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Basis of Presentation
The consolidated financial statements have been prepared on a historical cost basis,
except for available for sale financial assets and derivative financial instruments,
which are measured at fair value, and inventories which are measured at the lower
of net realizable value or cost. The consolidated financial statements have been
prepared in accordance with International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board (IASB) and are
presented in U.S. dollars with all amounts rounded to the nearest million, except
for share and per share data.
increases in natural gas prices in the region. Since a lot of fuel is consumed in steel
making process, it can lead to an increase in input costs for steel producers.
So it becomes a major risk for the major Steel Producer as Market risk is
concerned.
The Company utilizes certain instruments to manage interest rate risks in order
to optimize its financial results. Interest rate instruments allow the Company to
borrow long-term at fixed or variable rates, and to swap the rate of this debt either
from the start or during the period of the loan. The Company and its counter party
exchange, at predefined intervals, the difference between the agreed fixed rate and
the variable rate, calculated on the basis of the notional amount of the swap.
Similarly, swaps may be used for the exchange of variable rates against other
variable rates.
Derivatives used are non exchange-traded derivatives such as over-thecounter swaps, options and forward contracts.
ArcelorMittal has established detailed counterparty limits to mitigate the risk
of default by its counterparties. The limits restrict the exposure ArcelorMittal
may have to any single counterparty. Counterparty limits are calculated
taking into account a range of factors that govern the approval of all
counterparties.