18 Financial Instruments
The following table shows a presentation of financial assets and liabilities by measurement categories and classes. Liabilities from finance leases and derivatives that qualify for hedge accounting are also shown even though they do not belong to any of the IAS 39 measurement categories. WACKER has not pledged any financial assets as security.
The fair value of financial instruments measured at amortized cost is determined by means of discounting, taking into account market-participant interest rates that are adequate to the inherent risk and correspond to the relevant maturity. The fair value of current items in the statement of financial position is seen as equivalent to their carrying amounts as the differences are immaterial.
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€ million |
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Measurement pursuant to IAS 39 |
Measurement pursuant to IAS 17 |
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Balance sheet carrying amount Dec. 31, 2017 |
(Amortized) cost |
Fair value through profit or loss |
Fair value through other comprehensive income |
(Amortized) cost |
Fair value Dec. 31, 2017 |
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Trade receivables |
655.7 |
655.7 |
– |
– |
– |
655.7 |
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Loans and receivables |
– |
655.7 |
– |
– |
– |
655.7 |
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Other financial assets |
185.1 |
171.7 |
8.4 |
5.0 |
– |
174.0 |
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Loans and receivables |
– |
160.6 |
– |
– |
– |
160.6 |
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Available-for-sale financial assets1 |
– |
11.1 |
– |
– |
– |
– |
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Derivatives that do not qualify for hedge accounting |
– |
– |
3.0 |
– |
– |
3.0 |
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Derivatives that qualify for hedge accounting |
– |
– |
5.4 |
5.0 |
– |
10.4 |
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Securities and fixed-term deposits |
260.3 |
156.8 |
– |
103.5 |
– |
260.3 |
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Loans and receivables |
– |
156.8 |
– |
– |
– |
156.8 |
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Available-for-sale securities |
– |
– |
– |
103.5 |
– |
103.5 |
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Cash and cash equivalents |
286.9 |
286.9 |
– |
– |
– |
286.9 |
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Loans and receivables |
– |
286.9 |
– |
– |
– |
286.9 |
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Held-to-maturity securities |
– |
– |
– |
– |
– |
– |
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Total financial assets |
1,388.0 |
– |
– |
– |
– |
1,376.9 |
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Of which pursuant to IAS 39 measurement categories: |
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Loans and receivables |
1,260.0 |
1,260.0 |
– |
– |
– |
1,260.0 |
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Held-to-maturity securities |
– |
– |
– |
– |
– |
– |
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Available-for-sale financial assets |
114.6 |
11.1 |
– |
103.5 |
– |
103.5 |
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Derivatives that do not qualify for hedge accounting |
3.0 |
– |
3.0 |
– |
– |
3.0 |
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Derivatives that qualify for hedge accounting |
10.4 |
– |
5.4 |
5.0 |
– |
10.4 |
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Financial liabilities (excluding finance leases) |
971.8 |
971.8 |
– |
– |
– |
964.8 |
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Measured at amortized cost |
– |
971.8 |
– |
– |
– |
964.8 |
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Liabilities from finance leases |
29.8 |
– |
– |
– |
29.8 |
29.8 |
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Trade payables |
268.5 |
268.5 |
– |
– |
– |
268.5 |
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Measured at amortized cost |
– |
268.5 |
– |
– |
– |
268.5 |
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Other financial liabilities |
15.5 |
14.8 |
0.7 |
– |
– |
15.5 |
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Measured at amortized cost |
– |
14.8 |
– |
– |
– |
14.8 |
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Derivatives that do not qualify for hedge accounting |
– |
– |
0.7 |
– |
– |
0.7 |
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Derivatives that qualify for hedge accounting |
– |
– |
– |
– |
– |
– |
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Total financial liabilities |
1,285.6 |
– |
– |
– |
– |
1,278.6 |
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Of which pursuant to IAS 39 measurement categories: |
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Measured at amortized cost |
1,255.1 |
1,255.1 |
– |
– |
– |
1,248.1 |
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Derivatives that do not qualify for hedge accounting |
0.7 |
– |
0.7 |
– |
– |
0.7 |
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Derivatives that qualify for hedge accounting |
– |
– |
– |
– |
– |
– |
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€ million |
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Measurement pursuant to IAS 39 |
Measurement pursuant to IAS 17 |
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Balance sheet carrying amount Dec. 31, 2016 |
(Amortized) cost |
Fair value through profit or loss |
Fair value through other comprehensive income |
(Amortized) cost |
Fair value Dec. 31, 2016 |
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Trade receivables |
775.7 |
775.7 |
– |
– |
– |
775.7 |
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Loans and receivables |
– |
775.7 |
– |
– |
– |
775.7 |
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Other financial assets |
176.6 |
170.5 |
2.9 |
3.2 |
– |
165.5 |
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Loans and receivables |
– |
159.4 |
– |
– |
– |
159.4 |
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Available-for-sale financial assets1 |
– |
11.1 |
– |
– |
– |
– |
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Derivatives that do not qualify for hedge accounting |
– |
– |
2.9 |
– |
– |
2.9 |
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Derivatives that qualify for hedge accounting |
– |
– |
– |
3.2 |
– |
3.2 |
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Securities and fixed-term deposits |
182.2 |
78.9 |
– |
103.3 |
– |
182.2 |
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Loans and receivables |
– |
78.9 |
– |
– |
– |
78.9 |
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Available-for-sale securities |
– |
– |
– |
103.3 |
– |
103.3 |
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Cash and cash equivalents |
283.5 |
283.5 |
– |
– |
– |
283.5 |
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Loans and receivables |
– |
283.5 |
– |
– |
– |
283.5 |
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Total financial assets |
1,418.0 |
– |
– |
– |
– |
1,406.9 |
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Of which pursuant to IAS 39 measurement categories: |
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Loans and receivables |
1,104.8 |
1,104.8 |
– |
– |
– |
1,104.8 |
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Held-to-maturity securities |
192.7 |
192.7 |
– |
– |
– |
192.7 |
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Available-for-sale financial assets |
114.4 |
11.1 |
– |
103.3 |
– |
103.3 |
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Derivatives that do not qualify for hedge accounting |
2.9 |
– |
2.9 |
– |
– |
2.9 |
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Derivatives that qualify for hedge accounting |
3.2 |
– |
– |
3.2 |
– |
3.2 |
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Financial liabilities (excluding finance leases) |
1,422.1 |
1,422.1 |
– |
– |
– |
1,419.5 |
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Measured at amortized cost |
– |
1,422.1 |
– |
– |
– |
1,419.5 |
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Liabilities from finance leases |
36.1 |
– |
– |
– |
36.1 |
36.1 |
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Trade payables |
369.7 |
369.7 |
– |
– |
– |
369.7 |
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Measured at amortized cost |
– |
369.7 |
– |
– |
– |
369.7 |
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Other financial liabilities |
64.1 |
35.4 |
17.4 |
11.3 |
– |
64.1 |
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Measured at amortized cost |
– |
35.4 |
– |
– |
– |
35.4 |
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Derivatives that do not qualify for hedge accounting |
– |
– |
4.3 |
– |
– |
4.3 |
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Derivatives that qualify for hedge accounting |
– |
– |
13.1 |
11.3 |
– |
24.4 |
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Total financial liabilities |
1,892.0 |
– |
– |
– |
– |
1,889.4 |
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Of which pursuant to IAS 39 measurement categories: |
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Measured at amortized cost |
1,827.2 |
1,827.2 |
– |
– |
– |
1,824.6 |
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Derivatives that do not qualify for hedge accounting |
4.3 |
– |
4.3 |
– |
– |
4.3 |
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Derivatives that qualify for hedge accounting |
24.4 |
– |
13.1 |
11.3 |
– |
24.4 |
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The loans and receivables reported include trade receivables, other loans and fixed-term deposits as well as cash and cash equivalents. Cash and cash equivalents in foreign currency are measured at the conversion rate prevailing on the reporting date. Their carrying amounts correspond to their fair values. The fair value of the loans corresponds to their present value, i. e. the present value of the expected future cash flows. Discounting is carried out on the basis of the interest rates valid on the reporting date.
Available-for-sale financial assets include securities and investments in joint ventures and associates. Investments in joint ventures and associates are measured at cost, as no observable prices on active markets are available.
The carrying amounts of trade payables and other financial liabilities correspond to their fair values. The fair values of financial liabilities constitute the present value of the expected future cash flows. Discounting is carried out on the basis of the interest rates valid on the reporting date. All other financial liabilities are valued at cost as no observable prices are available for them.
The following table shows the net gains and losses from financial instruments.
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€ million |
2017 |
20161 |
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Net gains/losses from financial instruments |
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Loans and receivables |
-20.3 |
17.4 |
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Available-for-sale financial assets |
1.9 |
1.3 |
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Assets/liabilities measured at fair value through profit or loss |
46.4 |
-12.1 |
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Financial liabilities measured at amortized cost |
-86.6 |
-34.9 |
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Total |
-58.6 |
-28.3 |
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The net result of the category “Loans and receivables” primarily comprised net losses/gains from foreign currency translation, interest income from financial assets, fixed-term deposits, demand deposits and valuation allowances.
The category “Available-for-sale financial assets” includes interest income from fixed-interest securities and dividends from investments in joint ventures and associates.
The gains and losses from changes in the fair value of foreign-exchange, interest-rate and commodity derivatives that do not fulfill the requirements of IAS 39 for hedge accounting are posted in the category “Assets/liabilities measured at fair value through profit or loss.” This item also reflects changes in value from the remeasurement of hedging transactions as part of fair value hedge accounting.
The interest income from financial assets that are not recognized at fair value through profit or loss amounted to €7.5 million, compared with the prior-year figure of €4.3 million. This income mainly comprised interest on bank deposits, fixed-term deposits and loans.
The interest expense from financial liabilities that are not recognized at fair value through profit or loss amounted to €38.3 million, versus €39.9 million in the prior year. These interest expenses are mainly attributable to financial liabilities.
The net losses in the category “Financial liabilities measured at amortized cost” primarily comprise interest expenses on bank liabilities and other financial liabilities, as well as net losses/gains from foreign currency translation.
Neither in the year under review nor in the previous year were there any reclassifications of financial assets between those recognized at amortized cost and those recognized at market value or vice versa.
The financial assets and liabilities measured at fair value in the financial statements were allocated to one of three categories in accordance with the fair value hierarchy described in IFRS 13. Allocation to these categories reveals which of the fair values reported were settled through market transactions and the extent to which the measurement was based on models in the absence of observable market transactions.
The following are the levels of the hierarchy.
Level 1
Financial instruments measured using quoted prices in active markets, the fair value of which can be derived directly from prices in active liquid markets and for which the financial instrument observable in the market is representative of the financial instrument being measured. These include fixed-interest securities traded in liquid markets.
Level 2
Financial instruments measured using valuation methods based on observable market data, the fair value of which can be determined using similar financial instruments traded in active markets or using valuation methods all of whose parameters are observable. These include hedging and non-hedging derivative financial instruments, loans and financial liabilities.
Level 3
Financial instruments measured using valuation methods not based on observable parameters, the fair value of which cannot be determined using observable market data and which require the application of different valuation methods. The financial instruments belonging to this category have a value component that is not market-observable and has a major impact on fair value. These include over-the-counter derivatives and unquoted equity instruments.
The following table shows the categories in the fair value hierarchy to which the financial assets and liabilities measured at fair value in the statement of financial position are allocated. The table also shows financial assets and liabilities measured at cost in the statement of financial position. Their fair values are given in the Notes.
WACKER regularly reviews whether its financial instruments are still allocated to the appropriate fair-value-hierarchy levels. As was the case in the previous year, no reclassifications were carried out within the fair value hierarchy in 2017.
In the period under review, WACKER measured only financial assets and liabilities at fair value. The market values were calculated using market information available on the reporting date and based on counterparties’ quoted prices or via appropriate valuation methodologies (discounted cash-flow or well-established actuarial methodologies, such as the par method).
Derivative financial instruments and available-for-sale financial assets are recognized at fair value and are thus subject to a recurring fair value assessment.
The fair value of derivative financial instruments is calculated based on market data such as exchange rates or yield curves in accordance with market-specific valuation methodologies. The calculation of the fair value contains our own and the counterparty’s default risk, using maturity-matching and market-observable CDS values. The fair value of available-for-sale financial assets can be derived from prices listed in active markets.
Loans and financial liabilities are measured at amortized cost. However, the fair values must be provided in the Notes.
The fair value of the loans corresponds to the present value of expected future cash flows. Application of the discounted cash flow method using market interest rates means that the carrying amount of the loans corresponds to their fair value.
The fair value of financial liabilities is determined using the net present value method and is based on standard market interest rates.
It was not possible to calculate the fair value of the equity instruments that WACKER measures at amortized cost as no stock market prices or market values were available. The instruments in question are shares in unlisted companies for which there was no indication of a lasting impairment on the reporting date and the fair value of which cannot reliably be determined. WACKER had no intention of selling any of the shares reported as of December 31, 2017.
The unilateral call option held by WACKER for the purchase of 1 percent of the shares in the subsidiary WACKER Asahikasei Silicones Co. Ltd., Japan was recognized at cost as of December 31, 2017.
WACKER does not currently have any financial instruments measured at fair value that are allocated to Level 3 of the fair value hierarchy.
No changes were made to the valuation methodology compared with the previous year.
In the normal course of business, WACKER is exposed to credit, liquidity, and market risks from financial instruments. The aim of financial risk management is to limit risks from operations and the resultant financing requirements by using certain derivative and non-derivative hedging instruments.
The risks connected with the procurement, financing and selling of WACKER’s products and services are described in detail in the management report. WACKER counters financial risks via the risk management system it has in place. That system is monitored by the Supervisory Board.
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€ million |
Fair value hierarchy |
Total |
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Level 1 |
Level 2 |
Level 3 |
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As of December 31, 2017 |
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Financial assets measured at fair value |
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Fair value through profit or loss |
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Derivatives that do not qualify for hedge accounting |
– |
3.0 |
– |
3.0 |
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Fair value through other comprehensive income/through profit or loss |
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Derivatives that qualify for hedge accounting |
– |
10.4 |
– |
10.4 |
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Available-for-sale securities and fixed-term deposits |
103.5 |
– |
– |
103.5 |
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Total |
103.5 |
13.4 |
– |
116.9 |
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Financial assets measured at amortized cost |
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Loans and receivables |
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Loans |
– |
90.5 |
– |
90.5 |
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Total |
– |
90.5 |
– |
90.5 |
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Financial liabilities measured at fair value |
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Fair value through profit or loss |
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Derivatives that do not qualify for hedge accounting |
– |
0.7 |
– |
0.7 |
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Fair value through other comprehensive income/through profit or loss |
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Derivatives that qualify for hedge accounting |
– |
– |
– |
– |
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Total |
– |
0.7 |
– |
0.7 |
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Financial liabilities measured at amortized cost |
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Financial liabilities |
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Measured at amortized cost |
– |
964.8 |
– |
964.8 |
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Total |
– |
964.8 |
– |
964.8 |
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€ million |
Fair value hierarchy |
Total |
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Level 1 |
Level 2 |
Level 3 |
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As of December 31, 2016 |
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Financial assets measured at fair value |
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Fair value through profit or loss |
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Derivatives that do not qualify for hedge accounting |
– |
2.9 |
– |
2.9 |
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Fair value through other comprehensive income/through profit or loss |
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Derivatives that qualify for hedge accounting |
– |
3.2 |
– |
3.2 |
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Available-for-sale securities and fixed-term deposits |
103.3 |
– |
– |
103.3 |
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Total |
103.3 |
6.1 |
– |
109.4 |
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Financial assets measured at amortized cost |
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Loans and receivables |
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Loans |
– |
96.4 |
– |
96.4 |
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Total |
– |
96.4 |
– |
96.4 |
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Financial liabilities measured at fair value |
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Fair value through profit or loss |
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Derivatives that do not qualify for hedge accounting |
– |
4.3 |
– |
4.3 |
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Fair value through other comprehensive income/through profit or loss |
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Derivatives that qualify for hedge accounting |
– |
24.4 |
– |
24.4 |
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Total |
– |
28.7 |
– |
28.7 |
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Financial liabilities measured at amortized cost |
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Financial liabilities |
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Measured at amortized cost |
– |
1,419.5 |
– |
1,419.5 |
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Total |
– |
1,419.5 |
– |
1,419.5 |
The fundamental purpose of the risk management system is to identify, analyze, coordinate, monitor and communicate risks in a timely manner. The Executive Board receives regular analyses on the extent of those risks. The analyses focus on market risks, in particular on the potential impact of raw-material price risks, foreign-exchange risks and interest-rate risks on EBITDA and the interest result.