43.1 Financial assets by category

The following table reports the carrying amount for each category of financial asset provided for under IFRS 9, broken down into current and non-current financial assets, showing hedging derivatives and derivatives measured at fair value through profit or loss separately.

Millions of euro

 

Non-current

Current

 

Notes

at Dec. 31, 2019

at Dec. 31, 2018

at Dec. 31, 2019

at Dec. 31, 2018

Financial assets at amortized cost

43.1.1

4,258

4,292

26,377

25,268

Financial assets at FVTOCI

43.1.2

480

413

61

72

Financial assets at fair value through profit or loss

     

Derivative financial assets at FVTPL

43.1.3

29

31

3,086

3,163

Other financial assets at FVTPL

43.1.3

2,370

2,080

-

-

Financial assets designated upon initial recognition (fair value option)

43.1.3

-

-

-

-

Total financial assets at fair value through profit or loss

 

2,399

2,111

3,086

3,163

Derivative financial assets designated as hedging instruments

     

Fair value hedge derivatives

43.1.4

32

25

-

4

Cash flow hedge derivatives

43.1.4

1,322

949

979

747

Total derivative financial assets designated as hedging instruments

 

1,354

974

979

751

TOTAL

 

8,491

7,790

30,503

29,254

For more information on fair value measurement, see note 47 “Assets measured at fair value”.

   

43.1.1 Financial assets measured at amortized cost

The following table reports financial assets measured at amortized cost by nature, broken down into current and non-current financial assets.

Millions of euro

 

Non-current

 

Current

 

Notes

at Dec. 31, 2019

at Dec. 31, 2018

Notes

at Dec. 31, 2019

at Dec. 31, 2018

Cash and cash equivalents

 

-

-

32

9,029

6,630

Trade receivables

29

917

835

29

12,166

12,752

Short-term portion of long-term financial receivables

 

-

-

30.1

1,585

1,522

Cash collateral

 

-

-

30.1

2,153

2,559

Other financial receivables

26.1

2,769

2,912

30.1

370

859

Financial assets from service concession arrangements at amortized cost

26

340

345

30

13

12

Other financial assets at amortized cost

26, 27

232

200

30.31

1,061

934

Total

 

4,258

4,292

 

26,377

25,268

 

Impairment of financial assets at amortized cost

Financial assets measured at amortized cost at December 31, 2019 amounted to €3,370 million (€3,083 million at December 31, 2018) and are recognized net of allowances for expected credit losses.
The Group mainly has the following types of financial assets measured at amortized cost subject to impairment testing:

  • cash and cash equivalents;
  • trade receivables and contract assets;
  • financial receivables;
  • other financial assets.
While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial.

The expected credit loss (ECL), determined using probability of default (PD), loss given default (LGD) and exposure at default (EAD), is the difference between all contractual cash flows that are due in accordance with the contract and all cash flows that are expected to be received (i.e., all shortfalls) discounted at the original effective interest rate (EIR).
For calculating ECL, the Group applies two different approaches:

  • the general approach, for financial assets other than trade receivables, contract assets and lease receivables. This approach, based on an assessment of any significant increase in credit risk since initial recognition, is performed comparing the PD at origination with PD at the reporting date, at each reporting date. Then, based on the results of the assessment, a loss allowance is recognized based on 12-month ECL or lifetime ECL (i.e., staging):
    • 12-month ECL, for financial assets for which there has not been a significant increase in credit risk since initial recognition;
    • lifetime ECL, for financial assets for which there has been a significant increase in credit risk or which are credit impaired (i.e., defaulted based on past due information). 
  • the simplified approach, for trade receivables, contract assets and lease receivables with or without a significant financing component, based on lifetime ECL without tracking changes in credit risk.
For more information on assets deriving from contracts with customers, please see note 25 “Current/Non-current assets/ (liabilities) from contracts with customers”.

A forward-looking adjustment can be applied considering qualitative and quantitative information in order to reflect future events and macroeconomic developments that could impact the risk associated with the portfolio or financial instrument.
Depending on the nature of the financial assets and the credit risk information available, the assessment of the increase in credit risk can be performed on:

  • an individual basis, if the receivables are individually significant and for all receivables which have been individually identified for impairment based on reasonable and supportable information;
  • a collective basis, if no reasonable and supportable information is available without undue cost or effort to measure expected credit losses on an individual instrument basis.
When there is no reasonable expectation of recovering a financial asset in its entirety or a portion thereof, the gross carrying amount of the financial asset shall be reduced.
A write-off represents a derecognition event (e.g. the right to cash flows is legally or contractually extinguished, transferred or expired).

The following table reports expected credit losses on financial assets measured at amortized cost on the basis of the general simplified approach.

 

Millions of euro

at Dec. 31, 2019

 

at Dec. 31, 2018

 
 

Gross amount

Allowance for expected losses

Total

Gross amount

Allowance for expected losses

Total

Cash and cash equivalents

9,029

-

9,029

6,632

2

6,630

Trade receivables

16,063

2,980

13,083

16,415

2,828

13,587

Financial receivables

7,108

231

6,877

8,081

229

7,852

Other financial assets at amortized cost

1,805

159

1,646

1,515

24

1,491

Total

34,005

3,370

30,635

32,643

3,083

29,560

 

To measure expected losses, the Group assesses trade receivables and contract assets with the simplified approach, both on an individual basis (e.g. government entities, authorities, financial counterparties, wholesale sellers, traders and large companies, etc.) and a collective basis (e.g. retail customers).

In the case of individual assessments, PD is generally obtained from external providers.

Otherwise, in the case of collective assessments, trade receivables are grouped on the basis of their shared credit risk characteristics and information on past due positions, considering a specific definition of default.
Based on each business and local regulatory framework, as well as differences between customer portfolios, including their default and recovery rates (comprising expectations for recovery beyond 90 days):

  • the Group mainly defines a defaulted position as one that is 180 days past due. Accordingly, beyond this time limit, trade receivables are presumed to be credit impaired); 
  • specific clusters are defined on the basis of specific markets, business and risk characteristics.
Contract assets substantially have the same risk characteristics as trade receivables for the same types of contracts. In order to measure the ECL for trade credits on a collective basis, as well as for contract assets, the Group uses the following assumptions regarding the ECL parameters:
  • PD, assumed equal to the average default rate, is calculated by cluster and considering historical data from at least 24 months;
  • LGD is a function of the recovery rates for each cluster, discounted using the effective interest rate;
  • EAD is estimated as equal to the carrying amount at the reporting date net of cash deposits, including invoices issued but not past due and invoices to be issued. 
The following table reports changes in the allowance for expected credit losses on financial receivables in accordance with the general simplified approach.

   

Millions of euro

ECL 12-month

ECL lifetime

Opening balance at Jan. 1, 2018

7

23

Provisions

-

4

Uses

-

-

Reversals to profit or loss

(188)

(2)

Other changes

268

117

Closing balance at Dec. 31, 2018

87

142

Opening balance at Jan. 1, 2019

87

142

Provisions

-

26

Uses

-

-

Reversals to profit or loss

(1)

(3)

Other changes

(8)

(12)

Closing balance at Dec. 31, 2019

78

153

 

The following table reports changes in the allowance for expected credit losses on trade receivables.

 

Millions of euro

 

Opening balance at Jan. 1, 2018

2,609

Provisions

1,367

Uses

(897)

Reversals to profit or loss

(281)

Other changes

30

Closing balance at Dec. 31, 2018

2,828

Opening balance at Jan. 1, 2019

2,828

Provisions

1,239

Uses

(834)

Reversals to profit or loss

(202)

Other changes

(51)

Closing balance at Dec. 31, 2019

2,980

   

The following table reports changes in the allowance for expected credit losses on other financial assets at amortized cost.

 

Millions of euro

ECL lifetime

Opening balance at Jan. 1, 2018

15

Provisions

3

Uses

-

Reversals to profit or loss

(3)

Other changes

(9)

Closing balance at Dec. 31, 2018

24

Opening balance at Jan. 1, 2019

24

Provisions

105

Uses

-

Reversals to profit or loss

(7)

Other changes

37

Closing balance at Dec. 31, 2019

159

 

Note 44 “Risk management” provides additional information on the exposure to credit risk and expected losse.

The following table shows financial assets at fair value through other comprehensive income by nature, broken down into current and non-current financial assets.

   

Millions of euro

 

Non-current

 

Current

 

Notes

at Dec. 31, 2019

at Dec. 31, 2018

Notes

at Dec. 31, 2019

at Dec. 31, 2018

Equity investments in other entities at FVOCI

26

64

53

 

-

-

Securities

26.1

416

360

30.1

61

72

Total

 

480

413

 

61

72

43.1.2 Financial assets at fair value through other comprehensive income

Millions of euro

Non-current

Current

Opening balance at Jan. 1, 2019

53

-

Purchases

87

-

Sales

-

-

Changes in fair value through OCI

-

-

Other changes

(76)

-

Closing balance at Dec. 31, 2019

64

-

   

Securities at FVOCI

Millions of euro

Non-current

Current

Opening balance at Jan. 1, 2019

360

72

Purchases

160

-

Sales

(53)

-

Changes in fair value through OCI

10

-

Reclassifications

(61)

61

Other changes

-

(72)

Closing balance at Dec. 31, 2019

416

61

   

43.1.3 Financial assets at fair value through profit or loss

The following table shows financial assets at fair value through profit or loss by nature, broken down into current and non-current financial assets.

 

Millions of euro

 

Non-current

 

Current

 

Notes

at Dec. 31, 2019

at Dec. 31, 2018

Notes

at Dec. 31, 2019

at Dec. 31, 2018

Derivatives at FVTPL

46

29

31

46

3,086

3,163

Equity investments in other entities at FVTPL

26

8

10

 

-

-

Financial assets from service concession arrangements at FVTPL

26

2,362

2,070

30

-

-

Total

 

2,399

2,111

 

3,086

3,163

   

43.1.4 Derivative financial assets designated as hedging instruments

For more information on derivative financial assets, please see note 46 “Derivatives and hedge accounting”.