Ubisoft 2013 Annual Report Download - page 130

Financial Statements
2013
125
Foreign exchange risk
The Group is exposed to foreign exchange risk on its cash flows from operating activities and on its
investments in foreign subsidiaries. The percentage of sales generated outside the euro currency area
is 70%.
The Group only hedges its exposures on operating cash flows in the main significant foreign
currencies (US dollar, Canadian dollar and Pound sterling). Its strategy is to hedge only one year at a
time, so the hedging horizon never exceeds 18 months.
The Group first uses natural hedges provided by transactions in the other direction (development costs
in foreign currency offset by royalties from subsidiaries in the same currency). The parent company
uses foreign currency borrowings, futures or foreign exchange options to hedge any residual
exposures and non-commercial transactions (such as inter-company loans in foreign currencies).
Derivatives for which documentation on the hedging relationship does not meet the requirements of
IAS 39 are not referred to as hedging instruments in the accounts.
As of March 31, 2013, foreign exchange transactions denominated in US dollars and pounds sterling
meet the cash flow hedging requirements under IAS 39.
Hedging commitments are made by the parent company’s treasury department in France. No hedging
is taken out at subsidiaries in France or abroad.
The fair value of foreign exchange derivatives is confirmed by the banking counterparty. It is estimated
on the basis of market conditions, using the market price which the Group would have to pay to
unwind its positions.
At closing, the fair value of foreign exchange derivatives is as follows:
03/31/13
03/31/12
USD
CAD
GBP
SGD
INR
JPY
SEK
USD
CAD
GBP
SEK
Long-term hedges (1)
620
Swap
Net foreign exchange options
Qualifying foreign exchange
hedging derivatives
-
-
-
-
620
-
-
-
Long-term hedges (1)
903
(13)
213
19
1
82
(1)
(1,380)
(30)
(11)
25
Net foreign exchange options
Non-hedge foreign exchange
derivatives
903
(13)
213
19
1
82
(1)
(1,380)
(30)
(11)
25
(1)
Mark-to-market, level 2 in the hierarchy of fair value under IFRS 7
x The amount of ineffective derivative instruments qualifying for hedge accounting under IAS 39 is
accounted for as financial income.
Exposure to foreign exchange risk
In thousands of currency units
USD
GBP
CAD
AUD
Net position before hedging*
272,837
66,428
(175,540)
35,172
Futures contracts
6,433
-
18,000
-
Net position after hedging
279,270
66,428
(157,540)
35,172
* Transaction position brought about by any operation triggering a payment or future earnings.
Credit and counterparty risk
Exposure to credit risk
Credit risk reflects the risk of financial loss to the Group in the event that a customer or counterparty to
a financial instrument may fail to meet its contractual obligations. This risk is mainly incurred on trade
receivables and investment securities.