Deutsche Telekom AG (2011)
Notes to the consolidated financial statements [extract]
37. Risk management, financial derivatives, and other disclosures on capital management. [extract]
Credit risks.
Deutsche Telekom is exposed to a credit risk from its operating activities and certain financing activities. With regard to financing activities, transactions are only concluded with counterparties that have at least a credit rating of BBB+/Baa1, in connection with an operational credit management system. At the level of operations, the outstanding debts are continuously monitored in each area, i.e. locally. Credit risks are taken into account through individual and collective allowances.
The solvency of the business with corporate customers, especially international carriers, is monitored separately. In terms of the overall risk exposure from the credit risk, however, the receivables from these counterparties are not so extensive as to justify extraordinary concentrations of risk.
In line with the contractual provisions, in the event of insolvency all derivatives with a positive or negative fair value that exist with the respective counterparty are offset against each other, leaving a net receivable or liability. When the netting of the positive and negative fair values of all derivatives was positive from Deutsche Telekom’s perspective, the counterparty provided Deutsche Telekom with unrestricted cash pursuant to the collateral contracts mentioned in Note 1. The credit risk was thus further reduced (for details on the fair value of the cash reported under cash and cash equivalents; please also refer to Note 36).
On the basis of these contracts, derivatives with a positive fair value and a total carrying amount of EUR 1,533 million (December 31, 2010: EUR 835 million) have a maximum credit risk of EUR 45 million (December 31, 2010: EUR 126 million) as of the reporting date. When the netting of the positive and negative fair values of all derivatives was negative from Deutsche Telekom’s perspective, Deutsche Telekom provided cash collateral to counterparties pursuant to collateral contracts. The corresponding receivables of EUR 302 million (December 31, 2010: EUR 223 million) were thus not exposed to any credit risks as of the reporting date (please also refer to Note 8). No other significant agreements reducing the maximum exposure to the credit risks of financial assets existed. The maximum exposure to credit risk of the other financial assets thus corresponds to their carrying amounts. In addition, Deutsche Telekom is exposed to a credit risk through the granting of financial guarantees. Guarantees amounting to a nominal total of EUR 100 million has been pledged as of the reporting date (December 31, 2010: EUR 115 million), which also represent the maximum exposure to credit risk.