26. Supplementary Information on Financial Instruments

26.1 Accounting policies

Financial assets and financial liabilities are recognized in the consolidated balance sheet when the BASF Group becomes a party to a financial instrument. Financial assets are derecognized when BASF no longer has a contractual right to the cash flows from the financial asset or when the financial asset is transferred together with all material risks and rewards of ownership and BASF does not have control of the financial asset after it has been transferred. For example, receivables are derecognized when they are definitively found to be uncollectible such as in the event of concluded insolvency proceedings. Financial liabilities are derecognized when the contractual obligations expire, are discharged or cancelled. Regular-way purchases and sales of financial instruments are accounted for using the settlement date; in precious metal trading, the trade date is used.

The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. If pricing on an active market is available, for example in the form of exchange prices, these are used as the basis for the measurement. Otherwise, the measurement is based on either internal measurement models using current market parameters or external measurements, for example, from banks. These internal measurements rely predominantly on the net present value method and option pricing models. These models incorporate, for example, expected future cash flows as well as discount factors adjusted for term and, potentially, risk. Depending on the availability of market parameters, BASF assigns financial instruments’ market values one of the three levels of the fair value hierarchy pursuant to IFRS 13. Reassignment to a different level during a fiscal year is only carried out if the availability of observable market parameters for identical or similar items changes.

The classification and measurement of financial assets is based on the one hand on the cash flow condition (the “solely payments of principle and interest” criterion), that is, the contractual cash flow characteristics of an individual financial asset. On the other hand, it also depends on the business model used for managing financial asset portfolios. Based on these two criteria, BASF uses the following measurement categories for financial assets:

• Financial assets measured at fair value through profit or loss include all financial assets whose cash flows are not solely payments of principal and interest in accordance with the cash flow condition established in IFRS 9. At BASF, derivatives, for example, are allocated to this measurement category. In general, BASF does not exercise the fair value option in IFRS 9, which permits the allocation of financial instruments not to be measured at fair value through profit or loss on the basis of the cash flow condition or the business model criterion to the above category under certain circumstances.
• Financial assets measured at amortized cost include all assets with contractual terms that give rise to cash flows on specific dates, provided that these cash flows are solely payments of principal and interest on the principal amount outstanding in accordance with the cash flow condition in IFRS 9, to the extent that the asset is held with the intention of collecting the expected contractual cash flows over its term. At BASF, this measurement category includes trade accounts receivable, as well as receivables reported under other receivables and miscellaneous assets and certain securities.
  Initial measurement of these assets is generally at fair value, which usually corresponds to the transaction price at the time of acquisition or, in the case of trade accounts receivable, to the transaction price pursuant to IFRS 15. Subsequent measurement effects are recognized in income using the effective interest method.
  Impairments are recognized for expected credit losses at both initial and subsequent measurement, even before the occurrence of any default event. Counterparties are generally considered to default when they become insolvent, become a debtor in a creditor protection program or are in a finance-related legal dispute with BASF, or more than half of BASF’s receivables portfolio with them is more than 90 days overdue. In these cases, individual impairments are recognized for the financial assets measured at amortized cost that are then considered to be credit impaired.
  The extent of expected credit losses is determined based on the credit risk of a financial asset, as well as any changes to this credit risk: If the credit risk of a financial asset has increased significantly since initial recognition, expected credit losses are generally recognized over the lifetime of the asset. If, however, the credit risk has not increased significantly in this period, impairments are generally only recognized as 12-month expected credit losses. By contrast, under the simplified approach for determining expected credit losses permitted by IFRS 9, impairments for receivables such as lease receivables and trade accounts receivable always cover the lifetime expected credit losses of the receivable concerned.
  At BASF, the credit risk of a financial asset is assessed using both internal information and external rating information on the respective counterparty. A significant increase in the counter­party’s credit risk is assumed if its rating is lowered by a certain number of notches. It is generally assumed that the credit risk for a counterparty with a high credit rating will not have increased significantly.
  Regional and, in certain circumstances, industry-specific factors and expectations are taken into account when assessing the extent of impairment as part of the calculation of expected credit losses and individual impairments. In addition, BASF uses internal and external ratings and the assessments of debt collection agencies and credit insurers, when available. Individual impairments are also based on experience relating to customer solvency and customer-specific risks. Factors such as credit insurance, which covers a portion of receivables measured at amortized cost, are likewise considered when calculating impairments. Bank guarantees and letters of credit are used to an immaterial extent. Expected credit losses and individual impairments are only calculated for those receivables that are not covered by insurance or other collateral. Impairments on receivables whose insurance includes a deductible are not recognized in excess of the amount of the deductible.
  A decrease in impairment due, for example, to a reduction in the credit risk of a counterparty or an objective event occurring after the impairment is recorded in profit or loss. Reversals of impairments may not exceed amortized cost, less any expected future credit losses.
• Financial assets measured at fair value through other comprehensive income include all assets with contractual terms that give rise to cash flows on specified dates that are solely payments of principal and interest on the principal amount outstanding, in accordance with the cash flow condition in IFRS 9. Furthermore, the assets in this measurement category may not just be held with the intention of collecting the expected contractual cash flows over their term, but also generating cash flows from their sale. At BASF, certain securities that are reported as other financial assets or marketable securities are allocated to this category. BASF does not exercise the option to subsequently measure equity instruments through other comprehensive income.
  Assets measured at fair value through other comprehensive income are initially measured at fair value, which usually corresponds to the transaction price of the securities allocated to this category at the time of acquisition. Subsequent measurement is likewise at fair value. Changes in the fair value are recognized in other comprehensive income and reclassified to the statement of income when the asset is disposed of.
  Impairments on financial assets measured at fair value through other comprehensive income are calculated in the same way as impairments on financial assets measured at amortized cost and recognized in profit or loss.

The following measurement categories are used for financial liabilities:

• Financial liabilities measured at amortized cost generally include all financial liabilities, provided these do not represent derivatives. They are generally measured at fair value at the time of initial recognition, which usually corresponds to the value of the consideration received. Subsequent measurement is recognized in profit or loss at amortized cost using the effective interest method. At BASF, for example, bonds and liabilities to banks reported under financial indebtedness are measured at amortized cost.
• Financial liabilities measured at fair value through profit or loss contain derivative financial liabilities. These are likewise measured at the value of the consideration received as the fair value of the liability on the date of initial recognition. Fair value is also applied as a measurement basis for these liabilities in subsequent measurement. The option to subsequently measure non-derivative financial liabilities at fair value is not exercised. Derivative financial instruments can be embedded within other contracts, creating a hybrid financial instrument. If IFRS policies require separation, the embedded derivative is accounted for separately from its host contract and measured at fair value. If IFRS 9 does not provide for separation, the hybrid instrument is accounted for at fair value in its entirety.

Financial guarantees of the BASF Group are contracts that require compensation payments to be made to the guarantee holder if a debtor fails to make payment when due under the terms of a transaction entered into with the holder of the guarantee. Financial guarantees issued by BASF are measured at fair value upon initial recognition. In subsequent periods, these financial guarantees are carried at the higher of amortized cost or the best estimate of the present obligation as of the reporting date.

In cash flow hedges, future cash flows and the related income and expenses are hedged against the risk of changes in fair value. To this end, future underlying transactions and the corresponding hedging instruments are designated in a cash flow hedge accounting relationship for accounting purposes. The effective portion of the change in fair value of the hedging instrument, which often meets the definition of a derivative, and the cost of hedging are recognized directly in equity under other comprehensive income over the term of the hedge, taking deferred taxes into account. The ineffective portion is recognized immediately in the income statement. In the case of future transactions that lead to recognition of a nonfinancial asset or a nonfinancial liability, the cumulative fair value changes of the hedge in equity are generally charged against the cost of the hedged item on its initial recognition. For hedges based on financial assets, financial liabilities or future transactions, cumulative fair value changes of the hedges are transferred from equity to the income statement in the reporting period in which the hedged item is recognized in the income statement. The maturity of the hedging instrument is aligned with the effective date of the future transaction.

When fair value hedge accounting is used, the asset or liability recognized is hedged against the risk of a change in fair value. The hedging instruments used, which often take the form of a derivative, are measured at fair value and changes in fair value are recognized in the statement of income. The carrying amounts of the assets or liabilities designated as the underlying transaction are also measured at fair value through the statement of income.

26.2 Financial risks

Market risks

Foreign currency risks: Changes in exchange rates could lead to losses in the value of financial instruments and adverse changes in future cash flows from planned transactions. Foreign currency risks from financial instruments result from the translation at the closing rate of financial receivables, loans, securities, cash and financial liabilities into the functional currency of the respective Group company. Foreign currency contracts in various currencies are used to hedge foreign exchange risks from nonderivative financial instruments and planned transactions.

The foreign currency risk exposure corresponds to the net amount of the nominal volume of the primary and the derivative financial instruments that are exposed to currency risks. In addition, planned purchase and sales transactions of the respective following year are included if they fall under the currency risk management system. Long and short positions in the same currency are offset against each other.

The sensitivity analysis was conducted by simulating a 5% and 10% appreciation of the respective functional currency against the other currencies. A 5% appreciation of the respective functional currency would have reduced BASF’s income before income taxes by €156 million as of December 31, 2022. A 10% appreciation of the respective functional currency would have resulted in a negative effect on BASF’s income before income taxes in the amount of €293 million. A 5% appreciation of the respective functional currency would have resulted in a negative effect on BASF’s income before income taxes in the amount of €174 million (–€326 million applying 10% appreciation) as of December 31, 2021. The effect from the items designated under hedge accounting would have increased shareholders’ equity before income taxes by €15 million applying 5% appreciation to the functional currency, and increased it by €32 million applying 10% appreciation to the functional currency as of December 31, 2022 (2021: reduction of €3 million applying 5% appreciation to the functional currency and increase of €2 million applying 10% appreciation to the functional currency). This only refers to transactions in U.S. dollars in both years.

Due to the use of options to hedge currency risks, the sensitivity analysis is not a linear function of the assumed changes in exchange rates.

Interest rate risks: Interest rate risks arise from changes in prevailing market interest rates, which can lead to changes in the fair value of fixed-rate instruments and in interest payments for variable-rate instruments. Interest rate swaps and combined interest rate and currency derivatives are used in individual cases to hedge these risks. The derivatives are presented in Note 26.5. Interest rate risks are relevant to BASF’s financing activities but are not of material significance for BASF’s operating activities.

The variable interest risk exposure, which also includes fixed rate bonds maturing in the following year, amounted to –€2,441 million as of December 31, 2022 (2021: –€2,408 million). An increase in all relevant interest rates by one half of a percentage point would have lowered income before income taxes by €7 million as of December 31, 2022. An increase in all relevant interest rates by one percentage point would have lowered income before income taxes by €15 million as of the same date. An increase in all relevant interest rates by one half of a percentage point would have lowered income before income taxes by €4 million as of December 31, 2021 (an increase of one percentage point would have lowered income before income taxes by €9 million). Because no interest derivatives were designated in hedge accounting relationships as of December 31, 2022, a change in interest rates would not have had an effect on shareholders’ equity. There were also no interest derivatives designated in a hedge accounting relationship as of December 31, 2021.

Central benchmark interest rates are being comprehensively revised as part of what is known as the IBOR reform. Accordingly, the interest rates affected by the reform will be phased out and replaced by new ones. The publication of all GBP, EUR, CHF and JPY LIBORs as well as USD LIBORs with maturities of one week and two months was discontinued as of December 31, 2021. Publication of the remaining USD LIBORs is expected to continue until June 30, 2023.

BASF is continuously monitoring developments arising from the IBOR reform to ensure the timely adjustment of existing contracts as well as to identify potential financial risks at an early stage. Particular consideration is given to the carrying amounts or nominal values (derivatives) of contracts that reference an interest rate affected by the reform and therefore may still have to be converted to an alternative interest rate (contracts yet to be adjusted). As of December 31, 2022, financial liabilities related to contracts yet to be adjusted were identified in the amount of €61 million (December 31, 2021: €302 million). These are variable-rate bank loans referenced to a USD LIBOR. Furthermore, financial assets related to contracts yet to be adjusted were identified in the amount of €43 million (December 31, 2021: €85 million). These are mainly short-term loans, particularly to nonconsolidated subsidiaries, that are referenced to a USD LIBOR (€43 million). No derivatives were identified that are associated with contracts yet to be adjusted.

Commodity price risks: Some of BASF’s divisions are exposed to strong fluctuations in raw materials prices. These result primarily from raw materials (for example naphtha, benzene, natural gas, LPG condensate) as well as from precious metals. BASF takes the following measures to reduce price risks associated with the purchase of raw materials:

• BASF uses derivatives to hedge the risks of raw materials prices. These are primarily options on crude oil, oil products and natural gas.
• The Catalysts division enters into both short-term and long-term purchase contracts with precious metal and battery metal producers. It also buys precious metals on spot markets from various business partners. The price risk from metals purchased to be sold on to third parties, or for use in the production of catalysts and battery materials, is hedged using derivative instruments. This is mainly performed using forward contracts, which are settled by either entering into offsetting contracts or by delivering the precious metal.
• In the Agricultural Solutions division, the sales prices of products are sometimes pegged to the price of certain agricultural commodities. To hedge the resulting risks, derivatives on agricultural commodities are concluded.

In addition, BASF holds limited unhedged precious metal and oil product positions, which can also include derivatives, for trading on its own account. The value of these positions is exposed to market price volatility and is subject to constant monitoring.

By holding commodity derivatives and precious metal trading positions, BASF is exposed to price risks. The valuation of commodity derivatives and precious metal trading positions at fair value means that adverse changes in market prices could negatively affect the earnings and equity of BASF.

BASF holds several physical power purchase agreements (physical PPAs) with terms of up to 25 years. Under the physical PPAs, BASF procures electricity and associated green electricity certificates, known as guarantees of origin (GoOs). The physical PPAs are eligible for the own use exemption and are therefore not recognized as derivatives in the balance sheet even when electricity and green electricity certificates are purchased at a fixed price.

Furthermore, BASF holds several virtual power purchase agreements (virtual PPAs) in the United States with terms of up to 15 years. The virtual PPAs contain embedded contracts for difference for electricity prices that are recognized separately as derivatives at fair value through profit or loss. In the event of adverse changes in electricity market prices, valuation of the contracts for difference for electricity prices at fair value can lead to negative effects on earnings and equity of BASF.

BASF performs value-at-risk analyses for all commodity derivatives and precious metal trading positions. Value at risk continuously measures the market price risk and quantifies the loss that is not exceeded by a specific confidence level during a defined holding period. BASF bases the value-at-risk calculation on a confidence interval of 95% and a holding period of one day. BASF applies the variance-covariance method to calculate value at risk.

BASF uses value at risk in conjunction with other risk management tools. Besides value at risk, BASF sets volume-based limits as well as exposure and stop-loss limits.

The exposure corresponds to the net amount of all long and short positions of the respective commodity category.

• For more information on BASF’s financial risks and risk management, see Opportunities and Risks

Default and credit risk

Default and credit risks arise when customers and debtors do not fulfill their contractual obligations. BASF regularly analyzes the creditworthiness of the counterparties and grants credit limits on the basis of this analysis. Due to the global activities and diversified customer structure of the BASF Group, there is no significant concentration of default risk. The carrying amount of all receivables, loans and interest-bearing securities plus the nominal value of financial obligations stemming from contingent liabilities not to be recognized represents the maximum default risk for BASF.

• For more information on credit risks, see Note 18

Liquidity risks

BASF promptly recognizes any risks from cash flow fluctuations as part of liquidity planning. BASF has ready access to sufficient liquid funds from the ongoing commercial paper program and confirmed lines of credit from banks.

26.3 Maturity analysis

The interest and principal payments as well as other payments for derivative financial instruments are relevant for the presentation of the maturities of the contractual cash flows from financial liabilities. Future cash flows are not discounted here.

Derivatives are included using their net cash flows, provided they have negative fair values and therefore represent a liability. Derivatives with positive fair values are assets and are therefore not taken into account.

26.4 Classes and categories of financial instruments

For trade accounts receivable, other receivables and miscellaneous assets, cash and cash equivalents, as well as trade accounts payable and other liabilities, the carrying amount approximates the fair value.

The financial instruments reported under Derivatives – no hedge accounting, of which fair value level 3, in the table “Carrying amounts and fair values of financial instruments” relate to contracts for difference for electricity prices embedded in virtual power purchase agreements (virtual PPAs). The expected capacity of the solar power plants in Texas, United States, is 250 megawatts. The solar parks are scheduled to go into operation in 2023 (50 megawatts) and 2024 (200 megawatts). The level 3 fair value is determined as the present value of the expected cash flows from the contracts for difference for electricity prices. The key valuation parameters are the expected electricity prices and expected production volumes as well as expected startup date. A change in the key valuation parameters as of December 31, 2022, would have affected the fair value of the contracts for difference for electricity prices as follows:

At the time of initial recognition, the fair values of the contracts for difference for electricity prices, which were calculated using a valuation model, were higher than the respective transaction prices of zero. As these are level 3 fair values, the differences are deferred and reported in the balance sheet together with the positive or negative fair value of the respective contract for difference for electricity prices, according to the valuation model. The differences are amortized over the terms of the contracts using the straight-line method.

As of January 1, 2022, the difference yet to be amortized in profit or loss from a virtual PPA signed in the previous year amounted to €12 million. Further PPAs signed in 2022 resulted in differences of €61 million. In 2022, differences amounting to €3 million were amortized in profit or loss and recognized as other operating income in the income statement. After proportional amortization, differences yet to be amortized in profit or loss remained in the amount of €70 million as of December 31, 2022.

The carrying amount of the virtual PPA signed in the previous year reported in the balance sheet under other liabilities was €1 million as of January 1, 2022, after subtracting the difference of €12 million. As of December 31, 2022, the carrying amounts of the virtual PPAs amounted to €8 million and –€17 million after subtracting the differences in the amount of €70 million; they are reported in the balance sheet under other receivables and miscellaneous assets or other liabilities. The changes in carrying amounts were recognized in the income statement as other operating income or other operating expenses.

The table “Offsetting of derivative assets and liabilities” shows the extent to which assets and liabilities were offset in the balance sheet, as well as potential effects from the offsetting of derivatives subject to a legally enforceable global netting agreement (primarily in the form of an ISDA agreement) or similar agreement. For positive fair values of combined interest rate and currency swaps, the respective counterparties provided cash collaterals in an amount comparable to the outstanding fair values.

Deviations from the derivatives with positive fair values and derivatives with negative fair values reported in other receivables and other liabilities at the end of 2022 and 2021 arose from derivatives not subject to any netting agreements. These are not included in the table above.

In addition to the offsetting of derivatives presented in the table above, trade accounts receivable in 2022 were offset against trade accounts payable and advance payments received on orders, which were included in current other liabilities, provided specific netting agreements with customers existed. As a result, trade accounts receivable were reduced by €992 million. The reduction in trade accounts payable was €103 million and the reduction in advance payments received on orders was €889 million. Accordingly, the net amount for trade accounts receivable was €12,055 million (gross amount before offsetting: €13,047 million). The resulting net amount for trade accounts payable was €8,434 million (gross amount before offsetting: €8,537 million). The net amount for advance payments received on orders was €926 million (gross amount before offsetting: €1,815 million). In 2021, trade accounts receivable were also offset against trade accounts payable and the advance payments received on orders included in current other liabilities. This reduced trade accounts receivable by €805 million. The reduction in trade accounts payable was €36 million and the reduction in advance payments received on orders was €769 million. Accordingly, the net amount for trade accounts receivable was €11,942 million (gross amount before offsetting: €12,747 million). The resulting net amount for trade accounts payable was €7,826 million (gross amount before offsetting: €7,862 million). The net amount for advance payments received on orders was €949 million (gross amount before offsetting: €1,718 million).

The net gains and losses from financial instruments shown in the following table comprise the results of valuations, the amortization of discounts, the recognition and reversal of impairments, results from the translation of foreign currencies as well as interest, dividends and all other effects on the earnings resulting from financial instruments. The line item financial instruments at fair value through profit or loss contains only gains and losses from instruments that are not designated as hedging instruments in a hedging relationship in accordance with IFRS 9.

• Gains and losses from the valuation of securities recognized in equity are shown in development of income and expense recognized in equity attributable to shareholders of BASF SE
• For more information, see the Statement of Changes in Equity

26.5 Derivative financial instruments and hedging relationships

The use of derivative financial instruments

BASF is exposed to foreign currency, interest rate and commodity price risks during the normal course of business. These risks are hedged using derivative instruments as necessary in accordance with a centrally determined strategy. Hedging is employed for existing underlying transactions from the product business, cash investments and financing as well as for planned sales, raw materials purchases and capital measures. Furthermore, hedging may also be used for cash flows from acquisitions and divestitures. The risks from the hedged items and the derivatives are continually monitored. Where derivatives have a positive market value, BASF is exposed to credit risks from derivative transactions in the event of nonperformance of the other party. To minimize the default risk on derivatives with positive market values, transactions are exclusively conducted with creditworthy banks and partners and are subject to predefined credit limits.

To ensure efficient risk management, risk positions are centralized at BASF SE and certain Group companies. The contracting and execution of derivative financial instruments for hedging purposes are conducted according to internal guidelines, and subject to strict control mechanisms.

The fair values of derivative financial instruments are calculated using valuation models that, if available, use input parameters observable on the market. Exceptions to this are some commodity derivatives, whose valuation is based directly on market prices.

Hedge accounting

BASF is exposed to commodity price risks in the context of procuring naphtha. Some of the planned purchases of naphtha are hedged using options on oil and oil products. The main contractual elements of these items are aligned with the characteristics of the hedged item. Cash flow hedge accounting was employed for a portion of these hedging relationships in 2022 and 2021. The average exercise price of the designated options was $737.71 per metric ton as of December 31, 2022 (December 31, 2021: $675.54 per metric ton). Cash flows from designated hedging instruments and hedged transactions occur in the following year and are also recognized in profit or loss for that year.

Furthermore, cash flow hedge accounting continued to be employed to a minor extent for procuring natural gas, which is likewise exposed to commodity price risks. Commodity price-based options serve as hedging instruments, for which contract terms are defined to reflect the risks of the hedged item. Depending on where trading took place, the average exercise price of the designated options was €71.36 per MWh or $5.00 per mmBtu as of December 31, 2022. The average exercise price of the designated options was €32.60 per MWh or $3.74 per mmBtu as of December 31, 2021. Cash flows from the hedging transaction and hedged item are generally recognized in profit or loss for 2023 and 2024.

The change in the options’ time value is recognized separately in equity as costs of transaction-related hedging and, in the year during which the hedged items mature, it is initially derecognized against the carrying amount of the procured assets and recognized in profit or loss when the assets are consumed. In 2022, a decrease in fair value of €60 million was recognized in equity, and €49 million was initially derecognized against the carrying amount of the inventories procured and then recognized upon consumption in profit or loss. In 2021, a decrease in fair value of €27 million was recognized as a reduction in equity, and €24 million was derecognized against the carrying amount of the assets.

Due to planned sales in U.S. dollars, BASF is exposed to foreign currency risks, which are partially hedged with currency options and designated in a cash flow hedge accounting relationship. The hedged transaction – the designated share of expected sales in U.S. dollars – is calculated based on internal thresholds. The hedged volume is always below the total amount of expected sales in U.S. dollars for the following fiscal year. The average hedged rate was $1.0255 per euro as of December 31, 2022, and $1.1630 per euro in the previous year. The impact on earnings from designated transactions in 2022 will be recognized in the following year. The decrease in the options’ time value component arising in the amount of €8 million in 2022 was recognized separately in equity as the cost of hedging and resulted in a reduction in equity. Due to the maturity of hedged items, accumulated changes in the options’ time values were reclassified as a reduction in earnings in the amount of €9 million. In the previous year, €14 million was recognized as a change in the options’ time value component, thereby reducing equity; and €19 million was reclassified as a reduction in earnings.

Furthermore, BASF SE’s fixed-rate U.S. private placement of $1.25 billion, issued in 2013, was converted to euros using cross-currency swaps, as the private placement exposes BASF to a combined interest/currency risk. The hedged interest rate was 4.13% in the fiscal years 2022 and 2021. The hedged foreign exchange rate in both years was $1.3589 per euro. This hedge was designated as a cash flow hedge.

Furthermore, BASF was exposed to foreign currency risks in 2022 through U.S. dollar-denominated commercial paper. These risks are hedged with foreign currency forward contracts and designated in a cash flow hedge accounting relationship. The average hedged rate was $1.0683 per euro as of December 31, 2022. In 2022, the changes in value in the amount of €30 million resulting from the change in the forward rate were recognized separately in equity as hedging costs, leading to an increase in equity (2021: €11 million). Of accumulated hedging costs in equity, the amount of €30 million was reclassified in 2022 as time-period-related hedging costs, increasing earnings (2021: €11 million). There was no ineffectiveness at any time during the year.

The effects of the hedging relationships on the balance sheet, the cash flow hedge reserve, hedged nominal value and ineffectiveness to be determined are presented in the following tables by fiscal year.

The occurrence of all forecasted transactions was considered to be highly probable at all times during fiscal years 2022 and 2021. Amounts accumulated in the cash flow hedge reserve for commodity price risks are derecognized against the carrying amount of acquired assets once the hedged transaction occurs. Thus, there is no immediate reclassification of the amounts recognized in the cash flow hedge reserve to profit or loss in these cases.