33.4 Financial assets at fair value through profit or loss
Financial instruments measured at fair value through profit or loss include:
- financial instruments held for trading – assets purchased to be sold in a near future or liabilities incurred to be repurchased in near future and derivatives, which are not designated as effective hedges;
- financial instruments classified upon purchase to categories measured at fair value through profit or loss, if their fair value can be estimated reliably. Such financial instruments include:
- certain instruments designated to cover technical provisions and investment contracts in life insurance. The accepted classification of the instruments eliminates or reduces significantly the mismatch with respect to measurement and recognition of liabilities and assets to cover them;
- financial assets managed and assessed in accordance with a documented risk management strategy based on their fair value;
The rules of measurement to fair value are described in section 9.1. The effect of the change in measurement of financial instruments at fair value, including related interest income and changes in liabilities under investment contracts for the client’s account and risk are recognized under “Net movement in fair value of assets and liabilities measured at fair value” in the period to which they relate.
Derivatives are recognized at fair value on the transaction date and subsequently measured at fair value in accordance with the rules described in section 9.1.3.
Derivatives are recognized as financial assets if their fair value is positive or as financial liabilities if it is negative.
Changes of fair value of derivatives that are not hedges are recognized under “Net movement in fair value of assets and liabilities at fair value”.
As at 31 December 2017 and 31 December 2016, PZU Group companies were not parties to agreements including embedded derivatives whose character and related risks were not closely linked to the base agreement.
| Financial assets at fair value through profit or loss | 31 December 2017 | 31 December 2016 |
| Assets classified into this category upon first recognition | 6,650 | 14,479 |
| Equity instruments | 1,947 | 2,951 |
| Quoted on a regulated market | 1,781 | 2,830 |
| Not quoted on a regulated market | 166 | 121 |
| Debt instruments | 4,703 | 11,528 |
| Government securities | 4,664 | 11,437 |
| Domestic | 4,351 | 9,686 |
| Fixed rate | 4,054 | 8,257 |
| Floating rate | 297 | 1,429 |
| Foreign | 313 | 1,751 |
| Fixed rate | 313 | 1,674 |
| Floating rate | - | 77 |
| Other | 39 | 91 |
| Quoted on a regulated market | 39 | 91 |
| Fixed rate | 39 | 91 |
| Assets held for trading | 15,597 | 7,403 |
| Equity instruments | 4,617 | 4,066 |
| Quoted on a regulated market | 562 | 744 |
| Not quoted on a regulated market | 4,055 | 3,322 |
| Debt instruments | 8,976 | 2,456 |
| Government securities | 8,699 | 2,383 |
| Domestic | 6,702 | 1,416 |
| Fixed rate | 4,834 | 1,384 |
| Floating rate | 1,868 | 32 |
| Foreign | 1,997 | 967 |
| Fixed rate | 1,964 | 967 |
| Floating rate | 33 | - |
| Other | 277 | 73 |
| Quoted on a regulated market | 175 | - |
| Fixed rate | 175 | - |
| Not quoted on a regulated market | 102 | 73 |
| Floating rate | 102 | 73 |
| Derivatives | 2,004 | 881 |
| Total financial assets measured at fair value through profit or loss | 22,247 | 21,882 |
Additional information on exposure to derivatives and associated risks is presented in section 7.5.3
