| Risks and Financial Instruments | 33 Risks and f inancial i nstruments a. Risk m anagement and f inancial i nstruments – g overnance The main risks to which the Company and its subsidiaries are exposed reflect strategic/operational and economic/financial aspects. Operational/strategic risks (including, but not limited to, demand behavior, competition, technological innovation, and material changes in the industry structure) are addressed by the Company’s management model. Economic/financial risks primarily reflect default of customers, behavior of macroeconomic variables, such as exchange and interest rates, as well as the characteristics of the financial instruments used by the Company and its subsidiaries and their counterparties. These risks are managed through control policies, specific strategies, and the establishment of limits. The Company has a policy for the management of resources, financial instruments , and risks approved by its C ompany’s Board of Directors (“Policy”). In accordance with the Policy, the main objectives of financial management are to preserve the value and liquidity of financial assets and ensure financial resources for the development of the business, including expansions. The main financial risks considered in the Policy are market risks ( currencies, interest rates and commodities) , liquidity and credit. The g overnance of the management of financial risks follows the segregation of duties below: The execution of the Policy has done by corporate financial board, through its treasury department, with the assistance of the accounting, legal and tax departments. The monitoring of compliance of the Policy and possible issues is the responsibility of the Risk and Investment Committee, (“Committee”), which is composed of CFO, Treasury Director, Controller and other directors designated by the CFO. The Committee holds quarte r ly meetings and monitors the risk standards established by the Policy through a monitoring map on a monthly basis. Approval of the Policy and the periodic assessment of Company exposure to financial risks are subject to the approval of the C ompany’s Board of Directors of Ultrapar . The Audit and Risks Committee advises the C ompany’s Board of Directors in the assessment of controls, management and exposure of financial risks and revision of Policy. The Risk, Compliance and Audit board monitors of standards compliance of the Policy and reports to the Audit and Risks Committee the risks exposure and compliance or noncompliance of the Policy.
b. Currency r isk Most transactions of the Company , through its subsidiaries , are located in Brazil and, therefore, the reference currency for risk management is the Brazilian Real. Currency risk management is guided by neutrality of currency exposures and considers the risks of the Company and its subsidiaries and their exposure to changes in exchange rates. The Company considers as its main currency exposures the changes in assets and liabilities in foreign currency. The Company and its subsidiaries use exchange rate hedging instruments (especially between the Brazilian Real and the U.S. dollar) available in the financial market to protect their assets, liabilities, receipts , and disbursements in foreign currency and net investment s in foreign operation s . Hedge is used in order to reduce the effects of changes in exchange rates on the Company´s income and cash flows in Brazilian Reais within the exposure limits under its Policy. Such foreign exchange hedging instruments have amounts, periods, and rates substantially equivalent to those of assets, liabilities, receipts , and disbursements in foreign currenc ies to which they are related. Assets and liabilities in foreign currencies are stated below, translated into Brazilian Reais: b. 1 Assets and l iabilities in f oreign c urrencies
12/31/2020
12/31/2019
Assets in foreign currency
Cash, cash equivalents and financial investments in foreign currency (except hedging instruments)
1,413,276
455,620
Foreign trade receivables, net of allowance for doubtful accounts and advances to foreign customers
307,829
213,544
Other assets
1,767,626
1,445,022
3,488,731
2,114,186
Liabilities in foreign currency
Financing in foreign currency, gross of transaction costs and discount
( 9,246,707 )
( 6,895,052 )
Payables arising from imports, net of advances to foreign suppliers
( 633,013 )
( 344,523 )
( 9,879,720 )
( 7,239,575 )
Foreign currency hedging instruments
4,837,554
3,636,418
Net liability position – total
( 1,553,435 )
( 1,488,971 )
Net asset (liability) position – income statement effect
186,306
452,178
Net liability position – equity effect
( 1,739,741 )
( 1,941,149 )
b. 2 Sensitivity a nalysis of a ssets and l iabilities in f oreign c urrency Scenarios I, II and III were based on 10 25 50 on the net position of the Company exposed to the currency risk, simulating the effects of appreciation and devaluation of the Real in the income statement and the equity :
The table below shows , in the three the effect s of exchange rate changes o n the net liability position of R$ 1,553,435 in foreign currency as of December 3 1 , 20 20 :
Risk
Scenario I
Scenario II
Scenario III
Base
25
50
( 1
Real devaluation
18,631
46,577
93,153
( 2
( 173,974 )
( 434,935 )
( 869,871 )
( 1 2
Net effect
( 155,343 )
( 388,358 )
( 776,718 )
( 3
Real appreciation
( 18,631 )
( 46,577 )
( 93,153 )
( 4
173,974
434,935
869,871
( 3 4
Net effect
155,343
388,358
776,718 The table below shows, in the three of R$ 1,488,971 in foreign currency as of December 3 1 , 20 19 :
Risk
Scenario I
Scenario II
Scenario III
Base
25
50
( 1
Real devaluation
45,218
113,045
226,089
( 2
( 194,115 )
( 485,287 )
( 970,575 )
( 1 2
Net effect
( 148,897 )
( 372,242 )
( 744,486 )
( 3
Real appreciation
( 45,218 )
( 113,045 )
( 226,089 )
( 4
194,115
485,287
970,575
( 3 4
Net effect
148,897
372,242
744,486 The equity effect refer s to cumulative translation adjustments of changes in the exchange rate on equity of foreign subsidiaries (see Note s 2 s . 1 and 2 5 . g . 2 ) , net investments hedge in foreign entities, cash flow hedge of firm commitment and highly probable transaction (see Note 2 “h. Hedge Accounting ” below) . c. Interest r ate r isk The Company and its subsidiaries adopt policies for borrowing and investing financial resources and for capital cost minimization. The financial investments of the Company and its subsidiaries are primarily held in transactions linked to the DI, as set forth in Note 4 Bra s il , as well as debentures and borrowings in foreign currency, as shown in Note 1 6 . The Company attempts to maintain most of its financial interest assets and liabilities at floating rates.
c. 1
T he financial assets and liabilities exposed to floating interest rates are demonstrated below:
Note
12/31/2020
12/31/2019
DI
Cash equivalents
4
2,241,852
1,780,939
Financial investments
4
3,749,852
2,610,686
Asset position of foreign exchange hedging instruments – DI
33
-
19,323
Loans and debentures
16
( 6,947,362 )
( 6,268,615 )
Liability position of foreign exchange hedging instruments – DI
33
( 2,124,146 )
( 3,318,289 )
Liability position of fixed interest instruments + IPCA – DI
33
( 2,203,705 )
( 821,902 )
Net liability position in DI
( 5,283,509 )
( 5,997,858 )
TJLP
Loans –TJLP
16
( 29,803 )
( 103,945 )
Net liability position in TJLP
( 29,803 )
( 103,945 )
LIBOR
Asset position of foreign exchange hedging instruments – LIBOR
33
260,958
850,307
Loans – LIBOR
16
( 573,484 )
( 1,457,263 )
Net liability position in LIBOR
( 312,526 )
( 606,956 )
SELIC
Loans – SELIC
16
-
( 30,392 )
Net liability position in SELIC
-
( 30,392 )
Total net liability position exposed to floating interest
( 5,625,838 )
( 6,739,151 )
c. 2 Sensitivity a nalysis of f loating i nterest r ate r isk For sensitivity analysis of floating interest rate risk , the Company used the accumulated amount of the reference indexes (DI, TJLP, LIBOR based on 10 25 50 variation s , respectively, applied in the floating interest rate of the base scenario :
The tables below show the incremental expenses and income that would be recognized in finance income, due to the effect of floating interest rate changes in different scenarios.
12/31/2020
Risk
Scenario I
Scenario II
Scenario III
Base
25
50
Exposure of interest rate risk
Interest effect on cash equivalents and financial
Increase in DI
13,175
32,937
65,875
Interest effect on debt in DI
Increase in DI
( 19,674
( 49,184
( 98,368
Interest rate hedging instruments (liabilities in DI) effect
Increase in DI
( 1,137
( 11,934
( 29,929
Incremental expenses
( 7,636
( 28,181
( 62,422
Interest effect on debt in TJLP
Increase in TJLP
( 301
( 752
( 1,503
Incremental expenses
( 301
( 752
( 1,503
Foreign exchange hedging instruments (assets in LIBOR
Increase in LIBOR
528
1,320
2,640
Interest effect on debt in LIBOR
Increase in LIBOR
( 1,410
( 3,525
( 7,050
Incremental expenses
( 882
( 2,205
( 4,410
Interest effect on debt in SELIC
Increase in SELIC
( 41
( 102
( 203
Incremental expenses
( 41
( 102
( 203
12/31/2019
Risk
Scenario I
Scenario II
Scenario III
Base
25
50
Exposure of interest rate risk
Interest effect on cash equivalents and financial
Increase in DI
29,304
73,261
146,522
Foreign exchange hedging instruments (assets in DI)
Increase in DI
55
137
274
Interest effect on debt in DI
Increase in DI
( 44,469
( 111,173
( 222,345
Interest rate hedging instruments (liabilities in DI) effect
Increase in DI
( 39,175
( 85,571
( 162,897
Incremental expenses
( 54,285
( 123,346
( 238,446
Interest effect on debt in TJLP
Increase in TJLP
( 1,213
( 3,033
( 6,065
Incremental expenses
( 1,213
( 3,033
( 6,065
Foreign exchange hedging instruments (assets in LIBOR
Increase in LIBOR
1,722
4,305
8,609
Interest effect on debt in LIBOR
Increase in LIBOR
( 3,551
( 8,876
( 17,753
Incremental expenses
( 1,829
( 4,571
( 9,144
Interest effect on debt in SELIC
Increase in SELIC
( 251
( 628
( 1,257
Incremental expenses
( 251
( 628
( 1,257 d. Credit r isks The financial instruments that would expose the Company and its subsidiaries to credit risks of the counterparty are basically represented by cash and bank deposits, financial investments, hedging instruments (see Note 4 , and trade receivables (see Note 5 . d. 1 Credit risk of financial institutions Such risk results from the inability of financial institutions to comply with their financial obligations to the Company and its subsidiaries due to insolvency. The Company and its subsidiaries regularly conduct a credit review of the institutions with which they hold cash and cash equivalents, financial investments, and hedging instruments through various methodologies that assess liquidity, solvency, leverage, portfolio quality, etc. Cash and cash equivalents, financial investments, and hedging instruments are held only with institutions with a solid credit history, chosen for safety and soundness. The volume of cash and cash equivalents, financial investments , and hedging instruments are subject to maximum limits by each institution and, therefore, require diversification of counterpart ies .
d. 2 Government credit risk The Company's policy allows investments in government securities from countries classified as investment grade AAA or a aa by specialized credit rating agencies (S&P, Moody’s and Fitch) and in Brazilian government bonds. The volume of such financial investments is subject to maximum limits by each country and, therefore, requires diversification of counterparties.
The credit risk of financial institution and government of cash, cash equivalents and financial investments is summarized below:
Fair value
Counterparty credit rating
12/31/2020
12/31/2019
AAA
8,190,428
4,906,077
AA
317,894
331,512
A
163,839
418,020
BBB
-
56,488
Total
8,672,160
5,712,097 d. 3 Customer credit risk The credit policy establishes the analysis of the profile of each new customer , individually , regarding their financial condition. The review carried out by the subsidiaries of the Company includes the evaluation of external ratings, when available, f inancial statements , credit bureau information, industry information and, when necessary, bank references. Credit limits are established for each customer and reviewed periodically, in a shorter period the greater the risk, depending on the approval of the responsible area in cases of sales that exceed these limits. In monitoring credit risk, customers are grouped according to their credit characteristics and depending on the business the grouping takes into account, for example, whether they are natural or legal clients, whether they are wholesalers, resellers or final customers, considering also the geographic area. The expected of credit loss es are calculated by the expected loss ap p roach based on the probability of default rates. Loss rates are calculated on the basis of the average probability of a receivable amount to advance through successive stages of default until full write-off . The probability of default calculation takes into account a credit risk score for each exposure , based on data considered to be capable of fores eeing the risk of loss (external classifications, audited f inancial statements , cash flow projections, customer information available in the press, for example), with addition of the credit assessment based on experience. Such credit risks are managed by each business unit through specific criteria for acceptance of customers and their credit rating and are additionally mitigated by the diversification of sales. No 10
The subsidiaries of the Company request guarantees related to trade receivables and other receivables in specific situations to customers, but these guarantees don’t influence in the calculation of risk of loss. The subsidiaries of the Company maintained the following allowance for expected losses on doubtful accounts balances on trade receivables:
12/31/2020
12/31/2019
Ipiranga
447,389
447,235
Ultragaz
113,621
94,985
Oxiteno
16,430
13,252
Extrafarma
73
3,419
Ultracargo
1,594
2,001
Total
579,107
560,892
The table below presents information about credit risk exposure:
12/31/2020
12/31/2019
Weighted
Accounting balance
Provision
Weighted
Accounting balance
Provision for losses
Current
1.2
3,751,067
44,091
1.3
3,843,803
50,198
less than 30
2.2
134,836
2,939
2.1
185,612
3,975
31 60
8.2
43,207
3,563
7.1
37,801
2,688
61 90
10.9
42,589
4,630
20.4
24,861
5,062
91 180
36.8
76,158
28,062
41.8
91,633
38,337
more than 180
55.7
890,756
495,822
53.1
867,618
460,632
4,938,613
579,107
5,051,328
560,892
The information about expected losses on doubtful accounts balances by geographic area are as follows:
12/31/2020
12/31/2019
Brazil
568,461
550,928
Mexico
-
1,123
Uruguay
76
267
Other Latin American countries
271
561
United States of America and Canada
1,146
889
Europe
9,120
7,075
Others
33
49
579,107
560,892 For further information about the allowance for expected losses on doubtful accounts, see Notes 5 5
d. 4 The Company and its subsidiaries are exposed to commodity price risk, due the fluctuation in prices for diesel and gasoline , among others . To mitigate th e risk of the fluctuation of diesel and gasoline prices , the Company and its subsidiaries permanently monitor the market, seeking to protect ion of price movements through hedge transactions for cargo purchased in the international market , used contracts of derivative for heating oil (diesel) and RBOB (gasoline) traded on the stock exchange . These products are traded on the stock exchange and are subject ed to the impacts of macroeconomic and geopolitical factors outside the control of the Company and its subsidiaries.
The table below shows the positions of derivative financial instruments to hedge commodity price risk at December 3 1 , 2020
Derivative
Contract
Notional amount (m 3 )
Notional amount (USD thousands)
Fair value
Position
Product
Maturity
12/31/2020
12/31/2019
12/31/2020
12/31/2019
12/31/2020
12/31/2019
R$ thousands R$ thousands
Term
Sold
Heating Oil
jan-21
108,429
76,950
42,399
40,529
( 563
( 2,378
Term
Sold
RBOB
-
-
64,867
-
29,243
-
1,107
( 563
( 1,271
e. Liquidity r isk The Company and its subsidiaries’ main sources of liquidity derive from ( i ) cash, cash equivalents , and financial investments, (ii) cash generated from operations and (iii) financing. The Company and its subsidiaries believe that these sources are sufficient to satisfy their current funding requirements, which include, but are not limited to, working capital, capital expenditures, amortization of debt , and payment of dividends. The Company and its subsidiaries periodically examine opportunities for acquisitions and investments. They consider different types of investments, either directly , through joint ventures, or through associated companies, and finance such investments using cash generated from operations, debt financing, through capital increases , or through a combination of these methods. On December 31, 2020 t he Company and its subsidiaries believe to have enough working capital and sources of financing to satisfy their current needs. The gross indebtedness due over the next twelve ed R$ 3,620,550 including estimated interests on loans (for quantitative information, see Note 1 6 .a ) . Furthermore, the investment for 20 2 1 total ed R$ 1,890,763 . On December 3 1 , 20 20 , the Company and its subsidiaries had R$ 7,694,752 in c ash, cash equivalents , and short-term financial investments (for quantitative information, see Note 4
The table below presents a summary of financial liabilities as of December 3 1 , 20 20 by the Company and its subsidiaries, listed by maturity. The amounts disclosed in this table are the contractual undiscounted cash outflows, and, therefore, these amounts may be different from the amounts disclosed on the balance sheet.
Financial liabilities
Total
Less than 1
Between 1 3
Between 3 5
More 5
Loans including future contractual interest ( 1 2
20,131,159
3,620,550
6,716,208
1,695,276
8,099,125
Currency and interest rate hedging instruments ( 3
472,647
133,092
88,918
106,885
143,752
Trade payables
4,040,652
4,040,652
-
-
-
Leases payable
2,734,384
396,010
668,089
541,004
1,129,281
(1)
To calculate the estimated interest on loans some macroeconomic assumptions were used, including averag ing for the period the following : ( i ) DI of % 2.29 % to 2021 , 3.74 % to 2022 and 4.84 % to 2023 ; (ii) exchange rate of the R eal against the U.S. dollar of R$ 4.86 in 2021 4.33 in 2022 4.17 in 2023 4.20 in 2024 4.22 in 2025 , R$ 4.24 in 2026 , R$ 4.26 in 2027 4.28 in 2028 4.30 in 2029 ; (iii) TJLP of 4.39 % ; (iv) IGP-M of 4.79 % in 2021 4.02 % in 2022 3.25 % as from 20 2 3 ; (v) IPCA of 3.6 % in 202 1 , 3.3 % in 202 2 , 3.0 % as from 202 3 (source: B 3 , B ulletin Focus and financial institutions) .
(2)
Includes estimated interest payments on short-term and long-term loans until the payment date .
(3)
The currency and interest rate hedging instruments were estimated based on projected U.S dollar futures contracts and the futures curve s of DI x Pre and Pre x IPCA contract s quoted on B 3 on December 3 1 , 2020 and on the futures curve of LIBOR ICE – Intercontinental Exchange ) and commodities heating oil contracts and RBOB quoted on New York Mercantile Exchange (“NYMEX”) on December 3 1 , 2020 . In the table above, only the hedging instruments with negative result s at the time of settlement were considered.
f. Capital m anagement The Company manages its capital structure based on indicators and benchmarks. The key performance indicators related to the capital structure management are the weighted average cost of capital, net debt / EBITDA, interest coverage , and indebtedness / equity ratios. Net debt is composed of cash, cash equivalents , and financial investments (see Note 4 1 6 ). The Company can change its capital structure depending on the economic and financial conditions, in order to optimize its financial leverage and capital management. The Company seeks to improve its return on invested capital by implementing efficient working capital management and a selective investment program. g. Selection and u se of f inancial i nstruments In selecting financial investments and hedging instruments, an analysis is conducted to estimate rates of return, risks involved, liquidity, calculation methodology for the carrying value and fair value, and a review is conducted of any documentation applicable to the financial instruments. The financial instruments used to manage the financial resources of the Company and its subsidiaries are intended to preserve value and liquidity. The Policy contemplates the use of derivative financial instruments only to cover identified risks and in amounts consistent with the risk (limited to 100 S waps, options, and futures contracts to manage identified risks. Leveraged derivative instruments are not permitted. Because the use of derivative financial instruments is limited to the coverage of identified risks, the Company and its subsidiaries use the term “hedging instruments” to refer to derivative financial instruments.
The table below summarizes the position of hedging instruments entered by the Company and its subsidiaries:
Designated as hedge accounting
Product
Hedged object
Rates agreement
Maturity
Note
Notional amount 1
Fair value
Assets
Liabilities
12/31/2020
12/31/2019
12/31/2020
12/31/2019
Foreign exchange swap
Debt
USD + 4.58
103.9
nov-23
33 .1
USD 185,000
USD 245,000
298,889
69,298
Foreign exchange swap
Debt
USD + LIBOR 3 1.14
105.0
jun-22
33 .1
USD 50,000
USD 150,000
94,782
74,970
Interest rate swap
Debt
4.57
95.8
dec-25
33 .1
R$ 806,054
R$ 806,054
203,837
144,123
Interest rate swap
Debt
6.47
99.9
nov-24
33 .1
R$ 90,000
R$ 90,000
3,498
584
Term
Firm commitments
BRL
Heating Oil / RBOB
jan-21
33 .1
USD 42,399
-
( 563
-
NDF
Firm commitments
BRL
USD
jan-21
33 .1
USD 23,124
-
( 733
-
Zero
Operating margin
Put USD 3.86
Call USD 4.33
-
33 .2
-
USD 60,000
-
( 121
599,710
288,854
Not designated as hedge accounting
Product
Hedged object
Rates agreement
Maturity
Notional amount 1
Fair value
Assets
Liabilities
12/31/2020
12/31/2019
12/31/2020
12/31/2019
Foreign exchange swap
Debt
USD + 0.18
55.5
jun-29
USD 320,000
USD 853,000
519,260
353,451
NDF
Firm commitments
BRL
USD
may-21
USD 378,550
USD 71,600
( 112,152
( 1,080
Interest rate swap
Debt
1.9
100
jan-21
R$ 1,300,000
-
( 5
-
Foreign exchange swap
Debt
LIBOR 3 2.0
105.9
-
-
USD 60,000
-
48,535
Foreign exchange swap
Firm commitments
USD + 0.00
33.5
-
-
USD 17,896
-
( 2,203
Foreign exchange swap
Operating margin
34.8
USD + 0.00
-
-
USD 4,680
-
612
Term
Firm commitments
BRL
Heating Oil / RBOB
-
-
USD 56,000
-
( 1,271
407,103
398,044 ( 1 Currency as indicated. All transactions mentioned above were properly registered with CETIP S.A.
h. Hedge a ccounting The Company and its subsidiaries use derivative and non-derivative financial instruments for hedging purposes and test, throughout the duration of the hedge, the ir effectiveness, as well as the changes in their fair value. h. 1 The Company and its subsidiaries designate as fair value hedges certain financial instruments used to offset the variations in interest and exchange rates, which are based on the market value of financing contracted in Brazilian Reais and U.S. dollars .
T he foreign exchange hedging instruments designated as fair value hedge are:
In thousands, except the DI %
2020
2019
Notional amount – US$
235,000
395,000
Result of hedging instruments – gain/(loss) – R$
574,378
79,466
Fair value adjustment of debt – R$
( 13,131
( 36,764
Finance expense in the statements of profit or loss – R$
( 597,735
( 130,320
Average effective cost – DI %
104.1
104.4 For more information, see Note 16 1 T he interest rate hedging instruments designated as fair value hedge are:
In thousands, except the DI %
2020
2019
Notional amount – US$
806,054
806,054
Result of hedging instruments – gain/(loss) – R$
67,446
72,957
Fair value adjustment of debt – R$
( 18,446
( 76,992
Finance expense in the statements of profit or loss – R$
( 99,555
( 68,054
Average effective cost – DI %
95.8
95.8 For more information, see Note s 16 2 16 4 16 6
In thousands, except the DI %
2020
2019
Notional amount – US$
90,000
90,000
Result of hedging instruments – gain/(loss) – R$
6,528
584
Fair value adjustment of debt – R$
3,250
( 208
Finance expense in the statements of profit or loss – R$
( 8,968
( 377
Average effective cost – DI %
99.9
99.9 For more information, see Note 16 7
The foreign exchange hedging instruments and commodities designated as fair value hedge are as described below. The purpose of this relationship is to transform the cost of the imported product from fixed to variable until the moment of blend the fuel, as occurs with the price practiced in its sales. The subsidiary Ipiranga realizes these operations with over-the-counter derivatives that are designated in a hedge accounting relationship, as a fair value hedge in an amount equivalent to the inventories of imported product.
In thousands, except the DI %
2020
2019
Notional amount – US$
65,523
-
Result of hedging instruments – gain/(loss) – R$
( 87,448
-
Fair value adjustment of inventories – R$
18,468
- h. 2 The Company and its subsidiaries designate, as cash flow hedge of firm commitment and highly probable transactions, derivative financial instruments to hedge firm commitments and non-derivative financial instruments to hedge highly probable future transactions, to hedge against fluctuations arising from changes in exchange rate. On December 3 1 , 20 20 , the notional amount of foreign exchange hedging instruments for highly probable future transactions designated as cash flow hedge , related to notes in the foreign market totaled US$ 468,215 (US$ 550,000 on December 31, 201 9 ) . On December 3 1 , 20 20 , t he unrealized loss of “ Other comprehensive income ” is R$ 315,403 (loss of R$ 293,277 on December 31, 201 9 ) , net of deferred IRPJ and CSLL . On December 3 1 , 20 20 , the notional amount of foreign exchange hedging instruments for highly probable future transactions designated as cash flow hedge, related to future sales revenues of Oxiteno ( zero have not been renewed and did not have balance (US$ 60,000 on December 31, 20 19 ) or loss recognized in “Other comprehensive income” ( loss of R$ 74 on December 31, 201 9 ) . h. 3 The Company and its subsidiaries designate, as net investment hedge in foreign entities, notes in the foreign market , for hedging net investment in foreign entities, to offset changes in exchange rates. On December 3 1 , 20 20 , the balance of foreign exchange hedging instruments designated as net investments hedge in foreign entities, related to part of the investments made in entities which functional currency is other than the Brazilian Real, totaled US$ 95,000 (US$ 95,000 on December 31, 201 9 ) . On December 3 1 , 20 20 , t he unrealized loss of “Other comprehensive income” is R$ 73,108 (l oss of R$ 55,682 on December 31, 201 9 ) , net of deferred income and social contribution taxes. The effects of exchange rate changes on investments and hedg ing instruments were offset in equity.
i . Gains (losses) on h edging i nstruments
The following tables summarize the value of gains (losses) recognized, which affected the equity of the Company and its subsidiaries:
2020
Profit or loss
Equity
a – Exchange rate derivates receivable in U.S. dollars (i) and (ii) and commodities
497,210
-
b – Exchange rate derivates payable in U.S. dollars (ii)
( 330,999
80
c – Interest rate swaps in R$ (iii)
58,131
-
d – Non-derivative financial instruments (iv)
( 919,219
( 737,471
Total
( 694,877
( 737,391
2019
Profit or loss
Equity
a – Exchange rate derivates receivable in U.S. dollars (i) and (ii) and commodities
230,000
-
b – Exchange rate derivates payable in U.S. dollars (ii)
( 1,667
( 80
c – Interest rate swaps in R$ (iii)
( 4,035
-
d – Non-derivative financial instruments (iv)
( 262,098
( 348,959
Total
( 37,800
( 349,039
2018
R$ million
Profit or loss
Equity
a – Exchange rate swaps receivable in U.S. dollars (i) (ii)
181,544
-
b – Exchange rate swaps payable in U.S. dollars (ii)
( 3.903
0,176
c – Interest rate swaps in R$ (iii)
12,474
-
d – Non-derivative financial instruments (iv)
( 133,951
( 284,624
Total
56,163
( 289,448
(i) D oes S waps . S . / firm commitments ) .
(ii) Considers the designation effect of foreign exchange hedging .
(iii) C onsiders ; and
(iv) Considers the results the foreign market 1 6 .b).
j. Fair v alue of f inancial i nstruments
The fair values and the carrying values of the financial instruments, including currency and interest rate hedging instruments, are stated below:
12/31/2020
12/31/2019
Category
Note
Carrying
Fair
Carrying
Fair
Financial assets:
Cash and cash equivalents
Cash and bank
Measured at amortized cost
4
405,081
405,081
284,992
284,992
Financial investments in local currency
Measured at fair value through other comprehensive income
4
2,241,852
2,241,852
1,780,939
1,780,939
Financial investments in foreign currency
Measured at fair value through profit or loss
4
14,561
14,561
49,448
49,448
Financial investments:
Fixed-income securities and funds in local currency
Measured at fair value through profit or loss
4
3,643,286
3,643,286
1,937,967
1,937,967
Fixed-income securities and funds in local currency
Measured at fair value through other comprehensive income
4
31,315
31,315
595,816
595,816
Fixed-income securities (guarantee of loans)
Measured at amortized cost
4
75,251
75,251
76,904
76,904
Fixed-income securities and funds in foreign currency
Measured at fair value through other comprehensive income
4
1,278,940
1,278,940
303,417
303,417
Currency and interest rate hedging and commodities instruments
Measured at fair value through profit or loss
4
981,874
981,874
682,615
682,615
Trade Receivables
Measured at amortized cost
5
3,391,122
3,369,766
3,689,500
3,663,247
Reseller Financing
Measured at amortized cost
5
968,384
965,645
800,936
839,090
Total
13,031,666
13,007,571
10,202,534
10,214,435
Financial liabilities:
Financing
Measured at fair value through profit or loss
16
1,308,928
1,308,928
1,666,092
1,666,092
Financing
Measured at amortized cost
16
9,406,013
10,186,947
6,008,414
7,268,742
Debentures
Measured at amortized cost
16
5,450,751
5,363,621
5,657,339
5,603,669
Debentures
Measured at fair value through profit or loss
16
1,093,365
1,093,365
1,030,892
1,030,891
Leases payable
Measured at amortized cost
13
1,833,288
1,833,288
1,588,673
1,588,673
Commodities, currency and interest rate hedging instruments
Measured at fair value through profit or loss
16
117,159
117,159
29,985
29,985
Trade payables
Measured at amortized cost
17
4,040,652
4,008,457
2,700,071
2,678,808
Subscription warrants – indemnification
Measured at fair value through profit or loss
24
86,439
86,439
130,657
130,657
Total
23,336,595
23,998,204
18,812,123
19,997,517
The fair value of financial instruments, including currency and interest hedging instruments, was determined as follows:
The fair value of cash and bank deposit balances are identical to their carrying values.
Financial investments in investment funds are valued at the value of the fund unit as of the date of the financial statements , which corresponds to their fair value.
Financial investments in CDBs (Bank Certificates of Deposit) and similar investments offer daily liquidity through repurchase at the “yield curve” and the Company calculates their fair value through methodologies commonly used for mark to the market.
The fair value of trade receivables and trade payables are approximate to their carrying values and the Company calculates its fair value through methodologies commonly used in the market .
The subscription warrants – indemnification was measured based on the share price of Ultrapar (UGPA 3 statements date and are adjusted to the Company’s dividend yield, since the exercise is only possible starting in 2020 ( s ee Note 24
The fair value calculation of notes in the foreign market is based on the quoted price in an active market (see Note 16 The fair value of other financial investments , financing and leases payable was determined using calculation methodologies commonly used for mark-to-market reporting , which consist of calculating future cash flows associated with each instrument adopted and adjusting them to present value at the market rates as of the date of the f inancial statements . For some cases where there is no active market for the financial instrument, the Company and its subsidiaries can use quotes provided by the transaction counterparties. The interpretation of market information on the choice of calculation methodologies for the fair value requires considerable judgment and estimates to obtain a value deemed appropriate to each situation. Consequently, the esti |
