Saab 2011 Annual Report Download - page 126

Translation exposure
e translation exposure in the Group relates to the operations of foreign
subsidiaries. Saab Aircra Leasing’s operations in Sweden have their eco-
nomic environments in  (functional currency) and are translated from
the functional currency to . e translation exposure comprises net assets
in foreign currency and arises in connection with acquisitions and divest-
ments. e value of equity subject to translation exposure amounted to
, (,) at year-end; see the table below:
Net assets translated to SEK
MSEK 31-12-2011 31-12-2010
USD 1,861 727
EUR 33 56
AUD 470 465
ZAR 573 664
Other currencies 433 335
Total 3,370 2,247
e eect on net assets of a change in exchange rates where the krona depre-
ciates or appreciates is shown in the table below.
Sensitivity analysis of net assets
MSEK
Net assets
31-12-2011
SEK appreciation
of 10%
SEK depreciation
of 10%
USD 1,861 1,675 2,047
EUR 33 30 36
AUD 470 423 517
ZAR 573 516 630
Other currencies 433 391 476
Total 3,370 3,035 3,706
e foreign currency risk to the Group’s income and equity from translation
eects – the translation exposure – is not hedged according to the Group
Treasury Policy.
Impairment tests
Long-term contracts in commercial aircra programmes consist of an order
backlog and estimated future orders (business case) with cash ows primarily
in . Cash ows from the latter are normally hedged when they become
conrmed orders. In connection with impairment tests of loss contracts, in-
come is aected by the revaluation of future cash ows at spot rates. Larger
changes in exchange rates, primarily in  against , have a signicant
impact on income. is exposure is not hedged.
Interest rate risks
Interest rate risk refers to the risk that Saab will be negatively aected by
changes in interest rate levels.
Interest rate risk has been identied in the following areas:
t Saab is exposed to interest rate risk when the market value of certain
items in the statement of nancial position is aected by changes in
underlying interest rates. Large such items refer to pension obligations
and leasing operations.
t Saab’s net nancial items are aected by changes in market rates.
Interest rate eects on advance nancing aect gross income.
Interest rate risks in the Group’s nancial investments are managed based on
high liquidity and a duration of  months, with the option of deviating by
+/–  months. As of year-end, the duration for investments was  months
(). Interest rate risks in the Group’s funding are managed based on a bench-
mark with an -month duration, with the option of deviating by +/–
months. As of year-end, the duration for nancing was  months ().
Interest rate futures and swaps are used for interest risk management to
achieve the desired duration in the nancing. For a sensitivity analysis, see
also under liquidity and nancing risk. Lending to subsidiaries in foreign
currency is normally nanced in , which is converted to the subsidiary’s
currency through swaps. Interest rate swaps in  are used mainly for inter-
est risk management in the leasing portfolio, where the interest rate risk is
fully matched.
e pension liability, the present value of future pension obligations, is
the largest interest rate risk due to the liability’s long duration; see also the
Saab Pension Fund.
NOTE 41, CONT.
e table below shows the cash ows corresponding to the derivatives recognised
as cash ow hedges in  and  expressed in millions in local currency.
Cash flow hedges by currency
CZK EUR GBP NOK THB USD ZAR
Million
Out-
flow
In-
flow Net
Out-
flow
In-
flow Net
Out-
flow
In-
flow Net
Out-
flow
In-
flow Net
Out-
flow
In-
flow Net
Out-
flow
In-
flow Net
Out-
flow
In-
flow Net
< 90 days -19 58 39 -43 116 73 -22 52 30 -2 5 3-8 309 301 -91 199 108 -63 38 -25
91-180 days -15 32 17 -26 65 39 -9 29 20 -1 2 1-4 359 355 -36 97 61 -16 2 -14
181-210 days - 4 4-8 55 47 -7 21 14 -6 - -6 -2222 -14 46 32 -12 - -12
211-360 days - 19 19 -12 39 27 -8 19 11 -11-34 280 246 -23 54 31 -13 - -13
2013 - 25 25 -31 115 84 -5 29 24 ---- 988 988 -66 167 101 -25 1 -24
2014 - 6 6-20 50 30 -88---- 392 392 -13 111 98 -- -
2015 - 4 4-9 23 14 ----------2 91 89 -- -
2016 - - --3 13 10 ----------8686 -- -
2017 and forward - - --1 25 24 ----------6161 -- -
Total flows 2011 -34 148 114 -153 501 348 -51 158 107 -9 8 -1 -46 2,350 2,304 -245 912 667 -129 41 -88
Total flows 2010 -61 161 100 -230 585 355 -114 232 118 -15 6 -9 ----439 1,120 681 -154 70 -84
FINANCIAL INFORMATION > NOTES
122 SAAB ANNUAL REPORT 2011