Access the financial statements of Deutsche Lufthansa AG for the year ended December 31, 2011. These can be found at the company's website (investor-relations.lufthansa.com).
Instructions
(a) Discuss the company's business model (that is, how it earns income).
(b) Identify and summarize the various financial risks that the company is exposed to. (See the discussion on Financial Opportunities and Risks in the annual report.) How is the company dealing with its financial risks and what are its objectives in managing these risks? What types of derivatives are used for hedging purposes?
(c) Read the Risks and Opportunities Report to the financial statements. How many of the various risks noted in part (b) are hedged?
(d) Also from the Risks and Opportunities Report, what derivative instruments, if any, are being used by the company to hedge its risks related to commodities? Identify which derivatives are designated as cash flow hedges and which are designated as fair value hedges for 2011. Explain why the hedges have been designated as cash flow or fair value.
(e) How have the fair values of the derivatives been determined?
(f) Related to the derivatives, how much was moved from other comprehensive income to earnings during the year?