Volvo 2007 Annual Report Download - page 135
Download and view the complete annual report
Please find page 135 of the 2007 Volvo annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report. Financial information 2007 131
The Volvo Group’s outstanding forward contracts and options contracts for hedging of commercial currency risks
Other Fair
Currencies currencies value
Million USD GBP EUR JPY Net SEK
Due date 2008 amount 1,919 280 1,378 (7,889) 8,277
Due date 2009 amount (15) – – – (875)
Due date 2010 amount (2) – – – 45
Totalt 1,902 280 1,378 (7,889) 7,447
Average contract rate 6.75 13.30 9.28 0.06
Fair value of outstanding
forward contracts 348 76 (282) 6 118 266
The hedged amount of projected future fl ows for all periods are within
the framework of Volvo’s currency policy.
Volvo tests all cash-fl ow hedges for effectiveness when they are
entered into. Hedging is considered to be effective when the pro-
jected future cash fl ow’s currency fl uctuation and maturity date coin-
cide with those of the hedging instrument. The hedging relationship is
regularly tested up until its maturity date. If the identifi ed relationships
are no longer deemed effective, the currency fl uctuations on the
hedging instrument from the last period the instrument was con-
cidered effective are reported in the Group’s income statement. For
2007, Volvo reported 20 (10) in revenue related to the ineffectiveness
of cash-fl ow hedging.
Hedging of forecasted electricity is considered to be effective
when predetermined factors that affect electricity prices are in agree-
ment with forecasts of future electricity consumption and designated
derivative instruments. No ineffective hedging of forecasted elec-
tricity consumption was identifi ed during 2007.
Hedging of currency and interest rate risks on loans
Volvo has chosen to apply hedge accounting from June 1 for a loan of
1 billion euro borrowed during the second quarter. Volvo has not
applied hedge accounting for fi nancial instruments used to hedge
interest and currency risks on loans before. Going forward, in applic-
able cases when the requirements for hedge accounting are consid-
ered to be fulfi lled, Volvo will consider to apply hedge accounting for
this kind of instruments.
Hedging of net investments in foreign operations
Volvo applies hedge accounting for certain net investments in foreign
operations. Current earnings from such hedging shall be accounted
for in a separate item within shareholders’ equity. A total of neg 123
(63) in shareholders’ equity relating to hedging of net investments in
foreign operations was reported in 2007. An amount of 0 (37) was
reported in earnings relating to concluded hedges.