Integrated Report of KGHM Polska Miedź S.A.
and the KGHM Polska Miedź S.A. Group
for 2020

7.5.1.5 Impact of hedge accounting on the financial statements

in PLN millions, unless otherwise stated

 

The following table contains information on changes in the fair value of instruments, as well as corresponding changes in the fair value of hedged positions during the reporting period, being
the basis for recognising the effective and ineffective portions of changes in the fair value of hedging instruments in the years 2019-2020. In hedging relations, only the intrinsic value of the option is designated as a hedging instrument. The balance of other comprehensive income, presented below, shows a full change in the value of options, including the intrinsic value (effective part) and time value (understood as hedging cost). The time value approximates zero in the horizon of a hedging relation.

The hedge’s inefficiency recognised in the statements of profit or loss in the reporting periods 2019-2020 was immaterial.

As at 31 December 2020 from 1 January 2020
to 31 December 2020
from 1 January 2020 to 31 December 2020

As at 31 December 2019

from 1 January 2019 to 31 December 2019 from 1 January 2019 to 31 December 2019

Balance of other comprehensive income due to cash flow hedging for relations:

Balance of other comprehensive income due to cash flow hedging for relations:

relation type

risk type

instrument type – hedged item

remaining in hedge accounting for which hedge accounting was ceased Change in the value of hedged item Change in the value of hedging instrument remaining in hedge accounting for which hedge accounting was ceased Change in the value of hedged item Change in the value of hedging instrument
Cash flow hedging
Commodity risk (copper)
Options – Sales revenue (1 213) 409 (1 261) 40 (124) (115)
Commodity risk (silver)
Options – Sales revenue 89 (8) 88 (4) (4) (4)
Currency risk (USD)
Options – Sales revenue 164 22 (154) 149 (33) (39) (39)
Loans – Sales revenue (96) (113)
Currency-interest rate risk
Options – Sales revenue (61) 28 (21) (39) (44) (39)
Options – Finance income/costs (138) 122 (104) (34) (43) (34)
Total (1 159) (74) 397 (1 149) (70) (113) (254) (231)

 

The table below presents information on the impact of hedge accounting on profit or loss and other comprehensive income (excluding the tax effect).

from 1 January 2020 to 31 December 2020 from 1 January 2020 to 31 December 2019
relation type

risk type

instrument type

Profit or (loss) due to hedging recognised in other comprehensive income Amount reclassified from other comprehensive income to the statement of profit or loss as a reclassification adjustment, due to realisation of a hedged item in the period Profit or (loss) due to hedging recognised in other comprehensive income Amount reclassified from other comprehensive income to the statement of profit or loss as a reclassification adjustment, due to realisation of a hedged item in the period
Cash flow hedging
Commodity risk (copper)
Options* (1 108) 145 (140) 141
Commodity risk (silver)
Options* 89 (3) (4)
Currency risk (USD)
Options* 144 (76) (80) (34)
Loans** (16) (16)
Currency-interest rate risk
CIRS*** (151) (26) (79) (5)
Total (1 026) 24 (303) 86
Item of the statement of profit or loss which includes a reclassification adjustment:
* revenues from contracts with customers, other operating income and (costs),
** revenues from contracts with customers,
*** revenues from contracts with customers, other finance income and (costs).

 

The following table contains information on changes in other comprehensive income (excluding the tax effect) in the period in connection with the application of hedge accounting in 2020.

Other comprehensive income due to cash flow hedging
Effective value* Cost of hedging** Total
Other comprehensive income – transactions hedging against commodity and currency risk – as at 1 January 2020 (33) (150) (183)
Impact of measurement of hedging transactions (effective part) (397) (629) (1 026)
Reclassification to profit or loss due to realisation of hedged item (305) 281 (24)
Other comprehensive income – transactions hedging against commodity and currency risk – as at 31 December 2020 (735) (498) (1 233)
* Effective portions of changes in the fair value of hedging instruments due to hedged risk- intrinsic value of option.
** Time value of option.

 

The following table contains information on changes in other comprehensive income (excluding the tax effect) in the period in connection with the application of hedge accounting in 2019.

Other comprehensive income due to cash flow hedging
Effective value* Cost of hedging** Total
Other comprehensive income – transactions hedging against commodity and currency risk – as at 1 January 2019 278 (72) 206
Impact of measurement of hedging transactions (effective part) (67) (236) (303)
Reclassification to profit or loss due to realisation of hedged item (244) 158 (86)
Other comprehensive income – transactions hedging against commodity and currency risk – as at 31 December 2019 (33) (150) (183)
* Effective portions of changes in the fair value of hedging instruments due to hedged risk- intrinsic value of option.
** Time value of option.

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