Consolidated Financial Statements Notes Other notes 30. Financial instruments 
30. FINANCIAL INSTRUMENTS
VALUATION OF FINANCIAL INSTRUMENTS
Fair value of financial instruments
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (FAS 157), which establishes a framework for reporting fair value and expands disclosures about fair value measurements. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. FASB Staff Position No. 157-2 (FSP 157-2) issued February 12, 2008, delayed application of this Statement for non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis (at least annually), until fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. FAS 157 establishes a three-tier value hierarchy, which prioritizes the inputs used in estimating fair value: (i) Level 1 is defined as observable inputs, such as quoted prices in active markets, (ii) Level 2 is defined as inputs other than quoted prices in active markets, that are directly or indirectly observable, and (iii) Level 3 is defined as unobservable inputs for which little or no market data exists, therefore requiring the Fresenius Group to develop its own assumptions. The Fresenius Group adopted this standard, except for those sections affected by FSP 157-2, as of January 1, 2008.
The Fresenius Group holds interest rate swaps and foreign exchange contracts which are carried at fair value initially and on a recurring basis. The fair value of interest rate swaps is calculated by discounting the future cash flows on the basis of the market interest rates applicable for the remaining term of the contract as of the balance sheet date. To determine the fair value of foreign exchange forward contracts, the contracted forward rate is compared to the current forward rate for the remaining term of the contract as of the balance sheet date. The result is then discounted on the basis of the market interest rates prevailing at the balance sheet date for the respective currency. Under FAS 157, the Fresenius Group is now required to take into account credit risks when measuring the fair value of derivative financial instruments. In accordance with these requirements, the Fresenius Group’s own credit risk is incorporated in the fair value estimation of interest rate derivatives that are liabilities. However, for foreign exchange forward derivatives that are liabilities, due to the relatively short term of the contracts, the Fresenius Group did not take into account its own credit risk in the fair value estimation. Counterparty credit-risk adjustments are negligible due to the high credit ratings of the counterparties and is therefore not factored into the valuation of derivatives that are assets.
The following table presents the carrying amounts and fair values of the Group’s financial instruments as of December 31:
| 2008 | 2007 | |||
| in million € | Carrying amount | Fair value | Carrying amount | Fair value |
| Cash and cash equivalents | 370 | 370 | 361 | 361 |
| Assets recognized at carrying amount | 2,499 | 2,499 | 2,167 | 2,167 |
| Assets recognized at fair value | 8 | 8 | 0 | 0 |
| Liabilities recognized at carrying amount | 9,903 | 9,793 | 6,147 | 6,118 |
| Liabilities recognized at fair value | 41 | 41 | 0 | 0 |
| Derivatives designated as hedging instruments | -160 | -160 | -16 | -16 |
