DHL 2007 Annual Report Download - page 176
Download and view the complete annual report
Please find page 176 of the 2007 DHL annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.172
Deutsche Post World Net Annual Report 2007
Currency risk and currency management
e Group’s global activities expose it to currency risks from planned
and completed transactions in foreign currencies. Corporate Treasury is
responsible for the central recognition and management of these risks.
e Group companies report their foreign-currency risks to Corporate
Treasury, which calculates a net position per currency on the basis of
these gures and hedges this position externally, where applicable.
Currency forwards, currency swaps and currency options are used for
this purpose. e notional amount of outstanding currency forwards
and swaps was , million as at the reporting date (previous year:
, million). e corresponding fair value was – million (previous
year: – million). ese transactions were used to hedge planned and
recorded operational risks and to hedge internal and external nance
and investments. For reasons of simpli cation, fair value hedge account-
ing in accordance with IAS was not used for currency forwards and
swaps.
In addition, currency options with a nominal value of million (pre-
vious year: million) and a fair value of – million (previous year:
million) were used to hedge operational currency risks and risks aris-
ing from investing activities. e Group also held cross-currency swaps
with a nominal value of million (previous year: million) and
a fair value of – million (previous year – million) to hedge long-
term foreign currency nancing.
Currency risks resulting from translating assets and liabilities of for-
eign operations into the Group’s currency (translation risk) were not
hedged as at December . e net investment hedge recognised as
at December ceased to be accounted for in . e fair value of
currency forwards was measured on the basis of current market prices,
taking forward premiums and discounts into account. e currency
options were measured using the Black & Scholes option pricing model.
Of the unrealised losses from currency derivatives that were recognised
in equity as at December in accordance with IAS , a loss of
– million (previous year: – million) is expected to be recognised
in income in the course of .
IFRS requires a company to disclose a sensitivity analysis, showing how
pro t or loss and equity are a ected by hypothetical changes in exchange
rates at the reporting date. In this process, the hypothetical changes
in exchange rates are analysed in relation to the portfolio of nancial
instruments not denominated in their functional currency and being of
a monetary nature. It is assumed that the portfolio as at the reporting
date is representative for the whole year.
E ects of hypothetical changes in exchange rates on the translation risk
do not fall within the scope of IFRS . e following assumptions are
taken as a basis for the sensitivity analysis:
Primary monetary nancial instruments used by Group companies are
either denominated directly in the functional currency or the currency
risk was transferred to Deutsche Post AG at the exchange rates Deutsche
Post AG has guaranteed. Exchange-rate-induced changes have therefore
no e ect on the pro t or loss and equity of the Group companies.
Some isolated Group companies are legally not entitled to participate
in inhouse banking. ese companies hedge their currency risks from
primary monetary nancial instruments linked with Deutsche Post AG
by using derivatives. e internal derivatives are consolidated in the
Group. e risk remaining at Group level is taken into account when
computing the net position.
Hypothetical changes in exchange rates a ect the fair values of the ex-
ternal derivatives used by Deutsche Post AG with changes in fair value
reported in pro t or loss; they also a ect the currency results from the
measurement at closing date of the inhouse bank balances denominated
in foreign currency, the balances of external bank accounts as well as
internal and external loans of Deutsche Post AG.
In addition, hypothetical changes in exchange rates a ect equity and
the fair values of those derivatives used to hedge rm o -balance sheet
obligations and highly probable future currency transactions – desig-
nated as cash ow hedges.
A appreciation of the euro against all currencies as at December
would have reduced pro t by – million (previous year: – mil-
lion). ese hypothetical e ects on pro t or loss are mainly the result of
a sensitivity to changes in the euro against US (– million; previous
year: – million), GBP ( million; previous year: – million), BHD
( million; previous year: . million) and CNY ( million; previous
year: million). A devaluation of the euro would lead to exactly the
opposite sensitivities.
A appreciation of the euro would have changed the hedging reserve
accounted for in equity by – million (previous year: million).
e hypothetical change in equity is mainly the result of the euro’s sen-
sitivity to the US (– million; previous year: – million) and the
GBP ( million; previous year: million). A devaluation of the euro
would mainly have had the opposite e ect on equity .
Commodity risk
Most of the risks arising from the purchase of fuels and fuel oil are
passed on to customers via surcharges and contract clauses. ere was
no additional hedging using derivatives at the reporting date (nominal
amount in the previous year: million/fair value: – million).
A hypothetical increase in fuel prices by would have changed the
hedging reserve recognised in equity by million (previous year:
million); a fair-value decline by would have led to a change by
million (previous year: – million).
Interest rate risk and interest rate management
e Group’s primary debt currency is the euro. Euro funds are trans-
formed into foreign currencies using derivative nancial instruments,
to cover the liquidity needs of the respective operations. Taking into
account these transactions, the euro’s portion in the Group’s net debt
was (previous year: ), the portion of the US dollar stood at
(previous year: ). e increase in the euro’s share is mainly accounted
for by adjusting the foreign-currency loan portfolio.
e fair value of interest rate hedging instruments was calculated on the
basis of the discounted expected future cash ows, using the Group’s
treasury risk management system.
At December , Deutsche Post World Net had entered into inter-
est rate swaps with a notional volume of , million (previous year:
, million). e fair value of this interest rate swap position was
– million (previous year: million). e Group had not engaged
in interest-rate options as at the reporting date (notional amount in the
previous year: million).