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 129.9 million (2021: USD 607 million). A significant portion of the derivatives designated as hedging instruments will mature in 2023 with a weighted average forward price of the hedging instruments of EUR/USD 1.20.
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.
In 2022, a transfer of USD 49.8 million 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 (2021: no transfer).
Other derivative financial instruments
Several financial investments were made in foreign currencies in 2022. 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 2022 amounted to USD 3,554 million (2021: USD 3,060 million).
All other derivative financial instruments will mature in 2023. 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:
In certain credit events only (such as defaults), derivative financial liabilities of USD 103 million could have been offset against USD 18.8 million derivative financial assets and USD 66.5 million receivables (and vice versa) as at 31 December 2022 under the agreements with the derivative counterparties (2021: USD 19.7 million derivative financial liabilities could have been offset against USD 46 million derivative financial assets and vice versa).
At the reporting date, the group held the following foreign exchange forward contracts, which are designated as hedge accounting: