Annual Report 2013 | 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 3) Total
EUR million Note 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012
In non-current assets
Available for sale financial assets 1) 21 1 1 30 31 31 32
Derivative financial instruments 3
Electricity derivatives
Hedge accounting 54 56 -12 -14 42 42
Non-hedge accounting 1 68 55 2 2) -28 -24 40 34
Interest rate and currency derivatives
Hedge accounting 93 183 93 183
Non-hedge accounting 185 175 185 175
Oil and other futures and forward contracts
Non-hedge accounting 3 10 17 -10 3 17
In current assets
Derivative financial instruments 3
Electricity derivatives
Hedge accounting 127 96 -23 -41 104 55
Non-hedge accounting 2 18 244 175 -164 -114 82 79
Interest rate and currency derivatives
Hedge accounting 3 4 3 4
Non-hedge accounting 80 38 80 38
Oil and other futures and forward contracts
Hedge accounting 1 2 -1 0 2
Non-hedge accounting 60 125 60 -32 -140 28 45
Total 67 155 854 861 30 33 -260 -343 691 706
Financial liabilities
Level 1 Level 2 Level 3 Netting 3) Total
EUR million Note 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012
In non-current liabilities
Interest-bearing liabilities 28 1,299 1,895 4) 1,299 1,895
Derivative financial instruments 3
Electricity derivatives
Hedge accounting 19 17 1 2) -12 -14 7 4
Non-hedge accounting 12 56 22 -28 -24 28 10
Interest rate and currency derivatives
Hedge accounting 69 57 69 57
Non-hedge accounting 71 108 71 108
Oil and other futures and forward contracts
Non-hedge accounting 2 3 10 -10 2 3
In current liabilities
Derivative financial instruments 3
Electricity derivatives
Hedge accounting 23 42 -23 -41 0 1
Non-hedge accounting 3 23 185 109 -164 -114 24 18
Interest rate and currency derivatives
Hedge accounting 3 4 3 4
Non-hedge accounting 48 197 48 197
Oil and other futures and forward contracts
Hedge accounting 2 4 -1 1 4
Non-hedge accounting 41 116 64 -32 -140 9 40
Total 48 154 1,773 2,529 0 1 -260 -343 1,561 2,341
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 (2012: 31), 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 (2012: 1). The cumulative fair value change booked in Fortum's equity was EUR -3 million (2012: -3).
2) In 2013 NASDAQ OMX Commodities Europe quoted the closest 10 years and in 2012 for the closest 5 years, for years beyond a systematic price estimate made by Fortum is used. Reason for transferring electricity derivatives from level 3 to level 2 is the maturity of contracts.
3) Receivables and liabilities against electricity, oil and other commodity exchanges arising from standard derivative contracts with same delivery period are netted.
4) Fair valued part of bond in fair value hedge relationship.
Net fair value amount of interest rate and currency derivatives is EUR 170 million, assets EUR 361 million and liabilities EUR 191 million. Fortum has cash collaterals based on Credit Support Annex agreements with some counterparties. At the end of December 2013 Fortum had received EUR 134 million from Credit Support Annex agreements. The received cash has been booked as short term liability.
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