DHL 2008 Annual Report Download - page 185

Deutsche Post World Net Annual Report 2008
Consolidated Financial Statements
Notes
ing into account these transactions, the euro’s portion in the Group’s
 nancial liabilities was   (previous year:  ) and that of the 
dollar   (previous year:  ).  e rise in the portion of the 
dollar was due to the higher  nancial requirements of the Ameri-
can subsidiaries
 e fair value of interest rate hedging instruments was cal-
culated on the basis of the discounted expected future cash  ows
using the Group’s treasury risk management system.
As at  December  the Group had entered into interest
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). As in the previous year
there were no interest rate options at the reporting date.
 e Group slightly reduced the share of instruments with
short-term interest lock-ins in the course of . Overall, the ratio
of instruments with short-term interest rate lock-ins to instruments
with long-term interest rate lock-ins was well balanced.  e e ect
of interest rate changes on the Group’s  nancial position continues
to be immaterial.
A sensitivity analysis is performed to present the interest
rate risks in accordance with  .  is method is used to deter-
mine the e ects hypothetical changes in market interest rates have
on interest income, interest expense and on equity at the reporting
date.  e following assumptions are taken as a basis for the sensi-
tivity analysis:
Primary variable-interest  nancial instruments are subject to
interest rate risks and will therefore have to be included in the sensi-
tivity analysis. Primary variable-interest  nancial instruments which
have been transformed into  xed-income  nancial instruments in a
cash  ow hedge are not included. Changes in market interest rates
in derivative  nancial instruments used as a cash  ow hedge a ect
equity by a change in far values and must therefore be included in
the sensitivity analysis. Fixed-interest  nancial instruments meas-
ured at amortised cost are not subject to interest rate risk.
Designated fair value hedges of interest rate exposures are
not included in the sensitivity analysis because the interest-related
changes in the fair value of the hedged item and the hedging trans-
action almost fully o set each other in pro t or loss for the period.
Only the variable portion of the hedging instrument a ects net
 na nce cos ts / net  nancial income and must be included in the sen-
sitivity analysis.
Interest rate derivatives outside the scope of a hedging rela-
tionship which would a ect net  na nc e co sts / ne t  nancial income
due to changes in market rates were not recognised as at  Decem-
ber .
If the market interest rate level as at  December  had
been  basis points higher, pro t would have decreased by   mil-
lion (previous year:   million). A market rate level  basis points
lower would have had the opposite e ect. A change in the market
interest rate level by  basis points would have a ected the fair
values of the interest rate derivatives recognised in equity. A rise in
interest rates would have resulted in unrecognised gains in equity
of   million (previous year:   million); a reduction would have
had the opposite e ect.
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  .  e following
assumptions are taken as a basis for the sensitivity analysis:
Primary monetary  nancial instruments used by Group
companies were either denominated directly in the functional cur-
rency or the currency risk was transferred to Deutsche Post  at
the exchange rates Deutsche Post  has guaranteed. Exchange-
rate-induced changes therefore have no e ect on pro t or loss and
equity of the Group companies. Some isolated Group companies
are not legally entitled to participate in in-house banking.  ese
companies hedge their currency risks from primary monetary  nan-
cial instruments linked with Deutsche Post  by using deriva-
tives.  e internal derivatives are consolidated in the Group.  e
risk remaining at Group level is taken into account when comput-
ing the net position.
Hypothetical changes in exchange rates a ect the fair values
of the external derivatives used by Deutsche Post  with changes
in fair value reported in pro t or loss; they also a ect the currency
results from the measurement at the closing date of the in-house bank
balances denominated in foreign currency, balances from external
bank accounts as well as internal and external loans extended by
Deutsche Post . In addition, hypothetical changes in exchange
rates a ect equity and the fair values of those derivatives used to
hedge o -balance-sheet obligations and highly probable future cur-
rency transactions – designated as cash  ow hedges.
A   appreciation of the euro against all currencies as at
 December  would have reduced pro t by   million (previ-
ous year:   million).  ese hypothetical e ects on pro t or loss are
mainly the result of a sensitivity to changes in the euro against 
(–  million; previous year: –  million),  (  million; previous
year: –  million),  (  million; previous year:   million) and
 (  million; previous year:   million). A depreciation of the
euro would have approximately 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 sensitivity to the  (–  million; previous
year: –  million),  (  million; previous year:   million)
and  (  million; previous year:   million). A currency depre-
ciation would a ect equity in the amount of –  million (previous
year:   million).
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.
As in the previous year there was no additional hedging using deriva-
tives at the reporting date.
Interest rate risk and interest rate management
 e Group’s primary debt currency is the euro. Part of it is
exchanged for foreign currencies using derivative  nancial instru-
ments to cover the liquidity needs of the respective operations. Tak-
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