16 Additional Financial Instrument Disclosures

The section below provides information on the financial assets and financial liabilities not covered by IFRS 9:

• Employee benefits in accordance with IAS 19: Gross presentation of right to reimbursement arising from transferred pension obligations in the amount of € 4.6 million (Dec. 31, 2018: € 4.7 million).
• Amount by which the fair value of plan assets exceeds the corresponding obligation of € 0.5 million (Dec. 31, 2018: € 1.1 million).
• Provisions for pensions and similar obligations: € 565.8 million (Dec. 31, 2018: € 520.6 million).

The following table shows the assets and liabilities that are recognized in the balance sheet at fair value and their classification according to the fair value hierarchy:

In general, Vonovia measures its investment properties based on the discounted cash flow (DCF) methodology (Level 3). The material valuation parameters and valuation results can be found in note 13 “Investment Properties.”

The investment properties classified as assets held for sale are recognized at the time of their transfer to assets held for sale at their new fair value, the agreed purchase price (Level 2).

No financial instruments were reclassified to different hierarchy levels as against the comparative period.

Securities and shares in listed companies included in other investments are measured using the quoted prices in active markets (Level 1).

For the measurement of financial instruments, cash flows are initially calculated and then discounted. In addition to the tenor-specific EURIBOR/STIBOR rates (3M; 6M), the respective credit risk is taken as a basis for discounting. Depending on the expected cash flows, either Vonovia’s own credit risk or the counterparty risk is taken into account in the calculation.

For the consolidated financial statements, Vonovia’s own credit risk was fundamentally relevant for interest rate swaps. This credit risk is derived for material risks from rates observable on the capital markets and ranges of between 20 and 100 basis points, depending on the residual maturities of financial instruments. Regarding the positive market values of the cross currency swaps, a counterparty risk of 50 basis points was taken into account.

The calculated cash flows of the cross currency swap result from the forward curve for USD/EUR. The cash flows are discounted on the basis of the reference interest rate of each currency (LIBOR and EURIBOR) and translated into euros at the current exchange rate (Level 2).

The fair values of the cash and cash equivalents, trade receivables as well as other financial receivables approximate their carrying amounts at the reporting date owing to their mainly short maturities. The amount of the estimated impairment loss on cash and cash equivalents was calculated based on the losses expected over a period of twelve months. It was determined that the cash and cash equivalents have a low risk of default due to the external ratings and short residual maturities and that there is no need for any material impairment of cash and cash equivalents.