FIFA uses derivative instruments to manage its foreign currency risk, which is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes to foreign exchange rates. The group’s exposure to that risk relates primarily to its operating activities (when contracts with customers or suppliers are denominated in foreign currency).
Derivatives designated as hedging instruments
Foreign exchange forward contracts are designated as hedging instruments in cash flow hedges of forecast television broadcasting sales in EUR, GBP and CAD. These forecast transactions are highly probable.
The total notional amount of the outstanding foreign exchange forward contracts, which are designated as hedge accounting, was USD 607 million (2020: USD 570 million). The majority of the derivatives designated as hedging instruments will mature in 2022 with a weighted average forward price of the hedging instruments of EUR/USD 1.21, GBP/USD 1.32 and CAD/USD 0.8 respectively.
There is an economic relationship between the hedged items and the hedging instruments, as the terms of the foreign exchange forward contracts match those of the highly probable forecast transactions. Because the group does not hedge all of its revenue denominated in foreign currencies, the hedged item is identified as a proportion of the forecast transaction. The group has established a hedge ratio of 1:1 for the hedging relationships, as the underlying risk of the foreign exchange forward contracts is identical to the hedged risk. There are no material sources of ineffectiveness and, therefore, no ineffectiveness was recognised in the income statement.
As at 31 December 2021, no transfer from the cash flow hedge reserves to the “Revenue from television broadcasting rights” line item had been recognised in the consolidated statement of comprehensive income.
Other derivative financial instruments
Several financial investments were made in foreign currencies in 2021. The foreign exchange risk was hedged using swaps, forwards and options. The total notional value of the outstanding swaps and options as at 31 December 2021 amounted to USD 3,060 million (2020: USD 2,172 million).
All other derivative financial instruments will mature in 2022. The derivative financial instruments are valued at fair market prices.
The following table sets out the carrying amounts of derivative financial assets and liabilities recognised in the consolidated balance sheet:
At the reporting date, the group held the following foreign exchange forward contracts, which are designated as hedge accounting: