Unilever 2014 Annual Report Download - page 79

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16A. MANAGEMENT OF LIQUIDITY RISK ONTINUED
The followng table shows cash flows for whch cash flow hedge accountng s appled The dervatves n the cash flow hedge relatonshps
are expected to have an mpact on proft and loss n the same perods as the cash flows occur
 mllon
Due
wthn
1 year
 mllon
Due
between
1 and 2
years
 mllon
Due
between
2 and 3
years
 mllon
Due
between
3 and 4
years
 mllon
Due
between
4 and 5
years
 mllon
Due
after
5 years
 mllon
Total
 mllon
Net
carryng
amount of
related
dervatves(a)
2014
Foregn exchange cash nflows 1,506 2 – 347 – – 1,855
Foregn exchange cash outflows (1,503) (2) – (304) – – (1,809) 34
Interest rate cash flows (97) – – – – – (97) (100)
ommodty contracts cash flows (421) – – – – – (421) (15)
2013
Foregn exchange cash nflows 1,088 –––––1,088
Foregn exchange cash outflows (509) –––––(509) 1
Interest rate cash flows (2) (111) (2) (1) – – (116) (41)
ommodty contracts cash flows (313) –––––(313) 14
(a) See note 16 on page 118
16B. MANAGEMENT OF MARKET RISK
Unlever’s sze and operatons result n t beng exposed to the followng market rsks that arse from ts use of fnancal nstruments
• commodty prce rsk
• currency rsk and
• nterest rate rsk
The above rsks may affect the roup’s ncome and expenses, or the value of ts fnancal nstruments The objective of the roup’s
management of market rsk s to mantan ths rsk wthn acceptable parameters, whle optmsng returns enerally, the roup
apples hedge accountng to manage the volatlty n proft and loss arsng from market rsk
The roup’s exposure to, and management of, these rsks s explaned below It often ncludes dervatve fnancal nstruments,
the uses of whch are descrbed n note 16
POTENTIAL IMPAT OF RISK MANAEMENT POLIY AND
HEDIN STRATEY
SENSITIVITY TO THE RISK
I) OMMODITY PRIE RISK
The roup s exposed to the rsk of
changes n commodty prces n relaton
to ts purchase of certan raw materals
At 31 December 2014, the roup had
hedged ts exposure to future commodty
purchases for 197 mllon (2013 318
mllon) wth commodty dervatves
The roup uses commodty forward
contracts to hedge aganst ths rsk
All commodty forward contracts hedge
future purchases of raw materals and
the contracts are settled ether n cash
or by physcal delvery
ommodty dervatves are generally
desgnated as hedgng nstruments n
cash flow hedge accountng relatons
All commodty forward contracts are done
n lne wth approvals from the lobal
ommodty Executve whch s chared by the
Unlever hef Supply han Offcer (SO)
A 10% ncrease n commodty prces as
at 31 December 2014 would have led to
an 18 mllon gan on the commodty
dervatves n the cash flow hedge reserve
(2013 32 mllon gan n the cash flow
hedge reserve) A decrease of 10% n
commodty prces on a full-year bass
would have the equal but opposte effect
II) URRENY RISK
urrency rsk on sales, purchases
and borrowngs
Because of Unlever’s global reach, t s
subject to the risk that changes in foreign
currency values impact the roup’s sales,
purchases and borrowngs
The roup manages currency exposures
wthn prescrbed lmts, manly through the
use of forward foregn currency exchange
contracts
Operatng companes manage foregn
exchange exposures wthn prescrbed lmts
Local complance s montored centrally
As an estmaton of the approxmate mpact
of the resdual rsk, wth respect to fnancal
nstruments, the roup has calculated the
mpact of a 10% change n exchange rates
116 Unilever Annual Report and Accounts 2014Financial statements
NOTES TO THE ONSOLIDATED FINANIAL STATEMENTS
UNILEVER ROUP ONTINUED