Information on financial instruments

The carrying amounts and fair values of financial assets and liabilities in accordance with IFRS 7 are shown in >> Table 25.

Whereas lease liabilities stood at €667.6 million (31 December 2013: €617.1 million), lease receivables arising from sale and leaseback transactions amounted to €454.3 million (31 December 2013: €431.4 million) and leased assets under sale and leaseback transactions totalled €222.3 million (31 December 2013: €201.2 million).

The finance lease obligations reported in other liabilities comprise liabilities arising from the sale and leaseback financing of industrial trucks of €343.7 million (31 December 2013: €327.5 million). These are mainly allocated to the Financial Services segment and result from the intra-group financing provided by the Financial Services segment for the short-term rental business of the Linde Material Handling and STILL brand segments.

The investments in unconsolidated subsidiaries that are shown in >> table 25 are carried at amortised cost less impairment losses, as observable fair values are not available and reliable results cannot be obtained using other permitted measurement techniques. At present there is no intention to sell these financial instruments.

Fair value measurement and assignment to classification levels

The following tables show the assignment of fair values to the individual classification levels as defined by IFRS 13 for financial instruments measured at fair value. >> Tables 26 – 27

Level 1 comprises available-for-sale assets for which the fair value is calculated using prices quoted in an active market.

All currency forwards are classified as Level 2. The fair value of the currency forwards is calculated by the system using the discounting method based on forward rates on the reporting date. The default risk for the Group and for the counterparty is taken into account on the basis of gross figures.

The financial assets and liabilities allocated to Level 3 relate to a put option held by Linde Material Handling GmbH, Aschaffenburg, and two call options held by Weichai Power on the remaining shares in Linde Hydraulics. The Black-Scholes model and probability-weighted scenario analysis are used to calculate the fair value of the put option and the two call options. The measurement is based on the following significant, unobservable input parameters as at 30 September 2014. An amount of €64.0 million has been recognised as the fair value of the remaining shares in Linde Hydraulics, both for the put option and for the two call options (31 December 2013: €116.1 million). A base exercise price of €77.4 million and a term to maturity of 0.74 – 2.74 years have been assumed for the put option. For the measurement of call option 1, a base exercise price of €77.4 million and a term to maturity of 3.24 years was used, while a base exercise price of €38.7 million and a term to maturity of 0.74 – 3.24 years was used for call option 2. At 30 September 2014, the material changes in fair value and the impact on the income statement for the first nine months of the year were as follows. >> Table 28

As at 30 September 2014, the net value calculated for the options on the remaining shares in Linde Hydraulics came to €31.5 million (31 December 2013: minus €11.5 million). If the fair value of the shares had been 10.0 per cent lower on the reporting date, the net value arising from the options would have increased by €5.4 million (31 December 2013: by €9.4 million) to €36.9 million (31 December 2013: minus €2.1 million) and led to an additional gain of €5.4 million (31 December 2013: lower expense of €9.4 million). A 10.0 per cent rise in the fair value of the shares in Linde Hydraulics would have reduced the net value arising from the options by €5.6 million (31 December 2013: by €9.4 million) to €25.9 million (31 December 2013: minus €20.9 million) and the gain would have decreased by €5.6 million (31 December 2013: €9.4 million).

In order to eliminate default risk to the greatest possible extent, the KION Group only ever enters into derivatives with investment-grade counterparties.

If events or changes in circumstances make it necessary to reclassify financial instruments as a different level, they are reclassified at the end of a reporting period. No financial instruments were transferred between Levels 1, 2 or 3 in the first nine months of 2014.