Financial Report - Comptel

26. Financial risk management
Comptel is exposed to financial risks in its
ordinary business operations. The objective
of Comptel’s risk management is to minimize
the adverse effects arising from fluctuations
of financial markets on the Group
earnings. Comptel’s general risk management
principles are approved by the Board
of Directors and their implementation is the
responsibility of the Chief Financial Officer
(CFO) together with the business units.
The CFO identifies and evaluates risks and
acquires the instruments needed for the
hedging for risks in close co-operation with
operative units. Hedging transactions are
carried out in accordance with the written
risk management principles approved by
the Group management.
Currency risk
Comptel hedges non-euro denominated
commercial sales contracts, receivables and
cash reserves and applies hedge accounting.
The hedged currencies are US dollar (USD)
and UK pound sterling (GBP), of which
USD is the more important. The currency
position is monitored on a weekly basis.
The hedging instruments are forward
contracts entered into with banks.
The hedged risk relates to currency risk of
firm orders denominated in foreign currencies
(hedge of future cash flows) that finally
always affects the result (defined risk).
The hedging forward contract is always
denominated in the same currency as the
underlying item resulting the value of the
hedging instrument to change in the opposite
way compared to the underlying item
and consequently the hedge is effective. The
potential ineffectiveness may result from a
possible overhedging or underhedging.
The invoicing of sales orders follows
the progress of projects, which causes
timely uncertainty. Moreover, the realized
turnover of trade receivables exceeds the
terms in the client agreements. The hedging
of the future cash flows is timed taking
these facts into account. The ineffective
portion of a hedge is recognized in the income
statement.
Interest rate risk
Short-term investments in financial markets
expose Comptel’s liquid reserves to
interest rate risk but its effect is not significant.
Comptel’s revenues and operating
cash flows are mainly independent of the
fluctuations of market rates.
Credit risk
Comptel’s customers are mainly middlesized
or large teleoperators. The Group’s
clientele is large and geographically widely
dispersed, which decreases the customer
risk of the Group. However, credit risk related
to single customers or receivables may
be significant.
DERIVATIVE INSTRUMENTS MEASURED AT FAIR VALUE:
2006
in eur 1,000
Cash fl ow hedges
Positive fair value
(carrying amount)
Negative fair value
(carrying amount)
Nominal value of
underlying instrument
Recognized in equity 50 7,155
Fair value hedges
Recognized in the income statement 268 10,236
Currency forward contracts recorded in equity will be recognized in the income statement
during 2007.
Other balance sheet items have a maximum maturity of one year and their fair value
equals to their carrying amount.
2005
in eur 1,000
Cash fl ow hedges
0
COMPTEL FINANCIAL STATEMENTS
Positive fair value
(carrying amount)
Negative fair value
(carrying amount)
Nominal value of
underlying instrument
Recognized in equity 162 5,698
Fair value hedges
Recognized in the income statement 521 10,054