[6] Net financial debt

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Net financial debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

Non-current

 

Total

in € million

 

31.03.2015

 

31.12.2014

 

31.03.2015

 

31.12.2014

 

31.03.2015

 

31.12.2014

Financial debt

 

1,687

 

1,294

 

8,476

 

8,562

 

10,163

 

9,856

Less: Securities

 

573

 

521

 

 

 

573

 

521

Less: Cash and cash equivalents

 

1,397

 

1,137

 

 

 

1,397

 

1,137

Net financial debt

 

−283

 

−364

 

8,476

 

8,562

 

8,193

 

8,198

Of the financial debt at 31 March 2015, EUR 3.371 bn (31 December 2014: EUR 3.253 bn) is in a fair value hedging relationship. If there had been no adjustment to the carrying amount as a result of fair value hedging relationships which had been agreed and were outstanding at the end of the reporting period, the financial debt of EUR 10.163 bn (31 December 2014: EUR 9.856 bn) would have been EUR 107 m (31 December 2014: EUR 111 m) lower.

The Linde Group concludes Credit Support Annexes (CSAs) with banks to minimise counterparty risk. Under these agreements, the positive and negative fair values of derivatives held by Linde AG and Linde Finance B.V. are collateralised with cash on a regular basis. These transactions are governed by the rules set out in the master agreement for financial derivative transactions, whereby related rights and obligations to exchange financial collateral do not qualify for offsetting in the balance sheet. An amount of EUR 71 m (31 December 2014: EUR 80 m) in respect of these agreements has been disclosed in bank loans and overdrafts as part of financial debt and an amount of EUR 465 m (31 December 2014: EUR 141 m) has been disclosed in cash equivalents.

For individual categories of financial assets and financial liabilities in The Linde Group, the carrying amount of the item is generally a reasonable approximation of the fair value of the item. This does not apply to receivables from finance leases or to financial debt. In the case of receivables from finance leases, the fair value is EUR 373 m, while the carrying amount is EUR 319 m. The fair value of the financial debt is EUR 10.758 bn, compared with its carrying amount of EUR 10.163 bn. The fair value of financial instruments is generally determined using quoted market prices. If no quoted market prices are available, the financial instruments are measured using valuation methods customary in the market, based on market parameters specific to that instrument. At the balance sheet date, the figure for investments and securities included assets of EUR 561 m in respect of which the value had been determined by quoted prices in active markets for identical financial instruments (Level 1). The investments and securities category also included financial assets (available-for-sale financial assets) of EUR 49 m for which a fair value cannot be reliably determined. For these assets, there are neither observable market prices nor sufficient information for a reliable valuation using other valuation methods. There is currently no intention to sell these assets.

For derivative financial instruments, the fair value is determined as follows. Options are measured by external partners using Black-Scholes pricing models. Futures are measured with recourse to the quoted market price in the relevant market. Included in derivatives at the balance sheet date were assets of EUR 455 m and liabilities of EUR 913 m in respect of which the values were determined using valuation techniques where the principal inputs were derived from observable market data (Level 2).

All other derivative financial instruments are measured by discounting future cash flows using the present value method. The starting parameters for these models should, as far as possible, be the relevant observable market prices and interest rates at the balance sheet date, obtained from recognised external sources. At the balance sheet date, no assets or liabilities had been recognised for which the values had been determined by valuation techniques with principal inputs not derived from observable market data (Level 3). During the reporting period, there were no transfers between Levels 1, 2 and 3 of the fair value hierarchy.

Linde uses both derivative financial instruments and financial debt to hedge against exposure to translation risks (net investment hedges). The unrealised losses on derivative financial instruments of EUR 579 m (2014: EUR 51 m) recognised in other comprehensive income are mainly the result of movements in the dollar exchange rate against the euro.