Survey of Foreign Currency Exposure
Explanatory notes to accompany
Form 1FCE
This booklet is designed to assist providers in the completion
of the Survey of Foreign Currency Exposure – Form 1FCE.
This survey collects information on foreign currency
denominated financial assets and liabilities and future
estimated/forecasted foreign currency denominated receipts
and payments. It details the extent to which they are hedged
and the hedging policy used.
This survey is used in the compilation of aggregated data on
Australian resident enterprises’ foreign currency exposure
and the risk management practices associated with that
exposure.
The Survey of Foreign Currency Exposure was previously
conducted in March 2013 and published on the ABS website
as Foreign Currency Exposure, Australia, March Quarter
2013 (cat. No. 5308.0).
Queries regarding the Survey of Foreign Currency Exposure
may be directed to the following number: 1800 206 696.
© Commonwealth of Australia 2017
Australian Government Statistical Clearing House Approval Number: 00639-05
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1.Reporting arrangements
1.1 The Survey of Foreign Currency Exposure (Form 1FCE) is completed by the top
Australian entity within an enterprise on behalf of the enterprise group. For definitions of an
enterprise and an enterprise group see Note 2.1 on page 4.
1.2 A separate Form 1FCE is sent to the appropriate entities within your Australian enterprise
group (see Note 2.1 on page 4) that have been selected for the survey. A separate Form 1FCE
should still be completed for each different Standard Institutional Sector Classification of
Australia (SISCA) sub-sector.
The institutional sub-sectors generally applying to Form 1FCE are:
• Financial Corporations
- Banks
- Other depository corporations
- Reserve Bank of Australia
- Central borrowing authorities
- Other financial corporations
• Non-financial corporations
• General government
Further information on SISCA subsectors can be found here1 or by searching for catalogue
number 1218.0 on the ABS website.
1.3 The 1FCE has several key distinctions from the Survey of International Investment (SII Form
90) and Survey of International Trade in Services (SITS) collections. Some differences are:
• Form 1FCE seeks to obtain data on activities with resident counterparties as well as non-resident counterparties - only when
the transaction is denominated in a foreign currency.
Form 1FCE also includes;
• Forecasted foreign-currency-denominated receipts and payments from
trade in goods and services;
• The notional value of outstanding derivative contracts with a foreign currency component; and
• The policies enterprises adopted on hedging foreign currency exposure.
This may mean that certain enterprises within your group which were not involved in the
quarterly SITS/SII may be required to report for this collection. This would be the case,
for example, if an enterprise has foreign currency dealings with resident counterparties only.
The similarities between Form 1FCE and Form 90 are discussed in Note 3.5.
If you have any queries regarding the reporting arrangements for this collection, please contact
the Australian Bureau of Statistics on the number listed on the front page of the Form 1FCE.
1http://www.abs.gov.au/foreign-currency-exposure
4
2.General notes on questions
2.1An Australian enterprise consists of all the entities within an Australian enterprise group
that are in the same SISCA subsector. An Australian enterprise group consists of an
Australian parent enterprise (the top Australian enterprise), its Australian branches and its
Australian subsidiaries as defined by the Corporations Act 2001.
If you are unsure of the entities that make up your enterprise group,
the ABS can provide a list of ABNs that are included in your enterprise group. This list was
also included in the induction letter sent to your company.
2.2
All values should be reported in thousands of Australian dollars. Positions denominated in
foreign currency should be converted to Australian dollars at the midpoint of the appropriate
buy and sell rates applicable on 31 March 2017.
2.3
Residents and non-residents
A resident is any individual, enterprise or other organisation ordinarily domiciled in
Australia.
• Australian registered branches and incorporated subsidiaries of foreign
enterprises are regarded as Australian residents.
A non-resident is any individual, enterprise or other organisation ordinarily domiciled in a
country other than Australia.
• Foreign branches and foreign subsidiaries of Australian enterprises are regarded as
non-residents; and
• Residents of Norfolk Island and other external territories of Australia
are regarded as non-residents.
2.4
Institutional sector of resident counterparties
Throughout this form you are asked to record details of activities with resident counterparties
by the institutional sector of these counterparties. The institutional sectors of resident
counterparties applying to this collection are as follows:
• Banks (as licensed by APRA);
• Other depository corporations (see Note 2.5 on page 5);
• Reserve Bank of Australia;
• Central borrowing authorities (see Note 2.6 on page 5);
• Other financial corporations (see Note 2.7 on page 5);
• Non-financial corporations (see Note 2.8 on page 5); and
• General government (see Note 2.9 on page 5).
It should be noted that the sector of resident counterparty detail sought throughout the form
is the sector of the entity that your enterprise is physically dealing with, not the sector of that
entity’s parent enterprise.
If data by sector of resident counterparty are not readily available, please contact the ABS on
the number listed on the front page of 1FCE.
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2.5 Other depository corporations are those non-bank financial intermediaries with liabilities
included in the Reserve Bank of Australia’s definition of broad money. This includes nonbank Authorised Deposit-Taking Institutions (ADIs) such as building societies, credit unions
and cash management trusts. Financial corporations registered under the Financial Sector
(Collection of Data) Act 2001 Registered Financial Corporations (RFCs), which include
money market corporations and Other Category RFCs, also fall into this sector.
2.6 Central borrowing authorities refer to corporations established by state and territory
governments to provide finance for government authorities and to manage their surplus funds.
2.7 Other financial corporations include:
• Life insurance and pension funds;
• Other insurance corporations;
• Financial auxiliaries (for example: fund managers, security brokers and loan brokers); and
• Other financial institutions (which includes securitisers and mortgage brokers, fixed interest
and equity unit trusts).
2.8 Non-financial corporations include both public and private corporations and cover all
resident corporations engaged in the production of market goods and/or non-financial services
and holding companies with mainly non-financial corporations as subsidiaries.
2.9 General government includes federal, state and local general government agencies. It
excludes non-financial corporations (both public and private) and public marketing authorities
as these are included in the ‘Other resident sectors’ grouping.
2.10 Institutional sector grouping of non-resident counterparties
Throughout 1FCE you are asked to record details of activities with non-resident counterparties
by the institutional sector of these counterparties. The institutional sectors of non-resident
counterparties applying to this collection are as follows:
• Banks;
• Other.
If data by sector of non-resident counterparty are not readily available,
please contact the ABS on the number listed on the front page of 1FCE.
2.11 All values should be reported in thousands of Australian dollars.
This requirement is consistent with the Survey of International Investment and Survey of
International Trade in Services collections.
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2.12
Chart 1 provides a schematic diagram describing the foreign currency denominated activities
undertaken by Australian residents and the potential for foreign currency derivatives to impact
net foreign currency exposures.
Chart 1
Foreign currency denominated activities
engaged in by Australian residents
Assets
Equity
Liabilities
Debt
Debt
Net Balance Sheet foreign exchange
exposure (before hedging)
Estimated/
forecasted
receipts of
foreign exchange
from trade
Estimated/
forecasted
repayments of
foreign exchange
from trade
Net Trade foreign exchange
exposure (before hedging)
Foreign exchange derivatives in
buy/sell positions
Net foreign exchange
exposure (after hedging)
7
3.Notes on Parts A, B, C, D
3.1Equity for the purposes of this survey is defined as all classes of shares or units on issue.
Including
• Net equity held in joint venture
and other unincorporated
enterprises
Excluding
• Non-participating preference
shares
3.2 Debt assets and debt liabilities should include all non-equity balance sheet assets and
liabilities, such as, but not limited to:
• Cash and deposits;
• Short term instruments, i.e. certificates of deposit, convertible and non-convertible
securities, promissory notes, bills of exchange, other short-term commercial and financial
paper;
• Long term instruments, i.e. non-participating preference shares, bonds, asset backed
securities, bearer depository receipts, loans, debentures;
• Trade credits payables and receivables, which are accounts payable or receivable by your
Australian enterprise group for the import or export of goods and services; and:
• Prepayments made for future imports or exports of goods and services.
3.3Parts A,B,C & D collect information about financial claims on and liabilities to residents and
non-residents that are denominated in foreign currencies.
Including
Excluding
• All foreign denominated financial • All financial assets and liabilities
claims and liabilities that are
that your Australian enterprise
shown in your books and which
has negotiated on behalf of others
you have either acquired yourself
and which are not shown in your
or have arranged through a
books (unless you are a fund
financial intermediary
manager)
• All foreign currency denominated • All investments that are being
financial claims and liabilities
managed on behalf of your
acquired using funds managed by
Australian enterprise by an
your enterprise group on behalf of
independent fund manager in
other Australian enterprise groups,
Australia (Such investments will
governments or individuals
be reported separately by the
relevant fund manager/s)
• The market values of derivative
instruments held by your
Australian enterprise
For example, an Australian company issuing a bond denominated in USD would be issuing
a foreign currency denominated debt liability. Similarly, if the company was purchasing the
issue of the bond denominated in USD it would increase the company’s holdings of their
foreign currency denominated debt assets.
8
3.4 Parts A, B, C & D use market valuations only. If this is not available, estimate using one of the
following methods:
Market value of equity for unlisted enterprises: use
• A recent transaction price;
• Director’s valuation; or
• Net asset value: where net asset value is equal to total assets, including intangibles, less
liabilities, including the paid value of ordinary shares. Assets and liabilities should be recorded
at book value as reported on your balance sheet.
Market value for net equity of head office in branch: report the total assets of the branch at
book value less liabilities. Liabilities include retained earnings revaluation and other reserves as
well as capital invested by the head office.
Market value of securities/debt instruments: use the traded price as of
31 March 2017. If this is not available, estimate using (in order of preference) the following
methods:
•
•
•
•
•
Yield to maturity method;
Discounted net present value;
Face value less written down value;
Issue price plus amortisation of discount on the bond; or
Another mark to market method.
Market value of loans, trade credits, deposits and other instruments: use nominal (face)
value as an approximation for market value unless book values have been revalued. If further
clarification is required, please contact the ABS on the number listed on the front page of 1FCE.
3.5 If the enterprise group also currently receives the Survey of International Investment (SII) as of 31
March 2017:
• Foreign currency denominated financial debt liabilities to non-residents should be identical
to the foreign currency data reported collectively in Parts D and E of questions 6-13 in Form 90
for the quarter ended 31 March 2017, or questions 1b and 2b of Part A of Forms 52 and 53.
• Foreign equity assets should be identical to the foreign currency data reported collectively in
questions 14 and 15 (Part F) in the Form 90 for the quarter ended 31 March 2017.
• Foreign currency denominated financial debt assets with non-residents should be identical
to the foreign currency data reported collectively in Parts H and I of questions 17–24 in Form
90 for the quarter ended 31 March 2017.
All foreign currency denominated debt assets and liabilities refer to the currency (of the
closing positions) in which the assets or liabilities are likely to be repaid.
9
3.6
In Question 2 (Part B) and Question 6 (Part D) the mutually exclusive
hedging categories are:
•
•
•
•
•
•
Value fully hedged by derivatives;
Value partially hedged by derivatives;
Value naturally hedged;
Value hedged by overseas affiliate;
Other values hedged; and
Value of all unhedged.
The examples below illustrate how the different approaches to hedging
should be reported in this section. Note that these are illustrative examples
only. If further assistance is required for this section, please contact the
ABS on the number listed on the front page of 1FCE.
For all examples in this section suppose that at date t = 0, the exchange
rate is 1 AUD = 0.9 USD. At reporting date t = 1, suppose that the
exchange rate has appreciated to 1 AUD = 1 USD.
Example 1: Fully hedged by derivatives
A resident enterprise purchases equities in a US resident company
worth US$18 million (A$20 million) at time t = 0. They then enter into
a currency futures position worth US$18 million to remove the risk
associated with currency volatility.
At t = 1 the AUD appreciation means that the $US18 million equity asset
is now worth A$16 million. The entire A$16 million is reported as ‘fully
hedged’.
Exclude amounts hedged by an overseas affiliate.
This would be reported in Question 6 (Part D) as follows:
A$’000
Currency as at
31/3/2017
(A$’000)
Value fully hedged
by derivatives
US Dollar UK Pound
Japanese
Yen
Euro
New
Zealand
Dollar
Chinese
Renminbi
Other
foreign
currencies
Total of
foreign
currency
values
16,000
16,000
Value partially
hedged by derivatives
0
Value naturally
hedged
0
Value hedged
by overseas affiliate
0
Other values hedged
0
Value of all unhedged
0
Total of debt
and equity assets
(equal to Q4 +
Q5(a) + Q5(b))
16,000
0
0
0
0
0
0
16,000
10
Example 2: Partially hedged by derivatives
A resident enterprise issues a US$100 million bond at t = 0. They enter
into a cross currency basis swap with a notional value of US$80 million
to hedge the US$100 million bond (A$111 million).
At t = 1 the US$100 million liabilities exposure is now worth A$91
million and is 80% hedged. The 80% hedged amount (A$73 million) is
reported in the ‘partially hedged’ category and the remaining 20% (A$18
million) is categorised as ‘all unhedged’.
Exclude amounts hedged by an overseas affiliate.
These would be reported in Question 2 (Part B) as follows:
A$’000
Currency as at
31/3/2017
(A$’000)
US Dollar UK Pound
Japanese
Yen
Euro
New
Zealand
Dollar
Chinese
Renminbi
Other
foreign
currencies
Value fully hedged
by derivatives
Value partially
hedged by derivatives
Total of
foreign
currency
values
0
73,000
73,000
Value naturally
hedged
0
Value hedged by
overseas affiliate
0
Other values hedged
0
Value of all unhedged
18,000
Total of debt
liabilities (equal to
Q1(a) + Q1(b))
91,000
18,000
0
0
0
0
0
0
91,000
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Example 3: Naturally hedged
Natural hedging refers to carrying out two different types of transactions that
have opposite movements in order to reduce the underlying risk in one or both
transactions. Any portfolio of assets and liabilities that has both assets and
liabilities denominated in the same foreign currency in order to offset their
respective movements is covered under natural hedging; when positions are
naturally hedged this way, the asset and liability positions move by similar
proportions. The destination counterparty with which natural hedging is
conducted does not matter. This is in contrast to any hedging that uses
financial derivatives which is referred to in 1FCE as derivatives hedging.
Exclude amounts reported under ‘fully hedged’, ‘partially hedged’ or ‘hedged
by overseas affiliate’.
For example, an Australian company may borrow USD $10m to fund the
purchase of equipment in the US. In this case the loan (liability) offsets the
equipment (asset) purchased.
This would be reported in Question 2 (Part B) and Question 6 (Part D)
respectively as follows:
Question 2 (Part B):
A$’000
Currency as at
31/3/2017
(A$’000)
US Dollar UK Pound
Japanese
Yen
Euro
New
Zealand
Dollar
Chinese
Renminbi
Other
foreign
currencies
Total of
foreign
currency
values
Value fully hedged
by derivatives
0
Value partially
hedged by derivatives
0
Value naturally
hedged
10,000
10,000
Value hedged
by overseas affiliate
0
Other values hedged
0
Value of all unhedged
0
Total of debt
liabilities (equal to
Q1(a) + Q1(b))
10,000
0
0
0
0
0
0
10,000
12
Question 6 (Part D):
A$’000
Currency as at
31/3/2017
(A$’000)
US Dollar UK Pound
Japanese
Yen
Euro
New
Zealand
Dollar
Chinese
Renminbi
Other
foreign
currencies
Total of
foreign
currency
values
Value fully hedged
by derivatives
0
Value partially
hedged by derivatives
0
Value naturally
hedged
10,000
10,000
Value hedged
by overseas affiliate
0
Other values hedged
0
Value of all unhedged
0
Total of debt
and equity assets
(equal to Q4 +
Q5(a) + Q5(b))
10,000
0
0
0
0
0
0
10,000
Please see Note 5.3 on page 19 for the further breakdown required for hedging foreign currency
receipts and payments for this example.
A natural hedge may also be created via formal hedging activity. For example, a resident company
has US$125 million in assets and £$100 million in liabilities. Assuming an exchange rate of
1 USD = 0.8 GBP, the company may choose to take out a futures contract to buy US$125 million
for £$100 million. The futures contract effectively pegs the US asset to the UK liability in US
dollars. These amounts form a natural hedge against each other back to the Australian dollar.
This would be recorded in Question 2 (Part B) and Question 6 (Part D) respectively as follows.
Question 2 (Part B):
A$’000
Currency as at
31/3/2017
(A$’000)
US Dollar UK Pound
Japanese
Yen
Euro
New
Zealand
Dollar
Chinese
Renminbi
Other
foreign
currencies
Total of
foreign
currency
values
Value fully hedged
by derivatives
0
Value partially
hedged by derivatives
0
Value naturally
hedged
125,000
125,000
Value hedged
by overseas affiliate
0
Other values hedged
0
Value of all unhedged
0
Total of debt
liabilities (equal to
Q1(a) + Q1(b))
125,000
0
0
0
0
0
0
125,000
13
Question 6 (Part D):
A$’000
Currency as at
31/3/2017
(A$’000)
US Dollar UK Pound
Japanese
Yen
Euro
New
Zealand
Dollar
Chinese
Renminbi
Other
foreign
currencies
Total of
foreign
currency
values
Value fully hedged
by derivatives
0
Value partially
hedged by derivatives
0
Value naturally
hedged
125,000
125,000
Value hedged
by overseas affiliate
0
Other values hedged
0
Value of all unhedged
0
Total of debt and
equity assets
(equal to Q4 +
Q5(a) + Q5(b))
125,000
0
0
0
0
0
0
Other examples of natural hedging may include the following:
•
An Australian company buying raw materials from a foreign supplier (e.g. China) can also sell its product in China, generating receivables denominated in
Chinese Renminbi. Any gains in the AUD against the Renminbi will decrease
the value of the accounts receivable along with the value of the accounts payable.
•
An Australian trader purchases stock on the London Stock Exchange. They
fund the purchase with a loan denominated in pounds. The asset (stock
purchased on the London Stock Exchange) and the liability (loan in pounds) are
again kept in the same currency.
This list is not exhaustive; if further assistance is required on this section, please
contact the ABS on the number listed on the front page of 1FCE.
125,000
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Example 4: Hedged by overseas affiliate
A resident company borrows US$45 (A$50 million) at time t = 0. The US head
office of the resident company enters into a currency futures position worth
US$22.5 million to hedge the US$45 million loan on the resident company’s
behalf.
At t = 1 the AUD appreciation means that the $US45 million debt liability is
now worth A$41 million and is 50% hedged. The 50% hedged amount (A$20.5
million) is reported in the ‘hedged by overseas affiliate’ category and the
remaining 50% (A$20.5 million) is categorised as ‘all unhedged’.
This would be reported in Question 2 (Part B) as follows:
A$’000
Currency as at
31/3/2017
(A$’000)
US Dollar UK Pound
Japanese
Yen
Euro
New
Zealand
Dollar
Chinese
Renminbi
Other
foreign
currencies
Total of
foreign
currency
values
Value fully hedged
by derivatives
0
Value partially
hedged by derivatives
0
Value naturally
hedged
0
Value hedged
by overseas affiliate
20,500
20,500
Other values hedged
0
Value of all unhedged
20,500
Total of debt
liabilities (equal to
Q1(a) + Q1(b))
41,000
20,500
0
0
0
0
0
In addition to this example, please report hedging undertaken by overseas
affiliates on behalf of the resident enterprise group as per Examples 1, 2 or 3,
under formalised hedging (i.e. hedging using derivatives), natural hedging, or a
combination of the above.
Example 5: Hedged as part of a portfolio containing assets and liabilities
At t = 0 a company has a portfolio of US$ denominated bonds, equities (assets)
and debt liabilities, worth US$55 million (US$100 million of assets less US$45
million debt). The company hedges 50% of this portfolio back to A$ using
derivatives.
At t = 1 the portfolio’s net exposure is now A$50 million (A$91 million of
assets less A$41 million debt). In Question 2 (Part B) A$41 million of the
liability exposure is ‘naturally hedged’. In Question 6 (Part D), A$41 million
of the asset position is ‘naturally hedged’, A$25 million is hedged using
derivatives and included in ‘partially hedged’. The remaining A$25 million
is unhedged and included in ‘all unhedged’.
0
41,000
15
This would be reported in both Question 2 (Part B) and Question 6 (Part D) respectively
as follows:
Question 2 (Part B):
A$’000
Currency as at
31/3/2017
(A$’000)
US Dollar UK Pound
Japanese
Yen
Euro
New
Zealand
Dollar
Chinese
Renminbi
Other
foreign
currencies
Total of
foreign
currency
values
Value fully hedged
by derivatives
0
Value partially
hedged by derivatives
0
Value naturally
hedged
41,000
41,000
Value hedged
by overseas affiliate
0
Other values hedged
0
Value of all unhedged
0
Total of debt
liabilities (equal to
Q1(a) + Q1(b))
41,000
0
0
0
0
0
0
41,000
Euro
New
Zealand
Dollar
Chinese
Renminbi
Other
foreign
currencies
Total of
foreign
currency
values
Question 6 (Part D):
A$’000
Currency as at
31/3/2017
(A$’000)
US Dollar UK Pound
Japanese
Yen
Value fully hedged
by derivatives
0
Value partially
hedged by derivatives
25,000
25,000
Value naturally
hedged
41,000
41,000
Value hedged
by overseas affiliate
0
Other values hedged
0
Value of all unhedged
25,000
Total of debt
and equity assets
(equal to Q4 +
Q5(a) + Q5(b))
91,000
25,000
0
0
0
0
0
0
91,000
16
3.7
Maturity matching occurs when financial instruments are purchased with the intention
of offsetting the foreign currency risk of an asset or liability over a set time period or
a particular point in time. If an enterprise group has internal policies for recognising
maturity matching then they should apply. However, if they do not have internal policies
then the below guidelines may be applied:
• For assets/liabilities with an original maturity less than or equal to 1 year,
maturity matching would involve maturities that are matched to less than 90 days.
• For assets/liabilities with an original maturity more than 1 year but less than or
equal to 5 years, maturity matching would be within a few months.
• For assets/liabilities with an original maturity more than 5 years, maturity
matching would be within a six month period.
If the asset/liability has an option imbedded in its structure then the matching should
occur to the first put call date instead of the legal maturity date.
Example:
A resident enterprise borrows $US200 million with an original maturity of 10 years.
US$3 million repayments on the loan are due every month.
At the time of reporting, the residual maturity of the loan is 5 years and the market
value of the loan is $US120 million. The company has a policy of hedging 100% of
all liabilities, and takes out a cross-currency swap to buy US$9 million every 90 days
for five years. Since the company does not have a specific policy of maturity matching,
the guidelines listed above were used. The loan is deemed to be maturity matched as
the derivative matches the repayments to within a few months over the 5 year period.
This question would be completed in Question 3 (a) (Part B) as follows:
A$’000
US Dollars
Currency as at
31/3/2017
(A$’000)
3.8
<= 90 days
> 90 days
<= 6 months
> 6 months
<= 1 year
> 1 year
<= 5 years
Value in $A’000
120,000
of which: Value
hedged by derivatives
120,000
of which: Value
maturity matched
120,000
> 5 years
<= 10 years
> 10 years
Question 3 (Part B) seeks further information on the short and long term hedging
practices associated with wholesale debt funding. In particular, it asks for information on
the value of foreign currency exposures that are hedged back to AUD using derivatives.
It also seeks information on the extent to which these exposures are currency and/or
maturity matched (see Note 3.9 on page 17).
17
3.9 Maturity groups in this form are based on the residual maturity of the foreign currency debt liabilities and not the original maturity of the foreign currency debt liabilities. The maturity groups listed on the form are as follows:
Maturity Groups
<=90 days
> 90 days
<= 6 months
> 6 months
<= 1 year
> 1 year
<= 5 years
> 5 years
<= 10 years
> 10 years
Less than or equal to 90 days to maturity
Greater than 90 days or less than or equal to 6
months to maturity
Greater than 6 months or less than or equal to
1 year to maturity
Greater than 1 year or less than or equal to 5
years to maturity
Greater than 5 years or less than or equal to 10
years to maturity
Greater than 10 years to maturity
4.Notes on Part E
4.1 Part E collects information about estimated/forecasted future foreign currency denominated
receipts and payments arising from trade in goods and services for the period following
31 March 2017. Please include all estimated/forecasted receipts and payments denominated
in foreign currencies, not just those which you have already hedged, or expect to hedge
through financial derivative contracts.
Please do not include any receipts and payments already reported in Parts A, B, C or D, or
those arising from the following:
•
•
•
Estimated/forecasted future interest & dividends resulting in increases and/or decreases in the levels of financial assets and liabilities;
Future settlements of outstanding derivative contracts; or
Future investment income flows arising from existing financial assets and liabilities.
Accurate estimates of future receipts and payments may be difficult to evaluate; please provide
estimates where possible. If further assistance is required for this section, please contact the
ABS on the number listed on the front page of 1FCE.
18
4.2 Examples of estimated/forecasted foreign currency denominated receipts and payments that should
be incorporated into estimates include:
• Fees for services:
-Agricultural, mining and on-site processing services (including project management);
-Computer and information services;
-Construction services;
-Engineering services;
-Transport services;
-Financial services;
-Personal, cultural and recreational services.
Financial services covers:
• Financial, intermediary and auxiliary services denominated in foreign currency;
• Letters of credit;
• Bankers’ acceptances;
• Lines of credit;
• Financial leasing;
• Foreign exchange transactions;
• Commissions and other fees related to transactions in securities;
• Commissions of commodity futures traders;
• Services related to asset management;
• Financial market operational and regulatory services;
• Security custody services.
Excluding:
• Interest and dividends
• Items included in trade debtors and trade creditors reported in Parts A and C of 1FCE
4.3 Future receipts and payment groups in this form are broken down into the two following
categories:
Time Horizon Groups
Receipts or payments estimated/forecasted less
than or equal to 1 year in the future.
Receipts or payments estimated/forecasted
more than 1 year or less than or equal to 4
years in the future.
<= 1 year
> 1 year
<= 4 years
For example, an enterprise paying for a 4 year contract for services
worth US$20 million a year will be broken down as follows, assuming the exchange rate at
time t = 1 is 1 AUD = 1 USD and the contract is paid in annual instalments:
A$’000
Currency as at 31/3/2017
(A$’000)
<= 1 year
> 1 year
<= 4 years
Total of maturity group
values
Total of estimated/forecasted
future payments
20,000
60,000
80,000
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5.Notes on Part F
5.1Part F collects information about hedging of estimated/forecasted future foreign currency
denominated receipts and payments arising from the trade in goods and services in the period
following 31 March 2017. Please include all estimated/forecasted receipts and payments, and
not just existing receipts and payments currently hedged through financial derivative contracts.
5.2The different time horizon groups in which future foreign currency receipts and payments are
to be estimated/forecasted are listed in (see Note 4.3 on page 18).
5.3For the various types of hedging to be included in this question see the examples in part 3.6, as
well as the one below for natural hedging:
Example:
A resident company intends to purchase input materials from a US supplier worth US$9
million (A$10 million). It also expects to sell US$4.5 million (A$5 million) of its products
back into US dollars within a year. An increase in the AUD against the USD simultaneously
decreases the cost of the input materials from the supplier to A$8 million and the price of the
final product sold to A$4 million.
For natural hedging on receipts (Question 9) A$4 million is reported in the ‘naturally hedged’
category:
A$’000
Currency as at 31/3/2017
(A$’000)
<= 1 year
> 1 year
<= 4 years
Total of maturity
group values
Value fully hedged
by derivatives
0
Value partially hedged
by derivatives
0
Value naturally hedged
4,000
4,000
Value hedged by
overseas affiliate
0
Other values hedged
0
Value of all unhedged
0
Total of estimated/
forecasted future receipts
(equal to Q7)
4,000
0
4,000
20
For natural hedging on payments (Question 10) A$4 million is reported in the ‘naturally
hedged’ category and the remaining A$4 million is reported in the ‘all unhedged’ category,
as follows:
A$’000
Currency as at 31/3/2017
(A$’000)
< 1 year
> 1 year
<= 4 years
Total of maturity
group values
Value fully hedged
by derivatives
0
Value partially hedged
by derivatives
0
Value naturally hedged
4,000
4,000
Value hedged by
overseas affiliate
0
Other values hedged
0
Value of all unhedged
4,000
Total of estimated/
forecasted future payments
(equal to Q8)
8,000
4,000
0
8,000
6. Notes on Part G
6.1
Part G collects information about financial derivative currency contracts that could be used to
hedge (or create) a foreign currency exposure. Other derivatives (e.g. commodities) are not to
be included in Part G.
6.2
Forward foreign exchange denotes future commitments to buy or sell $A in exchange
for foreign currency at a pre-agreed exchange rate and includes forward contracts, spot
transactions that have not yet settled and outstanding commitments under foreign exchange
swaps.
• Forward contracts are contracts to buy or sell $A in exchange for foreign currency at a
pre-agreed exchange rate at a specified future date.
• Foreign exchange swaps combine a spot exchange of two currencies with a forward
transaction that reverses the initial exchange (though generally at a different exchange rate).
6.3
Futures are contracts to buy or sell $A in exchange for foreign currency at a pre-agreed
exchange rate at a specified future date. The principal difference between futures and
forward contracts is that futures are traded on organised exchanges and settlement is with
a central counterparty.
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6.4 Cross-currency interest rate swaps involve the exchange of streams of
interest payments in different currencies for an agreed period of time and
the exchange of principal amounts in different currencies at a pre-agreed
exchange rate at maturity.
6.5 Currency options grant the holder the right, but not the obligation, to
exchange $A for a foreign currency at a specified exchange rate at a
future date.
• Call options on the Australian dollar give the holder the right to buy
$A in exchange for a foreign currency (and are equivalent to a put on
the foreign currency).
• Put options on the Australian dollar give the holder the right to sell
$A in exchange for a foreign currency (and are equivalent to a call on
the foreign currency).
6.6 Repurchase agreements (currency repos) is a contractual agreement
between two parties to sell $A at an agreed price on a specified date, then
the other party to repurchase the $A at an agreed future date. This should
be included in the ‘all other’ total.
6.7The notional principal (notional or effective exposure) of a derivative
contract is the underlying nominal amount upon which the transaction
is based. The notional principal should be expressed in thousands of
Australian dollars. Where it is necessary to convert from a foreign
currency, this should be done at the spot rate for 31 March 2017 (and not
the contractual exchange rate).
6.8In Part G Question 11, report the notional principal of outstanding
derivatives where foreign currency will be purchased in exchange for
$A when the derivative is exercised. For options, this will include calls
purchased on foreign currency (i.e. puts purchased on Australian
dollars) and puts sold (or written) on foreign currency (i.e. calls sold
on Australian dollars).
6.9 In Part G Question 12, report the notional principal of outstanding
derivatives where foreign currency will be sold in exchange for $A when
the derivative is exercised. For options, this will include puts purchased
on foreign currency (i.e. calls purchased on Australian dollars) and calls
sold (or written) on foreign currency (i.e. puts sold on Australian dollars).
6.10 In Part G Question 13, report the notional principal of outstanding
derivatives where foreign currency will be sold in exchange for foreign
currency when the derivative is exercised. This will include both puts
purchased and calls sold on (or written) on foreign currency.
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6.11
In Part G Question 14, report the total market value of outstanding derivatives where
foreign currency will be sold in exchange for $A when the derivative is exercised. If a
market value is not currently available (see Note 3.4 on page 8).
Derivative contracts in an asset position with non-residents are those contracts where the
mark to market value of the closing position is positive at the reporting date.
Derivative contracts in a liability position with non-residents are those contracts where the
mark to market value of the closing position is negative at the reporting date.
The following examples go into further detail regarding which transactions are in scope for
Part G Questions 11 to 14:
•
An Australian enterprise issues a derivative contract to a foreign bank for the
purchase of US$100 million for A$100 million. Assuming the exchange rate remains
at 1 USD = 1 AUD, the notional principal reported will be A$100 million. This amount
should be reported under Part G Question 11(a) as follows:
A$’000
Currency as at
31/3/2017
(A$’000)
Banks
US Dollar UK Pound
Japanese
Yen
Euro
New
Zealand
Dollar
Chinese
Renminbi
Other
foreign
currencies
100,000
100,000
0
Other
Total of industry
group values
Total of
foreign
currency
values
100,000
0
0
0
0
0
0
100,000
Other
foreign
currencies
Total of
foreign
currency
values
•A foreign non-bank enterprise issues a derivative contract to an
Australian enterprise for the purchase of A$100 million for £100
million. Assuming the exchange rate remains at 1 AUD = 1 GBP,
the notional principal reported will be A$100 million. This amount
should be reported under Part G Question 12(a) as follows:
A$’000
Currency as at
31/3/2017
(A$’000)
US Dollar UK Pound
Japanese
Yen
Euro
New
Zealand
Dollar
Chinese
Renminbi
0
Banks
Other
Total of industry
group values
100,000
100,000
0
100,000
0
0
0
0
0
100,000
23
• An Australian enterprise issues a derivative contract to a non resident bank
for the purchase of £100 million for €100 million. This amount should be reported under Part G Question 13(a) as follows:
Foreign currency sold (A$’000)
Foreign currency
purchased
US Dollar
UK
Pound
Japanese
Yen
Euro
New
Zealand
Dollar
Other
Chinese
foreign
Renminbi currencies
Total value
of foreign
currencies
purchased
from nonresidents
0
US Dollar
UK Pound
100,000
100,000
Japanese Yen
0
Euro
0
New Zealand
Dollar
0
Chinese Renminbi
0
Other foreign
currencies
0
Total value
of foreign
currencies sold to
non- residents
0
0
0
100,000
0
0
0
100,000
7.Notes on Part H
7.1Part H provides a representation of the major factors which you may consider when
determining the extent to which your enterprise is exposed to foreign currency risk. The data
summarised here will, at best, provide a broad indication of the extent to which your enterprise
is exposed currently.
It should be noted that even if your enterprise has an overall policy of ensuring that the
enterprise is 100 per cent hedged against foreign exchange exposure; it is still unlikely that you
would record a zero at the bottom of the table in this section. There are a number of reasons
why this may be the case. For example:
• You may not consider all of the factors shown in the table (for example, foreign equity
assets) during your calculations;
• The time horizon for future receipts and payments may not be appropriate to your
enterprise;
• Balance sheet assets and liabilities are recorded at their market value (or approximation
thereof). A balance sheet position hedged with forward foreign exchange derivatives will
be based on the estimated/forecasted value of the assets and liabilities at the time the
derivative is exercised. Therefore it is likely that the sum of the present value of the balance
sheet with the principal of the offsetting hedge may not be zero.
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7.2When reporting the net balance sheet foreign currency exposures item in Question 15,
please report the total balance sheet foreign current exposure if the net amount is
not available.
8.Notes on Part I
8.1This section asks for information on your enterprise group’s hedging policy, which
may differ from the actual hedging reported in Parts A to H in 1FCE.
8.2When reporting the percentage of a partial hedge your enterprise may not have a
comprehensive portion of your portfolio hedged. To provide a best estimate take
a weighted average of your hedging strategies. An example which shows how to
calculate this weighted average is shown below; use it as a guide if necessary to
help consider your enterprise group’s overall hedging strategies.
Example:
Assume your enterprise group has two major foreign currency
investment strategies:
Strategy A
Fully hedged investment in foreign currency assets worth A$100 million.
Strategy B
Non-hedged trading on the FX market with a portfolio of A$10 million
of which $1 million is exposed to foreign currency movements.
The weighted average of these two strategies (assuming equal weighting
between both) would be:
(Market Value of A * Portion Hedged) + (Market Value of B * Portion Hedged)
Market Value of A + Market Value of B
=
= 99%
(A$100 million * 100%) + (A$10 million * 90%)
A$100 million + A$10million
25
This would be reported in Question 17(a) (Part I) as follows:
Indicate with an ‘X’ only once per column
Estimated/
forecasted future
receipts
from trade
Debt
assets
Equity
(i) No hedging �������������������������
(ii) Full hedge �������������������������
X
(iii) Partial hedge (or multiple hedge strategies) ������
- Specify the percentage (or average of multiple
strategies weighted by value) … … … … … … … …
%
99
%
(iv) No strategy/benchmark ������������������
If further clarification is required, please contact the ABS on the number listed on the
front page of 1FCE.
8.3 If your enterprise group targets a monetary level of exposure and not a percentage level of
exposure, convert your monetary level of exposure by dividing the total monetary level of
exposure in AUD as of 31 March 2017 by total assets or liabilities as of 31 March 2017,
depending on the type of exposure.
Example:
• Assume your enterprise group’s target exposure levels in foreign currencies are
US$100 million, £50 million and €50 million.
• Assume the exchange rates are 0.7 USD = 1 AUD, 0.6 GBP = 1 AUD, and
0.7 EUR = 1 AUD as of 31 March 2017.
If this enterprise group’s total foreign denominated liabilities exposure is A$500 million,
the enterprise group’s foreign currency exposure in percentage terms would be:
=
(
100
0.7
+
50
0.6
+
500
50
0.7
(
%
60%
8.4 In Part (e) of Questions 16 and 17, natural hedging is defined as in Example 3 in Part 3.6.
%
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