Siemens 2011 Annual Report Download - page 331

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

related swap agreements resulted in a loss of € million and
a gain of € million, respectively. Therefore, the net effect
recognized in line item Other financial income (expense), net,
representing the ineffective portion of the hedging relation-
ship, amounted to €() million and € million in fiscal 
and , respectively. Net cash receipts and payments relat-
ing to such interest rate swap agreements are recorded as in-
terest expense.
The Company had interest rate swap contracts to pay variable
rates of interest of an average of .% and .% as of Septem-
ber ,  and , respectively and received fixed rates of
interest (average rate of .% and .% as of September ,
 and , respectively). The notional amount of indebt-
edness hedged as of September ,  and  was €,
million and €, million, respectively. This changed %
and % of the Company ’s underlying notes and bonds from
fixed interest rates into variable interest rates as of September
,  and , respectively. The notional amounts of these
contracts mature at varying dates based on the maturity of
the underlying hedged items. The net fair value of interest
rate swap contracts (excluding accrued interest) used to
hedge indebtedness as of September ,  and  was
€, million and €, million, respectively.
Cash flow hedges of revolving term deposits
In fiscal , the Company applied cash flow hedge account-
ing to a revolving term deposit. To offset the effect of future
changes in interest payments of this revolving term deposit,
the Company had entered into an interest rate swap agree-
ment to pay a variable rate of interest and to receive a speci-
fied fixed rate of interest. When the swap contract ended in
June , cash flow hedge accounting was terminated. As
long as hedge accounting was applied, the interest rate swap
contract was reflected at fair value and the effective portion of
changes in fair value were recorded in line item Other com-
prehensive income, net of tax, while any ineffective portion of
changes in fair value was recognized in profit or loss. In fiscal
, the cash flow hedges of revolving term deposits did not
result in any ineffective portion to be recognized in profit or
loss. Net cash receipts and payments relating to such interest
rate swap agreements were recorded as interest income.
Cash flow hedges of a variable-rate term loan
As of September ,  and , the Company applied cash
flow hedge accounting for % of a variable-rate US$  billion
term loan. To benefit from the low interest rates in the U.S.,
the Company entered into interest rate swap agreements to
pay a fixed rate of interest and to receive in return a variable
rate of interest. These interest rate swap agreements offset
the effect of future changes in interest payments to be made
for the underlying variable-rate term loan. The interest rate
swap contracts are reflected at fair value and the effective
portion of changes in fair value of the interest rate swap con-
tracts that were designated as cash flow hedges are recorded
in line item Other comprehensive income, net of tax; any inef-
fective portion of changes in fair value is recognized in profit
or loss. In fiscal  and , the cash flow hedges of the
variable-rate term loan did not lead to any ineffective portion
to be recognized in profit or loss. Net cash receipts and pay-
ments relating to such interest rate swap agreements are re-
corded as interest expense.
The following table shows the periods in which the hedged
interest payments are expected to impact profit or loss and,
therefore, the relating net deferred gains and losses in line
item Other comprehensive income, net of tax will be reclassi-
fied into line item Interest expense.
Year ended September ,
 
 to

 and
thereafter
(in millions of €)
Expected income (loss)
to be reclassified from line
item Other comprehensive
income, net of tax into
interest expense (1) (12) (2) (6)
COMMODITY PRICE RISK MANAGEMENT
As described in Note 33 Financial risk management, the
Company employs commodity derivatives in order to mitigate
or eliminate price risks from the procurement of commodities.
Derivative financial instruments
not designated in a hedging relationship
The Company applies a portfolio approach to manage the Com-
pany-wide risks associated with fluctuations in commodity
prices from firm commitments and forecast transactions by
entering into commodity swaps and commodity options. As
such a strategy does not qualify for hedge accounting treat-
ment under IAS , Financial Instruments: Recognition and
Measurement, the derivative financial instruments are record-
ed at fair value on the Consolidated Statements of Financial