Siemens 2011 Annual Report Download - page 328

6 A. To our shareholders 51 C. Combined management’s discussion and analysis 23 B. Corporate Governance

The levels of the fair value hierarchy and its application to our
financial assets and financial liabilities are described below:
Level 1: quoted prices in active markets for identical assets
or liabilities;
Level 2: inputs other than quoted prices that are observable
for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices); and
Level 3: inputs for the asset or liability that are not based on
observable market data.
Net gains (losses) of financial instruments are as follows:
Year ended September ,
(in millions of €)  
Cash and cash equivalents –(34)
Available-for-sale financial assets 1,522 17
Loans and receivables (126) (92)
Financial liabilities measured at amortized cost (28) (286)
Financial assets and
financial liabilities held for trading (89) (667)
Net gains in  and  on available-for-sale financial as-
sets include net gains on derecognition as well as impairment
losses. The net gains on derecognition mainly comprise
€, million disposal gain related to the termination of the
Areva NP S.A.S. joint venture, for further information see
Note 9 Interest income, interest expense and other financial
income (expense), net. For the amount of unrealized gains or
losses on available-for-sale financial assets recognized direct-
ly in equity during the fiscal year and the amount removed
from equity and recognized in net income for the fiscal year
see line item Other Comprehensive Income, net of tax in
Note 27 Equity.
Net losses on loans and receivables contain changes in valua-
tion allowances, gains or losses on derecognition as well as
recoveries of amounts previously written-off.
Net losses in fiscal  and  on financial liabilities mea-
sured at amortized cost are comprised of gains or losses from
derecognition and the ineffective portion of fair value hedges.
Net losses in fiscal  and  on financial assets and fi-
nancial liabilities held for trading consist of changes in the
fair value of derivative financial instruments (including inter-
est income and expense), for which hedge accounting is not
applied.
The amounts presented include foreign currency gains and
losses from the realization and valuation of the financial as-
sets and liabilities mentioned above.
Collateral
Siemens holds collateral that can be sold or re-pledged in ab-
sence of default by the owner of the collateral mainly result-
ing from reverse repurchase agreements. As of September
,  and  the fair value of the collateral held amount-
ed to € million and €, million, respectively. As of Sep-
tember , , the right to sell or re-pledge the collateral
has not been exercised. As of September ,  and ,
the carrying amount of financial assets Siemens has pledged
as collateral amounted to € million and € million, re-
spectively.
 – Derivative financial instruments
and hedging activities
As part of the Company ’s risk management program, a variety
of derivative financial instruments is used to reduce risks re-
sulting primarily from fluctuations in foreign currency ex-
change rates, interest rates and commodity prices. For addi-
tional information regarding the Company ’s risk management
strategies, including the use of derivative financial instru-
ments to mitigate or eliminate certain of these risks, see also
Note 33 Financial risk management.