Reebok 2011 Annual Report Download - page 211

adidas Group
2011 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
207
2011
207
2011
04.8 Notes Notes to the Consolidated Statement of Financial Position
Net gains or losses on loans and receivables comprise mainly impair-
ment losses and reversals.
Net gains or losses on financial liabilities measured at amortised
cost include effects from early settlement and reversals of accrued
liabilities.
The disclosures required by IFRS 7 “Financial Instruments:
Disclosures”, paragraphs 31 – 42 (“Nature and Extent of Risks arising
from Financial Instruments”) can be found in NOTE 06 and the Group
Management Report SEE RISK AND OPPORTUNITY REPORT, P. 145 .
Financial instruments for the hedging of foreign
exchange risk
The adidas Group uses natural hedges and arranges forward
contracts, currency options and currency swaps to protect against
foreign exchange risk. As at December 31, 2011, the Group had
outstanding currency options with premiums paid totalling an amount
of € 5 million (December 31, 2010: € 7 million). The effective part of
the currency hedges is directly recognised in hedging reserves and as
part of the acquisition costs of inventories, respectively, and posted
into the income statement at the same time as the underlying secured
transaction is recorded. An amount of € 17 million (2010: € 16 million)
for currency options and an amount of € 101 million (2010: negative
€ 25 million) for forward contracts were recorded in hedging reserves.
Currency option premiums impacted net income in the amount of
€ 6 million in 2011 (2010: € 4 million).
The total time value of the currency options not being part of a
hedge in an amount of € 2 million (2010: € 1 million) was recorded in
the income statement in 2011. Due to a change in the exposure, some
of the currency hedges were terminated and consequently an amount
of € 2 million was reclassified from hedging reserves to the income
statement.
In the years ending December 31, 2011 and 2010, hedging instru-
ments related to product sourcing were bought to hedge a total net
amount of US $ 4.8 billion and US $ 3.7 billion, respectively.
The notional amounts of all outstanding currency hedging instru-
ments, which are mainly related to cash flow hedges, are summarised
in the following table:
Notional amounts of all outstanding currency hedging
instruments (€ in millions)
Dec. 31, 2011 Dec. 31, 2010
Forward contracts 4,051 3,100
Currency options 376 617
Total 4,427 3,717
The comparatively high amount of forward contracts is primarily due
to currency swaps for liquidity management purposes and hedging
transactions.
Of the total amount of outstanding hedges, the following contracts
related to the US dollar (i.e. the biggest single exposure of product
sourcing):
Notional amounts of outstanding US dollar hedging
instruments (€ in millions)
Dec. 31, 2011 Dec. 31, 2010
Forward contracts 2,816 2,248
Currency options 365 576
Total 3,181 2,824
The fair value of all outstanding currency hedging instruments is as
follows:
Fair values (€ in millions)
Dec. 31, 2011 Dec. 31, 2010
Positive
fair
value
Negative
fair
value
Positive
fair
value
Negative
fair
value
Forward contracts 147 (22) 40 (86)
Currency options 34 (6) 38 (15)
Total 181 (28) 78 (101)
A total net fair value of € 115 million (2010: negative € 35 million) for
forward contracts related to hedging instruments falling under hedge
accounting as per definition of IAS 39 “Financial Instruments: Recog-
nition and Measurement” was recorded in the hedging reserve. The
remaining net fair value of € 10 million (2010: negative €11 million)
mainly related to liquidity swaps for cash management purposes
and to forward contracts hedging intercompany dividend receivables
and was recorded in the income statement. The total fair value of
€ 28 million (2010: € 23 million) for outstanding currency options
related to cash flow hedges.
The fair value adjustments of outstanding cash flow hedges
for forecasted sales is reported in the income statement when the
forecasted sales transactions are recorded. The vast majority of these
transactions are forecasted to occur in 2012. As at December 31,
2011, inventories were adjusted by negative € 5 million (2010: positive
€ 6 million) which will be recognised in the income statement in 2012.
In the hedging reserve, an amount of negative € 8 million (2010:
negative € 3 million) is included for hedges of net investments in
foreign entities. This reserve will remain until the investment in the
foreign entity has been sold or the loan has been paid back.