Nokia 2007 Annual Report Download - page 209

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35. Risk Management (Continued)
of less than a year. The Group does not hedge forecasted foreign currency cash flows beyond two
years.
Since Nokia has subsidiaries outside the Euro zone, the eurodenominated value of the shareholders’
equity of Nokia is also exposed to fluctuations in exchange rates. Equity changes caused by
movements in foreign exchange rates are shown as a translation difference in the Group
consolidation.
Nokia uses, from time to time, foreign exchange contracts and foreign currency denominated loans to
hedge its equity exposure arising from foreign net investments.
At the end of year 2007 and 2006, following currencies represent significant portion of the currency
mix in the outstanding financial instruments:
2007 USD JPY GBP INR
EURm EURm EURm EURm
FX derivatives used as cash flow hedges (net amount)
(1)
.......... 803 1274 (656) —
FX derivatives used as net investment hedges (net amount)
(2)
...... — — — (216)
FX exposure from balance sheet items (net amount)
(3)
............ 2204 (739) 89 33
FX derivatives not designated in a hedge relationship and carried at
fair value through profit and loss accounts (net amount)
(3)
...... (2361) 847 (127) (51)
2006 USD JPY GBP CNY
EURm EURm EURm EURm
FX derivatives used as cash flow hedges (net amount)
(1)
.......... (2439) 1 626 (526) —
FX derivatives used as net investment hedges (net amount)
(2)
...... (457) — — (785)
FX exposure from balance sheet items (net amount)
(3)
............ 617 (488) 196 —
FX derivatives not designated in a hedge relationship and carried at
fair value through profit and loss accounts (net amount)
(3)
...... (1442) 564 (235) —
(1)
The FX derivatives are used to hedge the foreign exchange risk from forecasted highly probably
cash flows related to sales, purchases and business acquisition activities. In some of the curren
cies, especially in US Dollar, Nokia has substantial foreign exchange risks in both estimated cash
inflows and outflows, which have been netted in the table. See Note 20 for more details on hedge
accounting. The underlying exposures which these hedges are entered for are not presented in
the table, as they are not financial instruments as defined under IFRS 7.
(2)
The FX derivatives are used to hedge the Group’s net investment exposure. The underlying expo
sures which these hedges are entered for are not presented in the table, as they are not financial
instruments as defined under IFRS 7.
(3)
The balance sheet items which are denominated in the foreign currencies are hedged by a portion
of FX derivatives not designated in a hedge relationship and carried at fair value through profit
and loss accounts, resulting in offsetting FX gains or losses in the financial income and expenses.
F66
Notes to the Consolidated Financial Statements (Continued)