Omron 2009 Annual Report Download - page 87

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85
Derivatives
The fair value of derivatives generally reflects the esti-
mated amounts that the Companies would receive or pay
to terminate the contracts at the reporting date, thereby
taking into account the current unrealized gains or losses
of open contracts. Dealer quotes are available for most
of the Companies’ derivatives; otherwise, pricing or valu-
ation models are applied to current market information to
estimate fair value. The Companies do not use deriva-
tives for trading purposes.
Forward exchange contracts
Foreign currency swap
Interest rate swap
2009 2008 2009
Millions of yen
Thousands of
U.S. dollars
¥ 64,916
¥ 620
—
¥ 63,784
¥ 2,646
¥ 20,000
$ 650,857
$ 27,000
$ 204,082
20. Derivatives and Hedging Activities
The notional amounts of contracts to exchange foreign currency outstanding at March 31, 2009 and 2008 were as follows:
The Companies enter into foreign exchange forward
contracts and combined purchased and written foreign
currency swap contracts to hedge foreign currency
transactions (primarily the U.S. dollar and the EURO). The
companies also enter into interest rate swap contracts to
hedge interest-rate fluctuations. The Companies do not
use derivatives for trading purposes. The Companies are
exposed to credit risk in the event of non-performance by
counterparties to derivatives, but management considers
the exposure to such risk to be minimal since the
counterparties are major financial institutions.
Changes in the fair value of foreign exchange forward
contracts, foreign currency swaps and interest rate swaps
designated and qualifying as cash flow hedges are report-
ed in accumulated other comprehensive income (loss).
These amounts are subsequently reclassified into other
expenses (income), net in the same period as the hedged
items affect earnings. Substantially all of the accumulated
other comprehensive income (loss) in relation to foreign
exchange forward contracts and interest rate at March
31, 2009 is expected to be reclassified into earnings with-
in twelve months.
Forward exchange contracts
Derivatives designated as hedges
The fair values of derivatives as of March 31, 2009 were as follows:
20092009
Assets Liabilities
Millions of yen
Thousands of
U.S. dollars
¥ 875 $ 8,929 Forward exchange contracts
Foreign currency swap
Interest rate swap
2009
2009
Millions of yen
Thousands of
U.S. dollars
$ (16,878)
(276)
(245)
¥ (1,654)
(27)
(24)
The effects on consolidated statements of operations in fourth quarter were as follows:
Forward exchange contracts
Foreign currency swap
Interest rate swap
Thousands of
U.S. dollars
Millions of yen
Derivatives designated as hedges
Cash flow hedge Millions of yen Thousands of
U.S. dollars
Profit and loss of other
comprehensive income (loss)
[Hedge effective part]
Transfer from accumulated other compre-
hensive income (loss) to profit and loss
[Hedge effective part]
¥ (1,714)
0
—
$ 8,255
(82)
(143)
¥ 809
(8)
(14)
$ (17,490)
0
—
The amount of the hedging ineffectiveness was not material.