Novo Nordisk Annual Report 2021
Contents
Introducing Novo Nordisk
Strategic Aspirations
Key risks Management
Consolidated statements
Additional information
Novo Nordisk Annual Report 2021 71
4.4 Derivative financial instruments
Derivative financial instruments
2021
Contract
amount
Positive
fair value
Negative
Contract
fair value
DKK million
Forward contracts USD¹
Forward contracts CNH, JPY, GBP and CAD
Forward contracts, cash flow hedges
at year-end at year-end at year-end
42,351
17
1,667
29,110
amount
at year-end at year-end
1,658
Positive
fair value
Negative
fair value
at year-end
9,032
32
122
10,291
191
47
51,383
49
1,789
39,401
1,849
47
Forward contracts USD²
30,909
1,607
284
19,411
379
1,307
Forward contracts CNH, CAD, EUR, GBP and JPY
7,361
34
111
4,578
104
11
Forward contracts, fair value hedges
38,270
1,641
395
23,989
483
1,318
Total derivative financial instruments
89,653
1,690
2,184
63,390
2,332
1,365
Recognised in the income statement
1,641
395
483
1,318
Recognised in other comprehensive income
49
1,789
1,849
47
1. Average hedge rate for USD cash flow hedges is 628 at the end of 2021 and 640 at the end of 2020.
2. Average hedge rate for USD fair value hedges is 628 at the end of 2021 and 634 at the end of 2020.
2020
Accounting policies
On initiation of the contract, Novo Nordisk designates each derivative
financial contract that qualifies for hedge accounting as one of:
- hedges of the fair value of a recognised asset or liability (fair value hedge)
- hedges of the fair value of a forecast financial transaction
(cash flow hedge).
All contracts are initially recognised at fair value and subsequently
remeasured at fair value at the end of the reporting period.
Fair value hedges
Value adjustments of fair value hedges are recognised in the income
statement along with any value adjustments of the hedged asset or liability
that are attributable to the hedged risk.
Cash flow hedges
Value adjustments of the effective part of cash flow hedges are recognised
in other comprehensive income. The cumulative value adjustment of these
contracts is transferred from other comprehensive income to the income
statement when the hedged transaction is recognised in the income
statement.
The fair value of cash flow hedges at year-end 2021, loss of DKK 1,740 million,
has been recognised in other comprehensive income. In addition,
DKK 15 million in cash flow hedge losses on intangible asset purchases has
been incurred for a total 2021 other comprehensive impact of DKK 1,755
million. The DKK 15 million deferred loss was transferred directly from the
cash flow hedge reserve to the initial cost of the intangible assets.
The financial contracts are expected to impact the income statement within
the next 12 months, with deferred gains and losses on cash flow hedges
then being transferred to financial income or financial expenses. There is no
expected ineffectiveness at 31 December 2021, primarily because hedging
instruments match currencies of hedged cash flows.
Use of derivative financial instruments
The derivative financial instruments are used to manage the exposure to
foreign exchange risk. None of the derivatives are held for trading. Novo
Nordisk uses forward exchange contracts to hedge forecast transactions,
assets and liabilities.
Net investments in foreign subsidiaries are currently not hedged.
For cash flow hedges of foreign currency risk on highly probable non-
financial asset purchases, the cumulative value adjustments are transferred
directly from the cash flow hedge reserve to the initial cost of the asset when
recognised.
Discontinuance of cash flow hedging
When a hedging instrument expires or is sold, or when a hedge no longer
meets the criteria for hedge accounting, any cumulative gain or loss existing
in equity at that time remains in equity and is recognised when the forecast
transaction is ultimately recognised in the income statement. When a
forecast transaction is no longer expected to occur, the cumulative gain or
loss that was reported in equity is immediately transferred to the income
statement under financial income or financial expenses.
For additional disclosures on accounting policies for financial instruments
please refer to note 4.9.View entire presentation