Saab 2012 Annual Report Download - page 118

directives are managed through a discretionary management mandate, under
which the manager has the mandate to accept risks in relation to benchmarks
(hedging strategy) at the equivalent of   () expressed in a. e mar-
ket value of electricity derivatives as of year-end was  - (-). Aer the
introduction of additional price areas in Sweden on  November , sto was
re-named se. Since  January , electricity derivatives are used as cash
ow hedges for the Stockholm price area (se). Ineciency aecting net
income for the year amounted to  - ().
Credit and counterparty risks
Credit risk is the risk that the counterparty in a transaction will not be able to
full the nancial obligations of a contract. In the course of its day-to-day
operations, Saab is exposed to credit risks as a result of transactions with
counterparties in the form of customers, suppliers and nancial players. e
Group’s aggregate credit risks consist of commercial credit risks and nancial
credit risks.
Commercial credit risks
According to the Group’s policy, commercial credit risks are identied and
actively managed on a case-by-case basis. Credit risks that arise in customer
contracts are managed by utilising available banking, insurance or export
credit institutions. According to the policy, credit risks that arise through
advances paid to suppliers are managed by always maintaining bank-guaran-
teed security for any advances. Commercial credit risks consist of outstand-
ing accounts receivable and advances paid to suppliers.
Accounts receivable
On  December , the Group’s outstanding accounts receivable amounted
to  , (,). e Receivables Financing Programme reduced
accounts receivable at year-end by  (). Defence-related sales accounted
for  per cent () of total sales, where the counterparties in most accounts
receivable are nations with high creditworthiness. e Group’s receivables are
mainly in the , which accounted for  per cent () of the total. Where
counterparties’ creditworthiness is deemed unsatisfactory, bank or insurance
guarantees or guarantees from  are secured.
In connection with cash transactions, Saab generally requires that a letter
of credit is opened in its name to ensure that payment is received.
Write-downs of accounts receivable amounted to   (), corre-
sponding to . per cent (.) of total accounts receivable. Write-downs of
accounts receivable have changed as follows.
MSEK 2012 2011
Write-downs, 1 January -19 -22
Write-downs for calculated losses -5 -5
Reversal of previous write-downs 1 3
Actual credit losses 10 5
Write-downs, 31 December -13 -19
e following table shows an age analysis of the Group’s overdue receivables: :
MSEK 31-12-2012 31-12-2011
<30 days 412 221
30 to 90 days 169 393
91 to 180 days 196 303
>181 days 124 125
Accounts receivable overdue 901 1,042
Accounts receivable not overdue 2,553 2,111
Total accounts receivable 3,454 3,153
Since accounts receivable are largely secured via bank or insurance guaran-
tees or are attributable to states, the commercial credit risk is low despite
overdue receivables.
Advances paid to suppliers
Advances paid to suppliers constitute a credit risk, since the counterparty’s
services have not been fully rendered. As of  December , the Group had
paid its suppliers advances of   (). As the Group’s policy is to main-
tain bank-guaranteed security for any advances it pays, the commercial sup-
plier credit risk is considered low.
Financial credit risks
Financial credit risk consists of exposures to banks through deposits, securi-
ties investments and/or the market value of outstanding derivatives.
e Group’s policy for managing nancial credit risks is to:
t Ensure that all nancial counterparties have a long-term credit rating
of no lower than  from Standard and Poor’s or   from Moody’s
t Assign each nancial counterparty a credit limit based on its long-
term credit rating
t Enter into  master agreements with nancial counterparties to
net the positive and negative market values of outstanding derivatives
Credit risk is calculated on established and anticipated risks pursuant to the
recommendations of the Bank of International Settlements ( I). On
December , counterparty risks amounted to  , (,), of
which deposits with banks, mortgage institutions, companies and the Swed-
ish state totalled  , (,).
Trading
e Board has given Saab Treasury a risk mandate for trading in currency
and money market instruments. During the year,   was allocated to
trading expressed according to a. If the cumulative result for the year is
negative, the mandate is reduced correspondingly. In , trading income
was   (), which is reported as other operating income. e average
utilised risk mandate (a) during the year was   ().
Hedge accounting
Hedge accounting to fair value is applied to foreign exchange contracts and
currency swaps. e market value of currency derivatives accounted for as
fair value hedges and the market value of hedged items are indicated in the
table below. For information on the impact on net income for the year of
gains and losses on derivatives accounted for as fair value hedges, see Note ,
Other operating expenses.
Hedge accouting to fair value, MSEK 2012 2011
Foreign currency risk in order backlog (hedged item) -13 -13
Currency derivatives (hedging instrument) 13 13
Certain forward exchange contracts and currency swaps (hedge instruments)
entered into to hedge future receipts and disbursements against currency
risks are accounted for according to the rules for cash ow hedging. ese
cash ow hedges relate principally to contractual sales volumes.
Derivatives that protect future receipts and disbursements are recognised
in the statement of nancial position at fair value. Changes in value are recog-
nised in other comprehensive income and separately recognised in the hedge
reserve in equity until the hedged cash ow meets the operating prot or loss,
at which point the cumulative changes in value of the hedging instrument are
transferred to prot or loss to meet and match the eects on earnings of the
hedge transaction. e hedge reserve before tax amounted to   (),
of which the unrealised value of derivatives was   (-) and the real-
ised eects arising from rollovers of derivatives was   ().
e change in the hedge reserve in  of   consists of a reversal
to prot or loss of  , the change in the value of existing derivatives of
 , the market value of hedges obtained during the year of  ,
and the change that arose due to the extension of derivatives of  -. For
information on the amount recognised in other comprehensive income, see
consolidated net comprehensive income.
e ineciency in cash ow hedges that aected net income for the year
amounted to  - ().
NOTE 41, CONT.
FINANCIAL INFORMATION > NOTES
114 SAAB ANNUAL REPORT 2012