Financial Instruments

Carrying Amounts and Fair Values of Financial Instruments

 

 

 

 

 

 

 

 

September 30, 2017

 

 

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 7.29(a) were applied for information on specific fair values.

Trade accounts receivable

 

8,791

 

 

 

 

 

 

 

8,791

Loans and receivables

 

8,791

 

 

 

 

 

 

 

8,791

Other financial assets

 

3,844

 

422

2,487

791

 

 

 

7,544

Loans and receivables

 

3,759

 

 

[3,759]

 

 

 

 

3,759

Available-for-sale financial assets

 

28

 

419

1,872

782

 

 

 

3,101

Held-to-maturity financial assets

 

57

 

 

[59]

 

 

 

 

57

Derivatives

 

 

 

3

615

9

 

 

 

627

Other receivables

 

509

 

 

 

51

 

1,225

 

1,785

Loans and receivables

 

509

 

 

[509]

 

 

 

 

509

Available-for-sale financial assets

 

 

 

 

 

51

 

 

 

51

Nonfinancial assets

 

 

 

 

 

 

 

1,225

 

1,225

Cash and cash equivalents

 

5,555

 

 

 

 

 

 

 

5,555

Loans and receivables

 

5,555

 

 

[5,555]

 

 

 

 

5,555

Total financial assets

 

18,699

 

422

2,487

842

 

 

 

22,450

of which loans and receivables

 

18,614

 

 

 

 

 

 

 

18,614

of which available-for-sale financial assets

 

28

 

419

1,872

833

 

 

 

3,152

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities

 

14,724

 

1,115

278

 

 

 

 

16,117

Carried at amortized cost

 

14,724

 

[13,231]

[2,075]

 

 

 

 

14,724

Carried at fair value (nonderivative)

 

 

 

1,115

 

 

 

 

 

1,115

Derivatives

 

 

 

 

278

 

 

 

 

278

Trade accounts payable

 

3,837

 

 

 

 

 

91

 

3,928

Carried at amortized cost

 

3,837

 

 

 

 

 

 

 

3,837

Nonfinancial liabilities

 

 

 

 

 

 

 

91

 

91

Other liabilities

 

767

 

1

324

7

 

1,569

 

2,668

Carried at amortized cost

 

767

 

 

[767]

 

 

 

 

767

Carried at fair value (nonderivative)

 

 

 

 

 

7

 

 

 

7

Derivatives

 

 

 

1

324

 

 

 

 

325

Nonfinancial liabilities

 

 

 

 

 

 

 

1,569

 

1,569

Total financial liabilities

 

19,328

 

1,116

602

7

 

 

 

21,053

of which carried at amortized cost

 

19,328

 

 

 

 

 

 

 

19,328

of which carried at fair value (nonderivative)

 

 

 

1,115

 

7

 

 

 

1,122

of which derivatives

 

 

 

1

602

 

 

 

 

603

Carrying Amounts and Fair Values of Financial Instruments

 

 

 

 

 

 

 

 

December 31, 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 7.29(a) were applied for information on specific fair values.

Trade accounts receivable

 

10,969

 

 

 

 

 

 

 

10,969

Loans and receivables

 

10,969

 

 

 

 

 

 

 

10,969

Other financial assets

 

2,245

 

523

3,985

803

 

 

 

7,556

Loans and receivables

 

2,148

 

 

[2,145]

[16]

 

 

 

2,148

Available-for-sale financial assets

 

32

 

520

3,283

794

 

 

 

4,629

Held-to-maturity financial assets

 

65

 

 

[68]

 

 

 

 

65

Derivatives

 

 

 

3

702

9

 

 

 

714

Other receivables

 

633

 

 

 

57

 

2,103

 

2,793

Loans and receivables

 

633

 

 

[633]

 

 

 

 

633

Available-for-sale financial assets

 

 

 

 

 

57

 

 

 

57

Nonfinancial assets

 

 

 

 

 

 

 

2,103

 

2,103

Cash and cash equivalents

 

1,899

 

 

 

 

 

 

 

1,899

Loans and receivables

 

1,899

 

 

[1,899]

 

 

 

 

1,899

Total financial assets

 

15,746

 

523

3,985

860

 

 

 

21,114

of which loans and receivables

 

15,649

 

 

 

 

 

 

 

15,649

of which available-for-sale financial assets

 

32

 

520

3,283

851

 

 

 

4,686

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities

 

18,994

 

 

587

 

 

 

 

19,581

Carried at amortized cost

 

18,994

 

[16,040]

[3,362]

 

 

 

 

18,994

Carried at fair value (nonderivative)

 

 

 

 

 

 

 

 

 

 

Derivatives

 

 

 

 

587

 

 

 

 

587

Trade accounts payable

 

6,035

 

 

 

 

 

375

 

6,410

Carried at amortized cost

 

6,035

 

 

 

 

 

 

 

6,035

Nonfinancial liabilities

 

 

 

 

 

 

 

375

 

375

Other liabilities

 

840

 

2

252

25

 

2,259

 

3,378

Carried at amortized cost

 

840

 

 

[840]

 

 

 

 

840

Carried at fair value (nonderivative)

 

 

 

 

 

8

 

 

 

8

Derivatives

 

 

 

2

252

17

 

 

 

271

Nonfinancial liabilities

 

 

 

 

 

 

 

2,259

 

2,259

Total financial liabilities

 

25,869

 

2

839

25

 

 

 

26,735

of which carried at amortized cost

 

25,869

 

 

 

 

 

 

 

25,869

of which carried at fair value (nonderivative)

 

 

 

 

 

8

 

 

 

8

of which derivatives

 

 

 

2

839

17

 

 

 

858

The preceding two tables show the carrying amounts and fair values of financial assets and liabilities for each financial instrument category and a reconciliation to the corresponding line items in the statements of financial position. Since the line items “Other receivables,” “Trade accounts payable” and “Other liabilities” contain both financial instruments and nonfinancial 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 of financial liabilities carried at amortized cost that are given for information are the present values of the respective future cash flows. The present values are 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 is available, however, this is 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 determined using valuation techniques based on observable market data as of the end of the reporting period (Level 2) 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 exist in active markets (Level 1) are 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 are determined to allow for the contracting party’s credit risk.

Currency and commodity forward contracts are 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. Here the credit spreads of comparable issuers are applied. 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 relative change of 10% in the credit spread does not materially affect the fair value.

Embedded derivatives are separated from their respective host contracts. Such host contracts are generally sale or purchase agreements relating to the operational business. The embedded derivatives cause the cash flows from the contracts to vary with exchange-rate or price fluctuations. 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.

Within the financial liabilities, use was made of the fair value option according to IAS 39.11A for the debt instruments (exchangeable bond) issued in June 2017 that can be converted into Covestro shares. This exchangeable bond is a hybrid financial instrument containing a debt instrument as a nonderivative host contract and several embedded derivatives. Due to the application of the fair value option, the bond was designated as a financial liability at fair value through profit or loss at its initial recognition including the embedded derivatives.

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

Development of Financial Assets and Liabilities (Level 3)

 

 

2017

 

 

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), January 1

 

851

 

(8)

 

(8)

 

835

Gains (losses) recognized in profit or loss

 

11

 

20

 

 

31

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

 

11

 

20

 

 

31

Gains (losses) recognized outside profit or loss

 

(18)

 

 

 

(18)

Additions of assets (liabilities)

 

6

 

 

 

6

Settlements of (assets) liabilities

 

(17)

 

 

1

 

(16)

Disposals from divestments / changes in scope of consolidation

 

 

(3)

 

 

(3)

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

 

833

 

9

 

(7)

 

835

Development of Financial Assets and Liabilities (Level 3)

 

 

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), January 1

 

833

 

9

 

(37)

 

805

Gains (losses) recognized in profit or loss

 

14

 

(3)

 

 

11

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

 

14

 

(3)

 

 

11

Gains (losses) recognized outside profit or loss

 

13

 

 

 

13

Additions of assets (liabilities)

 

39

 

 

 

39

Settlements of (assets) liabilities

 

(23)

 

 

16

 

(7)

Disposals from divestments / changes in scope of consolidation

 

 

 

 

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

 

876

 

6

 

(21)

 

861

The changes recognized in profit or loss were included in other operating income / expenses, or in interest income or exchange gains / losses in the financial result.

Contingent liabilities and other financial commitments

The Group’s contingent liabilities amounted to €861 million as of September 30, 2017, and mainly comprise pending legal cases in several countries. The Group’s other financial commitments amounted to €52,732 million as of September 30, 2017, and mainly comprise Bayer’s contingent financial commitment in an amount of €47,401 million to acquire Monsanto Company pursuant to the Merger Agreement signed with Monsanto Company on September 14, 2016, which provides for Bayer’s acquisition of all outstanding shares of Monsanto Company against a payment of US$128 per share in cash.