Chrysler 2010 Annual Report Download - page 209

FIAT GROUP
CONSOLIDATED
FINANCIAL
STATEMENTS
AT 31 DECEMBER
2010
NOTES
208
For €12 million (€23 million at 31 December 2009) relating to Continuing Operations and for €2 million (€3 million at 31 December 2009) relating to
Discontinued Operations the notional amount of derivatives linked to commodity prices hedging specific exposures arising from supply agreements.
Under these agreements, there is a regular updating of the prices on the basis of trends in the quoted prices of the raw material.
The following table provides an analysis by due date of outstanding derivatives financial instruments at 31 December 2010 based on their notional amounts:
At 31 December 2010
within due between one due beyond
(€ million) one year and five years five years Total
Continuing Operations
Currency risk management 7,444 739 -
8,183
Interest rate risk management 4,593 3,426 1,388 9,407
Interest rate and currency risk management - - 1,005 1,005
Other derivative financial instruments 216 - 14 230
Total Continuing Operations 12,253 4,165 2,407 18,825
Discontinued Operations
Currency risk management 4,241 137 -
4,378
Interest rate risk management 834 1,664 635 3,133
Other derivative financial instruments 2 - - 2
Total Discontinued Operations 5,077 1,801 635 7,513
Total notional amount 17,330 5,966 3,042 26,338
Cash flow hedges
The effects arising on the income statement mainly refer to the management of the currency risk and, to a lesser extent, to the hedges relating to the debt
of the Group’s financial companies and Group treasury.
The policy of the Group for managing currency risk normally requires that future cash flows from trading activities which will occur for accounting purposes
within the following twelve months, and from orders acquired (or contracts in progress), whatever their due dates, be hedged. As a result, it is considered
reasonable to suppose that the hedging effect arising from this and recorded in the cash flow hedge reserve will be recognised in income, mainly during the
following year.
The interest rate and currency derivatives treated as cash flow hedges were entered into by the North American treasury for the purpose of hedging the
bond issued in Euros and maturing in 2017; the amount recorded in the cash flow hedge reserve will be recognised in income according to the timing of the
flows of the underlying bond.
Where a derivative financial instrument is designated as a hedge of the exposure to variability in cash flows of a recognised asset or liability or a highly
probable forecasted transaction and could affect the income statement, the effective portion of any gain or loss on the derivative financial instrument is
recognised directly in equity. The cumulative gain or loss is removed from other comprehensive income and recognised in the income statement at the
same time as the economic effect arising from the hedged item affects income. The gain or loss associated with a hedge or part of a hedge that has become
ineffective is recognised in the Income statement immediately. When a hedging instrument or hedge relationship is terminated but the hedged transaction is
still expected to occur, the cumulative gain or loss realised to the point of termination remains in Other comprehensive income and is recognised at the same
time as the related transaction occurs. If the hedged transaction is no longer probable, the cumulative unrealised gain or loss held in other comprehensive
income is recognised in the Income statement immediately.