Note 13. Classification of financial assets and liabilities

* Valued at amortized cost.

** Refers to shares in other companies.

* Valued at amortized cost.

Alfa Laval measures financial assets and liabilities at fair value or amortized cost. Fair value is determined according to a hierarchy consisting of the following three levels:

1. Market prices in active markets,
2. Other inputs than market prices, which are directly observable (prices) or indirectly observable (derived from prices), and
3. Unobservable market data.

The fair values of holdings of bonds are arrived at using market prices according to level 1. The effect of the measurement at fair value is reported in net income. The fair value adjustment of these instruments is reflected directly on the item bonds in the statement of financial position.

The fair values of shares in external companies are arrived at using market prices according to level 1 or other inputs according to level 2. The effect of the measurement at fair value is reported in other comprehensive income. The fair value adjustment of these instruments is reflected directly on the item other long-term securities in the statement of financial position.

The fair values of the Group’s currency forward contracts, currency options, interest-rate swaps, metal forward contracts and electricity futures are arrived at using market prices according to level 2. The fair value changes are arrived at by comparing the conditions of the derivative entered into with the market price for the same instrument at the closing date and with the same maturity date. The effect of the measurement at fair value is reported in other comprehensive income if the derivative constitutes an effective cash flow hedge and otherwise on the concerned line above net income. The fair value adjustment of these instruments is reported as derivative assets or derivative liabilities in the statement of financial position. The derivative assets or derivative liabilities are split into a current and a non-current part depending on if the derivatives mature within 12 months or after 12 months.

Derivatives measured through other comprehensive income only relate to cash flow hedges. Other liabilities measured at fair value through profit or loss was related to a liability for the seller’s earn-out possibility in connection with a business acquisition.

All of the financial instruments above sum up either to the corresponding item in the statement on financial position or to the item specified in the notes referred to in the statement on financial position. The risks linked to these financial instruments including any concentrations of risk are presented in the Risks section.

Result of financial instruments

The result of the bonds and other current and non-current securities measured at fair value through profit or loss is found in Note 10 as fair value changes in securities.

The result of financial assets measured at amortized cost is presented in Note 11 as other interest income for deposits with banks, other deposits and cash and cash equivalents. The other financial assets measured at amortized cost do not generate a result but only a cash-in of the principal amount.

The result of the financial liabilities measured at amortized cost is presented in Note 11 as other interest costs for the liabilities to credit institutions etc. The other financial liabilities measured at amortized cost do not generate a result but only a cash-out of the principal amount.

The result of the derivative instruments impacting net income is presented below:

The result of the derivative assets and liabilities measured at fair value through other comprehensive income is reported as part of other comprehensive income in the consolidated comprehensive income statement.