H
136
30 Financial risk management and financial instruments (continued)
Ahold ata glanceOur strategy Our performance j Governance
The cash flow hedge reserve would be impacted by interest rate movements through the JPY cross-currency swap which qualified for cash flow hedge accounting. The impact of interest rate
movements related to the bond and the swap's variable leg are not reflected as they offset each other. The impact of 25 basis points increase (25 basis point decrease) in euro interest rates
related to the remaining fair value exposure on the swap's fixed leg (defined as those on the rate for the EUR fix leg, so impact on discount rate) is a loss of €1 5 million (gain of €15 million).
The above sensitivity analyses are for illustrative purposes only as, in practice, market rates rarely change in isolation from other factors that also affect Ahold's financial position and results.
Credit risk
Ahold has no significant concentrations of credit risk. Sales to retail customers are made in cash, checks and debit cards, or via major credit cards. Sales to franchisees are done on credit.
Derivative counterparties and cash transactions are limited to high-credit-quality financial institutions' products. Ahold invests in funds with a minimum rating of A- (Standard Poor's). With
respect to credit risk, derivative contracts with counterparties are entered into primarily under the standard terms and conditions of the International Swap and Derivatives Association. The
counterparties have an externally validated investment grade credit rating. Ahold has policies that limit the amount of counterparty credit exposure to any single financial institution or investment
vehicle and continually monitors these exposures. The maximum exposure to credit risk is represented by the carrying amounts of the financial assets on the balance sheet (refer to the table on
fair values of financial instruments below in this note). The maximum net amount of a credit risk loss that Ahold would incur if financial institutions that are parties to the derivative instruments
completely failed to perform according to the terms of the contracts is €102 million as of December 29, 2013 (December 30, 2012: €106 million). A netting agreement is in place with one
financial counterparty that reduces the credit exposure (as of December 29, 2013, net exposure of €96 million).
The concentration of credit risk with respect to receivables is limited as the Company's customer base and vendor base are large and unrelated. As a result, management believes there is no
further credit risk provision required in excess of the normal individual and collective impairment, based on an aging analysis performed as of December 29, 2013. For further discussion on
Ahold's receivables, see Notes 15 and J 7.
Liquidity risk
Ahold manages its liquidity risk on a consolidated basis with cash provided from operating activities being the primary source of liquidity, in addition to debt and equity issuances in the capital
markets, committed and uncommitted credit facilities, letters of credit under credit facilities, and available cash. Ahold manages short-term liquidity based on projected cash flows over rolling
periods of six months. As of December 29, 2013, Ahold had €1 billion of committed undrawn bank facilities. The facility can be drawn on for working capital and general corporate purposes
and €4 billion of cash balances (including short-term deposits and similar instruments) available to manage its liquidity.
Financials
Investors
Ahold Annual Report 2013
Notes to the consolidated
financial statements
