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Derivative Financial Instruments and Risk Management Policies (Tables)

12 Months Ended

Dec. 31, 2023

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 2023 was considered constant during 2024; 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 2024 and identical to that existing at the end of 2023. 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%			(17)			(355)
USD vs EUR			10%			1			(47)
Other currencies vs EUR			10%			1			(12)
Latin American currencies vs USD			10%			(19)			(296)
All currencies vs EUR			(10%)			17			355
USD vs EUR			(10%)			(1)			47
Other currencies vs EUR			(10%)			(1)			12
Latin American currencies vs USD			(10%)			19			296

Millions of euros
Change in basis points (bp)			Impact on consolidated income statement			Impact on consolidated equity
+100bp			(25)			238
-100bp			25			(238)

Schedule of Financial Results

The breakdown of the financial results recognized in 2023, 2022 and 2021 is as follows:

Millions of euros			2023			2022			2021
Interest income			516			384			191
Dividends received			29			25			14
Other financial income			349			894			174
Subtotal			894			1,303			379
Changes in fair value of asset derivatives at fair value through profit or loss			114			377			132
Changes in fair value of liability derivatives at fair value through profit or loss			(42)			(861)			(24)
Changes in the fair value of debt instruments and other assets at fair value to profit or loss			4			8			—
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			246			(1,818)			(517)
Gain/(loss) on adjustment to items hedged by fair value hedges			(292)			1,763			527
Subtotal			30			(533)			118
Interest expenses			(1,606)			(1,548)			(1,290)
Financial expenses on lease liabilities (see Note 20)			(435)			(393)			(274)
Ineffective portion of cash flow hedges			(12)			(15)			(41)
Accretion of provisions and other liabilities			(489)			276			(169)
Other financial expenses			(297)			(317)			(137)
Subtotal			(2,839)			(1,997)			(1,911)
Net finance costs excluding foreign exchange differences and hyperinflation adjustments			(1,915)			(1,227)			(1,414)

Schedule of Derivatives, Fair Value, and Expected Maturity

The movement of the net position of derivatives during the years ended December 31, 2023 and December 31, 2022 is as follows:

Millions of euros			Movement in 2023			Movement in 2022
Opening balance of assets/(liabilities)			1,012			1,573
Financing payments			(33)			715
Financing proceeds			(20)			(89)
Interest (proceeds)/payments			97			283
Other (proceeds)/payments			87			(17)
Fair value adjustments through other comprehensive income			(584)			1,031
Movements with counterparty in the income statement			(57)			(2,649)
Translation differences			(115)			169
Other movements			12			(4)
Closing balance of assets/(liabilities)			399			1,012

The breakdown of Telefónica’s hedges and other derivative instruments at December 31, 2023 and December 31, 2022, their fair value at year-end and the expected maturity schedule is as set forth in the table below:

December 31, 2023
			Notional amount - Maturities (*)																		Book value of the derivative and no-derivative instruments (**)
Millions of euros			2024			2025			2026			Later			Total						Non-current asset			Current asset			Non-current liabilities			Current liabilities			Total
Derivative instruments of accounting hedges			(3,225)			873			2,533			4,917			5,098						(1,785)			(272)			1,224			87			(746)
Interest rate risk			(1,190)			(123)			2			(4,070)			(5,381)						(334)			(163)			404			35			(58)
Cash flow hedges			(1,490)			(650)			—			3,532			1,392						(16)			—			83			35			102
Fair value hedges			300			527			2			(7,602)			(6,773)						(318)			(163)			321			—			(160)
Exchange rate risk			(2,115)			—			2,344			6,103			6,332						(1,124)			(69)			711			51			(431)
Cash flow hedges			657			—			2,344			6,038			9,039						(1,124)			(38)			708			20			(434)
Fair value hedges			401			—			—			65			466						—			(5)			3			20			18
Net investment in a foreign business hedges			(3,173)			—			—			—			(3,173)						—			(26)			—			11			(15)
Interest rate and exchange rate risk			80			996			187			2,884			4,147						(327)			(40)			109			1			(257)
Cash flow hedges			80			996			9			2,339			3,424						(281)			(40)			35			1			(285)
Fair value hedges			—			—			178			545			723						(46)			—			74			—			28
Undesignated derivatives			396			(416)			(738)			(1,625)			(2,383)						(155)			(80)			433			149			347
Other derivatives of interest rate			(288)			(525)			(738)			(1,625)			(3,176)						(155)			(54)			399			14			204
Other derivatives of exchange rate			(123)			—			—			—			(123)						—			(14)			—			13			(1)
Other derivatives			807			109			—			—			916						—			(12)			34			122			144
Total derivative instruments			(2,829)			457			1,795			3,292			2,715						(1,940)			(352)			1,657			236			(399)
No derivatives instruments of accounting hedges (***)			—			—			—			27			27						—			—			27			—			27
Exchange rate risk			—			—			—			27			27						—			—			27			—			27
Fair value hedges			—			—			—			—			—						—			—			—			—			—
Net investment in a foreign business hedges			—			—			—			27			27						—			—			27			—			27

(*) 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,27 million euros correspond to "Loans and other debts"" (see Note 18).

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 investment in a foreign business 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 investment in a foreign business 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).

The detail of hedged items by fair value hedges at December 31, 2023 and December 31, 2022 are as follows:

December 31, 2023
			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			32			249			—			281						(15)			—			—			(15)			—
Financial assets and other non-current assets			28			96			—			124						(14)			—			—			(14)			—
Receivables and other current assets			—			150			—			150						—			—			—			—			—
Other current financial assets			4			—			—			4						(1)			—			—			(1)			—
Other heading of assets			—			3			—			3						—			—			—			—			—
Liabilities			8,092			1,365			1,495			10,952						153			(8)			34			179			(9)
Non-current financial liabilities			8,009			452			1,397			9,858						153			—			34			187			33
Payables and other non-current liabilities			—			44			—			44						—			(1)			—			(1)			—
Current financial liabilities			83			10			98			191						—			—			—			—			—
Payables and other current liabilities			—			859			—			859						—			(7)			—			(7)			(42)

(*) 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, 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 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
Non-current lease liabilities			—			—			—			—						—			—			—			—			—
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 vice versa.

The evolutions of hedges in equity at December 31, 2023 and December 31, 2022 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 12/31/2022			(37)			861			210			(30)																		(9)						995			(270)			725
Changes in the fair value registered in equity			(49)			(445)			(66)			(66)																		2						(624)			155			(469)
Transfer to the initial value of hedged item			1			6			13			—																		—						20			(5)			15
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			32			19			19			—																		—						70			(17)			53
Total translation differences			(3)			—			—			(1)																		—						(4)			—			(4)
Other movements			—			—			—			(3)																		(4)						(7)			—			(7)
Balance at 12/31/2023			(56)			441			176			(100)																		(11)						450			(137)			313
Amounts remaining in equity for continuing hedges			(33)			408			250			(100)																		(11)						514
Amounts remaining in equity from any hedging relationship for which hedge accounting is no longer applied			(23)			33			(74)			—																		—						(64)
Balance at 12/31/2023			(56)			441			176			(100)																		(11)						450

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 +240 million euros (+181 million euros in 2022), see detail of "Net finance costs excluding foreign exchange differences and hyperinflation adjustments" in this Note, and in exchange differences amounted to -324 million euros (+536 million euros in 2022).

			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 evolution of cost of hedging in equity in 2023 and 2022 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 12/31/2021			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)
Changes in the fair value registered in equity			79			79			(20)			59
Transfer to the income statement of the period - the hedged item has affected profit or loss			(9)			(9)			2			(7)
Balance at 12/31/2023			45			45			(12)			33

The details of the ineffective portion of accounting hedges with impact on the income statement in 2023 and 2022 are as follows:

2023
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			97			98			(1)
Cash flow hedges			(39)			(39)			—
Fair value hedges			136			137			(1)
Exchange rate risk			(702)			(699)			(3)
Cash flow hedges			(409)			(406)			(3)
Net investment hedges			(293)			(293)			—
Interest rate and exchange rate risk			(45)			(35)			(10)
Cash flow hedges			(45)			(35)			(10)
Total			(650)			(636)			(14)

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)

X

- Definition

The disclosure of the sensitivity analysis for types of market risk to which the entity is exposed, showing how profit or loss and equity would have been affected by changes in the relevant risk variable that were reasonably possible at that date. [Refer: Market risk [member]]

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-Paragraph 40
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