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Financial instruments by category

12 Months Ended

Jun. 30, 2020

Financial Instruments By Category [Abstract]

16.

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, 2020 are as follows:

			Financial assets at fair value through profit or loss
	Financial assets at amortized cost (i)		Level 1		Level 2		Level 3		Subtotal financial assets		Non-financial assets		Total
June 30, 2020
Assets as per Statement of Financial Position
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables) (Note 17)		57,759		-		-		-		57,759		17,134		74,893
Investment in financial assets:
- Equity securities in public companies		-		574		230		-		804		-		804
- Equity securities in private companies		-		-		-		2,909		2,909		-		2,909
- Deposits		956		61		-		-		1,017		-		1,017
- Bonds		-		7,823		1,444		-		9,267		-		9,267
- Mutual funds		-		4,455		-		-		4,455		-		4,455
- Others		-		2,213		810		232		3,255		-		3,255
Derivative financial instruments:
- Crops options contracts		-		86		-		-		86		-		86
- Crops future contracts		-		15		-		-		15		-		15
- Foreign-currency options contracts		-		-		-		-		-		-		-
- Foreign-currency future contracts		-		16		128		-		144		-		144
- Swaps		-		-		17		-		17		-		17
- Warrants		-		-		-		142		142		-		142
- Others		61		-		20		-		81		-		81
Restricted assets (ii)		8,145		-		-		-		8,145		-		8,145
Financial assets held for sale
- Clal		-		3,377		-		-		3,377		-		3,377
Cash and cash equivalents (excluding bank overdrafts):
- Cash on hand and at bank		27,031		-		-		-		27,031		-		27,031
- Short-term investments		63,765		10,130		-		-		73,895		-		73,895
Total assets		157,717		28,750		2,649		3,283		192,399		17,134		209,533

			Financial liabilities at fair value
	Financial liabilities at amortized cost		Level 1		Level 2		Level 3		Subtotal financial liabilities		Non-financial liabilities		Total
June 30, 2020
Liabilities as per Statement of Financial Position
Trade and other payables (Note 20)		30,928		-		-		-		30,928		7,881		38,809
Borrowings (excluding finance lease liabilities) (Note 22)		418,807		-		-		-		418,807		-		418,807
Finance lease obligations (Note 22)		-		-		-		-		-		-		-
Derivative financial instruments:
- Crops options contracts		-		71		-		-		71		-		71
- Crops futures contracts		-		37		-		-		37		-		37
- Crops options contracts		-		171		50		-		221		-		221
- Swaps		-		-		95		-		95		-		95
- Forwards		-		-		61		-		61		-		61
- Others		-		-		956		20		976		-		976
Total liabilities		449,735		279		1,162		20		451,196		7,881		459,077

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

			Financial assets at fair value through profit or loss
	Financial assets at amortized cost (i)		Level 1		Level 2		Level 3		Subtotal financial assets		Non-financial assets		Total
June 30, 2019
Assets as per Statement of Financial Position
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables) (Note 17)		49,341		-		-		-		49,341		13,547		62,888
Investment in financial assets:
- Equity securities in public companies		-		1,367		197		-		1,564		-		1,564
- Equity securities in private companies		-		-		-		2,610		2,610		-		2,610
- Deposits		5,301		51		-		-		5,352		-		5,352
- Bonds		-		22,430		1,518		966		24,914		-		24,914
- Mutual funds		-		10,289		-		-		10,289		-		10,289
- Others		-		3,411		623		500		4,534		-		4,534
Derivative financial instruments:
- Crops futures contracts		-		13		-		-		13		-		13
- Swaps		-		-		16		-		16		-		16
- Warrants		-		-		-		136		136		-		136
- Crops options contracts		-		46		-		-		46		-		46
- Foreign-currency options contracts		-		43		-		-		43		-		43
- Foreign-currency future contracts		-		3		41		-		44		-		44
- Others		-		-		17		-		17		-		17
Restricted assets (ii)		10,808		-		-		-		10,808		-		10,808
Financial assets held for sale
- Clal		-		22,638		-		-		22,638		-		22,638
Cash and cash equivalents (excluding bank overdrafts):
- Cash on hand and at bank		10,142		-		-		-		10,142		-		10,142
- Short-term investments		74,873		4,289		-		-		79,162		-		79,162
Total assets		150,465		64,580		2,412		4,212		221,669		13,547		235,216

	Financial liabilities at amortized		Financial liabilities at fair value						Subtotal financial		Non-financial
	cost (i)		Level 1		Level 2		Level 3		liabilities		liabilities		Total
June 30, 2019
Liabilities as per Statement of Financial Position
Trade and other payables (Note 20)		26,444		-		-		-		26,444		8,685		35,129
Borrowings (excluding finance lease liabilities) (Note 22)		477,432		-		-		-		477,432		-		477,432
Finance lease obligations (Note 22)		366		-		-		-		366		-		366
Derivative financial instruments:
- Crops futures contracts		-		103		-		-		103		-		103
- Foreign-currency contracts		-		36		-		-		36		-		36
- Crops options contracts		-		89		-		-		89		-		89
- Swaps		-		-		192		-		192		-		192
- Others		-		-		1,246		69		1,315		-		1,315
Total liabilities		504,242		228		1,438		69		505,977		8,685		514,662

(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 22).

(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:

	06.30.20							06.30.19
			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)		60,296		(2,537	)		57,759		51,753		(2,412	)		49,341
Financial liabilities
Trade and other payables		33,465		(2,537	)		30,928		28,856		(2,412	)		26,444

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

	Financial assets and liabilities at amortized cost			Financial assets and liabilities at fair value through profit or loss			Total
June 30, 2020
Interest income		1,059			-			1,059
Interest earned on operating assets		1,782			-			1,782
Interest expenses		(24,357	)		-			(24,357	)
Foreign exchange loss		(10,197	)		-			(10,197	)
Dividends income		168			-			168
Fair value gains financial assets at fair value through profit or loss		-			(9,862	)		(9,862	)
Gain from repurchase of Non-convertible Notes		2,885			-			2,885
Gain on financial instruments derived from commodities		-			439			439
Results from derivative financial instruments, net		-			(1,493	)		(1,493	)
Other financial income		236			-			236
Other financial results		(1,439	)		-			(1,439	)
Net result (i)		(29,863	)		(10,916	)		(40,779	)

	Financial assets and liabilities at amortized cost			Financial assets and liabilities at fair value through profit or loss		Total
June 30, 2019
Interest income		983			-		983
Interest earned on operating assets		841			-		841
Interest expenses		(21,893	)		-		(21,893	)
Foreign exchange loss		2,633			-		2,633
Dividends income		97			-		97
Fair value gains financial assets at fair value through profit or loss		-			2,797		2,797
Gain / (loss) from repurchase of Non-convertible Notes		74			-		74
Gain on financial instruments derived from commodities		-			446		446
Results from derivative financial instruments, net		-			477		477
Other financial income		695			-		695
Other financial results		(971	)		-		(971	)
Net result (i)		(17,541	)		3,720		(13,821	)

	Financial assets and liabilities at amortized cost			Financial assets and liabilities at fair value through profit or loss			Total
June 30, 2018
Interest income		1,267			-			1,267
Interest earned on operating assets		156			-			156
Interest expenses		(19,564	)		-			(19,564	)
Foreign exchange loss		(19,587	)		-			(19,587	)
Dividends income		209			-			209
Fair value loss in financial assets at fair value through profit or loss		-			(1,834	)		(1,834	)
Loss from repurchase of Non-convertible Notes		(5,908	)		-			(5,908	)
Results from derivative financial instruments, net		-			(743	)		(743	)
Loss from repurchase of Non-convertible Notes		-			(4	)		(4	)
Gain on financial instruments derived from commodities		-			56			56
Other financial results		(1,078	)		-			(1,078	)
Net result (i)		(44,505	)		(2,525	)		(47,030	)

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 40 of these financial statements for the sale of Clal shares.

The following table presents the changes in Level 3 financial instruments as of June 30, 2020 and 2019:

	Derivative financial instruments - Forwards			Investments in financial assets - Private companies’ securities			Investments in financial assets - Others			Investments in financial assets - Warrants			Total
Balance as of June 30, 2018		(51	)		2,597			2,064			-			4,610
Additions and acquisitions		-			172			-			-			172
Transfer to level 1 (ii)		-			153			(197	)		103			59
Currency translation adjustment		-			(65	)		(31	)		19			(77	)
Gains and losses recognized in the year (i)		(18	)		(247	)		(370	)		14			(621	)
Balance as of June 30, 2019		(69	)		2,610			1,466			136			4,143
Additions and acquisitions		-			35			-			-			35
Transfer to level 1 (ii)		-			-			-			351			351
Currency translation adjustment		(7	)		476			106			245			820
Write off		-			-			(977	)		(610	)		(1,587	)
Gains and losses recognized in the year (i)		56			(212	)		(363	)		20			(499	)
Balance as of June 30, 2020		(20	)		2,909			232			142			3,263

(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.

During the fiscal year ended June 30, 2020 and 2019, 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	-
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, 2020, there have been no changes to the economic or business circumstances affecting the fair value of the financial assets and liabilities of the group.