14. Loans to associates
(in thousands of euros)
Carrying amount as at 1 January
Exchange differences hedging transactions
Other exchange differences
Reclassification to current assets
Expected credit loss
Total movements in the year
Carrying amount as at 31 December
The loans to associates relate exclusively to the Redeemable Preference Shares (RPS) in BACH held by Schiphol Group. The RPS carry entitlement to a cumulative dividend. The formal maturity date of this loan is 30 June 2022. Under the contractual terms the RPS of AUD 91.3 million (56.1 million euros including accumulated dividend) are classified as a loan to an associate and the dividend on these shares is treated as financial income.
RPS are measured at amortised costs and, as there has been no significant change in credit risk, expected credit losses are determined on the basis of possible situations and developments that may lead to a counterparty defaulting within a period of 12 months. In establishing the expected credit losses, the rating of other debt issued by BACH (currently rated at BBB) is taken into account. The change in expected credit losses is reported under costs of depreciation, amortisation and impairment.
The currency risk relating to the nominal value of this long-term loan and the accrued interest is hedged by annual forward transactions which hedge the Australian dollar position against the euro. All hedging transactions are accounted for as cash flow hedges while the exchange differences relating to the part of the loan and accrued interest that is not hedged and the period between the successive annual forward transactions are recognised in the income statement. The exchange differences as part of the hedging transaction are recognised in the reserve for hedging transactions through other comprehensive income.
The fair value of the loans to associates (including accumulated dividend) at 31 December 2018 is 60.0 million euros (AUD 97.6 million) and the effective interest rate is 10%. The fair value is estimated by discounting the future contractual cash flows at current market interest rates available to the borrower for similar financial instruments.
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