financial report and registration document 2011 - Groupe SEB

5 Notes
Consolidated fi nancial statements
to the consolidated fi nancial statements
Note 25.3. INFORMATION ON FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE
In accordance with the amended IFRS 7, fair value measurements are
classifi ed using a fair value hierarchy that refl ects the signifi cance of the
inputs used in making the measurements. The hierarchy breaks down into
three levels, as follows:
� level 1: quoted prices in active markets for the same instrument;
(in € millions)
� level 2: quoted prices in active markets for similar assets or liabilities or
other valuation techniques for which all signifi cant inputs are based on
observable market data;
� level 3: valuation techniques for which any signifi cant input is not based
on observable market data.
31 December 2011
Total Level 1 Level 2 Level 3
Assets
Derivative instruments 8.0 8.0
Cash and cash equivalents 196.0 196.0
TOTAL FINANCIAL ASSETS MEASURED
AT FAIR VALUE
Liabilities
204.0 196.0 8.0
Derivative instruments 17.6 17.6
TOTAL FINANCIAL LIABILITIES MEASURED
AT FAIR VALUE 17.6 17.6
The portfolio of derivatives used by the Group to manage risk mainly
includes forward currency contracts, interest rate and currency swaps and
NOTE 26 FINANCIAL RISK MANAGEMENT
Note 26.1. RISK MANAGEMENT
Risks are managed by Corporate Finance, based on financial market
conditions and in accordance with procedures established by the Group.
Hedging transactions are carried out in the financial markets with a
limited number of high-quality partners in order to avoid counterparty risk.
Subsidiaries’ risks are hedged at corporate level when this is allowed under
the laws and regulations of the country concerned and when the hedges
can be arranged on the fi nancial markets.
Subsidiaries that are prevented from hedging financial risks through
Corporate Finance due to local laws and regulations enter into hedging
transactions directly with local banks in compliance with Group procedures
and policies.
Note 26.2. MARKET RISKS
26.2.1. Currency risks
The majority of Group sales are billed in currencies other than the euro,
mainly the US dollar, Russian ruble, Brazilian real and Japanese yen. Most
commodities options. These instruments are classifi ed as Level 2, as their fair
value is calculated using internal valuation models based on observable data.
billing currencies correspond to the functional currencies of the subsidiaries
concerned and do not give rise to any transactional currency risk at the
local level.
Similarly, goods purchased for resale billed in US dollars are bought from
Asian suppliers by SEB Asia whose functional currency is also the US dollar.
The main sources of transactional currency risks therefore arise from:
� intra-group billings between two Group companies with different functional
currencies, as follows:
� exports by manufacturing subsidiaries in the euro zone billed in the
local currency of the marketing subsidiaries,
� imports of goods from SEB Asia billed in US dollars by marketing
subsidiaries whose functional currency is not the US dollar;
� purchases of industrial components from external suppliers by the
manufacturing subsidiaries, that are billed in a currency other than their
functional currency (for example, components purchases by French
subsidiaries that are billed in US dollars).
These risks are managed at Group level by SEB S.A., which acts as the
subsidiaries’ sole counterparty except where this is not possible due to
local regulations. The resulting balance sheet currency positions in the main
124 GROUPE SEB Financial Report and Registration Document 2011