Siemens 2012 Annual Report Download - page 290

1 A. To our Shareholders 49 C. Combined Management Report 21 B. Corporate Governance

The levels of the fair value hierarchy and its application to our
financial assets and financial liabilities are described below:
Level : quoted prices in active markets for identical as-
sets or liabilities;
Level : inputs other than quoted prices that are observ-
able for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
Level : inputs for assets or liabilities, not based on observ-
able market data.
Net gains (losses) of financial instruments are as follows:
Year ended September ,
(in millions of €)  
Cash and cash equivalents 11 –
Available-for-sale financial assets 83 1,522
Loans and receivables (228) (100)
Financial liabilities measured at amortized cost (257) (26)
Financial assets and
financial liabilities held for trading (189) (95)
Net gains (losses) in fiscal  and  on available-for-sale
financial assets include net gains on derecognition as well as
impairment losses. In fiscal , net gains on derecognition
mainly comprise €, million disposal gain related to the ter-
mination of the Areva NP S.A.S. joint venture. For the amount
of unrealized gains (losses) on available-for-sale financial as-
sets recognized directly in equity and the amount removed
from equity and recognized in net income in the respective fis-
cal years, see line item Other Comprehensive Income, net of
tax in   .
Net losses on loans and receivables contain changes in valua-
tion allowances, gains or losses on derecognition as well as re-
coveries of amounts previously written-off. Net gains (losses)
in fiscal  and  on financial liabilities measured at am-
ortized cost are comprised of gains (losses) from derecogni-
tion and the ineffective portion of fair value hedges. Net gains
(losses) in fiscal  and  on financial assets and financial
liabilities held for trading consist of changes in the fair value
of derivative financial instruments, including interest 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.

Siemens holds collateral that can be sold or re-pledged in ab-
sence of default by the owner of the collateral mainly resulting
from reverse repurchase agreements. As of September , 
and  the fair value of the collateral held amounted to €
million and € million, respectively. As of September , 
and , the right to sell or re-pledge the collateral has not
been exercised. As of September ,  and , the carry-
ing amount of financial assets Siemens has pledged as collater-
al amounted to € million and € million, respectively.
  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
resulting primarily from fluctuations in foreign currency ex-
change rates, interest rates and commodity prices.
The fair values of each type of derivative financial instru-
ments recorded as financial assets or financial liabilities are as
follows:
September ,  September , 
(in millions of €) Asset Liability Asset Liability
Foreign currency
exchange contracts 343 325 390 644
Interest rate swaps
and combined
interest/currency swaps 2,577 534 2,161 423
Commodity swaps 36 27 62 155
Embedded derivatives 208 98 167 97
Options 164 141 242 286
3,328 1,125 3,022 1,605
   
 
    
Derivative financial instruments not designated
in a hedging relationship
The Company manages its risks associated with fluctuations in
foreign currency denominated receivables, payables, debt,
firm commitments and forecast transactions primarily through
a Company-wide portfolio approach. Under this approach the
Company-wide risks are concentrated centrally, and various
derivative financial instruments, primarily foreign currency ex-
change contracts, foreign currency swaps and options, are uti-
lized to minimize such risks. Such a strategy does not qualify