Reebok 2012 Annual Report Download - page 250

adidas Group
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2012 Annual Report
Consolidated Financial Statements
228
2012
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04.8
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Notes
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Notes to the Consolidated Statement of Financial Position
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, 2012, the Group had outstanding
currency options with premiums paid totalling an amount of € 4 million
(2011: € 5 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 € 4 million after taxes (2011: € 17 million) for currency options and
an amount of negative € 7 million after taxes (2011: € 101 million) for
forward contracts were recorded in hedging reserves. Currency option
premiums impacted net income in the amount of € 4 million in 2012
(2011: € 6 million).
The total time value of the currency options not being part of a hedge
in an amount of negative € 3 million (2011: € 2 million) was recorded in
the income statement in 2012. Due to a change in the exposure, some
of the currency hedges were terminated and consequently an amount
of € 1 million was reclassified from hedging reserves to the income
statement.
In the years ending December 31, 2012 and 2011, hedging
instruments related to product sourcing were bought to hedge a total
net amount of US $ 5.1 billion and US $ 4.8 billion, respectively.
The notional amounts of all outstanding currency hedging
instruments, 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, 2012 Dec. 31, 2011
Forward contracts 3,943 4,051
Currency options 265 376
Total 4,208 4,427
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, 2012 Dec. 31, 2011
Forward contracts 2,130 2,816
Currency options 225 365
Total 2,355 3,181
The fair value of all outstanding currency hedging instruments is as
follows:
Fair values (€ in millions)
Dec. 31, 2012 Dec. 31, 2011
Positive
fair
value
Negative
fair
value
Positive
fair
value
Negative
fair
value
Forward contracts 53 (54) 147 (22)
Currency options 7 (5) 34 (6)
Total 60 (59) 181 (28)
A total net fair value of negative € 10 million (2011: € 115 million)
for forward contracts related to hedging instruments falling under
hedge accounting as per definition of IAS 39 “Financial Instruments:
Recognition and Measurement” was recorded in the hedging reserve.
The remaining net fair value of € 9 million (2011: € 10 million), mainly
related to liquidity swaps for cash management purposes and to
forward contracts hedging intercompany dividend receivables, was
recorded in the income statement. The total fair value of € 2 million
(2011: € 28 million) for outstanding currency options related to cash
flow hedges. This consists of a positive time value of € 2 million and
a negative time value of € 5 million and, in contrast to the table above,
does not include the intrinsic value of the options.
The fair value adjustments of outstanding cash flow hedges for
forecasted sales are reported in the income statement when the
forecasted sales transactions are recorded. The vast majority of these
transactions are forecasted to occur in 2013. As at December 31, 2012,
inventories were adjusted by positive € 16 million (2011: negative
€ 5 million) which will be recognised in the income statement in 2013.
In the hedging reserve, a negative amount of € 21 million (2011:
negative € 8 million) is included for hedging the currency risk of net
investments in foreign entities, mainly for the Russian subsidiary LLC
“adidas, Ltd.”. This reserve will remain until the investment in the
foreign entity has been sold. As at December 31, 2012, no ineffective part
of the hedges was recorded in the income statement.
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.
In 2012, the fair values of the derivatives were determined applying
mainly the “par method”, which uses actively traded forward rates.