Note 29 – Derivative instruments
|Interest rate swaps – cash flow hedge||0||8||–||7|
|Currency forward contracts||1||12||4||0|
|Total reported in the balance sheet||1||20||4||7|
|Financial instruments covered by set-off master agreement||0||0|
|Total after taking into consideration set-off master agreement||1||4|
Duni uses interest rate swaps and currency forward contracts to manage its translation risk. All derivative instruments are valued at market value and changes in value with respect to currency forward contracts are reported in the income statement, whereas changes in the value of interest rate swaps are reported in “Other comprehensive income”. The subsidiary’s figures correspond to those of the Group.
The maximum exposure to credit risks on the balance sheet date is the fair value of the derivative instruments reported as assets in the balance sheet.
Interest rate swaps
The finance policy prescribes that the average interest term shall be six months for the total loan portfolio, with the possibility of a variation of +/-six months.
Duni has chosen to hedge part of outstanding loans through interest rate swaps, variable against fixed interest rates. Reporting of interest rate swaps is classified as cash flow hedging and handled as hedge accounting in accordance with IAS 39.
Outstanding nominal amounts on December 31, 2016 are EUR 40 m. Profits and losses on interest rate swaps as per December 31, 2016, which are reported in the hedging reserve in equity, “Consolidated Statement of Changes in Equity”, will be regularly transferred to financial expenses in the income statement until such time as the swap has expired.
Currency forward contracts
Currency forward contracts are entered into with the aim of protecting the Group against exchange rate movements through the contract determining the rate at which an asset or liability in foreign currency will be realized. An increase or decrease in the amount required to settle the asset/liability is offset by a corresponding change in value of the currency forward contract.
Weighted average terms to expiration for the Group’s currency forward contracts broken down by purpose are shown in the table below:
|Average term in months|
|Currency forward contracts for financial assets and liabilities||3||1|
At the end of the period, the market value of these forward contracts was SEK -11 m (2015: SEK 3 m) .