Acer 2005 Annual Report Download - page 73

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- 68 -
December 31, 2004
Notional amount Contract period
(in thousands)
USD CALL/THB PUT USD 6,000 11/08/2004~02/25/2005
NTD CALL/USD PUT USD 3,000 12/20/2004~01/03/2005
December 31, 2005
Notional amount Contract period
(in thousands)
EUR CALL/CHF PUT EUR 31,000 09/27/2005~05/22/2006
EUR CALL/GBP PUT EUR 74,500 10/24/2005~03/31/2006
USD CALL/EUR PUT USD 202,000 10/27/2005~04/13/2006
USD CALL/EUR PUT EUR 815,000 09/02/2005~04/28/2006
USD CALL/MYR PUT USD 9,238 11/22/2005~04/07/2006
USD CALL/INR PUT USD 22,414 11/07/2005~03/31/2006
USD CALL/CAD PUT USD 77,500 09/20/2005~05/29/2005
USD CALL/THB PUT USD 34,000 10/20/2005~01/17/2006
AUD CALL/NZD PUT NZD 8,000 11/25/2005~02/23/2006
USD CALL/JPY PUT USD 5,000 10/27/2005~04/04/2006
Since the foreign exchange forward contracts were entered into to hedge the existing foreign
currency assets and liabilities and anticipated cash flows, and the exchange rates of the
forward contracts were fixed, no significant liquidity and cash flow risks are expected.
The Consolidated Companies enter into forward contract transactions only with reputable,
creditworthy international financial institutions. The Consolidated Companies usually enter
into forward contracts with several different financial institutions in order to minimize
financial risk. The Consolidated Companies believe that the risk that the financial
institutions will default on these contracts is relatively low. Furthermore, market risk due to
foreign currency exchange rate fluctuation will be offset by the gains from the hedged assets
or liabilities.
(c) The fair values of the derivative financial instruments were as follows:
December 31, 2004 December 31, 2005
NT$ NT$ US$
Foreign currency options (490,904) 90,336 2,751
Foreign exchange forward contracts (1,135,805) 660,586 20,119
(1,626,709) 750,922 22,870
As of December 31, 2004 and 2005, the above-mentioned foreign exchange forward contracts
and options had fair values amounting to NT$(516,611) and NT$66,062, respectively, were to
hedge the exchange risk of anticipated foreign currency transactions, and were booked as
“hedging reserve”, a component of stockholders’ equity, in the accompanying balance sheets.
The remainders, amounting to NT$(1,110,098) and NT$684,860 for 2004 and 2005,
respectively, were charged to profit and loss accounts.
The fair value of derivative financial instruments represents the estimated amount that the
Consolidated Companies would receive or pay to terminate the contracts at the balance sheet
date, generally including unrealized gain or loss on unsettled agreements. The fair values are
based on quotations received from financial institutions.
(d) Fair value of non-derivative financial instruments
The carrying amounts of the non-derivative financial instruments reflected in the consolidated
balance sheets, including cash and cash equivalents, pledged time deposits, notes and accounts
receivable/payable, receivables from and payables to related parties, other financial
assets-current, short-term borrowings, current installments of long-term debt and royalties
payable approximate their fair values because of the short-term nature of these instruments.