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41. Financial Instrument Disclosures

The groups' business operations are exposed to various risks. Derivative financial instruments are used to hedge interest rate, foreign exchange, and commodities price risks.

On the basis of agreements dated 14 December 2011, REWE Projektentwicklung Kft., Budapest, Hungary, I+R Projektentwicklung Kft., Alsónémedi, Hungary, and T+R Projektentwicklung Kft., Alsónémedi, Hungary, entered into interest rate swaps with a bank to hedge variable-rate interest on external loans. The nominal volume of the swaps was 14.0 million euros, 8.9 million euros and 4.2 million euros. The interest rate swaps mature on 31 October 2018. Under those interest rate swaps, fixed-rate interest of 2.2 per cent is paid or received. Interest rate swaps are reported as stand-alone derivatives. The measurement of these interest rate swaps resulted in income of 0.7 million euros in the financial year (previous year: 0.9 million euros).

On the basis of agreements dated 5 October 2012, C+R Projekt spol. s r.o., Prague, Czech Republic, and K+R Projekt s.r.o., Prague, Czech Republic, entered into interest rate swaps with a bank to hedge variable-rate interest on external loans. The nominal volume of the swaps was 827.5 million Czech korunas and 712.3 million Czech korunas. The interest rate swaps mature on 31 October 2018. Under those interest rate swaps, fixed-rate interest of 1.1 per cent is paid or received. These interest rate swaps are accounted for using cash-flow hedge accounting.

In the context of managing foreign exchange risks associated with the tourism business, liabilities denominated in foreign currency (hedged items) resulting from hotel procurement are hedged by using exchange rate hedges to mitigate the risk of exchange rate factors negatively impacting on earnings. These foreign exchange transaction risks arise on the date on which the calculation rates for the various seasonal classifications are set. The hedged transactions on these dates are planned foreign exchange liabilities that are realised only as the corresponding account entries are subsequently made. As part of currency hedging, the hedged transactions are offset against forward exchange contracts and currency options intended to hedge the underlying transaction against exchange rate movements recognised in profit or loss. Hedge accounting is applied if the requirements of IAS 39 are met.

In addition, forward exchange contracts and currency swaps are used to hedge against exchange rate fluctuations arising from merchandise management contracts. The contracts have a term of up to 18 months. These currency derivatives are accounted for as cash flow hedges under hedge accounting.

Moreover, short-term forward exchange contracts and currency swaps were entered into to hedge the foreign exchange risk arising from foreign-currency receivables and liabilities already recognised.

Nominal Volumes of the Currency Derivatives for Each Currency
ISO code
 
 
Country
 
 
Currency
 
 
31 Dec. 2017
Nominal volume
in million units
31 Dec. 2016
Nominal volume
in million units
AEDUnited Arab EmiratesDirham37.729.1
AUDAustraliaDollar18.420.3
CADCanadaDollar19.817.2
CHFSwitzerlandFranc134.7229.4
CNYChinaYuan3.19.1
CZKCzech RepublicKoruna95.2126.6
DKKDenmarkKrone59.42.8
GBPUnited KingdomPound Sterling105.778.4
HKDHong KongDollar44.62.1
HRKCroatiaKuna36.185.4
HUFHungaryForint104.769.8
INRIndiaRupee2.71.6
JPYJapanYen1.70.0
KRWSouth KoreaWon0.011.0
MADMoroccoDirham3.72.0
NOKNorwayKrone125.229.8
NZDNew ZealandDollar16.914.4
PLNPolandZloty1.53.8
RONRomaniaLei272.4212.7
RUBRussiaRouble13.16.3
SEKSwedenKrona328.9449.1
SGDSingaporeDollar2.52.1
THBThailandBaht67.272.4
TNDTunisiaDinar2.92.6
USDUSADollar407.7510.3
ZARSouth AfricaRand37.435.4

In the financial year, derivatives in the form of commodities futures were also used for price hedging of aviation fuel. A total volume of 15,500 megatons (previous year: 18,150 megatons) of aviation fuel was hedged using the commodity derivatives entered into over a period from January until November 2018. The hedge is accounted for as a cash flow hedge.

Fair Values of the Derivative Financial Instruments
in million €Fair value
- Assets -
Fair value
- Liabilities -
31 Dec. 201731 Dec. 201631 Dec. 201731 Dec. 2016
Interest rate swaps0.00.00.82.5
Currency derivatives24.057.034.914.8
  of which: within cash flow hedges7.639.318.15.0
  of which: within fair value hedges1.13.22.50.3
  of which: outside a hedging relationship15.314.514.39.5
Commodity derivatives1.21.30.80.0
Total25.258.336.517.3

The fair values of the above derivative financial instruments are determined on the basis of market information as at the balance sheet date.

For an explanation of the effects of cash flow hedges on the equity attributable to the shareholders of the parent companies, please refer to the changes in the reserve for cash flow hedges presented in the statement of changes in equity. In addition, the statement of comprehensive income presents for all shareholders the amounts recognised in the income statement and those taken directly to equity and thus the impact of cash flow hedges on other comprehensive income and on net income for the year.

Financial Instruments by Class and Measurement Category as at 31 December 2017

The classes of financial instruments were based on the structure of the balance sheet.

Reconciliation of the Individual Classes and Measurement Categories of IAS 39 to the Balance Sheet Items
in million €Carrying amount
31 Dec. 2017
Carrying amount pursuant to IAS 39Carrying amount
pursuant to IAS 17
(Amortised) costFair value recognised directly in equityFair value recognised through profit or loss
ASSETS
Non-current financial assets283.1263.919.20.00.0
Financial assets available for sale107.187.919.20.00.0
Loans and receivables176.0176.00.00.00.0
Current financial assets681.5656.38.816.40.0
Financial assets held for trading15.30.00.015.30.0
Financial assets available for sale0.10.10.00.00.0
Loans and receivables656.2656.20.00.00.0
Financial assets in hedge accounting*9.90.08.81.10.0
Current trade receivables1,262.41,262.40.00.00.0
Loans and receivables1,262.41,262.40.00.00.0
Cash and cash equivalents653.4653.40.00.00.0
Loans and receivables653.4653.40.00.00.0
Total ASSETS2,880.42,836.028.016.40.0
LIABILITIES
Non-current financial liabilities1,209.0372.40.00.0836.6
Financial liabilities held for trading0.00.00.00.00.0
Other financial liabilities372.4372.40.00.00.0
Financial liabilities in hedge accounting*0.00.00.00.00.0
Liabilities from finance leases*836.60.00.00.0836.6
Non-current trade payables6.96.90.00.00.0
Other financial liabilities6.96.90.00.00.0
Current financial liabilities1,188.61,089.019.017.563.1
Financial liabilities held for trading15.00.00.015.00.0
Other financial liabilities1,089.01,089.00.00.00.0
Financial liabilities in hedge accounting*21.50.019.02.50.0
Liabilities from finance leases*63.10.00.00.063.1
Current trade payables6,153.26,153.20.00.00.0
Other financial liabilities6,153.26,153.20.00.00.0
Total LIABILITIES8,557.77,621.519.017.5899.7
Of which: aggregated by measurement categories pursuant to IAS 39:     
Financial assets held for trading15.30.00.015.30.0
Financial assets available for sale107.288.019.20.00.0
Loans and receivables2,748.02,748.00.00.00.0
Financial liabilities held for trading15.00.00.015.00.0
Other financial liabilities7,621.57,621.50.00.00.0
Of which: in hedge accounting pursuant to IAS 39:     
Financial assets in hedge accounting9.90.08.81.10.0
Financial liabilities in hedge accounting21.50.019.02.50.0
  • *Not a measurement category pursuant to IAS 39

Financial Instruments by Class and Measurement Category as at 31 December 2016

Reconciliation of the Individual Classes and Measurement Categories of IAS 39 to the Balance Sheet Items
in million €Carrying amount
31 Dec. 2016
Carrying amount pursuant to IAS 39Carrying amount
pursuant to IAS 17
(Amortised) costFair value recognised directly in equityFair value through profit and loss
ASSETS
Non-current financial assets 247.0234.512.50.00.0
Financial assets available for sale95.983.412.50.00.0
Loans and receivables151.1151.10.00.00.0
Current financial assets609.6551.440.517.70.0
Financial assets held for trading14.50.00.014.50.0
Financial assets available for sale0.10.10.00.00.0
Loans and receivables551.3551.30.00.00.0
Financial assets in hedge accounting*43.70.040.53.20.0
Current trade receivables1,241.31,241.30.00.00.0
Loans and receivables1,241.31,241.30.00.00.0
Cash and cash equivalents615.8615.80.00.00.0
Loans and receivables615.8615.80.00.00.0
Total ASSETS2,713.72,643.053.017.70.0
LIABILITIES
Non-current financial liabilities914.4428.11.11.4483.8
Financial liabilities held for trading1.40.00.01.40.0
Other financial liabilities428.1428.10.00.00.0
Financial liabilities in hedge accounting*1.10.01.10.00.0
Liabilities from finance leases*483.80.00.00.0483.8
Non-current trade payables5.15.10.00.00.0
Other financial liabilities5.15.10.00.00.0
Current financial liabilities423.3374.55.09.834.0
Financial liabilities held for trading9.50.00.09.50.0
Other financial liabilities374.5374.50.00.00.0
Financial liabilities in hedge accounting*5.30.05.00.30.0
Liabilities from finance leases*34.00.00.00.034.0
Current trade payables5,825.45,825.40.00.00.0
Other financial liabilities5,825.45,825.40.00.00.0
Total LIABILITIES7,168.26,633.16.111.2517.8
Of which: aggregated by measurement categories pursuant to IAS 39:     
Financial assets held for trading14.50.00.014.50.0
Financial assets available for sale96.083.512.50.00.0
Loans and receivables2,559.52,559.50.00.00.0
Financial liabilities held for trading10.90.00.010.90.0
Other financial liabilities6,633.16,633.10.00.00.0
Of which: in hedge accounting pursuant to IAS 39:     
Financial assets in hedge accounting43.70.040.53.20.0
Financial liabilities in hedge accounting6.40.06.10.30.0
  • *Not a measurement category pursuant to IAS 39

IFRS 7 requires financial instruments measured at fair value to be assigned to a fair value hierarchy. There are three hierarchy levels. Level 1 comprises financial instruments whose fair values can be derived from quoted prices. Level 2 comprises financial instruments whose fair values cannot be derived from quoted prices, but whose measurement-related inputs are directly or indirectly observable on the market. Financial instruments that cannot be assigned to either level 1 or level 2 are assigned to level 3. Fair value in this case is determined using factors that are not based on observable market data.

Available-for-sale financial assets also include financial instruments measured at fair value. An amount of 19.2 million euros (previous year: 12.5 million euros), which is reported under non-current financial assets, relates shares in an associate traded on a regulated market and must therefore be assigned to level 1. The associate is not included in the Combined Financial Statements due to materiality.

The interest rate swaps, currency and commodity derivatives of 25.2 million euros (previous year: 58.3 million euros) under other current financial assets and of 36.5 million euros (previous year: 17.3 million euros) under financial liabilities are financial instruments measured at fair value that are assignable to level 2 of the fair value hierarchy.

Fair Value Disclosures

Comparison of the Carrying Amounts and Fair Values of the Financial Instruments for Each Class
in million €31 Dec. 201731 Dec. 2016
Carrying amountFair valueCarrying amountFair value
ASSETS
Non-current283.1284.3247.0247.8
Non-current other financial assets283.1284.3247.0247.8
Current2,597.32,597.62,466.72,466.9
Current other financial assets681.5681.8609.6609.8
Current trade receivables1,262.41,262.41,241.31,241.3
Cash and cash equivalents653.4653.4615.8615.8
LIABILITIES
Non-current1,215.91,251.7919.5972.3
Other non-current financial liabilities1,209.01,244.8914.4967.2
Non-current trade payables6.96.95.15.1
Current7,341.87,345.86,248.76,248.8
Other current financial liabilities1,188.61,192.6423.3423.4
Current trade payables6,153.26,153.25,825.45,825.4

Due to the short remaining maturities, the carrying amounts of current trade receivables and trade payables as well as of cash and cash equivalents approximate their fair values.

Non-current trade receivables and trade payables are discounted to present value. In this case, the carrying amounts largely reflect the fair values.

Market prices are generally used to measure other financial assets and liabilities. In the absence of a market price, the approved discounted cash flow methods are used to calculate fair value. The valuation model is based on the yield curves and exchange rates that apply on the balance sheet date.

Net Result from Financial Instruments

Breakdown of Income and Expenses from Financial Instruments According to IAS 39 Measurement Categories
Income (+)/expenses (-)
in million €
2017
 
2016
 
Loans and receivables35.064.8
Financial assets available for sale3.50.8
Financial assets and liabilities held for trading-17.59.1
Other financial liabilities-70.8-73.1

Income on loans and receivables mainly comprises exchange gains and losses and income from receivables previously written down, offset by losses from allowances on financial receivables. Furthermore, income from financial assets available for sale mainly comprises income from equity investments. Gains or losses from financial assets and liabilities held for trading result from the measurement of derivative financial instruments. Expenses from other financial liabilities relate primarily to interest expense on financial liabilities and exchange gains or losses.

Interest income on financial instruments not measured at fair value through profit or loss amounted to 6.3 million euros (previous year: 8.5 million euros), while corresponding interest expenses amounted to 28.2 million euros (previous year: 23.1 million euros).