Merck 2010 Annual Report Download - page 193

Transaction risks: Owing to its international business focus, Merck is subject to currency risks within
the scope of both ordinary business and financing activities. Different strategies are used to limit
or exclude these risks.
In principle, currency risks from financing activities are eliminated as far as possible through the
use of forward exchange contracts. Currency risks arising from operating business are analyzed
regularly and reduced if necessary through forward exchange contracts or currency options using
hedge accounting.
The following table presents the net currency risk from expected and recognized transactions in 2011
in the key currencies:
EUR million as of Dec. 31, 2010 CHF GBP JPY TWD USD
Foreign exchange risk from balance sheet items –80.9 74.9 206.6 70.4 2,804.9
Foreign exchange risk from contingent business and
anticipated transactions in 2011 –467.9 114.2 291.3 421.5 1,147.1
Transaction-related foreign exchange position –548.8 189.1 497.9 491.9 3,952.0
Position hedged by derivates 130.0 –75.0 –386.5 –346.6 –3,294.2
Open-end foreign exchange risk position –418.8 114.1 111.4 145.3 657.8
Change in foreign exchange position due to
a 10% appreciation of the euro 41.9 –11.4 –11.1 –14.5 –65.8
included in profit/loss –4.9 – 3.5 4.5 8.4
recognized in equity – – 14.5 23.1 40.5
Furthermore, derivatives exist to hedge expected cash flows beyond the year 2011. These would
lead to a change in equity amounting to EUR 20.0 million in Japanese yen. Due to the hedging of
expected cash flows beyond the year 2010, this would have caused in 2009 a change in equity of
EUR 11.5 million in the Japanese yen, EUR 4.1 million in the Taiwanese dollar, and EUR 18.5 million
in U.S. dollars. The following table presents the corresponding net currency risk from expected and
recognized transactions for 2010:
EUR million as of Dec. 31, 2009 CHF GBP JPY TWD USD
Foreign exchange risk from balance sheet items –167.8 154.7 156.9 57.9 –345.9
Foreign exchange risk from contingent business and
anticipated transactions in 2010 –281.3 78.2 158.0 290.1 672.9
Transaction-related foreign exchange position –449.1 232.9 314.9 348.0 327.0
Position hedged by derivatives 176.0 –172.1 –262.4 –136.1 –7.5
Open-end foreign exchange risk position –273.1 60.8 52.5 211.9 319.5
Change in foreign exchange position due to
a 10% appreciation of the euro 27.3 –6.1 –5.2 –21.2 –31.9
included in profit/loss –0.8 –0.3 –0.9 2.4 12.6
recognized in equity – 2.0 11.4 5.4 22.8
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