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Fair value of financial assets and liabilities
1
After initial recognition, financial instruments are measured at
fair value on the balance sheet. This fair value can be presented
according to three levels (1 to 3). The allocation of the level depends
on the degree of observability of the variables used for the measure-
ment of the instrument, i.e.:
•
The level 1 fair value measurements are those derived from listed
prices (unadjusted) in active markets for similar assets or liabilities;
•
The level 2 fair value measurements are those established using
observable data for the assets or liabilities concerned. These data
may be either “direct” (prices, other than those covered by level 1)
or “indirect” (data derived from prices);
•
The level 3 fair value measurements are those that are not based
on observable market data for the assets or liabilities in question.
Changes in the fair value of the convertible bonds
(x 1,000 EUR)
2015
2014
Convertible 1 Convertible 2
Total Convertible 1 Convertible 2
Total
AT 01.01
178,675
202,716
381,391
178,072
195,063
373,135
Residual change in fair value attributable to changes
in credit riskof the instrument recognised during the
financial year
-506
9,173
8,667
578
-3,000
-2,422
Change in fair value attributable to changes in market
conditions generating a market risk (interest rate,
share prices) during the financial year
-3,398
890
-2,508
25
10,653
10,678
AT 31.12
174,771
212,779
387,550
178,675
202,716
381,391
Level 1
The convertible bonds issued by Cofinimmo are the subject of a level 1 valuation.
At 31.12.2015, the convertible bonds have a total fair value of
387,550,292 EUR. If the bonds are not converted into shares, the
redemption value will amount to 364,147,180 EUR at final maturity.
Level 2
All other financial assets and liabilities, namely the financial deriva-
tives stated at fair value, are level 2. The fair value of financial assets
and liabilities with standard terms and conditions and negotiated
on active and liquid markets is determined based on stock market
prices. The fair value of “Trade receivables”, “Trade debts”, “Loans
to associated companies” as well as any other floating-rate debt is
close to their book value. Bank debts are primarily in the form of roll-
over credit facilities. The calculation of the fair value of “Finance lease
receivables” and “Swaps” derivatives is based on the discounted
cash flow method, using a yield curve adapted to the duration of the
instruments.
More details on the finance lease receivables can be found in Note 25.
Level 3
Cofinimmo currently does not hold any financial instrument meeting
the definition of level 3.
B. MANAGEMENT OF FINANCIAL RISK
Interest rate risk
Since the Cofinimmo Group owns a (very) long-term property portfolio,
it is highly probable that the borrowings financing this portfolio will
be refinanced upon maturity by other borrowings. Therefore, the
company’s total financial debt is regularly renewed for an indefinite
future period. For reasons of cost efficiency, the group’s financing
policy by debt separates the raising of borrowings (liquidity and
margins on floating rates) from the management of interest rates
risks and charges (fixing and hedging of future floating interest rates).
Generally, funds are borrowed at a floating rate. Some borrowings
contracted at a fixed rate have been converted into a floating rate
through interest rate swaps. The goal of this is to take advantage of
low short-term rates.
1
For more details on the changes that occurred during 2015, and on the composition and conditions of our bonds, we also recommend reading the “Management of Financial
Resources” chapter of this Annual Financial Report.
2
Non-current and current.
Allocation of borrowings
2
at floating rate and at fixed rate (calculated on their nominal values)
(x 1,000 EUR)
2015
2014
Floating-rate borrowings (incl. 100,000 EUR of bonds converted into floating rate)
561,000
1,119,200
Fixed-rate borrowings
653,820
464,283
TOTAL
1,214,820 1,583,483
185