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METRO GROUP : ANNUAL REPORT 2010 : BUSINESS → NOTES : OThER NOTES for the purpose of showing this reconciliation appropriately for the period, relationships are created between hedging transactions and underlying transactions and recognised as follows: Within a fair value hedge, both the hedging transaction and the hedged risk of the underlying transaction are recognised at their fair value (market value). The value fluctuations of both trades are shown in the income statement, where they will be fully set off against each other in the case of full effectiveness. Within a cash flow hedge, the hedging transactions are also principally recognised at their fair value (market value). In the case of full effectiveness of the hedging transaction, the value changes will be recognised in equity until the hedged payment flows or expected transactions impact the result. Only then will they be recognised in income. 31/12/2010 fair values 31/12/2009 fair values Maturities Maturities → p. 206 hedging transactions that, according to IAS 39, are not part of a hedge are recognised at their fair value (market value). Value changes are recognised directly in income. Even if no formal hedging relationship was created, these are hedging transactions that are closely connected to the underlying business and whose impact on earnings will be netted by the underlying transaction (natural hedge). The currency derivatives are used primarily for pound sterling, danish krone, Czech koruna, Polish złoty, Japanese yen, Swiss franc, hungarian forint, Russian rouble, new Romanian leu, Turkish lira and uS dollar. The derivative financial instruments have the following maturities: € million Interest rate transactions Up to 1 year 1 to 5 years Over 5 years Up to 1 year 1 to 5 years Over 5 years Interest rate swaps –9 –8 0 0 –15 0 within fair value hedges (0) (0) (0) (0) (0) (0) within cash flow hedges (0) (–8) (0) (0) (–6) (0) not part of a hedge Currency transactions (–9) (0) (0) (0) (–9) (0) Currency futures/options –7 0 0 –2 0 0 within fair value hedges (0) (0) (0) (0) (0) (0) within cash flow hedges (–7) (0) (0) (0) (0) (0) not part of a hedge (0) (0) (0) (–2) (0) (0) Interest rate/currency swaps 15 0 0 0 4 0 within fair value hedges (0) (0) (0) (0) (0) (0) within cash flow hedges (0) (0) (0) (0) (0) (0) not part of a hedge Commodity transactions (15) (0) (0) (0) (4) (0) futures 0 4 0 –9 1 0 within fair value hedges (0) (0) (0) (0) (0) (0) within cash flow hedges (0) (0) (0) (0) (0) (0) not part of a hedge Share price-related transactions (0) (4) (0) (–9) (1) (0) hedging of stock options 33 0 0 0 14 0 within fair value hedges (0) (0) (0) (0) (0) (0) within cash flow hedges (33) (0) (0) (0) (14) (0) not part of a hedge (0) (0) (0) (0) (0) (0) 32 –4 0 –11 4 0
METRO GROUP : ANNUAL REPORT 2010 : BUSINESS → NOTES : OThER NOTES listed below the maturities are the fair values of the financial assets and liabilities that fall due during these periods. Variable interest rates are adjusted at intervals of less than one year. Liquidity risks METRO AG acts as financial coordinator for METRO GROuP companies to ensure that they are provided with the necessary financing to fund their operating and investing activities at all times and in the most cost-efficient manner possible. The necessary information is provided by means of a Group financial plan, which is updated monthly and checked monthly for deviations. This financial plan is complemented by a weekly rolling 14-day liquidity plan. financial instruments utilised include money and capital market products (time deposits, call money, commercial papers, promissory note loans and bonds sold as part of ongoing issue programmes) as well as bilateral and syndicated loans. METRO GROuP has a sufficient liquidity reserve so that there is no danger of liquidity risks even if an unexpected event has a negative financial impact on the Company’s liquidity situation. further details on financial instruments and credit lines are provided by the explanatory notes under the respective balance sheet items. Intra-Group cash pooling reduces the amount of debt and optimises the money market and capital market investments of METRO GROuP, which has a positive effect on net interest income. Cash pooling allows the surplus liquidity of individual Group companies to be used to fund other Group companies internally. In addition, METRO AG draws on all the financial expertise pooled in its finance department to advise the Group companies in all relevant financial matters and provide support. This ranges from the elaboration of investment financing concepts to supporting the responsible financial officers of the individual Group companies in their negotiations with local banks and financial service providers. This ensures, on the one hand, that the financial resources of METRO GROuP are optimally employed in Germany and internationally, and, on the other hand, that all Group companies benefit from the strength and credit standing of METRO GROuP in negotiating their financing terms. → p. 207 In a number of Eastern European countries, the payment terms for food suppliers have been reduced by law. Shorter payment terms vis-à-vis suppliers generally result in higher financing requirements. however, this does not impair METRO GROuP’s solid liquidity position. Creditworthiness risks Creditworthiness risks arise from the total or partial loss of a counterparty, for example through bankruptcy or in connection with monetary investments and derivative financial instruments with positive market values. METRO GROuP’s maximum default exposure as of the closing date is reflected by the book values of financial assets totalling €7,610 million (previous year: €6,802 million). further details on the size of the respective book value are listed in the notes to the consolidated financial statements in no. 39 “Book values and fair values according to measurement category”. Cash in hand considered in cash and totalling €127 million (previous year: €145 million) is not susceptible to any default risk. In the course of the risk management of monetary investments totalling €4,476 million (previous year: €3,636 million) and financial derivatives totalling €67 million (previous year: €52 million), minimum creditworthiness requirements and maximum exposure limits have been defined for all business partners of METRO GROuP. Cheques and money in circulation are not considered in the determination of creditworthiness risks. This is based on a system of limits laid down in the treasury guidelines which are based mainly on the ratings of international rating agencies or internal credit assessments. An individual limit is allocated to every counterparty of METRO GROuP; compliance is constantly monitored by the treasury systems. The following table shows a breakdown of counterparties by credit rating:
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