Engineering

3.6 Consolidated financial statements Notes to the consolidated financial statements
The fair value hierarchy reflects the significance of the inputs used to
determine fair values. Financial instruments with fair value
measurement based on quoted prices in active markets are disclosed
in Level 1. In Level 2 determination of fair values is based on
observable inputs, e.g. foreign exchange rates. Level 3 comprises
financial instruments for which the fair value measurement is based on
unobservable inputs.
The following table shows net gains and losses from financial
instruments by measurement categories. Gains or losses arising from
finance lease and from derivatives that qualify for hedge accounting
are not included, as they are not part of any IAS 39 measurement
category.
million €
Year ended
Sept. 30,
2010
Year ended
Sept. 30,
2011
Loans and receivables 576 409
Available-for-sale financial assets
Derivatives that do not qualify for hedge accounting
98 38
(Financial assets/liabilities held for trading) (19) 44
Financial liabilities measured at amortized cost (514) (633)
Net gains under “loans and receivables” mainly comprises interest on
financial receivables and gains and losses on foreign currency
receivables.
The category “available-for-sale financial assets” mainly includes
current earnings from equity and debt instruments, gains or losses on
their disposal as well as impairments.
Gains and losses arising from changes in fair value of foreign currency,
interest rate and commodity derivatives that do not comply with the
hedge accounting requirements under IAS 39 are included in the
“derivatives that do not qualify for hedge accounting” category.
The category “financial liabilities measured at amortized cost” mainly
comprises of interest expenses on financial liabilities, gains and losses
on foreign currency liabilities as well as income resulting from
capitalized borrowing cost.
Included in net gains and loses are exchange differences of €130
million (2009/2010: €158 million).
Derivative financial instruments
The Group uses various derivative financial instruments, including
foreign currency forward contracts, foreign currency options, interest
rate swaps, cross currency swaps and commodity forward contracts.
Derivative financial instruments are generally used to hedge existing or
anticipated underlying transactions so as to reduce foreign currency,
interest rate and commodity price risks.
The following table shows the notional amounts and fair values of
derivatives used within the Group:
million €
Notional
amount
Sept. 30,
2010
Carrying
amount
Sept. 30,
2010
Notional
amount
Sept. 30,
2011
Carrying
amount
Sept. 30,
2011
Assets
Foreign currency derivatives that do
not qualify for hedge accounting
Foreign currency derivatives
3,240 115 2,275 68
qualifying as cash flow hedges 1,286 93 2,026 63
Embedded derivatives
Interest rate derivatives that do not
128 6 128 5
qualify for hedge accounting*
Interest rate derivatives qualifying
20 1 0 0
as cash flow hedges*
Interest rate derivatives qualifying
0 0 299 5
as fair value hedges
Commodity derivatives that do not
987 3 0 0
qualify for hedge accounting
Commodity derivatives qualifying as
393 50 400 64
cash flow hedges
Commodity derivatives qualifying
123 57 111 14
as fair value hedges 20 1 0 0
Total 6,197 326 5,239 219
Liabilities
Foreign currency derivatives that do
not qualify for hedge accounting
Foreign currency derivatives
1,890 73 5,062 235
qualifying as cash flow hedges 1,038 30 357 38
Embedded derivatives
Interest rate derivatives that do not
94 5 70 2
qualify for hedge accounting*
Interest rate derivatives qualifying
0 0 0 0
as cash flow hedges*
Interest rate derivatives qualifying
752 34 750 35
as fair value hedges
Commodity derivatives that do not
0 0 0 0
qualify for hedge accounting
Commodity derivatives qualifying
408 59 287 45
as cash flow hedges
Commodity derivatives qualifying
10 2 97 23
as fair value hedges 20 1 0 0
Total 4,212 204 6,623 378
* inclusive of cross currency swaps