Hexagon Annual Report 2019

(IV) FOREIGN EXCHANGE RISK As the Group has production and sales in different countries with different functional currencies, it is exposed to currency risk associated with movements of the Norwegian krone against other currencies, while the Group's presentation currency is NOK. The carrying amount of the Group's net investments in foreign companies fluctuates as the Norwegian krone moves in relation to other relevant currencies. The Group's profit after tax is also affected by currency movements, as the results of foreign companies are translated to the Norwegian currency using the weighted average exchange rate for the period. The Group uses forward contracts to reduce its currency risk from cash flows denominated in foreign currencies. Currency risk is calculated for each currency and takes into consideration assets and liabilities, off-balance sheet obligations and highly probable purchases and sales in the relevant currency. The following table shows the group's sensitivity to potential changes in the Norwegian krone, with all other conditions remaining constant. The calculation is based on the same movement of the krone against the relevant currencies. The effect on the profit/loss is caused by changes in the value of monetary items and currency derivatives. The effect on equity is caused by currency effects of net investments in foreign currencies. MOVEMENT OF NOK AGAINST USD EFFECT ON PROFIT/LOSS AFTER TAX EFFECT ON OTHER INCOME AND EXPENSES AFTER TAX (NOK 1 000) 2019 +5 % 26 544 1 886 -5 % -26 544 -1 886 2018 +5 % -9 946 -55 653 -5 % 9 946 55 653 MOVEMENT OF NOK AGAINST EUR EFFECT ON PROFIT/LOSS AFTER TAX EFFECT ON OTHER INCOME AND EXPENSES AFTER TAX (NOK 1 000) 2019 +5 % 16 728 2 936 -5 % -16 728 -2 936 2018 +5 % 2 745 1 330 -5 % -2 745 -1 330 The fair values of derivatives classified as hedging instruments are reported under other current assets/liabilities or other non-current assets/liabilities depending on the recovery or settlement date for the associated hedged item. As of 31.12.2019, the group had the following forward contracts to hedge forecast sales to customers. Forward contracts are used to reduce currency risk associated with expected future sales. The terms of the contracts are as follows: CURRENCY SELL/BUY AMOUNT (NOK 1 000) MATURITY EXCHANGE RATE FAIR VALUE 31.12.2019 Forward contracts to hedge expected future sales 1) EUR/NOK 6 520/64 731 2020 9.78 - 10.41 -278 Forward contracts to hedge expected future sales 1) EUR/NOK 2 000/20 424 2021 9.97 - 10.63 +33 Total -245 1) The forward contracts do not qualify for hedge accounting under IFRS 7 FORWARD EXCHANGE CONTRACTS As of 31.12.2018, the Group had the following forward contracts to hedge future sales to customers. CURRENCY SELL/BUY AMOUNT (NOK 1 000) MATURITY EXCHANGE RATE FAIR VALUE 31.12.2017 Forward contracts to hedge expected future sales 1) EUR/NOK 9 240/89 848 2019 9.37 - 10.09 -2 737 Forward contracts to hedge expected future sales 1) EUR/NOK 5 820/57 773 2020 9.81 - 10.26 -1 556 Total -4 294 1) The forward contracts do not qualify for hedge accounting under IFRS 7. 53 139 2019 AT A GLANCE FROM THE BOARD ROOM FINANCIAL STATEMENTS