Most interest rate and foreign currency exchange rate derivatives used by VINCI are designated as hedging instruments. Hedge accounting is applicable if the conditions provided for in IFRS 9 are satisfied:
Changes in fair value from one period to the next are recognised differently depending on whether the instrument is designated for accounting purposes as:
The Group applies the permitted or required provisions of IFRS 9 as regards the treatment of hedging costs of all instruments qualifying for hedge accounting.
A fair value hedge enables the exposure to the risk of a change in the fair value of a financial asset, a financial liability or unrecognised firm commitment to be hedged. It involves mainly receive fixed/pay floating interest rate swaps.
Changes in the fair value of the hedging instrument are recognised in the income statement for the period. The change in value of the hedged item attributable to the hedged risk is also recognised symmetrically in the income statement for the period (and adjusts the value of the hedged item). Except for the ineffective part of the hedge, these two revaluations offset each other within the same line items in the income statement.
A cash flow hedge allows exposure to variability in future cash flows associated with an existing asset or liability, or a highly probable forecast transaction, to be hedged. It involves mainly receive floating/pay fixed interest rate swaps.
Changes in the fair value of the hedging instrument are recognised under “Other comprehensive income” (OCI) for the effective portion and in the income statement for the period for the ineffective portion. Gains or losses accumulated under equity (OCI) are taken to profit or loss under the same line item as the hedged item – i.e. under “Operating income and expenses” for cash flows from operations and under “Financial income and expense” otherwise – when the hedged cash flow occurs.
If the hedging relationship is disqualified because it is no longer considered effective, the cumulative gains or losses in respect of the hedging instrument are retained in equity (OCI) and reclassified in the income statement as and when the hedged cash flows occur, with subsequent changes in fair value recorded directly in the income statement. If the future cash flow is no longer expected, the gains and losses previously recognised in equity (OCI) are recognised in the income statement.
A net investment hedge consists of hedging the exchange rate risk relating to the equity of an investment in a consolidated subsidiary outside of the eurozone. Changes in the value of the hedging instrument are recorded in equity under “Currency translation differences” for the effective portion. The portion of the changes in the value of the hedging instrument regarded as ineffective is recognised in the cost of net financial debt. Currency translation differences relating to changes in the value of the hedging instrument are recognised in the income statement when the foreign entity in which the initial investment was made leaves the consolidation scope.
Derivative financial instruments that are not designated as hedging instruments are reported in the balance sheet at fair value and changes in their fair value are recognised in the income statement.
Cross currency swaps are regarded as interest rate instruments where they are designated as fair value or cash flow hedges for accounting purposes, or as foreign exchange instruments in other cases.
At the balance sheet date, the fair value of derivative financial instruments broke down as follows:
| 31/12/2021 | 31/12/2020 | |||||||
|---|---|---|---|---|---|---|---|---|
| (in € millions) | Balance sheet item | Note | Asset | Liability | Fair value (*) | Asset | Liability | Fair value (*) |
| Derivatives related to net financial debt | ||||||||
| Interest rate derivatives: fair value hedges | 27.1.2 | 731 | 164 | 567 | 1 281 | 46 | 1,235 | |
| Interest rate derivatives: cash flow hedges | 27.1.2 | - | 141 | (141) | - | 323 | (323) | |
| Interest rate derivatives not designated as hedges | 27.1.3 | 33 | 31 | 2 | 57 | 55 | 3 | |
| Interest rate derivatives | Net financial debt | 764 | 335 | 429 | 1,339 | 423 | 915 | |
| Foreign currency exchange rate derivatives: fair value hedges |
27.2 | - | - | - | - | - | - | |
| Foreign currency exchange rate derivatives: cash flow hedges |
27.2 | 6 | 2 | 4 | 1 | - | 1 | |
| Foreign currency exchange rate derivatives: hedges of net foreign investments |
27.2 | 2 | 143 | (142) | 27 | 12 | 16 | |
| Foreign currency exchange rate derivatives not designated as hedges | 27.2 | 4 | 23 | (19) | 12 | 6 | 6 | |
| Foreign currency exchange rate derivatives | Net financial debt | 12 | 168 | (156) | 41 | 18 | 23 | |
| Other derivative | Net financial debt | 91 | 432 | (341) | 71 | 312 | (241) | |
| Derivatives related to WCR | ||||||||
| Foreign currency exchange rate derivatives: fair value hedges | 27.2 | 2 | 6 | (4) | 9 | 4 | 5 | |
| Foreign currency exchange rate derivatives: cash flow hedges | 27.2 | 1 | 2 | (2) | 2 | 2 | - | |
| Foreign currency exchange rate derivatives | Working capital requirement | 3 | 9 | (6) | 10 | 6 | 5 | |
| Other derivatives | Working capital requirement | 26 | - | 25 | - | - | - | |
| Total derivative financial instruments | 894 | 944 | (50) | 1,461 | 759 | 702 | ||
(*) Fair value includes interest accrued but not matured of €129 million at 31 December 2021 and €117 million at 31 December 2020.
