[42] Hedge accounting

Hedging currency risk

The KION Group applies cash flow hedge accounting in hedging the exchange rate risks arising (in various currencies) from highly probable future transactions and firm commitments not reported in the statement of financial position. Foreign-currency forwards with settlement dates in the same month as the expected cash flows from the Group’s operating activities are used as hedges. The critical terms of the hedging instruments and the hedged items are therefore matched. The hedge ratio, which is derived from the volume of hedged items and the hedging instruments used, is 1:1 for these hedges. Because the hedges are highly effective, the change in the fair value of the cash flows from the hedged items corresponds to the change in the fair value of the hedging instruments.

The main currency hedges relate to pound sterling and the US dollar. The foreign-currency forwards in existence as at December 31, 2021 were entered into at average hedging rates of £0.8608 to €1 (2020: £0.6464 to €1) and US$1.1909 to €1 (2020: US$1.1389 to €1).

On account of the short-term nature of the Group’s payment terms, reclassifications to the income statement of fair value changes previously recognized in equity in the hedge reserve and the recognition of the corresponding cash flows generally take place in the same reporting period. A foreign-currency receivable or liability is recognized when goods are dispatched or received. Until the corresponding payment is received, changes in the fair value of the derivative are recognized in the income statement such that they largely offset the effect of the measurement of the foreign-currency receivable or liability at the reporting date.

The foreign-currency forwards used as hedges will mature in 2023 at the latest. In total, foreign-currency cash flows of €644.2 million (2020: €385.9 million) were hedged and designated as hedged items, of which €553.7 million is expected by December 31, 2022 (2020: €350.2 million expected by December 31, 2021). The remaining cash flows designated as hedged items, which amount to €90.5 million (2020: €35.7 million), fall due in the period up to December 31, 2023 (2020: December 31, 2022).

The following table provides an overview of the foreign-currency forwards entered into by the KION Group.

Foreign-currency forwards

 

 

Fair value

Notional amount

in € million

 

Dec. 31, 2021

Dec. 31, 2020

Dec. 31, 2021

Dec. 31, 2020

Foreign-currency forwards (assets)

Cash flow hedge

5.5

9.3

270.1

216.5

Held for trading

3.5

5.7

487.3

369.3

Foreign-currency forwards (liabilities)

Cash flow hedge

10.1

4.6

374.1

169.4

Held for trading

4.8

1.8

499.5

320.3