Page 33 - KELAG Annual Report 2017
P. 33

Group currently does not use hedge accounting in the energy business. The income and expenses
                                      from measurement at fair value are netted for each trading partner and reported in revenue and
                                      in cost of materials in the income statement.

                                      For  own  use contracts,  i.e., contracts entered  for  the  purpose of  receiving  or  delivering  non-
                                      financial items in accordance with the expected purchase, sale or usage requirements of the
                                      KELAG Group are recognised not as derivative financial instruments but as pending transactions
                                      (own use exemption). If such an own use contract is onerous as defined by IAS 37, a provision for
                                      losses from pending transactions must be created. If the contracts contain embedded derivatives,
                                      these and the host contracts are recognised separately unless the economic characteristics and
                                      risks are closely linked to those of the host contract. Reassessment only occurs if there is a change
                                      in the terms of the contract that significantly modifies the cash flows that would otherwise have
                                      occurred.

                                      All  trading  transactions  that  optimise  energy  production  constitute  derivative  financial
                                      instruments as defined by IAS 39. They are reported in other assets if they have a positive fair value
                                      and in other liabilities if they have a negative fair value.

                                      The fair values of the derivatives used in the KELAG Group (forwards) can be measured reliably as
                                      of each reporting date. The measurement of derivative financial instruments relating to energy is
                                      based  on  market  prices  and  a  forward  price  curve  derived  from  market  prices.  As  already
                                      mentioned,  in  the  field  of  gas,  listings  for  the  corresponding  virtual  trading  points  are  used
                                      directly for measurement.

                                      The results of fair value measurement are recorded in the corresponding energy-industry-related
                                      income and expense items. The respective total result is part of the operating result.

                                      Positive and negative fair values are presented separately. If a master agreement is in place with a
                                      counterparty that contains a netting arrangement, the positive and negative fair values of the
                                      transactions are netted for accounting purposes.

                                      Energy trading transactions that are settled physically and allocable to the value-added activities
                                      in the energy industry are recognised separately, while pure trading transactions and thus price
                                      optimisation transactions that are settled by netting them with other transactions (such as an
                                      offsetting transaction) are presented on a net basis. Contracts that satisfy the own use exemption
                                      in IAS 39 are always allocable to the value-added activities in the energy industry.
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