Registration document 2007 - Total.com

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