Saab 2014 Annual Report Download - page 122

FINANCIAL INFORMATION – NOTES
The table below shows the cash flows for the derivatives recognised as cash flow hedges, expressed in millions in local currency.
Cash flow hedges by currency
AUD CZK EUR GBP THB USD ZAR
Million
Out-
flow Inflow Net
Out-
flow Inflow Net
Out-
flow Inflow Net
Out-
flow Inflow Net
Out-
flow Inflow Net
Out-
flow Inflow Net
Out-
flow Inflow Net
< 90 days -13 2 -11 -58 6 -52 -44 127 83 -5 16 11 -462 894 432 -106 159 53 -20 - -20
91-180
days -4 1 -3 -23 10 -13 -13 38 25 -5 6 1 -110 562 452 -49 90 41 -5 - -5
181-210
days -10 1 -9 -15 6 -9 -8 30 22 -3 4 1 -64 118 54 -31 60 29 -1 - -1
211-360
days -4 - -4 -23 6 -17 -6 32 26 -5 3 -2 -88 290 202 -112 118 6 -1 - -1
2016 -10 1 -9 -1 24 23 -27 88 61 -13 16 3 -20 182 162 -206 340 134 -16 - -16
2017 -7 - -7 - 6 6 -9 39 30 -12 11 -1 - - - -178 224 46 - - -
2018 -3 - -3 - - - -6 14 8 -12 3 -9 - - - -189 221 32 - - -
2019 - - - - - - -10 8 -2 -19 1 -18 - - - -118 92 -26 - - -
2020 and
forward - - - - - - -55 14 -41 -47 - -47 - - - -98 150 52 - - -
Total
flows
2014 -51 5 -46 -120 58 -62 -178 390 212 -121 60 -61 -744 2,046 1,302 -1,087 1,454 367 -43 - -43
Total
flows
2013 -35 6 -29 -111 83 -28 -119 401 282 -38 101 63 -369 2,589 2,220 -249 1,068 819 -40 - -40
Translation exposure
The translation exposure in the Group relates to the operations of foreign subsidia-
ries. Saab Aircraft Leasing’s operations in Sweden have their economic environme-
nts in USD (functional currency) and are translated from the functional currency to
SEK. The translation exposure comprises net assets in foreign currency and arises
in connection with acquisitions and divestments. The value of equity subject to
translation exposure amounted to MSEK 4,072 (3,460) at year-end; see the table
below.
Net assets translated to SEK
MSEK 31-12-2014 31-12-2013
USD 1,826 1,552
EUR 650 601
AUD 472 442
ZAR 361 289
Other currencies 763 576
Total 4,072 3,460
The effect on net assets of a change in exchange rates where the SEK depreciates
or appreciates is shown in the table below.
Sensitivity analysis of net assets
MSEK
Net assets
31-12-2014
SEK appreciation
of 10%
SEK depreciation
of 10%
USD 1,826 1,643 2,009
EUR 650 585 715
AUD 472 425 519
ZAR 361 325 397
Other currencies 763 687 839
Total 4,072 3,665 4,479
Change -407 407
The foreign currency risk to the Group’s income and equity from translation effects
(the translation exposure) is not hedged, pursuant to the Group Treasury Policy.
Impairment tests
Long-term contracts, primarily in USD, in commercial aircraft programmes consist
of a hedged order backlog and estimated future orders (business case) with cash
flows. Cash flows from the latter are normally hedged when they become confir-
med orders. In connection with impairment tests of onerous contracts, income is
affected by the revaluation of future cash flows at spot rates. Larger changes in
exchange rates, primarily in USD against SEK, have a significant impact on income.
This exposure is not hedged.
Interest rate risks
Interest rate risk refers to the risk that Saab will be negatively affected by changes
in interest rate levels.
Interest rate risk has been identified in the following areas:
• Saab is exposed to interest rate risk when the market value of certain items in the
statement of financial position is affected by changes in underlying interest rates.
Large items of this type refer to pension obligations and leasing operations.
• Saab’s net financial items are affected by changes in market rates. Interest rate
effects on advance financing affect gross income.
Interest rate risks in the Group’s financial investments are managed based on high
liquidity and a duration of 12 months, with the option of deviating by +/– 12
months. As of year-end, the duration for investments was 10 months (7). Interest
rate risks in the Group’s funding must not exceed 60 months duration. As of year-
end, the duration for financing was 49 months (55). Currency swaps that are used
to hedge commercial currency flows contain an interest component. For currency
flows far in the future, pricing of currency swaps may be ineffective. As a result, only
part of the interest rate risk in future currency flows was hedged during the year
(the hedges have been made for shorter periods than the expected flows). The
underlying flows that are exposed to extensions through currency swaps amount
to MUSD 248.
Interest rate futures and swaps are used for interest risk management to achieve
the desired duration in the financing. For a sensitivity analysis, see also the section
on liquidity and financing risks. Lending to subsidiaries in foreign currency is nor-
mally financed in SEK, which is converted to the subsidiary’s currency through
swaps. Interest rate swaps in USD are used mainly for interest risk management in
the leasing portfolio, where the interest rate risk is fully matched.
The 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 Pension Fund section.
Note 41, cont.
118 – SAAB ANNUAL REPORT 2014