29 | Financial risk management

a) Accounting classifications and fair value measurements

31 December 2021 in TUSD Financial assets/ liabilities at fair value through profit and loss Financial assets/ liabilities at amortised cost Financial assets/ liabilities at FVOCI Total
Financial assets measured at fair value
Derivative financial assets designated as hedging instruments 30,830 30,830
Other derivative financial instruments 15,693 15,693
Equity investment funds 106,950 106,950
Debt securities 105,852 591,370 697,222
Total 259,325 591,370 850,695
Financial assets measured at amortised cost
Cash and cash equivalents 832,089 832,089
Receivables 398,985 398,985
Deposits 310,775 310,775
Debt securities 1,694,851 1,694,851
Loans 628,004 628,004
Total 3,864,704 3,864,704
Financial liabilities measured at fair value
Derivative financial liabilities designated as hedging instruments 2,013 2,013
Other derivative financial instruments 17,662 17,662
Total 19,675 19,675
Financial liabilities measured at amortised cost
Payables 100,437 100,437
Lease liabilities 187,352 187,352
Total 287,789 287,789
Carrying amount Fair value
31 December 2021 in TUSD Total Level 1 Level 2 Level 3
Financial assets measured at fair value
Derivative financial assets designated as hedging instruments 30,830 30,830
Other derivative financial instruments 15,693 15,693
Equity investment funds 106,950 106,950
Debt securities 697,222 697,222
Total 850,695
Financial assets not measured at fair value
Cash and cash equivalents 832,089
Receivables 398,985
Deposits 310,775
Debt securities 1,694,851 1,026,649 661,811
Loans 628,004
Total 3,864,704
Financial liabilities measured at fair value
Derivative financial liabilities designated as hedging instruments 2,013 2,013
Other derivative financial instruments 17,662 17,662
Total 19,675
Financial liabilities not measured at fair value
Payables 100,437
Lease liabilities 187,352
Total 287,789

Fair value disclosure: equity investment funds and some debt securities are traded in active markets and the fair value is based on unadjusted quoted market prices on the balance sheet date (Level 1). Derivatives and some debt securities are not traded in active markets and the fair value on the balance sheet is determined by using valuation techniques (Level 2) with observable market data. No transfer was made between Level 1 and Level 2 during the year. FIFA has not disclosed the fair values for financial instruments such as short-term receivables and payables because their carrying amounts are a reasonable approximation of fair value.

Fair value measurements and disclosure of assets and liabilities

When measuring the fair value of an asset or a liability, the group uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

1) Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

2) Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

3) Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability are categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety at the lowest level input that is significant to the entire measurement.

31 December 2020 in TUSD Financial assets/ liabilities at fair value through profit and loss Financial assets/ liabilities at amortised cost Financial assets/ liabilities at FVOCI Total
Financial assets measured at fair value
Derivative financial assets designated as hedging instruments 46 46
Other derivative financial instruments 15,021 15,021
Equity investment funds 35,835 35,835
Debt securities 310,627 198,598 509,225
Total 361,529 198,598 560,127
Financial assets measured at amortised cost
Cash and cash equivalents 1,155,191 1,155,191
Receivables 417,403 417,403
Deposits 187,295 187,295
Debt securities 1,188,005 1,188,005
Loans 418,852 418,852
Total 3,366,746 3,366,746
Financial liabilities measured at fair value
Derivative financial assets designated as hedging instruments 10,145 10,145
Other derivative financial instruments 38,093 38,093
Total 48,238 48,238
Financial liabilities measured at amortised cost
Payables 62,668 62,668
Lease liabilities 198,116 198,116
Total 260,784 260,784
Carrying amount Fair value
31 December 2020 in TUSD Total Level 1 Level 2 Level 3
Financial assets measured at fair value
Derivative financial assets designated as hedging instruments 46 46
Other derivative financial instruments 15,021 15,021
Equity investment funds 35,835 35,835
Debt securities 509,225 509,225
Total 560,127
Financial assets not measured at fair value
Cash and cash equivalents 1,155,191
Receivables 417,403
Deposits 187,295
Debt securities 1,188,005 766,271 453,058
Loans 418,852
Total 3,366,746
Financial liabilities measured at fair value
Derivative financial liabilities designated as hedging instruments 10,145 10,145
Other derivative financial instruments 38,093 38,093
Total 48,238
Financial liabilities not measured at fair value
Payables 62,668
Lease liabilities 198,116
Total 260,784

Fair value disclosure: equity investment funds and some debt securities are traded in active markets and the fair value is based on unadjusted quoted market prices on the balance sheet date (Level 1). Derivatives and some debt securities are not traded in active markets and the fair value on the balance sheet is determined by using valuation techniques (Level 2) with observable market data. No transfer was made between Level 1 and Level 2 during the year. FIFA has not disclosed the fair values for financial instruments such as short-term receivables and payables because their carrying amounts are a reasonable approximation of fair value.

b) Financial risk management

FIFA is exposed to currency and interest risks as well as credit, liquidity and equity price risks in the course of its normal operations.

Credit risk
In line with FIFA's marketing and TV strategy, FIFA sold the television broadcasting rights in the key markets for the final tournaments of the FIFA World Cups directly to broadcasters.

The revenue from television and marketing rights is received from large multinational companies and public broadcasters. Part of the outstanding revenue is also covered by bank guarantees. Additionally, the contracts include a default clause, whereby the contract terminates as soon as one party is in default. In the event of a default, FIFA is not required to reimburse any of the services or contributions received. FIFA is also entitled to replace terminated contracts with new marketing or broadcasting agreements.

Material credit risks could arise if several parties were unable to meet their contractual obligations. FIFA’s management monitors the credit standing of the Commercial Affiliates very closely on an ongoing basis. Given their good credit ratings and the high diversification of the portfolio of Commercial Affiliates, the management believes that this scenario is unlikely to occur.

The vast majority of cash and cash equivalents are held with bank and financial institution counterparties with a rating equivalent to “A-1” or higher in S&P ratings. Fixed-income investments with residual terms to maturity of 12 months or less are only executed with borrowers with a short-term rating of “A-3” or higher. Investments in bonds are only executed in listed, tradable bonds issued by borrowers with a “BBB-”rating or higher. Derivative financial instruments are executed only with counterparties with high credit ratings. The carrying amount of the financial assets represents the maximum exposure to credit risk.

Equity price risk
FIFA's exposure to equity price risk arises from equity investment funds held by the group classified as at fair value through profit or loss. FIFA manages its price risk arising from equity securities through diversification.

As at 31 December 2021, the exposure to equity investments was USD 107 million (2020: 35.8 million). If the fair values of the equity investments had increased/(decreased) by 10%, the impact on the net result would have been USD +10.7 million or USD (-10.7 million), respectively (2020: USD +3.6 million or USD (-3.6 million)).

Interest rate risk
Interest rate risks arise from changes in market interest rates, which could affect the Group’s profit or loss or equity. Since the interest rates of all term deposits and debt securities are fixed, there is only limited exposure to cash flow interest rate risk. FIFA’s interest rate risk exposure therefore mainly arises from changes in the fair value of such fixed-rate debt instruments measured at FVOCI and FVTPL.

As at 31 December 2020 and 31 December 2021, there was no interest rate risk arising from financing transactions because FIFA is self-financed.

Foreign currency risk
FIFA's functional currency is USD because the majority of its cash flows are denominated in USD. Exposure to foreign currency exchange rates arises from transactions denominated in currencies other than USD, especially in EUR, CHF and QAR.

FIFA receives foreign currency cash inflows in the form of revenue from the sale of certain rights denominated in currencies other than USD, such as EUR, GBP and CHF. On the other hand, FIFA has substantial costs, especially employee costs and operating costs in connection with FIFA’s offices in Zurich, denominated in CHF and other currencies. The Controlling & Strategic Planning sub-division regularly forecasts the liquidity and foreign exchange requirements. If any foreign currency risks are identified, FIFA uses derivative products to hedge this exposure (see also Note 30).

As at 31 December 2021, FIFA was exposed to the following foreign exchange fluctuation risks:
• If the CHF had gained 10% against the USD as at 31 December 2021, the impact on the net result would have been USD +1.2 million (2020: USD +3.6 million).
• If the EUR had gained 10% against the USD as at 31 December 2021, the impact on the net result would have been USD +0.8 million (2020: USD +3.7 million).
• If the NZD had gained 10% against the USD as at 31 December 2021, the impact on the net result would have been USD +0.1 million (2020: USD 0 million).
• If the BRL had gained 10% against the USD as at 31 December 2021, the impact on the net result would have been USD +0.1 million (2020: USD +0.1 million).
• If the QAR had gained 10% against the USD as at 31 December 2021, the impact on the net result would have been USD +0.1 million (2020: USD 0 million).

This fluctuation analysis can be applied using the same method in reverse (a decrease of 10%). It only shows the effect from a risk management perspective and not realised gains or losses.

Positions exposed to foreign currency risk as at 31 December 2021

in thousands CHF EUR NZD BRL QAR
Cash and cash equivalents* 0 0 887 0 4,961
Receivables 26,800 12,581 122 3,883 354
Financial assets* 0 0 0 0 0
Total assets in foreign currency 26,800 12,581 1,009 3,883 5,315
Payables 13,506 2,634 134 12 79
Lease liabilities 2,558 3,067 54 0 0
Total liabilities in foreign currency 16,064 5,701 188 12 79
Net exposure in foreign currency 10,736 6,880 821 3,871 5,236
Net exposure in functional currency (USD) 11,740 7,783 561 695 1,438

Positions exposed to foreign currency risk as at 31 December 2020

in thousands CHF EUR GBP BRL QAR
Cash and cash equivalents* 35,655 6,794 1,768 0 1,345
Receivables 31,409 26,134 8,278 3,883 0
Financial assets* 0 0 0 0 0
Total assets in foreign currency 67,064 32,928 10,046 3,883 1,345
Payables 31,050 3,124 438 0 182
Lease liabilities 4,366 0 0 0 0
Total liabilities in foreign currency 35,416 3,124 438 0 182
Net exposure in foreign currency 31,648 29,804 9,608 3,883 1,163
Net exposure in functional currency (USD) 35,527 36,622 13,084 748 320

*Positions exposed to foreign currency risk arise on financial instruments that are denominated in a foreign currency, i.e. in a currency other than the functional currency in which they are measured. The amounts displayed in the above tables represent the unhedged portion in foreign currency. As at 31 December 2021, FIFA held a total amount of USD 1,312 million (2020: USD 904.2 million) in financial assets, USD 70.3 million (2020: USD 163 million) in cash and cash equivalents as well as USD 36.4 million (2020: USD 0 million) in receivables, categories of which were denominated in CHF and EUR and are fully hedged against foreign currency risk.

Liquidity risk

As at 31 December 2020 and 31 December 2021, FIFA was self-financed. Moreover, FIFA holds mortgage notes in the amount of CHF 145.7 million (2020: CHF 158 million), guaranteed by its own properties, which could be used to cover any additional liquidity needs.

Maturity of financial liabilities

31 Dec 2021 31 Dec 2020
in TUSD 90 days 1 year or less More than a year 90 days 1 year or less More than a year
Payables – member associations and confederations 0 49,071 0 0 9,370 0
Payables – third parties and related parties 51,366 0 0 53,298 0 0
Derivative financial liabilities 0 19,675 0 0 39,230 9,008
Total 51,366 68,746 0 53,298 48,600 9,008

Please refer to Note 27 for the maturity analysis of undiscounted lease liabilities.

Cancellation risk

FIFA's financial position depends on the successful staging of the FIFA World Cup because almost all contracts with its Commercial Affiliates are related to this event. In the event of cancellation, curtailment or abandonment of the FIFA World Cup, FIFA would run the risk of potentially being exposed to legal claims.

In 2019, FIFA concluded an insurance policy for the FIFA World Cup 2022. The maximum insurance volume is USD 900 million, which covers FIFA’s additional costs in case of cancellation, postponement and/or relocation of the event.

The risks covered include natural disasters, accidents, turmoil, war, acts of terrorism and communicable diseases.