Chrysler 2015 Annual Report Download - page 236

236 2015 | ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Quantitative information on foreign currency exchange rate risk
The Group is exposed to risk resulting from changes in foreign currency exchange rates, which can affect its earnings
and equity. In particular:
where a Group company incurs costs in a currency different from that of its revenues, any change in exchange rates
can affect the operating results of that company.
the principal exchange rates to which the Group is exposed are:
EUR/U.S.$, relating to sales in U.S.$ made by Italian companies (in particular, companies belonging to the
Maserati segment) and to sales and purchases in Euro made by FCA US;
U.S.$/CAD, primarily relating to FCA US’s Canadian manufacturing operations;
CNY, in relation to sales in China originating from FCA US and from Italian companies (in particular, companies
belonging to the Maserati segment);
GBP, AUD, MXN, CHF, ARS and VEF in relation to sales in the UK, Australian, Mexican, Swiss, Argentinean and
Venezuelan markets;
PLN and TRY, relating to manufacturing costs incurred in Poland and Turkey;
JPY mainly in relation to purchase of parts from Japanese suppliers and sales of vehicles in Japan;
U.S.$/BRL, EUR/BRL, relating to Brazilian manufacturing operations and the related import and export flows.
The Group’s policy is to use derivative financial instruments to hedge a percentage of certain exposures subject to
foreign currency exchange rate risk for the upcoming 12 months (including such risk before or beyond that date where
it is deemed appropriate in relation to the characteristics of the business) and to hedge the exposure resulting from
firm commitments unless not deemed appropriate.
Group companies may have trade receivables or payables denominated in a currency different from their respective
functional currency. In addition, in a limited number of cases, it may be convenient from an economic point of view, or
it may be required under local market conditions, for Group companies to obtain financing or use funds in a currency
different from their respective functional currency. Changes in exchange rates may result in exchange gains or losses
arising from these situations. The Group’s policy is to hedge, whenever deemed appropriate, the exposure resulting
from receivables, payables and securities denominated in foreign currencies different from the respective Group
companies’ functional currency.
Certain of the Group’s companies are located in countries which are outside of the Eurozone, in particular the U.S.,
Brazil, Canada, Poland, Serbia, Turkey, Mexico, Argentina, the Czech Republic, India, China and South Africa. As
the Group’s reporting currency is the Euro, the income statements of those entities that have a reporting currency
other than the Euro, are translated into Euro using the average exchange rate for the period. In addition, the monetary
assets and liabilities of these consolidated companies are translated into Euro at the period-end foreign exchange
rate. The effects of these changes in foreign exchange rates are recognized directly in the Cumulative Translation
Adjustments reserve included in Other comprehensive income/(losses). Changes in exchange rates may lead to
effects on the translated balances of revenues, costs and monetary assets and liabilities reported in Euro, even when
corresponding items are unchanged in the respective local currency of these companies.
The Group monitors its principal exposure to conversion exchange risk, although there was no specific hedging in this
respect at the balance sheet dates.
There have been no substantial changes in 2015 in the nature or structure of exposure to foreign currency exchange
rate risk or in the Group’s hedging policies.
The potential loss in fair value of derivative financial instruments held for foreign currency exchange rate risk
management (currency swaps/forwards, cross-currency interest rate and currency swaps) at December31, 2015
resulting from a hypothetical 10.0 percent change in the exchange rates would have been approximately €1,490
million (€1,402 million at December31, 2014).