A N N U A L R E P O R T - Bouygues

dual exchange rate risk arising from
commercial transactions. When cash
flows are certain, exchange rate risk
is covered by forward purchases and
sales or by currency swaps. For some
major projects, a hedge using currency
options may be put in place before
the contract is finally concluded.
As with exchange rate risk, and likewise
for rationalisation purposes, the
interest rate positions of some Group
entities may be managed centrally and
partially offset against each other.
Accounting methods
If the euro were to depreciate by
1% against all other currencies, the
market value of the portfolio would be
+€4 million.
Values have been calculated by the
Group or obtained from the bank
counterparties to the contracts.
Equity interests in foreign companies
are generally covered by debt of a
comparable amount in the same currency
on the books of the companies
holding the interests in question.
As a general rule the Group uses
hedge accounting for its hedging
instruments. Hedge documentation is
prepared in accordance with IAS 39
and one of two methods is used to
account for hedging instruments:
For rationalisation purposes, the foreign
exchange position of some Group
entities may be managed centrally
so that symmetrical positions can be
offset against each other.
■ Interest rate risk
The principle is to hedge all or some of
the foreseeable and recurring financial
assets and liabilities at the level
of each sub-group.
In practice, the entities that hedge
interest rate risk are those whose
business is capital-intensive by nature
(telecom and media). These entities
secure their future financial position
by fixing the cost of their debt with
swaps and FRAs or by limiting it with
caps for a period of time linked to
the maturity of the financial liabilities
being hedged.
• fair value hedge: changes in the fair
value of the hedging instrument and
the hedged item are recognised symmetrically
in the income statement;
• cash flow hedge: the ineffective part
of the change in the fair value of the
hedging instrument is recognised
in the income statement and the
effective part in shareholders’ equity
(until the transaction is unwound).
In a few cases, such as when the
notional amount is small or the maturity
is short, it is Group policy not to
use hedge accounting so as to avoid
cumbersome administrative procedures.
In such cases, any change in the
fair value of the hedging instrument is
recognised in the income statement.
Market value of
hedging instruments
At 31 December 2005, the market
value (net present value) of the portfolio
of hedging instruments was +€9
million (1) . This amount consists mainly
of the net present value of interest
rate swaps to hedge the Group’s debt
(fair value and cash flow hedges) and
the net present value of forward transactions
to hedge the currency risk on
commercial transactions.
The market value by type of hedge
was as follows:
• transactions as part of a fair value
hedge: +€14 million,
• transactions as part of a cash flow
hedge: -€5 million.
If the yield curve were to shift upward
(downward) by one percentage point,
the market value of the portfolio of
hedging instruments would be respectively
+€5 million (+€12 million).
(1) Including Colas for -€9 million. The impact of the market value of the interest rate swap taken out by Colas’ UK subsidiary for the Portsmouth contract (-€9 million) is entirely offset by the market value
of the derivative incorporated into the contractual flat fee paid by the customer (+€9 million).
SUSTAINABLE DEVELOPMENT
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