Nokia 2009 Annual Report Download - page 252

33. Risk management (Continued)
2008 USD JPY CNY INR
EURm EURm EURm EURm
FX derivatives used as cashflow hedges (net amount)
(1)
........... (3359) 2674 — (122)
FX derivatives used as net investment hedges (net amount)
(2)
...... (232) — (699) (179)
FX exposure from balance sheet items (net amount)
(3)
............ 729 (494) (579) 236
FX derivatives not designated in a hedge relationship and carried at
fair value through profit and loss (net amount)
(3)
.............. (615) 480 527 (443)
(1)
The FX derivatives are used to hedge the foreign exchange risk from forecasted highly probable
cash flows related to sales, purchases and business acquisition activities. In some of the
currencies, especially in US Dollar, Nokia has substantial foreign exchange risks in both estimated
cash inflows and outflows, which have been netted in the table. See Note 20 for more details on
hedge accounting. The underlying exposures for which these hedges are entered into are not
presented in the table, as they are not financial instruments as defined under IFRS 7.
(2)
The FX derivatives are used to hedge the Group’s net investment exposure. The underlying
exposures for which these hedges are entered into are not presented in the table, as they are not
financial instruments as defined under IFRS 7.
(3)
The balance sheet items which are denominated in the foreign currencies are hedged by a portion
of FX derivatives not designated in a hedge relationship and carried at fair value through profit
and loss resulting in offsetting FX gains or losses in the financial income and expenses.
Interest rate risk
The Group is exposed to interest rate risk either through market value fluctuations of balance sheet
items (i.e. price risk) or through changes in interest income or expenses (i.e. refinancing or re
investment risk). Interest rate risk mainly arises through interest bearing liabilities and assets.
Estimated future changes in cash flows and balance sheet structure also expose the Group to interest
rate risk.
The objective of interest rate risk management is to optimize the balance between minimizing
uncertainty caused by fluctuations in interest rates and maximizing the consolidated net interest
income and expenses.
The interest rate exposure of the Group is monitored and managed centrally. Nokia uses the
ValueatRisk (VaR) methodology to assess and measure the interest rate risk of the net investments
(cash and investments less outstanding debt) and related derivatives.
As at the reporting date, the interest rate profile of the Group’s interestbearing assets and liabilities
is presented in the table below:
Fixed rate
Floating
rate
Fixed
rate
Floating
rate
2009 2008
EURm EURm EURm EURm
Assets............................................. 5 712 3 241 2 946 4 007
Liabilities .......................................... (3 771) (1 403) (3 604) (785)
Assets and liabilities before derivatives .................. 1 941 1 838 (658) 3 222
Interest rate derivatives .............................. 1 628 (1 693) ——
Assets and liabilities after derivatives ................... 3 569 145 (658) 3 222
F78
Notes to the Consolidated Financial Statements (Continued)