Annual Report 2014 | Suomeksi |

17 Financial assets and liabilities by fair value hierarchy

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Accounting policies + -
Fair value measurements are classified using a fair value hierarchy i.e. Level 1, Level 2 and Level 3 that reflects the significance of the inputs used in making the measurements.
Fair values under Level 1 measurement hierarchy
The fair value of some commodity derivatives traded in active markets (such as publicly traded electricity options, coal and oil forwards) are market quotes at the closing date.
Fair values under Level 2 measurement hierarchy
The fair value of financial instruments including electricity derivatives traded in active markets (such as publicly traded derivatives, and trading and available for sale securities) is based on quoted market prices at the closing date. Known calculation techniques, such as estimated discounted cash flows, are used to determine fair value of interest rate and currency financial instruments. The fair value of interest‑rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward foreign exchange contracts is determined using forward exchange market rates at the closing date. Fair values of options are determined by using option valuation models. The fair value of financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. In fair valuation, credit spread has not been adjusted, as quoted market prices of the instruments used are believed to be consistent with the objective of a fair value measurement.
The Group bases the calculation on existing market conditions at each closing date. Financial instruments used in Fortum are standardised products that are either cleared via exchanges or widely traded in the market. Commodity derivatives are generally cleared through exchanges such as for example NASDAQ OMX Commodities Europe and financial derivatives done with creditworthy financial institutions with investment grade ratings.
Fair values under Level 3 measurement hierarchy
Fair valuation of electricity derivatives maturing over ten years which are not standard NASDAQ OMX Commodities Europe products are based on prices collected from reliable market participants. Other financial assets and liabilities that are not based on observable market data.
Other measurements
The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values.
Financial assets
Level 1 Level 2 Level 3 Netting 2) Total
EUR million Note 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013
In non‑current assets
Available for sale financial assets 1) 21 1 1 29 30 30 31
Derivative financial instruments 3
Electricity derivatives
Hedge accounting 6 54 ‑5 ‑12 1 42
Non‑hedge accounting 66 71 ‑17 ‑28 49 43
Interest rate and currency derivatives
Hedge accounting 335 94 335 94
Non‑hedge accounting 206 186 206 186
Oil and other futures and forward contracts
Non‑hedge accounting 1 3 6 ‑3 3 3
In current assets
Derivative financial instruments 3
Electricity derivatives
Hedge accounting 79 127 ‑11 ‑23 67 104
Non‑hedge accounting 2 153 250 ‑106 ‑164 47 88
Interest rate and currency derivatives
Hedge accounting 48 5 48 5
Non‑hedge accounting 274 80 274 80
Oil and other futures and forward contracts
Hedge accounting 1 ‑1 0 0
Non‑hedge accounting 30 59 9 ‑26 ‑32 12 29
Total 32 66 1,182 867 29 30 ‑168 ‑260 1,073 706
Financial liabilities
Level 1 Level 2 Level 3 Netting 2) Total
EUR million Note 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013
In non‑current liabilities
Interest‑bearing liabilities 28 1,454 1,299 3) 1,454 1,299
Derivative financial instruments 3
Electricity derivatives
Hedge accounting 11 19 ‑5 ‑12 7 7
Non‑hedge accounting 62 58 ‑17 ‑28 45 30
Interest rate and currency derivatives
Hedge accounting 96 72 96 72
Non‑hedge accounting 96 71 96 71
Oil and other futures and forward contracts
Non‑hedge accounting 5 2 2 ‑3 3 2
In current liabilities
Derivative financial instruments 3
Electricity derivatives
Hedge accounting 12 23 ‑11 ‑23 1 0
Non‑hedge accounting 3 134 192 ‑106 ‑164 27 31
Interest rate and currency derivatives
Hedge accounting 22 5 22 5
Non‑hedge accounting 22 48 22 48
Oil and other futures and forward contracts
Hedge accounting 2 ‑1 0 1
Non‑hedge accounting 29 41 2 ‑26 ‑32 4 10
Total 34 48 1,913 1,787 0 0 ‑168 ‑260 1,778 1,575
1) Available for sale financial assets, i.e. shares which are not classified as associated companies or joint ventures, consists mainly of shares in unlisted companies of EUR 30 million (2013: 30), for which the fair value cannot be reliably determined. These assets are measured at cost less possible impairment.
Available for sale financial assets include listed shares at fair value of EUR 1 million (2013: 1). The cumulative fair value change booked in Fortum's equity was EUR ‑3 million (2013: ‑3).
2) Receivables and liabilities against electricity, oil and other commodity exchanges arising from standard derivative contracts with same delivery period are netted.
3) Fair valued part of bond in fair value hedge relationship.
Net fair value amount of interest rate and currency derivatives is EUR 626 million, assets EUR 863 million and liabilities EUR 237 million. Fortum has cash collaterals based on Credit Support Annex agreements with some counterparties. At the end of December 2014 Fortum had received EUR 286 million from Credit Support Annex agreements. The received cash has been booked as short term liability.
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