Loreal 2011 Annual Report Download - page 137

135REGISTRATION DOCUMENT − L’ORÉAL 2011
2011 Consolidated Financial Statements
4
Notes to the consolidated  nancial statements
24.3. Sensitivity to changes
ininterest rates
An increase of 100basis points in interest rates would have
a direct positive impact of €5.6million on the Group’s net
finance costs at December31st, 2011, compared with a
positive impact of €0.5million at December31st, 2010 and a
negative impact of €18.6million at December31st, 2009. This
calculation allows for cash, cash equivalents and derivatives,
and assumes that total net debt/net cash remains stable
and that fixed-rate debt at maturity is replaced by floating-
rate debt.
The impact of a 100basis point rise in interest rates on
the fair value of the Group’s fixed-rate financial assets and
liabilities, after allowing for derivatives, can be estimated
at €0.2million at December31st, 2011 compared with
€1.3million at December31st, 2010 and €1.2million at
December31st, 2009.
24.4. Counterparty risk
The Group has financial relations with international banks rated
investment grade. The Group thus considers that its exposure
to counterparty risk is low.
Furthermore, the financial instruments used to manage
exchange rate and interest rate risk are issued by leading
international banking counterparties.
24.5. Liquidity risk
The Group’s liquidity risk can be assessed on the basis of its
outstanding short-term debt under its paper programme
totalling €795.7million. If these bank facilities were not renewed,
the Group had confirmed undrawn credit lines of €2,438.6million
at December31st, 2011. The availability of these credit lines is
not dependent on financial covenants.
24.6. Shareholding risk
No cash has been invested in shares.
Available cash is invested with top-ranking financial institutions
in the form of non-speculative instruments which can be drawn
in very short periods. At December31st, 2011, cash was invested
exclusively in Euro-zone government bonds through mutual
funds (note19).
At December31st, 2011, the Group holds 118,227,307 Sanofi
shares for an amount of €6,709.4million (note15). A change
of plus or minus 10% in the market price of these shares relative
to the market price of €56.75on December31st, 2011 would
have an impact of plus or minus €670.9million before tax on
Group equity.
If the share price were to fall significantly below €34.12 (the initial
cost of the Sanofi shares), or fall below that price for a prolonged
length of time, L’Oréal may have to recognise an impairment
loss on its asset through profit or loss.
At December31st, 2010, the Group held 118,227,307 Sanofi
shares for an amount of €5,657.2million (note15). A change
of plus or minus 10% in the market price of these shares relative
to the market price of €47.85on December31st, 2010 would
have an impact of plus or minus €565.7million before tax on
Group equity.
At December31st, 2009, the Group held 118,227,307 Sanofi
shares for an amount of €6,509.6million (note15). A change
of plus or minus 10% in the market price of these shares relative
to the market price of €55.06on December31st, 2009 would
have an impact of plus or minus €651.0million before tax on
Group equity.
24.7. Fair value hierarchy
IFRS7 as amended in2009 requires financial assets and liabilities
recognised at fair value in the balance sheet to be classified
according to three levels:
♦level 1: quoted prices on an active market;
♦level 2: valuation techniques using observable inputs;
♦level 3: valuation techniques using unobservable inputs.