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Financial instruments by category

12 Months Ended

Jun. 30, 2019

Financial Instruments By Category [Abstract]

13.

Financial instruments by category

The following note presents the financial assets and financial liabilities by category and a reconciliation to the corresponding line in the Consolidated Statements of Financial Position, as appropriate. Since the line items "Trade and other receivables" and "Trade and other payables" contain both financial instruments and non-financial assets or liabilities (such as prepayments, trade receivables, trade payables in-kind and tax receivables and payables), the reconciliation is shown in the columns headed "Non-financial assets" and "Non-financial liabilities". Financial assets and liabilities measured at fair value are assigned based on their different levels in the fair value hierarchy.

IFRS 9 defines the fair value of a financial instrument as the amount for which an asset could be exchanged, or a financial liability settled, between knowledgeable, willing parties in an arm's length transaction. All financial instruments recognized at fair value are allocated to one of the valuation hierarchy levels of IFRS 7. This valuation hierarchy provides for three levels.

In the case of Level 1, valuation is based on quoted prices (unadjusted) in active markets for identical assets and liabilities that the Company can refer to at the date of valuation. In the case of Level 2, fair value is determined by using valuation methods based on inputs directly or indirectly observable in the market. If the financial instrument concerned has a fixed contract period, the inputs used for valuation must be observable for the whole of this period. In the case of Level 3, the Group uses valuation techniques not based on inputs observable in the market. This is only permissible insofar as no market data is available. The inputs used reflect the Group's assumptions regarding the factors which market players would consider in their pricing.

The Group's Finance Division has a team in place in charge of estimating the valuation of financial assets required to be reported in the Consolidated Financial Statements, including the fair value of Level-3 instruments. The team directly reports to the Chief Financial Officer ("CFO"). The CFO and the valuation team discuss the valuation methods and results upon the acquisition of an asset and, as of the end of each reporting period.

According to the Group's policy, transfers among the several categories of valuation are recognized when occurred, or when there are changes in the prevailing circumstances requiring the transfer.

Financial assets and financial liabilities as of June 30, 2019 are as follows:

	Financial assets at amortized cost (i)		Financial assets at fair value through profit or loss						Subtotal financial assets		Non-financial assets		Total
			Level 1		Level 2		Level 3
June 30, 2019
Assets as per Statement of Financial Position
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables)		28,988		-		-		-		28,988		7,782		36,770
Investments in financial assets:
- Public companies' securities		-		957		138		28		1,123		-		1,123
- Private companies' securities		-		-		-		1,826		1,826		-		1,826
- Deposits		3,664		36		-		-		3,700		-		3,700
- Bonds		-		16,728		1,062		998		18,788		-		18,788
- Investments in financial assets with quotation		-		9,234		436		-		9,670		-		9,670
Derivative financial instruments:
- Foreign-currency future contracts		-		-		29		-		29		-		29
- Others		-		-		12		95		107		-		107
Restricted assets (ii)		7,460		-		-		-		7,460		-		7,460
Financial assets held for sale:
- Clal		-		15,839		-		-		15,839		-		15,839
Cash and cash equivalents:
- Cash at bank and on hand		6,726		-		-		-		6,726		-		6,726
- Short-term investments		52,387		1,369		-		-		53,756		-		53,756
Total assets		99,225		44,163		1,677		2,947		148,012		7,782		155,794

	Financial liabilities at amortized cost (i)		Financial liabilities at fair value through profit or loss						Subtotal financial liabilities		Non-financial liabilities		Total
			Level 1		Level 2		Level 3
June 30, 2019
Liabilities as per Statement of Financial Position
Trade and other payables		14,768		-		-		-		14,768		5,546		20,314
Borrowings (excluding finance leases)		312,512		-		-		-		312,512		-		312,512
Derivative financial instruments:
- Swaps		-		-		134		-		134		-		134
- Others		-		-		871		48		919		-		919
Total liabilities		327,280		-		1,005		48		328,333		5,546		333,879

(i)

The fair value of financial assets and liabilities at their amortized cost does not differ significantly from their book value, except for borrowings (Note 19).

(ii)

Corresponds to deposits in guarantee and escrows.

Financial assets and financial liabilities as of June 30, 2018 were as follows:

	Financial assets at amortized cost (i)		Financial assets at fair value through profit or loss						Subtotal financial assets		Non-financial assets		Total
			Level 1		Level 2		Level 3
June 30, 2018
Assets as per Statements of Financial Position
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables)		29,024		-		-		-		29,024		8,156		37,180
Investments in financial assets:
- Public companies' securities		-		1,282		-		210		1,492		-		1,492
- Private companies' securities		-		-		-		1,817		1,817		-		1,817
- Deposits		2,172		37		-		-		2,209		-		2,209
- Bonds		16		21,669		786		1,234		23,705		-		23,705
- Investments in financial assets with quotation		-		13,102		-		-		13,102		-		13,102
Derivative financial instruments:
- Foreign-currency future contracts		-		-		110		-		110		-		110
- Others		-		-		25		-		25		-		25
Restricted assets (ii)		9,784		-		-		-		9,784		-		9,784
Financial assets held for sale:
- Clal		-		19,064		-		-		19,064		-		19,064
Cash and cash equivalents:
- Cash at bank and on hand		10,037		-		-		-		10,037		-		10,037
- Short term investments		44,080		3,938		-		-		48,018		-		48,018
Total assets		95,113		59,092		921		3,261		158,387		8,156		166,543

	Financial liabilities at amortized cost (i)		Financial liabilities at fair value through profit or loss						Subtotal financial liabilities		Non-financial liabilities		Total
			Level 1		Level 2		Level 3
June 30, 2018
Liabilities as per Statement of Financial Position
Trade and other payables		16,280		-		-		-		16,280		12,271		28,551
Borrowings (excluding finance leases)		321,438		-		-		-		321,438		-		321,438
Derivative financial instruments:
- Foreign-currency future contracts		-		-		12		-		12		-		12
- Swaps		-		-		73		-		73		-		73
- Others		-		13		-		36		49		-		49
- Forwards		-		-		185		-		185		-		185
Total liabilities		337,718		13		270		36		338,037		12,271		350,308

(i)

The fair value of financial assets and liabilities at their amortized cost does not differ significantly from their book value, except for borrowings (Note 19).

(ii)

Corresponds to deposits in guarantee and escrows.

Liabilities carried at amortized cost also include liabilities under finance leases where the Group is the lessee and which therefore have to be measured in accordance with IAS 17 "Leases". The categories disclosed are determined by reference to IFRS 9. Finance leases are excluded from the scope of IFRS 7 "Financial Instruments Disclosures". Therefore, finance leases have been shown separately.

The following are details of the book value of financial instruments recognized, which were offset in the statements of financial position:

	As of June 30, 2019							As of June 30, 2018
	Gross amounts recognized		Gross amounts offset			Net amount presented		Gross amounts recognized		Gross amounts offset			Net amount presented
Financial assets
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables)		30,501		(1,513	)		28,988		30,379		(1,355	)		29,024
Financial liabilities
Trade and other payables		16,281		(1,513	)		14,768		17,635		(1,355	)		16,280

Income, expense, gains and losses on financial instruments can be assigned to the following categories:

	Financial assets / liabilities at amortized cost			Financial assets / liabilities at fair value through profit or loss		Total
June 30, 2019
Interest income		854			-		854
Interest expense		(15,549	)		-		(15,549	)
Foreign exchange gains, net		873			-		873
Dividend income		68			-		68
Fair value gain on financial assets at fair value through profit or loss (i)		-			1,645		1,645
Gain on derivative financial instruments, net		-			360		360
Other finance costs		623			-		623
Total financial instruments		(13,131	)		2,005		(11,126	)

	Financial assets / liabilities at amortized cost			Financial assets / liabilities at fair value through profit or loss			Total
June 30, 2018
Interest income		930			-			930
Interest expense		(13,645	)		-			(13,645	)
Loss from debt exchange		(4,297	)		-			(4,297	)
Foreign exchange losses, net		(9,460	)		-			(9,460	)
Dividend income		146			78			224
Fair value loss on financial assets at fair value through profit or loss		-			(1,400	)		(1,400	)
(Loss) / Gain on derivative financial instruments, net		(2	)		282			280
Other finance costs		(89	)		-			(89	)
Total financial instruments		(26,417	)		(1,040	)		(27,457	)

	Financial assets / liabilities at amortized cost			Financial assets / liabilities at fair value through profit or loss		Total
June 30, 2017
Interest income		1,063			-		1,063
Interest expense		(13,185	)		-		(13,185	)
Foreign exchange gains, net		1,000			8		1,008
Dividend income		10			79		89
Fair value gain on financial assets at fair value through profit or loss		-			5,152		5,152
Gain on derivative financial instruments, net		4			248		252
Other finance costs		(482	)		-		(482	)
Total financial instruments		(11,590	)		5,487		(6,103	)

(i)

Included within "Financial results, net" in the Statements of Income.

Clal

Clal is a holding company that mainly operates in the insurance and pension markets and in segments of pension funds. The Company holds assets and other businesses (such as insurance agencies) and is one of the largest insurance groups in Israel. Clal mainly develops its activities in three operating segments: long-term savings, general insurance and health insurance.

Given that IDBD failed to meet the requirements set forth to have control over an insurance company, on August 21, 2013, the Commissioner required that IDBD granted an irrevocable power of attorney to Mr. Moshe Tery ("the Trustee") for the 51% of the shareholding capital and vote interests in Clal, thus transferring control over that investee. From such date, IDBD recognized its equity interest in Clal as a financial asset held for sale, at fair value through profit or loss.

On December 30, 2014, the Commissioner sent an additional letter setting a term by which IDBD's control over and equity interests in Clal were to be sold and giving directions as to the Trustee's continuity in office, among other aspects. Refer to Note 4 and Note 33 of these financial statements for the sale of Clal shares.

During the fiscal year ended June 30, 2019, preferred shares of Condor were transferred form level 3 to level 2 as result of the merger agreement described in Note 33. During the fiscal year ended June 30, 2018, shares of private companies were transferred from level 3 to level 1 when they began trading.. When there are no quoted prices available in an active market, fair values (especially derivative instruments) are based on recognized valuation methods. The Group uses a range of valuation models for the measurement of Level 2 and Level 3 instruments, details of which may be obtained from the following table.

Description	Pricing model / method	Parameters	Fair value hierarchy	Range
Interest rate swaps	Cash flows - Theoretical price	Interest rate futures contracts and cash flows	Level 2	-
Preferred shares of Condor	Binomial tree – Theoretical price I	Underlying asset price (Market price); share price volatility (historical) and market interest rate (Libor rate curve).	Level 3	Underlying asset price 1.8 to 2.2 Share price volatility 58% to 78% Market interest-rate 1.7% to 2.1%
Promissory note	Discounted cash flows - Theoretical price	Market interest-rate (Libor rate curve)	Level 3	Market interest-rate 1.8% to 2.2%
Warrants of Condor	Black-Scholes – Theoretical price	Underlying asset price (Market price); share price volatility (historical) and market interest rate (Libor rate curve).	Level 2	Underlying asset price 1.8 to 1.7 Share price volatility 58% to 78% Market interest-rate 1.7% to 2.1%
TGLT Non-convertible Notes	Black-Scholes – Theoretical price	Underlying asset price (Market price); share price volatility (historical) and market interest rate.	Level 3	Underlying asset price Ps. 8 to Ps.12 Share price volatility 50% to 70% Market interest-rate 8% to 9%
Call option of Arcos	Discounted cash flows	Projected revenues and discounting rate.	Level 3	-
Investments in financial assets - Other private companies' securities (*)	Cash flow / NAV - Theoretical price	Projected revenue discounted at the discount rate The value is calculated in accordance with shares in the equity funds on the basis of their Financial Statements, based on fair value or investments assessments.	Level 3	1 - 3.5
Investments in financial assets - Others	Discounted cash flows - Theoretical price	Projected revenue discounted at the discount rate The value is calculated in accordance with shares in the equity funds on the basis of their Financial Statements, based on fair value or investment assessments.	Level 3	1 - 3.5
Derivative financial instruments Forwards	Theoretical price	Underlying asset price and volatility	Level 2 and 3	-

(*)

An increase in the discount rate would decrease the value of investments in private companies, while an increase in projected revenues would increase their value.

As of June 30, 2019, there have been no changes to the economic or business circumstances affecting the fair value of the financial assets and liabilities of the group.

The following table presents the changes in Level 3 financial instruments as of June 30, 2019 and 2018:

	Investments in financial assets - Public companies' Securities			Derivative financial instruments - Forwards			Investments in financial assets - Private companies' Securities			Investment in financial assets - Others			Derivative financial instruments - Warrants		Total
Balances at June 30, 2017		128			(16	)		1,500			-			-		1,612
Additions and acquisitions		-			-			53			818			-		871
Transfer to level 1 (ii)		-			-			(156	)		-			-		(156	)
Cumulative translation adjustment		-			(20	)		761			122			-		863
Deconsolidation (see Note 4.I.)		-			-			(196	)		-			-		(196	)
Write off		(105	)		-			-			-			-		(105	)
Gain / (loss) for the year (i)		187			-			(145	)		294			-		336
Balances at June 30, 2018		210			(36	)		1,817			1,234			-		3,225
Additions and acquisitions		-			-			120			-			-		120
Transfer between levels		(138	)		-			107			-			72		41
Cumulative translation adjustment		(8	)		-			(45	)		(13	)		13		(53	)
Write off		-			-			-			-			-		-
Gain / (loss) for the year (i)		(36	)		(12	)		(173	)		(223	)		10		(434	)
Balances at June 30, 2019		28			(48	)		1,826			998			95		2,899

(i)

Included within "Financial results, net" in the Statements of income.

(ii)

The Group transferred a financial asset measured at fair value from level 3 to level 1, because it began trading in the stock exchange.