Alpine 2008 Annual Report Download - page 29

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29
11. Derivative Financial Instruments
The Companies have entered into forward exchange contracts and currency option contracts with banks as hedges against receivables denominated in
foreign currencies. These derivative financial transactions are executed by the Company’s accounting department solely for hedging purposes under
the internal control rules and the supervision by the Board of Directors. The Companies do not anticipate any credit loss from nonperformance by the
counterparties to forward exchange contracts because the counterparties are creditworthy securities companies of Japan.
Hedging derivative financial instruments used by the Companies and items hedged are as follows:
Hedging instruments: Forward foreign exchange contracts
Currency option contracts
Hedged items: Foreign currency trade receivables and payables,
The Companies evaluate hedge effectiveness semi-annually by comparing the cumulative changes in cash flows or the changes in fair value of hedged
items and the corresponding changes in the hedging derivative instruments.
The outstanding contract amounts of derivative financial transactions and their market values at March 31, 2008 and 2007, are summarized as follows:
2008
Currency related
Forward foreign exchange contracts
To sell U.S. dollars ¥5,748 ¥ — ¥5,688 ¥60
To sell Euro 5,906 — 5,890 16
¥76
Millions of Yen
Recognized gains (losses)Fair valueOver one year
Total
Contract value
2007
Currency related
Forward foreign exchange contracts
To sell U.S. dollars ¥7,680 ¥ — ¥7,697 ¥(17)
To sell Euro 4,688 — 4,706 (18)
¥(35)
Millions of Yen
Recognized gains (losses)Fair valueOver one year
Total
Contract value
2008
Currency related
Forward foreign exchange contracts
To sell U.S. dollars $57,371 $— $56,772 $599
To sell Euro 58,948 — 58,788 160
$759
Thousands of U.S. dollars
Recognized gains (losses)Fair valueOver one year
Total
Contract value
The fair values of forward foreign exchange contracts were estimated based on the market as of March 31, 2008 and 2007.
The fair values of currency option contracts were estimated based on the offered price from the financial institutions. Lower figures of Currency option’s
Contract value total show the option premium. All currency option contracts are zero cost option contracts.
Derivative financial transactions, to which hedge accounting is applied, were excluded from the above.