Asus 2014 Annual Report Download - page 212

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(B) The Group’s key financial plans are all reviewed by the board of directors under the related
principles and internal control system. When executing the financial plans, the Group’s
treasury departments will follow the financial operating procedures in accordance with the
overall financial risk management and proper segregation of duties.
C. Nature and degree of significant financial risks
(A) Market risk
Foreign exchange risk
a. The Group operates internationally and is exposed to foreign exchange risk arising from
various currency exposures, primarily with respect to the USD and EUR. Foreign
exchange risk arises from future commercial transactions, recognized assets and
liabilities and net investments in foreign operations.
b. Management has set up a policy to require group companies to manage their foreign
exchange risk against their functional currency. To manage their foreign exchange risk
arising from future commercial transactions and recognized assets and liabilities, the
Group uses forward exchange contracts, currency swap contracts and currency option
contracts to hedge. Foreign exchange risk arises when future commercial transactions or
recognized assets or liabilities are denominated in a currency that is not the entity’s
functional currency.
c. The Group has certain investments in foreign operations, whose net assets are exposed
to foreign currency translation risk.
d. For hedging recognized assets or liabilities denominated in foreign currencies or the
highly probable forecast transactions, the Group adopts the foreign exchange contracts
and other derivative financial instruments to hedge the fair value risk and cash flow risk
due to foreign exchange rate fluctuations. The Group monitors at any time and pre-sets a
“stop loss“ amount to limit its foreign exchange risk.
e. The Group’s businesses involve some non-functional currency operations (the
Company’s and certain subsidiaries’ functional currency is NTD; other certain
subsidiaries’ functional currency is USD or EUR). Non-monetary items are assessed to
have no significant impact on the Group. The information on assets and liabilities
denominated in foreign currencies whose values would be materially affected by the
exchange rate fluctuations is as follows: