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Financial instruments: fair value measurement and sensitivity analysis of market risk | 12 Months Ended
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Dec. 31, 2020
Disclosure of Financial instruments: fair value measurement and sensitivity analysis of market risk [abstract] |
Disclosure of Financial instruments: fair value measurement and sensitivity analysis of market risk [text block] | 25 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 categories 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 and bank loans. See note 2 Significant accounting policies for further information regarding me asurement of fair value s.
(in USD million) | Note | Amortised cost | Fair value through profit or loss | Non-financial assets | Total carrying amount
At 31 December 2020 |  |  |  |  |
Assets |  |  |  |  |
Non-current derivative financial instruments |  |  | 2,476 |  | 2,476
Non-current financial investments | 13 | 261 | 3,822 |  | 4,083
Prepayments and financial receivables | 13 | 497 |  | 364 | 861
Trade and other receivables | 15 | 7,418 |  | 814 | 8,232
Current derivative financial instruments |  |  | 886 |  | 886
Current financial investments | 13 | 11,649 | 216 |  | 11,865
Cash and cash equivalents | 16 | 6,264 | 492 |  | 6,757
Total financial assets |  | 26,090 | 7,892 | 1,178 | 35,159
(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 financial assets |  | 20,125 | 6,452 | 1,016 | 27,593
(in USD million) | Note | Amortised cost | Fair value through profit or loss | Non-financial liabilities | Total carrying amount
At 31 December 2020 |  |  |  |  |
Liabilities |  |  |  |  |
Non-current finance debt | 18 | 29,118 |  |  | 29,118
Non-current derivative financial instruments |  |  | 676 |  | 676
Trade, other payables and provisions | 21 | 7,736 |  | 2,774 | 10,510
Current finance debt | 18 | 4,591 |  |  | 4,591
Dividend payable |  | 357 |  |  | 357
Current derivative financial instruments |  |  | 1,710 |  | 1,710
Total financial liabilities |  | 41,802 | 2,386 | 2,774 | 46,961
(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 debt1) | 18 | 21,754 |  |  | 21,754
Non-current derivative financial instruments |  |  | 1,173 |  | 1,173
Trade, other payables and provisions | 21 | 9,027 |  | 1,423 | 10,450
Current finance debt1) | 18 | 2,939 |  |  | 2,939
Dividend payable |  | 859 |  |  | 859
Current derivative financial instruments |  |  | 462 |  | 462
Total financial liabilities1) |  | 34,580 | 1,635 | 1,423 | 37,637
1) Non-current finance debt and Current finance debt in the column Non-financial liabilities reclassified as Lease liabilities is separated from the line item Finance debt in the Consolidated balance sheet.
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 2020 |  |  |  |  |  |  |  |
Level 1 | 1,379 | 0 | 66 | 419 |  | 0 | (432) | 1,432
Level 2 | 2,135 | 2,146 | 150 | 443 | 492 | (671) | (1,277) | 3,417
Level 3 | 308 | 330 |  | 24 |  | (5) |  | 657
Total fair value | 3,822 | 2,476 | 216 | 886 | 492 | (676) | (1,710) | 5,505
At 31 December 2019 |  |  |  |  |  |  |  |
Level 1 | 1,456 | 7 | 0 | 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
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 currency exchange rates as inputs to the valuation models to determin e the fair value of it derivative financial instruments. Level 3, fair value based on unobservable 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 assumpt ions. 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 derivativ e contracts 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 applicable 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 i nstrume 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. If Equinor had applied this assumption, the fair value of the contracts included would have increased by approximately USD 0.1 billion at end of 2020, while at end of 2019 the impact was considered insignificant. The reconciliation of the changes in fair value durin g 20 20 and 201 9 for financial instruments classified as level 3 in the hierarchy is 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 at 1 January 2020 | 277 | 219 | 33 | (19) | 0 | 510
Total gains and losses recognised in statement of income | (29) | 106 | 19 | 14 | 0 | 109
Purchases | 64 |  |  |  |  | 64
Settlement | (8) |  | (28) |  |  | (36)
Transfer to level 1 | 1 |  |  |  |  | 1
Foreign currency translation effects | 4 | 5 | (0) |  |  | 9
Closing at 31 December 2020 | 308 | 330 | 24 | (5) | 0 | 657
Opening 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 effects | (0) | (2) | (0) |  |  | (3)
Closing at 31 December 2019 | 277 | 219 | 33 | (19) | 0 | 510
During 2020 the financial instruments within level 3 have had a net increase in fair value of USD 147 million. The USD 109 million recognised in the Consolidated statement of income during 2020 are mainly related to changes in fair value of embedded derivatives. USD 28 million r elated to certain earn-out agreements included in the opening balance for 2020 has been fully reali sed as the underlying volumes have been delivered during 2020. Sensitivity 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 info rmation related to the type of commodity risks and how Equinor manages these 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 have been bifurcated and recognised at fair value in the Consolidated balance sheet. Price risk sensitivities at the end of 2020 and 2019 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 | At 31 December
| 2020 | 2019
(in USD million) | - 30% | + 30% | - 30% | + 30%
Crude oil and refined products net gains/(losses) | 1,025 | (1,025) | 569 | (563)
Natural gas, electricity and Co2 net gains/(losses) | 184 | (94) | (33) | 49
Currency risk The following currency risk sensitivity has been calculated, by assuming a n 8% reasonable change in the most relevant foreign currency e xchange rates that impact Equinor’s financial accounts, based on balances at 31 December 20 20. As of 31 December 2019, a change of 9% in the most relevant foreign currency e xchange rates were viewed as a reasonable change. With reference to table below, an increase in the foreign currency exchange rates means that the disclosed currency has strengthened in value against all other currencies. The estimated gains and the estimated losses following from a change in the foreign currency 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 | At 31 December
| 2020 | 2019
(in USD million) | - 8% | + 8% | - 9% | + 9%
USD net gains/(losses) | (319) | 319 | (220) | 220
NOK net gains/(losses) | 322 | (322) | 282 | (282)
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 2020. A change of 0.6 percentage points in interest rates was also in 2019 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 | At 31 December
| 2020 | 2019
(in USD million) | - 0.6 percentage points | + 0.6 percentage points | - 0.6 percentage points | + 0.6 percentage points
Positive/(negative) impact on net financial items | 516 | (516) | 526 | (526)
Equity price risk The following equity price risk sensitivity has been calculated, by assuming a 35% possible change in equity prices that impact Equinor’s financial accounts, based on balances at 31 December 2020. A t 31 December 2019, a change of 35% in equity pr i ces were viewed as a reasonable possible change. 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 and how Equinor manages these risks, see note 5 Financial risk and capital management.
Equity price sensitivity | At 31 December
| 2020 | 2019
(in USD million) | - 35% | + 35% | - 35% | + 35%
Net gains/(losses) | (684) | 684 | (631) | 631

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