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Derivative

A financial instrument whose value is predominantly derived from the price, price fluctuations and price expectations of an underlying asset, such as shares, bonds or foreign currencies. Derivatives are not just traded for speculative purposes. In fact, they are frequently used to hedge potential fluctuations in the value of an underlying asset.

Accounting for derivative financial instruments at HAMBORNER REIT AG

When they are used, derivative financial instruments are recognised for the first time on the trade date. For cash flow hedges used to hedge risks affecting the amount or timing of future cash flows, any changes in market value are recognised in retained earnings in equity and hedge effectiveness is documented. At the same time, the profit or loss from the effective portion of the hedging instrument determined is recognised in other comprehensive income.

Asset and liability derivative financial instruments are reported in separate items of the statement of financial position. The market values calculated by banks as at the end of the respective reporting period including the risk of default result from discounting the expected future cash flows over the residual term of the contracts on the basis of current market interest rates or yield curves.

Derivatives are measured in line with Level 2. This means that the measurement models use factors observed directly (i.e. as prices) or indirectly (i.e. derived from prices) on active markets. The fair value of the derivative financial instruments designated as hedging instruments is reported in full as a non-current asset or liability if the remaining term of the hedged item is longer than twelve months after the end of the reporting period, and as a current asset or liability if the remaining term is shorter.