H
KÜ1I3E3
140
30 Financial risk management and financial instruments (continued)
-
-
-
-
419
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Our strategy
Our performance
Governan
Financials
Investors
Ahold Annual Report 2013
The valuation of Ahold's derivatives instruments is adjusted for the credit risk of the counterparty (counterparty credit risk) and of the reporting entity (own credit risk) in accordance with IFRS13.
The valuation adjustment for counterparty credit risk requires a Credit Valuation Adjustment ("CVA") and a Debit Valuation Adjustment ("DVA") for an adjustment to own credit risk. The CVA
DVA calculations have been added to the risk-free fair value of Ahold's interest and cross currency swaps. The valuation technique for the CVA DVA calculation is based on relevant
observable market inputs.
The carrying amount of receivables, cash and cash equivalents, accounts payable, short-term deposits and similar instruments, and other current financial assets and liabilities approximate their
fair values because of the short-term nature of these instruments and, for receivables, because of the fact that any recoverability loss is reflected in an impairment loss. The fair values of quoted
borrowings are based on year-end ask-market quoted prices. The fair value of other non-derivative financial assets and liabilities that are not traded in an active market are estimated using
discounted cash flow analyses based on market rates prevailing at year-end. The fair value calculation method and the conditions for redemption and conversion of the cumulative preferred
financing shares are disclosed in Note 22. The accrued interest is included in other current financial liabilities (see Note 26) and not in the carrying amounts of non-derivative financial assets
and liabilities.
Short-term deposits and similar instruments include financial assets at fair value through profit or loss (€135 million) and loans and receivables (€1,332 million). Short-term deposits and similar
instruments contain short-term liquid investments that are considered part of Ahold's cash management financial assets as these investment products provide short-term liquidity while also
providing capital preservation.
Derivatives
Fair values, notional amounts, maturities and the qualification of derivative financial instruments for accounting purposes are presented in the table below:
December 29, 2013
December 30, 2012
Fair value
Fair value
Notional
amount
million
Maturity
Assets
Liabilities
Notional
amount
Assets
Liabilities
Forward foreign currency contracts
Within 1 year
6
124
2
129
Cross-currency swap2
After 5 years
(182)
228
(175)
290
Total cash flow hedges
6
(182)
352
2
(175)
Forward foreign currency contracts3
Within 1 year
(2)
64
Total net investment hedges
(2)
64
Between 1 to 5
Interest rate swap
years
41
3005
59
3065
Between 1 to 5
Cross-currency swap4
years
237
3005
221
3065
Total derivatives - no hedge accounting treatment
278
3005
280
3065
Total derivative financial instruments
284
(182)
652
282
(177)
789
1 Foreign currency forwards designated as cash flow hedges are used to hedge the future cash flows denominated in foreign currencies.
2 Cross-currency swap accounted for as a cash flow hedge used to hedge currency and cash flow risk on floating debt denominated in foreign currency, related to JPY 33,000 notes (see Note 21 for additional information).
3 Foreign currency forwards accounted for as net investment hedges are used to hedge cash flow currency risk on a dividend flow from ICA.
4 As of December 29, 2013, the valuation of the GBP 250 cross-currency swap, related to the GBP 250 notes (see Note 21 for additional information) includes the impact of the mark-to-market valuation of an embedded credit clause in the amount
of €(1) million. The volatility in the financial markets resulted in a €4 million gain related to this credit clause in the year 2013 (€8 million gain in 2012). Ahold is required under these swap contracts to redeem the U.S. dollar notional amount through
semi-annual installments that commenced in September 2004. $260 million has been paid down as of December 29, 2013.
5 Interest rate swap and cross-currency swap relate to the same notional amount of GBP 250 million.
Gains and losses recognized in cash flow hedging reserve in equity as of December 29, 2013, mainly relate to the swap on the JPY 33,000 notes and will be released to the income statement
over a period lasting until 2031
