Notes to the consolidated financial statements
Download note 23 in XLS23.Financial hedges
As at the date of preparing these consolidated financial statements, the Group used hedge accounting to hedge its cash flows.
Hedging relationship
Elimination of the risk of fluctuation in the cash flows generated from the loan portfolio denominated in PLN with floating rate resulting from fluctuations in market interest rates during the period hedged. The Group uses IR swaps to hedge the IR risk resulting from fluctuations in the cash flows.
Hedged risk
Interest rate risk.
Hedging instruments
IRS which the Group uses to pay the coupon based on the 3M WIBOR and receives a coupon based on a fixed rate on the nominal amount of the transaction.
Hedged item
Loan portfolio denominated in PLN indexed to the floating rate based on 3M WIBOR.
Periods when cash flows and their effect on profit/loss are expected
From 1 April 2015 to 3 April 2017.
Measurement of hedge effectiveness
In order to measure effectiveness of the hedges the Group uses the “Hypothetical Derivative Approach”, i.e. it compares changes in the fair value of the actual hedging transaction with the fair value of the corresponding derivative transaction whose value is aligned with the value of the hedged item.
| Hedging instruments - fair value | Balance as at | Balance as at | ||
|---|---|---|---|---|
| 31 December 2015 | 31 December 2014 | |||
| Assets | Liabilities | Assets | Liabilities | |
| Derivative instruments | PLN’000 | PLN’000 | PLN’000 | PLN’000 |
| IRS | 1 140 | 0 | 0 | 0 |
| Total | 1 140 | 0 | 0 | 0 |
The face value of hedging instruments with the time to maturity as at 31 December 2015
| Balance as at | Up to 1 month | From 1 to 3 months | From 3 months to 1 year | From 1 year to 5 years | Over 5 years | Total |
|---|---|---|---|---|---|---|
| 31 December 2015 | ||||||
| PLN’000 | PLN’000 | PLN’000 | PLN’000 | PLN’000 | PLN’000 | |
| IRS | ||||||
| purchase | 0 | 0 | 0 | 140 000 | 0 | 140 000 |
| sale | 0 | 0 | 0 | 140 000 | 0 | 140 000 |
Effect of cash flow hedges on net comprehensive income
| Period | |
|---|---|
| from 1 January 2015 | |
| to 31 December 2015 | |
| PLN’000 | |
| Revaluation reserve – change in the fair value of cash flow hedges, including: | 25 |
| income tax | (6) |
| Interest expense for derivative instruments designated as cash flow hedges, including: | (104) |
| income tax | 24 |
| Ineffective portion of cash flow hedges recognized in the income statement, including: | 44 |
| income tax | (10) |
| Effect of cash flow hedges on net comprehensive income | (35) |