Annual Report and Financial Statements 2007 - Finnlines

60
Calculation on the present value of defi ned benefi t obligations
EUR 1 000 2007 2006 2005
Present value of the obligation 9 132 7 052 6 163
Fair value of plans assets -6 191 -3 704 -802
2 941 3 348 5 361
The Group estimates to reimburse EUR 0.5 million in 2008 relating to the defi ned benefi t plans valid on 31 December 2007.
32. FINANCIAL RISK MANAGEMENT
The management of fi nancial risks aims to reduce the volatility in earnings, the balance sheet and cash fl ow, while securing effective
and competitive fi nancing for the Group. The main fi nancial risks are currency risk, interest rate risk, credit risk, liquidity risk, fund-
ing risk and fuel price risk. For risk management the Group uses currency forwards, currency loans, interest rate swaps and fuel price
clauses included in customer contracts. The Group’s risk management principles are approved by the Board of Directors, and the re-
sponsibility for their implementation lies with the fi nance unit, with the exception of the fuel price clauses, which are the responsibility of
the business units.
CURRENCY RISK
The Group operates internationally and is therefore exposed to transaction risks through different currency positions. The main foreign
currencies used by the Group are USD and SEK. Currency risks arise from commercial transactions, monetary balance sheet items
and net investments in foreign subsidiaries.
Transaction risk
In 2007, around 90 per cent of sales were invoiced in EUR, and the rest in SEK, DKK, NOK and GBP.
Purchases are mainly paid in EUR. Fuel oil purchases are made in USD. Fuel price clauses included in customer contracts cover part
of this USD risk. Currency positions are reviewed for each currency every 12 months when annual budgets are made. In 2007, the
currency risk arising from the cash fl ow in foreign currencies resulting from operations was hedged for the next 3-month-period fully
against USD and SEK. In 2007, the Swedish companies changed over to mainly use EUR as their invoicing currency. For 2008, no
transaction risk has been hedged separately by derivative fi nancial instruments.
The Group's business units may make internal derivative contracts with the fi nance unit to hedge a specifi c activity. In such cases
the fi nance unit also decides on any hedging to be made with an external counterpart based on the whole Group's net currency position
according to the principles set by the Board of Directors.
All of the Group's interest-bearing liabilities on the balance sheet date are in EUR. The Group has USD-denominated interest-bearing
loan assets worth approximately EUR 4.1 million.
Hedge accounting
The Group has ordered six ro-ro vessels from the Chinese Jinling shipyard at a total price of approximately EUR 240 million. These vessels
will be paid partly in USD but the instalments have been fully hedged against EUR. The Group applies hedge accounting in accordance
with IAS 39 to the these derivative contracts for the spot part of the currency forward. It is considered as hedging of cash
fl ow from a highly probable transaction. The following table shows the duration and fair values.