NOTES TO THE BALANCE SHEET

26. Fair values of financial assets and liabilities

 

The fair value determination principles applied by the Group on all financial instruments

When determining the fair values of the financial assets and liabilities, the following price quotations, assumptions and measurement models have been used.

Available-for-sale financial assets

Unlisted investments in shares were measured at acquisition cost because it was not possible to measure them at fair value using the methods of measurement or their amount was low.

Derivatives

The fair values of currency forward contracts are determined by using the market prices for contracts of equal duration at the reporting date. The fair values of interest rate swaps are determined using the net present value method supported by the market interest rate or other market information at the reporting date. If the market value given by a counterparty is used, the Group also produces its own calculation using generally accepted valuation methods. The fair values of commodity derivatives are determined by using publicly quoted market prices. The fair values are equal to the prices which the Group would have to pay or would obtain if it were to terminate a derivative instrument.

Bank loans

The fair values of liabilities are based on the discounted cash flows. The rate used for measurement is the rate at which the Group could obtain corresponding credit from a third party on the reporting date. The overall rate consists of a risk free rate and a risk premium (margin on loan) for the company.

Finance lease liabilities

The fair value is measured by discounting future cash flows by an interest rate which corresponds to the interest rate of future leases.

Trade and other receivables

The original carrying amounts of non-derivative based receivables are equal to their fair values, as discounting has no material effect taking into account the maturity of the receivables.

Trade and other payables

The original carrying amounts of trade and other payables are equal to their fair values, as discounting has no material effect taking into account the maturity of the payables.

Fair value hierarchy for financial assets and liabilities measured at fair value. Fair values at end of reporting period.
31 Dec. 2015 Level 1 Level 2 Level 3
Assets measured at fair value
Financial assets recognised at fair value through profit or loss
Trading securities - - - -
Trading derivatives
Interest rate swaps - - - -
Foreign exchange derivatives 0.1 0.0 0.1 0.0
Commodity derivatives - - - -
Available-for-sale financial assets
Investments in shares 0.0 0.0 0.0 0.0
Total 0.1 0.0 0.1 0.0
Liabilities measured at fair value
Financial assets recognised at fair value through profit or loss
Trading derivatives
Interest rate swaps -14.0 0.0 -14.0 0.0
of which subject to cash flow hedging -14.0 0.0 -14.0 0.0
Foreign exchange derivatives -0.3 0.0 -0.3 0.0
of which subject to net investment hedging - - - -
Commodity derivatives -2.9 0.0 -2.9 0.0
of which subject to cash flow hedging -2.9 0.0 -2.9 0.0
Total -17.2 0.0 -17.2 0.0
31 Dec. 2014 Level 1 Level 2 Level 3
Assets measured at fair value
Financial assets recognised at fair value through profit or loss
Trading securities - - - -
Trading derivatives
Interest rate swaps - - - -
Foreign exchange derivatives 0.4 0.0 0.4 0.0
Commodity derivatives - - - -
Available-for-sale financial assets
Investments in shares 0.0 0.0 0.0 0.0
Total 0.4 0.0 0.4 0.0
Liabilities measured at fair value
Financial assets recognised at fair value through profit or loss
Trading derivatives
Interest rate swaps -15.7 0.0 -15.7 0.0
of which subject to cash flow hedging -15.5 0.0 -15.5 0.0
Foreign exchange derivatives -0.1 0.0 -0.1 0.0
of which subject to net investment hedging - - - -
Commodity derivatives -1.7 0.0 -1.7 0.0
of which subject to cash flow hedging -1.7 0.0 -1.7 0.0
Total -17.5 0.0 -17.5 0.0
The quoted prices of Level 1 foreign exchange and commodity derivatives are based on prices quoted on the market. The fair values of Level 2 instruments are to a significant degree based on inputs other than the quoted prices included in Level 1 but nonetheless observable for the relevant asset or liability either directly or indirectly (derived from prices). In determining the fair value of these instruments, the Group uses generally accepted measurement models, the inputs of which are nonetheless to a considerable degree based on observable market information. The fair values of Level 3 instruments are based on inputs which are not based on observable market information; rather to a significant degree on the Management estimates and measurement models generally acceptable for their use.