Electrolux 2005 Annual Report Download - page 70

Notes
66 Electrolux Annual Report 2005
GBP CAD AUD DKK CZK CHF HUF EUR SEK USD Other Total
Inflow of currency (long position) 3,760 3,280 1,680 1,090 960 1,020 1,020 8,290 1,970 1,030 6,280 30,380
Outflow of currency (short position) –100 –120 –370 –90 — –70 –3,130 –10,720 –6,080 –7,430 –2,270 –30,380
Gross transaction flow 3,660 3,160 1,310 1,000 960 950 –2,110 –2,430 –4,110 –6,400 4,010 —
Hedge –2,370 –1,550 –890 –490 –560 –590 1,210 440 3,250 2,940 –1,390 —
Net transaction flow 1,290 1,610 420 510 400 360 –900 –1,990 –860 –3,460 2,620 —
Amounts in SEKm, unless otherwise stated
The effect of hedging on operating income during 2005 amounted to
SEK –304m (–76). At year-end 2005, unrealized exchange-rate gains
on forward contracts amounted to SEK 22m (–20), all of which will
mature in 2006.
Derivatives at market value
2005 2004
Assets Liabilities Assets Liabilities
Interest-rate swaps 118 17 290 65
Fair-value hedges 111 —
Held for trading 7 17
Cross currency
interest-rate swaps — 11 20 10
Held for trading — 11
Forward-rate agreements
and futures 1 2 9 9
Held for trading 1 2
Forward foreign-
exchange contracts 361 297 828 534
Cash-flow hedges 168 143
Net-investment hedges 171 11
Held for trading 22 142
Commodity derivatives 59 57 1 0
Held for trading 59 57
Total 539 384 1,148 618
Non-current portion of derivatives at market value
2005 2004
Assets Liabilities Assets Liabilities
Interest-rate swaps 118 1 — —
Fair-value hedges 110 —
Held for trading 8 1
Cross currency
interest-rate swaps — 4 — —
Held for trading — 4
Forward foreign-
exchange contracts — 1 — —
Cash-flow hedges — 1
Total 118 6 — —
Derivative financial instruments
The tables present the fair value and nominal amounts of the Group’s
derivative financial instruments for managing of financial risks and
proprietary trading.
Valuation of derivative financial instruments at market value, presented
in the tables, is done at the most accurate market prices available.
This means that instruments, which are quoted on the market, such
as, for instance, the major bond and interest-rate future markets, are
all marked-to-market with the current spot mid-price. The foreign-
exchange spot mid-rate is then used to convert the market value into
Swedish krona, before it is discounted back to the valuation date. For
instruments where no reliable price is available on the market, cash
flows are discounted using the deposit/swap curve of the cash-flow
currency. In the event that no proper cash flow schedule is available,
for instance, as in the case with forward-rate agreements, the under-
lying schedule is used for valuation purposes. To the extent option
instruments are used, the valuation is based on the Black & Scholes
formula. All valuations are done at mid-prices, e.g., the average of bid
and ask prices are used.
Nominal amounts
2005 2004
Interest-rate swaps
Maturity shorter than 1 year 2,459 5,600
Maturity 2–5 years 2,329 4,760
Maturity 6–10 years 94 —
Total interest-rate swaps 4,882 10,360
Cross currency interest-rate swaps 90 75
Forward-rate agreements 19,432 15,751
Foreign-exchange derivatives
(Forwards and Options) 17,890 18,104
Total 42,294 44,290
Note 17 continued
Commercial flows
The table below shows the forecasted transaction flows (imports and
exports) for the 12-month period of 2006 and hedges at year-end 2005.
The hedged amounts during 2006 are dependent on the hedging pol-
icy for each flow considering the existing risk exposure. Gross hedg-
ing of flows above 12 months and up to 18 months, not shown in the
table, amounts to SEK 1,170m, and this hedging refers mainly to
USD/SEK and EUR/SEK.