Information on financial instruments

The carrying amounts and fair values of financial assets and liabilities in accordance with IFRS 7 are shown in > TABLE 26.

Whereas lease liabilities arising from sale and leaseback transactions stood at €802.5 million (31 December 2014: €707.7 million), lease receivables amounted to €554.6 million (31 December 2014: €490.6 million) and leased assets amounted to €262.5 million (31 December 2014: €230.5 million). Both items resulted from long-term leases with end customers and are funded using sale and leaseback transactions.

The finance lease obligations reported in other liabilities comprise liabilities arising from the sale and leaseback financing of industrial trucks of €377.7 million (31 December 2014: €339.1 million). They are mainly allocated to the Financial Services segment and result from the intra-group financing provided by the Financial Services segment for the short-term rental business of the Linde Material Handling and STILL brand segments.

The unconsolidated subsidiaries and other equity investments that are shown in > TABLE 26 are carried at cost less impairment losses, as observable fair values are not available and reliable results cannot be obtained using other permitted measurement techniques. At present there is no intention to sell these financial instruments.

Fair value measurement and assignment to classification levels

The following tables show the assignment of fair values to the individual classification levels as defined by IFRS 13 for financial instruments measured at fair value. > TABLES 27 – 28

Level 1 comprises long-term securities for which the fair value is calculated using prices quoted in an active market.

All currency forwards are classified as Level 2. The fair value of the currency forwards is calculated by the system using the discounting method based on forward rates on the reporting date. The default risk for the Group and for the counterparty is taken into account on the basis of gross figures.

For the first time, the currency forwards at Level 2 included a currency forward that is used to hedge currency risk arising on the translation of a foreign subsidiary’s financial statements into the Group’s reporting currency. Only the spot rate element of the currency forward is designated as the hedging instrument when hedging the net investment in the foreign operation. The fair value of the spot rate element was minus €4.7 million as at 30 September 2015 (30 September 2014: €0.0 million) and was recognised in other comprehensive income (loss). In the third quarter of 2015, ineffective portions of minus €0.3 million (Q3 2014: €0.0 million) arising in connection with the interest element of the currency forward were recognised as an expense.

The financial liabilities allocated to Level 3 relate to a call option of Weichai Power on some of the shares in Linde Hydraulics. The Black-Scholes model and probability-weighted scenario analysis are used to calculate the fair value of the call option. The measurement is based on the following significant, unobservable input parameters as at 30 September 2015. An amount of €21.4 million has been recognised as the fair value of the underlying portion of the shares in Linde Hydraulics (31 December 2014: €21.4 million). A base exercise price of €38.7 million (31 December 2014: €38.7 million) and a term to maturity of 2.79 years (31 December 2014: 0.49-2.99 years) have been assumed for call option 2. In the prior-year period, a put option held by Linde Material Handling GmbH, Aschaffenburg, and Weichai Power’s call option 1 on some of the shares in Linde Hydraulics had also been allocated to Level 3. On 20 July 2015, the KION Group exercised the put option that it held via Linde Material Handling GmbH, Aschaffenburg, on 20.0 per cent of the shares in Linde Hydraulics. This eliminated the corresponding call option 1 held by Weichai Power. As at 30 September 2015, the receivable of €34.7 million arising from the exercise of the put option was recognised under other non-derivative receivables.

At 30 September 2015, the material changes in fair value and the impact on the income statement for the first nine months of the year were as follows. > TABLE 29

As at 30 September 2015, the fair value calculated for call option 2 on the shares in Linde Hydraulics came to minus €0.7 million (31 December 2014: net value arising from the options of €31.7 million). If the fair value of the shares had been 10.0 per cent lower on the reporting date, the fair value of call option 2 (31 December 2014: the net value arising from the options) would have increased by €0.3 million (31 December 2014: by €5.3 million) to minus €0.4 million (31 December 2014: €37.1 million) and led to a gain of €0.3 million (31 December 2014: gain of €5.3 million). A 10.0 per cent rise in the fair value of the shares in Linde Hydraulics would have reduced the fair value of call option 2 (31 December 2014: the net value arising from the options) by minus €0.3 million (31 December 2014: by €5.6 million) to minus €1.0 million (31 December 2014: €26.2 million) and led to an additional expense of €0.3 million (31 December 2014: €5.6 million).

In order to eliminate default risk to the greatest possible extent, the KION Group only ever enters into derivatives with investment-grade counterparties.

If events or changes in circumstances make it necessary to reclassify financial instruments as a different level, they are reclassified at the end of a reporting period. No financial instruments were transferred between Levels 1, 2 or 3 in the first nine months of 2015.