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48
Bridgestone Annual Report 2004
NOTE 14—DERIVATIVES
The Companies enter into foreign currency forward contracts, currency swap contracts and currency option contracts to hedge foreign
currency exchange risk associated with certain assets and liabilities denominated in foreign currencies. The Companies enter into inter-
est rate swap contracts to manage their interest rate exposure on certain liabilities. In addition, the Companies enter into commodity
future contracts to hedge the risk of fluctuation of commodity prices for raw materials.
All derivative transactions are entered into to hedge foreign currency, interest and commodity price exposures that arise in the
course of the Companies’ business. Accordingly, the market risk in these derivatives is basically offset by opposite movements in the
value of hedged assets or liabilities. Because the counterparties to these derivatives are limited to major international financial institu-
tions, the Companies do not anticipate any losses arising from credit risk. Derivative transactions entered into by the Companies have
been made in accordance with internal policies which regulate the authorization and credit limit amounts.
Foreign currency forward contracts and currency swap contracts which qualify for hedge accounting for the years ended December
31, 2004 and 2003 are excluded from the disclosure of market value information.
The contract or notional amounts of derivatives which are shown in the following table do not represent the amounts exchanged by
the parties and do not measure the Companies’ exposure to credit or market risk.
The Companies had the following derivative contracts outstanding at December 31, 2004 and 2003:
Millions of yen
2004 2003
Contract Unrealized Contract Unrealized
amount Fair value gains (losses) amount Fair value gains (losses)
Foreign currency forward contracts:
Sell:
U.S. dollar ¥45,108 ¥44,085 ¥ 1,023 ¥33,697 ¥32,652 ¥ 1,045
Euro 48,097 49,443 (1,346) 35,913 37,596 (1,683)
Australian dollar 6,115 6,229 (114) 6,644 6,971 (327)
British pound 617 624 (7) 859 893 (34)
Other 6,466 6,718 (252) 5,070 5,150 (80)
Buy:
U.S. dollar 6,890 6,598 (292) 8,557 7,986 (571)
Japanese yen 712 688 (24) 1,380 1,360 (20)
Other 1,730 1,692 (38) 1,836 1,822 (14)
Currency swap contracts:
Indian rupee receipt, Japanese yen payment 1,402 (99) (99) ———
Interest rate swap contracts:
Floating rate receipt, fixed rate payment 23,752 (1,088) (1,088) 26,598 (1,290) (1,290)
Commodity future contracts:
Natural rubber:
Buy 604 588 (16) 340 308 (32)