Saab 2013 Annual Report Download - page 117

NOTE 41, CONT.
2012
Gross
amount Set-off
Net
amount in
balance
sheet
Master
netting
arrange-
ments
Collateral
received/
assets
pledged
Net
amount
Currency derivatives 509 - 509 -181 - 328
Interest rate derivatives 1 - 1 -1 - -
Electricity derivatives 4 - 4 - - 4
Assets 514 - 514 -182 - 332
Currency derivatives 204 - 204 -181 - 23
Interest rate derivatives 37 - 37 -1 - 36
Electricity derivatives 17 - 17 - - 17
Liabilities 258 - 258 -182 - 76
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 as VaR. 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 (VaR) during the year amounted to   ().
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 (hedging instruments) amounts to   (), market
value of currency risk in order backlog (hedged items) amounts to -
(-). 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.
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 primarily 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 rollovers 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   (-).
Valuation methods for financial assets and liabilities
e fair value of listed nancial assets is determined using market prices.
Saab also applies various valuation methods to determine the fair value of
nancial assets that are traded on an inactive market or are unlisted holdings.
ese valuation methods are based on the valuation of similar instruments,
discounted cash ows or customary valuation methods such as Black-Scholes.
e following instruments were valued at fair value according to listed
(unadjusted) prices on an active market on the closing date (Level ):
 Bonds
 Electricity derivatives
 Interest derivatives
e following instruments were valued at fair value according to accepted
valuation models based on observable market data (Level ):
• Forward exchange contracts: Future payment ows in each cur-
rency are discounted by current market rates to the valuation day and
valued to  at year-end exchange rates
• Options: e Black-Scholes option pricing model is used in the mar-
ket valuation of all options
• Interest swaps: Future variable interest rates are calculated with the
help of current forward rates. ese implicit interest payments are dis-
counted on the valuation date using current market rates. e market
value of interest rate swaps is obtained by contrasting the discounted
variable interest payments with the discounted present value of xed
interest payments
Unlisted shares and participations: Valued according to accepted principles;
e.g., for venture capital rms (Level ).
As of  December , the Group had the following nancial assets and
liabilities at fair value:
Assets at fair value
MSEK 2013 Level 1 Level 2 Level 3
Bonds and interest-bearing
securities 2,002 2,002 - -
Forward exchange contracts 376 - 376 -
Currency options 8 - 8 -
Interest rate swaps 6 - 6 -
Electricity derivatives 6 6 - -
Shares and participations 154 114 - 40
Total 2,552 2,122 390 40
Liabilities at fair value
MSEK 2013 Level 1 Level 2 Level 3
Forward exchange contracts 281 - 281 -
Currency options 12 - 12 -
Interest rate swaps 5 - 5 -
Electricity derivatives 18 18 - -
Total 316 18 298 -
Pension fund
e Saab Pension Fund was established in  to secure the main part of the
Group’s pension obligation and is not consolidated in the Group.
e fund has a long-term real yield requirement of  per cent per year.
e investment policy requires an asset distribution of a maximum of  per
cent equities/alternative investments (hedge funds) and - per cent
interest-bearing instruments. Investments are made in interest-bearing secu-
rities from issuers with a credit rating of no lower than  according to
Standard & Poor’s and aa according to Moody’s. Of the fund’s capital at year-
end,  per cent () was invested in interest-bearing assets and the remain-
ing  per cent () in equities and alternative investments. e market value
of the fund’s assets as of  December  was  , (,) and the
annual return was  per cent (). In , the fund was capitalised by
() and   () in refunds were paid. e table below shows the
solvency margin for the pension fund.
FINANCIAL INFORMATION > NOTES
SAAB ANNUAL REPORT 2013 113