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Consolidated Financial Statements
73
Notes
In the absence of quoted prices, the Group estimates fair values of financial instruments based on widely accepted valuation techniques including discounted cash flows, dealer or supplier quotes for similar instruments or recent arm’s length transactions.
Effect of cash flow hedges on equity
Interest rate risk in thousands of CHF as of September 1, 2006 Movements in the period: Gains/(losses) taken into equity, net of tax Transfer to the Statement of Income for the period Currency translation adjustment as of August 31, 2007 Movements in the period: Gains/(losses) taken into equity, net of tax Transfer to the Statement of Income for the period Currency translation adjustment as of August 31, 2008 14,939 14,939 Total hedging reserve
9,732 (20,315) 474 4,830
9,732 (20,315) 474 4,830
(2,913) (3,100) (36) (1,219)
(2,913) (3,100) (36) (1,219)
Cash flow hedges In the course of fiscal year 2007/08, the Group entered into interest rate derivatives (exchanging floating into fixed interest rates) according to the guidelines stipulated in the Group’s Treasury Policy (note 29). In order to avoid volatility in the Consolidated Statement of Income, the interest rate derivatives have been put in cash flow hedge relationship reflecting the underlying currency mix of the Group’s debt portfolio. The following table provides an overview over the periods, in which the cash flow hedges are expected to impact the Consolidated Statement of Income:
First year as of August 31, in thousands of CHF Derivative financial assets Derivative financial liabilities Total net – 115 115 – (1,144) (1,144) – – – Second to fifth year After five years Expect- First ed cash year flows 2008 Second to fifth year After five Expected years cash flows 2007
– (1,029) (1,029)
1,946 – 1,946
2,981 – 2,981
– – –
4,927 – 4,927
Fair value hedges Fair value hedges include forward purchase commitments and cocoa future contracts designated as the hedging instruments for commodities related to firm sales commitments as well as hedging instruments in relation to foreign currency risks.
For the fair value hedge relationship of the contract business, the Group also considers its related fair valued inventories as hedging instruments even though they are not reported as financial derivatives but as inventories. The amount of fair value adjustments to inventories on August 31, 2008, was chf 142.5 million (2007: chf 16.4 million).
