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Financial instruments: fair value measurement and sensitivity analysis of market risk | 12 Months Ended
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Dec. 31, 2019
Disclosure of detailed information about financial instruments [abstract] |
Disclosure of financial instruments [text block] | 26 Financial instruments: fair value measurement and sensitivity analysis of market risk Financial instruments by category The following tables present Equinor's classes of financial instruments and their carrying amounts by the categories as they are defined in IFRS 9 Financial Instruments: Classification and Measurement. For financial investments the difference between measurement as defined by IFRS 9 categori es and measurement at fair value is immaterial. For trade and other receivables and payables, and cash and cash equivalents, the carrying amounts are considered a reasonable approximation of fair value. See note 18 Finance debt for fair value information of non-current bonds, bank loans and lease liabilities. See note 2 Significant accounting policies for further information regarding measurement of fair val ues.
(in USD million) | Note | Amortised cost | Fair value through profit or loss | Non-financial assets | Total carrying amount
At 31 December 2019 |  |  |  |  |
Assets |  |  |  |  |
Non-current derivative financial instruments |  | - | 1,365 | - | 1,365
Non-current financial investments | 13 | 167 | 3,433 | - | 3,600
Prepayments and financial receivables | 13 | 1,057 | - | 157 | 1,214
Trade and other receivables | 15 | 7,374 | - | 859 | 8,233
Current derivative financial instruments |  | - | 578 | - | 578
Current financial investments | 13 | 7,050 | 377 | - | 7,426
Cash and cash equivalents | 16 | 4,478 | 700 | - | 5,177
Total |  | 20,125 | 6,452 | 1,016 | 27,593
(in USD million) | Note | Amortised cost | Fair value through profit or loss | Non-financial assets | Total carrying amount
At 31 December 2018 |  |  |  |  |
Assets |  |  |  |  |
Non-current derivative financial instruments |  | - | 1,032 | - | 1,032
Non-current financial investments | 13 | 90 | 2,365 | - | 2,455
Prepayments and financial receivables | 13 | 854 | - | 179 | 1,033
Trade and other receivables | 15 | 8,488 | - | 510 | 8,998
Current derivative financial instruments |  | - | 318 | - | 318
Current financial investments | 13 | 6,145 | 896 | - | 7,041
Cash and cash equivalents | 16 | 5,301 | 2,255 | - | 7,556
Total |  | 20,878 | 6,866 | 689 | 28,433
(in USD million) | Note | Amortised cost | Fair value through profit or loss | Non-financial liabilities | Total carrying amount
At 31 December 2019 |  |  |  |  |
Liabilities |  |  |  |  |
Non-current finance debt | 18, 22 | 21,754 | - | 3,191 | 24,945
Non-current derivative financial instruments |  | - | 1,173 | - | 1,173
Trade, other payables and provisions | 21 | 9,027 | - | 1,423 | 10,450
Current finance debt | 18, 22 | 2,939 | - | 1,148 | 4,087
Dividend payable |  | 859 | - | - | 859
Current derivative financial instruments |  | - | 462 | - | 462
Total |  | 34,580 | 1,635 | 5,762 | 41,976
(in USD million) | Note | Amortised cost | Fair value through profit or loss | Non-financial liabilities | Total carrying amount
At 31 December 2018 |  |  |  |  |
Liabilities |  |  |  |  |
Non-current finance debt | 18, 22 | 23,264 | - | - | 23,264
Non-current derivative financial instruments |  | - | 1,207 | - | 1,207
Trade, other payables and provisions | 21 | 8,115 | - | 255 | 8,369
Current finance debt | 18, 22 | 2,463 | - | - | 2,463
Dividend payable |  | 766 | - | - | 766
Current derivative financial instruments |  | - | 352 | - | 352
Total |  | 34,608 | 1,559 | 255 | 36,422
Fair value hierarchy The following table summarises each class of financial instruments which are recognised in the Consolidated balance sheet at fair value, split by Equinor's basis for fair value measurement.
(in USD million) | Non-current financial investments | Non-current derivative financial instruments - assets | Current financial investments | Current derivative financial instruments - assets | Cash equivalents | Non-current derivative financial instruments - liabilities | Current derivative financial instruments - liabilities | Net fair value
At 31 December 2019 |  |  |  |  |  |  |  |
Level 1 | 1,456 | 7 | - | 86 | - | (6) | (70) | 1,473
Level 2 | 1,700 | 1,139 | 377 | 461 | 700 | (1,148) | (394) | 2,835
Level 3 | 277 | 219 | - | 33 | - | (19) | - | 510
Total fair value | 3,433 | 1,365 | 377 | 578 | 700 | (1,173) | (462) | 4,817
At 31 December 2018 |  |  |  |  |  |  |  |
Level 1 | 1,088 | - | 365 | - | - | - | - | 1,453
Level 2 | 1,027 | 806 | 531 | 274 | 2,255 | (1,172) | (351) | 3,370
Level 3 | 250 | 227 | - | 44 | - | (35) | (1) | 485
Total fair value | 2,365 | 1,032 | 896 | 318 | 2,255 | (1,207) | (352) | 5,307
Level 1, fair value based on prices quoted in an active market for identical assets or liabilities, includes financial instruments actively traded and for which the values recognised in the Consolidated balance sheet are determined based on observable prices on identical instruments. For Equinor this category will, in most cases, only be relevant for investments in listed equity securities and government bonds. Level 2, fair value based on inputs other t han quoted prices included within l evel 1, which are derived from observable market transactions, includes Equinor's non-standardised contracts for which fair values are determined on the basis of price inputs from observable market transactions. This will typically be when Equinor uses forward prices on crude oil, natural gas, interest rates and foreign exchange rates as inputs to the valuation models to determining the fair value of its derivative financial instruments. Level 3, fair value based on unobse rvable inputs, includes financial instruments for which fair values are determined on the basis of input and assumptions that are not from observable market transactions. The fair values presented in this category are mainly based on internal assumptions. The internal assumptions are only used in the absence of quoted prices from an active market or other observable price inputs for the financial instruments subject to the valuation. The fair value of certain earn-out agreements and embedded derivative cont racts are determined by the use of valuation techniques with price inputs from observable market transactions as well as internally generated price assumptions and volume profiles. The discount rate used in the valuation is a risk-free rate based on the ap plicable currency and time horizon of the underlying cash flows adjusted for a credit premium to reflect either Equinor's credit premium, if the value is a liability, or an estimated counterparty credit premium if the value is an asset. In addition a risk premium for risk elements not adjusted for in the cash flow may be included when applicable. The fair values of these derivative financial instruments have been classified in their entiret y in the third category within c urrent derivative financial instrume nts and n on-current de rivative financial instruments. Another reasonable assumption, that could have been applied when determining the fair value of these contracts, would be to extrapolate the last observed forward prices with inflation. Applying this ass umption would have an insignificant impact on the fair value for these contracts. The reconciliation of the changes in fair value during 201 9 and 201 8 for financial instruments classified as level 3 in the hierarchy are presented in the following table.
(in USD million) | Non-current financial investments | Non-current derivative financial instruments - assets | Current derivative financial instruments - assets | Non-current derivative financial instruments - liabilities | Current derivative financial instruments - liabilities | Total amount
Opening as at 1 January 2019 | 250 | 227 | 44 | (35) | (1) | 485
Total gains and losses recognised in statement of income | (38) | (6) | 31 | 16 | 1 | 4
Purchases | 78 | - | - | - | - | 78
Settlement | (11) | - | (42) | - | - | (52)
Transfer to level 1 | (3) | - | - | - | - | (3)
Foreign currency translation differences | (0) | (2) | (0) | - | - | (3)
Closing as at 31 December 2019 | 277 | 219 | 33 | (19) | - | 510
Opening as at 1 January 2018 | 397 | 283 | 37 | - | (4) | 713
Total gains and losses recognised in statement of income | (91) | (44) | 46 | (35) | 3 | (122)
Purchases | 35 | - | - | - | - | 35
Settlement | - | - | (36) | - | - | (36)
Transfer into level 3 | (88) | - | - | - | - | (88)
Foreign currency translation differences | (3) | (13) | (3) | - | - | (18)
Closing as at 31 December 2018 | 250 | 227 | 44 | (35) | (1) | 485
During 2019 the financial instruments within level 3 have had a net increase in fair value of USD 25 million. The USD 4 million recognised in the Consolidated statement of income during 2019 are impacted by a n increase of USD 24 million related to changes in fair value of certain earn-out agreements. Related to the same earn-out agreements, USD 42 million included in the opening balance for 2019 has been fully realised as the underlying volumes have bee n delivered during 2019. Sensitiv ity analysis of market risk Commodity price risk The table below contains the commodity price risk sensitivities of Equinor's commodity based derivatives contracts. For further information related to the type of commodity risks and how Equinor manages th ese risks, see note 5 Financial risk and capital management. Equinor's assets and liabilities resulting from commodity based derivatives contracts consist of both exchange traded and non-exchange traded instruments, including embedded derivatives that hav e been bifurcated and recognised at fair value in the Consolidated balance sheet. Price risk sensitivities at the end of 201 9 and 2018 at 30%, are assum ed to represent a reasonably possible change based on the duration of the derivatives. Since none of the derivative financial instruments included in the table below are part of hedging relationships, any changes in the fair value would be recognised in the Consolidated statement of income.
Commodity price sensitivity | 2019 | 2018
(in USD million) | - 30% | + 30% | - 30% | + 30%
At 31 December |  |  |  |
Crude oil and refined products net gains/(losses) | 569 | (563) | 275 | (230)
Natural gas and electricity net gains/(losses) | (33) | 49 | 1,157 | (1,156)
Currency risk The following currency risk sensitivity has been calculated, by assuming a 9% reasonable change in the main exchange rates that impact Equinor’s financial accounts, based on balances at 31 December 201 9. A lso a t 31 December 201 8 a change of 9% in the main exchange rates were viewed as a reasonable change. With reference to table below, an increase in the exchange rates means that the disclosed cur rency has strengthened in value against all other currencies. The estimated gains and the estimated losses following from a change in the exchange rates would impact the Consolidated statement of income. For further information related to the currency risk and how Equinor manages these risks, see note 5 Financial risk and capital management.
Currency risk sensitivity | 2019 | 2018
(in USD million) | - 9% | + 9% | - 9% | + 9%
At 31 December |  |  |  |
USD net gains/(losses) | (220) | 220 | (230) | 230
NOK net gains/(losses) | 282 | (282) | 311 | (311)
Interest rate risk The following interest rate risk sensitivity has been calculated by assuming a change of 0.6 percentage points as a reasonab le possible change in i nterest rates at the end of 2019. A change of 0.6 percentage points in interest rates was also in 2018 viewed as a reasonabl e possible change. A decrease in interest rates will have an estimated positive impact on net financial items in the C onsolidated statement of income, while an increase in interest rates has an estimated negative impact on net financial items in the C onsolidated statement of income. For further information related to the interest risks and how Equinor manages these risks, see note 5 Financial risk and capital management.
Interest risk sensitivity | 2019 | 2018
(in USD million) | - 0.6 percentage points | + 0.6 percentage points | - 0.6 percentage points | + 0.6 percentage points
At 31 December |  |  |  |
Positive/(negative) impact on net financial items | 526 | (526) | 575 | (575)
Equity price risk The following equity price risk sensitivity has been calculated, by assuming a 35% possibl e change in equity prices that impact Equinor’s financial accounts, based on balances at 31 December 2019. The estimated gains and the estimated losses following from a change in equity prices would impact the Consolidated statement of income. For further information related to the equity price risk an d how Equinor manages these risks, see note 5 Financial risk and capital management.
Equity price sensitivity | 2019
(in USD million) | - 35% | + 35%
At 31 December |  |
Net gains/(losses) | (631) | 631

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