Financial market risk
The functional currency of the company is USD and the presentation currency is NOK. Balance sheet items in USD are converted to NOK at currency rate of 7.4332, which was Norges Bank’s exchange rate at 31 December 2014. The company’s revenue has the recent years been limited. Revenues consist primarily of management fees, dividends and group contributions from subsidiaries. Operating revenues and expenses in this company are primarily in USD. At year end the company had a cash balance in NOK of approximately 12 millions.
To hedge payments of the administrative expenses in Norway, the company entered in December 2014 into 2 forward contracts to sell USD corresponding NOK 10 millions at a currency rate of USD 7.5122 in June 2015 and further to sell USD corresponding NOK 10 millions at a currency rate of USD 7.5222 in December 2015. The market value of the forward contracts amounted to 96 in total at yearend.
Due to limited risk, no further hedging agreement towards NOK has been concluded.
The company does not use hedge accounting.
There will always exist a credit risk related to the company’s business. Belships monitors this risk and the strategy is to carefully select counterparts. Historical losses have been limited.