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Derivative financial instruments and hedge accounting | 12 Months Ended
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Dec. 31, 2019
Derivative financial instruments and hedge accounting |
Derivative financial instruments and hedge accounting | 23 Derivative financial instruments and hedge accounting
|  | December 31, 2019 |  | December 31, 2018
|  | Fair value |  | Fair value |  | Level of Fair |  | Fair value |  | Fair value |  | Level of Fair
(€ million) |  | asset |  | liability |  | value |  | asset |  | liability |  | value
Non-hedging derivatives |  |  |  |  |  |  |  |  |  |  |  |
Derivatives on exchange rate |  |  |  |  |  |  |  |  |  |  |  |
- Currency swap |  | 97 |  | 43 |  | 2 |  | 99 |  | 46 |  | 2
- Interest currency swap |  | 26 |  |  |  | 2 |  | 14 |  | 71 |  | 2
- Outright |  | 8 |  | 5 |  | 2 |  | 3 |  | 5 |  | 2
|  | 131 |  | 48 |  |  |  | 116 |  | 122 |  |
Derivatives on interest rate |  |  |  |  |  |  |  |  |  |  |  |
- Interest rate swap |  | 13 |  | 34 |  | 2 |  | 18 |  | 6 |  | 2
|  | 13 |  | 34 |  |  |  | 18 |  | 6 |  |
Derivatives on commodities |  |  |  |  |  |  |  |  |  |  |  |
- Future |  | 192 |  | 181 |  | 1 |  | 1,060 |  | 1,107 |  | 1
- Over the counter |  | 89 |  | 58 |  | 2 |  | 306 |  | 284 |  | 2
- Other |  | 12 |  |  |  | 2 |  | 1 |  | 5 |  | 2
|  | 293 |  | 239 |  |  |  | 1,367 |  | 1,396 |  |
|  | 437 |  | 321 |  |  |  | 1,501 |  | 1,524 |  |
Trading derivatives |  |  |  |  |  |  |  |  |  |  |  |
Derivatives on commodities |  |  |  |  |  |  |  |  |  |  |  |
- Over the counter |  | 2,387 |  | 1,953 |  | 2 |  | 992 |  | 1,031 |  | 2
- Future |  | 348 |  | 313 |  | 1 |  | 367 |  | 263 |  | 1
- Options |  | 21 |  | 22 |  | 2 |  | 80 |  | 71 |  | 2
|  | 2,756 |  | 2,288 |  |  |  | 1,439 |  | 1,365 |  |
Cash flow hedge derivatives |  |  |  |  |  |  |  |  |  |  |  |
Derivatives on commodities |  |  |  |  |  |  |  |  |  |  |  |
- Over the counter |  | 1 |  | 596 |  | 2 |  | 311 |  | 196 |  | 2
- Future |  | 34 |  | 148 |  | 1 |  |  |  |  |  |
- Options |  |  |  | 2 |  | 2 |  | 26 |  | 15 |  | 1
|  | 35 |  | 746 |  |  |  | 337 |  | 211 |  |
Option embedded in convertible bonds |  | 11 |  | 11 |  | 2 |  | 21 |  | 21 |  | 2
Gross amount |  | 3,239 |  | 3,366 |  |  |  | 3,298 |  | 3,121 |  |
Offsetting |  | (612) |  | (612) |  |  |  | (1,636) |  | (1,636) |  |
Net amount |  | 2,627 |  | 2,754 |  |  |  | 1,662 |  | 1,485 |  |
Of which: |  |  |  |  |  |  |  |  |  |  |  |
- current |  | 2,573 |  | 2,704 |  |  |  | 1,594 |  | 1,445 |  |
- non-current |  | 54 |  | 50 |  |  |  | 68 |  | 40 |  |
Derivative fair values were estimated on the basis of market quotations provided by primary info-provider or, alternatively, appropriate valuation techniques generally adopted in the marketplace. Fair values of non-hedging derivatives consisted of derivatives that did not meet the formal criteria to be designated as hedges under IFRS. Fair values of trading derivatives consisted of derivatives entered for trading purposes and proprietary trading. Fair value of cash flow hedge derivatives related to commodity hedges were entered into by the Gas & Power segment. These derivatives were entered into to hedge variability in future cash flows associated with highly probable future sale transactions of gas or electricity or on already contracted sales due to different indexation mechanisms of supply costs versus selling prices. A similar scheme applies to exchange rate hedging derivatives. The effects of the measurement at fair value of cash flow hedge derivatives are given in note 25 – Shareholders’ equity and in note 29 – Costs. Information on hedged risks and hedging policies is disclosed in note 27 – Guarantees, commitments and risks - Risk factors. Options embedded in convertible bonds relate to equity-linked cash settled. More information is disclosed in note 18 – Finance debts. The offsetting of financial derivatives related to the Gas & Power segment. During 2019, there were no transfers between the different hierarchy levels of fair value. Hedging derivative instruments are disclosed below:
|  | December 31, 2019 |  | December 31, 2018
|  | Nominal |  |  |  | Change in fair |  | Nominal |  |  |  | Change in fair
|  | amount of the |  | Change in fair |  | value |  | amount of the |  | Change in fair |  | value
|  | hedging |  | value |  | (ineffective |  | hedging |  | value |  | (ineffective
(€ million) |  | instrument |  | (effective hedge) |  | hedge) |  | instrument |  | (effective hedge) |  | hedge)
Cash flow hedge derivatives |  |  |  |  |  |  |  |  |  |  |  |
Derivatives on commodity |  |  |  |  |  |  |  |  |  |  |  |
- Over the counter |  | 2,179 |  | (1,357) |  | (2) |  | 3,528 |  | 404 |  | 2
- Future |  | 1,245 |  | (61) |  |  |  | 71 |  | (6) |  | (2)
|  | 3,424 |  | (1,418) |  | (2) |  | 3,599 |  | 398 |  |
In 2019, the exposure to the exchange rate risk deriving from securities denominated in U.S. dollars included in the strategic liquidity portfolio amounting to €1,902 million was hedged by using, in a fair value hedge relationship, negative exchange differences for €21 million resulting on a portion of bonds denominated in U.S. dollars amounting to €1,844 million. The breakdown of the underlying asset or liability by type of risk hedged under cash flow hedge is provided below:
|  | December 31, 2019 |  | December 31, 2018
|  | Change of the underlying |  |  |  |  |  | Change of the underlying |  |  |  |
|  | asset used for the |  |  |  |  |  | asset used for the |  |  |  |
|  | calculation of |  |  |  | Reclassification |  | calculation of |  |  |  | Reclassification
(€ million) |  | hedging ineffectiveness |  | CFH reserve |  | adjustments |  | hedging ineffectiveness |  | CFH reserve |  | adjustments
Cash flow hedge derivatives |  |  |  |  |  |  |  |  |  |  |  |
Commodity price risk |  |  |  |  |  |  |  |  |  |  |  |
- Planned sales |  | 1,444 |  | (656) |  | (739) |  | (389) |  | (13) |  | 642
|  | 1,444 |  | (656) |  | (739) |  | (389) |  | (13) |  | 642
Eni’s results of operations are affected by fluctuations in the price of commodities. To that end, Eni enters into commodities derivatives traded on organized markets (like MTF and OTF) and commodities derivatives traded over the counter (swaps, forward, contracts for differences and options on commodities) with underlying commodities being crude oil, gas, refined products, electricity or emission certificates that are not settled through physical delivery of the underlying commodity but are designated as hedging instruments in a cash flow hedge relation. The existence of a relationship between the hedged item and the hedging derivative is checked at inception to verify eligibility for hedge accounting by observing the offset in changes of the fair values at both the underlying commodity and the derivative. The hedging relationship is also stress-tested against the level of credit risk of the counterparty in the derivative transaction. The hedge ratio is defined consistently with the Company's risk management objectives, under a defined risk management strategy. The hedging relationship is discontinued when it ceases to meet the qualifying criteria and the risk management objectives on the basis of which hedge accounting has initially been applied. More information is reported in note 27 — Guarantees, Commitments and Risks — Financial risks. Effects recognized in other operating profit (loss) Other operating profit (loss) related to derivative financial instruments on commodity was as follows:
(€ million) |  | 2019 |  | 2018 |  | 2017
Net income (loss) on cash flow hedging derivatives |  | (2) |  |  |  | 12
Net income (loss) on other derivatives |  | 289 |  | 129 |  | (44)
|  | 287 |  | 129 |  | (32)
Net income (loss) on cash flow hedging derivatives related to the ineffective portion of the hedging relationship on commodity derivatives was recognized through profit and loss in the Gas & Power segment. Net income (loss) on other derivatives included the fair value measurement and settlement of commodity derivatives which could not be elected for hedge accounting under IFRS because they related to net exposure to commodity risk and derivatives for trading purposes and proprietary trading. Effects recognized in finance income (loss) Finance income (loss) on derivative financial instruments consisted of the following:
(€ million) |  | 2019 |  | 2018 |  | 2017
Derivatives on exchange rate |  | 9 |  | (329) |  | 809
Derivatives on interest rate |  | (23) |  | 22 |  | 28
|  | (14) |  | (307) |  | 837
Net financial income from derivative financial instruments was recognized in connection with the fair value valuation of certain derivatives which lacked the formal criteria to be treated in accordance with hedge accounting under IFRS, as they were entered into for amounts equal to the net exposure to exchange rate risk and interest rate risk, and as such, they cannot be referred to specific trade or financing transactions. Exchange rate derivatives were entered into in order to manage exposures to foreign currency exchange rates arising from the pricing formulas of commodities in the Gas & Power segment. Finance income (expense) with related parties is disclosed in note 36 - Transactions with related parties.

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- Definition Disclosure of derivative financial instruments. + References No definition available. + Details
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- Definition The disclosure of derivative financial instruments. [Refer: Derivatives [member]] + References Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef -Name IAS -Number 1 -IssueDate 2019-01-01 -Paragraph 10 -Subparagraph e -URI http://eifrs.ifrs.org/eifrs/xifrs-link?type=IAS&num=1&code=ifrs-tx-2019-en-r&anchor=para_10_e&doctype=Standard -URIDate 2019-03-27 + Details
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