In the voestalpine Group, trade receivables are sold monthly to various banks on a revolving basis. In this context, there are four different types of factoring agreements.
In the first type of factoring agreement, trade receivables totaling EUR 799.0 million (March 31, 2017: EUR 611.1 million) were sold to various banks. Receivables covered by credit insurance were assigned to banks in an amount corresponding to 100% of the nominal value, with the acquiring banks assuming the risk of default. Any claims arising from credit insurance are assigned to the acquiring bank. The Group company that is selling only assumes liability for default up to—generally—10% of the retention level under the credit insurance. On the reporting date, the maximum risk associated with liability for default was EUR 79.9 million (March 31, 2017: EUR 59.5 million). The liability for default corresponds to the theoretical maximum loss. The probability of needing to fall back on this liability is extremely low. The fair value of this risk is assessed at EUR 0.3 million (March 31, 2017: EUR 0.0 million). The receivables are fully derecognized in accordance with the regulations of IAS 39 on the basis of the cessions of the essential opportunities and risks and on the basis of the transfer of the right of use to the acquiring party.
In the second type of factoring agreement, uninsured trade receivables of EUR 163.6 million (March 31, 2017: EUR 117.1 million) are sold. The purchasing bank assumes 100% of the risk of default. All of the receivables are fully derecognized. With the exception of the capitalized service fee mentioned below for administration of receivables, there is no ongoing commitment.
In the third type of factoring agreement (introduced in October 2014), both insured and uninsured trade receivables of EUR 131.7 million (March 31, 2017: EUR 124.3 million) are sold. Any claims arising from credit insurance are assigned to the acquiring bank. At the time of the sale of the receivable, loss reserves of 0.9% and dilution reserves of 1.6% (with reference to the sold receivables) are deducted from the purchase price. The dilution reserves totaling EUR 2.1 million (March 31, 2017: EUR 2.0 million) for receivables sold on the reporting date are for payment of discounts, bonuses, etc. and are posted as other receivables. The carrying amount corresponds to the fair value. A loss reserve to cover any defaults to the amount of EUR 1.2 million (March 31, 2017: EUR 1.1 million) for receivables sold on the reporting date was posted as an expenditure, which is reversed in the absence of any defaults. The theoretical maximum loss is limited to the loss reserve. The receivables are fully derecognized in accordance with the regulations of IAS 39 on the basis of the cessions of the essential opportunities and risks and on the basis of the transfer of the right of use to the acquiring party.
In the fourth type of factoring agreement, both insured and uninsured trade receivables of EUR 33.4 million (March 31, 2017: EUR 28.0 million) are sold. Any claims arising from credit insurance are assigned to the acquiring bank. For any bad debts, a “first loss reserve account” was funded in the amount of EUR 0.2 million for 12 months by the selling Group company. The first loss reserve account was EUR 0.2 million (March 31, 2017: EUR 0.2 million) on the reporting date and was reported as cash. The carrying amount corresponds to the fair value. The theoretical maximum loss is limited to the amount of the “first loss reserve account.” Because of the transfer of significant rewards and risks and the transition of control to the purchaser, the receivables were fully derecognized pursuant to the provisions of IAS 39.
In all of the types of factoring agreements, the payments received from customers during the period between the last sale of receivables and the reporting date are recognized on an accrual basis under other short-term financial liabilities in the voestalpine Group.
Administration of receivables for all types of factoring contracts remains with the particular companies of the Group. For the receivables that were sold, as of March 31, 2018, a total service fee of 0.15% of the sold amount of receivables of EUR 1.7 million (March 31, 2017: EUR 1.3 million) was recorded as other provisions. The carrying amount corresponds to the fair value of the ongoing commitment.
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