Epson 2015 Annual Report Download - page 106

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105
(5) Foreign Exchange Risk
Epson operates businesses globally and, therefore, is exposed to the following risks due to foreign exchange
fluctuation:
(A) The risk that the profit or loss and cash flow in each functional currency of Epson is influenced by foreign
exchange fluctuation as a result of external transactions and intergroup transactions, including the payment and
receipt of dividends, in currencies that are different from each functional currency of Epson.
(B) The risk that the equity of Epson is influenced by foreign exchange fluctuation when equity denominated in
each functional currency of Epson is translated into Japanese yen and consolidated.
(C) The risk that the profit or loss of Epson is influenced by foreign exchange fluctuation when profit or loss
denominated in each functional currency of Epson is translated into Japanese yen and consolidated.
Epson hedges against risk (A) using derivatives or foreign currency-denominated interest-bearing debt when future
cash flow is projected or when receivables and payables are fixed. As a rule, the net of foreign
currency-denominated operating receivables and payables is hedged mainly using forward foreign exchange
contracts.
Epson does not hedge against risk (B) and (C), in principle.
In order to mitigate risks mentioned above resulting from the foreign exchange fluctuation, in accordance with
Epson’ s Foreign Exchange Management Regulation, Epson establishes a foreign currency hedge policy based on
the current conditions and forecast of the foreign exchange market, implements the aforementioned hedges under
the supervision of the Foreign Exchange Management Committee of the Company. The financial and general
accounting department of the Company regularly reports the performances to the Executive Committee of the
Company.
The breakdown of currency derivatives was follows:
Derivative transactions to which hedge accounting is not applied
Contract
amount
Over one
year
Fair value
Contract
amount
Over one
year
Fair value
Contract
amount
Over one
year
Fair value
Foreign exchange forward contract
Buying 2,571 -72 3,238 -(52) 26,945 -(432)
Selling 37,357 -(1,080) 34,957 -1,383 290,905 -11,508
Non-Deliverable Forward
Selling 3,297 -(48) 2,940 -36 24,465 -299
Total 43,226 -(1,055) 41,136 -1,367 342,315 -11,375
Derivative transactions to which hedge accounting is applied
Contract
amount
Over one
year
Fair value
Contract
amount
Over one
year
Fair value
Contract
amount
Over one
year
Fair value
(Note)
Foreign exchange forward contract
Selling 40,101 -(898) 37,030 -1,557 308,155 -12,948
Non-Deliverable Forward
Selling 6,615 -(105) 8,172 -(44) 68,003 -(366)
Total 46,716 -(1,004) 45,203 -1,512 376,158 -12,582
Millions of yen
Thousands of U.S. dollars
March 31,
March 31,
2014
2015
2015
Millions of yen
Thousands of U.S. dollars
March 31,
March 31,
2014
2015
2015
(Note) Cash flow hedge is applied, and derivative transactions are measured at fair value in the consolidated
statement of financial position.