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NOK in millions 2011 2010 Fair value as of 31 december liabilities liabilities Net investment hedge instruments (22 522) (20 845) Exchange rate risk sensitivity analysis
This analysis does not take into account correlation between currencies other than NOK. Empirical studies confirm substantial diversification
effect across the currencies that the Group is exposed to.
Effects on net currency gains (losses)
The Group is exposed to currency fluctuations on monetary items in the statement of financial position, denominated in other currencies than
the functional currency. As of 31 December 2011, if the relevant functional currencies had weakened / strengthened by 10 % against the
currencies in which these items are denominated, with all other variables held constant, net income for the Group for the year would have
been NOK 1,193 million higher / lower (NOK 950 million for 2010). This is mainly a result of foreign exchange translation of EuR, SEK, DKK,
SGD and uSD denominated trade payables, receivables and debt in subsidiaries. As of 31 December 2011, if the Norwegian Krone had weakened / strengthened by 10%, with all other variables held constant, the currency
effects of translating the Group’s foreign debt to the functional currency would be NOK 3,392 million lower / higher of which NOK 2,252
million would impact other comprehensive income as the debt is part of net investment hedges. /page 68/
telenor annual report 2011
notes to the financial statements / telenor group Effects due to foreign exchange translations on other comprehensive income
Translation of subsidiaries from their functional currencies into the presentation currency of the Group (NOK) will impact the Group’s other
comprehensive income and equity. If local currency had weakened/strengthened by 10% against the presentation currency of the Group
(NOK), the increase/decrease in the carrying amount of equity as of 31 December 2011 would have been approximately NOK 6.4 billion
(NOK 7.5 billion as of 31 December 2010).
Effects due to foreign exchange translations on net income
Translation of net income from subsidiaries with functional currency other than NOK, also represents a currency exposure for the Group. The
sensitivity analysis is only carried out for the Group’s major subsidiaries. If local currency had weakened / strengthened by 10% against all
other currencies included in the analysis, net income for the Group would have been NOK 358 million lower / higher in 2011 (NOK 552 million
Credit risk is the loss that the Group would suffer if a counterparty fails to perform its financial obligations. Except for equity instruments, the
Group considers its maximum exposure to credit risk to be as follows:
Maximum credit exposure
NOK in millions Cash and cash equivalents bonds and commercial papers > 3 months (note 23) Financial derivatives (note 23) Trade and other current financial receivables (note 22) 2011 2010 12 899 2 292 1 942 13 738 13 606
13 694 Concentrations of credit risk with respect to trade receivables are limited due to the Group’s customer base containing a high number of
customers that are also considered unrelated. Due to this, there is no further credit risk provision required in excess of the normal provision for
bad and doubtful receivables. See note 22 for information on receivables in terms of age distribution and provision for bad debt.
The Group invests surplus liquidity in current interest-bearing assets. Credit risk is inherent in such instruments. Financial derivatives with
positive replacement value for the Group, taking into account legal netting agreements, also represents a credit risk.
Credit risk arising from financial transactions is managed through diversification, only accepting counterparties with high credit rating and
defining aggregate credit exposure limits for each counterparty. Telenor ASA has legal netting agreements (ISDA Master Agreements) with
11 banks which allow gains to be offset against losses in the event of default or bankruptcy. As of 31 December 2011, Telenor ASA had
collateral agreements with four banks. Both the ISDA Master Agreements and collateral agreements are means to reduce overall credit risk.
Counterparty risk in subsidiaries in emerging markets is higher due to lack of counterparties with high credit rating. This counterparty risk is
monitored on a regular basis.
Fair value of derivatives with positive replacement value for the Group was NOK 1.4 billion as of 31 December 2011, taking into account legal
netting agreements (NOK 1.7 billion as of 31 December 2010). The Group’s cash and cash equivalents do also represent a credit risk. The
Group normally has deposits in countries with major operations. The credit risk on such deposits varies dependent on the credit worthiness
of the individual banks and countries in which the banks are located. See note 24 for information regarding cash inside and outside the cash
pool. Credit risk exposure for the Group is monitored on a daily basis.
Other market risk
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