NOTES
Consolidated financial statements •89
SECTION 4: CAPITAL STRUCTURE AND NET FINANCIALS, CONTINUED
Analysis of assets and liabilities
31December 2014
31December 2013
Change in
Profit (loss)
Profit (loss)
DKKmillion
exchange rate
before tax
Equity
before tax
Equity
USD
-10%
156
305
171
59
USD
+10%
-156
-305
-171
-59
CAD
-10%
1
39
-
32
CAD
+10%
-1
-39
-
-32
AUD
-10%
4
37
4
6
AUD
+10%
-4
-37
-4
-6
GBP
-10%
15
104
11
21
GBP
+10%
-15
-104
-11
-21
EUR
-1%
-11
-11
-12
-7
EUR
+1%
11
11
12
7
THB
-10%
-
-154
-
-93
THB
+10%
-
154
-
93
Themovements in the income statement arise frommonetary items (cash, borrowings, receivables andpayables)where the functional currencyof the entity is
different to the currency that themonetary items aredenominated in.Themovements in equity arise frommonetary items andhedging instrumentswhere the func-
tional currencyof the entity is different to the currency that thehedging instruments ormonetary items aredenominated in.
Foreign currency risk
PANDORA’s presentation currency isDKK, but the
majority of PANDORA’s activities and investments are in
other currencies. Consequently, there is a substantial risk
of exchange rate fluctuations having a negative impact
on PANDORA’s reported cash flows, profit (loss) and/or
financial position inDKK.
Themajority of PANDORA’s revenue is inUSD,
CAD, AUD, GBP and EUR. A drop in the strength of
these currencies against DKKwill result in a decline in
the translated future cash flows. A substantial portion of
PANDORA’s costs are related to rawmaterials purchased
from suppliers that price their products inUSD. PANDORA
also purchases rawmaterials and pays other costs in
THB. Exchange rate increaseswill result in a decline
in the translated value of future cash flows. PANDORA
finances themajority of its subsidiaries’ needs for cash via
intercompany loans denominated in the local currency of
the individual subsidiary. Adrop in the strength of these
currencies against DKKwill result in a foreign exchange
loss in the Parent Company. PANDORA owns foreign
subsidiarieswhere the translation of equity intoDKK
is influenced by exchange rate fluctuations. Declining
exchange rateswill result in a foreign exchange loss in the
Group’s equity.
Exchange rate fluctuationsmay lead to a decrease
in revenue and an increase in costs and thus declining
margins. In addition, exchange rate fluctuations affect the
translated value of the profit or loss of foreign subsidiaries
and the translation of foreign currency assets and liabilities.
It is PANDORA’s policy to hedge foreign currency risks
related to the risk of declining net cash flows resulting
from exchange rate fluctuations. PANDORA basically does
not hedge balance sheet items or ownership interests in
foreign subsidiaries. It is PANDORA’s policy for itsGroup
Treasury to hedge 100% of the risk 1-3months forward,
80% of the risk 4-6months forward, 60% of the risk 7-9
months forward and40% of the risk 10-12months forward,
based on a rolling 12-month liquidity budget. Foreign
currency hedging is updated at the end of eachquarter or in
connectionwith revised12-month rolling cash forecasts.
Below is an illustration of the impact inDKKmillion on
the net profit and changes in equity resulting from a change
in theGroup’s primary foreign currencies after the effect of
hedge accounting.
FINANCIAL RISKS, CONTINUED
4.4
