Electrolux 2010 Annual Report Download - page 149

Short-term borrowings pertain mainly to countries with capital
restrictions. The average maturity of the Group’s long-term bor-
rowings including long-term borrowings with maturities within
12months was 3.3 years (3.9), at the end of 2010. The table below
presents the repayment schedule of long-term borrowings.
Repayment schedule of long-term borrowings, December 31
2011 2012 2013 2014 2015 2016– Total
Debenture and bond loans — 2,057 762 1,187 — 680 4,686
Bank and other loans — 36 1,309 15 1,855 512 3,727
Short-term part of long-term loans 1,177 — — — — — 1,177
Total 1,177 2,093 2,071 1,202 1,855 1,192 9,590
Forecasted transaction flows and hedges
GBP AUD RUB DKK BRL CHF CZK HUF USD EUR Other Total
Inflow of currency, long position 2,510 2,040 2,230 1,540 1,320 740 3,580 350 10,330 1,370 9,950 35,960
Outflow of currency, short position –190 –20 –220 — –40 — –4,410 –1,340 –15,200 –8,360 –6,180 –35,960
Gross transaction flow 2,320 2,020 2,010 1,540 1,280 740 –830 –990 –4,870 –6,990 3,770 —
Hedges –580 –930 –1,430 –300 –710 –310 230 420 1,770 2,870 –1,030 —
Net transaction flow 1,740 1,090 580 1,240 570 430 -600 –570 –3,100 –4,120 2,740 —
Other interest-bearing investments
Interest-bearing receivables from customer financing amounting
to SEK 82m (103) are included in the item Trade receivables in the
consolidated balance sheet. The Group’s customer-financing
activities are performed in order to provide sales support and are
directed mainly to independent retailers in Scandinavia. The
majority of the financing is shorter than 12 months. There is no
major concentration of credit risk related to customer financing.
Collaterals and the right to repossess the inventory also reduce
the credit risk in the financing operations. The income from cus-
tomer financing is subject to interest-rate risk. This risk is immate-
rial to the Group.
Commercial flows
The table below shows the forecasted transaction flows, imports
and exports, for the 12-month period of 2011 and hedges at year-
end 2010.
The hedged amounts are dependent on the hedging policy for
each flow considering the existing risk exposure. Hedges with
maturity above 12 months have a market value of SEK –14m at
year-end. The effect of hedging on operating income during
2010 amounted to SEK –489m (–535). At year-end 2010, unreal-
ized exchange-rate losses on forward contracts charged against
other comprehensive income amounted to SEK –122m (–13).
Fair value estimation
Valuation of financial instruments at fair value 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 price. The foreign-exchange spot rate is then
used to convert the value into SEK. For instruments where no reli-
able 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 underlying
schedule is used for valuation purposes. To the extent option
instruments are used, the valuation is based on the Black & Scho-
les´ formula.
The carrying value less impairment provision of trade receivables
and payables are assumed to approximate their fair values. The fair
value of financial liabilities for disclosure purposes is estimated by
discounting the future contractual cash flows at the current market
interest rate that is available to the Group for similar financial instru-
ments. The Group’s financial assets and liabilities are measured at
fair value according to the following fair value hierarchy:
Level 1: Quoted prices (unadjusted) in active markets for identi-
cal assets or liabilities.
Level 2: Inputs other than quoted prices included in Level 1 that
are observable for assets or liabilities, either directly, i.e., as prices
or indirectly, i.e., derived from prices.
Level 3: Inputs for the assets or liabilities that are not entirely
based on observable market date, i.e., unobservable inputs.
During 2010, the investment in Videocon Industries Ltd., which
is classified as an available for sale asset, was reclassified from
Level 3 to Level 1. Prior to 2010, the valuation model included a
reduction in the fair value due to a restriction for Electrolux to sell
the shares. The restriction expired in 2010 and hence, the fair
value at year-end 2010 is calculated based on quoted prices only.
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