Disclosures on financial instruments

Carrying amounts, amounts recognized, and fair values by class and measurement category

millions of €

 

 

 

 

 

 

 

 

 

 

 

 

Amounts recognized in the statement of financial position in accordance with IFRS 9

 

 

 

 

Measure­ment category in accordance with IFRS 9

Carrying amount
Sept. 30,
2019

Amortized cost

Fair value through other compre­hensive income without recycling to profit or loss

Fair value through other compre­hensive income with recycling to profit or loss

Fair value through profit or loss

Amounts recognized in the statement of financial position in accordance with
IFRS 16

Fair value Sept. 30, 2019a

 

a

The exemption provisions under IFRS 7.29 were applied for disclosures on specific fair values.

ASSETS

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

AC

6,461

6,461

 

 

 

 

 

Trade receivables

 

 

 

 

 

 

 

 

 

At amortized cost

AC

4,524

4,524

 

 

 

 

 

At fair value through other comprehensive income

FVOCI

5,393

 

 

5,393

 

 

5,393

 

At fair value through profit or loss

FVTPL

3

 

 

 

3

 

3

 

Other financial assets

 

 

 

 

 

 

 

 

 

Originated loans and other receivables

 

 

 

 

 

 

 

 

At amortized cost

AC

3,711

3,711

 

 

 

 

3,751

 

Of which: collateral paid

AC

6

6

 

 

 

 

 

 

Of which: publicly funded projects

AC

1,287

1,287

 

 

 

 

 

 

At fair value through other comprehensive income

FVOCI

0

 

 

0

 

 

 

 

At fair value through profit or loss

FVTPL

120

 

 

 

120

 

120

 

Equity instruments

 

 

 

 

 

 

 

 

 

At fair value through other comprehensive income

FVOCI

324

 

324

 

 

 

324

 

Derivative financial assets

 

 

 

 

 

 

 

 

 

Derivatives without a hedging relationship

FVTPL

881

 

 

 

881

 

881

 

Of which: termination rights embedded in bonds issued

FVTPL

633

 

 

 

633

 

633

 

Of which: energy forward agreements embedded in contracts

FVTPL

7

 

 

 

7

 

7

 

Derivatives with a hedging relationship

n.a.

2,046

 

 

307

1,739

 

2,046

 

Lease assets

n.a.

186

 

 

 

 

186

 

 

Cash and cash equivalents and trade receivables directly associated with non-current assets and disposal groups held for sale

AC

0

0

 

 

 

 

 

 

Equity instruments within non-current assets and disposal groups held for sale

FVOCI

119

 

119

 

 

 

119

 

LIABILITIES

 

 

 

 

 

 

 

 

 

Trade payables

AC

8,896

8,896

 

 

 

 

 

Bonds and other securitized liabilities

AC

54,719

54,719

 

 

 

 

58,978

 

Liabilities to banks

AC

5,881

5,881

 

 

 

 

5,929

 

Liabilities to non-banks from promissory note bonds

AC

357

357

 

 

 

 

448

 

Other interest-bearing liabilities

AC

5,253

5,253

 

 

 

 

5,277

 

Of which: collateral received

AC

1,759

1,759

 

 

 

 

 

 

Other non-interest-bearing liabilities

AC

1,472

1,472

 

 

 

 

 

 

Lease liabilities

n.a.

20,314

 

 

 

 

20,314

 

 

Finance lease liabilities

n.a.

n.a.

 

 

 

 

 

 

 

Derivative financial liabilities

 

 

 

 

 

 

 

 

 

Derivatives without a hedging relationship

FVTPL

325

 

 

 

325

 

325

Of which: options granted to third parties for the purchase of shares in subsidiaries and associates

FVTPL

7

 

 

 

7

 

7

 

Of which: energy forward agreements embedded in contracts

FVTPL

101

 

 

 

101

 

101

 

Derivatives with a hedging relationship

n.a.

1,650

 

 

1,631

19

 

1,650

 

Trade payables directly associated with non-current assets and disposal groups held for sale

AC

0

0

 

 

 

 

 

 

Of which: aggregated by measurement category in accordance with IFRS 9

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Financial assets at amortized cost

AC

14,696

14,696

 

 

 

 

3,751

Financial assets at fair value through other comprehensive income with recycling to profit or loss

FVOCI

5,393

 

 

5,393

 

 

5,393

 

Financial assets at fair value through other comprehensive income without recycling to profit or loss

FVOCI

443

 

443

 

 

 

443

 

Financial assets at fair value through profit or loss

FVTPL

1,004

 

 

 

1,004

 

1,004

 

LIABILITIES

 

 

 

 

 

 

 

 

 

Financial liabilities at amortized cost

AC

76,578

76,578

 

 

 

 

70,632

Financial liabilities at fair value through profit or loss

FVTPL

325

 

 

 

325

 

325

 

Carrying amounts, amounts recognized, and fair values by class and measurement category

millions of €

 

 

 

 

 

 

 

 

 

 

 

 

Amounts recognized in the statement of financial position in accordance with IFRS 9

 

 

 

 

Measure­ment category in accordance with IFRS 9

Carrying amount Dec. 31, 2018

Amortized cost

Fair value through other compre­hensive income without recycling to profit or loss

Fair value through other compre­hensive income with recycling to profit or loss

Fair value through profit or loss

Amounts recognized in the statement of financial position in accordance with
IAS 17

Fair value Dec. 31, 2018a

 

a

The exemption provisions under IFRS 7.29 were applied for disclosures on specific fair values.

ASSETS

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

AC

3,679

3,679

 

 

 

 

 

 

Trade receivables

 

 

 

 

 

 

 

 

 

At amortized cost

AC

4,280

4,280

 

 

 

 

 

 

At fair value through other comprehensive income

FVOCI

5,703

 

 

5,703

 

 

5,703

 

At fair value through profit or loss

FVTPL

5

 

 

 

5

 

5

 

Other financial assets

 

 

 

 

 

 

 

 

 

Originated loans and other receivables

 

 

 

 

 

 

 

 

 

At amortized cost

AC

2,982

2,982

 

 

 

 

3,013

 

Of which: collateral paid

AC

299

299

 

 

 

 

 

 

Of which: publicly funded projects

AC

 

 

 

 

 

 

 

 

At fair value through other comprehensive income

FVOCI

0

 

 

 

 

 

0

 

At fair value through profit or loss

FVTPL

103

 

 

 

103

 

103

 

Equity instruments

 

 

 

 

 

 

 

 

 

At fair value through other comprehensive income

FVOCI

324

 

324

 

 

 

324

 

Derivative financial assets

 

 

 

 

 

 

 

 

 

Derivatives without a hedging relationship

FVTPL

597

 

 

 

597

 

597

 

Of which: termination rights embedded in bonds issued

FVTPL

99

 

 

 

99

 

99

 

Of which: energy forward agreements embedded in contracts

FVTPL

12

 

 

 

12

 

12

 

Derivatives with a hedging relationship

n.a.

273

 

 

5

268

 

273

 

Lease assets

n.a.

147

 

 

 

 

147

 

 

Cash and cash equivalents and trade receivables directly associated with non-current assets and disposal groups held for sale

AC

27

27

 

 

 

 

 

 

Equity instruments within non-current assets and disposal groups held for sale

FVOCI

34

 

34

 

 

 

34

 

LIABILITIES

 

 

 

 

 

 

 

 

 

Trade payables

AC

10,735

10,735

 

 

 

 

 

 

Bonds and other securitized liabilities

AC

49,033

49,033

 

 

 

 

51,736

 

Liabilities to banks

AC

5,710

5,710

 

 

 

 

5,749

 

Liabilities to non-banks from promissory note bonds

AC

497

497

 

 

 

 

578

 

Other interest-bearing liabilities

AC

1,878

1,878

 

 

 

 

1,927

 

Of which: collateral received

AC

404

404

 

 

 

 

 

 

Other non-interest-bearing liabilities

AC

1,608

1,608

 

 

 

 

 

 

Lease liabilities

n.a.

n.a.

 

 

 

 

 

 

 

Finance lease liabilities

n.a.

2,472

 

 

 

 

2,472

2,695

 

Derivative financial liabilities

 

 

 

 

 

 

 

 

 

Derivatives without a hedging relationship

FVTPL

242

 

 

 

242

 

242

 

Of which: options granted to third parties for the purchase of shares in subsidiaries and associates

FVTPL

10

 

 

 

10

 

10

 

Of which: energy forward agreements embedded in contracts

FVTPL

52

 

 

 

52

 

52

 

Derivatives with a hedging relationship

n.a.

836

 

 

486

350

 

836

 

Trade payables directly associated with non-current assets and disposal groups held for sale

AC

36

36

 

 

 

 

 

 

Of which: aggregated by measurement category in accordance with IFRS 9

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

Financial assets at amortized cost

AC

10,968

10,968

 

 

 

 

3,013

 

Financial assets at fair value through other comprehensive income with recycling to profit or loss

FVOCI

5,703

 

 

5,703

 

 

5,703

 

Financial assets at fair value through other comprehensive
income without recycling to profit or loss

FVOCI

358

 

358

 

 

 

358

 

Financial assets at fair value through profit or loss

FVTPL

705

 

 

 

705

 

705

 

LIABILITIES

 

 

 

 

 

 

 

 

 

Financial liabilities at amortized cost

AC

69,497

69,497

 

 

 

 

59,990

 

Financial liabilities at fair value through profit or loss

FVTPL

242

 

 

 

242

 

242

 

Trade receivables include receivables amounting to EUR 1.7 billion (December 31, 2018: EUR 1.7 billion) due in more than one year. The fair value generally equals the carrying amount.

Financial instruments measured at fair value

When determining the fair value, it is important to maximize the use of current inputs observable in liquid markets for the financial instrument in question and minimize the use of other inputs (e.g., historical prices, prices for similar instruments, prices on illiquid markets). A three-level measurement hierarchy is defined for these purposes. If prices quoted in liquid markets are available at the reporting date for the respective financial instrument, these will be used unadjusted for the measurement (Level 1 measurement). Other input parameters are then irrelevant for the measurement. One such example is shares and bonds that are actively traded on a stock exchange. If quoted prices on liquid markets are not available at the reporting date for the respective financial instrument, but the instrument can be measured using other inputs that are observable on the market at the reporting date, a Level 2 measurement will be applied. The conditions for this are that no major adjustments have been made to the observable inputs and no unobservable inputs are used. Examples of Level 2 measurements are collateralized interest rate swaps, currency forwards, and cross-currency swaps that can be measured using current interest rates or exchange rates. If the conditions for a Level 1 or Level 2 measurement are not met, a Level 3 measurement is applied. In such cases, major adjustments must be made to observable inputs or unobservable inputs must be used.

Financial instruments measured at fair value

millions of €

 

 

 

 

 

 

Sept. 30, 2019

 

 

 

 

 

 

 

 

Level 1

Level 2

Level 3

Total

 

ASSETS

 

 

 

 

 

Trade receivables

 

 

 

 

 

At fair value through other comprehensive income

 

 

5,393

5,393

 

At fair value through profit or loss

 

 

3

3

 

Other financial assets – Originated loans and other receivables

 

 

 

 

 

At fair value through other comprehensive income

 

 

 

 

 

At fair value through profit or loss

113

 

7

120

 

Equity instruments

 

 

 

 

 

At fair value through other comprehensive income

5

 

438

443

 

Derivative financial assets

 

 

 

 

 

Derivatives without a hedging relationship

 

241

640

881

 

Derivatives with a hedging relationship

 

2,046

 

2,046

 

LIABILITIES

 

 

 

 

 

Derivative financial liabilities

 

 

 

 

 

Derivatives without a hedging relationship

 

217

108

325

 

Derivatives with a hedging relationship

 

1,650

 

1,650

 

Financial instruments measured at fair value

millions of €

 

 

 

 

 

 

Dec. 31, 2018

 

 

 

 

 

 

 

 

Level 1

Level 2

Level 3

Total

 

ASSETS

 

 

 

 

 

Trade receivables

 

 

 

 

 

At fair value through other comprehensive income

 

 

5,703

5,703

 

At fair value through profit or loss

 

 

5

5

 

Other financial assets – Originated loans and other receivables

 

 

 

 

 

At fair value through other comprehensive income

 

 

 

 

 

At fair value through profit or loss

93

 

10

103

 

Equity instruments

 

 

 

 

 

At fair value through other comprehensive income

 

 

358

358

 

Derivative financial assets

 

 

 

 

 

Derivatives without a hedging relationship

 

486

111

597

 

Derivatives with a hedging relationship

 

273

 

273

 

LIABILITIES

 

 

 

 

 

Derivative financial liabilities

 

 

 

 

 

Derivatives without a hedging relationship

 

180

62

242

 

Derivatives with a hedging relationship

 

836

 

836

 

Of the equity instruments measured at fair value through other comprehensive income and recognized under other financial assets, the instruments presented in the different levels constitute separate classes of financial instruments. In each case, the fair values of the total volume of equity instruments recognized as Level 1 are the price quotations at the reporting date.

The listed bonds and other securitized liabilities are assigned to Level 1 or Level 2 depending on the market liquidity of the relevant instrument. Consequently, issues denominated in euros or U.S. dollars with relatively large nominal amounts are to be classified as Level 1, the rest as Level 2. The fair values of the instruments assigned to Level 1 equal the nominal amounts multiplied by the price quotations at the reporting date. The fair values of the instruments assigned to Level 2 are calculated as the present values of the payments associated with the debts, based on the applicable yield curve and Deutsche Telekom’s credit spread curve for specific currencies.

The fair values of liabilities to banks, liabilities to non-banks from promissory notes, and other interest-bearing liabilities are calculated as the present values of the payments associated with the debts, based on the applicable yield curve and Deutsche Telekom’s credit spread curve for specific currencies.

Since there are no market prices available for the derivative financial instruments in the portfolio assigned to Level 2 due to the fact that they are not listed on the market, the fair values are calculated using standard financial valuation models, based entirely on observable inputs. The fair value of derivatives is the price that Deutsche Telekom would receive or have to pay if the financial instrument were transferred at the reporting date. Interest rates of contractual partners relevant as of the reporting date are used in this respect. The middle rates applicable as of the reporting date are used as exchange rates. In the case of interest-bearing derivatives, a distinction is made between the clean price and the dirty price. In contrast to the clean price, the dirty price also includes the interest accrued. The fair values carried correspond to the full fair value or the dirty price.

Derivatives with a hedging relationship include forward-payer swaps for highly probable future borrowings at T‑Mobile US with a nominal value of EUR 8.8 billion when translated into euros. These transactions were designated as cash flow hedges in effective hedging relationships. In the first nine months of 2019, the measurement resulted in a loss from hedging instruments of EUR 887 million recognized under other comprehensive income.

The equity instruments measured at fair value through other comprehensive income comprise a large number of investments in strategic, unlisted individual positions. Deutsche Telekom considers the chosen measurement through other comprehensive income without recycling to profit or loss to be appropriate because there are no plans to use the investments for short-term profit-taking. At the date of disposal of an investment, the total cumulative gain or loss is reclassified to retained earnings. Acquisitions and disposals are based on business policy investment decisions.

Development of the carrying amounts of the financial assets and financial liabilities assigned to Level 3

millions of €

 

 

 

 

 

Equity instruments at fair value through other comprehensive income

Derivative financial assets at fair value through profit or loss: termination rights embedded in bonds issued

Derivative financial assets at fair value through profit or loss: energy forward agreements embedded in contracts

Derivative financial liabilities at fair value through profit or loss: energy forward agreements embedded in contracts

Carrying amount as of January 1, 2019

358

99

12

(52)

Additions (including first-time categorization as Level 3)

78

0

0

0

Decreases in fair value recognized in profit/loss (including losses on disposal)

n.a.

(46)

(13)

(64)

Increases in fair value recognized in profit/loss (including gains on disposal)

n.a.

559

8

20

Decreases in fair value recognized directly in equity

(17)

n.a.

n.a.

n.a.

Increases in fair value recognized directly in equity

49

n.a.

n.a.

n.a.

Disposals

(30)

0

0

0

Currency translation effects recognized directly in equity

0

21

0

(5)

CARRYING AMOUNT AS OF SEPTEMBER 30, 2019

438

633

7

(101)

The equity instruments assigned to Level 3 that are measured at fair value through other comprehensive income and carried under other financial assets are equity investments with a carrying amount of EUR 438 million measured using the best information available at the reporting date. As a rule, Deutsche Telekom considers transactions involving shares in those companies to have the greatest relevance. Transactions involving shares in comparable companies are also considered. The proximity of the relevant transaction to the reporting date, and the question of whether it was conducted at arm’s length, are relevant for deciding which information is used for the measurement. Furthermore, the degree of similarity between the object being measured and comparable companies must be taken into consideration. Based on Deutsche Telekom’s own assessment, the fair values of the equity investments at the reporting date could be determined with sufficient reliability. For the development of the carrying amounts in the reporting period, please refer to the table above. At the reporting date, investments with a carrying amount of EUR 119 million were held for sale, while there were no plans to sell the remaining investments. In the case of investments with a carrying amount of EUR 295 million, transactions involving shares in these companies took place at arm’s length sufficiently close to the reporting date, which is why the share prices agreed in the transactions were to be used without adjustment for the measurement as of September 30, 2019. In the case of investments with a carrying amount of EUR 91 million, an analysis of operational indicators (especially revenue, EBIT, and liquidity) revealed that the carrying amounts were equivalent to current fair values. Due to better comparability, previous arm’s-length transactions involving shares in these companies are preferable to more recent transactions involving shares in similar companies. In the case of investments with a carrying amount of EUR 52 million, for which the last arm’s length transactions relating to shares in these companies took place some time ago, a measurement performed more recently relating to shares in similar companies provides the most reliable representation of the fair values. Here, multiples to the reference variable of expected revenue (ranging between 3.2 and 8.2) were taken. The 25 percent quantile, the median, or the 75 percent quantile was used for the multiples depending on the specific circumstances. If other values had been used for the multiples and for the expected revenue amounts, the fair values calculated would have been different. These hypothetical deviations (sensitivities) are shown in the table below.

The derivatives without a hedging relationship assigned to Level 3 and carried under derivative financial assets relate to options embedded in bonds issued by T‑Mobile US with a carrying amount of EUR 633 million when translated into euros. The options, which can be exercised by T‑Mobile US at any time, allow early redemption of the bonds at fixed exercise prices. Observable market prices are available regularly and also at the reporting date for the bonds as entire instruments, but not for the options embedded therein. The termination rights are measured using an option pricing model. Historical interest rate volatilities of bonds issued by T‑Mobile US and comparable issuers are used for the measurement because these provide a more reliable estimate at the reporting date than current market interest rate volatilities. The absolute figure used for the interest rate volatility at the current reporting date was between 1.0 and 1.6 percent. The spread curve, which is also unobservable, was derived on the basis of current market prices of bonds issued by T‑Mobile US and debt instruments of comparable issuers. The spreads used at the current reporting date were between 1.7 and 2.4 percent for the maturities of the bonds and between 0.8 and 1.5 percent for shorter terms. For the mean reversion input, which is likewise unobservable, 10 percent was used. In our opinion, the values used constitute the best estimate in each case. If other values had been used for interest rate volatility, spread curve or mean reversion, the fair values calculated would have been different. These hypothetical deviations (sensitivities) are shown in the table below. In the reporting period, net income of EUR 513 million when translated into euros was recognized under Level 3 in other financial income/expense for unrealized gains for the options in the portfolio at the reporting date. Please refer to the table above for the development of the carrying amounts in the reporting period. The changes in value recognized in profit or loss in the reporting period were mainly attributable to fluctuations in the interest rates and historical interest rate volatilities in absolute terms that are relevant for measurement. Due to their distinctiveness, these instruments constitute a separate class of financial instruments.

Sensitivitiesa of the carrying amounts of the financial assets and financial liabilities assigned to Level 3 depending on unobservable inputs

millions of €

 

 

 

 

 

Equity instruments at fair value through other comprehensive income

Derivative financial assets at fair value through profit or loss: termination rights embedded in bonds issued

Derivative financial assets at fair value through profit or loss: energy forward agreements embedded in contracts

Derivative financial liabilities at fair value through profit or loss: energy forward agreements embedded in contracts

a

Change in the relevant input parameter assuming all other input parameters are unchanged.

b

Interest rate volatility shows the magnitude of fluctuations in interest rates over time (relative change). The larger the fluctuations, the higher the interest rate volatility.

c

The spread curve shows, for the respective maturities, the difference between the interest rates payable by T‑Mobile US and the interest rates on U.S. government bonds.

d

Mean reversion describes the assumption that, after a change, an interest rate will revert to its average over time. The higher the selected value (mean reversion speed), the faster the interest rate will revert to its average in the measurement model.

e

Renewable energy credits is the term used for U.S. emission certificates.

Multiple next-level-up quantile

22

 

 

 

Multiple next-level-down quantile

(24)

 

 

 

Expected revenues +10%

3

 

 

 

Expected revenues -10%

(3)

 

 

 

Interest rate volatilityb +10%

 

12

 

 

Interest rate volatilityb -10%

 

(13)

 

 

Spread curvec +100 basis points

 

(245)

 

 

Spread curvec -100 basis points

 

279

 

 

Mean reversiond +100 basis points

 

(3)

 

 

Mean reversiond -100 basis points

 

0

 

 

Future energy prices +10%

 

 

19

52

Future energy prices -10%

 

 

(20)

(52)

Future energy output +5%

 

 

5

7

Future energy output -5%

 

 

(6)

(7)

Future prices for renewable energy credits+100%

 

 

5

14

Future prices for renewable energy creditse from zero

 

 

(5)

(14)

With a carrying amount of EUR 101 million when translated into euros, the derivatives without a hedging relationship assigned to Level 3 and carried under derivative financial liabilities relate to energy forward agreements embedded in contracts entered into by T‑Mobile US. The same applies to derivative financial assets with a carrying amount of EUR 7 million when translated into euros. These agreements consist of two components: the energy forward agreement and the acquisition of renewable energy credits by T‑Mobile US. The contracts have been entered into with energy producers since 2017 and run for terms of between 12 and 20 years from the commencement of commercial operation. In the case of two energy forward agreements, commercial operations have already begun; with the others, commercial operations are set to begin between 2020 and 2021. The respective settlement period of the energy forward agreement, which is accounted for separately as a derivative, also starts when the facility begins commercial operation. Under the energy forward agreements, T‑Mobile US receives variable amounts based on the facility’s actual energy output and the then current energy prices, and pays fixed amounts per unit of energy generated throughout the term of the contract. The energy forward agreements are measured using valuation models because no observable market prices are available. The value of the derivatives is materially influenced by the facility’s future energy output, for which T‑Mobile US estimated a value of 2,899 gigawatt hours per year at the reporting date. The value of the derivatives is also significantly influenced by future energy prices, which are not observable for the period beyond five years. Further, the value of the derivatives is materially influenced by the future prices for renewable energy credits, which are also not observable. For the unobservable portion of the term, T‑Mobile US used on-peak energy prices of between EUR 14.85/MWh and EUR 70.61/MWh when translated into euros and off-peak prices of between EUR 11.71/MWh and EUR 46.09/MWh when translated into euros. An average on-peak/off-peak ratio of 47 percent was used. In our opinion, the values used constitute the best estimate in each case. If other values had been used for future energy prices, future energy output, or future prices of renewable energy credits, the fair values calculated would have been different. These hypothetical deviations (sensitivities) are shown in the table above. In the reporting period, a net expense of EUR 49 million (when translated into euros) was recognized under the Level 3 measurement in other operating income/expense for unrealized losses for the derivatives. Please refer to the corresponding table for the development of the carrying amounts in the reporting period. The market-price changes in the reporting period were largely attributable to changes in observable and unobservable energy prices and to interest rate effects. Due to their distinctiveness, these instruments constitute a separate class of financial instruments. In the view of T‑Mobile US, the contracts were entered into at current market conditions, and the most appropriate parameters for the unobservable inputs were used for measurement purposes. The transaction price at inception was zero in each case. Since the unobservable inputs have a material influence on the measurement of the derivatives, the respective amount resulting from initial measurement was not carried on initial recognition. Instead, these amounts are amortized in profit or loss on a straight-line basis over the period of commercial energy generation (for a total amount of EUR 13 million per year when translated into euros). This amortization adjusts the effects from measuring the derivatives in each accounting period using the respective valuation models and updated parameters. All amounts from the measurement of the derivatives are presented in net terms per contract in the statement of financial position (derivative financial assets/liabilities) and in the income statement (other operating income/expenses). The difference yet to be amortized in the income statement developed as follows during the reporting period:

Energy forward agreements

millions of €

Development of the not yet amortized amounts

Measurement amounts on initial recognition

151

Measurement amounts on initial recognition (additions during the reporting period)

27

Measurement amounts amortized in profit or loss in prior periods

(3)

Measurement amounts amortized in profit or loss in the current reporting period

(4)

Currency translation adjustments

9

MEASUREMENT AMOUNTS NOT AMORTIZED AS OF SEPTEMBER 30, 2019

180

For the trade receivables, loans issued, and other receivables assigned to Level 3, which are measured either at fair value through other comprehensive income or at fair value through profit or loss, the main factor in determining fair value is the credit risk of the relevant counterparties. If the default rates applied as of the reporting date had been 1 percent higher (lower) with no change in the reference variables, the fair values of the instruments would have been 1 percent lower (higher).

The financial liabilities measured at fair value through profit or loss and assigned to Level 3 include derivative financial liabilities with a carrying amount of EUR 7 million resulting from an option granted to third parties for the purchase of shares in an associate of Deutsche Telekom. The option was granted in connection with a sale of shares in this associate, and no notable fluctuations in value are expected. Due to its distinctiveness, this instrument constitutes a separate class of financial instruments.

Disclosures on credit risk

In line with the contractual provisions, in the event of insolvency, all derivatives with a positive or negative fair value that exist with the respective counterparty are offset against each other, leaving a net receivable or liability. The net amounts are normally recalculated every bank working day and offset against each other. When the netting of the positive and negative fair values of all derivatives was positive from Deutsche Telekom’s perspective, Deutsche Telekom received unrestricted cash collateral from counterparties pursuant to collateral contracts in the amount of EUR 1,759 million as of the reporting date (December 31, 2018: EUR 404 million). The credit risk was thus reduced by EUR 1,740 million (December 31, 2018: EUR 400 million) because, on the reporting date, the collateral received was offset by corresponding net derivative positions in the same amount. On the basis of these contracts, derivatives with a positive fair value and a total carrying amount of EUR 2,287 million as of the reporting date (December 31, 2018: EUR 756 million) had a maximum credit risk of EUR 15 million as of September 30, 2019 (December 31, 2018: EUR 24 million).

When the netting of the positive and negative fair values of all derivatives was negative from Deutsche Telekom’s perspective, Deutsche Telekom provided cash collateral in the amount of EUR 6 million as of the reporting date (December 31, 2018: EUR 299 million) to counterparties pursuant to collateral agreements. The cash collateral paid is offset by corresponding net derivative positions of EUR 4 million at the reporting date (December 31, 2018: EUR 285 million), which is why it was not exposed to any credit risks in this amount.

On account of its close connection to the corresponding derivatives, the collateral received (paid) constitutes a separate class of financial liabilities (assets). There were no other significant agreements reducing the maximum exposure to the credit risks of financial assets. The maximum exposure to credit risk of the other financial assets thus corresponds to their carrying amounts.

According to agreement, no cash collateral was provided for interest rate swaps concluded by T‑Mobile US with a nominal value of EUR 8.8 billion (when translated into euros). The fair values at the reporting date were negative in each case from the perspective of T‑Mobile US and amounted to EUR -1,322 million when translated into euros (December 31, 2018: EUR -391 million).

Please refer to the explanations above for more information on the energy forward agreements for which no collateral is provided. There is also no default risk on embedded derivatives held.