Registration document 2007 - Total.com
Registration document 2007 - Total.com
Registration document 2007 - Total.com
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As a result of its policy for management of currency exposure<br />
previously described, the Group believes that its short-term<br />
currency exposure is not material. The Group’s sensitivity to longterm<br />
currency exposure is primarily influenced by the net equity<br />
of the subsidiaries whose functional currency is the dollar and, to<br />
a lesser extent, the pound sterling and the Norwegian krone.<br />
This sensitivity is reflected by the historical evolution of the<br />
currency translation adjustment imputed in the statement of<br />
changes in shareholders’ equity which, in the course of the last<br />
three fiscal years, is essentially related to the evolution of the<br />
dollar and is set forth in the table below:<br />
Currency translation<br />
Euro/Dollar adjustments<br />
exchange rates (in M€)<br />
As of December 31, 2006 1.32 (1,383)<br />
As of December 31, 2005 1.18 1,421<br />
As of December 31, 2004 1.36 (1,429)<br />
The non-current debt in dollars described in note 20 to the<br />
consolidated financial statements is generally raised by the<br />
central treasury entities either in dollars or in euros, or in other<br />
currencies which are then systematically exchanged for dollars or<br />
euros according to the general corporate purposes, through<br />
issue swaps. The proceeds from these debt issuances are<br />
principally loaned to affiliates whose accounts are kept in dollars<br />
and any remaining balance is held in dollar-denominated<br />
investments. Thus, the net sensitivity of these positions to<br />
currency exposure is not material.<br />
Short-term currency swaps for the nominal amounts appear in<br />
note 27 to the consolidated financial statements are used with<br />
the aim of optimizing the centralized management of the cash of<br />
the Group. Thus the sensitivity to currency fluctuations which<br />
may be induced is likewise considered negligible.<br />
As a result of this policy, the impact of currency exchange on<br />
consolidated in<strong>com</strong>e, as illustrated in note 7 to the consolidated<br />
financial statements, has not been significant despite the<br />
considerable fluctuation of the dollar (loss of 30 M€ in 2006, gain<br />
of 76 M€ in 2005 and loss of 75 M€ in 2004).<br />
Appendix 1 – Consolidated financial statements<br />
Notes to the consolidated financial statement<br />
9<br />
Management of counterparty risk<br />
The Group has established standards for market transactions<br />
according to which bank counterparties must be approved in<br />
advance, based on an assessment of the counterparty’s financial<br />
soundness and its rating (Standard & Poors, Moody’s), which<br />
must be of high quality.<br />
An overall authorized credit limit is set for each bank and is<br />
divided among the subsidiaries and the Group’s central treasury<br />
entities according to their needs.<br />
Stock Market risk<br />
The Group holds interests in a number of publicly-traded<br />
<strong>com</strong>panies (see note 13 to the consolidated financial<br />
statements). The market values of these holdings fluctuate due to<br />
various factors, including stock market trends, valuations of the<br />
sectors in which the <strong>com</strong>panies operate, and the economic and<br />
financial condition of each individual <strong>com</strong>pany.<br />
Liquidity risk<br />
TOTAL S.A. has confirmed lines of credit granted by international<br />
banks, which would allow it to manage its short-term liquidity<br />
needs as required.<br />
The total amount of these lines of credit as of December 31,<br />
2006, was $7,701 million, of which $7,649 million was unused.<br />
The terms and availability of these lines of credit are not<br />
conditioned on the Company’s financial ratios, its financial ratings<br />
or on the absence of events that could have a material adverse<br />
impact on its financial situation. The total amount, as of<br />
December 31, 2006, of confirmed lines of credit granted by<br />
international banks to Group <strong>com</strong>panies, including TOTAL S.A.,<br />
was $11,638 million of which $9,268 million was unused. Lines<br />
of credit given to Group <strong>com</strong>panies other than TOTAL S.A. are<br />
not used for general Group purposes. They are used to finance<br />
general activities of that <strong>com</strong>pany or for specific projects.<br />
TOTAL – <strong>Registration</strong> Document 2006 229