Aer Lingus 2014 Annual Report Download - page 105

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103
The following table presents the Group's assets and liabilities that are measured at fair value at 31 December 2013.
Level 1
Level 2
Level 3
Total
€'000
€'000
€'000
€'000
Assets
Derivative financial instruments
-
11,393
-
11,393
Liabilities
Derivative financial instruments
-
14,489
-
14,489
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by
using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as
possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included
in Level 2.
Specific valuation techniques used to value financial instruments include:
The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable
yield curves.
The fair value of forward foreign exchange contracts is determined using forward exchange rates at the statement of financial
position date, with the resulting value discounted back to present value
The fair value of fuel price swaps is determined using forward fuel prices at the reporting date, with the resulting value
discounted back to present value.
5.4 Master netting arrangements
There are no financial assets and financial liabilities netted and offset against each other on the statement of financial position at the
reporting dates. However, certain financial assets and financial liabilities are subject to enforceable master netting arrangements which
could create a potential right of offset within the scope of the amendment to IFRS 7, Offsetting Financial Assets and Financial Liabilities.
These arrangements are contained within ISDA (International Swaps and Derivatives Association) Master Agreements ("ISDA's") and relate
to derivative financial instruments only.
Each party to the master netting arrangements has a right of offset between financial assets and financial liabilities where there is an early
termination event such as a default or change of ownership of the counterparty. Such events of default include failure to perform obligations
or to make prompt payment when due. The right of offset is only enforceable in those situations and as such does not meet the criteria for
offset in the statement of financial position, nor is there any intention by the Group or its counterparties to settle on a net basis or to realise
the assets and settle the liabilities simultaneously.
The carrying value of derivative financial instruments in the statement of financial position would potentially be reduced by approximately
€21.9 million (2013: €4.7 million) if all master netting arrangements were enforced (as reflected in the following tables):
Derivative Financial Assets
As at 31 December 2014
Related Amounts Not Offset
Gross amounts
of recognised
Financial
Assets
Gross amounts
of recognised
financial
liabilities set
off in the
balance sheet
Net amounts of
financial assets
presented in
balance sheet
Financial
Instruments
Cash
Collateral
Received
Net Amount
€'000's
€'000's
€'000's
€'000's
€'000's
€'000's
Derivative Financial Assets
30,097
-
30,097
(21,926)
-
8,171
As at 31 December 2013
Related Amounts Not Offset
Gross amounts
of recognised
Financial
Assets
Gross amounts
of recognised
financial
liabilities set
off in the
balance sheet
Net amounts of
financial assets
presented in
balance sheet
Financial
Instruments
Cash
Collateral
Received
Net Amount
€'000's
€'000's
€'000's
€'000's
€'000's
€'000's
Derivative Financial Assets
11,393
-
11,393
(4,664)
-
6,729