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Notes to the consolidated accounts Unilever Group
Unilever Annual Report and Accounts 2008 111
Financial statements
17 Financial instruments and treasury risk management (continued)
Cash flow hedges
The fair values of derivatives hedging the risk on future foreign currency cash flows, floating interest rate cash flows and the price risk on future
purchases of raw materials amount to €(14) million (2007: €85 million) of which €(21) million relates to commodity contracts (2007: €88
million), €7 million to foreign exchange contracts (2007: €(10) million) and €nil to interest rate derivatives (2007: €7 million). Of the total fair
value of €(14) million, €(14) million is due within one year (2007: €82 million).
The following table shows the amounts of cash outflows that are designated as hedged items in the cash flow hedge relations (no cash inflows
are designated as hedged items):
€ million € million € million € million € million € million € million
Due Due Due Due Due Due
within between between between between after
1 year 1-2 years 2-3 years 3-4 years 4-5 years 5 years Total
2008
Foreign exchange cash flows (200) –––––(200)
Interest rate cash flows –––––––
Commodity contracts cash flows (121) –––––(121)
2007
Foreign exchange cash flows (235) –––––(235)
Interest rate cash flows (18) (19) (21) – – – (58)
Commodity contracts cash flows (310) (1) ––––(311)
Fair Value hedges
The fair values of derivatives hedging the fair value interest rate risk on fixed rate debt at 31 December 2008 amounted to €68 million
(2007: €nil) which is included under other financial assets.
Net investment hedges
The following table shows the fair values of derivatives outstanding at year end designated as hedging instruments in hedges of net
investments in foreign operations:
€ million € million € million € million
Assets Assets Liabilities Liabilities
Fair values of derivatives used as hedges of net investments in foreign entities 2008 2007 2008 2007
Current
Foreign exchange derivatives 28 –257 337
Of the above mentioned fair values, an amount of €28 million (2007: €nil) is included under other financial assets and €(257) million
(2007: €(337) million) is included under financial liabilities.
The impact of exchange rate movements on the fair value of forward exchange contracts used to hedge net investments is recognised in
reserves.
Natural hedges
A natural hedge – sometimes known as an economic hedge – is where exposure to a risk is offset, or partly offset, by an opposite exposure to
that same risk. Hedge accounting is not applied to these relationships.
The following table shows the fair value of derivatives outstanding at year end that are natural hedges.
€ million € million € million € million
Assets Assets Liabilities Liabilities
Fair values of natural hedges 2008 2007 2008 2007
Current
Interest rate derivatives 11–3
Cross-currency swaps 9–––
Foreign exchange derivatives 648 377 115 41
658 378 115 44
Non-current
Interest rate derivatives ––––
Cross-currency swaps –––18
–––18
658 378 115 62