Arla Foods Consolidated Annual Report 2021
106
Arla Foods Consolidated Annual Report 2021 / Consolidated Financial Statements / Notes
Funding
4.5 FINANCIAL INSTRUMENTS
Funding
4.6 SALE AND REPURCHASE AGREEMENTS
Contents
III
Risk mitigation
Methods and assumptions applied when measuring fair
values of financial instruments:
Bonds and shares
The fair value is determined using the quoted prices in
an active market.
Non-option derivatives
The fair value is calculated using discounted cash flow
models and observable market data. The fair value is
determined as a termination price and, consequently,
the value is not adjusted for credit risks.
Option instruments
The fair value is calculated using option models and
observable market data, such as option volatilities.
The fair value is determined as a termination price and,
consequently, the value is not adjusted for credit risks.
Fair value hierarchy
Level 1: Fair values measured using unadjusted
quoted prices in an active market
Level 2: Fair values measured using valuation
techniques and observable market data
Level 3: Fair values measured using valuation
techniques and observable as well as significant
non-observable market data.
ATTRACTIVE FUNDING ARRANGEMENT
The group has invested in listed Danish mortgage
bonds underlying its mortgage debt. By entering into
a sale and repurchase agreement on the mortgage
bonds, the group is able to archieve a lower interest rate
compared to current market interest rates on mortgage
debt. The mortgage bonds are measured at fair value
through other comprehensive income.
Table 4.6 Transfer of financial assets
(EURM)
The proceeds from these bonds create a repurchase
obligation which is recognised in short-term borrowings.
In addition to mortgage bonds, the group holds other
securities with a carrying amount of EUR 5 million.
2021
Mortgage bonds
Repurchase liabilities
Net position
2020
Carrying
value
Notional
Fair
amount
value
398
394
398
-385
-387
-385
13
7
13
Mortgage bonds
409
405
409
Repurchase liabilities
-398
-397
-398
Net position
11
8
11View entire presentation