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Derivative Financial Instruments and Risk Management Policies (Tables)
 12 Months Ended
Dec. 31, 2019
Financial Instruments [Abstract]  
Schedule of Sensitivity Analysis
The following table illustrates the sensitivity of foreign currency gains and sensitivity losses and of equity to changes in exchange rates, where: a) in calculating the impact on the income statement, the exchange rate position affecting the income statement at the end of 2019 was considered constant during 2020; b) in calculating the impact on equity, only monetary items have been considered, namely debt and derivatives such as hedges of net investment and loans to subsidiaries related to the investment, breakdown of which is considered constant in 2020 and identical to that existing at the end of 2019. In both cases, Latin American currencies are assumed to change their value against the dollar and the rest of the currencies against the euro by 10%.
Millions of euros
 
 

 

Currency
Change
Impact on the consolidated income statement

Impact on consolidated equity

All currencies vs EUR
10%
3

(615
)
USD
10%
2

(114
)
European currencies vs EUR
10%
1

(375
)
Latin American currencies vs USD
10%
—

(126
)
All currencies vs EUR
(10%)
(3
)
615

USD
(10%)
(2
)
114

European currencies vs EUR
(10%)
(1
)
375

Latin American currencies vs USD
(10%)
—

126

Millions of euros
Change in basis points (bp)
Impact on consolidated income statement

Impact on consolidated equity

 +100bp
(87
)
(642
)
 -100bp
85

642
Schedule of Financial Results
The breakdown of the financial results recognized in 2019, 2018 and 2017 is as follows:

Millions of euros
2019

2018

2017

Interest income
291

234

638

Dividends received
15

15

16

Other financial income
120

826

17

Subtotal
426

1,075

671

Changes in fair value of asset derivatives at fair value through profit or loss
353

202

35

Changes in fair value of liability derivatives at fair value through profit or loss
(376
)
(190
)
(97
)
Changes in the fair value of debt instruments and other assets at fair value to profit or loss
(3
)
(3
)
—

Transfer from equity of results of cash flow hedges - future cash flows that are not longer expected to happen
—

(7
)
—

Transfer from equity to profit and loss from available-for-sale assets and others
n.a.

n.a.

(33
)
(Loss)/Gain on fair value hedges
604

(223
)
(150
)
Gain/(loss) on adjustment to items hedged by fair value hedges
(540
)
271

194

Subtotal
38

50

(51
)
Interest expenses
(1,903
)
(1,715
)
(2,137
)
Ineffective portion of cash flow hedges
(20
)
(29
)
(10
)
Accretion of provisions and other liabilities
(334
)
(410
)
(453
)
Other financial expenses
(160
)
(203
)
(310
)
Subtotal
(2,417
)
(2,357
)
(2,910
)
Net finance costs excluding foreign exchange differences and hyperinflation adjustments
(1,953
)
(1,232
)
(2,290
)
n.a.: not applicable.


Schedule of Derivatives, Fair Value, and Expected Maturity
The detail of hedged items by fair value hedges at December 31, 2019 and December 31, 2018 are as follows:
December 31, 2019
 
Hedged items carrying amount
 
Accumulated amount in the hedged item adjusted by fair value hedge (*)
Millions of euros
Interest rate risk
Exchange rate risk
Interest rate and exchange rate risk
Total
 
Interest rate risk
Exchange rate risk
Interest rate and exchange rate risk
Total
Of which: accumulated amount of any hedge item that have cesased to be adjusted for gains and losses
Assets
—

474

3

477

 
—

1

—

1

—

Financial assets and other non-current assets
—

151

—

151

 
—

—

—

—

—

Receivables and other current assets
—

323

—

323

 
—

1

—

1

—

Other current financial assets
—

—

3

3

 
—

—

—

—

—

Liabilities
3,929

1,956

5,703

11,588

 
819

(6
)
774

1,587

152

Non-current financial liabilities
3,858

1,176

5,512

10,546

 
817

—

750

1,567

125

Payables and other non-current liabilities
—

99

—

99

 
—

—

—

—

—

Current financial liabilities
71

9

191

271

 
2

—

24

26

6

Payables and other current liabilities
—

672

—

672

 
—

(6
)
—

(6
)
21

(*) Accumulated amount adjusted by fair value hedge is shown with negative sign when it reduces the value (lowest liability or lowest asset) and vice versa.
The movement of the net position of derivatives during the years ended December 31, 2019 and December 31, 2018 is as follows:
Millions of euros

Movement in 2019

Movement in 2018

Opening balance of assets/(liabilities)
1,181

505

Financing payments
148

52

Financing proceeds
(153
)
(209
)
Interest (proceeds)/payments
(238
)
(126
)
Other (proceeds)/payments
5

(28
)
Fair value adjustments through other comprehensive income
357

999

Movements with counterparty in the income statement
646

2

Translation differences
(49
)
(70
)
Other movements
51

56

Closing balance of assets/(liabilities)
1,948

1,181

The evolutions of hedges in equity at December 31, 2019 and December 31, 2018 are as follows:
 
Derivate instruments
 
No derivate instruments
Total Gross amount

Tax effect

Total hedges in equity

 
Gains (losses) of cash flow hedges
Derivates - Net investment hedges

 
No Derivates - Net investment hedges

Millions of euros
Interest rate risk
Exchange rate risk
Exchange rate and interest rate risks
 
Balance at 12/31/2018
(295
)
(348
)
(78
)
1,535

 
(5
)
809

(249
)
560

Changes in the fair value registered in equity
(5
)
572

67

(260
)
 
(1
)
373

(100
)
273

Transfer to the initial value of hedged item
2

(4
)
(7
)
—

 
—

(9
)
3

(6
)
Transfer to the income statement of the period - the hedged future cash flows are no longer expected to happen
26

—

—

—

 
—

26

—

26

Transfer to the income statement of the period - the hedged item has affected profit or loss
124

(371
)
(295
)
73

 
—

(469
)
118

(351
)
Total translation differences
—

(1
)
—

1

 
—

—

—

—

Other movements
—

(4
)
3

—

 
—

(1
)
1

—

Balance at 12/31/2019
(148
)
(156
)
(310
)
1,349

 
(6
)
729

(227
)
502

Amounts remaining in equity for continuing hedges
(12
)
(188
)
(216
)
1,349

 
(6
)
927

 
 
Amounts remaining in equity from any hedging relationship for which hedge accounting is no longer applied
(136
)
32

(94
)
—

 
—

(198
)
 
 
Balance at 12/31/2019
(148
)
(156
)
(310
)
1,349

 
(6
)
729

 
 


The total amount of "Transfer to the income statements of the period - the hedged item has affected profit or loss" has impacted in financial results, reported under "Interest expenses" amounted to +166 million euros (+68 million euros in 2018), see detail of "Net finance costs excluding foreign exchange differences and hyperinflation adjustments" in this note, and in exchange differences amounted to +369 million euros (+645 million euros in 2018).
 
Derivate instruments
 
No derivate instruments
Total Gross amount

Tax effect

Total hedges in equity

 
Gains (losses) of cash flow hedges
Derivates - Net investment hedges

 
No Derivates - Net investment hedges

Millions of euros
Interest rate risk
Exchange rate risk
Exchange rate and interest rate risks
 
Balance at 12/31/2017
(394
)
(357
)
(179
)
1,502

 
—

572

(188
)
384

Changes in the fair value registered in equity
(52
)
584

392

33

 
(5
)
952

(243
)
709

Transfer to the initial value of hedged item
—

—

(1
)
—

 
—

(1
)
—

(1
)
Transfer to the income statement of the period - the hedged future cash flows are no longer expected to happen
7

—

—

—

 
—

7

(2
)
5

Transfer to the income statement of the period - the hedged item has affected profit or loss
144

(574
)
(290
)
—

 
—

(720
)
184

(536
)
Total translation differences
—

(1
)
—

—

 
—

(1
)
—

(1
)
Balance at 12/31/2018
(295
)
(348
)
(78
)
1,535

 
(5
)
809

(249
)
560

Amounts remaining in equity for continuing hedges
(176
)
(377
)
14

1,534

 
(5
)
990





Amounts remaining in equity from any hedging relationship for which hedge accounting is no longer applied
(119
)
29

(92
)
1

 
—

(181
)




Balance at 12/31/2018
(295
)
(348
)
(78
)
1,535

 
(5
)
809





The details of the ineffective portion of accounting hedges with impact on the income statement in 2019 and 2018 are as follows:
2019
Millions of euros
Changes in fair value of the hedging instrument

Changes in the fair value of hedges item for the hedged risk

Ineffective portion hedged registered in the income statement

Interest rate risk
315

336

(21
)
Cash flow hedges
(129
)
(108
)
(21
)
Fair value hedges
444

444

—

Exchange rate risk
242

238

4

Cash flow hedges
551

547

4

Net investment hedges
(309
)
(309
)
—

Interest rate and exchange rate risk
191

194

(3
)
Cash flow hedges
191

194

(3
)
Total
748

768

(20
)

2018
Millions of euros
Changes in fair value of the hedging instrument

Changes in the fair value of hedges item for the hedged risk

Ineffective portion hedged registered in the income statement

Interest rate risk
(53
)
(53
)
—

Cash flow hedges
(27
)
(27
)
—

Fair value hedges
(26
)
(26
)
—

Exchange rate risk
622

651

(29
)
Cash flow hedges
605

634

(29
)
Net investment hedges
17

17

—

Interest rate and exchange rate risk
377

377

—

Cash flow hedges
377

377

—

Total
946

975

(29
)
The evolution of cost of hedging in equity in 2019 and 2018 are as follows:
 
Exchange rate risk
Total gross amount


Tax effect


Total cost of hedging in equity


 
Forward element /CBS
Millions of euros
A time - period related hedge item

Balance at 12/31/2017
—

—

—

—

Changes in the fair value registered in equity
51

51

(13
)
38

Transfer to the income statement of the period - the hedged item has affected profit or loss
(2
)
(2
)
1

(1
)
Balance at 12/31/2018
49

49

(12
)
37

Changes in the fair value registered in equity
(14
)
(14
)
4

(10
)
Transfer to the income statement of the period - the hedged item has affected profit or loss
(4
)
(4
)
1

(3
)
Balance at 12/31/2019
31

31

(7
)
24

The breakdown of Telefónica’s detail of hedges and other derivative instruments at December 31, 2019 and December 31, 2018, their fair value at year-end and the expected maturity schedule is as set forth in the table below:


December 31, 2019
 
Notional amount - Maturities (*)
 
Book value of the derivative and no-derivative instruments (**)
Millions of euros
2020
2021
2022
Later
Total
 
Non-current asset
Current asset
Non-current liabilities
Current liabilities
Total
Derivate instruments of accounting hedges
(662
)
2,827

1,446

7,041

10,652

 
(2,676
)
(1,104
)
1,667

254

(1,859
)
Interest rate risk
677

(199
)
818

(1,605
)
(309
)
 
(584
)
(289
)
41

38

(794
)
Cash flow hedges
482

—

1,403

884

2,769

 
(8
)
(4
)
29

38

55

Fair value hedges
195

(199
)
(585
)
(2,489
)
(3,078
)
 
(576
)
(285
)
12

—

(849
)
Exchange rate risk
(2,331
)
1,038

400

6,033

5,140

 
(1,489
)
(389
)
1,339

148

(391
)
Cash flow hedges
1,587

1,102

686

6,033

9,408

 
(1,325
)
(348
)
1,337

37

(299
)
Fair value hedges
693

—

(286
)
—

407

 
(164
)
(21
)
—

15

(170
)
Net investments hedges
(4,611
)
(64
)
—

—

(4,675
)
 
—

(20
)
2

96

78

Interest rate and exchange rate risk
992

1,988

228

2,613

5,821

 
(603
)
(426
)
287

68

(674
)
Cash flow hedges
1,006

2,004

230

2,648

5,888

 
(549
)
(409
)
287

65

(606
)
Fair value hedges
(14
)
(16
)
(2
)
(35
)
(67
)
 
(54
)
(17
)
—

3

(68
)
Derivate instruments of no-accounting hedges
(3,798
)
(349
)
(774
)
(1,799
)
(6,720
)
 
(713
)
(337
)
691

270

(89
)
Other derivatives of interest rate
(1,501
)
(473
)
(774
)
(1,799
)
(4,547
)
 
(713
)
(316
)
688

146

(195
)
Other derivatives of exchange rate
(2,484
)
—

—

—

(2,484
)
 
—

(21
)
—

113

92

Other derivatives
187

124

—

—

311

 
—

—

3

11

14

Total derivative instruments
(4,460
)
2,478

672

5,242

3,932

 
(3,389
)
(1,441
)
2,358

524

(1,948
)
No derivatives instruments of accounting hedges (***)
—

59

234

720

1,013

 
—

—

1,043

—

1,043

Exchange rate risk
—

59

234

720

1,013

 
—

—

1,043

—

1,043

Fair value hedges
—

—

—

—

—

 
—

—

—

—

—

Net investments hedges
—

59

234

720

1,013

 
—

—

1,043

—

1,043

(*) For interest rate hedges, the positive amount is in terms of fixed “payment.” For foreign currency hedges, a positive amount means payment in functional vs. foreign currency.
(**) Positive amounts indicate payables.
(***) Of the hedging instruments that are not derivatives, 251 million euros correspond to "Loans and other debts" and 792 million euros to "Obligations and bonds" (see Note 18).
 
December 31, 2018
 
Notional amount - Maturities (*)
 
Book value of the derivative and no-derivative instruments (**)
Millions of euros
2019
2020
2021
Later
Total
 
Non-current asset
Current asset
Non-current liabilities
Current liabilities
Total
Derivate instruments of accounting hedges
(4,443
)
4,743

2,799

7,471

10,570

 
(1,950
)
(660
)
1,447

200

(963
)
Interest rate risk
(686
)
1,746

(299
)
(86
)
675

 
(398
)
(186
)
270

9

(305
)
Cash flow hedges
(607
)
1,567

46

1,269

2,275

 
(154
)
(2
)
228

4

76

Fair value hedges
(79
)
179

(345
)
(1,355
)
(1,600
)
 
(244
)
(184
)
42

5

(381
)
Exchange rate risk
(4,718
)
2,219

1,102

5,980

4,583

 
(835
)
(183
)
939

70

(9
)
Cash flow hedges
341

2,219

1,102

5,980

9,642

 
(834
)
(76
)
939

10

39

Fair value hedges
50

—

—

—

50

 
(1
)
(45
)
—

14

(32
)
Net investments hedges
(5,109
)
—

—

—

(5,109
)
 
—

(62
)
—

46

(16
)
Interest rate and exchange rate risk
961

778

1,996

1,577

5,312

 
(717
)
(291
)
238

121

(649
)
Cash flow hedges
962

801

2,001

1,736

5,500

 
(541
)
(291
)
238

121

(473
)
Fair value hedges
(1
)
(23
)
(5
)
(159
)
(188
)
 
(176
)
—

—

—

(176
)
Derivate instruments of no-accounting hedges
(4,318
)
(321
)
(531
)
(2,551
)
(7,721
)
 
(826
)
(262
)
840

30

(218
)
Other derivatives of interest rate
(3,571
)
(321
)
(531
)
(2,551
)
(6,974
)
 
(826
)
(128
)
830

3

(121
)
Other derivatives of exchange rate
(747
)
—

—

—

(747
)
 
—

(134
)
—

25

(109
)
Other derivatives
—

—

—

—

—

 
—

—

10

2

12

Total derivative instruments
(8,761
)
4,422

2,268

4,920

2,849

 
(2,776
)
(922
)
2,287

230

(1,181
)
No derivatives instruments of accounting hedges (***)
—

56

56

858

970

 
—

—

996

—

996

Exchange rate risk
—

56

56

858

970

 
—

—

996

—

996

Fair value hedges
—

—

—

—

—

 
—

—

—

—

—

Net investments hedges
—

56

56

858

970

 
—

—

996

—

996

(*) For interest rate hedges, the positive amount is in terms of fixed “payment.” For foreign currency hedges, a positive amount means payment in functional vs. foreign currency.
(**) Positive amounts indicate payables.
(***) Of the hedging instruments that are not derivatives, 243 million euros correspond to "Loans and other debts" and 753 million euros to "Obligations and bonds" (see Note 18).