Siemens 2008 Annual Report Download - page 285

Notes to Consolidated Financial Statements 189
(in millions of €, except where otherwise stated and per share amounts)
Financial assets and liabilities measured at fair value are presented in the following table:
Fair values for available-for-sale nancial assets are derived from quoted market prices in active markets, if
available. In certain cases, fair values are estimated using a valuation technique.
The Company limits default risks in derivative instruments by a careful counterparty selection. Derivative
instruments are principally transacted with nancial institutions with investment grade credit ratings. The fair
valuation of derivative instruments at Siemens incorporates all factors that market participants would consider,
including an adequate consideration of the counterparties’ credit risks. This assures that, especially given the
current credit crisis, the counterparties’ credit risks themselves as well as any changes in the counterparties’
credit worthiness are included in the fair valuation of the Company’s derivative instruments and thus reected
in the Consolidated Financial Statements. The exact calculation of fair values for derivative nancial instru-
ments depends on the specic type of instruments:
Derivative interest rate contracts – The fair values of derivative interest rate contracts (e.g. interest rate swap
agreements) are estimated by discounting expected future cash ows using current market interest rates and
yield curves over the remaining term of the instrument. Interest rate options are valued on the basis of quoted
market prices or on estimates based on option pricing models.
Derivative currency contracts – The fair value of forward foreign exchange contracts is based on forward
exchange rates. Currency options are valued on the basis of quoted market prices or on estimates based on
option pricing models.
Credit default swaps – The fair value of credit default swaps is calculated by comparing discounted expected
future cash ows using current bank conditions with discounted expected future cash ows using contracted
conditions.
September 30,
2008 2007
Financial assets measured at fair value
Available-for-sale nancial assets 185 280
Derivative nancial instruments 997 943
Without hedging relationship 331 469
In connection with fair value hedges 394 176
Foreign currency exchange derivatives 15 25
Interest rate derivatives 379 151
In connection with cash ow hedges (foreign currency exchange derivatives) 144 191
Embedded derivatives 128 107
Financial liabilities measured at fair value
Derivative nancial instruments 1,405 917
Without hedging relationship 860 403
In connection with fair value hedges 70 103
Foreign currency exchange derivatives 18 3
Interest rate derivatives 52 100
In connection with cash ow hedges 331 157
Foreign currency exchange derivatives 331 155
Interest rate derivatives – 2
Other embedded derivatives 144 254