Note 28 - Derivatives - Hedge accounting


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Cash flow hedges
The table below shows the derivatives that the Group has contracted to hedge currency exposure, interest rate exposure, or price exposure on future cash flows. The total fair value adjustment at year-end is entered directly in Shareholders' equity and will be taken to the income statement as the financial contracts are realized, with the exception of currency translation and accrued interest on currency swaps used for interest hedging, as these do not qualify as cash flow hedges and are therefore entered directly in the income statement.
   2010    2009  
DKK million Contract amount based on agreed rates Market value Dec. 31   Contract amount based on agreed rates Market value Dec. 31  
Forward exchange contracts (sales)
JPY   -     -   118  15 
USD 2,834  115    1,418  164   
2,834  115  1,536  179 
Interest rate swaps
DKK/DKK - pays fixed rate of 2.95% / earns variable rate of 1.21% (compared to 1.55% in 2009) 307  (8) 307  (3)
EUR/EUR - pays fixed rate of 3.06% / earns variable rate of 1.09% (compared to 1.38% in 2009) 112  (5) 112  (2)
EUR/EUR - pays fixed rate of 3.58% / earns variable rate of 1.09% (compared to 1.38% in 2009) 112  (6)   112  (3)  
531  (19) 531  (8)
Currency swaps
EUR/DKK - pays fixed rate of 4.27% / earns variable rate of 1.21% (compared to 1.55% in 2009) 250  (15) 250  (16)
EUR/USD - paid fixed rate of 4.03% / earned variable rate of 0.25% in 2009   -    -    383  (61)  
250  (15) 633  (77)
Forwards            
Electricity price agreement (average payment of DKK 326/MWh) (2009: DKK 288/MWh) 76  74 
Oil price agreement (average payment of USD 707/MT) (2009: USD 0/MT) 11      -     -    
87  74 
  3,702  85    2,774  97   
The forward exchange contracts fall due in the period January 2011 to December 2012 (January 2010 to December 2010 at the end of 2009), while the interest rate and currency swaps fall due in the period March 2013 to July 2019 (June 2010 to July 2017 at the end of 2009). Electricity agreements have been contracted for the period January 2011 to December 2012 (January 2010 to December 2011 at the end of 2009) and oil contracts for the period January 2011 to December 2011.
The Group's future net cash flows in USD and JPY are hedged over the following periods:
        2010 2009  
USD 24 months 12 months
JPY - 12 months

Hedges of net investments in foreign subsidiaries
There were no hedges of currency exposure on investments in subsidiaries in 2010 or 2009.
Fair value hedges
The table below shows the derivatives that the Group has contracted to hedge currency exposure on financial assets and liabilities that give rise to currency adjustments in the income statement, and derivatives that no longer fulfill the criteria for cash flow hedges. Gains or losses on market value adjustments at year-end are entered in the income statement.
   2010    2009  
DKK million Contract amount based on agreed rates Market value Dec. 31   Contract amount based on agreed rates Market value Dec. 31  
Forward exchange contracts (sales)
AUD (net purchase) (55) (11)   - 
CAD (net purchase)   -    -  (7)   - 
CHF (net purchase)   -    -  (249) (2)
GBP (net purchase) (112) (1) (124)
JPY 25  (5) 40  (1)
MXN 23    - 
SEK 41    -  43    - 
USD 1,182  (3)   618   
1,104  (7) 310 
The forward exchange contracts fall due in the period January 2011 to October 2011 (January 2010 to December 2010 at the end of 2009). 
The gain on forward exchange contracts was DKK 31 million (2009: DKK 46 million), compared to a gain on the hedged items of DKK 41 million (2009: DKK (17) million).
    
Other information
The derivatives are not traded on an active marked based on quoted prices, but are individual contracts. The fair value of the derivatives is determined using valuation techniques that utilize market-based data such as exchange rates, interest rates, electricity prices, and oil prices (Level 2).
The carrying amounts for the categories Loans and receivables and Other financial liabilities at December 31, 2010, are DKK 3,422 million and DKK 3,734 million respectively (2009: DKK 2,967 million and DKK 3,853 million). For the categories Hedge accounting (asset), Available-for-sale financial assets, and Hedge accounting (liability) the carrying amounts are shown in Notes 15 and 24.
    

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