20. Other financial assets and Other financial liabilities

These line items mainly consist of fair value measurement of derivative financial instruments. They also include some collateral deposits (held in connection with derivative transactions and debts). 

 At 31 December 2013At 31 December 2012
(€ million)Positive
fair value
Negative
fair value

Positive
fair value

Negative
fair value

Fair value hedges        
Interest rate risk - Interest rate swaps 93 - 121 -
Interest rate and currency risk - Combined interest rate and currency swaps 15 - 1 (1)
Total Fair value hedges 108 - 122 (1)
         
Cash flow hedges        
Currency risks - Forward contracts, Currency swaps and Currency options 260 (59) 108 (75)
Interest rate risk - Interest rate swaps 1 (3) - (8)
Interest rate and currency risk - Combined interest rate and currency swaps 9 (22) 7 (9)
Commodity price risk – Commodity swap 6 (5) 10 (6)
Total Cash flow hedges 276 (89) 125 (98)
         
Derivatives for trading 129 (48) 254 (102)
Fair value of derivative instruments 513 (137) 501 (201)
Collateral deposits 20 - 18  
Other financial assets/(liabilities) 533 (137) 519 (201)

The overall change in Other financial assets (from €519 million at 31 December 2012 to €533 million at 31 December 2013) and in Other financial liabilities (from €201 million at 31 December 2012 to €137 million at 31 December 2013) is mostly due to fluctuations in exchange rates, in interest rates and in commodity prices during the year, and to the equity swaps on Fiat S.p.A. and CNH Industrial N.V. ordinary shares, expired in 2013.

As this item consists principally of hedging derivatives financial instruments, the change in their value is compensated by the change in the value of the hedged items.

At 31 December 2013 derivatives for trading consisted principally of derivative contracts entered for hedging purposes which do not qualify for hedge accounting and one embedded derivative in a bond issue in which the yield is determined as a function of trends in the inflation rate and related hedging derivative, which converts the exposure to floating rate (the total value of the embedded derivative is offset by the value of the hedging derivative). At 31 December 2012 derivatives for trading also included certain equity swaps on Fiat S.p.A. and CNH Industrial N.V. shares that expired in 2013.

At 31 December 2013, the notional amount of outstanding derivative financial instruments is as follows:

(€ million)

At 31 December 2013At 31 December 2012
Currency risk management 11,248 10,540
Interest rate risk management 2,546 5,226
Interest rate and currency risk management 1,455 1,118
Commodity price risk management 473 495
Other derivative financial instruments 14 168
Total notional amount 15,736 17,547

At 31 December 2013, the notional amount of Other derivative financial instruments of €14 million (€14 million at 31 December 2012) relates to the notional amount of the above mentioned embedded derivative and the related hedging derivative. At 31 December 2012 this amount also included €154 million which was the notional amount of the above mentioned equity swaps.

The following table provides an analysis by due date of outstanding derivatives financial instruments based on their notional amounts:

 At 31 December 2013
(€ million)

within
one year

due
between one
and five years

due
beyond
five years

Total
Currency risk management 10,446 802 - 11,248
Interest rate risk management 764 1,782 - 2,546
Interest rate and currency risk management - 1,455 - 1,455
Commodity price risk management 450 23 - 473
Other derivative financial instruments - - 14 14
Total notional amount 11,660 4,062 14 15,736

Cash flow hedge

The effects recognized in the Income statement mainly relate to currency risk management and, to a lesser extent, to hedges regarding commodity price risk management and the cash flows that are exposed to an interest rate risk.

The policy of the Group for managing currency risk normally requires that future cash flows from trading activities which will occur within the following twelve months, and from orders acquired (or contracts in progress), whatever their due dates, be hedged. It is considered reasonable to suppose that the hedging effect arising from this and recorded in the cash flow hedge reserve will be recognized in Income statement, mainly during the following year.

Derivatives relating to interest rate and currency risk management are treated as cash flow hedges and were entered into by treasuries for the purpose of hedging bonds issued in foreign currencies. The amount recorded in the cash flow hedge reserve will be recognized in Income statement according to the timing of the flows of the underlying bonds.

In respect of derivative financial instruments, in 2013 the Group reclassified gains of €190 million (losses of €105 million in 2012), net of the tax effect, from Other comprehensive income/(losses) to Income statement. These items are reported in the following lines:

(€ million)20132012
Currency risk    
Increase/(Decrease) in Net revenues 126 (92)
Decrease/(Increase) in Cost of sales 44 25
Financial income/(expenses) 22 32
Result from investments 17 (12)
     
Interest rate risk    
Decrease/(Increase) in Cost of sales (6) (6)
Result from investments (4) (5)
Financial income/(expenses) (10) (6)
     
Commodities price risk    
Decrease/(Increase) in Cost of sales (1) (40)
     
Ineffectiveness - overhedges 5 (6)
     
Taxes income/(expenses) (3) 5
Total recognized in the Income statement 190 (105)

The ineffectiveness of cash flow hedges was not material in 2013 or 2012.

In 2013 there was an overall positive economic effect of €5 million (negative effect of €6 million in 2012) which related to excess future flows hedged (over-hedges).

Fair value hedge

The gains and losses arising from the valuation of outstanding interest rate and currency derivatives financial instruments (mostly for managing currency risk) and interest rate derivatives (for managing the interest rate risk) recognized in accordance with fair value hedge accounting and the gains and losses arising from the respective hedged items are set out in the following table:

(€ million)20132012
Currency risk    
Net gains/(losses) on qualifying hedges 19 14
Fair value changes in hedged items (19) (14)
     
Interest rate risk    
Net gains/(losses) on qualifying hedges (28) (51)
Fair value changes in hedged items 29 53
Net gains/(losses) 1 2

The ineffective portion of transactions treated as fair value hedges was a positive amount of €1 million in 2013  (positive amount of €2 million in 2012).