Financial Instruments

Carrying Amounts and Fair Values of Financial Instruments

 

 

 

 

 

 

 

 

 

 

Jun. 30, 2016

 

 

Carried at amortized cost

 

Carried at fair value [Fair value for information1]

 

Nonfinancial assets / liabilities

 

 

 

 

 

 

Based on quoted prices in active markets (Level 1)

Based on observable market data (Level 2)

Based on unobservable
inputs
(Level 3)

 

 

 

 

 

 

Carrying amount

 

Carrying amount

Carrying amount

Carrying amount

 

Carrying amount

 

Carrying amount in the statement of financial position

 

 

€ million

 

€ million

€ million

€ million

 

€ million

 

€ million

1

Fair value of the financial instruments carried at amortized cost; the exemption provisions under IFRS 7.29a were applied for information on specific fair values.

Trade accounts receivable

 

11,792

 

 

 

 

 

 

 

11,792

Loans and receivables

 

11,792

 

 

 

 

 

 

 

11,792

Other financial assets

 

649

 

215

459

836

 

 

 

2,159

Loans and receivables

 

535

 

 

[527]

[17]

 

 

 

535

Available-for-sale financial assets

 

41

 

215

 

823

 

 

 

1,079

Held-to-maturity financial assets

 

73

 

 

[77]

 

 

 

 

73

Derivatives

 

 

 

 

459

13

 

 

 

472

Other receivables

 

551

 

 

 

68

 

1,853

 

2,472

Loans and receivables

 

551

 

 

[551]

 

 

 

 

551

Available-for-sale financial assets

 

 

 

 

 

68

 

 

 

68

Nonfinancial assets

 

 

 

 

 

 

 

1,853

 

1,853

Cash and cash equivalents

 

1,055

 

 

 

 

 

 

 

1,055

Loans and receivables

 

1,055

 

 

 

 

 

 

 

1,055

Total financial assets

 

14,047

 

215

459

904

 

 

 

15,625

of which loans and receivables

 

13,933

 

 

 

 

 

 

 

13,933

of which available-for-sale financial assets

 

41

 

215

 

891

 

 

 

1,147

Financial liabilities

 

18,969

 

 

739

 

 

 

 

19,708

Carried at amortized cost

 

18,969

 

[16,350]

[3,227]

 

 

 

 

18,969

Derivatives

 

 

 

 

739

 

 

 

 

739

Trade accounts payable

 

4,986

 

 

 

 

 

69

 

5,055

Carried at amortized cost

 

4,986

 

 

 

 

 

 

 

4,986

Nonfinancial liabilities

 

 

 

 

 

 

 

69

 

69

Other liabilities

 

885

 

 

227

39

 

2,481

 

3,632

Carried at amortized cost

 

885

 

 

[885]

 

 

 

 

885

Carried at fair value (nonderivative)

 

 

 

 

 

32

 

 

 

32

Derivatives

 

 

 

 

227

7

 

 

 

234

Nonfinancial liabilities

 

 

 

 

 

 

 

2,481

 

2,481

Total financial liabilities

 

24,840

 

 

966

39

 

 

 

25,845

of which carried at amortized cost

 

24,840

 

 

 

 

 

 

 

24,840

of which derivatives

 

 

 

 

966

7

 

 

 

973

Carrying Amounts and Fair Values of Financial Instruments

 

 

 

 

 

 

 

 

 

 

Dec. 31, 2015

 

 

Carried at amortized cost

 

Carried at fair value [Fair value for information1]

 

Nonfinancial assets / liabilities

 

 

 

 

 

 

Based on quoted prices in active markets (Level 1)

Based on observable market data (Level 2)

Based on unobservable
inputs
(Level 3)

 

 

 

 

 

 

Carrying amount

 

Carrying amount

Carrying amount

Carrying amount

 

Carrying amount

 

Carrying amount in the statement of financial position

 

 

€ million

 

€ million

€ million

€ million

 

€ million

 

€ million

1

Fair value of the financial instruments carried at amortized cost; the exemption provisions under IFRS 7.29a were applied for information on specific fair values.

Trade accounts receivable

 

9,933

 

 

 

 

 

 

 

9,933

Loans and receivables

 

9,933

 

 

 

 

 

 

 

9,933

Other financial assets

 

185

 

363

509

791

 

 

 

1,848

Loans and receivables

 

72

 

 

[64]

[18]

 

 

 

72

Available-for-sale financial assets

 

40

 

363

 

774

 

 

 

1,177

Held-to-maturity financial assets

 

73

 

 

[74]

 

 

 

 

73

Derivatives

 

 

 

 

509

17

 

 

 

526

Other receivables

 

506

 

 

 

59

 

1,882

 

2,447

Loans and receivables

 

506

 

 

[506]

 

 

 

 

506

Available-for-sale financial assets

 

 

 

 

 

59

 

 

 

59

Nonfinancial assets

 

 

 

 

 

 

 

1,882

 

1,882

Cash and cash equivalents

 

1,859

 

 

 

 

 

 

 

1,859

Loans and receivables

 

1,859

 

 

 

 

 

 

 

1,859

Total financial assets

 

12,483

 

363

509

850

 

 

 

14,205

of which loans and receivables

 

12,370

 

 

 

 

 

 

 

12,370

of which available-for-sale financial assets

 

40

 

363

 

833

 

 

 

1,236

Financial liabilities

 

19,169

 

 

765

 

 

 

 

19,934

Carried at amortized cost

 

19,169

 

[15,440]

[4,121]

 

 

 

 

19,169

Derivatives

 

 

 

 

765

 

 

 

 

765

Trade accounts payable

 

5,680

 

 

 

 

 

265

 

5,945

Carried at amortized cost

 

5,680

 

 

 

 

 

 

 

5,680

Nonfinancial liabilities

 

 

 

 

 

 

 

265

 

265

Other liabilities

 

606

 

 

117

45

 

1,831

 

2,599

Carried at amortized cost

 

606

 

 

[606]

 

 

 

 

606

Carried at fair value (nonderivative)

 

 

 

 

 

37

 

 

 

37

Derivatives

 

 

 

 

117

8

 

 

 

125

Nonfinancial liabilities

 

 

 

 

 

 

 

1,831

 

1,831

Total financial liabilities

 

25,455

 

 

882

45

 

 

 

26,382

of which carried at amortized cost

 

25,455

 

 

 

 

 

 

 

25,455

of which derivatives

 

 

 

 

882

8

 

 

 

890

The preceding two tables show the carrying amounts and fair values of financial assets and liabilities by category of financial instrument and a reconciliation to the corresponding line item in the statements of financial position. Since the line items “Other receivables,” “Trade accounts payable” and “Other liabilities” contain both financial instruments and non-financial assets or liabilities (such as other tax receivables or advance payments for services to be received in the future), the reconciliation is shown in the column headed “Nonfinancial assets / liabilities.”

The loans and receivables reflected in other financial assets and the liabilities measured at amortized cost also include receivables and liabilities under finance leases in which Bayer is the lessor or lessee and which are therefore measured in accordance with IAS 17.

Because of the short maturities of most trade accounts receivable and payable, other receivables and liabilities, and cash and cash equivalents, their carrying amounts at the closing date did not significantly differ from the fair values.

The fair values of loans and receivables, held-to-maturity financial investments and financial liabilities carried at amortized cost that are given for information are the present values of the respective future cash flows. The present values were determined by discounting the cash flows at a closing-date interest rate, taking into account the term of the assets or liabilities and the creditworthiness of the counterparty. Where a market price was available, however, this was deemed to be the fair value.

The fair values of available-for-sale financial assets correspond to quoted prices in active markets (Level 1) or are the present values of the respective future cash flows, determined on the basis of unobservable inputs (Level 3).

The fair values of derivatives for which no publicly quoted prices existed in active markets (Level 1) were determined using valuation techniques based on observable market data as of the end of the reporting period (Level 2). In applying valuation techniques, credit value adjustments were determined to allow for the contracting party’s credit risk.

Currency and commodity forward contracts were measured individually at their forward rates or forward prices on the closing date. These depend on spot rates or prices, including time spreads. The fair values of interest-rate hedging instruments and cross-currency interest-rate swaps were determined by discounting future cash flows over the remaining terms of the instruments at market rates of interest, taking into account any foreign currency translation as of the closing date.

Fair values measured using unobservable inputs are categorized within Level 3 of the fair value hierarchy. This applies to certain available-for-sale debt or equity instruments, in some cases to the fair values of embedded derivatives, and to obligations for contingent consideration in business combinations. Credit risk is frequently the principal unobservable input used to determine the fair values of debt instruments classified as available-for-sale financial assets by the discounted cash flow method. Reference is made here to the credit spreads of comparable issuers. A significant increase in credit risk could result in a lower fair value, whereas a significant decrease could result in a higher fair value. However, a 10% relative change in the credit spread would not materially affect fair value.

Embedded derivatives are separated from their respective host contracts, which are generally sales or purchase agreements relating to the operational business, and cause the cash flows from the contracts to vary with fluctuations in exchange rates or prices, for example. The internal measurement of embedded derivatives is mainly performed using the discounted cash flow method, which is based on unobservable inputs. These include planned sales and purchase volumes, and prices derived from market data. Regular monitoring is carried out based on these fair values as part of quarterly reporting.

The changes in the amount of financial assets and liabilities recognized at fair value based on unobservable inputs (Level 3) for each individual financial instrument category were as follows:

Changes in the Amount of Financial Assets and Liabilities Recognized at Fair Value Based on Unobservable Inputs

 

 

2016

 

 

Available-for-sale financial assets

 

Derivatives (net)

 

Liabilities carried at fair value (non-derivative)

 

Total

 

 

€ million

 

€ million

 

€ million

 

€ million

Carrying amounts of net assets (net liabilities), Jan. 1

 

833

 

9

 

(37)

 

805

Gains (losses) recognized in profit or loss

 

9

 

(3)

 

 

6

of which related to assets / liabilities recognized in the statements of financial position

 

9

 

(3)

 

 

6

Gains (losses) recognized outside profit or loss

 

14

 

 

 

14

Additions of assets (liabilities)

 

38

 

 

 

38

Settlements of (assets) liabilities

 

(3)

 

 

5

 

2

Carrying amounts of net assets (net liabilities), June 30

 

891

 

6

 

(32)

 

865

The changes recognized in profit or loss were included in other operating income/expenses or in interest income.

Contribution to the plan assets of Bayer Pension Trust e.V.

The contribution of 4.9% of the issued shares of Covestro AG to Bayer Pension Trust e.V. led to a €337 million reduction in the pension provisions of Bayer AG. The equity of the Bayer Group rose accordingly. An amount equal to 4.9% of the equity of Covestro AG was allocated to noncontrolling interest.