Reebok 2009 Annual Report Download - page 204

200 CONSOLIDATED FINANCIAL STATEMENTS Notes
A total net fair value of negative € 57 million (2008: € 111 million) for forward contracts related
to hedging instruments falling under hedge accounting as per definition of IAS 39 was recorded
in hedging reserve. The remaining net fair value of € 5 million (2008: € 9 million) mainly related
to liquidity swaps for cash management purposes and forward contracts hedging intercompany
dividend receivables was recorded in the income statement. The total fair value of € 10 million
(2008: € 16 million) for outstanding currency options related to cash flow hedges.
The fair value adjustments of outstanding cash flow hedges for forecasted sales will be
reported in the income statement when the forecasted sales transactions are recorded. The
vast majority of these transactions are forecasted to occur in 2010. As at December 31, 2009,
inventories were adjusted by € 4 million which will be recognised in the income statement in 2010.
In hedging reserve, an amount of negative € 3 million (2008: negative € 3 million) is
included for hedges of net investments in foreign entities. This reserve will remain until the
investment in the foreign entity is divested.
In order to determine the fair values of its derivatives that are not publicly traded, the
adidas Group uses generally accepted quantitative financial models based on market conditions
prevailing at the balance sheet date.
The fair values of the derivatives were determined applying the “zero method”. The “zero
method” is a theoretical model for the determination of forward rates based on deposit and swap
interest rates. An alternative method is the “par method” which uses actively traded forward
rates. A comparison of the fair valuation based on the alternative methods revealed no substantive
differences.
Financial instruments for the hedging of interest rate riskFinancial instruments for the hedging of interest rate risk
Interest rate hedges which were outstanding as at December 31, 2009 and 2008, respectively
expire as detailed below:
N °-
28
EXPIRATION DATES OF INTEREST RATE HEDGES
€ IN MILLIONS
Dec. 31, 2009 Dec. 31, 2008
Within 1 year 139 23
Between 1 and 3 years 150 184
Between 3 and 5 years — 105
After 5 years 81 83
Total 370 395
The above summary for 2009 includes interest rate and cross-currency interest rate swaps in
the amount of € 79 million (2008: € 105 million) which are classified as fair value hedges pursu-
ant to IAS 39. The aim of one cross-currency interest rate swap which was classified as a fair
value hedge at December 31, 2009 was to turn the financing into euro while retaining the financ-
ing method. The aim of the US dollar interest rate swap which was classified as a fair value
hedge was to obtain variable financing for a private placement in US dollar. The total positive
fair value of € 4 million (2008: € 7 million) was offset by a total negative fair value change in the
hedged private placements in the amount of € 4 million (2008: € 7 million).
The above summary further includes interest rate swaps in the nominal amount of
€ 279 million (2008: € 279 million), which are classified as cash flow hedges pursuant to IAS 39.
The goal of these hedges is to protect future cash flows arising from private placements with
variable interest rates by generating synthetic fixed interest rate financing. These interest rate
swaps classified as cash flow hedges had a positive fair value in the amount of € 0 million (2008:
€ 1 million) and a negative fair value of € 10 million (2008: negative € 6 million). The negative
fair value change of € 2 million (2008: negative € 5 million) for interest rate swaps which were
classified as cash flow hedges was booked in hedging reserves. A nominal amount of € 129 mil-
lion for interest rate swaps classified as cash flow hedges relates to private placements which
mature in 2010. The remaining interest rate swaps classified as cash flow hedges in a nominal
amount of € 45 million and € 105 million secure variable interest payments arising from private
placements with maturities in 2011 and 2012, respectively.