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Derivative Financial Instruments and Risk Management Policies (Tables)

12 Months Ended

Dec. 31, 2022

Financial Instruments [Abstract]

Schedule of Sensitivity Analysis

The following table illustrates the sensitivity of foreign currency gains and sensitivity losses and of equity to changes in exchange rates, where: a) in calculating the impact on the income statement, the exchange rate position affecting the income statement at the end of 2022 was considered constant during 2023; b) in calculating the impact on equity, only monetary items have been considered, namely debt and derivatives such as hedges of net investment and loans to subsidiaries related to the investment, breakdown of which is considered constant in 2023 and identical to that existing at the end of 2022. In both cases, Latin American currencies are assumed to change their value against the dollar and the rest of the currencies against the euro by 10%.

Millions of euros
Currency			Change			Impact on the consolidated income statement			Impact on consolidated equity
All currencies vs EUR			10%			(11)			(314)
USD vs EUR			10%			—			(48)
Other currencies vs EUR			10%			1			(56)
Latin American currencies vs USD			10%			(12)			(210)
All currencies vs EUR			(10%)			11			314
USD vs EUR			(10%)			—			48
Other currencies vs EUR			(10%)			(1)			56
Latin American currencies vs USD			(10%)			12			210

Millions of euros
Change in basis points (bp)			Impact on consolidated income statement			Impact on consolidated equity
+100bp			(34)			61
-100bp			34			(61)

Disclosure Of Detailed Information About Hedging Instruments

The detail of notional amounts of the hedging instruments in hedging relationships which are subject to the reform as of December 31, 2022 and December 31, 2021 is as follows:

			Gross notional in original currency (in millions)
Interest rate index/Tenor			2022			2021
USD Libor 3M			32,947			35,140
USD Libor 1M			—			—
USD Libor 6M			140			140

Schedule of Financial Results

The breakdown of the financial results recognized in 2022, 2021 and 2020 is as follows:

Millions of euros			2022			2021			2020
Interest income			384			191			185
Dividends received			25			14			12
Other financial income			894			174			159
Subtotal			1,303			379			356
Changes in fair value of asset derivatives at fair value through profit or loss			377			132			255
Changes in fair value of liability derivatives at fair value through profit or loss			(861)			(24)			(507)
Changes in the fair value of debt instruments and other assets at fair value to profit or loss			8			—			(3)
Transfer from equity of results of cash flow hedges - future cash flows that are no longer expected to happen			(2)			—			—
(Loss)/Gain on fair value hedges			(1,818)			(517)			563
Gain/(loss) on adjustment to items hedged by fair value hedges			1,763			527			(525)
Subtotal			(533)			118			(217)
Interest expenses			(1,548)			(1,290)			(1,320)
Financial expenses on lease liabilities (see Note 20)			(393)			(274)			(193)
Ineffective portion of cash flow hedges			(15)			(41)			45
Accretion of provisions and other liabilities			276			(169)			(280)
Other financial expenses			(317)			(137)			(131)
Subtotal			(1,997)			(1,911)			(1,879)
Net finance costs excluding foreign exchange differences and hyperinflation adjustments			(1,227)			(1,414)			(1,740)

Schedule of Derivatives, Fair Value, and Expected Maturity

The movement of the net position of derivatives during the years ended December 31, 2022 and December 31, 2021 is as follows:

Millions of euros			Movement in 2022			Movement in 2021
Opening balance of assets/(liabilities)			1,573			13
Financing payments			715			34
Financing proceeds			(89)			89
Interest (proceeds)/payments			283			(91)
Other (proceeds)/payments			(17)			(31)
Fair value adjustments through other comprehensive income			1,031			1,733
Movements with counterparty in the income statement			(2,649)			(538)
Translation differences			169			393
Other movements			(4)			(29)
Closing balance of assets/(liabilities)			1,012			1,573

The breakdown of Telefónica’s hedges and other derivative instruments at December 31, 2022 and December 31, 2021, their fair value at year-end and the expected maturity schedule is as set forth in the table below:

December 31, 2022
			Notional amount - Maturities (*)																		Book value of the derivative and no-derivative instruments (**)
Millions of euros			2023			2024			2025			Later			Total						Non-current asset			Current asset			Non-current liabilities			Current liabilities			Total
Derivative instruments of accounting hedges			(2,034)			116			(77)			7,237			5,242						(2,404)			(466)			1,317			78			(1,475)
Interest rate risk			(795)			2			(123)			(5,590)			(6,506)						(211)			(187)			446			9			57
Cash flow hedges			3			—			—			1,114			1,117						(26)			(4)			8			9			(13)
Fair value hedges			(798)			2			(123)			(6,704)			(7,623)						(185)			(183)			438			—			70
Exchange rate risk			(1,340)			34			—			9,284			7,978						(1,742)			(213)			711			68			(1,176)
Cash flow hedges			744			34			—			8,824			9,602						(1,742)			(57)			704			30			(1,065)
Fair value hedges			837			—			—			460			1,297						—			(87)			7			28			(52)
Net investments hedges			(2,921)			—			—			—			(2,921)						—			(69)			—			10			(59)
Interest rate and exchange rate risk			101			80			46			3,543			3,770						(451)			(66)			160			1			(356)
Cash flow hedges			101			80			46			3,234			3,461						(445)			(66)			74			1			(436)
Fair value hedges			—			—			—			309			309						(6)			—			86			—			80
Undesignated derivatives			(1,964)			(479)			(525)			(2,363)			(5,331)						(264)			(246)			706			267			463
Other derivatives of interest rate			(1,539)			(688)			(525)			(2,363)			(5,115)						(264)			(59)			631			16			324
Other derivatives of exchange rate			(1,132)			—			—			—			(1,132)						—			(179)			—			145			(34)
Other derivatives			707			209			—			—			916						—			(8)			75			106			173
Total derivative instruments			(3,998)			(363)			(602)			4,874			(89)						(2,668)			(712)			2,023			345			(1,012)
No derivatives instruments of accounting hedges (***)			—			141			—			—			141						—			—			141			—			141
Exchange rate risk			—			141			—			—			141						—			—			141			—			141
Fair value hedges			—			—			—			—			—						—			—			—			—			—
Net investments hedges			—			141			—			—			141						—			—			141			—			141

(*) For interest rate hedges, the positive amount is in terms of "fixed payment.” For foreign currency hedges, a positive amount means payment in functional vs. foreign currency.

(**) Positive amounts indicate payables.

(***) Of the hedging instruments that are not derivatives,141 million euros correspond to "Loans and other debts"" (see Note 18).

December 31, 2021
			Notional amount - Maturities (*)																		Book value of the derivative and no-derivative instruments (**)
Millions of euros			2022			2023			2024			Later			Total						Non-current asset			Current asset			Non-current liabilities			Current liabilities			Total
Derivative instruments of accounting hedges			(5,020)			(904)			98			8,805			2,979						(2,301)			(908)			1,438			232			(1,539)
Interest rate risk			63			(801)			(1)			(2,860)			(3,599)						(914)			(480)			22			4			(1,368)
Cash flow hedges			64			—			—			1,060			1,124						(24)			(11)			11			4			(20)
Fair value hedges			(1)			(801)			(1)			(3,920)			(4,723)						(890)			(469)			11			—			(1,348)
Exchange rate risk			(5,021)			26			19			8,824			3,848						(1,245)			(131)			1,124			228			(24)
Cash flow hedges			318			32			19			8,824			9,193						(1,245)			(102)			1,124			95			(128)
Fair value hedges			209			(6)			—			—			203						—			(28)			—			18			(10)
Net investments hedges			(5,548)			—			—			—			(5,548)						—			(1)			—			115			114
Interest rate and exchange rate risk			(62)			(129)			80			2,841			2,730						(142)			(297)			292			—			(147)
Cash flow hedges			189			118			80			2,841			3,228						(97)			(104)			292			—			91
Fair value hedges			(251)			(247)			—			—			(498)						(45)			(193)			—			—			(238)
Undesignated derivatives			(1,254)			(1,187)			(303)			(1,238)			(3,982)						(471)			(87)			397			127			(34)
Other derivatives of interest rate			(963)			(1,283)			(303)			(1,238)			(3,787)						(244)			(55)			170			8			(121)
Other derivatives of exchange rate			(740)			(370)			—			—			(1,110)						(214)			(23)			142			101			6
Other derivatives			449			466			—			—			915						(13)			(9)			85			18			81
Total derivative instruments			(6,274)			(2,091)			(205)			7,567			(1,003)						(2,772)			(995)			1,835			359			(1,573)
No derivatives instruments of accounting hedges (***)			—			—			133			—			133						—			—			132			—			132
Exchange rate risk			—			—			133			—			133						—			—			132			—			132
Fair value hedges			—			—			—			—			—						—			—			—			—			—
Net investments hedges			—			—			133			—			133						—			—			132			—			132

(*) For interest rate hedges, the positive amount is in terms of "fixed payment.” For foreign currency hedges, a positive amount means payment in functional vs. foreign currency.

(**) Positive amounts indicate payables.

(***) Of the hedging instruments that are not derivatives, 132 million euros correspond to "Loans and other debts" (see Note 18).

The detail of hedged items by fair value hedges at December 31, 2022 and December 31, 2021 are as follows:

December 31, 2022
			Hedged items carrying amount															Accumulated amount in the hedged item adjusted by fair value hedge (*)
Millions of euros			Interest rate risk			Exchange rate risk			Interest rate and exchange rate risk			Total						Interest rate risk			Exchange rate risk			Interest rate and exchange rate risk			Total			Of which: accumulated amount of any hedge item that have cesased to be adjusted for gains and losses
Assets			15			250			—			265						8			22			—			30			—
Financial assets and other non-current assets			8			96			—			104						8			1			—			9			—
Receivables and other current assets			—			152			—			152						—			21			—			21			—
Other current financial assets			7			—			—			7						—			—			—			—			—
Other heading of assets			—			2			—			2						—			—			—			—			—
Liabilities			8,125			1,295			1,619			11,039						(88)			(38)			67			(59)			21
Non-current financial liabilities			7,735			468			1,454			9,657						(89)			—			15			(74)			36
Payables and other non-current liabilities			—			60			—			60						—			(2)			—			(2)			—
Current financial liabilities			387			11			165			563						—			—			52			52			1
Payables and other current liabilities			3			756			—			759						1			(36)			—			(35)			(16)

(*) Accumulated amount adjusted by fair value hedge is shown with negative sign when it reduces the value (lowest liability or lowest asset) and viceversa.

December 31, 2021
			Hedged items carrying amount															Accumulated amount in the hedged item adjusted by fair value hedge (*)
Millions of euros			Interest rate risk			Exchange rate risk			Interest rate and exchange rate risk			Total						Interest rate risk			Exchange rate risk			Interest rate and exchange rate risk			Total			Of which: accumulated amount of any hedge item that have cesased to be adjusted for gains and losses
Assets			—			226			—			226						—			4			—			4			—
Financial assets and other non-current assets			—			101			—			101						—			1			—			1			—
Receivables and other current assets			—			106			—			106						—			3			—			3			—
Other heading of assets			—			19			—			19						—			—			—			—			—
Liabilities			6,101			1,437			2,460			9,998						1,322			(23)			390			1,689			63
Non-current financial liabilities			5,987			558			1,919			8,464						1,309			—			195			1,504			52
Non-current lease liabilities			31			—			—			31						(2)			—			—			(2)			—
Payables and other non-current liabilities			—			55			—			55						—			(3)			—			(3)			—
Current financial liabilities			83			—			541			624						15			—			195			210			16
Payables and other current liabilities			—			824			—			824						—			(20)			—			(20)			(5)

(*) Accumulated amount adjusted by fair value hedge is shown with negative sign when it reduces the value (lowest liability or lowest asset) and vice versa.

The evolutions of hedges in equity at December 31, 2022 and December 31, 2021 are as follows:

			Derivative instruments																								No derivative instruments						Total Gross amount			Tax effect			Total hedges in equity
			Gains (losses) of cash flow hedges									Derivatives - Net investment hedges												No Derivatives - Net investment hedges
Millions of euros			Interest rate risk			Exchange rate risk			Exchange rate and interest rate risks
Balance at 12/31/2021			(70)			247			(270)			705																		(5)						607			(170)			437
Changes in the fair value registered in equity			4			1,235			612			(743)																		(4)						1,104			(284)			820
Transfer to the initial value of hedged item			1			(2)			(7)			—																		—						(8)			2			(6)
Transfer to the income statement of the period - the hedged future cash flows are no longer expected to happen			—			1			—			—																		—						1			—			1
Transfer to the income statement of the period - the hedged item has affected profit or loss			26			(620)			(127)			10																		—						(711)			181			(530)
Total translation differences			2			—			2			(6)																		—						(2)			5			3
Other movements			—			—			—			4																		—						4			(4)			—
Balance at 12/31/2022			(37)			861			210			(30)																		(9)						995			(270)			725
Amounts remaining in equity for continuing hedges			10			826			290			(30)																		(9)						1,087
Amounts remaining in equity from any hedging relationship for which hedge accounting is no longer applied			(47)			35			(80)			—																		—						(92)
Balance at 12/31/2022			(37)			861			210			(30)																		(9)						995

The total amount of "Transfer to the income statements of the period - the hedged item has affected profit or loss" has impacted in financial results, reported under "Interest expenses" amounted to +181 million euros (+72 million euros in 2021), see detail of "Net finance costs excluding foreign exchange differences and hyperinflation adjustments" in this Note, and in exchange differences amounted to +536 million euros (+873 million euros in 2021).

			Derivative instruments																								No derivative instruments						Total Gross amount			Tax effect			Total hedges in equity
			Gains (losses) of cash flow hedges									Derivatives - Net investment hedges												No Derivatives - Net investment hedges
Millions of euros			Interest rate risk			Exchange rate risk			Exchange rate and interest rate risks
Balance at 12/31/2020			(154)			(443)			(523)			2,061																		—						941			(295)			646
Changes in the fair value registered in equity			34			1,473			445			(353)																		(5)						1,594			(396)			1,198
Transfer to the initial value of hedged item			—			(1)			(1)			—																		—						(2)			1			(1)
Transfer to the income statement of the period - the hedged future cash flows are no longer expected to happen			—			—			—			—																		—						—			—			—
Transfer to the income statement of the period - the hedged item has affected profit or loss			48			(782)			(188)			(962)																		—						(1,884)			478			(1,406)
Total translation differences			2			—			(3)			—																		—						(1)			1			—
Other movements			—			—			—			(41)																		—						(41)			41			—
Balance at 12/31/2021			(70)			247			(270)			705																		(5)						607			(170)			437
Amounts remaining in equity for continuing hedges			(7)			211			(184)			705																		(5)						720
Amounts remaining in equity from any hedging relationship for which hedge accounting is no longer applied			(63)			36			(86)			—																		—						(113)
Balance at 12/31/2021			(70)			247			(270)			705																		(5)						607

The evolution of cost of hedging in equity in 2022 and 2021 are as follows:

			Exchange rate risk			Total gross amount			Tax effect			Total cost of hedging in equity
			Forward element /CBS
Millions of euros			A time - period related hedge item
Balance at 12/31/2020			(75)			(75)			19			(56)
Changes in the fair value registered in equity			128			128			(32)			96
Transfer to the income statement of the period - the hedged item has affected profit or loss			(10)			(10)			2			(8)
Balance at 12/31/2021			43			43			(11)			32
Changes in the fair value registered in equity			(59)			(59)			15			(44)
Transfer to the income statement of the period - the hedged item has affected profit or loss			(9)			(9)			2			(7)
Balance at 12/31/2022			(25)			(25)			6			(19)

The details of the ineffective portion of accounting hedges with impact on the income statement in 2022 and 2021 are as follows:

2022
Millions of euros			Changes in fair value of the hedging instrument			Changes in the fair value of hedges item for the hedged risk			Ineffective portion hedged registered in the income statement
Interest rate risk			(1,257)			(1,238)			(19)
Cash flow hedges			35			35			—
Fair value hedges			(1,292)			(1,273)			(19)
Exchange rate risk			(8)			(8)			—
Cash flow hedges			1,108			1,108			—
Net investment hedges			(1,116)			(1,116)			—
Interest rate and exchange rate risk			462			475			(13)
Cash flow hedges			462			475			(13)
Total			(803)			(771)			(32)

2021
Millions of euros			Changes in fair value of the hedging instrument			Changes in the fair value of hedges item for the hedged risk			Ineffective portion hedged registered in the income statement
Interest rate risk			(142)			(143)			1
Cash flow hedges			8			7			1
Fair value hedges			(150)			(150)			—
Exchange rate risk			960			994			(34)
Cash flow hedges			1,510			1,544			(34)
Net investment hedges			(550)			(550)			—
Interest rate and exchange rate risk			412			418			(6)
Cash flow hedges			412			418			(6)
Total			1,230			1,269			(39)

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The disclosure of detailed information about hedging instruments. [Refer: Hedging instruments [member]]

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