Siemens 2015 Annual Report Download - page 94

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Consolidated Financial Statements

Sep 30, 2014
(in millions of €) Level 1 Level 2 Level 3 Total
Financial assets measured at fair value 1,527 3,272 307 5,105
Available-for-sale financial assets: Equity instruments 1,527 1 307 1,834
Available-for-sale financial assets: Debt instruments − 702 − 702
Derivative financial instruments − 2,569 − 2,569
Not designated in a hedge accounting relationship
(including embedded derivatives) − 1,995 − 1,995
In connection with fair value hedges − 476 − 476
In connection with cash flow hedges − 98 − 98
Financial liabilities measured at fair value – Derivative financial instruments − 1,749 − 1,749
Not designated in a hedge accounting relationship
(including embedded derivatives) − 1,338 − 1,338
In connection with cash flow hedges − 406 − 406
The fair value of available-for-sale financial equity instruments
quoted in an active market is based on price quotations at the
period-end date. The fair value of debt instruments is either
based on prices provided by price service agencies or esti-
mated by discounting future cash flows using current market
interest rates.
Non-current available-for-sale financial assets measured at
fair value include interests in Atos SE (AtoS) and OSRAM of
€ , million and € , million as of September ,  and
. Unrealized gains (losses) in fiscal  and  resulting
from non-current available-for-sale financial assets measured
at fair value are €  million and €() million, respectively.
Siemens determines the fair values of derivative financial instru-
ments depending on the specific type of instrument. Fair values
of derivative interest rate contracts are estimated by discount-
ing expected future cash flows using current market interest
rates and yield curves over the remaining term of the instru-
ment. Interest rate futures are valued on the basis of quoted
market prices, if available. Fair values of foreign currency deriv-
atives are based on forward exchange rates. Options are gener-
ally valued based on quoted market prices or based on option
pricing models. In determining the fair values of the derivative
financial instruments, no compensating effects from underly-
ing transactions (e. g. firm commitments and forecast transac-
tions) are taken into consideration.
The Company limits default risks resulting from derivative
financial instruments by generally transacting with financial
institutions with a minimum credit rating of investment grade.
Based on Siemens’ net risk exposure towards the counterparty,
the resulting credit risk is taken into account via a credit valua-
tion adjustment.
The unquoted equity instrument allocated to level  of the fair
value hierarchy relates to an investment in an offshore wind
farm. The fair value is determined based on discounted cash
flow calculations. The most significant unobservable input
used to determine the fair value is the cash flow forecast which
is mainly based on the future power generation income. This
income is generally subject to future market developments and
thus price volatility. Since a long-term power purchase agree-
ment is in place that mitigates price volatility, significant
changes to the cash flow forecast are unlikely and thus, no sig-
nificant effects on Other comprehensive income, net of income
taxes, are expected.
Net gains (losses) of financial instruments are:
Fiscal year
(in millions of €) 2015 2014
Cash and cash equivalents (24) 19
Available-for-sale financial assets 39 29
Loans and receivables (42) 60
Financial liabilities measured
at amortized cost (1,049) (844)
Financial assets and financial
liabilities held for trading (945) (283)