Konica Minolta 2013 Annual Report Download - page 44

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43
24. Derivatives
The Companies utilize derivative instruments, including foreign currency exchange forward contracts, currency options, currency swaps, and interest
rate swaps, to hedge against the adverse effects of fl uctuations in foreign currency exchange rates and interest rates. Additionally, the Companies have
a policy of limiting the activity of such transactions to only hedge identifi ed exposures and not to hold transactions for speculative or trading purposes.
Risks associated with derivative transactions
Although the Companies are exposed to credit-related risks and risks associated with the changes in interest rates and foreign exchange rates, such
derivative instruments are limited to hedging purposes only and the risks associated with these transactions are limited. All derivative contracts entered
into by the Companies are with selected major fi nancial institutions based upon their credit ratings and other factors. Such credit-related risks are not
anticipated to have a signifi cant impact on the Companies’ results.
Risk control system for derivative transactions
In order to manage market and credit risks, the Finance Division of the Company is responsible for setting or managing the position limits and credit
limits under the Company’s internal policies for derivative instruments. Resources are assigned to each function, including transaction execution,
administration, and risk management, independently, in order to clarify the responsibility and the role of each function.
The principal policies on foreign currency exchange instruments and other derivative instruments of the Company and its major subsidiaries are
approved by the Management Committee of the Company. Additionally, a Committee that consists of management from the Company and its major
subsidiaries meets regularly to discuss the principal policies on foreign currency exchange instruments and to reaffi rm and reassess other derivative
instruments and market risks. All derivative instruments are reported monthly to the respective responsible offi cer. Market risks and credit risks for other
subsidiaries are controlled and assessed based on internal rules. Derivative instruments are approved by the respective president or equivalent of each
subsidiary.
Interest rate swap contracts and currency swap contracts are approved by the Finance Manager of the Company and the President or equivalent of
other subsidiaries, respectively.
A summary of derivative instruments at March 31, 2013 and 2012 is as follows:
Derivative transactions to which hedge accounting is not applied
Currency-Related Derivatives
Millions of yen Thousands of U.S. dollars
2013 2012 2013
Contract value
(notional
principal
amount) Fair value
Unrealized gain
(loss)
Contract value
(notional
principal
amount) Fair value
Unrealized gain
(loss)
Contract value
(notional
principal
amount) Fair value
Unrealized gain
(loss)
Forward foreign currency
exchange contracts:
To sell foreign currencies:
US$....... ¥ 5,246 ¥ (65) ¥ (65) ¥ 7,817 ¥ (273) ¥ (273) ¥ 55,779 $ (691) $ (691)
EURO .... 14,369 (939) (939) 18,989 (1,247) (1,247) 152,780 (9,984) (9,984)
Other ..... 3,617 (85) (85) 3,310 (128) (128) 38,458 (904) (904)
To buy foreign currencies:
US$....... 109 (1) (1) —— — 1,159 (11) (11)
EURO .... 473 1 1 1,302 (26) (26) 5,029 11 11
Other ..... —— —707 11 11 —— —
Total .... ¥23,815 ¥(1,090) ¥(1,090) ¥32,127 ¥(1,664) ¥(1,664) $253,216 $(11,590) $(11,590)
Currency Swaps:
Pay JPY, receive US$ ........ ¥ 1,896 ¥ 14 ¥ 14 ¥ — ¥ — ¥ — $ 20,159 $ 149 $ 149
Total .... ¥ 1,896 ¥ 14 ¥ 14 ¥ — ¥ — ¥ — $ 20,159 $ 149 $ 149
Note: Fair value of foreign currency forward exchange contracts is calculated based on the foreign currency forward exchange rates prevailing as of March 31, 2013
and 2012, respectively.