Cellcom Israel Ltd. | CIK:0001385145 | 3

  • Filed: 3/26/2018
  • Entity registrant name: Cellcom Israel Ltd. (CIK: 0001385145)
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    • ifrs-full:DisclosureOfFinancialInstrumentsExplanatory

    Note 21 - Financial Instruments

    Credit risk

    Exposure to credit risk

    The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

       
    December 31,
    		    
    December 31,
    		  
       
    2016
    		    
    2017
    		  
       
    NIS millions
    		    
    NIS millions
    		  
                 
    Trade receivables including long-term amounts
    		    
    1,786
    		      
    1,692
    		  
    Loans and other receivables including long-term amounts
    		    
    5
    		      
    146
    		  
    Investment in debt securities
    		    
    282
    		      
    325
    		  
    Cash and cash equivalents in banks
    		    
    1,240
    		      
    527
    		  
    Derivative financial instrument
    		    
    2
    		      
    3
    		  
         
    3,315
    		      
    2,693
    		  
     
    The maximum exposure to credit risk of financial assets at the reporting date by type of counterparty is:

       
    December 31,
    		    
    December 31,
    		  
       
    2016
    		    
    2017
    		  
       
    NIS millions
    		    
    NIS millions
    		  
                 
    Receivables from subscribers
    		    
    1,590
    		      
    1,511
    		  
    Receivables from distributors and other operators
    		    
    196
    		      
    158
    		  
    Investment in government of Israel debt securities
    		    
    131
    		      
    90
    		  
    Investment in institutional debt securities
    		    
    151
    		      
    235
    		  
    Cash and cash equivalents in banks
    		    
    1,240
    		      
    527
    		  
    Other
    		    
    7
    		      
    172
    		  
         
    3,315
    		      
    2,693
    		  

    Impairment losses

    The aging of financial assets at the reporting date was as follows:

       
    Gross
    		    
    Impairment
    		    
    Gross
    		    
    Impairment
    		  
       
    2016
    		    
    2017
    		  
       
    NIS millions
    		    
    NIS millions
    		    
    NIS millions
    		    
    NIS millions
    		  
                             
    Not past due
    		    
    3,200
    		      
    22
    		      
    2,580
    		      
    12
    		  
    Past due less than one year
    		    
    154
    		      
    62
    		      
    143
    		      
    53
    		  
    Past due more than one year
    		    
    146
    		      
    101
    		      
    157
    		      
    122
    		  
         
    3,500
    		      
    185
    		      
    2,880
    		      
    187
    		  

    The movement in the allowance for impairment in respect of trade receivables during the year was as follows:

       
    2016
    		    
    2017
    		  
       
    NIS millions
    		    
    NIS millions
    		  
                 
    Balance at January 1
    		    
    202
    		      
    185
    		  
    Impairment loss recognized
    		    
    (50
    )
    		    
    (44
    )
    Doubtful debt expenses
    		    
    33
    		      
    46
    		  
    Balance at December 31
    		    
    185
    		      
    187
    		  

    The allowance accounts in respect of trade receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible. At that point, the amount considered irrecoverable is written off against the trade receivable directly.
     

    Liquidity risk
     
    The following are the maturities of contractual financial liabilities and other non-contractual liabilities, including estimated interest payments and excluding the impact of netting agreements:

    December 31, 2017
    		  
    Carrying
    		    
    Contractual
    		                            
    More than
    		  
       
    amount
    		    
    Cash flows
    		    
    1st year
    		    
    2nd year
    		    
    3rd year
    		    
    4-5 years
    		    
    5 years
    		  
       
    NIS millions
    		  
                                               
    Debentures*
    		    
    (2,954
    )
    		    
    (3,435
    )
    		    
    (658
    )
    		    
    (577
    )
    		    
    (473
    )
    		    
    (739
    )
    		    
    (988
    		 ) 
    Long-term loans from financial institutions
    		    
    (540
    )
    		    
    (605
    )
    		    
    (102
    )
    		    
    (147
    )
    		    
    (141
    )
    		    
    (215
    )
    		    
    -
    		  
    Trade and other  payables
    		    
    (784
    )
    		    
    (784
    )
    		    
    (784
    )
    		    
    -
    		      
    -
    		      
    -
    		      
    -
    		  
    Forward exchange  contracts on foreign currencies
    		    
    (1
    )
    		    
    (1
    )
    		    
    (1
    )
    		    
    -
    		      
    -
    		      
    -
    		      
    -
    		  
    Forward exchange  contracts on CPI
    		    
    (17
    )
    		    
    (17
    )
    		    
    (17
    )
    		    
    -
    		      
    -
    		      
    -
    		      
    -
    		  
    Other long-term liabilities
    		    
    (12
    )
    		    
    (12
    )
    		    
    -
    		      
    (12
    )
    		    
    -
    		      
    -
    		      
    -
    		  
         
    (4,308
    )
    		    
    (4,854
    )
    		    
    (1,562
    )
    		    
    (736
    )
    		    
    (614
    )
    		    
    (954
    )
    		    
    (988
    )

    *   Including accrued interest on debentures.

    December 31, 2016
    		  
    Carrying
    		    
    Contractual
    		                            
    More than
    		  
       
    amount
    		    
    Cash flows
    		    
    1st year
    		    
    2nd year
    		    
    3rd year
    		    
    4-5 years
    		    
    5 years
    		  
       
    NIS millions
    		  
                                               
    Debentures*
    		    
    (3,815
    )
    		    
    (4,448
    )
    		    
    (1,014
    )
    		    
    (657
    )
    		    
    (577
    )
    		    
    (847
    )
    		    
    (1,353
    		 ) 
    Long-term loans from financial institutions
    		    
    (340
    )
    		    
    (392
    )
    		    
    (16
    )
    		    
    (92
    )
    		    
    (89
    )
    		    
    (166
    )
    		    
    (29
    )
    Trade and other  payables
    		    
    (803
    )
    		    
    (803
    )
    		    
    (803
    )
    		    
    -
    		      
    -
    		      
    -
    		      
    -
    		  
    Forward exchange  contracts on CPI
    		    
    (17
    )
    		    
    (17
    )
    		    
    (2
    )
    		    
    (15
    )
    		    
    -
    		      
    -
    		      
    -
    		  
    Other long-term liabilities
    		    
    (13
    )
    		    
    (13
    )
    		    
    (2
    )
    		    
    -
    		      
    (11
    )
    		    
    -
    		      
    -
    		  
         
    (4,988
    )
    		    
    (5,673
    )
    		    
    (1,837
    )
    		    
    (764
    )
    		    
    (677
    )
    		    
    (1,013
    )
    		    
    (1,382
    )

    *   Including accrued interest on debentures.
     

    Currency risk and CPI

    The Group's exposure to foreign currency risk and CPI is as follows:

       
    December 31, 2016
    		    
    December 31, 2017
    		  
       
    In or linked
    		                
    In or linked
    		              
       
    to foreign
    		                
    to foreign
    		              
       
    currencies
    		    
    Linked
    		          
    currencies
    		    
    Linked
    		        
       
    (mainly USD)
    		    
    to CPI
    		    
    Unlinked
    		    
    (mainly USD)
    		    
    to CPI
    		    
    Unlinked
    		  
       
    NIS millions
    		    
    NIS millions
    		  
    Current assets
    		                              
    Cash and cash equivalents
    		    
    12
    		      
    -
    		      
    1,228
    		      
    29
    		      
    -
    		      
    498
    		  
    Current investments, including derivatives
    		    
    2
    		      
    141
    		      
    141
    		      
    13
    		      
    135
    		      
    181
    		  
    Trade receivables
    		    
    89
    		      
    -
    		      
    1,236
    		      
    61
    		      
    -
    		      
    1,219
    		  
    Other receivables
    		    
    -
    		      
    -
    		      
    4
    		      
    -
    		      
    -
    		      
    8
    		  
                                                     
    Non- current assets
    		                                                
    Long-term receivables
    		    
    -
    		      
    1
    		      
    461
    		      
    -
    		      
    54
    		      
    495
    		  
                                                     
    Current liabilities
    		                                                
    Current maturities of debentures
    		    
    -
    		      
    (642
    )
    		    
    (221
    )
    		    
    -
    		      
    (322
    )
    		    
    (297
    )
    Trade payables and accrued expenses
    		    
    (182
    )
    		    
    -
    		      
    (493
    )
    		    
    (115
    )
    		    
    -
    		      
    (537
    )
    Other current liabilities, including derivatives
    		    
    -
    		      
    (49
    )
    		    
    (167
    )
    		    
    (1
    )
    		    
    (42
    )
    		    
    (161
    )
                                                     
    Non- current liabilities
    		                                                
    Long-term loans from financial institutions
    		    
    -
    		      
    -
    		      
    (340
    )
    		    
    -
    		      
    -
    		      
    (462
    )
    Debentures
    		    
    -
    		      
    (1,584
    )
    		    
    (1,282
    )
    		    
    -
    		      
    (1,288
    )
    		    
    (1,071
    )
    Other non-current liabilities, including derivatives
    		    
    (3
    )
    		    
    (15
    )
    		    
    (10
    )
    		    
    (1
    )
    		    
    -
    		      
    (11
    )
         
    (82
    )
    		    
    (2,148
    )
    		    
    557
    		      
    (14
    )
    		    
    (1,463
    )
    		    
    (138
    )
     
    The Group's exposure to linkage and foreign currency risk in respect of derivatives is as follows:
     
       
    December 31, 2017
    		  
      Currency/ linkage receivable    
    Currency/ linkage payable
    		    
    Notional Value
    		    
    Fair value
    		  
             
    NIS millions
    		  
    Instruments not used for hedging
    		                        
    Forward exchange contracts on foreign currencies
    		  
    USD
    		    
    NIS
    		      
    105
    		      
    (1
    		 )
    Forward exchange contracts on CPI
    		  
    CPI
    		    
    NIS
    		      
    500
    		      
    (17
    )
    Foreign currency put options
    		  
     
    NIS
    		    
     
    USD
    		      
    (105
    )
    		    
    1
    		  
    Embedded derivative in lease contracts
    		    
    USD
    		      
    NIS
    		      
    16
    		      
    2
    		  
     
       
    December 31, 2016
    		  
      Currency/ linkage receivable    
    Currency/ linkage payable
    		    
    Notional Value
    		    
    Fair value
    		  
             
    NIS millions
    		  
    Instruments not used for hedging
    		                        
    Forward exchange contracts on foreign currencies
    		  
    USD
    		    
    NIS
    		      
    95
    		      
    1
    		  
    Forward exchange contracts on CPI
    		  
    CPI
    		    
    NIS
    		      
    800
    		      
    (17
    )
    Foreign currency put options
    		  
     
    NIS
    		    
     
    USD
    		      
    (95
    )
    		    
    1
    		  
     
    Sensitivity analysis

    A change of the CPI as at December 31, 2017 and 2016 would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2016.

             
    Equity
    		    
    Net income
    		  
       
    Change
    		    
    NIS millions
    		    
    NIS millions
    		  
    December 31, 2017
    		                  
    Increase in the CPI of
    		    
    2.0
    %
    		    
    (9
    )
    		    
    (9
    )
    Increase in the CPI of
    		    
    1.0
    %
    		    
    (2
    )
    		    
    (2
    )
    Decrease in the CPI of
    		    
    (1.0
    )%
    		    
    -
    		      
    -
    		  
    Decrease in the CPI of
    		    
    (2.0
    )%
    		    
    -
    		      
    -
    		  
                             
    December 31, 2016
    		                        
    Increase in the CPI of
    		    
    2.0
    %
    		    
    (13
    )
    		    
    (13
    )
    Increase in the CPI of
    		    
    1.0
    %
    		    
    (4
    )
    		    
    (4
    )
    Decrease in the CPI of
    		    
    (1.0
    )%
    		    
    3
    		      
    3
    		  
    Decrease in the CPI of
    		    
    (2.0
    )%
    		    
    6
    		      
    6
    		  
     
    Sensitivity of change in foreign exchange rate is immaterial as at December 31, 2017 and 2016.

    Interest rate risk

    Profile

    At the reporting date the interest rate profile of the Group's interest-bearing financial instruments, not including derivatives, was:

       
    Carrying amount
    		  
       
    2016
    		    
    2017
    		  
       
    NIS millions
    		    
    NIS millions
    		  
    Fixed rate instruments
    		            
    Financial assets
    		    
    845
    		      
    679
    		  
    Financial liabilities
    		    
    (4,069
    )
    		    
    (3,440
    )
         
    (3,224
    )
    		    
    (2,761
    )
    Variable rate instruments
    		                
    Financial assets
    		    
    500
    		      
    221
    		  

    Fair value sensitivity analysis for fixed rate instruments
     
    A change of interest rates at the end of the reporting period would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

       
    Equity
    		    
    Profit or loss
    		  
       
    1.0% increase
    		    
    1.0% decrease
    		    
    0.5% increase
    		    
    0.5% decrease
    		    
    1.0% increase
    		    
    1.0% decrease
    		    
    0.5% increase
    		    
    0.5% decrease
    		  
       
    NIS millions
    		    
    NIS millions
    		  
    December 31, 2017
    		                                                
    Fair value sensitivity (net)
    		    
    (9
    )
    		    
    9
    		      
    (5
    )
    		    
    5
    		      
    (9
    )
    		    
    9
    		      
    (5
    )
    		    
    5
    		  

       
    Equity
    		    
    Profit or loss
    		  
       
    1.0% increase
    		    
    1.0% decrease
    		    
    0.5% increase
    		    
    0.5% decrease
    		    
    1.0% increase
    		    
    1.0% decrease
    		    
    0.5% increase
    		    
    0.5% decrease
    		  
       
    NIS millions
    		    
    NIS millions
    		  
    December 31, 2016
    		                                                
    Fair value sensitivity (net)
    		    
    (7
    )
    		    
    7
    		      
    (4
    )
    		    
    4
    		      
    (7
    )
    		    
    7
    		      
    (4
    )
    		    
    4
    		  

    Cash flow sensitivity analysis for variable rate instruments
    A change of 1% in interest rates at the end of the reporting period would have increased (decreased) equity and profit or loss by immaterial amounts.
     
    Fair Values

    (1)
    Financial instruments measured at fair value for disclosure purposes only

    The book value of certain financial assets and liabilities, including cash and cash equivalents, trade and other receivables, current investments, including derivatives, trade and other payables, including derivatives and other long-term liabilities, are equal or approximate to their fair value.

    The fair values of the remaining financial liabilities and their book values as presented in the consolidated statements of financial position are as follows:

     
    		  
    December 31, 2016
    		    
    December 31, 2017
    		  
     
    		  
    Book value
    		    
    Fair value*
    		    
    Book value
    		    
    Fair value*
    		  
     
    		  
    NIS millions
    		    
    NIS millions
    		  
    Debentures including current maturities and accrued interest
    		    
    (3,815
    )
    		    
    (4,112
    )
    		    
    (2,954
    )
    		    
    (3,288
    )
    Long-term loans from financial institutions including current maturities and accrued interest
    		    
    (340
    )
    		    
    (350
    )
    		    
    (540
    )
    		    
    (574
    )

    * The fair value as of December 31, 2017 includes principal and interest in a total sum of approximately NIS 418 million, paid in January 2018, after the end of the reporting period. The fair value as of December 31, 2016 includes principal and interest in a total sum of approximately NIS 592 million, paid in January 2017.

    The fair value of marketable debentures is determined by reference to the quoted closing asking price at the reporting date (level 1), with the addition of principal and interest amounts, which were paid during the following month after the end of the reporting period.
     
    (2)
    Fair value hierarchy of financial instruments measured at fair value

    The table below analyses financial instruments carried at fair value, by valuation method.

       
    December 31, 2017
    		  
       
    Level 1
    		    
    Level 2
    		    
    Level 3
    		    
    Total
    		  
       
    NIS millions
    		    
    NIS millions
    		    
    NIS millions
    		    
    NIS millions
    		  
    Financial assets at fair value through profit or loss
    		                        
    Current investments in debt securities
    		    
    361
    		      
    -
    		      
    -
    		      
    361
    		  
    Derivatives
    		    
    -
    		      
    3
    		      
    -
    		      
    3
    		  
    Total assets
    		    
    361
    		      
    3
    		      
    -
    		      
    364
    		  
                                     
    Financial liabilities at fair value through profit or loss
    		                                
    Derivatives
    		    
    -
    		      
    (18
    )
    		    
    -
    		      
    (18
    )
    Total liabilities
    		    
    -
    		      
    (18
    )
    		    
    -
    		      
    (18
    )

    There have been no transfers during the year between Levels 1 and 2.

       
    December 31, 2016
    		  
       
    Level 1
    		    
    Level 2
    		    
    Level 3
    		    
    Total
    		  
       
    NIS millions
    		    
    NIS millions
    		    
    NIS millions
    		    
    NIS millions
    		  
    Financial assets at fair value through profit or loss
    		                        
    Current investments in debt securities
    		    
    282
    		      
    -
    		      
    -
    		      
    282
    		  
    Derivatives
    		    
    -
    		      
    2
    		      
    -
    		      
    2
    		  
    Total assets
    		    
    282
    		      
    2
    		      
    -
    		      
    284
    		  
                                     
    Financial liabilities at fair value through profit or loss
    		                                
    Derivatives
    		    
    -
    		      
    (17
    )
    		    
    -
    		      
    (17
    )
    Total liabilities
    		    
    -
    		      
    (17
    )
    		    
    -
    		      
    (17
    )
     
    (3)
    Details regarding fair value measurement at Level 2

    Financial  instrument
    		  
    Valuation method for determining fair value
         
    Forward contracts
    		  
    Fair value measured on the basis of discounting the difference between the forward price in the contract and the current forward price for the residual period until redemption using market interest rates appropriate for similar instruments, including the adjustment required for the parties’ credit risks.
         
    Foreign currency options
    		  
    Fair value is measured based on the Black-Scholes formula.
     
    (4)
    Offset of financial assets and financial liabilities

    The following table sets out the carrying amounts of recognized financial instruments that were offset in the consolidated statements of financial position:

       
    December 31, 2017
    		  
       
     
     
     
     
     
    Note
    		    
     
     
     
    Gross amounts of recognized financial assets (liabilities)
    		    
    Gross amounts of financial assets (liabilities) recognized and offset in the consolidated statements of financial position
    		    
    Net amounts of financial assets (liabilities) presented in the consolidated statements of financial position
    		  
             
    NIS millions
    		    
    NIS millions
    		    
    NIS millions
    		  
    Financial assets
    		                        
    Trade receivables
    		    
    9
    		      
    170
    		      
    (123
    )
    		    
    47
    		  
                                     
    Financial liabilities
    		                                
    Trade payables and accrued expenses
    		    
    13
    		      
    (149
    )
    		    
    123
    		      
    (26
    )
     
     
    		  
    December 31, 2016
    		  
     
    		  
    Note
    		    
    Gross amounts of recognized financial assets (liabilities)
    		    
    Gross amounts of financial assets (liabilities) recognized and offset in the consolidated statements of financial position
    		    
    Net amounts of financial assets (liabilities) presented in the consolidated statements of financial position
    		  
     
    		        
    NIS millions
    		    
    NIS millions
    		    
    NIS millions
    		  
    Financial assets
    		                        
    Trade receivables
    		    
    9
    		      
    224
    		      
    (159
    )
    		    
    65
    		  
     
    		                                
    Financial liabilities
    		                                
    Trade payables and accrued expenses
    		    
    13
    		      
    (183
    )
    		    
    159
    		      
    (24
    )
     
    Share price risk - sensitivity analysis

    The Group’s investments in securities include investments in equity instruments. The sensitivity analysis below presents the effect of a change in share prices on the fair value of securities held by the Group, assuming that all other variables remain constant.

    A change in share prices would have increased (decreased) profit or loss and equity by the amounts shown below (after tax):

           
       
    December 31, 2017
    		  
       
    NIS millions
    		  
       
    Profit or loss
    		    
    Equity
    		  
    Increase of 5%
    		    
    1
    		      
    1
    		  
    Increase of 10%
    		    
    3
    		      
    3
    		  
    Decrease of 5%
    		    
    (1
    )
    		    
    (1
    )
    Decrease of 10%
    		    
    (3
    )
    		    
    (3
    )