Information on financial instruments

The carrying amounts and fair values of financial assets and liabilities in accordance with IFRS 7 are shown in > TABLE 26.

Whereas lease liabilities arising from sale and leaseback transactions stood at €1,037.5 million (31 December 2016: €1,007.2 million), lease receivables arising from sale and leaseback transactions amounted to €669.5 million (31 December 2016: €663.4 million) and leased assets under sale and leaseback transactions totalled €390.3 million (31 December 2016: €367.5 million).

The liabilities from finance leases recognised within other financial liabilities comprise liabilities arising from the financing of industrial trucks for short-term rental of €451.8 million (31 December 2016: €440.0 million) and residual value obligations of €17.2 million (31 December 2016: €16.7 million). Within other financial liabilities, the KION Group has also recognised liabilities from finance leases amounting to €28.2 million (31 December 2016: €21.0 million) arising from procurement leases, which are classified as finance leases due to their terms and conditions. Other financial liabilities also included designated leasing credit lines that have been drawn down in an amount of €24.5 million (31 December 2016: €8.3 million).

The non-consolidated subsidiaries and other equity investments that are shown as at 30 June 2017 in > TABLE 26 are, with the exception of the equity investment in Balyo SA, carried at 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. Because Balyo SA successfully floated on the stock market in June 2017, this equity investment is carried at fair value.

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 27 – 28

Level 1 comprises the equity investment in Balyo SA as well as other financial assets for which the fair value is calculated using prices quoted in an active market.

Interest-rate swaps and currency forwards are classified as Level 2. The fair value of derivative financial instruments is determined by the system using appropriate valuation methods on the basis of the observable market information at the reporting date. The default risk for the Group and for the counterparty is taken into account on the basis of gross figures. The fair value of interest-rate swaps is calculated as the present value of the future cash flows. Both contractually agreed payments and forward interest rates are used to calculate the cash flows, which are then discounted on the basis of a yield curve that is observable in the market. 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 financial liabilities allocated to Level 3 relate to a call option of Weichai Power on 10.0 per cent of the shares in Linde Hydraulics. The unobservable inputs that were significant to fair value measurement as at the reporting date were unchanged compared with the end of 2016. Unrealised gains of €0.2 million in connection with the call option were recognised in net financial income / expenses in the first half of 2017 (H1 2016: €0.1 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 to 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 six months of 2017.