Alpine 2009 Annual Report Download - page 27

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27
10. Derivative Financial Instruments
The Companies have entered into forward exchange contracts and currency option contracts with banks as hedges against receivables denominated in
foreign currencies.
These derivative financial transactions are executed by the Company’s accounting department solely for hedging purposes under the internal control rules
and the supervision by the Board of Directors. The Companies do not anticipate any credit loss from nonperformance by the counterparties to forward
exchange contracts because the counterparties are creditworthy securities companies of Japan.
Hedging derivative financial instruments used by the Companies and items hedged are as follows:
Hedging instruments: Forward foreign exchange contracts
Currency option contracts
Currency swap contracts
Hedged items: Foreign currency trade receivables and payables,
The Companies evaluate hedge effectiveness semi-annually by comparing the cumulative changes in cash flows or the changes in fair value of hedged
items and the corresponding changes in the hedging derivative instruments.
The outstanding contract amounts of derivative financial transactions and their market values at March 31, 2009 and 2008, are summarized as follows:
2009
Currency related
Forward foreign exchange contracts
To sell U.S. dollars ¥ 2,041 ¥ — ¥2,150 ¥ (109)
To sell Euro 7,206 — 5,711 1,495
To buy U.S. dollars 520 — 520 0
To buy Euro 727 — 727 (0)
Currency option
To sell Euro 24,690 4,115 581 (125)
706 113
To buy Euro 12,345 2,058 3,409 2,703
706 145
¥3,964
Millions of Yen
Recognized gains (losses)Fair valueOver one year
Total
Contract value
2008
Currency related
Forward foreign exchange contracts
To sell U.S. dollars ¥5,748 ¥ — ¥5,688 ¥60
To sell Euro 5,906 — 5,890 16
¥76
Millions of Yen
Recognized gains (losses)Fair valueOver one year
Total
Contract value
2009
Currency related
Forward foreign exchange contracts
To sell U.S. dollars $ 20,778 $ — $21,887 $ (1,109)
To sell Euro 73,358 — 58,139 15,219
To buy U.S. dollars 5,294 — 5,294 0
To buy Euro 7,401 — 7,401 (0)
Currency option
To sell Euro 251,349 41,891 5,915 (1,272)
7,187 1,150
To buy Euro 125,674 20,951 34,703 27,516
7,187 1,476
$40,354
Thousands of U.S. dollars
Recognized gains (losses)Fair valueOver one year
Total
Contract value
The fair values of forward foreign exchange contracts were estimated based on the market as of March 31, 2009 and 2008.
The fair values of currency option contracts were estimated based on the offered price from the financial institutions. Lower figures of Currency option’s
Contract value total show the option premium. All currency option contracts are zero cost option contracts.