BMW 2011 Annual Report Download - page 139

139 GROUP FINANCIAL STATEMENTS
in € million 31. 12. 2011 31. 12. 2010
Euro / Chinese Renminbi 180 265
Euro / US Dollar 121 103
Euro / British Pound 182 184
Euro / Japanese Yen 23 30
in € million 31. 12. 2011 31. 12. 2010
Euro 6,066 4,290
US Dollar 8,684 7,429
British Pound 3,278 2,599
In the next stage, these exposures are compared to all
hedges that are in place. The net cash flow surplus rep-
resents an uncovered risk position. The cash-flow-at-
risk approach involves allocating the impact of potential
exchange rate fluctuations to operating cash flows on
the basis of probability distributions. Volatilities and
correlations serve as input factors to assess the relevant
probability distributions.
The potential negative impact on earnings for the
current period is computed on the basis of current
Currency risk for the BMW Group is concentrated on
the currencies referred to above.
Interest rate risk
The BMW Group’s financial management system in-
volves the use of standard financial instruments such
as short-term deposits, investments in variable and
fixed-income securities as well as securities funds. The
BMW Group is therefore exposed to risks resulting
from changes in interest rates.
Interest rate risks can be managed by the use of interest
rate derivatives. The interest rate contracts used for
hedging purposes comprise mainly swaps which are ac-
counted for on the basis of whether they are designated
market prices and exposures to a confidence level of
95 % and a holding period of up to one year for each
currency. Aggregation of these results creates a risk re-
duction effect due to correlations between the various
portfolios.
The following table shows the potential negative impact
for the BMW Group – measured on the basis of the
cash-flow-at-risk approach – attributable at the balance
sheet date to unfavourable changes in exchange rates
for the principal currencies.
These risks arise when funds with differing fixed-rate
periods or differing terms are borrowed and invested.
All items subject to, or bearing, interest are exposed to
interest rate risk. Interest rate risks can affect either
side of the balance sheet.
The fair values of the Group’s interest rate portfolios for
the three principal currencies were as follows at the
end of the reporting period:
as a fair value hedge or as a cash flow hedge. A descrip-
tion of the management of interest rate risk is provided
in the Combined Group and Company Management
Report.
transactions or “exposures”. At the end of the reporting period, the principal exposures for the coming year were
as follows:
in € million 31. 12. 2011 31. 12. 2010
Euro / Chinese Renminbi 7,114 6,256
Euro / US Dollar 4,281 3,888
Euro / British Pound 3,266 3,056
Euro / Japanese Yen 1,334 1,086