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AAK Annual Report 2016

60 The Group’s financial assets and liabilities measured at fair value As at December 31, 2016 Assets and liabilities measured at fair value through the income statement Derivatives held for hedging purposes Derivatives measured at fair value through equity SEK million Carrying amount Valuation level Carrying amount Valuation level Carrying amount Valuation level Total Sales and purchase contracts 246 2 246 Currency hedge contracts 223 2 223 Fair value of changes in inventories 246 2 246 Total assets - - Sales and purchase contracts 525 2 525 Currency hedge contracts 198 2 198 Fair value of changes in inventories 1 2 1 Total liabilities - 724 - 724 The Group’s financial assets and liabilities measured at fair value $VDW'HFHPEHU Assets and liabilities measured at fair value through the income statement Derivatives held for hedging purposes Derivatives measured at fair value through equity SEK million Carrying amount Valuation level Carrying amount Valuation level Carrying amount Valuation level Total Sales and purchase contracts 256 2 256 Currency hedge contracts 103 2 103 Interest rate hedge swaps - 3 2 3 Fair value of changes in inventories 102 2 102 Total assets - 461 3 464 Sales and purchase contracts 188 2 188 Currency hedge contracts 90 2 90 Interest rate hedge swaps - 40 2 40 Fair value of changes in inventories -14 2 -14 Total liabilities - 264 40 304 Foreign currency contracts and the foreign currency components in sales and purchase contracts are valued at actual market foreign currency forward rates. The raw material price components in sales and purchase contracts are valued at actual market forward prices for identical or similar raw materials. Inventory is valued at actual market spot prices for identical or similar raw materials. Interest rate swap contracts are valued at actual market interest rates. +HGJHDFFRXQWLQJ Inventory hedging at fair value Future contracts, and purchase and sales contracts not deemed to be assets for own use are used for hedging, which means that they cannot be exempted from derivative accounting. Since the quality of the underlying raw materials used for hedging differs from the quality of the hedged raw materials, some inefficiency is likely. AAK minimizes this inefficiency by reducing the basis risk between hedged raw material risks and the underlying raw materials used as hedging contracts. Due to the basis risk involved, $$.XVHVWKH³GROODURIIVHW´PHWKRGIRUWHVWLQJWKHKHGJHHIILFLHQF\RIWKHIDLUYDOXHRIUDZPDWHULDOV+HGJHHIILFLHQF\WHVWLQJLQ 2016 confirmed that the fair-value hedge of raw materials qualifies for hedge accounting. Hedge efficiency for the 2016 full year was 100 percent (106). Fair-value hedge of currency risk on sales contracts qualifying for exemption under assets for own use The hedging instruments used are future contracts and purchase contracts. As the currency risk of the hedge instruments is LGHQWLFDOWRWKHFXUUHQF\ULVNRIWKHKHGJHGFRQWUDFWVQRPDWHULDOEDVLFULVNHLVWV$$.WKHUHIRUHRQO\XVHVWKH³FULWLFDOPDWFK´ method to test the hedge efficiency of currency risk on sales contracts that qualify for own use exemption and that may consequently be exempted from derivative accounting. The hedge efficiency testing in 2016 confirmed a perfect critical match.


AAK Annual Report 2016
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