Notes on financial instruments

The carrying amount of the financial assets and liabilities represents an adequate approximation of the fair value if there is no difference between the fair value and the carrying amount.

Financial liabilities measured at amortized cost, excluding bonds issued, fall under Level 2. The valuation is performed using the discounted cash flow method, where the input parameters for the calculation of the market values are the foreign exchange rates, interest rates, and credit spreads observable on the market. Based on the input parameters, the fair values are calculated by discounting the estimated future cash flows at typical market interest rates.

Bonds issued are measured using Level 1 inputs according to the quoted price as of the reporting date.

The table below analyzes financial assets and financial liabilities that are measured at fair value on a recurring basis. These measurements are based on a fair value hierarchy that categorizes the inputs for the valuation methods used to measure fair value into three levels. The three levels are defined as follows:

Derivative transactions (Level 2) are measured using the discounted cash flow method. This entails determining the value that would be realized if the hedging position were sold. The observable currency exchange rates and raw materials prices as well as the interest rates are the input for the calculation of fair values. The fair values are calculated based on the inputs by discounting expected future cash flows at typical market interest rates.

The voestalpine Group recognizes reclassifications between different levels of the fair value hierarchy as of the end of the reporting period in which the change occurred. No reclassifications were made in the business year 2018/19 and from April 1, 2019, through September 30, 2019.

The reconciliation of Level 3 financial assets measured at fair value from the opening balance to the closing balance is depicted as follows:

Level 3 includes the investment in Energie AG Oberösterreich that is measured at fair value as “FVTPL.” The fair value of this company can be reliably determined based on the valuation performed once a year for Energie AG Oberösterreich as a whole and taking into account all relevant information.

Significant sensitivities in the determination of fair values can result from changes in the underlying market data of comparable entities and in the input factors used to determine the net present value (in particular, discount rates, long-term forecasts, plan data, etc.).

The receivables in this portfolio are sold monthly on a rolling basis as part of the Group’s factoring programs. The results attributable to this portfolio are immaterial.

The credit risk associated with the respective debtor is the most important factor in the fair value determination of the portfolio entitled “Trade and other receivables earmarked for factoring.” Hence any increase/decrease by 1% in the established default rates would result in a change in the fair value of this portfolio in the same amount; as a rule, however, the fair value change is disproportionately low, because credit insurance has been purchased for material portions of the portfolio.