LensCrafters 2009 Annual Report Download - page 47
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Please find page 47 of the 2009 LensCrafters annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.RISK MANAGEMENT | 45 <
• Transactionriskisdefinedastheeffectarisingfromthedifferenceinforeigncurrencyratesatthetime
ofpricingorstipulatingacontractandthatofrealizationofatransaction.Transactionriskisdefinedin
relationtothebasecurrencyofacompany.
• Translationriskisdefined asthesum ofthe effectsofchangesin foreigncurrencyratesonthe con-
solidatedincomestatementandbalancesheetoftheGroup.AstheforeignGroupcompanies’income
statementsandbalancesheetsaretranslatedintotheGroup’sfunctionalcurrencyusingmarketrates,
thevaluesoftheGroup’sconsolidatednetincome,assets,debtandequitychange.Inadditiontothe
absoluteamounts,balancesheetratioslikegearingandequityratiomayalsochangeiftheproportions
betweennetincome,assets,debtandnetequityinthevariouscurrenciesdiffer.
• CompetitiveriskreferstotheGroup’sforeigncurrencyratesensitivityincomparisontoitscompetitors,
i.e.tothelongtermeffectsofcurrencyratechangesontheGroup’scompetitiveposition inagiven
market.
Counterparty Riskisdenedasfollows:theinabilityofthecounterparttomeetitscommitmentthatcan
materialisethroughdefaultorthroughachangeinacounterparty’screditworthinessaffectingthemarket
valueofinvestmentsorderivativeinstruments.
Asaconsequence,theobjectiveofCounterpartyRiskistominimizethepossibilityofincurringinlosses
derivingfrominvestmentsorderivativeportofolioduetocounterparty’sdefault.Toavoidthisrisk,counter-
partyrelationshouldmeetcertainobjectivecreditrating.