4.6 DETERMINATION OF FAIR VALUE AND FINANCIAL RISKS
Area of risk
Description of risk
Risk management measures
Exposure
Credit risk
Untimely settlement or failure to settle due receivables.
Continuous and up-to-date recovery activities, in-depth work in the area of compensation, conclusion of settlement agreements and best possible receivables turnover ratio. Preventive measures in the form of verifying credit ratings, setting credit limits and securing collateral instruments, the active monitoring of the balance of receivables from customers, the regular implementation of recovery procedures, and the centralised management of customers for larger Group companies.
Low
Currency risk
Effect of changes to exchange rates on operating results.
Due to the low amount of turnover in foreign currencies, the Group did not implement measures, such as currency risk hedging, the purchase of foreign currencies when issuing orders, or the monitoring of indicators on international markets. The Group does not use hedges; instead it mostly concludes agreements in stable currencies. Note: The exceptions are the subsidiaries in Ukraine, where financial liabilities are denominated in euros, operations are not closely linked to the euro and the local currency is unstable.
Low
Interest-rate risk
Failure to achieve planned interest rates according to the plan due to increased borrowing and changes on the market, and lower actual deposit rates.
Distribution of loans and deposits between banks and active cooperation with the latter, contingency plan in the event of fluctuations in interest rates of 50%.
Low
Solvency risk
Mismatched liquidity, i.e. maturity mismatches between assets and liabilities, could result in insolvency.
Raising of loans; control over implementation of investments; regular recovery of receivables from domestic and foreign customers; use of deposits. All of the Group’s activities focus on continuous control, the planning of liquidity and regulated relations with all stakeholders, ensuring short-term and long-term solvency, the continuous monitoring of liquidity, cash-flow forecasting, appropriately high credit lines for balancing short-term fluctuations in liquidity, the appropriate level and maturity of long-term loans, and regular contact with creditor banks.
Low
Credit risk
Credit risk is the risk of financial loss to Group companies if a customer fails to meet its contractual obligations. Credit risk arises primarily in connection with trade receivables.
Special attention is given to credit risk owing to the socioeconomic environment and the effect of COVID-19. The Group actively monitored trade receivables again in 2020. By applying a standard policy regarding payment terms and maximum exposure limits to individual customers, we can generally prevent significant negative deviations with regard to the regular payment of receivables. Pošta Slovenije is in a more favourable position compared to other sectors in terms of the non-settlement of financial obligations by a specific customer owing to the nature of products, the activities of major customers, the Company’s highly dispersed customer base and the active collection of receivables.
The carrying amount of financial assets (excluding receivables from employees, the government and advances paid) was exposed to credit risk, and was as follows as at the reporting date:
In EUR
Note
31. 12. 2020
31. 12. 2019
Loans granted and deposits
6. 12
10,485,771
1,501,006
Adjustments to the value of loans granted and deposits
6. 12
-407,283
-1,607
Trade receivables
7. 13
75,482,792
77,424,277
Adjustments to the value of trade receivables
7. 13
-6,410,906
-7,455,812
Other operating receivables
7. 13
2,217,629
3,474,567
Adjustments to value of other operating receivables
7. 13
-722,332
-812,473
Cash and cash equivalents
16
77,550,619
50,603,445
Accrued revenues
10
11,355,189
7,993,479
Adjustments to the value of accrued revenues
10
-53,109
-64,400
Total
169,498,370
132,662,482
The Group’s receivables are generally not collateralised, except those from customers with poor credit ratings. Collateralised receivables totalled EUR 5,422,157 in 2020, and primarily relate to the Intereuropa Group.
A breakdown of receivables by maturity is presented in the table below.
Trade receivables (current and non-current) by maturity
In EUR
31. 12. 2020
31. 12. 2019
Non-past-due receivables
59,857,046
56,238,575
Past-due receivables
15,622,756
21,185,702
- up to 30 days
5,273,913
8,865,465
- from 31 to 60 days
1,687,153
1,155,282
- from 61 to 90 days
762,136
2,489,595
- from 91 to 180 days
1,467,176
1,643,073
- from 181 to 365 days
1,191,996
5,156,863
- more than 365 days
5,240,382
1,862,424
Exchange rate differences
2,990
13,000
Total
75,482,792
77,424,277
Receivables for interest and other receivables (current and non-current) by maturity
In EUR
31. 12. 2020
31. 12. 2019
Non-past-due receivables
943,553
1,962,894
Past-due receivables
1,274,076
1,511,673
- up to 30 days
109,868
105,759
- from 31 to 60 days
5,102
1,280
- from 61 to 90 days
2,453
10,052
- from 91 to 180 days
13,449
53,438
- from 181 to 365 days
375,149
515,322
- more than 365 days
768,055
825,822
Total
2,217,629
3,474,567
Operating receivables by maturity are disclosed in their gross value.
Changes in adjustments to the value of operating receivables (non-current and current)
In EUR
31. 12. 2020
31. 12. 2019
Balance at the end of previous financial year
8,268,285
3,241,546
Transition to IFRS 9
-
Balance as at 1 Jan
8,268,285
3,241,546
Increase due to business combination
-
5,680,000
Other
-61,192
-
Write-downs
-1,299,321
-606,127
Payment of receivables
-5,727
-7,964
Loss due to the impairment of receivables
358,424
394,632
Elimination of losses due to impairment
-104,880
-431,801
Exchange rate differences
-22,351
-2,001
Balance as at 31 Dec
7,133,238
8,268,285
Changes in adjustments to the value of assets from contracts with customers
In EUR
31. 12. 2020
31. 12. 2019
Balance at the end of previous financial year
64,000
72,286
Balance as at 1 Jan
64,000
72,286
Loss due to the impairment of receivables
-
-7,886
Elimination of losses due to impairment
-11,291
-
Balance as at 31 Dec
53,109
64,400
Changes in adjustments to the value of financial receivables (non-current and current)
In EUR
31. 12. 2020
31. 12. 2019
Balance at the end of previous financial year
405,813
404,206
Balance as at 1 Jan
405,813
404,206
Loss due to the impairment of receivables
1,649
1,607
Elimination of losses due to impairment
-514
Exchange rate differences
335
Balance as at 31 Dec
407,283
405,813
Currency risk
Similar to all postal service providers, the controlling company Pošta Slovenije is involved in international postal transactions. Nevertheless, the majority of its cash flows are in euros. The volume of transactions in foreign currencies is insignificant. Exposure to currency risk is thus negligible.
Exposure to changes in exchange rates (excluding receivables from and liabilities to employees, the government and for advances) is presented in the table below.
In EUR
31. 12. 2020
EUR
USD
HRK
SDR*
OTHER
Cash and cash equivalents
77,550,619
71,431,709
490,414
5,331,632
-
296,864
Current operating receivables
70,011,836
61,583,682
357,254
3,732,774
2,412,815
1,925,311
Non-current operating receivables
555,347
552,441
-
-
-
2,906
Current financial receivables
9,603,406
9,602,640
-
-
-
766
Non-current financial receivables
475,082
422,111
-
39,279
-
13,692
Current operating liabilities
-34,482,974
-27,895,858
-488,798
-2,870,115
-1,300,105
-1,928,098
Non-current operating liabilities
-151,736
-151,736
-
-
-
-
Current financial liabilities
-17,348,079
-16,914,625
-
-57,542
-
-375,912
Non-current financial liabilities
-116,887,034
-115,827,658
-
-117,308
-
-942,068
Exposure disclosed in the statement of financial position
-10,673,533
-17,197,294
358,870
6,058,720
1,112,710
-1,006,539
* SDR (Special Drawing Right) or DTS (Droit de tirage special) is a special drawing right that refers to a currency unit comprised from the basket of currencies defined by the International Monetary Fund, International postal services are typically charged in this currency unit.
In EUR
31. 12. 2019
EUR
USD
HRK
SDR*
OTHER
Cash and cash equivalents
50,603,445
47,793,575
272,753
1,433,079
-
1,104,038
Current operating receivables
72,006,480
61,224,061
102,597
4,356,158
3,227,664
3,096,000
Non-current operating receivables
624,079
612,079
-
-
-
12,000
Current financial receivables
1,010,000
1,009,000
-
-
-
1,000
Non-current financial receivables
489,399
426,684
-
9,715
-
53,000
Current operating liabilities
-36,963,976
-29,810,315
-2,118
-4,241,288
-914,859
-1,995,396
Non-current operating liabilities
-1,228,713
-1,228,713
-
-
-
-
Current financial liabilities
-66,754,989
-65,897,315
-
-346,674
-
-511,000
Non-current financial liabilities
-45,746,768
-44,679,773
-
-759,995
-
-307,000
Exposure disclosed in the statement of financial position
-25,961,043
-30,550,717
373,232
450,995
2,312,805
1,452,642
* SDR (Special Drawing Right) or DTS (Droit de tirage special) is a special drawing right that refers to a currency unit comprised from the basket of currencies defined by the International Monetary Fund, International postal services are typically charged in this currency unit.
Unfavourable change in the currency pairing EUR against USD, HRK, SDR or RSD of 10% as at 31 December 2020 would lower the operating result by EUR 666,615.
Interest-rate risk
Exposure to interest-rate risk that poses a risk to changes in interest rates is presented in the table below:
In EUR
31. 12. 2020
31. 12. 2019
Financial instruments at fixed interest rates
Financial receivables
10,013,488
1,434,399
Cash and cash equivalents
77,550,619
50,603,445
Financial liabilities
-10,869,443
-12,484,930
Net financial instruments at fixed interest rates
76,694,664
39,552,914
Financial instruments at variable interest rates
Financial receivables
65,000
65,000
Financial liabilities
-123,365,671
-100,016,827
Net financial instruments at variable interest rates
-123,300,671
-99,951,827
Sensitivity analysis and effect on profit or loss from ordinary operations
In EUR
Loan as at 31 December 2020
Increase in IR by 0.1 basis points
Increase in IR by 0.25 basis points
Increase in IR by 0.5 basis points
6-month EURIBOR
67,715,875
-
-
-
3-month EURIBOR
54,850,000
-
-
-
1-month BELIBOR*
799,796
-800
-1,999
-3,999
Total
123,365,671
-800
-1,999
-3,999
*Reference interest rate on the Serbian interbank market
The analysis shows the extent of the change to the Group’s profit or loss if the interest rate that is applicable on 31 December 2020 changes by 0.1 percentage points, 0.25 percentage points or 0.5 percentage points. Given that the 6-month and 3-month EURIBOR amounted to less than 0.5% as at 31 December 2020, the changed interest rate would have no effect on profit or loss as at 31 December 2020. However, a change to the monthly BELIBOR would impact profit or loss, as indicated in the table above. The monthly BELIBOR amounted to 0.6% as at 31 December 2020.
Liquidity risk
Liquidity risk derives from maturity mismatches between assets and liabilities, which could result in insolvency (insufficient funds to settle liabilities at maturity). This risk is closely linked to credit risk due to negative trends in economic activity, which in 2020 was primarily connected with the COVID-19 pandemic. The Group manages the aforementioned risk through the prudent planning of cash flows (e.g. investments, and the management of credit risk and current operations).
In EUR
Carrying amount as at
31. 12. 2020
Total contractual cash flows
From 0 to 6 months
From 6 to 12 months
From 1 to 5 years
More than 5 years
Loans from banks and others
123,276,143
Financial liabilities from leases
10,533,884
10,558,115
2,525,978
1,918,358
6,113,779
-
Liabilities for dividends and other shares in profit
425,086
425,087
5,142
419,945
-
-
Trade payables
29,324,299
30,080,067
29,939,610
24,647
93,098
22,712
Other operating liabilities*
5,310,410
5,310,410
5,146,229
12,445
151,736
-
Total
168,869,822
174,640,376
44,544,754
9,846,890
90,858,396
29,390,337
*Excluding liabilities to employees, the government, and received advances
In EUR
Carrying amount as at
31. 12. 2019
Total contractual cash flows
From 0 to 6 months
From 6 to 12 months
From 1 to 5 years
More than 5 years
Loans from banks and others
99,855,609
Financial liabilities from leases
12,208,148
12,884,517
3,262,472
1,723,473
7,898,572
-
Liabilities for dividends and other shares in profit
438,000
438,000
438,000
-
-
-
Trade payables
32,795,345
33,592,345
33,383,345
69,000
71,000
69,000
Other operating liabilities*
5,397,345
5,411,344
4,384,567
-
1,026,777
-
Total
150,694,451
153,731,326
101,353,203
4,930,189
35,492,139
11,955,795
*Excluding liabilities to employees, the government, and received advances
Determination of fair value
Given the Group’s accounting policies and classification approach, the determination of the fair value of both financial and non-financial assets and liabilities is necessary.
The Group determined the fair values of individual groups of assets for measurement and/or reporting purposes based on the methods described below.
Land and investment property
The fair value of the majority of land and investment property is determined on the basis of valuations, where the recoverable market value was determined.
Other non-current financial assets
The fair value of other non-current financial assets is determined based on the closing market price as at the reporting date.
Financial liabilities
Fair value is calculated for reporting purposes based on the present value of future principal and interest payments, discounted using a market interest rate at the end of the reporting period.
Trade and other receivables
The fair value of operating and other receivables is calculated for reporting purposes based on the present value of future principal and interest payments, discounted according to a market interest rate at the reporting date.
Fair value
2020
2019
In EUR
Carrying amount
Fair value
Carrying amount
Fair value
Non-current financial assets
2,773,201
2,773,201
2,734,434
2,734,434
Investment property
33,160,030
33,160,030
35,185,013
35,185,013
Non-current financial receivables
475,082
475,082
489,399
489,399
Non-current operating receivables
509,613
509,613
624,079
624,079
Current financial receivables
9,603,406
9,603,406
1,010,000
1,010,000
Current operating receivables
75,250,781
75,250,781
73,918,327
73,918,327
Cash and cash equivalents
77,550,619
77,550,619
50,603,445
50,603,445
Non-current financial liabilities
-116,887,035
-116,887,035
-45,746,768
-45,746,768
Non-current operating liabilities
-1,162,068
-1,162,068
-1,228,713
-1,228,713
Current financial liabilities
-17,348,079
-17,348,079
-66,754,988
-66,754,988
Current operating liabilities
-59,169,165
-59,169,165
-56,948,257
-56,948,257
Total
4,756,385
4,756,385
-6,114,029
-6,114,029
Fair value of assets
In EUR
2020
2019
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Assets measured at fair value
Non-current financial assets
44,400
-
2,728,801
49,284
-
2,685,150
44,400
-
2,728,801
49,284
-
2,685,150
Assets for which fair value is disclosed
Non-current financial receivables
-
-
475,082
-
-
489,399
Non-current operating receivables
-
-
509,613
-
-
624,079
Current financial receivables
-
-
9,603,406
-
-
-1,010,000
Current operating receivables
-
-
75,250,781
-
-
73,918,327
Cash and cash equivalents
77,550,619
-
-
50,603,445
-
-
77,550,619
-
85,838,882
50,603,445
-
76,041,805
Total
77,595,019
-
88,567,683
50,652,729
-
78,726,955
Fair value of investment property
In EUR
2020
2019
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Assets for which fair value is disclosed
Investment property
33,160,030
-
-
35,185,013
Total
33,160,030
-
-
35,185,013
Fair value of liabilities
In EUR
2020
2019
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Assets for which fair value is disclosed
Non-current financial liabilities
-
-
116,887,035
-
-
45,746,768
Non-current operating liabilities
-
-
1,162,068
-
-
1,228,713
Current financial liabilities
-
-
17,348,079
-
-
66,754,988
Current operating liabilities
-
-
59,169,165
-
-
56,948,257
Total
-
-
194,566,347
-
-
170,678,726
Assets and liabilities are categorised to three levels with respect to the calculation of their fair value:
Level 1 – assets and liabilities at market price (the use of published prices arising on an active market for the same assets or liabilities);
Level 2 – assets and liabilities not classified as Level 1, but whose value is determined directly or indirectly on the basis of market observables; and
Level 3 – assets and liabilities whose value cannot be determined on the basis of market observables and thus cannot be classified to Level 1 or Level 2.
The fair value of current assets and liabilities is equal to their carrying amount. The fair value of investment property is determined on the basis of appraisals drawn up by certified real estate valuers. For investment property for which fair value was assessed, the valuer used the market approach and income approach, where data regarding comparable sales were adjusted taking into account the characteristics of specific real estate (size, location, intended use, etc.).