SOMFY - Annual Financial Report 2020

05 CONSOLIDATED FINANCIAL STATEMENTS

Classification and fair value of financial instruments Note 7.2.4

DERIVATIVE FINANCIAL INSTRUMENTS All derivative financial instruments are measured at their fair value. Fair value is either the market value for listed instruments, or a value provided by financial institutions in accordance with usual criteria (over-the-counter market). Derivative financial instruments primarily comprise options related to business acquisitions, forward foreign exchange contracts, raw material hedging contracts and interest rate swaps. For derivatives designated as cash flow hedge instruments, the effective portion of fair value movements of the derivatives is recognised in items of other comprehensive income and accumulated in the hedging reserve. Any ineffective portion in the fair value movement of derivatives is immediately recognised through net profit. The fair value movements in foreign currency, raw material and interest rate hedging instruments ineligible for hedge accounting are recognised in net financial income/expense. The fair value of derivative instruments is recognised in the balance sheet under specific items: “current and non-current asset derivative instruments” or “current and non-current liability derivative instruments” depending on the nature of the hedged good. FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value measurements are specified by level in accordance with the following fair value hierarchy: the instrument is quoted on an active market (Level 1); – measurement requires the use of valuation techniques drawing on observable data, either directly (prices) or indirectly (as derived – from prices) (Level 2); at least one significant component of fair value is based on non-observable data (Level 3). – The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, pricing service or regulatory agency, and those prices represent regularly occurring market transactions. These instruments are classified as Level 1. The fair values of financial instruments that are not traded in an active market ( e.g. over-the-counter derivatives) are determined using valuation techniques. These different valuation techniques maximise the use of observable market data, where available, and rely little on the Group’s estimates. The instrument is classified as Level 2 if all elements required to calculate the fair value of an instrument are observable. If one or more of the principal pricing elements is not based on observable market prices, the instrument is classified as Level 3.

Amount at 31 December 2020

Assets and liabilities at amortised cost (1) (Fair value equal to net book value)

Financial assets and liabilities (2) (Fair value recognised in items of other comprehensive income)

Financial assets and liabilities (3) (Fair value recognised in income statement)

Fair value hierarchy (2 & 3)

€ thousands

Assets Non-current financial assets Current financial assets Current derivative instruments Cash and cash equivalents Liabilities Non-current financial liabilities Current financial liabilities Current derivative instruments

3,653

1,724

1,929

– – –

Level 3

406 657

406

–

–

657

Level 2 Level 2

588,925

588,840

–

85

40,531 30,817

38,763 13,448

1,768

–

Level 3 Level 3 Level 2

–

17,369

554

–

276

278

133

SOMFY – ANNUAL FINANCIAL REPORT 2020