121 Cloudberry Annual report 2022 Financial statements The fair value hierarchy for assets and liabilities measured at fair value are presented in the following table: Level 1 Level 2 Level 3 31.12.2022 31.12.2021 31.12.2022 31.12.2021 31.12.2022 31.12.2021 Derivative assets – Interest rate derivatives - - 36 7 - - – Commodity derivatives (power) - - 2 - - - Derivative liabilities – Interest rate derivatives - - (1) (3) - - – Interest rate derivatives - - - - - - – Commodity derivatives (power) - - (24) - - - Fair value - - 14 4 - - * Note 1: fair value of the interest rate derivative in Forte is included in the carrying amount of the equity accounted company, the fair value per 31 December 2022 is NOK 57m and is measured at level 2 in the hierarchy). The contracts at level 2 as of 31 December are the Groups interest rate derivatives, PPA agreements and EUR forward swap. The fair value of the derivatives is determined by discounting expected future cash flows to present value through the use of observed market rates. The Group’s interest rate derivatives and a PPA agreement are held for hedging purposes, reference to note 10 Hedge accounting. Note 10 Hedge accounting Accounting principle Derivatives are measured at fair value. The resulting gain or loss on re-measurement is recognised immediately in the statement of profit or loss, unless the derivative is designated into an effective hedge relationship as a hedging instrument. The Group designates currently only derivatives as cash flow hedges (where the derivative is used to manage the variability in cash flows relating to recognised liabilities or forecast transactions). Please refer to Note 9 under Fair value measurement for information on how fair value is determined. Cash flow hedges If a financial instrument is designated as a cash flow hedging instrument the effective portion of the changes in the fair value of the derivative are recognised in other comprehensive income and accumulated in a separate reserve in equity (cash flow hedge reserve). Subsequently the cumulative amount is transferred to the statement of profit or loss when the underlying transactions are recognised. The ineffective portion of changes in the fair value of the hedging instruments are recognised immediately. Hedge accounting is discontinued when the hedging instrument expires, is terminated, is exercised, or no longer qualifies for hedge accounting. The cumulative gain or loss recognised in other comprehensive income remains in the hedge reserve until the forecast transaction occurs, or it is immediately recognised in the statement of profit or loss if the transaction is no longer expected to occur. The Group applies hedge accounting to the borrowings and the associated interest rate swaps, for movements in benchmark interest rates (i.e. excluding any margin component). The secured debt and the interest rate swap agreement has critical terms that match and are expected to be highly effective. Critical terms
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