BMW 2009 Annual Report Download - page 130

128
74 Group Financial Statements
74 Income Statements
74 Statement of
Comprehensive Income
76 Balance Sheets
78 Cash Flow Statements
80 Group Statement of Changes
in Equity
81 Notes
81 Accounting Principles
and Policies
90 Notes to the Income
Statement
97
Notes to the Statement
of Comprehensive Income
98 Notes to the Balance Sheet
119 Other Disclosures
133 Segment Information
in euro million 31. 12. 2009 31. 12. 2008
Euro / US Dollar 1 7 4 39
Euro / Chinese Renminbi 201 29
Euro / British Pound 188 56
Euro / Japanese Yen 1 7 54
Protection against such risks is provided in the first instance
though natural hedging which arises when the values of
non-derivative financial instruments have matching maturi-
ties and amounts (netting). Derivative financial instruments
are used to reduce the risk remaining after netting.
Finan-
cial instruments are only used to hedge underlying posi-
tions
or forecast transactions.
The scope of permitted transactions, responsibilities, finan-
cial reporting procedures and control mechanisms used
for financial instruments are set out in internal guidelines.
This includes, above all, a clear separation of duties be-
tween trading and processing. Currency and interest rate
risks are managed at a corporate level.
Further disclosures relating to risk management are pro-
vided in the Group Management Report.
Currency risk
As an enterprise with worldwide operations, business is
conducted in a variety of currencies, from which currency
risks arise. Since a significant portion of Group revenues
are generated outside the euro currency region and the
procurement of production material and funding is also
organised on a worldwide basis, the currency risk is an ex-
tremely important factor for Group earnings.
At 31 December 2009, derivative financial instruments
were in place to hedge exchange rate risks, in particular
for the currencies US dollar, British pound, Japanese yen
and Chinese renminbi. The hedging contracts comprise
mainly option and forward currency contracts.
A description of how these risks are managed is provided
in the Group Management Report on page 64 et seq. The
BMW Group measures currency risks using a cash-flow-
at-risk model.
The starting point for analysing currency risk with this model
is the identification of forecast foreign currency transac-
tions or “exposures”. At the end of the reporting period, the
principal exposures for the coming year were as follows:
In the next stage, these exposures are compared to all
hedges that are in place. The net cash flow surplus repre-
sents an uncovered risk position. The cash-flow-at-risk
approach involves allocating the impact of potential ex-
change rate fluctuations to operating cash flows on the
basis of probability distributions. Volatilities and correlations
serve as input factors to assess those relevant probability
distributions.
The potential negative impact on earnings for the current
period is computed on the basis of current market prices
and exposures to a confidence level of 95 % for each
cur-
rency. Aggregation of these results creates a risk reduc-
tion
effect due to correlations between the various port-
folios.
The following table shows the potential negative impact
for the BMW Group – measured on the basis of the cash-
flow-at-risk approach – attributable at the balance sheet
date to unfavourable changes in exchange rates for the
principal currencies.
in euro million 31. 12. 2009 31. 12. 2008
Euro / US Dollar 3,696 3,631
Euro / Chinese Renminbi 3,119 1,712
Euro / British Pound 2,446 2,291
Euro / Japanese Yen 902 835