APC 2007 Annual Report Download - page 139

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Consolidated financial statements at December 31, 2007
Note 20 - Financial instruments
The Group uses financial instruments to manage its exposure to fluctuations in interest rates, exchange rates and metal
prices. Exposure to these risks is described in the chapter on Risk Factors in the Registration Document.
20.1 - Carrying amount and
nominal amount of derivative financial instruments
Dec. 31, 2006 Dec. 31, 2007 Dec. 31, 2007
IFRS Carrying Other Equity Cash Carrying Nominal amount
designation amount financial (2) and cash amount Purchase Sale
income and equivalents
expense (1)
Foreign exchange
Futures - cash flow hedges CFH* (74.0) 32.3 54.7 - 13.0 979.9 -
Futures - hedges
of balance sheet items Trading 19.1 6.3 - - 25.4 662.7 941.6
Options and other Trading and
hedging instruments CFH* (0.9) 4.1 - - 3.2 184.6 -
Metal prices
Futures and options CFH* (4.4) - (5.2) - (9.6) 214.4 -
Interest rates
Swaps on credit lines CFH*/FVH* (1.7) (1.5) 2.1 - (1.1) 746.0 -
Derivatives financial instruments (61.9) 41.2 51.6 - 30.9 - -
* Cash flow hedge / Fair value hedge.
(1) Gains and losses on hedging instruments for the period are offset by changes in the fair value of the underlying, which are also
recognized in "Other financial income and expense".
(2) Reported in equity under "Other reserves".
The market value of financial instruments, which corresponds to their carrying amount, is estimated either internally by
discounting future differential cash flows at current market interest rates or by third party banks.
19.2 - Purchase commitments
Shares in subsidiaries and affiliates
Commitments to purchase equity investments correspond
to put options given to minority shareholders in consoli-
dated companies or relate to earn-out payments. The
amount of these commitments was not material at De-
cember 31, 2007.
Information technology services
In 2004, the Group signed an agreement with Capgemini
to outsource its European IT functions and to develop and
deploy shared management applications using SAP in Eu-
rope. The first pilot version was deployed in India in April
2007 and a second version should be rolled out in several
European countries in mid-2008.
Payments to Capgemini replace the cost of the IT function,
which was previously managed internally. In early 2006,
the duration of the reciprocal commitments between
Capgemini and Schneider Electric was extended from ten
to twelve years.
The 2007 expense related to this outsourcing agreement
contractually amounted to 147 million, including volume
and indexation effects provided for in the contract. This
compares with 136 million in 2006. Schneider Electric
capitalized expenses relating to the SAP contract in a net
amount of 53 million at end-2007.
During the year, the Schneider Electric and Capgemini en-
tered into discussions to adjust the contract with a view to
continuously improving quality and cost effectiveness for
both parties. It was decided that part of the operations cur-
rently managed by Capgemini will be brought back in
house in 2008. These include IT operations in certain Eu-
ropean countries and network operations.
19.3 - Contingent liabilities
Management is confident that balance sheet provisions for
known disputes in which the Group is involved are suffi-
cient to ensure that these disputes do not have a material
impact on its financial position or profit. This is notably the
case for the potential consequences of a current dispute in
Belgium involving former senior executives and managers
of the Group.
The loan agreements related to the Group's long-term debt
do not include any rating triggers.
The Group has also signed an agreement concerning
statutory employee training rights in France (DIF). Because
the vested rights cannot be reliably estimated, no corre-
sponding provision has been set aside in the financial
statements.
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