment –Determining residual values and useful lives
Note 18Intangible assets –Assumptions used in the impairment tests
Note 21Taxation –Utilisation of tax losses
–Uncertain tax positions
Note 22Contingent liabilities, provisions
and commitments
–Measurement of provisions and contingent liabilities
Note 25Fair value measurement –Fair value measurement
f ) Global uncertainties
Current global uncertainties exist in relation to the ongoing impact of COVID-19, financial markets and foreign
exchange volatility, inflationary pressures and increasing interest rates, geopolitical events, as well as potential
impacts on demand. The Group has assessed the impact on its assets and liabilities. Debtor collectability and
inventory obsolescence continue to be closely monitored, and forecasts and budgets used for impairment testing
include the Group’s best estimate of the ongoing impact of such events.
Basis of Preparation (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
09
CONTENTS

Notes to the Financial Statements
FOR THE YEAR ENDED 31 JULY 2022
NOTEFS PAGE
Performance11
1 Segment reporting11
2 Divestments 14
3 Revenue from sale of goods17
4 Cost of goods sold18
5 Earnings per share19
6 Profit before net finance costs and tax20
Debt and Equity21
7 Subscribed equity instruments21
8 Dividends22
9 Borrowings23
10 Net finance costs25
11 Capital management26
Working capital28
12 Trade and other receivables28
13 Inventories29
14 Trade and other payables29
15 Owing to suppliers30
Long-term assets31
16 Property, plant and equipment31
17 Leases33
18 Intangible assets35
NOTEFS PAGE
Financial risk management40
19 Financial risk management40
20 Hedge accounting46
Other56
21 Taxation56
22 Contingent liabilities, provisions and commitments60
23 Related party transactions61
24 Subsidiaries62
25 Fair value measurement64
26 Offsetting of financial assets and liabilities67
27 Net tangible assets per quoted equity security68

FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
10
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
Performance
This section focuses on the Group’s financial performance and the returns provided to equity holders.
This section includes the following notes:
Note 1: Segment reporting
Note 2: Divestments
Note 3: Revenue from sale of goods
Note 4: Cost of goods sold
Note 5: Earnings per share
Note 6: Profit before net finance costs and tax
1. Segment reporting
Segment information provided in this note reflects the Group’s performance from continuing operations only.
The China Farms and Brazil consumer and foodservice businesses are considered discontinued operations and
have been excluded from the disclosures in this note. Please see Note 2 Divestments for further information
about the Group’s discontinued operations.
a) Reportable segments
Operating segments reflect the way financial information is regularly reviewed by the Fonterra Management
Team (FMT). The FMT is considered to be the Chief Operating Decision Maker. During the year ended 31 July
2022, the FMT consisted of the Group Chief Executive Officer (CEO), Chief Financial Officer and Chief Operating
Officer, the CEOs of the three customer-facing regional business units (Asia Pacific, AMENA and Greater China),
the Managing Director People & Culture and the Managing Director Co-operative Affairs.
The measure of profit or loss used by the FMT to evaluate the underlying performance of operating segments
is normalised earnings before interest and tax (normalised EBIT).
The Group’s operating model is based around the three customer-facing regional business units, supported
by a shared infrastructure, referred to as Group Operations which comprises:
–the functions under the Chief Operating Office (COO) and includes New Zealand milk collection and
processing operations and assets, supply chain, Group IT, Sustainability and Innovation;
–Fonterra Farm Source™ retail stores; and
–the Central Portfolio Management function (CPM).
The operating model forms the basis for the Group’s operating segments. Under the operating model, the
business is managed as a matrix form organisation, whereby regional business unit CEOs and the FMT members
that have responsibility for COO and CPM have overlapping responsibility for performance. Information about
the performance of Group Operations is reported to the FMT both separately and attributed to each of the
regional business units.
The Group has determined that its reportable segments are Asia Pacific, AMENA and Greater China, inclusive of
their respective attribution of Group Operations. This presentation provides a full end-to-end view of performance
for each of the customer-facing regional business units.
REPORTABLE SEGMENTSDESCRIPTION
Asia PacificRepresents the Ingredients, Foodservice and Consumer channels in New Zealand,
Australia, Pacific Islands, South East Asia and South Asia.
AMENARepresents the Ingredients, Foodservice and Consumer channels in Africa, Middle East,
Europe, North Asia and Americas.
Greater ChinaRepresents the Ingredients, Foodservice and Consumer channels in Greater China.
The performance of large multi-national customers are reported within the reportable segment that they are
managed by. This can differ from the geographical region of the destination of goods sold.
The attribution of Group Operations to reportable segments and transactions between reportable segments
follow underlying business rules. These rules have been designed to reflect the end-to-end contribution of each
reportable segment.
Where there is common activity amongst segments and there is an attribution of those revenues and costs across
segments, the attribution is based on a number of principles. These principles include:
–activity-based allocation where appropriate; and
–share of product sold/manufactured in the segment.
The performance of Fonterra Farm Source™ retail stores are attributed to the Asia Pacific reportable segment.
The Group regularly reviews the application of these principles to ensure they continue to remain appropriate and
where possible to expand the portion attributed using activity-based principles. Where appropriate, comparative
information may be re-presented for consistency with the current period attribution.
For the year ended 31 July 2022, the Group has continued to refine its approach to attributing the change in the cost
of milk across the season.
Unallocated costs represent corporate costs including Co-operative Affairs and Group Functions.

FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
11
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
GROUP $ MILLION
CONTINUING OPERATIONSASIA PACIFICAMENAGREATER CHINA
UNALLOCATED COSTS AND
ELIMINATIONSTOTAL
31 JULY 202231 JULY 202131 JULY 202231 JULY 202131 JULY 202231 JULY 202131 JULY 202231 JULY 202131 JULY 202231 JULY 2021
Sales volume (metric tonnes, thousands)1,370 1,3861,355 1,3521,029 1,176(48)(40)3,706 3, 874
Revenue from sale of goods7, 8 7 9 7, 1 108,612 7,3046,660 6,312(198)(161)22,953 20,565
Cost of goods sold(6,652)(5,915)( 7, 4 75 )(6,400)(5,794)(5,476)184 210(19,737)( 17, 5 81)
Normalised gross profit1,227 1,1951,137 904866 836(14)493,216 2,984
Operating expenses(941)(889)(674)(605)(464)(436)(205)(223)(2,284)(2,153)
Other
1
(49)(1)64 3730 35 2650 65
Normalised EBIT237 305527 336432 403(214)(148)982 896
Normalisation adjustments:
–Gain on sale of Falcon China Farms JV–––––40–––40
–Income Statement impact of Beingmate investment–––––(49)–––(49)
–Gain on sale of Global Dairy Trade––––––42 –42 –
Profit/(loss) before net finance costs and tax237 305527 336432 394(172)(148)1,024 887
Other segment information:
–Inter-segment revenue 161 15537 6––(198)(161)––
–Depreciation and amortisation (240)(242)(204)(196)(172)(182)(19)(22)(635)(642)
–Share of (loss)/profit of equity accounted investments–(3)8 6––2 210 5
1 Comprises other operating income, net foreign exchange gains/(losses) and share of profit/(loss) of equity accounted investments.
1. Segment reporting continued
a) Reportable segments continued
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
12
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
1. Segment reporting continued
b) Geographical analysis of revenue
Revenue is analysed by geography on the basis of the destination of the goods sold. Geographical groupings in the
following table are not aligned with the Group’s reportable segments.
GROUP $ MILLION
NEW
ZEALANDAUSTRALIACHINA
REST OF
ASIA AMERICAS
REST OF
WORLDTOTAL
Geographical external revenue
Year ended 31 July 20222,1401,7266,2448,0163,0501,77722,953
Year ended 31 July 20211,7261,6996,1197, 0 5 62,5971,36820,565
c) Geographical analysis of non-current assets
Geographical groupings in the following table are not aligned with the Group’s reportable segments.
GROUP $ MILLION
NEW
ZEALANDAUSTRALIACHINA
REST OF
ASIA AMERICAS
REST OF
WORLDTOTAL
Geographical non-current assets
As at 31 July 20226,6031,026207993782419,067
As at 31 July 2021
1
6,602970177773882539,007
GROUP $ MILLION
AS AT
31 JULY 2022
AS AT
31 JULY 2021
1
Reconciliation of geographical non-current assets
to total non-current assets
Geographical non-current assets 9,0679,007
Deferred tax assets551460
Derivative financial instruments 434437
Total non-current assets10,0529,904
1 Comparative information includes re-presentations for consistency with the current period.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
13
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
2. Divestments
This note provides information about the Group’s disposal groups held for sale and discontinued operations for
the year ended 31 July 2022.
At 31 July 2022, the Hangu China farm and the Brazil consumer and foodservice business continued to meet the
definition of held for sale and are discontinued operations. The Group’s divestment of the Chilean business is
underway, however it does not meet the held for sale criteria at balance date and is not presented as held for sale
in these Financial Statements.
a) Disposal groups held for sale
A disposal group is a group of assets and liabilities to be disposed of (by sale or otherwise) in a single
transaction. A disposal group is classified as held for sale if it is available for immediate sale in its present
condition and its sale is highly probable.
Disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value
less costs to sell. Immediately prior to being classified as held for sale, the carrying amounts of assets and
liabilities in the disposal group are measured in accordance with the applicable accounting policy. Impairment
losses on initial classification as held for sale and subsequent gains and losses on remeasurement are
recognised in the Income Statement.
Once classified as held for sale, assets are no longer depreciated or amortised and equity accounted
investments are no longer equity accounted.
Assets of disposal groups held for sale are presented in a single line item within current assets, and
liabilities of disposal groups held for sale are presented in a single line item within current liabilities.
Comparative period information for assets and liabilities held for sale is not re-presented in the
Statement of Financial Position.
Judgement is involved in determining whether a disposal group is held for sale at balance date.
Uncertainty is involved in estimating fair value less costs to sell. The fair value less costs to sell for assets and
liabilities held for sale has been estimated based on information received through the sales process.
The major classes of assets and liabilities held for sale are presented in the following table.
$ MILLION
ASSETS AND LIABILITIES HELD FOR SALE
AS AT
31 JULY 2022
AS AT
31 JULY 2021
Cash and cash equivalents24 17
Trade receivables58 39
Inventory32 37
Property, plant and equipment79 79
Livestock21 25
Intangible assets111 122
Other assets148 143
Total assets held for sale473 462
Borrowings 333 282
Trade and other payables 209 150
Provisions42 54
Other liabilities44 56
Total liabilities held for sale628 542
Net liabilities held for sale(155)(80)
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
14
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
2. Divestments continued
Hangu China farm
In January 2022 the Group purchased the 15 percent non-controlling interest in the Hangu China farm, and as at
31 July 2022 the Hangu China farm continued to meet the requirements to be classified as held for sale (31 July
2021: held for sale).
The sale process was initially delayed due to a lack of progress in agreeing the specific terms of sale following
the minority shareholder exercising their right of first refusal to purchase Fonterra’s interest. Subsequent delays
have been due to market conditions related to COVID-19, including the effect of lockdowns in China. However at
31 July 2022 the Group remains committed to the sale and the farm continues to be actively marketed. The Group
expects the sale to be completed within one year of balance date.
At 31 July 2022 the Group reassessed the fair value less costs to sell of the Hangu China farm and no further
adjustment has been recognised (31 July 2021: nil).
The foreign currency translation reserve balance as at 31 July 2022 attributable to the Hangu China farm was a
debit balance of $3 million (31 July 2021: debit balance of $1 million).
Brazil consumer and foodservice business
As at 31 July 2022 the Brazil consumer and foodservice business continued to meet the requirements to be
classified as held for sale (31 July 2021: held for sale).
The sale process has been delayed due to market conditions related to COVID-19, however at 31 July 2022 the
Group remains committed to the sale and continues to actively progress the sale. The Group expects the sale to
be completed within one year of balance date.
The Group has reassessed the fair value less costs to sell at 31 July 2022 and recognised a further write-down of
$57 million ($50 million after tax) (31 July 2021: $39 million ($35 million after tax)), of which $26 million after tax is
attributable to the Group’s equity holders (31 July 2021: $18 million).
At 31 July 2022 the foreign currency translation reserve balance attributable to the Brazil consumer and
foodservice business was a debit balance of $67 million (31 July 2021: debit balance of $63 million).
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
15
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
$ MILLION
DISCONTINUED OPERATIONS31 JULY 202231 JULY 2021
Revenue from sale of goods472 559
Cost of goods sold(348)(429)
China Farms impairment reversal–23
Gross profit124 153
Other operating income–18
Other operating expenses (115)(92)
Gain on sale of Ying and Yutian China farms–32
Brazil consumer and foodservice impairment(57)(39)
(Loss)/profit before net finance costs and tax(48)72
Net finance costs(37)(10)
(Loss)/profit before tax(85)62
Tax credit7 5
(Loss)/profit after tax from discontinued operations(78)67
Share of loss attributable to non-controlling interests36 13
(Loss)/profit after tax attributable to equity holders of the
Co-operative(42)80
Movement in exchange differences on translation of
discontinued operations3 2
Foreign currency translation reserve gains transferred to the
Income Statement(1)(19)
Other reserve movements8 (1)
Total comprehensive (expense)/income from discontinued operations(68)49
Net cash inflow/(outflow) from operating activities9 (8)
Net cash (outflow)/inflow from investing activities(5)510
Net cash outflow from financing activities–(6)
Net increase in cash generated by the discontinued operations4 496
2. Divestments continued
b) Discontinued operations
A disposal group that meets the criterion to be classified as held for sale (or has been sold) is a discontinued
operation if it represents, or is part of a single co-ordinated plan to dispose of, a separate major line of
business or geographical area of operations, or is a subsidiary acquired exclusively with a view to resale.
Profit/(loss) after tax from discontinued operations is presented in a single line item in the Income Statement
for both the current and comparative year.
The China Farms business and Brazil consumer and foodservice business both meet the definition of a
discontinued operation.
For the year ended 31 July 2022, the China Farms business represents solely the Hangu China farm.
For the year ended 31 July 2021, the China Farms business also included the Ying and Yutian farms, up to the date
of sale (1 April 2021). The financial performance of the Ying and Yutian farms has been recognised in profit/(loss)
after tax from discontinued operations.
The summarised financial performance of the China Farms business and Brazil consumer and foodservice
business, recognised in profit/(loss) after tax from discontinued operations in the Income Statement, is presented
in the following table.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
16
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
3. Revenue from sale of goods
The Group recognises revenue from the sale of products when control of the products transfers to the
customer. The transfer of control of products typically occurs at the following times:
–Ingredient products (export sales) - once the products are loaded onto the ship.
–Ingredient products (domestic sales) - on delivery of the products to the customer’s designated location.
–Consumer and foodservice products - on delivery of the products to the customer’s designated location.
The amount of revenue recognised reflects the consideration that the Group expects to be entitled to for
providing the products to the customer. Revenue is measured as the sales price specified in the contract
adjusted for pricing adjustments, trade spend and rebates. Pricing adjustments, trade spend and rebates are
recognised as deductions from revenue at the time that the related sale is recognised. The estimated amount
of the deduction from revenue is based on historical experience and the specific terms of the contracts with
customers so that it is highly probable that a significant reversal of revenue recognised will not occur.
For export sales the Group sells a significant proportion of its products on terms that include freight and
insurance to the destination port. For these sales the Group has a separate performance obligation to
arrange freight and insurance services for the customers after the date at which control of the products
passes to the customer. As the Group does not control the freight and insurance services before those
services are transferred to the customer, the Group is acting as an agent. Therefore, the Group recognises
the net agency fee as revenue when freight and insurance services are made available to customers, usually
this is when the products are loaded onto the ship.
The Group offers credit terms which are short-term in nature. In addition, as part of its normal trade terms,
the Group receives payments in advance from certain customers. Contracts with customers do not contain
significant financing components.
The Group sells products either directly to customers or through distributors. For transactions involving
distributors, judgement is required to assess whether:
–control of the products passes and therefore revenue is recognised when the products are transferred to
the distributor, in which case the distributor is the Group’s customer; or
–the Group retains control of the products after transfer to the distributor, in which case control of the
products does not pass until the products reach the customer in the supply chain who does obtain control
of the product. In this situation the customer, referred to as the ‘end customer’ may be a retailer, reseller
or food manufacturer. Revenue is not recognised until the products are transferred to the end customer.
The assessment of whether control of the products passes to the distributor can involve significant
judgement. In assessing control, the following indicators are considered:
–The ability to direct the use of the product. This includes consideration of who has the primary
responsibility for providing the products to the end customer and whether the Group can restrict who the
distributor sells the product to.
–The transfer of inventory risk and demand risk. This includes consideration of the level of, or allowance for,
product returns and who bears the residual risk of product expiry.
–The level of support provided by the Group to assist the distributor to on-sell the product. This includes
consideration of collaboration on marketing plans, financial support provided by the Group through
pricing discounts or funding of promotional activity.
Sales to distributors where significant judgement is involved in determining the timing of revenue
recognition are primarily in the Foodservice channel.
Contractual terms vary across markets and sales channels. In most arrangements the contractual terms
indicate that the distributor is responsible for providing the products to the end customer and has assumed
the inventory risk. The Group often retains price risk through the provision of price discounts, funding
promotional activity or influence over price setting. In general, these pricing mechanisms impact the amount
of revenue recognised by the Group rather than indicating control of the products is retained.
In order to conclude on the transfer of control of the products the contract must be assessed in its entirety,
along with implied contractual terms based on commercial customary practices.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
17
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
3. Revenue from sale of goods continued
Revenue is disaggregated by Ingredients, Foodservice and Consumer channels across the Group’s reportable
segments in the following table.
GROUP $ MILLION
ASIA PACIFICAMENAGREATER CHINATOTAL
31 JULY
2022
31 JULY
2021
31 JULY
2022
31 JULY
2021
31 JULY
2022
31 JULY
2021
31 JULY
2022
31 JULY
2021
Ingredients channel revenue4,1893,5216,8835,7834,4794,25915,55113,563
Foodservice channel revenue1,0759283933331,8241,6913,2922,952
Consumer channel revenue2,4542,5061,2991,1823573624,1104,050
Revenue from sale of goods7, 7 1 86,9558,5757, 2 9 86,6606,31222,95320,565
Revenue is disaggregated by geography on the basis of the destination of the goods sold in Note 1 Segment
reporting.
4. Cost of goods sold
Cost of goods sold is primarily made up of New Zealand-sourced cost of milk.
New Zealand-sourced cost of milk includes the cost of milk supplied by farmer shareholders, supplier
premiums paid, and the cost of milk purchased from contract milk suppliers during the financial year.
New Zealand-sourced cost of milk supplied by farmer shareholders comprises the volume of milk solids
supplied at the Farmgate Milk Price as determined by the Board for the relevant season. In making that
determination the Board takes into account the Farmgate Milk Price calculated in accordance with the
Farmgate Milk Price Manual, which is independently assured. The Fonterra Farmgate Milk Price Statement
sets out information about the Farmgate Milk Price, and how it is calculated. It can be found in the
‘Investors/Farmgate Milk Prices/Milk Price Methodology’ section of Fonterra’s website.
Other costs include purchases of other products, raw materials and packing, direct labour costs, depreciation
and other costs directly incurred to bring inventory to its final point of sale location.
GROUP $ MILLION
31 JULY 202231 JULY 2021
Opening inventory3,766 3,268
Cost of milk:
–New Zealand-sourced13,722 11,660
–Non-New Zealand-sourced1,113 994
Other costs6,143 5,425
Closing inventory(5,007)(3,766)
Total cost of goods sold19,737 17, 5 81
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
18
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
5. Earnings per share
Basic earnings per share is calculated as profit after tax attributable to equity holders of the Co-operative divided
by the weighted average number of shares on issue for the period.
Diluted earnings per share is determined by adjusting profit after tax attributable to equity holders of the
Co-operative and the weighted average number of shares on issue for the effects of all shares with dilutive
potential. There were no shares on issue with dilutive potential for either of the years presented.
GROUP
31 JULY 202231 JULY 2021
Basic and diluted earnings per share from continuing operations ($)0.38 0.31
Basic and diluted (loss)/earnings per share from discontinued operations ($)(0.02)0.05
Basic and diluted earnings per share ($)0.36 0.36
Profit attributable to equity holders of the Co-operative ($ million)584 578
Weighted average number of shares (thousands of shares)1,613,353 1,613,105
Normalised earnings per share
Normalised earnings per share is calculated as normalised profit after tax attributable to equity holders of the
Co-operative divided by the weighted average number of shares on issue for the period.
GROUP
31 JULY 202231 JULY 2021
Normalised basic and diluted earnings per share ($)0.350.34
Normalised profit after tax attributable to equity holders of the
Co-operative ($ million)568550
Weighted average number of shares (thousands of shares)1,613,3531,613,105
A reconciliation of profit after tax attributable to equity holders of the Co-operative to normalised profit after tax
attributable to equity holders of the Co-operative is presented in the following table.
GROUP $ MILLION
31 JULY 202231 JULY 2021
Profit after tax attributable to equity holders of the Co-operative584 578
Less: Gain on sale of Global Dairy Trade(42)–
Less: Loss on sale of Ying and Yutian China farms–(32)
Less: China Farms impairment reversal–(23)
Less: Loss on sale of Falcon China Farms JV–(40)
Add: Income Statement impact of Beingmate investment–49
Add: Brazil consumer and foodservice business impairment57 39
Total normalisation adjustments15 (7)
Less: Tax on normalisation adjustments(7)(4)
Less: Normalisation adjustments attributable to non-controlling interests(24)(17)
Normalised profit after tax attributable to equity holders
of the Co-operative568 550
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
19
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
6. Profit before net finance costs and tax
a) Additional information about items included in profit before net finance costs and tax
The following items have been included in profit before net finance costs and tax in the Income Statement.
GROUP $ MILLION
31 JULY 202231 JULY 2021
Total employee benefits expense2,1592,117
Depreciation and amortisation expense635642
Research and development costs115110
Contributions to defined contribution plans included in employee benefits
expense9183
Donations2–
Net foreign exchange losses5826
b) Fees paid to the auditor and network firms
KPMG has been appointed the Group’s external auditor for three consecutive years. The lead audit partner has
served for three consecutive years. The Board has overseen compliance with the Group’s Audit Independence
Policy. KPMG has not provided any services during the year other than audit and audit-related services.
A breakdown of fees paid to the auditor and network firms which are included in the Income Statement is
presented in the following table. Fees are inclusive of any disbursements.
GROUP $ MILLION
31 JULY 202231 JULY 2021
Audit and review of the Financial Statements of the Group and its
subsidiaries:
–New Zealand6.06.2
–Network firms of the auditor1.72.4
Total fees for the audit and review of the Financial Statements7. 78.6
Audit-related services:
–Assurance services in respect of the Farmgate Milk Price Statement0.10.1
–Other audit-related services
1
0.10.1
Total fees for audit-related services0.20.2
Total fees paid to auditor7. 98.8
1 Other audit-related services include assurance and agreed upon procedure engagements.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
20
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
Debt and equity
This section outlines the Group’s capital structure and the related financing costs. It also provides information on
how the funds that finance current and future activities are raised and how the Group manages capital.
This section includes the following notes:
Note 7: Subscribed equity instruments
Note 8: Dividends
Note 9: Borrowings
Note 10: Net finance costs
Note 11: Capital management
7. Subscribed equity instruments
Subscribed equity instruments comprise Co-operative shares and units in the Fonterra Shareholders’ Fund
(the Fund). Incremental costs directly attributable to equity transactions are recognised as a deduction from
subscribed equity.
a) Co-operative shares, including shares held within the Group
Co-operative shares may only be held by a shareholder supplying milk to Fonterra (farmer shareholder), by former
farmer shareholders for up to three seasons after cessation of milk supply, or by Fonterra Farmer Custodian
Limited (the Custodian). Voting rights in Fonterra are dependent on milk supply supported by Co-operative shares,
these rights are also attached to vouchers when backed by milk supply (subject to limits).
The rights attaching to Co-operative shares are set out in Fonterra’s Constitution, available in the ‘Our
Co-operative/Governance and Management’ section of Fonterra’s website.
On 8 June 2022, Fonterra announced that it would allocate up to $50 million to an on-market share buyback
programme commencing 30 June 2022.
At 31 July 2022, Fonterra had bought back 532,294 shares (31 July 2021: nil) at a total cost of $1 million. The
shares bought back were cancelled on acquisition.
At 31 July 2022 there were 1,612,825,585 Co-operative shares on issue (31 July 2021: 1,613,357,879 shares).
During the year ended 31 July 2022 no shares were issued under the Dividend Reinvestment Plan (31 July 2021:
1,138,230 shares) or the Farm Source Rewards scheme (31 July 2021: 122,582 shares).
Co-operative shares can be traded between farmer shareholders on the Fonterra Shareholders’ Market (a private
market operated by NZX Limited). At a Special Meeting held on 9 December 2021, Fonterra shareholders voted
in favour of capital structure related amendments to Fonterra’s Constitution that would give effect to the Flexible
Shareholding structure. Subsequently, on 27 April 2022 the Government announced that it intends to amend
the DIRA to support Fonterra’s new structure, signalling it expects the amendments to DIRA to pass through
Parliament in the 2022 calendar year. The Constitution amendments and new structure will come into effect once
the Fonterra Board is satisfied that any steps necessary for implementation have been (or will be) completed. The
Co-operative is aiming to implement the changes as soon as possible. Share compliance obligations will remain
on hold for all shareholders holding a minimum of 1,000 shares and exiting suppliers that are selling shares over
three seasons in accordance with Fonterra’s Constitution, until at least six months after the new structure comes
into effect. The current cap on the Fund remains, so Fonterra shares are not able to be exchanged into units in the
Fund on a day-to-day basis. A capped Fund is a feature of the Flexible Shareholding structure.
Information about the Group’s capital structure review is available in the ‘Investors/Capital Structure’ section of
Fonterra’s website.
b) Units in the Fonterra Shareholders’ Fund
The Custodian holds legal title of Co-operative shares of which the Economic Rights have been sold to the Fund
on trust for the benefit of the Fund. At 31 July 2022 107,417,322 Co-operative shares (31 July 2021: 107,420,162)
were legally owned by the Custodian, on trust for the benefit of the Fund.
Units in the Fund are traded on the New Zealand Stock Exchange (NZX) and Australian Securities Exchange (ASX).
During the year ended 31 July 2022, the Fund issued no units (31 July 2021: 11,794,492 units) and redeemed
2,840 units (31 July 2021: 8,955,846 units).
Under the capital structure related amendments to Fonterra’s Constitution the overall limit on the Fund size
reduces from 20% to 10%. The current cap on the Fund remains, so Fonterra shares are not able to be exchanged
into units in the Fund on a day-to-day basis. The Fonterra share buyback programme has not had a material impact
on the Fund size as a percentage of the total number of Fonterra shares on issue.
The rights attaching to units are set out in the Fonterra Shareholders’ Fund 2022 Annual Report, available in the
‘Investors/Fonterra Shareholders’ Fund’ section of Fonterra’s website.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
21
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
7. Subscribed equity instruments continued
c) Market capitalisation
The Group’s market capitalisation has been below the carrying amount of net assets since Fonterra’s capital
review announcement in May 2021. Accounting standards consider this to be an indicator of impairment. The
Group does not believe the current share price provides an accurate reflection of the fair value of the net assets,
due to factors such as being traded in a restricted market and the reduced levels of liquidity following the
announcement of the capital review.
The Group has undertaken an impairment test and obtained an independent valuation to determine the
recoverable amount of its net assets. The independent valuation was used to determine the Group’s recoverable
amount on a fair value less costs of disposal basis. The valuation uses a sustainable EBIT based on normalised
earnings and an appropriate range of earnings multiples based on benchmarking against peers.
The estimate of the recoverable amount exceeded the carrying amount and as such, no impairment has been
identified.
8. Dividends
All Co-operative shares, including those held by the Custodian, are eligible to receive dividends if declared
by the Board. As set out in Fonterra’s Constitution, dividends on Co-operative shares held by farmer
shareholders in excess of the maximum number of Co-operative shares that the shareholder is permitted to
hold at compliance date, shall be forfeited by the shareholder and retained by the Group.
Dividends are recognised as a liability in the Group’s Financial Statements in the period in which they are
declared by the Board. The Group’s Dividend Policy can be found in the ‘Investors/Results & Reporting/
Dividends & Reinvestment Plan’ section of Fonterra’s website.
The Group has a Dividend Reinvestment Plan, where eligible shareholders can choose to reinvest all or part
of their future dividend in additional Co-operative shares. The Group’s Dividend Reinvestment Plan can be
found in the ‘Investors/Results & Reporting/Dividends & Reinvestment Plan’ section of Fonterra’s website.
$ MILLION
DIVIDENDS 31 JULY 202231 JULY 2021
2022 Interim dividend – 5 cents per share
1
81–
2021 Final dividend – 15 cents per share
2
242–
2021 Interim dividend – 5 cents per share
3
–80
2020 Final dividend – 5 cents per share
4
–81
1 Declared on 16 March 2022 and paid on 14 April 2022 to all Co-operative shares on issue at 24 March 2022. The Dividend Reinvestment Plan did
not apply to this dividend.
2 Declared on 22 September 2021 and paid on 15 October 2021 to all Co-operative shares on issue at 30 September 2021. The Dividend
Reinvestment Plan did not apply to this dividend.
3 Declared on 16 March 2021 and paid on 15 April 2021 to all Co-operative shares on issue at 24 March 2021. The Dividend Reinvestment Plan did
not apply to this dividend.
4 Declared on 17 September 2020 and paid on 15 October 2020 to all Co-operative shares on issue at 25 September 2020. The Dividend
Reinvestment Plan applied to this dividend.
Dividend declared after balance date
On 21 September 2022, the Board declared a final dividend of 15 cents per share, to be paid on 14 October 2022
to all holders of Co-operative shares on issue at 29 September 2022.
The Dividend Reinvestment Plan does not apply to this dividend.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
22
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
9. Borrowings
The Group borrows in the form of bonds, bank facilities and other financial instruments. The Group also
recognises lease liabilities within borrowings. Refer to Note 17 Leases for further information about the
Group’s lease liabilities and related right-of-use assets.
The interest expense incurred on the Group’s borrowings is presented in Note 10 Net finance costs.
Borrowings (excluding lease liabilities) are recognised initially at fair value, net of transaction costs incurred.
Borrowings are subsequently measured at amortised cost using the effective interest method, with the
hedged risks on certain debt instruments measured at fair value.
a) Total borrowings
GROUP $ MILLION
AS AT
31 JULY 2022
AS AT
31 JULY 2021
Total current borrowings356818
Total non-current borrowings4,9004,254
Total borrowings
1
5,2565,072
1 Borrowings of $333 million attributable to disposal groups held for sale are not included in the table above (31 July 2021: $282 million).
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
23
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
9. Borrowings continued
a) Total borrowings continued
A breakdown of total borrowings is presented in the following tables.
GROUP $ MILLION
BALANCE
AS AT
1 AUGUST 2021PROCEEDS
NEW LEASE
LIABILITIESREPAYMENTS
FOREIGN
EXCHANGE
MOVEMENT
CHANGES
IN FAIR VALUESOTHER
BALANCE
AS AT 31 JULY 2022
Commercial paper–1,469 –(1,375)––4 98
Bank loans11 2,425 –(1,437)–––999
Lease liabilities
1
523 –41 (106)––(20)438
Capital notes
2
35 ––––––35
NZX-listed bonds600 ––(350)–––250
Medium-term notes3,903 ––(366)168 (270)1 3,436
Total borrowings
3
5,072 3,894 41 (3,634)168 (270)(15)5,256
GROUP $ MILLION
BALANCE
AS AT
1 AUGUST 2020PROCEEDS
NEW LEASE
LIABILITIESREPAYMENTS
FOREIGN
EXCHANGE
MOVEMENT
CHANGES
IN FAIR VALUESOTHER
BALANCE
AS AT 31 JULY 2021
Commercial paper–444–(444)––––
Bank loans201,882–(1,888)(3)––11
Lease liabilities
1
604–34(109)(6)––523
Capital notes
2
35––––––35
NZX-listed bonds600––––––600
Medium-term notes4,782––(633)(97)(151)23,903
Total borrowings
3
6,0412,32634(3, 074)(106)(151)25,072
1 Refer to Note 17 Leases for further information about lease liabilities.
2 Capital notes are unsecured subordinated borrowings.
3 All borrowings other than lease liabilities and capital notes are unsecured and unsubordinated.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
24
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
9. Borrowings continued
b) Adjusted net debt
The Group uses adjusted net debt, a non-GAAP debt measure in monitoring its net debt position and in
calculating the Group’s debt to EBITDA ratio, gearing ratio, and return on capital. Refer to Note 11 Capital
management for further information about this ratio.
Adjusted net debt is total borrowings, plus bank overdraft, less cash and cash equivalents, plus borrowings
attributable to disposal groups held for sale, less cash and cash equivalents attributable to disposal groups held
for sale, plus a cash adjustment for 25% of cash and cash equivalents held by the Group’s subsidiaries (including
cash and cash equivalents attributable to disposal groups held for sale), less derivatives used to manage changes
in hedged risks on debt instruments.
The Group believes that adjusted net debt provides useful information as it is aligned with how certain rating
agencies calculate the Group’s debt to EBITDA and gearing ratios.
GROUP $ MILLION
AS AT
31 JULY 2022
AS AT
31 JULY 2021
Total borrowings5,2565,072
Plus: Bank overdraft3120
Less: Cash and cash equivalents(288)(985)
Plus: Borrowings attributable to disposal groups held for sale333282
Less: Cash and cash equivalents attributable to disposal groups
held for sale(24)(17)
Plus: Cash adjustment for cash held by subsidiaries77110
Less: Adjusted for the carrying value of derivatives used to manage
changes in hedged risks on debt instruments(46)(157)
Adjusted net debt5,3394,325
10. Net finance costs
Interest income and expense is recognised on an accrual basis in the Income Statement, using the effective
interest method.
Finance costs also include the changes in fair value relating to derivatives used to manage interest rate risk,
and the associated changes in fair value of the borrowings designated in a hedge relationship attributable
to the hedged risk. Information about the Group’s hedge accounting policies are included in Note 20 Hedge
accounting.
GROUP $ MILLION
31 JULY 202231 JULY 2021
Finance income149
Interest expense
1,2
(263)(299)
Changes in fair value relating to:
–Borrowings designated in a hedge relationship270151
–Derivatives designated in a hedge relationship(225)(107)
–Derivatives where hedge accounting has not been applied10(6)
Total interest income from fair value movements5538
Finance costs(208)(261)
Net finance costs(194)(252)
1 Includes interest expense of $3 million (31 July 2021: $2 million) relating to derivatives where hedge accounting has not been applied.
2 Includes interest expense of $13 million (31 July 2021: $17 million) relating to lease liabilities.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
25
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
11. Capital management
The Group is not subject to debt covenants or any other externally imposed capital requirements. The Board
closely monitors the following non-GAAP measures: debt to EBITDA ratio, gearing ratio and return on capital.
a) Debt to EBITDA ratio
Debt to EBITDA is calculated as adjusted net debt divided by total Group normalised earnings before interest, tax,
depreciation and amortisation (total Group normalised EBITDA) excluding share of profit/loss of equity accounted
investees and net foreign exchange gains/losses.
Total Group normalised EBITDA includes amounts relating to discontinued operations.
Debt to EBITDA is a key ratio considered by the credit rating agencies when determining Fonterra’s credit rating.
The Board approved Debt Policy establishes a maximum debt to EBITDA of 3.75x, with a long-term target range of
2.5 to 3.0x.
GROUP $ MILLION
AS AT
31 JULY 2022
AS AT
31 JULY 2021
Adjusted net debt
1
5,3394,325
Profit after tax583599
Add: Net finance costs from continuing operations194252
Add: Net finance costs from discontinued operations3710
Add: Tax expense from continuing operations169103
Less: Tax credit from discontinued operations(7)(5)
Total Group EBIT976959
Add: Depreciation and amortisation from continuing operations635642
Total Group EBITDA 1,6111,601
Add/(less): Normalisation adjustments
2
15(7)
Total Group normalised EBITDA 1,6261,594
Less: Share of profit of equity accounted investments(10)(5)
Add: Net foreign exchange losses from continuing operations5826
Less: Net foreign exchange losses included in normalisation adjustments–(2)
Add/(less): Net foreign exchange losses/(gains) from discontinued
operations2(7)
Total Group normalised EBITDA excluding share of profit/loss of
equity accounted investees and net foreign exchange gains/losses1 ,6761,606
Debt to EBITDA ratio3.2x2.7x
1 Refer to Note 9 Borrowings for further information about adjusted net debt.
2 Refer to Note 5 Earnings per share for further information about normalisation adjustments.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
26
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
11. Capital management continued
b) Gearing ratio
Adjusted net debt gearing ratio
The adjusted net debt gearing ratio is calculated as adjusted net debt divided by total capital.
Total capital is equity excluding hedge reserves, plus adjusted net debt.
The Board approved Gearing Policy establishes a maximum adjusted net debt gearing ratio of 45%, with a
long-term target range of 30% to 40%.
GROUP $ MILLION
AS AT
31 JULY 2022
AS AT
31 JULY 2021
Adjusted net debt
1
5,3394,325
Equity excluding hedge reserves 7, 2 5 26,895
Total capital12,59111,220
Adjusted net debt gearing ratio (%)42.4%38.5%
1 Refer to Note 9 Borrowings for further information about adjusted net debt.
c) Return on capital
Return on capital is calculated as total Group normalised earnings before interest and tax (total Group normalised
EBIT) plus finance income on long-term advances less a notional tax charge, divided by average capital employed.
Return on capital is reported regularly to key management personnel, and compared against budget and prior
years return on capital.
Total Group normalised EBIT includes both continuing operations and discontinued operations.
Capital employed is adjusted net debt, less the cash adjustment (used in calculating adjusted net debt), plus cash
and cash equivalents held by subsidiaries for working capital purposes, plus equity excluding hedge reserves and
net deferred tax assets. Average capital employed is calculated as a 13-month rolling average of capital employed.
GROUP $ MILLION
31 JULY 202231 JULY 2021
Total Group EBIT976959
Add/(less): Normalisation adjustments
1
15(7)
Total Group normalised EBIT991952
Plus: Finance income on long-term advances78
Less: Notional tax charge(161)(155)
Total Group normalised EBIT including finance income on long-term
advances less notional tax charge 837805
Adjusted net debt
2
5,3394,325
Less: Cash adjustment
2
(77)(110)
Plus: Cash and cash equivalents held by subsidiaries for working
capital purposes 166188
Plus: Total equity6,9066,869
Plus: Hedge reserves34626
Less: Net deferred tax assets(501)(435)
Capital employed12,17910,863
Impact of seasonal variation in capital employed1771,418
Average capital employed12,35612,281
Return on capital6.8%6.6%
1 Refer to Note 5 Earnings per share for further information about normalisation adjustments.
2 Refer to Note 9 Borrowings for further information about adjusted net debt.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
27
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
Working capital
This section provides information about the primary elements of the Group’s working capital. Working capital
represents the short-term operating assets and liabilities generated by the Group. Movements in these items have
a direct impact on the net cash flows generated from operating activities.
This section includes the following notes:
Note 12: Trade and other receivables
Note 13: Inventories
Note 14: Trade and other payables
Note 15: Owing to suppliers
12. Trade and other receivables
Trade receivables are amounts due from customers for products sold and services provided. Trade
receivables are recognised initially at their transaction price and subsequently measured at the amount
expected to be collected. Due to their short-term nature trade receivables are not discounted.
The Group recognises an allowance for expected credit losses on trade receivables based on the lifetime
expected credit loss at balance date.
GROUP $ MILLION
AS AT
31 JULY 2022
AS AT
31 JULY 2021
Trade receivables2,3551,673
Less: Allowance for expected credit losses on trade receivables(12)(18)
Trade receivables net of allowance for expected credit losses2,3431,655
Receivables from related parties
1
1925
Other receivables5067
Total trade and other receivables (excluding prepayments)2,4121 ,747
Prepayments7055
Total trade and other receivables2,4821,802
1 Refer to Note 23 Related party transactions for further information about receivables from related parties.
Amounts received in advance from customers of $58 million (31 July 2021: $17 million) have been recognised in
trade and other payables.
The Group has a receivables management programme. At 31 July 2022 the Group’s exposure was $20 million,
which reflects the first loss component of amounts managed at balance date (31 July 2021: $17 million).
The ageing profile of the Group’s trade and other receivables (excluding prepayments) is presented in the
following table.
GROUP $ MILLION
CURRENT
LESS THAN
1 MONTH
PAST DUE
MORE THAN
1 MONTH BUT
LESS THAN
3 MONTHS
PAST DUE
MORE THAN
3 MONTHS
PAST DUETOTAL
As at 31 July 20222,16416655272,412
As at 31 July 20211,57911432221 ,747
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
28
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
13. Inventories
Raw materials and finished goods
Raw materials and finished goods are measured at the lower of cost or net realisable value on a first-in-first-
out basis.
In the case of manufactured inventories, cost includes all direct costs plus the portion of fixed and variable
production overheads incurred in bringing inventories to their present location and condition.
Net realisable value is the estimated selling price, less the costs of completion and selling expenses.
Emissions units held for trading
The Group holds emissions units for trading and compliance purposes.
Emissions units held for trading purposes are accounted for as inventories and measured at fair value. Refer
to Note 18 Intangible assets for further information about emissions units held for compliance purposes.
GROUP $ MILLION
AS AT
31 JULY 2022
AS AT
31 JULY 2021
Raw materials802678
Finished goods4,2613,133
Less: Provision for impairment of raw materials and finished goods(95)(69)
Total raw materials and finished goods4,9683,742
Emissions units held for trading3924
Total inventories5,0073,766
14. Trade and other payables
Trade and other payables are recognised at the amount invoiced by the supplier. Due to their short-term
nature, they are not discounted. Amounts owing to farmer shareholders and New Zealand contract milk
suppliers are recognised in owing to suppliers (refer to Note 15 Owing to suppliers).
GROUP $ MILLION
AS AT
31 JULY 2022
AS AT
31 JULY 2021
Trade payables1,8631,677
Amounts due to related parties
1
149
Other payables158190
Total trade and other payables (excluding employee entitlements)2,0351,876
Employee entitlements368332
Total trade and other payables2,4032,208
1 Refer to Note 23 Related party transactions for further information about payables to related parties.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
29
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
15. Owing to suppliers
Amounts owing to suppliers are amounts the Group owes to farmer shareholders and New Zealand contract
milk suppliers for the collection of milk, which includes end of season adjustments, offset by amounts owing
from farmer shareholders for goods and services provided to them by the Group.
These amounts are recognised at the net amount due to the supplier for the milk provided. Due to their
short-term nature, they are not discounted.
The Board uses its discretion in establishing the rate at which the Group will pay suppliers for the milk supplied
over the season. This is referred to as the advance rate. A breakdown of the advance payments made to suppliers
is presented in the following table.
GROUP
AS AT
31 JULY 2022
AS AT
31 JULY 2021
Owing to suppliers ($ million)2,1191,825
Details relating to the season ended 31 May:
Farmgate Milk Price¹ (per kgMS)$9.30$ 7. 5 4
–Total advance payments made during the year$ 7. 9 0$6.41
–Total owing as at 31 July$1.40$1.13
Amount advanced during the year as a percentage of the milk price 85%85%
1 Represents the average price for milk supplied on standard terms of supply. The Fonterra Farmgate Milk Price Statement sets out information
about the Farmgate Milk Price as calculated in accordance with the Farmgate Milk Price Manual. It can be found in the ‘Investors/Farmgate Milk
Prices/Milk Price Methodology’ section of Fonterra’s website.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
30
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
Long-term assets
This section provides information about the investments the Group has made in long-term assets to operate the
business and generate returns to equity holders. These assets include physical assets such as land and buildings,
and non-physical assets such as right-of-use assets, brands and goodwill.
This section includes the following notes:
Note 16: Property, plant and equipment
Note 17: Leases
Note 18: Intangible assets
16. Property, plant and equipment
Items of property, plant and equipment are measured at cost less accumulated depreciation and any
impairment losses. Cost includes the purchase consideration and those costs directly attributable to bringing
the asset to the location and condition necessary for its intended use. It also includes financing costs directly
attributable to the acquisition, production or construction of the asset. Subsequent costs are capitalised
only when it is probable that future economic benefits associated with the item will flow to the Group and
the cost of the item can be measured reliably. The carrying amount of any replaced part is derecognised.
All other repairs and maintenance costs are charged to the Income Statement during the financial period in
which they are incurred.
Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount
and are recognised in the Income Statement.
Depreciation
Depreciation is calculated on a straight-line basis to allocate the cost of the asset, less any residual value,
over its estimated useful life. The range of estimated useful lives for each class of property, plant and
equipment is as follows:
–Land Indefinite
–Buildings and leasehold improvements 2–55 years
–Plant, vehicles and equipment 2–50 years
Judgement is involved in determining the assets’ residual values and useful lives, which are reviewed and
adjusted, where required, each financial year.
GROUP $ MILLION
LAND
BUILDINGS AND
LEASEHOLD
IMPROVEMENTS
PLANT,
VEHICLES AND
EQUIPMENT
CAPITAL
WORK IN
PROGRESSTOTAL
As at 31 July 2022
Cost 3682,7068,35650811,938
Accumulated depreciation
and impairment–(1,189)(4,682)–(5,871)
Net book value at 31 July 20223681,5173, 6745086,067
As at 31 July 2021
Cost 3502,6708,17037111,561
Accumulated depreciation
and impairment–(1,118)(4,464)–(5,582)
Net book value at 31 July 20213501,5523,7063715,979
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
31
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
16. Property, plant and equipment continued
GROUP $ MILLION
LAND
BUILDINGS AND
LEASEHOLD
IMPROVEMENTS
PLANT,
VEHICLES AND
EQUIPMENT
CAPITAL
WORK IN
PROGRESSTOTAL
Net book value
As at 1 August 20213501,5523,7063715,979
Additions
1
22165490533
Transferred from capital work in progress–35309(344)–
Depreciation charge –(87)(352)–(439)
Impairment–––(8)(8)
Disposals(6)(1)(5)–(12)
Foreign currency translation2211(1)14
As at 31 July 20223681,5173, 6745086,067
Net book value
As at 1 August 20203571,5233,8103166,006
Additions
1
1462427449
Transferred from capital work in progress –109261(370)–
Transferred to buildings and leasehold
improvements (19)19–––
Acquisition from business combination ––16–16
Depreciation charge –(86)(350)–(436)
Impairment ––(5)–(5)
Disposals (1)(5)(9)(1)(16)
Foreign currency translation(1)(14)(19)(1)(35)
As at 31 July 20213501,5523,7063715,979
1 Additions include borrowing costs of $7 million (31 July 2021: $5 million) capitalised using a weighted average interest rate of 4.74% (31 July 2021: 4.94%).
There has been no significant impairment of assets during the year ended 31 July 2022.
New Zealand ingredients manufacturing assets
The Group’s New Zealand ingredients manufacturing sites are utilised as a single network for processing raw milk
supply. In estimating useful lives and residual values of its New Zealand ingredients manufacturing assets, the
Group has considered the impact of:
–possible flat or declining milk supply scenarios (together with individual plant peak milk
processing requirements);
–environmental matters (such as the New Zealand Government’s Emissions Reduction Plan); and
–the Group’s investment in sustainability, including its decarbonisation plan to exit coal by 2037.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
32
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
1 7. L e a s e s
The Group is a lessee of various types of assets, including buildings, plant, vehicles and equipment. Right-of-use
assets reflect the Group’s right to use leased assets. Corresponding lease liabilities reflect the present value of the
related future lease payments.
The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets
and short-term leases. These lease costs are recognised as an expense in the Income Statement as incurred.
a) Right-of-use assets
Right-of-use assets are measured at cost, less any accumulated depreciation and any impairment losses. Cost
is calculated as the initial amount of the lease liability plus any initial direct costs incurred and an estimate of
costs required to dismantle and remove the underlying asset or to restore the underlying asset or the site on
which it is located.
Right-of-use assets are depreciated on a straight-line basis over the lease term, unless the useful life of the
asset is less than the lease term or if the Group will own the asset at the end of the lease term. In these
situations, the right-of-use asset is depreciated over the useful life of the asset, which is determined on
the same basis as those of property, plant and equipment. Right-of-use assets are also adjusted for any
impairment losses and certain remeasurements of the lease liability.
The Group enters into lease arrangements for land and buildings with options for renewal that typically run
for a period of three to ten years, however some property leases can run up to a period of 50 years. Lease
payment changes are renegotiated at periods specified in the lease contracts and are usually based on local
price indices or market rental rates.
Leases for plant, vehicles and equipment typically run for a period of two to five years.
Information about right-of-use assets from leases for which the Group is a lessee is presented in the
following table.
GROUP $ MILLION
NET BOOK VALUEDEPRECIATION CHARGE
AS AT
31 JULY 2022
AS AT
31 JULY 2021
1
YEAR ENDED
31 JULY 2022
YEAR ENDED
31 JULY 2021
Land222218
Buildings2753316458
Plant, vehicles and equipment1011333942
Total398486104108
1 Comparative information has been re-presented for consistency with the current period.
Additions to right-of-use assets during the year were $15 million (31 July 2021: $32 million).
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
33
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
17. Leases continued
b) Lease liabilities
Lease liabilities are recognised at the commencement date of the lease as the present value of the lease
payments over the lease term. The lease payments include the exercise price of a purchase option where the
Group is reasonably certain to exercise the option.
The lease payments are discounted using the incremental borrowing rate at the lease commencement date if
the interest rate implicit in the lease is not readily determinable.
The lease term is the non-cancellable period, plus renewal options if they are reasonably certain to be
exercised. Once a lease has commenced, the Group will only reassess the lease term on the occurrence of a
significant event or change in circumstance that is within its control and affects its ability to exercise, or not
exercise, an option not previously included in the lease term.
Total lease liabilities included within borrowings in the Statement of Financial Position are presented in the
following table.
GROUP $ MILLION
AS AT
31 JULY 2022
AS AT
31 JULY 2021
Current lease liabilities9499
Non-current lease liabilities344424
Total lease liabilities438523
During the year ended 31 July 2022 total cash payments for leases were $145 million (31 July 2021: $145 million).
In addition to the lease liability recognised, the Group’s lease arrangements include renewal options, termination
options and residual guarantees that have been assessed as unlikely to result in cash payments.
As at 31 July 2022, the Group has entered into a number of lease arrangements that have not yet commenced. The
total lease liability that will be recognised on commencement of these leases in the next 12 months is $1 million
(31 July 2021: $2 million).
c) Other lease-related expenses recognised in the Income Statement
GROUP $ MILLION
31 JULY 202231 JULY 2021
Interest on lease liabilities1317
Variable lease payments not included in the measurement of
lease liabilities45
Expenses relating to short-term leases108
Expenses relating to low value leases1010
Income from sub-leasing right-of-use assets1–
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
34
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
18. Intangible assets
The significant intangible assets recognised by the Group are goodwill, brands, software assets, and
emissions units.
Goodwill
Goodwill represents the premium paid by the Group over the fair value of the Group’s share of the net
identifiable assets of an acquired business at the date of acquisition. Goodwill is initially recognised at cost
and subsequently measured at cost less accumulated impairment losses. Goodwill is tested for impairment
annually and is not amortised.
Brands
Brands that are purchased by the Group are initially recognised at cost, or at their fair value if acquired as
part of a business combination, and subsequently measured at cost less any impairment losses. A brand is
determined to have an indefinite life where there is an intention to maintain and support the brand for an
indefinite period.
Indefinite life brands are tested for impairment annually and are not amortised.
Indefinite life brands that have been impaired are reviewed for possible reversal of impairment annually.
A reversal of an impairment loss shall not exceed the carrying amount that would have been recognised
had no impairment loss occurred in prior years.
Software assets
Software assets, both purchased and internally developed, are capitalised provided there is an identifiable
asset that will generate future economic benefits through cost savings or supporting revenue generation.
Subsequent costs are capitalised if they extend the useful life or enhance the functionality of the asset.
Software assets are amortised on a straight-line basis over their estimated useful lives (two to 13 years).
Software assets are tested for impairment when an indicator of impairment exists.
Emissions units held for compliance purposes
Emissions units held for compliance purposes are accounted for as intangible assets with an indefinite life
and measured at cost less any impairment losses. Emissions units are not amortised.
Refer to Note 13 Inventories for further information about emissions units held for trading.
The Group’s obligation to surrender emissions units is included in other current liabilities. Emissions units
held for compliance purposes expected to be surrendered within twelve months are classified as current
intangible assets, and are derecognised as they are surrendered to settle the Group’s emissions obligation.
Impairment testing
A cash-generating unit (CGU) is tested for impairment when there are indicators of impairment. An
impairment test is also completed on an annual basis when a CGU has goodwill or indefinite life intangibles
allocated to it. To determine if an asset or CGU is impaired, the carrying amount of the asset or CGU is
compared to its recoverable amount, being the higher of its value in use and fair value less costs to dispose. If
the carrying amount is higher than the recoverable amount, the CGU is impaired to its recoverable amount.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
35
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
18. Intangible assets continued
Uncertainty is involved in estimating value in use and fair value less costs to dispose.
Value in use is determined as the present value of the future cash flows expected to be derived from the
CGU. The value in use calculation requires the Group to estimate future cash flows, discount rates and
terminal growth rates. Cash flows are based on approved forecasts which are consistent with the Board
approved strategy. Cash flows do not exceed five years. Discount rates are based on external data where
possible.
Where the Group has applied the relief from royalty method for valuing its brands, judgement is involved in
estimating royalty rates.
Fair value less costs to dispose reflects the price that would be received to sell the CGU in an orderly
transaction between market participants at the measurement date less the costs of disposal.
GROUP $ MILLION
AS AT
31 JULY 2022
AS AT
31 JULY 2021
1
Current intangible assets7847
Non-current intangible assets2,2162,195
Total intangible assets2,2942,242
1 Comparative information includes re-presentations for consistency with the current period.
A breakdown of total intangible assets is presented in the following table.
GROUP $ MILLION
GOODWILLBRANDSSOFTWARE
SOFTWARE
WIP
EMISSIONS
UNITSOTHER
TOTAL
INTANGIBLES
As at 31 July 2022
Cost8521,4851,49774141364,085
Accumulated
amortisation and
impairment(319)(237)(1,214)––(21)(1,791)
Net book value at
31 July 20225331,24828374141152,294
As at 31 July 2021
Cost8391,3991,4938097283,936
Accumulated
amortisation and
impairment(310)(175)(1,191)––(18)(1,694)
Net book value at 31
July 20215291,2243028097102,242
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
36
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
18. Intangible assets continued
GROUP $ MILLION
GOODWILLBRANDSSOFTWARE
SOFTWARE
WIP
EMISSIONS
UNITSOTHER
TOTAL
INTANGIBLES
Net book value
As at 1 August 20215291,2243028097102,242
Additions–––631138184
Transferred from work
in progress––69(69)–––
Impairment–(34)––––(34)
Amortisation ––(89)––(3)(92)
Disposals/surrender
of units––––(69)–(69)
Foreign currency
translation4581–––63
As at 31 July 20225331,24828374141152,294
Net book value
As at 1 August 20205371,2473544050122,240
Additions––48496–184
Transferred from work
in progress––44(44)–––
Amortisation ––(96)––(2)(98)
Disposals/surrender
of units–(2)(3)–(49)–(54)
Foreign currency
translation(8)(21)(1)–––(30)
As at 31 July 20215291,2243028097102,242
Amortisation is recognised in cost of goods sold and other operating expenses in the Income Statement.
Impairment is recognised within other operating expenses in the Income Statement.
Goodwill and indefinite life brands
The allocation of goodwill and brands across the Group’s reportable segments is presented in the following table.
All brands presented in the following table have indefinite lives.
GROUP $ MILLION
AS AT 31 JULY 2022AS AT 31 JULY 2021
GOODWILLBRANDSTOTALGOODWILLBRANDSTOTAL
Asia Pacific reportable segment
–New Zealand consumer and
foodservice CGU229282511229282511
–Australia CGU140148288131148279
–Asia brands–678678–653653
–NZMP brand–120120–120120
AMENA reportable segment
–Chile CGU90201109721118
Other CGUs74–7472–72
Total5331,2481,7815291,2241,753
Impairment testing of goodwill and indefinite life brands
The Group has performed impairment tests for CGUs with goodwill or intangible assets with indefinite
useful lives. Impairment has been recognised on the Group’s Asia brands. No further impairment was identified.
Further information about impairment tests performed for CGUs (or groups of CGUs) with significant goodwill or
indefinite life brands is provided below.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
37
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
18. Intangible assets continued
a) New Zealand consumer and foodservice CGU
The recoverable amount of the business was determined on a value in use basis using a discounted cash flow
methodology.
The model uses a five-year cash flow forecast based on the three-year business plan approved by the Board.
Cash flows for years four and five have been prepared based on growth expectations for the business.
The key drivers for the business to achieve its performance targets are volume growth, margin growth, increases
in intra-group revenues and operational cost management. These key assumptions are set as part of the three-year
business plan approved by the Board, and reflect past experience and Management’s future expectations for
the business.
The long-term growth rate applied to the future cash flows after year five of the forecast was 2.0% (31 July 2021:
2.0%). This reflects the expected long-term economic growth rate for New Zealand.
The post-tax discount rate was 8.4% (31 July 2021: 7.5%). The pre-tax discount rate was 11.0% (31 July 2021: 9.8%).
The recoverable amount of the business exceeds its carrying amount by $66 million. The Group has identified that
a reasonably possible change in five key assumptions could cause the carrying amount to exceed the recoverable
amount. The following table shows the amount by which these assumptions would need to change individually for
the carrying amount to exceed estimated recoverable amount.
KEY ASSUMPTIONSVALUE ATTRIBUTED
CHANGE REQUIRED FOR THE CARRYING AMOUNT
TO EXCEED THE RECOVERABLE AMOUNT
Volume growth2.3%A decrease in volume growth of 0.5%
Margin growth3.8%A decrease in margin growth of 0.5%
Increase in intra-group revenues$14 million per annum from FY23A decrease of $6 million per annum
Operational cost management$15 million by FY25Savings of $6 million by FY25 not achieved
Discount rate (post-tax)8.4%An increase in the discount rate of 0.6%
b) Australia CGU
The recoverable amount of the business was determined on a value in use basis using a discounted cash flow
methodology.
The model uses a five-year cash flow forecast based on the three-year business plan approved by the Board.
Cash flows for years four and five have been prepared based on growth expectations for the business. A key driver
for the business to achieve its performance targets is delivery on identified consumer and foodservice growth
opportunities. This key assumption was based on business cases prepared by Management, leveraging from
past experience.
The long-term growth rate applied to the future cash flows after year five of the forecast was 2.5% (31 July 2021:
2.0%). This reflects the expected long-term economic growth rate for Australia.
The post-tax discount rate was 7.0% (31 July 2021: 6.5%). The pre-tax discount rate was 9.3% (31 July 2021: 8.7%).
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
38
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
18. Intangible assets continued
c) Asia brands
Asia brands represent the Group’s trademarks and other intellectual property in territories outside of
New Zealand and Australia, relating to the Anchor, Anmum, Anlene and Chesdale brands.
The relief from royalty method has been used to calculate the recoverable amounts of the brands. The relief from
royalty methodology is a value in use calculation which determines the recoverable amount by calculating the
present value of what a licensee would theoretically pay as a royalty to use the brands. The royalty rates applied
in the calculation are determined based on comparable market data and range from 3% to 7% (31 July 2021: 3%
to 7%). The key assumption used in the relief from royalty method is forecast sales growth. The value attributed
to the assumption is based on five-year cash flow forecasts using the three-year business plans approved by the
Board. Cash flows for years four and five have been prepared based on growth expectations for the brand.
For these brands, the long-term growth rates applied to the future sales revenue used in the valuation model
range from 1.6% to 7.4% (31 July 2021: 2.0% to 6.5%) and the range of discount rates (post-tax) that have been
applied in the valuation model range from 8.8% to 31.5% (31 July 2021: 7.0% to 18.0%), country dependent.
The range of pre-tax discount rates was 11.1% to 41.4% (31 July 2021: 8.8% to 23.1%).
The carrying amount for the Anchor, Anlene and Anmum brands and cash flow forecasts for each region are in
local currency and converted to NZD.
Anlene brand
The recoverable amount of the Anlene brand was assessed to be $195 million. This was lower than the carrying
value of the brand, resulting in an impairment of $22 million. The impairment was a result of changes in discount
rates, long-term growth rates and foreign exchange rates. Impairment was recognised in the Group’s Asia Pacific
operating segment.
As the brand is sold across a number of markets, all with different characteristics, the range of post-tax discount
rates applied was 9.2% to 31.5% (31 July 2021: 7.0% to 18.0%). The range of pre-tax discount rates was 11.1% to
41.4% (31 July 2021: 8.8% to 23.1%).
Anmum brand
The recoverable amount of the Anmum brand was assessed to be $114 million. This was lower than the carrying
value of the brand, resulting in an impairment of $11 million. The impairment was a result of changes in discount
rates, long-term growth rates and foreign exchange rates. Impairment was recognised in the Group’s Asia Pacific
operating segment.
As the brand is sold across a number of markets, all with different characteristics, the range of post-tax discount
rates applied was 9.2% to 15.8% (31 July 2021: 7.0% to 11.5%). The range of pre-tax discount rates was 11.1%
to 19.8% (31 July 2021: 8.8% to 14.4%).
Chesdale brand
The recoverable amount of the Chesdale brand was assessed to be $27 million. This was lower than the carrying
value of the brand, resulting in an impairment of $1 million. The impairment was a result of changes in discount
rates, long-term growth rates and foreign exchange rates. Impairment was recognised in the Group’s Greater
China operating segment.
As the brand is sold across a number of markets, all with different characteristics, the range of post-tax discount
rates applied was 8.8% to 31.5% (31 July 2021: 7.0% to 16.5%). The range of pre-tax discount rates was 11.1%
to 41.4% (31 July 2021: 8.8% to 21.7%).
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
39
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
Financial risk management
This section outlines the key risk management activities undertaken to manage the Group’s exposure
to financial risk.
This section includes the following notes:
Note 19: Financial risk management
Note 20: Hedge accounting
19. Financial risk management
The Group has exposure to the following financial risks:
–market risk;
–liquidity risk; and
–credit risk.
The Group’s overall financial risk management programme focuses primarily on maintaining a financial risk
profile that provides flexibility to implement the Group’s strategies, while optimising return on assets. Financial
risk management is centralised, which supports compliance with the financial risk management policies and
procedures set by the Board.
The Group uses derivatives, such as forwards, futures, options and swaps to manage its exposure to certain risks
as described in this section. Derivatives are measured at fair value.
Measurement differences between derivatives and the associated item being hedged can present volatility in
the Income Statement. To reduce this volatility the Group applies hedge accounting. Refer to Note 20 Hedge
accounting for further information.
Market risk
a) Foreign exchange risk
Nature and exposure of risk
Foreign exchange risk is the risk that changes in foreign exchange rates will affect the Group’s future cash flows or
fair value of financial instruments.
The Group is exposed to movements in foreign exchange rates through transactions and balances denominated
in foreign currencies. The Group’s exposure to foreign currency before applying risk management strategies are
as follows:
–forecast foreign currency transactions, which predominately includes the Group’s forecast sales transactions
which are mainly denominated in United States Dollars.
–net investments in foreign operations of $4,067 million (31 July 2021: $3,729 million). This amount excludes net
investments in foreign operations held for sale and borrowings held by the Group in the same currency as the
investment.
–borrowings denominated in foreign currency of $3,506 million (31 July 2021: $3,780 million).
–foreign currency receivables of $2,089 million (31 July 2021: $1,459 million) and payables of $1,075 million
(31 July 2021: $991 million).
How foreign exchange risk is managed
Forecast foreign currency transactions
The Group enters into foreign currency forward contracts and foreign currency options to manage foreign
exchange risk on the following forecast foreign currency transactions:
–forecast cash receipts from foreign currency sales for a period of up to 18 months within decreasing limits
approved by the Board; and
–up to 100% of other forecast foreign currency transactions.
Foreign operations
The Group uses foreign currency denominated borrowings and foreign currency swaps to manage foreign
exchange risk on net investments in foreign operations.
Foreign currency denominated borrowings
To the extent the Group has monetary assets in the same foreign currency as the borrowing, the Group has a
reduced exposure to foreign exchange risk. Foreign currency gains and losses relating to these balances are offset
in the Income Statement.
The Group uses cross-currency interest rate swaps (CCIRS) to manage residual foreign exchange and interest rate
risk on foreign currency denominated borrowings. CCIRS exchange fixed rate foreign currency borrowings and
interest payments into equivalent New Zealand Dollar-denominated amounts of principal with floating interest
rates. The Group’s policy is to maintain its net exposure to a foreign currency within predefined limits.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
40
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
19. Financial risk management continued
a) Foreign exchange risk continued
Receivables and payables denominated in foreign currency
The Group typically enters into foreign currency forward contracts and foreign currency options for 100% of its
net foreign currency receivables and payables which generate foreign exchange risk within the Income Statement.
Derivatives used to hedge the changes in the value of foreign currency receivables and payables are not hedge
accounted. Changes in the fair value of these derivatives provide an offset to the changes in the value of foreign
currency receivables and payables recognised in the Income Statement. These are recognised within other
operating expenses in the Income Statement.
Sensitivity analysis
The following table presents the Group’s sensitivity, after taking into consideration the impact of hedge
accounting, from a reasonably possible strengthening or weakening NZD against foreign currencies, with all other
variables held constant.
Assets and liabilities held for sale have been excluded from the sensitivity analysis in the following table.
GROUP $ MILLION
31 JULY 202231 JULY 2021
EQUITYPROFITEQUITYPROFIT
10% strengthening of the NZD5131035116
10% weakening of the NZD (617)(13)(366)(17)
b) Interest rate risk
Nature and exposure of risk
Interest rate risk is the risk that changes in interest rates will affect the Group’s future cash flows or fair value of
financial instruments.
Changes in interest rates expose the Group to changes in the fair value of borrowings subject to fixed interest
rates (fair value risk), and changes in future interest payments on borrowings subject to floating interest rates
(cash flow risk).
The Group is exposed to movements in interest rates on its interest-bearing borrowings. The Group’s exposure
before applying risk management strategies is $4,845 million (31 July 2021: $3,944 million).
How interest rate risk is managed
The Group issues fixed and floating rate debt and uses interest rate swaps (IRS) to manage interest rate exposure
on its borrowings within a Board approved target ratio of fixed and floating rate exposure.
Sensitivity analysis
The following table presents the Group’s sensitivity, after taking into consideration the impact of hedge
accounting, from a reasonably possible increase or decrease in interest rates, with all other variables held
constant. Hedge ineffectiveness relating to interest rate swaps that have been designated into hedge relationships
after their initial recognition contributes to $3 million of the impact on profit from a 100 basis point movement
(31 July 2021: $20 million).
Assets and liabilities held for sale have been excluded from the sensitivity analysis in the following table.
GROUP $ MILLION
31 JULY 202231 JULY 2021
EQUITYPROFITEQUITYPROFIT
100 basis point increase4834821
100 basis point decrease(50)(3)(55)(17)
A change in interest rates would also impact floating rate interest payments and receipts on the Group’s
borrowing and derivatives held at balance date. The impact of a change in interest rates on one-year contracted
cash flows is presented in the following table.
GROUP $ MILLION
31 JULY 202231 JULY 2021
100 basis point increase(7)(1)
100 basis point decrease71
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
41
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
19. Financial risk management continued
c) Commodity price risk
Nature and exposure of risk
Commodity price risk is the risk that changes in commodity prices will affect the Group’s future cash flows or fair
value of financial instruments.
The Group is exposed to dairy commodity price risk through changes in selling prices and the cost of milk. In
addition, the Group is a large purchaser of electricity and diesel and is exposed to changes in the cost of these
commodities.
How commodity price risk is managed
Dairy commodity price risk
The Group manages its exposure to dairy commodity price risk by:
–determining the most appropriate mix of products to manufacture based on expected milk supply and global
demand for dairy products;
–governing the length and terms of sales contracts, so that sales revenue is reflective of current market prices
and is, where possible, linked to Global Dairy Trade prices; and
–using dairy commodity derivative contracts to obtain a certain price for future sales, or the cost of milk, to
manage margin risk. The markets for dairy commodity derivatives are relatively limited, which reduces the
ability to manage earnings volatility. As markets for these derivatives grow, the use of dairy commodity
derivatives to manage dairy commodity price risk may increase.
Other commodity price risk
The Group manages its exposure to other commodity price risk through the use of derivative contracts, which are
transacted at Board approved levels, to hedge the cost of electricity and diesel.
Sensitivity analysis
The following table presents the Group’s sensitivity on its commodity derivatives, after taking into consideration
the impact of hedge accounting, from a reasonably possible increase or decrease in commodity prices, with all
other variables held constant. Commodity price sensitivity arises from the revaluation of derivative assets and
liabilities in the Statement of Financial Position at balance date.
GROUP $ MILLION
31 JULY 202231 JULY 2021
EQUITYPROFITEQUITYPROFIT
10% increase in commodity prices76354031
10% decrease in commodity prices(77)(35)(40)(31)
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
42
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
19. Financial risk management continued
Liquidity risk
Nature and exposure of risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. Timings of the gross contractual cash flows for the Group’s financial instruments are presented in the following tables.
GROUP $ MILLION
AS AT 31 JULY 2022
CARRYING AMOUNTCONTRACTUAL CASH FLOWS3 MONTHS OR LESS3-12 MONTHS1-5 YEARSMORE THAN 5 YEARS
Non-derivative financial liabilities
Borrowings
–Bank loans(999)(1,119)(17)(33)(1,069)–
–Commercial paper(98)(100)–(100)––
–Lease liabilities(438)(443)(26)(70)(210)(137)
–Capital notes(35)(41)–(1)(5)(35)
–NZX-listed bonds(250)(270)(3)(157)(110)–
–Medium-term notes(3,436)(4,031)(25)(117)(2,450)(1,439)
Bank overdraft(31)(31)(31)–––
Owing to suppliers(2,119)(2,119)(2,018)(101)––
Trade and other payables (excluding employee entitlements)(2,035)(2,035)(2,035)–––
Other financial liabilities(32)(32)(17)–(15)–
Financial guarantees issued
1
–(1)(1)–––
Total non-derivative financial liabilities(9,473)(10,222)(4,173)(579)(3,859)(1,611)
Derivative financial instruments
Gross settled derivatives
Inflow22,8407, 8 7 110,1533,5891,227
Outflow (23,476)(8,098)(10,605)(3,721)(1,052)
Total gross settled derivative financial instruments(639)(636)(227)(452)(132)175
Net settled derivatives2572741097097(2)
Total financial liabilities and derivatives(9,855)(10,584)(4,291)(961)(3,894)(1,438)
1 Maximum cash flows under guarantees provided by the Group.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
43
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
19. Financial risk management continued
GROUP $ MILLION
AS AT 31 JULY 2021
CARRYING AMOUNTCONTRACTUAL CASH FLOWS3 MONTHS OR LESS3-12 MONTHS1-5 YEARSMORE THAN 5 YEARS
Non-derivative financial liabilities
Borrowings
–Bank loans(11)(11)(6)(5)––
–Lease liabilities(523)(528)(27)( 74)(252)(175)
–Capital notes(35)(40)–(1)(4)(35)
–NZX-listed bonds(600)(639)(361)(7)(271)–
–Medium-term notes(3,903)(4,344)(126)(383)(2,116)(1,719)
Bank overdraft(20)(20)(20)–––
Owing to suppliers
1
(1,825)(1,825)(1,718)(107)––
Trade and other payables (excluding employee entitlements)(1,876)(1,876)(1,876)–––
Other financial liabilities(60)(60)(15)(6)(38)(1)
Financial guarantees issued
2
–(1)(1)–––
Total non-derivative financial liabilities(8,853)(9,344)(4,150)(583)(2,681)(1,930)
Derivative financial instruments
Gross settled derivatives
Inflow18,6626,8507, 57 72,7311,504
Outflow (18,524)(6,776)( 7, 5 62)(2,833)(1,353)
Total gross settled derivative financial instruments1421387415(102)151
Net settled derivatives1011202813709
Total financial liabilities and derivatives(8,610)(9,086)(4,048)(555)(2,713)(1,770)
1 Comparative information includes re-presentations for consistency with the current period.
2 Maximum cash flows under guarantees provided by the Group.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
44
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
19. Financial risk management continued
How liquidity risk is managed
The Group’s approach to managing liquidity risk is to ensure that it will always have sufficient funds to meet its
liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking
damage to the Group’s reputation.
The Group has a Board approved policy in place to ensure that it has sufficient cash or facilities on demand
to meet expected operational expenses for a period of at least 80 days, including the servicing of financial
obligations. This excludes the potential impact of extreme circumstances that cannot reasonably be predicted,
such as natural disasters. In such situations back-up funding lines are maintained and as set out in Fonterra’s
Constitution, the Group can defer payments to farmer shareholders if necessary.
The Group manages its liquidity by retaining cash and marketable securities, the availability of funding from an
adequate amount of committed credit facilities and the ability to close out market positions. The Group’s funding
facilities are reviewed at least annually, which is one of the key financial risk management activities undertaken by
the Group to ensure an appropriate maturity profile given the nature of the Group’s business. At balance date the
Group had undrawn lines of committed credit totalling $2,345 million (31 July 2021: $2,905 million).
Liquidity and refinancing risks are also managed by ensuring that the Group can maintain access to funding
markets throughout the world. To that end, the Group maintains debt issuance programmes in a number of key
markets and manages relationships with international investors.
The concentration of NZX-listed bonds and medium-term notes by currency is presented in the following table.
GROUP $ MILLION
AS AT
31 JULY 2022
AS AT
31 JULY 2021
New Zealand Dollar345908
Australian Dollar708894
United States Dollar1,4371,432
British Pound447488
European Euro559603
Chinese Renminbi190178
Total 3,6864,503
Credit risk
Nature and exposure of risk
Credit risk is the risk of loss to the Group due to customer or counterparty default on the Group’s receivable
balances. The Group’s maximum exposure to credit risk is represented by the carrying amounts of cash and cash
equivalents, trade and other receivables, long-term advances and derivative assets.
The Group has no significant concentrations of credit risk.
How credit risk is managed
The Group sets minimum credit quality requirements, credit limits and uses other credit mitigation tools to
manage its credit risk. The Group’s Board approved policy is to actively manage its exposure to credit risk through
the following actions:
Derivative contracts, cash and cash equivalents and other balances
–Use of financial counterparties that have a credit rating of at least ‘A-’ from Standard & Poor’s (or equivalent);
–Use of commodity counterparties that have a credit rating of at least ‘BBB-’ from Standard & Poor’s (or
equivalent) for commodity derivative contracts; and
–Posting or receiving margin in respect of derivative contracts transacted on exchanges. As at 31 July 2022 the
Group received $54 million (31 July 2021: received $14 million) of margin as collateral for derivative financial
instruments.
The Group further manages its credit risk through the following:
Trade and other receivables
–Application of credit limits, and credit mitigation tools, such as letters of credit.
Long-term advances
–Counterparty creditworthiness is assessed before the commencement of any long-term advances. Depending
on the nature and amount of the advance, they are subject to Board approval. The collectability of long-term
advances is monitored on a regular basis.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
45
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
20. Hedge accounting
Derivatives are measured at fair value. Refer to Note 25 Fair value measurement for information on how fair
value is determined.
The resulting gain or loss on re-measurement is recognised immediately in the Income Statement, unless
the derivative is designated into an effective hedge relationship as a hedging instrument, in which case the
timing of recognition in the Income Statement depends on the nature of the designated hedge relationship.
The Group may designate derivatives as:
–fair value hedges (where the derivative is used to manage the variability in the fair value of recognised
assets and liabilities);
–cash flow hedges (where the derivative is used to manage the variability in cash flows relating to
recognised liabilities or forecast transactions); or
–net investment hedges (where borrowings or derivatives are used to manage the risk of fluctuation in the
translated value of its foreign operations).
Hedge accounting is discontinued when the hedging instrument expires, is terminated, is exercised, or no
longer qualifies for hedge accounting.
Fair value hedges
For fair value hedges the following are recognised in the Income Statement:
–the change in fair value of the hedging instruments; and
–the change in the fair value of the underlying hedged item attributable to the hedged risk.
If the hedge no longer meets the criteria for hedge accounting, hedge accounting is discontinued. The
fair value adjustment to the carrying amount of the hedged item upon discontinuance is amortised and
recognised in the Income Statement over the remaining term of the original hedge. If the hedged item is sold
or extinguished any unamortised fair value adjustment is immediately recognised in the Income Statement.
Cash flow hedges
The effective portion of changes in the fair value of the hedging instruments are recognised in other
comprehensive income in the Statement of Comprehensive Income and accumulated in a separate reserve
in equity. Subsequently the cumulative amount is transferred to the Income Statement when the underlying
transactions are recognised in the Income Statement.
The ineffective portion of changes in the fair value of the hedging instruments are recognised immediately in
the Income Statement.
If the hedge no longer meets the criteria for hedge accounting, hedge accounting is discontinued. The
cumulative gain or loss recognised in other comprehensive income remains in the hedge reserve until the
forecast transaction occurs, or it is immediately recognised in the Income Statement if the transaction is no
longer expected to occur.
Net investment hedges
The effective portion of changes in the fair value of the hedging instruments are recognised in the Statement
of Comprehensive Income and transferred to the Income Statement when the foreign operation is disposed
of or sold.
The ineffective portion of changes in the fair value of the hedging instruments are recognised immediately in
the Income Statement.
Costs of hedging
The change in fair value of a hedging instrument relating to the time-value of foreign currency options,
and the foreign currency basis component of cross-currency interest rate swaps are recognised in other
comprehensive income and accumulated within hedge reserves in the Statement of Financial Position.
Subsequently, the cumulative amount is transferred to the Income Statement at the same time as the
hedged item impacts the Income Statement.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
46
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
20. Hedge accounting continued
The Group’s risk management activities described in Note 19 Financial risk management result in volatility
to the Income Statement caused by timing and measurement differences between hedging instruments
and the associated item being hedged. Where a hedge relationship between a hedged item and the hedging
instrument (e.g. a derivative) qualifies for hedge accounting, and the Group applies hedge accounting, the volatility
in the Income Statement caused by the timing and measurement differences between hedging instruments and
the associated hedged item is reduced. The Group applies the following hedge accounting activities.
Foreign exchange risk
Forecast foreign currency transactions
The Group applies cash flow hedge accounting where derivatives are used to manage foreign exchange risk on
forecast foreign currency transactions. The amount and maturity of the derivative and the forecast transaction is
aligned to ensure that the hedge relationship remains effective, with any undesignated costs of hedging accounted
for separately.
Hedge ineffectiveness arises if the amount of the forecast transactions falls below the amount of the designated
hedging instruments.
The Income Statement impact of hedge accounting effectiveness and ineffectiveness is recognised in revenue
from sale of goods.
Foreign operations
The Group’s net investments are designated in hedge relationships to the extent borrowings denominated in the
same foreign currency and foreign currency swaps are directly attributed to the net investment.
Hedge ineffectiveness arises if the carrying amount of the net investment falls below the amount of the
designated hedging instruments.
The Income Statement impact of hedge accounting effectiveness and ineffectiveness is recognised in other
operating expenses.
Foreign currency denominated borrowings
The Group applies hedge accounting to foreign currency denominated borrowings that are managed by CCIRS.
The amount and maturity of the CCIRS and the hedged debt is aligned to ensure that the hedge relationship
remains effective, with any undesignated costs of hedging accounted for separately.
The hedge relationship may be designated into separate cash flow hedges and fair value hedges to manage the
different components of foreign currency and interest rate risk:
–fair value hedge relationship where CCIRS are used to manage the interest rate and foreign currency risk in
relation to foreign currency denominated borrowings with fixed interest rates.
–cash flow hedge relationship where CCIRS are used to manage the variability in cash flows arising from interest
rate movements on floating interest rate payments and foreign exchange movements on payments of principal
and interest.
Hedge ineffectiveness arises in relation to CCIRS that have been designated in hedge relationships after their
initial recognition, or from changes in counterparty credit risk and cross currency basis spreads.
The Income Statement impact of hedge accounting effectiveness and ineffectiveness is recognised in net finance
costs and other operating expenses.
Interest rate risk
The Group applies hedge accounting to the borrowings and the associated IRS, for movements in benchmark
market interest rates (i.e. excluding any margin component).
Hedge ineffectiveness arises in relation to IRS that have been designated to hedge relationships after their initial
recognition or from changes in counterparty credit risk.
In specific situations, where changes in the fair value of fixed to floating IRS provide an offset to the changes in
the fair value of other associated floating-to-fixed IRS, hedge accounting is not applied. The changes in fair values
of these IRS offset each other and are recognised within net finance costs in the Income Statement.
The Income Statement impact of hedge accounting effectiveness and ineffectiveness is recognised in net
finance costs.
Commodity price risk
The Group applies cash flow hedge accounting where derivatives are used to manage commodity price risk
on certain forecast transactions. The amount and maturity of the derivative and the forecast transaction
is aligned to ensure that the hedge relationship remains effective.
Hedge ineffectiveness arises if the amount of the forecast transactions falls below the amount of the designated
hedging instruments.
The Income Statement impact of hedge accounting effectiveness and ineffectiveness is recognised in cost of
goods sold and other operating expenses.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
47
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
20. Hedge accounting continued
a) Hedging instruments designated in a hedge accounting relationship
Information about hedging instruments that the Group has designated in a hedge accounting relationship is presented in the following tables.
AS AT 31 JULY 2022
GROUP $ MILLION
CARRYING AMOUNT IN THE STATEMENT OF FINANCIAL POSITION
RISK AND HEDGING INSTRUMENTSMATURITY (MONTHS)
WEIGHTED AVERAGE
RATE/PRICENOMINAL AMOUNT
1
DERIVATIVE ASSETSDERIVATIVE LIABILITIESBORROWINGS
Foreign exchange risk – Forecast foreign currency transactions
Cash flow hedges
NZD:USD forwards and options (sales)1–180.66314,63642(610)–
USD:CNY forwards and options (sales)1–1 26.61570814(2)–
AUD:USD forwards (sales)1–1 20.7141651(4)–
USD:AUD forwards (purchases)1–300.7141254(2)–
AUD:AED forwards (sales)1–92.57346–––
Total15,68061(618)–
Foreign exchange risk – Foreign operations
Net investment hedges
AUD borrowings64–89––(89)
EUR borrowings28–157––(157)
NZD:CNY forwards54.34019–(1)–
Total265–(1)(246)
Foreign exchange risk and interest rate risk – Foreign currency denominated
borrowings
Cash flow and fair value hedges
NZD:USD CCIRS50–970.760/Floating1,184239––
NZD:GBP CCIRS170.361/Floating6239(206)–
NZD:EUR CCIRS280.656/Floating38610––
NZD:CNY CCIRS364.669/Floating17116––
Total2,364274(206)–
1 Nominal amount is the face value converted into New Zealand Dollars using the exchange rate at year-end, except for CCIRS which are converted using the weighted average contracted foreign exchange rate.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
48
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
AS AT 31 JULY 2022
GROUP $ MILLION
CARRYING AMOUNT IN THE STATEMENT OF FINANCIAL POSITION
RISK AND HEDGING INSTRUMENTSMATURITY (MONTHS)
WEIGHTED AVERAGE
RATE/PRICENOMINAL AMOUNT
1
DERIVATIVE ASSETSDERIVATIVE LIABILITIESBORROWINGS
Interest rate risk – Borrowings
Cash flow hedges
NZD IRS1– 602.43%4,193106(12)–
AUD IRS23–253.34%178–––
Total4,371106(12)–
Fair value hedges
NZD IRS8–40Floating250–(4)–
AUD IRS47– 6 4Floating534–(19)–
Total784–(23)–
Commodity price risk – Forecast transactions
Cash flow hedges
2
Fuel futures1–18$109.55255––
Milk Price futures and options3–27$8.501,291130––
Electricity futures1–45$119.8113828––
Total1,454163––
1 Nominal amount is the face value converted into New Zealand Dollars using the exchange rate at year-end, except for CCIRS which are converted using the weighted average contracted foreign exchange rate.
2 The weighted average prices for commodity hedges are presented as the price per barrel for fuel futures (shown in USD), kilogram of milk solid for milk price futures and options, and per megawatt hour for electricity futures.
20. Hedge accounting continued
a) Hedging instruments designated in a hedge accounting relationship continued
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
49
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
20. Hedge accounting continued
a) Hedging instruments designated in a hedge accounting relationship continued
AS AT 31 JULY 2021
GROUP $ MILLION
CARRYING AMOUNT IN THE STATEMENT OF FINANCIAL POSITION
RISK AND HEDGING INSTRUMENTSMATURITY (MONTHS)
WEIGHTED AVERAGE
RATE/PRICENOMINAL AMOUNT
1
DERIVATIVE ASSETSDERIVATIVE LIABILITIESBORROWINGS
Foreign exchange risk – Forecast foreign currency transactions
Cash flow hedges
NZD:USD forwards and options (sales)1–180.70711,205152(98)–
USD:CNY forwards and options (sales)1–126.6721,1173(18)–
AUD:USD forwards (sales)2–130.776721(4)–
Total12,394156(120)–
Foreign exchange risk – Foreign operations
Net investment hedges
AUD borrowings76–84––(84)
EUR borrowings40–164––(164)
NZD:CNY forwards114.60318–––
Total266––(248)
Foreign exchange risk and interest rate risk – Foreign currency denominated
borrowings
Cash flow and fair value hedges
NZD:USD CCIRS62–1090.760/Floating1,184227––
NZD:GBP CCIRS290.361/Floating62340(211)–
NZD:EUR CCIRS400.656/Floating38639––
NZD:CNY CCIRS484.669/Floating1715––
Total2,364311(211)–
1 Nominal amount is the face value converted into New Zealand Dollars using the exchange rate at year-end, except for CCIRS which are converted using the weighted average contracted foreign exchange rate.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
50
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
AS AT 31 JULY 2021
GROUP $ MILLION
CARRYING AMOUNT IN THE STATEMENT OF FINANCIAL POSITION
RISK AND HEDGING INSTRUMENTSMATURITY (MONTHS)
WEIGHTED AVERAGE
RATE/PRICENOMINAL AMOUNT
1
DERIVATIVE ASSETSDERIVATIVE LIABILITIESBORROWINGS
Interest rate risk – Borrowings
Cash flow hedges
NZD IRS3–602.39%4,01822(103)–
AUD IRS35–373.34%169–(14)–
Total4,18722(117)–
Fair value hedges
NZD IRS20–52Floating25010––
AUD IRS10 –76Floating55946––
Total80956––
Commodity price risk – Forecast transactions
Cash flow hedges
2
Fuel futures1–18$65.38133––
Milk Price futures and options3–27$6.9570783––
Electricity futures1–30$100.1510921––
Total829107––
1 Nominal amount is the face value converted into New Zealand Dollars using the exchange rate at year-end, except for CCIRS which are converted using the weighted average contracted foreign exchange rate.
2 The weighted average prices for commodity hedges are presented as the price per barrel for fuel futures (shown in USD), kilogram of milk solid for milk price futures and options, and per megawatt hour for electricity futures.
20. Hedge accounting continued
a) Hedging instruments designated in a hedge accounting relationship continued
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
51
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
20. Hedge accounting continued
b) Impact of hedge accounting
Information about the impact of hedge accounting on the Group’s Financial Statements is presented in the following tables.
GROUP $ MILLION
AS AT 31 JULY 2022YEAR ENDED 31 JULY 2022
RISK AND HEDGING INSTRUMENTS USED
ACCUMULATED COST OF
HEDGING
CHANGE IN
VALUE USED
TO CALCULATE HEDGE
EFFECTIVENESS
1
CHANGE IN
VALUE OF
HEDGING INSTRUMENT
RECOGNISED IN OCI
AMOUNT RECLASSIFIED
FROM HEDGING RESERVE
TO INCOME STATEMENT
FAIR VALUE HEDGE
ADJUSTMENTS
RECOGNISED IN THE
INCOME STATEMENT
GAIN/(LOSS)
2
HEDGE INEFFECTIVENESS
RECOGNISED IN THE
INCOME STATEMENT
GAIN/(LOSS)
Foreign exchange risk – Forecast foreign currency transactions
Cash flow hedges(56)(545)(973)409––
Foreign exchange risk – Foreign operations
Net investment hedges–22–––
Foreign exchange risk and interest rate risk – Foreign currency
denominated borrowings
Cash flow and fair value hedges(8)145145(82)5
Interest rate risk – Borrowings
Cash flow hedges–16810642–42
Fair value hedges–(26)––(79)–
Commodity price risk – Forecast transactions
Cash flow hedges–158127(148)–3
Total(64)N/A(724)308(161)50
1 For those borrowings in a net investment hedge, the change in value to calculate hedge effectiveness is for the year ended 2022.
2 For those borrowings in fair value hedges, life-to-date fair value hedge adjustments decrease the carrying amount of borrowings by $9 million.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
52
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
GROUP $ MILLION
AS AT 31 JULY 2021YEAR ENDED 31 JULY 2021
RISK AND HEDGING INSTRUMENTS USED
ACCUMULATED COST OF
HEDGING
CHANGE IN
VALUE USED TO
CALCULATE
HEDGE EFFECTIVENESS
1
CHANGE IN
VALUE OF
HEDGING INSTRUMENT
RECOGNISED
IN OCI
AMOUNT RECLASSIFIED
FROM HEDGING RESERVE
TO INCOME STATEMENT
FAIR VALUE HEDGE
ADJUSTMENTS
RECOGNISED IN THE
INCOME STATEMENT
GAIN/(LOSS)
2
HEDGE INEFFECTIVENESS
RECOGNISED IN THE
INCOME STATEMENT
GAIN/(LOSS)
Foreign exchange risk – Forecast foreign currency transactions
Cash flow hedges(24)19323(664)––
Foreign exchange risk – Foreign operations
Net investment hedges–1010–––
Foreign exchange risk and interest rate risk – Foreign currency
denominated borrowings
Cash flow and fair value hedges(14)189(42)57(152)(1)
Interest rate risk – Borrowings
Cash flow hedges–37051–45
Fair value hedges–54––(31)–
Commodity price risk – Forecast transactions
Cash flow hedges–107154(95)––
Total(38)N/A515(651)(183)44
1 For those borrowings in a net investment hedge, the change in value to calculate hedge effectiveness is for the year ended 2021.
2 For those borrowings in fair value hedges, life-to-date fair value hedge adjustments increase the carrying amount of borrowings by $260 million.
20. Hedge accounting continued
b) Impact of hedge accounting continued
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
53
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
20. Hedge accounting continued
c) Impact to reserves in equity
Hedge reserves
GROUP $ MILLION
AS AT
31 JULY 2022
AS AT
31 JULY 2021
Opening balance(26)101
Movements attributable to cash flow hedges
Change in value of effective derivative hedging instruments(726)505
Reclassifications to the Income Statement:
–As hedged transactions occurred 308(651)
Net change in the cost of hedging reserve(26)(30)
Tax credit12449
Total movement(320)(127)
Closing balance
1
(346)(26)
1 Included in the closing balance of the hedge reserves is a credit balance of $1 million (31 July 2021: credit balance of $1 million) relating to hedge
relationships for which hedge accounting is no longer applied.
Foreign currency translation reserve
GROUP $ MILLION
31 JULY 202231 JULY 2021
Opening balance(355)(229)
Movements attributable to net investments in foreign operations
and net investment hedges
Net translation loss on:
–Borrowings and derivative hedging instruments76(67)
–Net investments in foreign operations27(42)
Reclassifications to the Income Statement:
–Disposals of foreign operations(1)(14)
–Tax expense–(3)
Total movement102(126)
Closing balance
1
(253)(355)
1 Included in the closing balance of the foreign currency translation reserve is a debit balance of $26 million (31 July 2021: debit balance of
$22 million) relating to hedge relationships for which hedge accounting is no longer applied.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
54
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
20. Hedge accounting continued
d) Income Statement impact from derivatives not designated in a hedge relationship
In addition to derivatives that are designated and qualify for hedge accounting, the Group also holds certain
derivatives as economic hedges of foreign currency, commodity and interest rate exposure.
The impact of derivatives not designated in a hedging relationship is presented in the following table.
GROUP $ MILLION
DERIVATIVES NOT DESIGNATED IN A
HEDGING RELATIONSHIP
LOCATION OF GAIN/(LOSS) IN
INCOME STATEMENT31 JULY 202231 JULY 2021
Foreign currency contractsRevenue from sale of goods–4
Foreign currency contractsOther operating expenses
1
(182)25
Commodity contractsCost of goods sold(39)14
Commodity contractsOther operating expenses9(1)
Interest rate contractsFinance costs7(2)
Total(205)40
1 These predominantly relate to foreign currency contracts hedging net receivables. The revaluation of the net receivables also recognised in other
operating expenses is a gain of $207 million (31 July 2021: loss of $35 million).
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
55
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
Other
This section contains additional notes and disclosures that aid in understanding the Group’s position and
performance but do not form part of the primary sections.
This section includes the following notes:
Note 21: Taxation
Note 22: Contingent liabilities, provisions and commitments
Note 23: Related party transactions
Note 24: Subsidiaries
Note 25: Fair value measurement
Note 26: Offsetting of financial assets and liabilities
Note 27: Net tangible assets per quoted equity security
21. Taxation
Tax expense comprises current and deferred tax. Tax expense, including the tax consequences of
distributions to farmer shareholders, is recognised in the Income Statement. The tax consequences of
distributions to farmer shareholders are recognised in the year to which the distribution relates. Other
than distributions to farmer shareholders, tax consequences of items recognised directly in equity are also
recognised in equity.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax
rates enacted or substantively enacted at balance date, and any adjustment to tax payable or receivable in
respect of previous years.
Deferred tax arises due to certain temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and those for taxation purposes. Deferred tax is measured at the
tax rate that is expected to apply to the temporary differences when they reverse, based on laws that have
been enacted or substantively enacted at balance date.
Deferred tax is not recognised on the following temporary differences:
–the initial recognition of goodwill;
–the initial recognition of assets and liabilities in a transaction that is not a business combination and that
affects neither accounting nor taxable profit; and
–differences relating to investments in subsidiaries and equity accounted investees to the extent that
the timing of the reversal is controlled by the Group and it is probable that they will not reverse in the
foreseeable future.
In determining the probability of reversal, consideration is taken of whether the related assets are held for
sale, future expectations of exiting, and if applicable, the impact any exit would have on the crystallisation of
the deferred tax.
Deferred tax assets are recognised to the extent it is probable that future taxable profits will be available
against which the temporary differences can be utilised.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
56
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
21. Taxation continued
a) Taxation – Income Statement
The total tax expense in the Income Statement is summarised in the following table.
GROUP $ MILLION
31 JULY 202231 JULY 2021
Current tax expense11883
Prior period adjustments to current tax(9)11
Deferred tax movements:
–Origination and reversal of temporary differences609
Tax expense169103
The taxation charge that would arise at the standard rate of corporation tax in New Zealand is reconciled to the
tax expense as follows:
GROUP $ MILLION
31 JULY 202231 JULY 2021
Profit before tax from continuing operations830635
Prima facie tax expense at 28%232178
(Deduct)/add tax effect of:
–Effect of tax rates in foreign jurisdictions (11)(9)
–Non-deductible expenses/additional assessable income9585
–Non-assessable income/additional deductible expenses(62)(85)
–Prior year (over)/under provision(9)11
Tax expense before distributions and deferred tax245180
Effective tax rate before distributions and deferred tax29.5%28.3%
Tax effect of distributions to farmer shareholders(79)(77)
Tax expense before deferred tax166103
Effective tax rate before deferred tax20.0%16.2%
(Deduct)/add tax effect of:
–Origination and reversal of other temporary differences2(2)
–Losses of overseas Group entities not recognised12
Tax expense from continuing operations169103
Effective tax rate20.4%16.2%
Imputation credits
Imputation credits available for use in subsequent reporting periods 2020
Tax losses
Gross tax losses available for which no deferred tax asset has
been recognised

54

45
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
57
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
21. Taxation continued
b) Taxation – Statement of Financial Position
Deferred tax assets and deferred tax liabilities relate to the following:
GROUP $ MILLION
AS AT 31 JULY 2022AS AT 31 JULY 2021
DEFERRED
TAX ASSET
DEFERRED
TAX LIABILITYNET
DEFERRED
TAX ASSET
DEFERRED
TAX LIABILITYNET
Deferred tax
Property, plant and equipment1,613(1,658)(45)1,589(1,637)(48)
Intangible assets–(380)(380)–(380)(380)
Right-of-use assets117(109)8142(134)8
Derivative financial instruments131–13117–17
Employee entitlements93–9385–85
Inventories79–7945–45
Receivables, payables and provisions92–9282–82
New Zealand tax losses348–348434–434
Offshore tax losses187–187215–215
Other9(21)(12)7(30)(23)
Total before offsetting 2,669(2,168)5012,616(2,181)435
Offset adjustment(2,118)2,118–(2,156)2,156–
Total551(50)501460(25)435
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
58
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
21. Taxation continued
b) Taxation – Statement of Financial Position continued
GROUP $ MILLION
31 JULY 202231 JULY 2021
Movements for the year
Opening balance435401
Recognised in the Income Statement
1
(60)(9)
Recognised directly in other comprehensive income12446
Foreign currency translation2(3)
Closing balance501435
1 Comparative information has been re-presented for consistency with the current period.
Tax losses
Judgement is involved in assessing the availability of future taxable income against which tax losses carried
forward can be utilised.
New Zealand tax losses
The New Zealand tax consolidated group generated taxable income in the current year. The deferred tax asset
relating to New Zealand tax losses of $348 million (31 July 2021: $434 million) has been recognised on the basis
that taxable income will be generated in the future against which the tax losses can be utilised.
The key assumptions in the assessment of future taxable income are New Zealand earnings, and the
tax-deductible dividend. The estimate of New Zealand earnings is based on performance of the New Zealand tax
consolidated group relative to the overall Group. This ratio has been applied to the profit before tax forecast in
the Group’s three-year business plan. The tax-deductible dividend assumption is based on the Group’s Dividend
Policy. The Group determines its Dividend Policy and therefore has the ability to influence utilisation of the losses.
The time horizon for utilising these losses is estimated at seven years (31 July 2021: seven years). Changes in
the key assumptions used could impact the expected time horizon for utilisation of the tax losses, for example
higher dividends could extend the utilisation horizon and could impact the carrying amount of deferred tax assets
available to be utilised against future taxable profits. A reasonably possible change in the key assumptions does
not change the carrying amount of the deferred tax asset recognised.
Offshore tax losses
Gross tax losses of $54 million reflecting a deferred tax asset of $15 million (31 July 2021: $45 million
gross, deferred tax asset of $14 million) relating to offshore entities have not been recognised as they may
not be utilised.
Deferred tax liabilities
Earnings made by foreign subsidiaries could be subject to withholding and other taxes on remittance. Deferred
tax liabilities are not recognised in respect of unremitted earnings that are considered indefinitely reinvested in
foreign subsidiaries. During the year, the Group assessed the likelihood of earnings being remitted to New Zealand
and has recorded a deferred tax liability of $21 million (31 July 2021: $30 million).
As at 31 July 2022, unremitted earnings that are considered indefinitely reinvested in foreign subsidiaries amount
to $185 million (31 July 2021: $128 million). The Group made a judgement not to recognise deferred tax liabilities
in respect of these amounts because it can control the timing and the manner in which the associated temporary
difference will reverse. This includes controlling the timing of dividends, and in the event of divestments made
because of the strategic review, the manner in which divestment proceeds are remitted, and therefore the
associated tax consequences.
Uncertain Tax Positions
In determining the amount of current and deferred tax, the Group takes into account the effect of uncertain
tax positions and whether additional taxes, penalties and interest may be due. The Group operates in several
different tax jurisdictions. This leads to complex tax issues. The ultimate decision regarding these complex
tax issues is often outside the control of the Group and depends on the efficiency of the legal processes in
the relevant tax jurisdiction. The Group believes that its estimation of accruals for tax liabilities are adequate
for all open tax years based on its assessment of many factors, including interpretations of tax law and prior
experience. This assessment relies on estimates and assumptions about future events. New information may
become available that causes the Group to change its estimate of uncertain tax positions. Such changes to
tax liabilities will affect tax expense in the period that such determination is made.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
59
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
22. Contingent liabilities, provisions and commitments
Provisions are recognised in the Statement of Financial Position only where the Group has a present
legal or constructive obligation. This obligation must be the result of a past event, when it is probable that
an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount
can be made.
Estimates and assumptions are made in determining the likelihood, amount and timing of cash outflows
when the outcome is uncertain. Legal counsel or other experts are consulted on matters that may give rise
to a provision or a contingent liability.
In the normal course of business, the Group is exposed to claims and legal proceedings that may in some cases
result in costs.
In June 2020 a class action was filed in the Supreme Court of Victoria against Fonterra Australia Pty. Ltd., Fonterra
Milk Australia Pty. Ltd. and Fonterra Brands (Australia) Pty. Ltd. (collectively, Fonterra Australia) by Geoffrey and
Lynden Iddles on behalf of farmers who supplied milk to Fonterra Australia during the 2015/2016 season. The
class action relates to actions taken by Fonterra Australia in connection with its milk price in the 2015/2016
season including the manner in which Fonterra Australia set its opening milk price and forecast closing milk price
at the outset of that season, its communications with suppliers about the milk price throughout the season,
and its reduction of the milk price in May 2016. The plaintiffs are alleging that Fonterra Australia breached its
contracts with suppliers, engaged in misleading and deceptive conduct and engaged in unconscionable conduct
in connection with these matters. Fonterra is vigorously defending these claims, with compulsory mediation and
the trial scheduled for later in 2022.
GROUP $ MILLION
AS AT
31 JULY 2022
AS AT
31 JULY 2021
Current provisions7072
Non-current provisions7982
Total provisions149154
A breakdown of total provisions is presented in the following table.
GROUP $ MILLION
EMPLOYEE
RELATED
PROVISIONS
OTHER
PROVISIONS
TOTAL
PROVISIONS
As at 1 August 2021
1
10846154
Additional provisions20103123
Unused amounts reversed(44)(17)(61)
Charged to Income Statement(24)8662
Charged to equity(3)–(3)
Utilised during the year(7)(52)(59)
Foreign currency translation(5)–(5)
As at 31 July 20226980149
1 Categories have been re-presented for consistency with the current period.
Employee related provisions include defined benefit scheme obligations, other obligations that fall due on
termination of employment, and long-term employee benefits.
Other provisions include obligations relating to customs and duties, legal matters, product quality claims and
other claims arising in the normal course of business. The timing and amount of settlement is uncertain as it
depends on the outcome of judicial proceedings or commercial negotiations relating to each individual claim.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
60
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
22. Contingent liabilities, provisions and commitments continued
At year end the Group was committed to future capital expenditure for:
GROUP $ MILLION
AS AT
31 JULY 2022
AS AT
31 JULY 2021
Buildings2019
Plant, vehicles and equipment19292
Software132
Total commitments225113
The above table does not include lease commitments. Refer to Note 17 Leases for information about the Group’s
lease commitments.
23. Related party transactions
Information about transactions with related parties and year end balances that arose from those transactions are
presented within this note.
a) Key management personnel remuneration
Key management personnel comprise members of the Board and members of the Fonterra Management Team.
GROUP $ MILLION
31 JULY 202231 JULY 2021
Short-term employee benefits
1
2121
Long-term employee benefits51
Directors’ remuneration32
Total key management personnel remuneration2924
1 In addition to the amount disclosed in the table above, the Group has previously recognised a provision of $2 million relating to the pending
judicial interpretation of the requirements of the Holidays Act 2003 for former key management personnel. This interpretation was concluded
in the current year and the Group released the provision.
b) Transactions with related parties during the year
Transactions with related parties are on normal trade terms and no balances are secured.
GROUP $ MILLION
31 JULY 202231 JULY 2021
Equity accounted investees
Revenue from the sale of goods
1
8283
Sale of services
2
47
Royalty and other income–1
Dividends received68
Interest income from financing arrangements–1
Purchases of goods
3
(81)(61)
Purchases of services
4
(167)(171)
Key management personnel
Purchases of goods
5
(157)(135)
Sale of goods
6
88
Dividends paid32
1 Goods sold are primarily commodity products.
2 Services provided include management fees.
3 Goods purchased are primarily commodity products.
4 Services provided are primarily freight services.
5 Purchases from key management personnel primarily relate to milk supplied by farmer shareholder Directors.
6 Sales to key management personnel primarily related to sales through Farm Source™ retail stores.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
61
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
23. Related party transactions continued
c) Outstanding balances with related parties
GROUP $ MILLION
AS AT
31 JULY 2022
AS AT
31 JULY 2021
Equity accounted investees
Total receivables arising from the sale of goods or services¹1925
Total payables arising from the purchase of goods or services(14)(9)
Key management personnel
Total payables and provisions arising from remuneration
2
(22)(16)
Total payables arising from the sale or purchase of goods or services
3
(24)(21)
1 As at 31 July 2022, there was no provision for impairment of receivables from equity accounted investees (31 July 2021: nil).
2 In addition to the amount disclosed in the table above, the Group has previously recognised a provision of $2 million relating to the pending
judicial interpretation of the requirements of the Holidays Act 2003 for former key management personnel. This interpretation was concluded
in the current year and the Group released the provision.
3 Payables to key management personnel relate to amounts owing for milk supplied by farmer shareholder Directors and are recognised in owing
to suppliers.
d) Financial guarantees
The Group provides financial guarantees for certain equity accounted investees. At 31 July 2022, the aggregate
drawn down amount of equity accounted investees’ liabilities for which the Group is jointly and severally liable
is $1 million (31 July 2021: $1 million).
e) Transactions with related entities
As part of the administration of Trading Among Farmers, the Group entered into an Authorised Fund Contract to
provide administrative services in relation to the Fund and meet the operating expenses of the Fund. In addition,
the Group has agreed to provide corporate facilities, support functions and other services at no cost to the Fund.
f ) Commitments
The Group has prospective commitments with related parties including contracts with equity accounted
investments for the sale, supply and purchase of dairy products, energy and the provision of various
management services.
24. Subsidiaries
Subsidiaries are entities controlled by the Group. Subsidiaries are consolidated from the date the Group
gains control until the date on which control ceases.
Non-controlling interests are allocated their share of profit after tax in the Income Statement and are
presented within equity in the Statement of Financial Position separately from equity attributable to equity
holders of the Co-operative. The effect of all transactions with non-controlling interests that change the
Group’s ownership interest but do not result in a change in control are recorded in equity. Where control is
lost, the remaining interest in the investment is remeasured to fair value and any surplus or deficit arising
from that remeasurement is recognised in the Income Statement.
The Group’s subsidiaries are involved in the marketing, distribution, processing and financing of dairy products.
All Group subsidiaries have a balance date of 31 July unless otherwise indicated. Subsidiaries with different
balance dates from that of the Group are due to legislative requirements in the country the entities are domiciled.
The Group holds investments in certain countries that have restrictions on the repatriation of funds back to
New Zealand. This does not result in any significant restriction on the flow of funds for the Group.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
62
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
24. Subsidiaries continued
The significant subsidiaries of the Group are presented in the following table.
OWNERSHIP INTERESTS (%)
SUBSIDIARY NAME
COUNTRY OF INCORPORATION
AND PRINCIPAL PLACE OF BUSINESS
AS AT
31 JULY 2022
AS AT
31 JULY 2021
New Zealand Milk (Australasia) Pty LimitedAustralia100100
Fonterra Australia Pty Limited¹Australia100100
Fonterra Brands (Australia) Pty Limited¹Australia100100
Dairy Partners Americas Brasil Limitada²Brazil5151
Soprole Inversiones S.A.²Chile99.999.9
Comercial Santa Elena S.A.³Chile99.999.9
Soprole S.A.³Chile99.999.9
Prolesur S.A.³Chile99.999.9
Fonterra Commercial Trading (Shanghai)
Company Limited²China100100
Tangshan Fonterra Dairy Farm Limited
2,4
China10085
Fonterra Brands (Hong Kong) LimitedHong Kong100100
Fonterra Brands Indonesia, PTIndonesia100100
Fonterra Brands (Malaysia) Sdn BhdMalaysia100100
Fonterra (Europe) Coöperatie U.A.Netherlands100100
Fonterra Europe Manufacturing B.V.Netherlands100100
Fonterra (New Zealand) LimitedNew Zealand100100
Fonterra Brands (New Zealand) LimitedNew Zealand100100
Fonterra Dairy Solutions LimitedNew Zealand100100
Fonterra Ingredients LimitedNew Zealand100100
Fonterra LimitedNew Zealand100100
New Zealand Milk Brands LimitedNew Zealand100100
RD1 LimitedNew Zealand100100
Kotahi Logistics LPNew Zealand9091
Fonterra Brands (Singapore) Pte LimitedSingapore100100
Fonterra Brands Lanka (Private) LimitedSri Lanka100100
Fonterra (USA) Inc.United States100100
The Group’s ownership interest of the following entities is 50% or less. However, they have been consolidated on
the basis that the Group controls them through its exposure or rights to variable returns and the power to affect
those returns.
OWNERSHIP INTERESTS (%)
OVERSEAS SUBSIDIARIES 50% OR LESS OWNERSHIP
COUNTRY OF INCORPORATION
AND PRINCIPAL PLACE OF BUSINESS
AS AT
31 JULY 2022
AS AT
31 JULY 2021
Fonterra (Japan) LimitedJapan5050
Fonterra Brands (Middle East) L.L.C.UAE4949
In addition to the entities above, the Group controls the Fonterra Shareholders’ Fund and Fonterra Farmer
Custodian Limited and consolidates these two entities. The trustees of the Fonterra Farmer Custodian Trust
own the legal title to all of the shares of the Custodian. The Fund is a managed investment scheme with an
independent trustee. In concluding that the Group controls the Fund and the Custodian, the Directors took into
consideration that they form an integral part of the structure and operation of Trading Among Farmers.
1 These entities are subsidiaries of New Zealand Milk (Australasia) Pty Limited.
2 Balance date 31 December.
3 Balance date 31 December and these entities are subsidiaries of Soprole Inversiones S.A.
4 The Group purchased the 15% non-controlling interest in January 2022. Refer to Note 2 Divestments for more information.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
63
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
25. Fair value measurement
The fair value is the price that would be received to sell an asset, or paid to transfer a liability, in an orderly
transaction between market participants at the measurement date.
The fair values of financial assets and liabilities are calculated by reference to quoted market prices where
that is possible. A market is regarded as active if quoted prices are readily and regularly available from an
exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent
actual and regularly occurring market transactions on an arm’s length basis.
If quoted market prices are not available, the methodology used to calculate the fair values of financial
assets and liabilities is to identify the expected cash flows under the terms of each specific contract and
then discount these values back to the present value. These models use as their basis independently sourced
market data where it is available and rely as little as possible on entity-specific estimates.
The calculation of the fair value of financial instruments reflects the impact of credit risk where applicable.
Specific valuation techniques used to value financial instruments include:
–the fair value of foreign exchange contracts is determined using observable currency exchange rates,
option volatilities and interest rate yield curves;
–the fair value of interest rate contracts is calculated as the present value of the estimated future cash
flows based on observable interest rate yield curves;
–the fair value of commodity contracts that are not exchange traded is determined by calculating the
present value of estimated future cash flows based on observable quoted prices for similar instruments;
and
–the fair value on the hedged risks of borrowings and long-term advances that are not exchange traded is
calculated as the present value of the estimated future cash flows based on observable currency exchange
rates and interest rate yield curves.
Fair value hierarchy
The fair value hierarchy described below is used to provide an indication of the level of estimation or
judgement required in determining fair value:
–Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
–Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or
liability either directly (i.e. as prices) or indirectly (i.e. derived from prices).
–Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable
inputs).
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period
during which the change occurred.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
64
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
25. Fair value measurement continued
The fair value hierarchy for assets and liabilities measured at fair value are presented in the following table.
GROUP $ MILLION
LEVEL 1LEVEL 2LEVEL 3
AS AT
31 JULY 2022
AS AT
31 JULY 2021
AS AT
31 JULY 2022
AS AT
31 JULY 2021
AS AT
31 JULY 2022
AS AT
31 JULY 2021
Measured at fair value on a recurring basis
Derivative assets
–Commodity derivatives21110774––
–Foreign exchange derivatives––64185––
–Interest rate derivatives¹––382390––
Derivative liabilities
–Commodity derivatives(40)(2)(3)–––
–Foreign exchange derivatives––(760)(102)––
–Interest rate derivatives¹––(243)(339)––
Emissions units held for trading3924––––
Investments in shares242018183622
Measured at fair value on a non-recurring basis
Net liabilities held for sale––––(155)(80)
Fair value234149(535)156(119)(58)
1 Includes cross-currency interest rate swaps.
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
65
CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
25. Fair value measurement continued
The fair value hierarchy for each class of financial asset and liability where the carrying amount differs from the fair value is presented in the following table.
GROUP $ MILLION
FAIR VALUE
CARRYING AMOUNTLEVEL 1LEVEL 2
AS AT
31 JULY 2022
AS AT
31 JULY 2021
AS AT
31 JULY 2022
AS AT
31 JULY 2021
AS AT
31 JULY 2022
AS AT
31 JULY 2021
Financial assets
Long-term advances154163––153182
Financial liabilities
Borrowings
–NZX-listed bonds(250)(600)(246)(611)––
–Capital notes(35)(35)(34)(35)––
–Medium-term notes(3,436)(3,903)––(3,511)(4,056)
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CONTENTS

Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
26. Offsetting of financial assets and liabilities
Financial assets and liabilities are offset, and the net amount reported in the Statement of Financial Position, where there currently is a legally enforceable right to set off the recognised amounts and there is an intention to settle
on a net basis or realise the asset and settle the liability simultaneously.
The Group enters into various master netting arrangements or similar agreements that do not meet the criteria for offsetting in the Statement of Financial Position but still allow for the related amounts to be offset in certain circumstances.
These principally relate to derivative transactions under ISDA (International Swap and Derivative Association) agreements where each party has the option to settle amounts on a net basis in the event of default of the other party.
Financial assets and financial liabilities subject to offsetting, enforceable master netting arrangements and other agreements are presented in the following table.
GROUP $ MILLION
AMOUNTS OFFSET IN THE STATEMENT OF FINANCIAL POSITION
GROSS FINANCIAL ASSETS/
(LIABILITIES)
GROSS FINANCIAL ASSETS/
(LIABILITIES) SET OFF
NET FINANCIAL ASSETS/
(LIABILITIES) PRESENTEDAMOUNTS NOT OFFSETNET
Derivative financial assets944(280)664(444)220
Trade and other receivables (excluding prepayments)2,523(111)2,412–2,412
3,467(391)3,076(444)2,632
Derivative financial liabilities(1,326)280(1,046)363(683)
Total trade and other payables (excluding employee entitlements)(2,035)–(2,035)66(1,969)
Owing to suppliers(2,230)111(2,119)–(2,119)
Borrowings(5,256)–(5,256)15(5,241)
(10,847)391(10,456)444(10,012)
As at 31 July 2022( 7, 3 8 0 )–( 7, 3 8 0 )–( 7, 3 8 0 )
Derivative financial assets
851(165)686(337)349
Trade and other receivables (excluding prepayments)1,841(94)1 ,747–1 ,747
2,692(259)2,433(337)2,096
Derivative financial liabilities(608)165(443)292(151)
Total trade and other payables (excluding employee entitlements)(1,876)–(1,876)45(1,831)
Owing to suppliers(1,919)94(1,825)–(1,825)
(4,403)259(4,144)337(3,807)
As at 31 July 2021(1,711)–(1,711)–(1,711)
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Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2022
27. Net tangible assets per quoted equity security
Net tangible assets is calculated as net assets less intangible assets.
GROUP
AS AT
31 JULY 2022
AS AT
31 JULY 2021
Net tangible assets per security
$ per equity instrument on issue2.862.87
Equity instruments on issue (million)1,6131,613
FONTERRA ANNUAL REVIEW 2022
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Independent Auditor’s Report
To the shareholders of Fonterra Co-operative Group Limited
Report on the audit of the consolidated financial statements
Opinion
In our opinion, the consolidated financial statements of Fonterra Co-operative Group Limited (the ’Company’)
and its subsidiaries (the ‘Group’) on pages 3 to 68:
i. present fairly in all material respects the Group’s financial position as at 31 July 2022 and its financial
performance and cash flows for the year ended on that date; and
ii. comply with New Zealand Equivalents to International Financial Reporting Standards and International
Financial Reporting Standards.
We have audited the accompanying consolidated financial statements which comprise:
— the consolidated statement of financial position as at 31 July 2022;
— the consolidated income statement, statements of other comprehensive income, changes in equity
and cash flows for the year then ended; and
— notes, including a summary of significant accounting policies and other explanatory information.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 International Code
of Ethics for Assurance Practitioners (including International Independence Standards) (New Zealand) issued by
the New Zealand Auditing and Assurance Standards Board and the International Ethics Standards Board for
Accountants’ International Code of Ethics for Professional Accountants (including International Independence
Standards) (‘IESBA Code’), and we have fulfilled our other ethical responsibilities in accordance with these
requirements and the IESBA Code.
Our responsibilities under ISAs (NZ) are further described in the Auditor’s responsibilities for the audit of the
consolidated financial statements section of our report.
Our firm has also provided other services to the Group that are related to our role as the Group’s auditor, such as
assurance and agreed upon procedures services. This includes an engagement to provide a separate reasonable
assurance report in connection with the Farmgate Milk Price. A copy of this assurance report is attached as an
appendix to Fonterra’s Farmgate Milk Price Statement. Subject to certain restrictions, partners and employees
of our firm may also deal with the Group on normal terms within the ordinary course of trading activities of the
business of the Group. These matters have not impaired our independence as auditor of the Group. The firm has
no other relationship with, or interest in, the Group.
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Taken together, the subsidiaries in scope for the Group audit accounted for 85% of the Group’s revenue and 87%
of the Group’s total assets. For the remaining subsidiaries, we performed analysis at an aggregated Group level to
confirm our assessment that there were no significant risks of material misstatement associated with them.
We assigned materiality levels to in scope subsidiaries for performance of audits and specified audit procedures.
These were lower than the materiality level for the Group as a whole, ranging from $5 million to $40 million, and
determined with reference to the size and risk profile of the subsidiary.
We visited subsidiary locations in New Zealand, Australia, Chile and the Netherlands. We held meetings with
management responsible for the financial information of all in scope subsidiaries.
We led the participation of overseas KPMG audit teams in the Group audit. We issued detailed audit instructions
to auditors of in scope subsidiaries. These instructions set out the significant audit areas that we required audit
teams to consider, and the information required to be reported back to the Group audit team. We held audit
planning meetings with overseas KPMG audit teams subject to both audit and specified audit procedures to
explain our audit instructions and discuss their audit plans. In addition, we held meetings to discuss the findings
they reported to us in more detail.
We audited the Group consolidation, financial statement disclosures and a number of complex items centrally
in New Zealand. These included general IT controls, controls operated through Fonterra’s shared service centre
environment, revenue recognition, the cost of New Zealand sourced milk, impairment, accounting for divestments
and assets held for sale, taxation and financial instruments.
Independent Auditor’s Report (CONTINUED)
Materiality
The scope of our audit was influenced by our application of materiality. Materiality helped us to determine the
nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually
and on the consolidated financial statements as a whole. The materiality for the consolidated financial statements
as a whole was set at $60 million determined with reference to a benchmark of the cost of New Zealand sourced
milk. We chose the benchmark because, in our view, this is a key measure of the Group’s performance.
Scoping
The scope of our audit is designed to ensure that we perform adequate work to be able to give an opinion on
the consolidated financial statements as a whole, taking into account the structure of the Group, the financial
reporting systems, processes and controls, and the industry in which it operates.
In establishing the overall approach to our audit, we considered the centralised nature of the Group’s operations,
the risk profile of countries where the Group operates, and changes taking place within the business. We also
considered the financial significance of each business unit together with any local statutory audit requirements.
The Group financial statements are a consolidation of over 100 individual subsidiaries and equity accounted
investees. We scoped in 12 subsidiaries in New Zealand, Australia, Chile, and the USA to be subject to audit due to
their financial significance and risk profile. We undertook audits of these subsidiaries ourselves, or by instructing
participating overseas KPMG audit teams. In addition, we performed specified risk-focused audit procedures
on certain transactions and balances in respect of a further 4 subsidiaries in Chile, Japan, the Netherlands and
Singapore, as well as 3 subsidiaries accounted for as held for sale during the year in Brazil, China and New Zealand.
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THE KEY AUDIT MATTERHOW THE MATTER WAS ADDRESSED IN OUR AUDIT
Revenue recognition
Refer to Note 3 to the financial statements.
We considered the recognition of revenue from contracts with key customers and
distributors to be a key audit matter due to:
— the significance of the Group’s $23.0 billion of revenue to the financial statements as
a whole;
— the level of judgement involved in establishing the timing and amount of revenue
recognised for certain customers and distributors, in particular judgement related to
agent versus principal considerations; and
— the extent of audit effort required to examine the Group’s contracts with customers
in the context of the size and complexity of this area, and the requirement under
auditing standards for us to consider fraud risk associated with revenue recognition.
The procedures we performed to evaluate whether revenue had been recognised appropriately included:
— identifying and testing relevant controls over revenue recognition, and using data analytics routines to evaluate 100% of sales transactions
undertaken through the Group’s two core ERP systems (representing 85% of Group revenue);
— assessing the Group’s revenue recognition accounting policies, and evaluating the application of these policies to actual contracts with
customers as noted below;
— evaluating contractual arrangements with key customers and distributors through discussion with management and inspection of the underlying
documentation, as well as sample testing other sales arrangements; and
— performing other audit procedures specifically designed to address the risk of management override of controls including journal entry testing,
applying particular focus to the timing of revenue transactions.
We completed these procedures and have no matters to report.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements in the current period. We summarise below those matters and our key audit
procedures to address those matters in order that the shareholders as a body may better understand the process by which we arrived at our audit opinion. Our procedures were undertaken in the context of and solely for the purpose of
our statutory audit opinion on the consolidated financial statements as a whole and we do not express discrete opinions on separate elements of the consolidated financial statements.
Independent Auditor’s Report (CONTINUED)
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
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THE KEY AUDIT MATTERHOW THE MATTER WAS ADDRESSED IN OUR AUDIT
Goodwill and brands
Refer to Notes 7 and 18 to the financial statements.
We considered the Group’s annual impairment testing of goodwill and brands to
be a key audit matter due to the significance of the balance of $1.8 billion to the
financial statements as a whole and the level of judgement involved in determining the
methodology and assumptions used in the testing.
$0.8 billion of goodwill and brands is included within two cash generating units (‘CGUs’),
which are tested using discounted cash flow models:
— Fonterra Brands New Zealand (‘FBNZ’) ($511 million of goodwill and brands); and
— Fonterra Australia ($288 million of goodwill and brands).
The Group’s portfolio of consumer & foodservice brands within the Asia Pacific segment
of $0.7 billion are tested using the relief from royalty valuation method.
We focused on the significant forward-looking assumptions the Group applied in their
impairment testing, including:
— forecast cash flows, taking into account the Group’s profit improvement plans for
FBNZ and Fonterra Australia;
— branded consumer & foodservice sales forecasts and market royalty rates appropriate
to each brand; and
— terminal growth rates and discount rates, as the Group’s models are highly sensitive
to small changes in these assumptions.
In addition to the above, the carrying amount of the Group’s net assets at 31 July 2022
was $6.9 billion whilst the market capitalisation of Fonterra Co-operative Group Limited
was $4.4 billion. This is an indicator of impairment and required additional analysis and
interpretation.
The procedures we performed to evaluate the impairment assessments included:
— assessing whether the methodology adopted was consistent with accepted valuation approaches of IAS 36 Impairment of Assets;
— evaluating the significant assumptions by comparing to historical trends, approved budgets, business plans and external market data;
— comparing the discount rates and terminal growth rates applied to the estimated future cash flows to relevant benchmarks using KPMG
valuation specialists;
— challenging the above assumptions and judgements by performing sensitivity analysis, considering a range of likely outcomes based on various
scenarios;
— evaluating the estimate of the recoverable amount of the Group as a whole, including evaluating the work performed by the Group’s external
valuation specialist; and
— considering the appropriateness of the disclosures in the financial statements.
No impairment of goodwill was recognised. However, the Group recognised an impairment of brands amounting to $34 million.
We found the impairment testing methodologies to be consistent with IAS 36. We found the discount and terminal growth rates were in an
acceptable range, and that the significant assumptions were largely supported by comparison to the sources we considered.
For FBNZ, our scenario analysis indicated there is limited headroom in the recoverable amount over the carrying value, and there are reasonably
possible scenarios that would result in impairment (which are disclosed in Note 18).
For Anlene, Anmum and Chesdale, our scenario analysis indicated that the impairments recognised were appropriate. As there is no headroom
over the carrying value of these brands, any adverse movement in key assumptions would result in further impairments.
For Fonterra Australia and the Anchor consumer & foodservice brand, our scenario analysis indicated that the recoverable amount of each of these
assets exceeded its carrying value.
The estimate of the recoverable amount for the Group as a whole exceeded the carrying amount of the Group’s net assets. The evidence we
obtained in respect of valuation ranges for the Group as a whole did not indicate that further impairment of goodwill and brands was necessary.
We consider the impairment disclosures to be a fair reflection of the underlying impairment tests.
Independent Auditor’s Report (CONTINUED)
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
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THE KEY AUDIT MATTERHOW THE MATTER WAS ADDRESSED IN OUR AUDIT
The cost of New Zealand sourced milk
Refer to Notes 4 and 13 to the financial statements.
The cost of New Zealand sourced milk supplied by farmer shareholders amounted to
$13.7 billion and comprises the volume of milk solids supplied at the Farmgate Milk Price
as determined by the Board of Directors for the relevant season.
In making that determination, the Board takes into account the Farmgate Milk Price
calculated in accordance with the Farmgate Milk Price Manual.
We considered the cost of New Zealand sourced milk to be a key audit matter due to:
— its significance to the financial statements as a whole. The cost of New Zealand
sourced milk is a key component of the Group’s cost of goods sold of $19.7 billion
and the carrying value of the Group’s inventory of $5.0 billion.
— the extent of audit effort required to examine the cost of New Zealand sourced milk
due to the complexity of applying the Board approved milk price to cost of goods sold
and inventory.
The procedures we performed to evaluate the impact of the Farmgate Milk Price calculation on the cost of New Zealand sourced milk included:
— examining minutes of Milk Price Panel meetings and confirming with the Company Secretary that the Board considered the recommended
Farmgate Milk Price from the Milk Price Panel and approved the payment of $9.30 per kgMS for New Zealand sourced milk for the season ended
31 May 2022; and
— examining the application of the Board approved Farmgate Milk Price to cost of goods sold and inventory. This involved understanding and
evaluating relevant controls to ensure that the latest milk price forecast series has been applied to cost of goods sold and inventory.
At season end, we checked that the cost of New Zealand sourced milk reflected the Board approved Farmgate Milk Price for the season,
particularly where there has been a dynamic monthly milk price and how that should be correctly applied to the month of collection.
We completed these procedures and have no matters to report.
The Farmgate Milk Price calculation prepared by the Milk Price Group amounted to $9.30 per kgMS (which equates to $13.7 billion in total) and we
confirmed with the Company Secretary that the Board of Directors approved a payment of $9.30 per kgMS for New Zealand sourced milk for the
season ended 31 May 2022 at their meeting on 21 September 2022.
Independent Auditor’s Report (CONTINUED)
FONTERRA ANNUAL REVIEW 2022
FINANCIAL STATEMENTS
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Other information
The Directors, on behalf of the Company, are responsible for the other
information included in the entity’s Annual Review and supporting
reports. Other information includes:
— the Annual Review;
— the Corporate Governance Statement and Statutory Information; and
— the Business Performance Report.
Our opinion on the consolidated financial statements does not cover
any other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the consolidated financial statements
our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with
the consolidated financial statements, or our knowledge obtained in the
audit or otherwise appears materially misstated. If, based on the work
we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We have
nothing to report in this regard.
Use of this independent auditor’s report
This independent auditor’s report is made solely to the shareholders as
a body. Our audit work has been undertaken so that we might state to
the shareholders those matters we are required to state to them in the
independent auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to
anyone other than the shareholders as a body for our audit work, this
independent auditor’s report, or any of the opinions we have formed.
Responsibilities of the Directors for the consolidated
financial statements
The Directors, on behalf of the Company, are responsible for:
— the preparation and fair presentation of the consolidated financial
statements in accordance with generally accepted accounting
practice in New Zealand (being New Zealand Equivalents to
International Financial Reporting Standards) and International
Financial Reporting Standards;
— implementing necessary internal control to enable the preparation of
a consolidated set of financial statements that is fairly presented and
free from material misstatement, whether due to fraud or error; and
— assessing the ability to continue as a going concern. This includes
disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless they either intend to
liquidate or to cease operations or have no realistic alternative but
to do so.
Auditor’s responsibilities for the audit of the consolidated
financial statements
Our objective is:
— to obtain reasonable assurance about whether the consolidated
financial statements as a whole are free from material misstatement,
whether due to fraud or error; and
— to issue an independent auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee
that an audit conducted in accordance with ISAs NZ will always detect a
material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered
material if, individually or in aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis
of these consolidated financial statements.
A further description of our responsibilities for the audit of these
consolidated financial statements is located at the External Reporting
Board (XRB) website at:
http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-
responsibilities/audit-report-1/
This description forms part of our independent auditor’s report.
The engagement partner on the audit resulting in this independent
auditor’s report is Matthew Diprose.
For and on behalf of
KPMG
Auckland
21 September 2022
Independent Auditor’s Report (CONTINUED)
FONTERRA ANNUAL REVIEW 2022
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