Fair Value Disclosures on Financial Instruments |
(F.2) Fair Value Disclosures on Financial Instruments y Level Transfers | It is our policy that transfers between the different levels of the fair value hierarchy are deemed to have occurred at the beginning of the period of the event or change in circumstances that caused the transfer. |
Fair Value of Financial Instruments We use various types of financial instruments in the ordinary course of business, which are classified as either amortized cost (AC) or fair value through profit or loss (FVTPL). For those financial instruments measured at fair value or for which fair value must be disclosed, we have categorized the financial instruments into a three-level fair value hierarchy depending on the inputs used to determine fair value and their significance for the valuation techniques. Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy | | | | | | | | | | | | | | | | | € millions | | Category | | 12/31/2022 | | | | | Carrying Amount | | Measurement Categories | | Fair Value | | | | | | | | | | | | | | | | | | | | | | At Amortized | | At Fair Value | | Level 1 | | Level 2 | | Level 3 | | Total | | | | | | | Cost | | | | | | | | | | | | | | | | | | | | | | | | | | | | Assets | | | | | | | | | | | | | | | | | Cash and cash equivalents | | | | 9,008 | | | | | | | | | | | | | Cash at banks1 | | AC | | 3,176 | | 3,176 | | | | | | | | | | | Time deposits1 | | AC | | 2,976 | | 2,976 | | | | | | | | | | | Money market and similar funds | | FVTPL | | 2,855 | | | | 2,855 | | 2,855 | | | | | | 2,855 | Trade and other receivables | | | | 6,405 | | | | | | | | | | | | | Trade receivables1 | | AC | | 5,776 | | 5,776 | | | | | | | | | | | Other receivables2 | | — | | 629 | | | | | | | | | | | | | Other financial assets | | | | 6,479 | | | | | | | | | | | | | Debt securities | | AC | | 32 | | 32 | | | | 32 | | | | | | 32 | Equity securities | | FVTPL | | 5,138 | | | | 5,138 | | 258 | | 0 | | 4,880 | | 5,138 | Investments in associates2 | | — | | 151 | | | | | | | | | | | | | Time deposits | | AC | | 654 | | 654 | | | | | | 654 | | | | 654 | Financial instruments related to employee benefit plans2 | | — | | 203 | | | | | | | | | | | | | Loans and other financial receivables | | AC | | 233 | | 233 | | | | | | 233 | | | | 233 | Derivative assets | | | | | | | | | | | | | | | | | Designated as hedging instrument | | | | | | | | | | | | | | | | | FX forward contracts | | — | | 33 | | | | 33 | | | | 33 | | | | 33 | Interest rate swaps | | — | | 0 | | | | 0 | | | | 0 | | | | 0 | Not designated as hedging instrument | | | | | | | | | | | | | | | | | FX forward contracts | | FVTPL | | 30 | | | | 30 | | | | 30 | | | | 30 | Call options for share-based payments | | FVTPL | | 0 | | | | 0 | | | | 0 | | | | 0 | Call option on equity shares | | FVTPL | | 5 | | | | 5 | | | | | | 5 | | 5 | Liabilities | | | | | | | | | | | | | | | | | Trade and other payables | | | | -2,226 | | | | | | | | | | | | | Trade payables1 | | AC | | -1,496 | | -1,496 | | | | | | | | | | | Other payables2 | | — | | -730 | | | | | | | | | | | | | Financial liabilities | | | | -14,355 | | | | | | | | | | | | | Non-derivative financial liabilities | | | | | | | | | | | | | | | | | Loans | | AC | | -1,456 | | -1,456 | | | | | | -1,456 | | | | -1,456 | Bonds | | AC | | -9,083 | | -9,083 | | | | -8,301 | | -928 | | | | -9,229 | Private placements | | AC | | -405 | | -405 | | | | | | -383 | | | | -383 | Other non-derivative financial liabilities3 | | AC | | -2,562 | | -2,562 | | | | | | -422 | | | | -422 | Derivatives | | | | | | | | | | | | | | | | | Designated as hedging instrument | | | | | | | | | | | | | | | | | FX forward contracts | | — | | -9 | | | | -9 | | | | -9 | | | | -9 | Interest rate swaps | | — | | -753 | | | | -753 | | | | -753 | | | | -753 | Not designated as hedging instrument | | | | | | | | | | | | | | | | | FX forward contracts | | FVTPL | | -88 | | | | -88 | | | | -88 | | | | -88 | Total financial instruments, net | | | | 5,311 | | -2,154 | | 7,212 | | -5,156 | | -3,087 | | 4,886 | | -3,357 |
Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy | | | | | | | | | | | | | | | | | € millions | | Category | | 12/31/2021 | | | | | Carrying Amount | | Measurement Categories | | Fair Value | | | | | | | | | | | | | | | | | | | | | | At Amortized | | At Fair Value | | Level 1 | | Level 2 | | Level 3 | | Total | | | | | | | Cost | | | | | | | | | | | | | | | | | | | | | | | | | | | | Assets | | | | | | | | | | | | | | | | | Cash and cash equivalents | | | | 8,898 | | | | | | | | | | | | | Cash at banks1 | | AC | | 3,149 | | 3,149 | | | | | | | | | | | Time deposits1 | | AC | | 1,467 | | 1,467 | | | | | | | | | | | Money market and similar funds | | FVTPL | | 4,281 | | | | 4,281 | | 4,281 | | | | | | 4,281 | Trade and other receivables | | | | 6,499 | | | | | | | | | | | | | Trade receivables1 | | AC | | 5,888 | | 5,888 | | | | | | | | | | | Other receivables2 | | — | | 611 | | | | | | | | | | | | | Other financial assets | | | | 9,033 | | | | | | | | | | | | | Debt securities | | AC | | 30 | | 30 | | | | 30 | | | | | | 30 | Equity securities | | FVTPL | | 5,799 | | | | 5,799 | | 772 | | 155 | | 4,871 | | 5,799 | Investments in associates2 | | — | | 155 | | | | | | | | | | | | | Time deposits | | AC | | 2,602 | | 2,602 | | | | | | 2,602 | | | | 2,602 | Financial instruments related to employee benefit plans2 | | — | | 201 | | | | | | | | | | | | | Loans and other financial receivables | | AC | | 186 | | 186 | | | | | | 186 | | | | 186 | Derivative assets | | | | | | | | | | | | | | | | | Designated as hedging instrument | | | | | | | | | | | | | | | | | FX forward contracts | | — | | 1 | | | | 1 | | | | 1 | | | | 1 | Interest rate swaps | | — | | 7 | | | | 7 | | | | 7 | | | | 7 | Not designated as hedging instrument | | | | | | | | | | | | | | | | | FX forward contracts | | FVTPL | | 41 | | | | 41 | | | | 41 | | | | 41 | Call options for share-based payments | | FVTPL | | 0 | | | | 0 | | | | 0 | | | | 0 | Call option on equity shares | | FVTPL | | 10 | | | | 10 | | | | | | 10 | | 10 | Liabilities | | | | | | | | | | | | | | | | | Trade and other payables | | | | -1,702 | | | | | | | | | | | | | Trade payables1 | | AC | | -1,089 | | -1,089 | | | | | | | | | | | Other payables2 | | — | | -613 | | | | | | | | | | | | | Financial liabilities | | | | -15,571 | | | | | | | | | | | | | Non-derivative financial liabilities | | | | | | | | | | | | | | | | | Loans | | AC | | -1,533 | | -1,533 | | | | | | -1,533 | | | | -1,533 | Bonds | | AC | | -10,682 | | -10,682 | | | | -10,248 | | -931 | | | | -11,179 | Private placements | | AC | | -790 | | -790 | | | | | | -801 | | | | -801 | Other non-derivative financial liabilities3 | | AC | | -2,424 | | -2,424 | | | | | | -281 | | | | -281 | Derivatives | | | | | | | | | | | | | | | | | Designated as hedging instrument | | | | | | | | | | | | | | | | | FX forward contracts | | — | | -31 | | | | -31 | | | | -31 | | | | -31 | Interest rate swaps | | — | | -49 | | | | -49 | | | | -49 | | | | -49 | Not designated as hedging instrument | | | | | | | | | | | | | | | | | FX forward contracts | | FVTPL | | -62 | | | | -62 | | | | -62 | | | | -62 | Total financial instruments, net | | | | 7,158 | | -3,194 | | 9,997 | | -5,164 | | -695 | | 4,881 | | -978 |
1 We do not separately disclose the fair value for cash and cash equivalents, trade receivables, and accounts payable as their carrying amounts are a reasonable approximation of their fair values. 2 Since the line items Trade receivables, Trade payables, and Other financial assets contain both financial and non-financial assets or liabilities (such as other taxes or advance payments), the csarrying amounts of non-financial assets or liabilities are shown to allow a reconciliation to the corresponding line items in the Consolidated Statements of Financial Position. 3 For lease liabilities, included in the line item Other non-derivative financial liabilities, separate disclosure of fair value is not required. Fair Values of Financial Instruments by Instrument Classification | | | | | | | | | € millions | | Category | | 12/31/2022 | | | | | Carrying Amount | | At Amortized Cost | | At Fair Value | Financial assets | | | | | | | | | At fair value through profit or loss | | FVTPL | | 8,028 | | | | 8,028 | At amortized cost | | AC | | 12,847 | | 12,847 | | | Financial liabilities | | | | | | | | | At fair value through profit or loss | | FVTPL | | -88 | | | | -88 | At amortized cost | | AC | | -15,002 | | -15,002 | | |
Fair Values of Financial Instruments by Instrument Classification | | | | | | | | | € millions | | Category | | 12/31/2021 | | | | | Carrying Amount | | At Amortized Cost | | At Fair Value | Financial assets | | | | | | | | | At fair value through profit or loss | | FVTPL | | 10,131 | | | | 10,131 | At amortized cost | | AC | | 13,323 | | 13,323 | | | Financial liabilities | | | | | | | | | At fair value through profit or loss | | FVTPL | | -62 | | | | -62 | At amortized cost | | AC | | -16,517 | | -16,517 | | |
Determination of Fair Values A description of the valuation techniques and the inputs used in the fair value measurement is given below: Financial Instruments Measured at Fair Value on a Recurring Basis | | | | | | | | |
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Type | | Fair Value Hierarchy | | Determination of Fair Value/Valuation Technique | | Significant Unobservable Inputs | | Interrelationship Between Significant Unobservable Inputs and Fair Value Measurement |
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Other financial assets | | | | | | | | | Money-market and similar funds | | Level 1 | | Quoted prices in an active market | | NA | | NA | Debt securities | | Level 1 | | Quoted prices in an active market | | NA | | NA | Listed equity securities | | Level 1 | | Quoted prices in an active market | | NA | | NA | | | Level 2 | | Quoted prices in an active market deducting a discount for the disposal restriction derived from the premium for a respective put option. | | NA | | NA | Unlisted equity securities | | Level 3 | | Market approach. Comparable company valuation using revenue multiples derived from companies comparable to the investee. | | -Peer companies used (revenue multiples range from 0.75 to 24.0) -Revenues of investees -Discounts for lack of marketability (7.3% to 28.3%) | | The estimated fair value would increase (decrease) if: -The revenue multiples were higher (lower) -The investees’ revenues were higher (lower) -The liquidity discounts were lower (higher) |
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Type | | Fair Value Hierarchy | | Determination of Fair Value/Valuation Technique | | Significant Unobservable Inputs | | Interrelationship Between Significant Unobservable Inputs and Fair Value Measurement |
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| | | | Market approach. Venture capital method evaluating a variety of quantitative and qualitative factors such as actual and forecasted results, cash position, recent or planned transactions, and market comparable companies. | | - Nature and selection of financing rounds - Weighting of financings rounds - Discounts for lack of marketability - Weighting of equity allocation method such as option pricing model and common stock equivalent model - Volatility assumptions - Estimated time to exit - Imminent exit value | | The estimated fair value would increase (decrease) if: - Different financing rounds are selected - Weighting of financing rounds changes -Weighting of the applied equity allocation methods changes - Volatility assumptions were higher (lower) - Estimated time to exit increases (decreases) - The imminent exit value increases (decreases) | | | | | Last financing round valuations | | Nature and pricing indication of latest financing round | | The estimated fair value would increase (decrease) if: -Price of latest financing round would increase (decrease) - The overall company value would be higher (lower) - The respective analyzed share class would be affected by this change due to its rights and preferences | | | | | Net asset value/fair market value as reported by the respective funds | | Net asset value calculations of the respective funds | | The estimated fair value would increase (decrease) if: Reported net asset value of respective fund would be higher (lower) | Call option on equity shares | | Level 3 | | Market approach. Venture capital method evaluating a variety of quantitative and qualitative factors such as actual and forecasted results, cash position, recent or planned transactions, and market comparable companies. | | NA | | NA | Other financial assets/ Financial liabilities | | | | | FX forward contracts | | Level 2 | | Discounted cash flow using par method. Expected future cash flows based on forward exchange rates are discounted over the respective remaining term of the contracts using the respective deposit interest rates and spot rates. | | NA | | NA | Interest rate swaps | | Level 2 | | Discounted cash flow. Expected future cash flows are estimated based on forward interest rates from observable yield curves and contract interest rates, discounted at a rate that reflects the credit risk of the counterparty. | | NA | | NA |
Financial Instruments Not Measured at Fair Value | | | | | Type | | Fair Value Hierarchy | | Determination of Fair Value/Valuation Technique | Financial liabilities | | | | | Fixed-rate bonds (financial liabilities) | | Level 1 | | Quoted prices in an active market | Fixed-rate private placements/ loans (financial liabilities) | | Level 2 | | Discounted cash flows Future cash outflows for fixed interest and principal are discounted over the term of the respective contracts using the market interest rates as at the reporting date. |
For other non-derivative financial assets/liabilities and variable rate financial debt, it is assumed that their carrying value reasonably approximates their fair values. Transfers Between Levels 1 and 2 Transfers of equity securities from Level 2 to Level 1, which occurred because disposal restrictions lapsed and deducting a discount for such restriction was no longer necessary, were €93 million in 2022 (2021: €1.030 million), while transfers from Level 1 to Level 2 did not occur at all. Level 3 Fair Value Disclosures The following table shows the reconciliation of fair values from the opening to the closing balances for our unlisted equity securities and call options on equity shares classified as Level 3 fair values: Reconciliation of Level 3 Fair Values | | | | | € millions | | 2022 | | 2021 | 1/1 | | 4,881 | | 2,508 | Transfers | | | | | Into Level 3 | | 0 | | 0 | Out of Level 3 | | -25 | | -455 | Purchases | | 522 | | 1,076 | Sales | | -43 | | -852 | Gains/losses | | | | | Included in financial income, net | | -789 | | 2,348 | Included in exchange differences in other comprehensive income | | 337 | | 256 | 12/31 | | 4,883 | | 4,881 | Change in unrealized gains/losses in profit or loss for equity investments held at the end of the reporting period | | -788 | | 1,789 |
Transfers out of Level 3 are due to initial public offerings of the respective investees or distributions in kind in the form of listed investees. Changing the unobservable inputs to reflect reasonably possible alternative assumptions would not have a material impact on the fair values of our unlisted equity securities held as FVTPL as at the reporting date.
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