Merck 2014 Annual Report Download - page 245

240 CONSOLIDATED FINANCIAL STATEMENTS → Notes to the Group accounts
Net gains and losses on financial instruments mainly include
measurement results from currency translation, fair value adjust-
ments, impairments and reversals of impairments as well as the
recognition of premiums and discounts. Dividends and interest
are
not recognized in the net gains and losses on financial instru-
ments, except for dividends and interest in the category “held for
trading”. The category “held
for trading” only includes derivatives
not in a hedging relationship.
The net gains and losses on financial instruments by category
on the reporting date were as follows:
Net gains or losses
€ million
2014 Interest Impairments
Reversals of
impairment
Fair value
adjustments
Disposal gains / losses
Financial instrument of the category
Held for trading – – – – 90.8 –
Held to maturity 1.4 – – – –
Loans and receivables 18.2 – 41.9 41.8 – –
Available-for-sale 10.0 – 4.4 – – 0.2
Other liabilities –141.4 – – – –
Net gains or losses
€ million
2013 Interest Impairments
Reversals of
impairment
Fair value
adjustments
Disposal gains / losses
Financial instrument of the category
Held for trading – – – 131.7 –
Held to maturity 2.5 – – – –
Loans and receivables 10.3 – 47.2 42.1 – –
Available-for-sale 15.1 – 4.1 – – 1.6
Other liabilities –163.3 – – – –
In 2014, foreign exchange gains of €53.3 million resulting from
receivables and payables in operating business, their economic
hedging, as well as hedging of forecast transactions in operating
business were recorded (2013: gains of €26.0 million). Foreign
exchange losses of €– 13.0 million resulting from financial bal-
ance sheet items, their economic hedging as well as fair value
fluctuations of option contracts to hedge forecast transactions
were recorded (2013: losses of €– 4.3 million).
The fair value of financial assets and liabilities is based on the
official market prices and market values quoted on the balance
sheet date (Level 1 assets and liabilities) as well as mathematical
calculation models with inputs observable in the market on the
balance sheet date (Level 2 assets and liabilities). Level 1 assets
comprise stocks and bonds and are classified as “available-for-
sale”, Level 1 liabilities comprise issued bonds and are classified as
“other liabilities”. Level 2 assets and liabilities are primarily liabil-
ities to banks classified as “other liabilities”, interest-bearing secu-
rities classified as “available-for-sale” as well as derivatives with
and without hedging relationships. The fair value of interest-bear-
ing securities is determined by discounting future cash flows using
market interest rates. The fair value measurement of forward ex-
change contracts and currency options uses spot and forward rates
as well as foreign exchange volatilities applying recognized math-
ematical principles. The fair value of interest rate swaps is deter-
mined with standard market valuation models using interest rate
curves available in the market.