Audi 2015 Annual Report Download - page 271

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ADDITIONAL DISCLOSURES
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These risks are limited by concluding appropriate hedges for
matching amounts and maturities. The hedging transactions
are performed centrally for the Audi Group by Volkswagen AG
on the basis of an agency agreement. The results from hedging
transactions are credited or debited on maturity by the Group
Treasury of Volkswagen AG on the basis of the contract volume
concluded for the Audi Group.
The AUDI Group additionally concludes hedging transactions
of its own to a limited extent, where this helps to simplify
current operations.
The hedging transactions are effected by means of marketable
derivative financial instruments (forward exchange contracts,
foreign exchange options and currency swaps). Contracts are
concluded exclusively with first-rate national and international
banks whose creditworthiness is regularly examined by leading
rating agencies and Central Risk Management at Volkswagen AG.
For the purpose of managing currency risks, exchange rate
hedging in the 2015 fiscal year primarily focused on the U.S.
dollar, the Chinese renminbi, the Korean won, the British
pound and the Japanese yen.
Currency risks pursuant to IFRS 7 arise as a result of financial
instruments that are of a monetary nature and that are denomi-
nated in a currency other than the functional currency. Exchange
rate differences from the translation of financial statements
into the Group currency (translation risk) are disregarded.
Within the Audi Group, the principal non-derivative financial
instruments (cash, receivables, securities held and debt instru-
ments held, interest-bearing liabilities, interest-free liabilities)
are either denominated directly in the functional currency or
substantially transferred to the functional currency through
the use of derivatives. Above all, the generally short maturity
of the instruments also means that potential exchange rate
movements have only a very minor impact on profit or equity.
Currency risks are measured using sensitivity analyses, during
which the impact on profit after tax and equity of hypothetical
changes to relevant risk variables is assessed. All non-functional
currencies in which the Audi Group enters into financial instru-
ments are fundamentally treated as relevant risk variables.
The periodic effects are determined by applying the hypothet-
ical changes in the risk variables to the inventory of financial
instruments on the reporting date. It is assumed for this pur-
pose that the inventory on the reporting date is representative
of the entire year. Movements in the exchange rates of the
underlying currencies for the hedged transactions affect the
fair value of these hedging transactions and the cash flow
hedge reserve in equity.
/// FUND PRICE RISKS
The securities funds created using surplus liquidity are exposed,
in particular, to an equity and bond price risk that may arise from
fluctuations in stock market prices and indices and market
interest rates. Changes in bond prices resulting from a change
in market interest rates, and the measurement of currency
risks and other interest rate risks from the securities funds, are
quantified separately in the corresponding notes on “Currency
risks” and “Interest rate risks.”
Risks from securities funds are generally countered by main-
taining a broad mix of products, issuers and regional markets
when making investments, as stipulated in the investment
guidelines. Where necessitated by the market situation, cur-
rency hedges are also used. Such measures are coordinated by
AUDI AG in agreement with the Group Treasury of Volkswagen AG
and implemented at operational level by the securities funds’
risk management teams.
Fund price risks are measured within the Audi Group in accord-
ance with IFRS 7 using sensitivity analyses. Hypothetical
changes to risk variables on the balance sheet date are exam-
ined to calculate their impact on the prices of the financial
instruments in the funds. Stock prices, exchange rates and
interest rates are particularly relevant risk variables in the case
of fund price risks.
/// COMMODITY PRICE RISKS
Commodities are subject to the risk of fluctuating prices given
the volatile nature of the commodity markets. Commodity
futures are used to limit these risks. The hedging measures are
coordinated regularly between AUDI AG and Volkswagen AG in
accordance with the existing Volkswagen organizational guide-
line. The hedging transactions are performed centrally for
AUDI AG by Volkswagen AG on the basis of an agency agree-
ment. The results from hedging contracts are credited or deb-
ited to the Audi Group on maturity.