ÖBB Annual Report 2023

Consolidated Financial Statements 288 Österreichische Bundesbahnen-Holding Aktiengesellschaft Consolidated Financial Statements | Group Management Report 70 statement. Fair value hedges, on the other hand, require the carrying amount of the underlying hedged item to be adjusted for changes in the fair value of the hedged risk through profit or loss. The ÖBB Group meets the requirements of IFRS 9 for hedge accounting as follows: At the inception of the hedge, the relationship between hedging instrument and underlying hedged item, and the reason for the hedge are documented. This includes both the specific allocation of hedging instruments to the corresponding assets and liabilities and planned transactions as well as the assessment of the degree of effectiveness of the hedging instruments used. Existing hedging measures are reviewed on an ongoing basis to ensure that the requirements for hedge effectiveness continue to be met. Should this not be the case and a recalibration of the hedge relationship is not possible, or the hedging instrument expires or is sold or terminated, then the hedge relationship is terminated. The ÖBB Group also enters into hedges which do not comply with the formal requirements of IFRS 9 but which contribute to economically effective hedging of financial risks in accordance with the principles of the risk management. Cash flow hedges – Interest rate risks Interest rate risks arise mainly from variable interest payments on financial investments and liabilities (i.e. cash flow risks) or from fair value risks, i.e. changes in the present value of fixed-interest financing. Within the ÖBB Group, an interest rate risk may occur in the existing financing portfolio and in the planned new business portfolio in accordance with budget/medium-term planning (BUD/MFP). The interest expense from refinancing raised during BUD/MFP is based on forward interest rates in accordance with planning premises. The actual interest expense is only fixed when the contract is concluded (fixed interest rate) or when the interest rate is fixed (variable interest rate). The ÖBB Group entered into payer interest rate swaps (“receive variable – pay fixed”) to hedge interest payment risk of underlying transactions with variable interest rates. The changes in cash flows of the underlying hedged item resulting from changes in the EURIBOR rate are offset by the changes in cash flows of the interest rate swaps. The objective of these hedges is to transform the variable interest rate financial liabilities into fixed interest rate bonds, thus hedging the cash flow from the financial liabilities. The following table shows the range of maturities of the cash flow hedges: Dec 31, 2023 Maturity Number of swaps Nominal volume in EUR million Portfolio 15 420.9 thereof maturing 2025 1 25.3 thereof maturing 2026 11 199.6 thereof maturing 2027 1 59.5 thereof maturing 2028 et seq. 2 136.5 Dec 31, 2022 Maturity Number of swaps Nominal volume in EUR million Portfolio 15 420.9 thereof maturing 2025 1 25.3 thereof maturing 2026 11 199.6 thereof maturing 2027 et seq. 3 196.0 The effectiveness of the hedging relationship is assessed using the Critical Terms Match method. Ineffectiveness is determined using the dollar offset method. For this purpose, a hypothetical derivative is formed for cash flow hedges that reflects the conditions contained in the hedged underlying item. Hedging relationships affected by the IBOR reform may experience ineffectiveness due to a timing mismatch between the underlying hedged item and the hedging instrument with respect to the transition from IBOR. If a hedging relationship is directly affected by the uncertainty arising from the IBOR reform, then the Group assumes for this purpose that the reference interest rate will not change as a result of the reform of the reference interest rate. Changes in the fair value of interest rate swaps, which are hedges of future interest payments on floating rate liabilities, are recognised in other comprehensive income in equity (see statement of changes in Group equity). These amounts are recognised as financing expenses in the period in which the corresponding interest payments from the underlying transaction are recognised in profit or loss (income of approx. EUR 1.3 million [py: expense of approx. EUR 12.4 million]). Furthermore, ineffective components of hedge accounting relationships amounting to approx. EUR 0.0 million (py: approx. EUR 0.0 million) were recognised in the income statement. As at the reporting date, the termination of hedging instruments (cash flow hedges) resulted in the recognition of approx. EUR 1.3 million (py: approx. EUR 1.8 million), through other comprehensive income in equity, which subsequently reverses as follows: 2024: approx. EUR 0.5 million (py: approx. EUR 0.5 million, 2025 until 2027: approx. EUR 0.8 million (py: approx. EUR 1.3 million), 2028 onwards: approx. EUR 0.0 million (py: approx. EUR 0.0 million).