Notes to the consolidated financial statements 126 30 Financial risk management and financial instruments (continued) - - - - - - - Ahold at a glance Business review Governance Financials Ahold Annual Report 2015 Of Ahold's categories of financial instruments, only derivatives, assets available-for-sale and reinsurance assets (liabilities) are measured and recognized on the balance sheet at fair value. These fair value measurements are categorized within Level 2 of the fair value hierarchy. The Company uses inputs other than quoted prices that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices). The fair value of derivative instruments is measured by using either a market or income approach (mainly present value techniques). Foreign currency forward contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates that match the maturity of the contracts. Interest rate swaps are measured at the present value of expected future cash flows. Expected future cash flows are discounted by using the applicable yield curves derived from quoted interest rates. The valuation of Ahold's derivative instruments is adjusted for the credit risk of the counterparty, called Credit Valuation Adjustment ("CVA"), and adjusted for Ahold's own credit risk, called Debit Valuation Adjustment ("DVA"). The CVA DVA calculations have been added to the 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 refected 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 of the cumulative preferred financing shares is measured as the present value of expected future cash flows. Such cash flows include the dividend payments and the payments of the nominal value plus paid in capital. Expected future cash flows are discounted by using the yield curves derived from quoted interest rates and Credit Default Swap rates that match the maturity of the contracts. 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 (€528 million) contain short-term liquid investments that are considered part of Ahold's cash management financial assets. Derivatives Fair values, notional amounts, maturities and the qualification of derivative financial instruments for accounting purposes are presented in the table below: January 3, 2016 December 28, 2014 Fair value Notional Fair value Notional million Maturity Assets Liabilities amount Assets Liabilities amount Forward foreign currency contracts1 Within 1 year 83 1 (1) 95 Cross-currency swap2 After 5 years (210) 253 (250) 225 Total cash flow hedges (210) 336 1 (251) 320 Interest rate swap3 Between 1 to 5 years 29 340 38 319 Cross-currency swap3,4 Between 1 to 5 years 309 340 272 319 Total derivatives - no hedge accounting treatment 338 340 310 319 Total derivative financial instruments 338 (210) 676 311 (251) 639 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 Interest rate swap and cross-currency swap relate to the same notional amount of GBP 250 million. 4 As of January 3, 2016, 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 nil. The volatility in the financial markets resulted in a gain of nil related to this credit clause in the year 2015 (€1 million gain in 2014). Ahold is required under these swap contracts to redeem the U.S. dollar notional amount through semi-annual installments that commenced in September 2004. $314 million has been paid down as of January 3, 2016. Gains and losses recognized in cash flow hedging reserve in equity as of January 3, 2016, primarily relate to the swap on the JPY 33,000 notes and will be released to the income statement over a period lasting until 2031

Jaarverslagen | 2015 | | pagina 30