Mazda 2009 Annual Report Download - page 68

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15. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING TRANSACTIONS
The Company and its consolidated subsidiaries use foreign exchange forward contracts as derivative financial
instruments only for the purpose of mitigating future risks of fluctuations in foreign currency exchange rates. Also, only
for the purpose of mitigating future risks of fluctuations in interest rates with respect to borrowings, the Company and
its consolidated subsidiaries use interest rate swap contracts.
Forward foreign exchange contracts are subject to risks of foreign exchange rate changes. Also, interest rate swap
contracts are subject to risks of interest rate changes.
Use of derivatives to manage these risks could result in the risk of a counterparty defaulting on a derivative
contract. However, the Company believes that the risk of a counterparty defaulting is minimal since the Company and
its consolidated subsidiaries use only highly credible financial institutions as counterparties.
The policies for derivative transactions of the Company and its consolidated subsidiaries are determined by
the Company’s president or chief financial officer. Derivative contracts are concluded under the directions of
the Company’s Financial Services Division in accordance with the established rules of the Company. Derivative
transactions are executed and the balances are managed by each individual company; the president of each
company is responsible for the inspection. Also, the Company’s Financial Services Division is responsible for overall
management on a Groupwide basis.
The following summarizes hedging derivative financial instruments used by the Company and its consolidated
subsidiaries and items hedged:
Hedging instruments: Hedged items:
Forward foreign exchange contracts Foreign currency-denominated transactions planned in the future
Interest rate swap contracts Interest on borrowings
The following tables summarize market value information as of March 31, 2009 and 2008 of derivative transactions
for which hedge accounting has not been applied:
Millions of yen Thousands of U.S. dollars
Contract Estimated Unrealized Contract Estimated Unrealized
As of March 31, 2009 amount fair value gain (loss) amount fair value gain (loss)
Forward foreign exchange contracts:
Sell:
U.S. dollar ¥ 1,939 ¥ 2,046 ¥(107) $ 19,786 $ 20,878 $(1,092)
Canadian dollar 296 300 (4) 3,020 3,061 (41)
Australian dollar 2,409 2,553 (144) 24,582 26,051 (1,469)
Buy:
Thai baht 2,260 2,117 (143) 23,061 21,602 (1,459)
Australian dollar 3,488 3,353 (135) 35,592 34,214 (1,378)
Japanese yen 348 347 (1) 3,551 3,541 (10)
¥10,740 ¥10,716 ¥(534) $109,592 $109,347 $(5,449)
Millions of yen
Contract Estimated Unrealized
As of March 31, 2008 amount fair value gain (loss)
Forward foreign exchange contracts:
Sell:
U.S. dollar ¥ 57,972 ¥ 53,148 ¥4,824
Australian dollar 2,289 2,133 156
Euro 21,431 21,169 262
Sterling pound 5,529 5,028 501
Buy:
Thai baht 8,486 7,610 (876)
Australian dollar 6,489 6,524 35
Sterling pound 6,366 6,372 6
Swiss franc 788 787 (1)
¥109,350 ¥102,771 ¥4,907
For forward foreign exchange contracts, fair values at year-end are estimated based on prevailing forward
exchange rates at that date.
Notes to Consolidated Financial Statements
66                       