Annual report 20108.31 MB - Boskalis

Financial statements 201026.1.3 Market riskMarket risk concerns the risk that group income or the value of investments in financial instruments is adverselyaffected by changes in market prices, such as exchange rates and interest rates. The objective of managingmarket risks is to keep the market risk position within acceptable boundaries while achieving the bestpossible return.Currency riskA significant proportion of the projects is denominated in foreign currencies. That means that reported financialresults and cash flows are exposed to risks ensuing from changes in exchange rates. The Board of Managementhas established a detailed currency risk management policy stipulating as main principle that currency risk,arising from transactions, must be hedged as soon as they occur, usually with forward contracts. Financialderivatives are used exclusively insofar as there are underlying real transactions, mainly future cash flows fromcontracted projects. Hedge accounting is applied to the majority of these cash flow hedges.Exposure to currency riskThe Group’s currency risk management policy was carried out during 2010 and resulted in a non-materialsensitivity of the Group to currency transaction risk.The following significant exchange rates applied during the year under review:Average rateReporting date spot rateEuro 2010 2009 2010 2009US dollar 1.334 1.391 1.342 1.435Arab Emirates Dirham 4.901 5.109 4.928 5.270Singapore dollar 1.814 2.022 1.720 2.010South African Rand 9.716 11.827 8.880 10.570Australian dollar 1.450 1.800 1.310 1.650Currency translation riskThe currency translation risk as per year-end can be summarized as follows:Euro 2010 2009Expected cash flows in US Dollars 139,626 161,914Expected cash flows in Australian Dollars 39,061 30,625Expected cash flows in Singapore Dollars 55,573 36,836Expected cash flows in Arab Emirates Dirhams — 130,384Expected cash flows in other currencies 97,243 27,850Expected cash flows in foreign currencies 331,503 387,609Cash flow hedges 325,970 382,296Net position 5,533 5,313Because of the relative linkage between the exchange rates of the Arab Emirates Dirhams and the US Dollars,the cash flows in Arab Emirates Dirhams are mainly hedged by means of US Dollar cash flow hedges.108 Annual Report 2010