Siemens 2011 Annual Report Download - page 327

153 D. Consolidated Financial Statements 273 E. Additional information
158 D. Consolidated Statements of Changes in Equity
160 D. Notes to Consolidated Financial Statements
266 D. Supervisory Board and Managing Board
154 D. Consolidated Statements of Income
155 D.2 Consolidated Statements of Comprehensive Income
156 D. Consolidated Statements of Financial Position
157 D. Consolidated Statements of Cash Flow

September ,
(in millions of €)  
Financial assets measured at fair value
Available-for-sale financial assets 939 322
Derivative financial instruments 3,022 3,642
Not designated in a hedge
accounting relationship 1,148 1,314
In connection with fair value hedges 1,575 1,936
Foreign currency exchange derivatives 39
Interest rate derivatives 1,572 1,927
In connection with cash flow hedges 132 296
Foreign currency exchange derivatives 132 295
Commodity derivatives –1
Embedded derivatives 167 96
3,961 3,964
Financial liabilities measured at fair value
Derivative financial instruments 1,605 1,262
Not designated in a hedge
accounting relationship 1,253 998
In connection with fair value hedges 811
Foreign currency exchange derivatives 811
In connection with cash flow hedges 247 153
Foreign currency exchange derivatives 207 137
Interest rate derivatives 13 16
Commodity derivatives 27 –
Embedded derivatives 97 100
1,605 1,262
Fair values for available-for-sale financial assets are derived
from quoted market prices in active markets.
The Company limits default risks resulting from derivative
financial instruments by a careful counterparty selection.
Derivative
financial instruments are generally transacted with
financial institutions with investment grade credit ratings.
The fair valuation of derivative financial instruments at
Siemens incorporates all factors that market participants
would consider, including the counterparties’ credit risks. The
exact calculation of fair values of derivative financial instru-
ments depends on the specific type of instrument:
Derivative interest rate contracts – The fair values of deriva-
tive interest rate contracts (e.g. interest rate swap agree-
ments) are estimated by discounting expected future cash
flows using current market interest rates and yield curves
over the remaining term of the instrument. Interest rate fu-
tures and interest rate options are valued on the basis of quot-
ed market prices when available. If quoted market prices are
not available, interest rate options are valued based on option
pricing models.
Derivative currency contracts – The fair value of foreign cur-
rency 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.
Derivative commodity contracts – The fair value of commo-
dity swaps is based on forward commodity prices. Commodity
options are valued on the basis of quoted market prices or on
estimates based on option pricing models.
In determining the fair values of the derivative financial in-
struments, no compensating effects from underlying transac-
tions (e.g. firm commitments and forecast transactions) are
taken into consideration.
The following table allocates financial assets and financial lia-
bilities measured at fair value to the three levels of the fair
value hierarchy, as defined in IFRS , Financial Instruments:
Disclosures.
September , 
(in millions of €) Level  Level  Level  Total
Financial assets
measured at fair value
Available-for-sale financial assets 939 – – 939
Derivative financial instruments – 3,022 – 3,022
Total 939 3,022 – 3,961
Financial liabilities
measured at fair value
Derivative financial instruments 8 1,597 – 1,605
September , 
Level  Level  Level  Total
Financial assets
measured at fair value
Available-for-sale financial assets 322 – – 322
Derivative financial instruments – 3,642 – 3,642
Total 322 3,642 – 3,964
Financial liabilities
measured at fair value
Derivative financial instruments – 1,262 – 1,262