DHL 2005 Annual Report Download - page 140

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Fair value hedges
Interest rate swaps were entered into to hedge the fair value risk of
xed-interest euro-denominated liabilities. e positive fair values of
the interest rate swaps used in fair value hedges amounts to €85 mil-
lion (previous year: €146 million). e reduction in fair value is due
primarily to an interest rate swap being closed out in 2005. e €45
million adjustment to the carrying amount of the underlying recog-
nized in the past in accordance with IAS 39 is amortized over the re-
maining term (2014) using the eective interest method, and reduces
the Group’s future interest expense.
In addition, cross-currency swaps were used to hedge liabilities in
foreign currency, with the liability being transformed into a variable
interest euro-denominated liability. is hedged the fair value risk
of the interest and currency component. e fair value of derivatives
disclosed as of December 31, 2005 is €–15 million (previous year:
€–39 million).
Cash ow hedges
e Group uses currency forwards and currency options to hedge the
future cash ow risks from foreign currency revenue and expenses
relating to the Group’s operating business. e fair values of currency
forwards amount to €1 million (previous year: €–13 million), and the
fair values of currency options amount to €3 million (previous year:
€2 million). e underlyings will be settled in 2006.
Currency forwards with a disclosed fair value of €–29 million (pre-
vious year: €–54 million) as of December 31, 2005 were entered into
to hedge the risk of future lease payments and annuities denominated
in foreign currencies. e payments for the underlyings are made in
installments, with the nal payment due in 2013.
Fixed-interest foreign currency investments and borrowings were
transformed into xed-interest euro investments and borrowings us-
ing cross-currency swaps. e cross-currency swaps hedge the cur-
rency risk, and their fair values as of December 31, 2005 were €–17
million (previous year: €–12 million). e investments relate to inter-
nal Group loans which mature in 2014.
e Group is exposed to commodity price risk in connection with
the purchase of aircra kerosene. Future cash ow risks are hedged
by entering into derivative transactions. Future cash ows from the
planned purchase of jet fuel are hedged against rising prices. e fair
values of swaps amounted to €30 million (previous year: €21 million)
at the balance sheet date. e underlyings will be recognized in the
income statement in 2006.
52 Contingent liabilities
e Group’s contingent liabilities total €2,658 million (previous year:
€2,083 million). €2,014 million of this relates to guarantee obligations
and €251 million to liabilities from litigation risks.
In addition to these contingent liabilities, the Deutsche Postbank
group has irrevocable loan commitments amounting to €16,583 mil-
lion (previous year: €13,518 million).
53 Litigation
Details of litigation can be found in the Group Management Report.
54 Other financial obligations
In addition to provisions, liabilities and contingent liabilities, there
are other nancial obligations amounting to €6,778 million (previous
year: €5,028 million) from non-cancelable operating leases as dened
by IAS 17. €2,049 million of this relates to the acquisition of Exel.
e Group’s future non-cancelable payment obligations under leases
are attributable to the following asset classes:
Leases 2004 2005
€m
Land and buildings 4,192 5,975
Technical equipment and machinery 121 209
Other equipment, operating and
office equipment 449 402
Aircraft 266 192
5,028 6,778
e acquisition of Exel led to an increase in non-cancelable payment
obligations under leases for land and buildings of €1,918 million.
Future payment obligations for technical equipment and machinery
rose by €131 million due to the acquisition of Exel.
Annual Report 2005
136