Mercedes 1999 Annual Report Download - page 110

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OTHER NOTES
104
At December 31,
1999
Carrying
amount
Carrying
amount
Fair
value
Fair
value
1998
Financial instruments
(other than derivative
instruments):
Assets:
Financial assets
Receivables from
financial services
Securities
Cash and cash
equivalents
Other
Liabilities:
Financial liabilities
Derivative instruments:
Assets:
Currency contracts
Interest rate contracts
Liabilities:
Currency contracts
Interest rate contracts
At December 31,
The notional amounts of off-balance sheet financial instruments
are as follows:
1998
At December 31,
Currency contracts
Interest rate contracts
28,974 28,204
25,911 26,162
1999
Currency contracts include foreign exchange forward and option
contracts which are mainly utilized to hedge existing receivables
and liabilities, firm commitments and anticipated transactions de-
nominated in foreign currencies (principally U.S. dollars, Japanese
Yen and major non-euro currencies in Europe). The objective of the
Group’s hedging transactions is to reduce the market risk of its
foreign denominated future cash flows to exchange rate fluctua-
tions. The Group has entered into currency contracts for periods of
one to five years.
The Group enters into interest rate and interest rate cross-currency
swaps, interest rate forward and futures contracts and interest rate
options in order to safeguard financial investments against fluctu-
ating interest rates as well as to reduce funding costs, to diversify
sources of funding, or to alter interest rate exposures arising from
mismatches between assets and liabilities.
The Group may be exposed to credit-related losses in the event of
non-performance by counterparties to financial instruments.
Counterparties to the Group’s financial instruments represent, in
general, international financial institutions. DaimlerChrysler does
not have a significant exposure to any individual counterparty,
based on the rating of the counterparties performed by established
rating agencies. The Group believes the overall credit risk related
to utilized derivatives is insignificant.
c) Fair value of financial instruments
The fair value of a financial instrument is the price at which one
party would assume the rights and/or duties of another party. Fair
values of financial instruments have been determined with refer-
ence to available market information at the balance sheet date and
the valuation methodologies discussed below. Considering the vari-
ability of their value-determining factors, the fair values presented
herein may not be indicative of the amounts that the Group could
realize in a current market exchange.
The carrying amounts and fair values of the Group’s financial in
struments are as follows:
In determining the fair values of derivative financial instruments,
certain compensating effects from underlying transactions (e.g.
firm commitments and anticipated transactions) are not taken into
consideration. At December 31, 1999 and 1998, the Group had de-
ferred net unrealized gains (losses) on forward currency exchange
contracts and options of €(1,148) and €325, respectively, pur-
chased against firm foreign currency denominated sales commit-
ments extending for a period of three years.
The carrying amounts of cash, other receivables and accounts pay-
able approximate fair values due to the short-term maturities of
these instruments.
1,360 1,360 912 912
38,735 38,835 26,468 26,460
8,969 8,969 12,160 12,160
9,099 9,099 6,589 6,589
133 133 261 261
64,488 64,954 40,430 40,459
57 74 338 744
34 348 97 309
944 2,109 268 349
61 590 19 303