Note 29 – Derivative instruments
|Interest rate swaps – cash flow hedge||0||5||0||8|
|Currency forward contracts||2||11||1||12|
|Liability for put option of minority owners||–||11||–||–|
|Total reported in the balance sheet||2||28||1||20|
|Financial instruments covered by set-off master agreement||0||0|
|Total after taking into consideration set-off master agreement||2||1|
Duni uses interest rate swaps and currency forward contracts to manage its exposure to changes in exchange rates. All derivative instruments are measured at market value and changes in value with respect to currency forward contracts are recognized in the income statement, whereas changes in the value of interest rate swaps are recognized in other comprehensive income. The change in value of the liability for the put option is recognized in equity. 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 recognized 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 its outstanding loans through interest rate swaps, variable against fixed interest rates. Reporting of interest rate swaps is classified as cash flow hedging and recognized under hedge accounting in accordance with IAS 39.
The outstanding nominal amount on 12/31/2017 was EUR 40 m. Gains and losses on interest rate swaps as per December 31, 2017, which are recognized in the hedging reserve in equity in the “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 from 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||3|
At the end of the period, the market value of these forward contracts was SEK -9 m (2016: SEK -11 m).
Liability for put option of minority owners
In May 2017, Duni acquired 80% of the shares of New Zealand company United Corporation Limited, which is traded under the name Sharp Serviettes. Duni has an obligation to acquire the remaining 20% of the shares. The minority owners have a put option during the April–June period in the years 2019–2021. The redemption price is determined by future income multiplied by a given multiple. Duni recognizes a liability, as a long-term derivative liability, equivalent to the discounted expected redemption price for the options.