4.3 Finance income and costs

Accounting policy

Borrowing costs

Borrowing costs which are directly attributable to the acquisition or construction of qualifying assets are capitalised. They are defined as the borrowing costs that would have been avoided if the expenditure on the qualifying asset had not been made. All other borrowing costs which are not capitalised are charged to finance costs, using the effective interest rate method.

4.3.1 Finance income and costs


52 weeks
ended
27 November 2011
£'000
52 weeks
ended
28 November
2010
£'000
Interest on cash balances and short-term investment 1,164 557
Other interest 4 12
Fair value movement in derivative financial instruments 933
Finance income 1,168 1,502
Borrowing costs

— Bank loans and overdrafts (17) (31)
— Obligations under finance leases (4,080) (4,356)
— Borrowings (957) (3,970)
Capitalised borrowing costs 552
Fair value movement on derivative financial instruments (161)
Finance costs (4,663) (8,357)
Net finance costs (3,495) (6,855)

The current period fair value movement on the derivative financial instruments arose from fair value adjustments on the Group's cash flow hedges. The prior period fair value movement on the derivative financial instruments arose from fair value adjustments on warrant agreements.

Included in interest on borrowings is an amount of £nil (2010: £197,000) relating to the accelerated amortisation of prepaid arrangement fees.