Page 140 - ENAV eng_Relazione_Finanziaria_Annuale_2014

138 ENAV – 2014 Financial Statements

32. Derivative contracts

To hedge against the risks deriving from changes in the exchange rate for
the purchase of Aireon in US dollars, on 20 December 2013 the parent
company entered four derivative contracts linked to the four instalments
agreed for the purchase of a total interest of 12.5%. At 31 December 2014
two foreign currency purchase transactions were concluded with respect
to the original four.

At 31 December 2014 the fair value of the remaining contracts was
calculated from the figures communicated by the bank, adjusted in
accordance with IFRS 13. More specifically, the positive mark to market
of ¤1,863 thousand was adjusted to take account of non-performance
risk, meaning the risk that one of the parties fails to meet its contractual
commitments due to a possible default, and for accounting purposes was
recognized as an equity reserve with a counter-entry of ¤383 thousand
to current financial assets and ¤1,480 thousand to non-current financial
assets.

More specifically, under IFRS 13 the fair value of a derivative must include
the risk that one or both of the parties may default on their obligations
(the Credit Risk Adjustment). In detail, from a financial standpoint if the
fair value of a derivative is positive the Credit Value Adjustment (CVA) is
the expected loss due to counterparty default. On the other hand if the fair
value is negative the Debt Value Adjustment (DVA) is the expected loss
due to the default of the Company.

The contractual features and the relative fair values at 31 December 2014,
as communicated by the bank, are as follows:

Counterparty Type of Contract Start date End date Notional Forward Forward Bank
transaction date (USD) exchange amount MtM
BNL (euros)
BNL rate 1,496
Totale 12,398
Buy USD 20/12/2013 14/02/2014 28/09/2015 16,837 1.3580 400
Flex 4,492 1,896

Buy USD 20/12/2013 14/02/2014 27/12/2017 6,122 1.3630 16,890
Flex 22,959