Danone // 2020 Universal Registration Document

DANONE UNIVERSAL REGISTRATION DOCUMENT 2020 106 4.1 Consolidated financial statements and notes to the consolidated financial statements Note 13. Organization of financial risks and derivatives management Sensitivity to a change in the euro against currencies exposed to exchange rate fluctuations As of December 31 (in € millions) 2019 2020 Equity (c) Gain (loss) Equity (c) Gain (loss) 10% increase in EUR (a) GBP (b) 61 − 52 − CNY (b) 35 − 26 − AUD (b) 26 − 18 − MXN (b) (12) – 3 - RUB (b) 9 − 9 − USD (b) 12 − 11 − BRL (b) 3 − 2 − HKD (b) 36 − 28 − 10% decrease in EUR (a) GBP (b) (65) − (54) − CNY (b) (43) − (32) − AUD (b) (30) − (22) − MXN (b) (3) − (3) − RUB (b) (11) − (10) − USD (b) (14) − (11) − BRL (b) (3) − (3) − HKD (b) (41) − (29) − (a) Increase/decrease in EUR applied to transactions that are outstanding and at constant interest rate volatility. (b) Transactions denominated with the EUR or other currencies as counterpart. In the case of transactions denominated in currencies other than the EUR, the increase or decrease in the EUR is applied to the base currency and the secondary currency. (c) Under IFRS 9, the intrinsic value and the time value are recognized in Other comprehensive income. These instruments and the hedged items typically have maturities of less than one year. Consequently the cash flows related to these instruments will, for themost part, be recognized in the consolidated income statement in 2021. Gains and losses related to fair value changes recognized in profit or loss Gains and losses recognized in profit or loss involve the following items: • the ineffective portion, during the year, of the changes in fair value of instruments qualified as cash flow hedges: in 2020, as in 2019, the amounts are not material; • the effective portion deferred in equity the previous year of instruments qualified as cash flow hedges and recycled to income during the year: in 2020 as in 2019, the amount recycled corresponded to the portion of hedges recorded in equity as of December 31 of the previous year, with these hedges having for the most part a maturity of less than one year. Management of currency risk related to financing activities and translation risk on net assets Sensitivity of equity and net income to changes in fair value A change in the fair value of these derivative financial instruments induced by a change in foreign exchange rates at the reporting date would not have a significant impact on the Group’s equity or net income. Changes in the foreign exchange rates of the financial instruments are offset by changes in the foreign exchange rates on loans and borrowings in hedged currencies or on net foreign investments. Net debt management Sensitivity of equity and net income to changes in fair value A change in the fair value of interest rate derivatives induced by a change in the yield curve recognized at the reporting date would have the following impact on the Group’s equity and net income: • in equity for the effective portion of the instruments eligible to be used as hedges of future cash flows; • in profit or loss for the ineffective portion of the instruments eligible to be used as hedges of future cash flows, and for the change in fair value of the instruments not qualifying as hedges. In 2020 as in 2019, a rate change applied to the entire yield curve would not have a material impact on consolidated equity or net income. Gains and losses related to fair value changes recognized in profit or loss Gains and losses recognized through profit or loss are related to: • the ineffective portion, during the year, of the changes in fair value of instruments qualified as cash flow hedges; • the effective portion deferred in equity the previous year of instruments qualified as future cash flow hedges and recycled to income during the year. In 2020 as in 2019, the corresponding amounts are not material.