Carrefour - 2017 Registration Document

5 CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2017 Notes to the Consolidated Financial Statements CARREFOUR | 2017 REGISTRATION DOCUMENT 279 The following table shows the sensitivity of total borrowings to changes in interest rates over one year: (in millions of euros) (- = loss; + = gain) 50-bps decline 50-bps increase Impact on shareholders’ equity (OCI) Impact on income statement Impact on shareholders’ equity (OCI) Impact on income statement Investments - (3.4) - 3.4 Options qualified as cash flow hedges (0.2) (8.3) 7.8 4.7 Instruments classified as held for trading - (0.2) - 0.5 TOTAL EFFECT (0.2) (11.9) 7.8 8.6 Currency risk 12.7.3 Currency transaction risk is the risk of an unfavourable change in exchange rates having an adverse effect on cash flows from commercial transactions denominated in foreign currency. The Group conducts its international operations through subsidiaries that operate almost exclusively in their home country, such that purchases and sales are denominated in local currency. As a result, the Group’s exposure to currency risk on commercial transactions is naturally limited and mainly concerns imported products. Currency risks on import transactions (i.e., goods purchases billed in foreign currencies) covered by firm commitments are hedged by forward purchases of the payment currency. Currency hedges are generally for periods of less than 12 months. The following table shows the effect of an increase/decrease in exchange rates on currency instruments: (in millions of euros) (- = loss; + = gain) 10% decline 10% increase Impact on shareholders’ equity (OCI) Impact on income statement Impact on shareholders’ equity (OCI) Impact on income statement Position EUR/USD - (104.7) - 104.7 Position EUR/RON - 6.2 - (6.2) Position EUR/PLN - 5.7 - (5.7) Position EUR/HKD - (4.3) - 4.3 Position EUR/CNY - (2.6) - 2.6 Position RON/USD - (2.0) - 2.0 Currency translation risk is the risk of an unfavourable change in exchange rates reducing the value of the net assets of a subsidiary whose functional currency is not the euro, after conversion into euros for inclusion in the Group’s consolidated statement of financial position. The consolidated statement of financial position and income statement are exposed to a currency translation risk: consolidated financial ratios are affected by changes in exchange rates used to translate the income and net assets of foreign subsidiaries operating outside the eurozone. The translation risk on foreign operations outside the eurozone mainly concerns the Brazilian real, Argentine peso and Chinese renminbi. For example, changes in the average exchange rates used in 2017 compared with those for 2016 increased consolidated net sales by 269 million euros, or 0.3%, and recurring operating income by 58 million euros, or 3%. Lastly, when financing is arranged locally, it is generally denominated in local currency.