40. Carrying amounts and fair values according to measurement categories

The carrying amounts and fair values of recognised financial instruments are as follows:

Classes were formed based on similar risks for the respective financial instruments and correspond to the categories of IFRS 9. Derivative financial instruments with a hedging relationship according to IAS 39 and other financial liabilities are each assigned to a separate class.

The fair value hierarchy comprises 3 levels which reflect the degree of closeness to the market of the input parameters used in the determination of the fair values. In cases in which the measurement is based on different input parameters, the fair value is attributed to the hierarchy level corresponding to the input parameter of the lowest level that is significant for the valuation.

Level 1 input parameters: quoted prices (that are adopted unchanged) in active markets for identical assets or liabilities which the company can access at the valuation date.

Level 2 input parameters: other input parameters than the quoted prices assigned to level 1 which are either directly or indirectly observable for the asset or liability.

Level 3 input parameters: unobservable inputs for the asset or liability.

Of the total carrying amount of investments of €54 million (30/9/2021: €63 million), €52 million (30/9/2021: €59 million) is measured at fair value through profit or loss. These are unlisted financial instruments for which no active market exists either. The remaining investments totalling €2 million (30/9/2021: €3 million) are measured at fair value recognised in equity. The classification (FVOCInR) was chosen because investment was made in these equity instruments with a longer-term investment horizon.

In addition, securities totalling €3 million (30/9/2021: €3 million) are recognised through profit or loss. These primarily concern highly liquid exchange-listed money market funds.

The other financial instrument of €114 million relates to the put option in connection with the intended disposal of the shares in WM Holding (HK) Limited.

The following table depicts the financial instruments that are recognised at fair value in the balance sheet. These are classified into the 3-level fair value hierarchy whose levels reflect the degree of closeness to the market of the data used in the determination of the fair values:

The measurement of securities (level 1) is carried out based on quoted market prices in active markets.

Interest rate swaps and currency transactions (all level 2) are measured using the mark-to-market valuation method based on quoted exchange rates and market yield curves.

The measurement of investments (all level 2) is based on comparable transactions in the past.

No transfers between levels 1 and 2 were effected during the reporting period.

Financial instruments that are recognised at amortised cost in the balance sheet, but for which the fair value is stated in the notes, are also classified according to a 3-level fair value hierarchy.

Due to their mostly short terms, the fair values of receivables due from suppliers, trade receivables and liabilities as well as cash and cash equivalents essentially correspond to their carrying amounts.

The measurement of the fair value of bonds, liabilities to banks and promissory note loans is based on the market interest rate curve following the discounted cash flow method in consideration of credit spreads (level 2). The amounts comprise the interest prorated to the closing date.

The fair values of all other financial assets and liabilities (level 2) that are not listed on an exchange correspond to the present value of payments underlying these balance sheet items. The calculation was based on the applicable country-specific yield curve (level 2) as of the closing date.

METRO has exercised a put option for the shares in WM Holding (HK) Limited, which is not yet settled. The shares are accounted for as an asset held for sale. The effect of discounting and credit risk on the valuation of the put option is considered immaterial due to the short maturity and implicit collateralisation. Since the value of the shares cannot be derived from observable markets, but is determined by an expert using a discounted cash flow method, it is officially a Level 3 instrument. The sales price is fixed through the minimum purchase price, so that the value of the shares and the value of the put option together represent the purchase price. Therefore, the value of the put option compensates for any changes in the value of the shares: if the value of the shares increases (decreases) by €10 million, for example, the value of the put option decreases (increases) by a comparable amount. From the year-end valuation, an income of €114 million was realised in the financial result from the valuation of the put option, while an expense of the same amount was recognised from the impairment of the investment.