Additional Balance Sheet Disclosures in accordance with IFRS 7 (Financial Instruments)

  (XLS:) Download

CARRYING AMOUNT OF FINANCIAL INSTRUMENTS BY IAS 39 MEASUREMENT CATEGORY

€ million

 

Dec. 31, 2016

 

Dec. 31, 2015

 

 

 

 

 

Financial assets at fair value through profit or loss

 

990

 

1,881

Loans and receivables

 

134,623

 

128,198

Available-for-sale financial assets

 

17,707

 

15,219

Financial liabilities at fair value through profit or loss

 

2,358

 

2,399

Financial liabilities measured at amortized cost

 

188,791

 

177,074

RECONCILIATION OF BALANCE SHEET ITEMS TO CLASSES OF FINANCIAL INSTRUMENTS

The following table shows the reconciliation of the balance sheet items to the relevant classes of financial instruments, broken down by the carrying amount and fair value of the financial instruments.

The fair value of financial instruments measured at amortized cost, such as receivables and liabilities, is calculated by discounting using a market rate of interest for a similar risk and matching maturity. For reasons of materiality, the fair value of current balance sheet items is generally deemed to be their carrying amount.

Financial instruments measured at fair value also include shares in partnerships and corporations. There is no active market for these instruments. Since the future cash flows cannot be reliably determined, fair value cannot be determined using measurement models. The shares in these companies are carried at cost.

  (XLS:) Download

RECONCILIATION OF BALANCE SHEET ITEMS TO CLASSES OF FINANCIAL INSTRUMENTS AS OF DECEMBER 31, 2015

 

 

MEASURED AT FAIR VALUE

 

MEASURED AT AMORTIZED COST

 

DERIVATIVE FINANCIAL INSTRUMENTS WITHIN HEDGE ACCOUNTING

 

NOT WITHIN SCOPE OF IFRS 7

 

BALANCE SHEET ITEM AT DEC. 31, 2015

€ million

 

Carrying amount

 

Carrying amount

 

Fair value

 

Carrying amount

 

Carrying amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncurrent assets

 

 

 

 

 

 

 

 

 

 

 

 

Equity-accounted investments

 

 

 

 

 

10,904

 

10,904

Other equity investments

 

211

 

 

 

 

763

 

974

Financial services receivables

 

 

63,185

 

64,630

 

 

 

63,185

Other financial assets

 

996

 

4,484

 

4,492

 

1,249

 

 

6,730

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

Trade receivables

 

 

11,132

 

11,132

 

 

 

11,132

Financial services receivables

 

 

46,888

 

46,888

 

 

 

46,888

Other financial assets

 

885

 

7,963

 

7,963

 

1,196

 

 

10,043

Marketable securities

 

15,007

 

 

 

 

 

15,007

Cash, cash equivalents and time deposits

 

 

20,871

 

20,871

 

 

 

20,871

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncurrent liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Noncurrent financial liabilities

 

 

73,292

 

73,844

 

 

 

73,292

Other noncurrent financial liabilities

 

1,325

 

1,996

 

1,998

 

2,580

 

 

5,901

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Put options and compensation rights granted to noncontrolling interest shareholders

 

 

3,933

 

3,783

 

 

 

3,933

Current financial liabilities

 

 

72,313

 

72,313

 

 

 

72,313

Trade payables

 

 

20,460

 

20,460

 

 

 

20,460

Other current financial liabilities

 

1,074

 

5,551

 

5,551

 

3,725

 

 

10,350

  (XLS:) Download

RECONCILIATION OF BALANCE SHEET ITEMS TO CLASSES OF F INANCIAL INSTRUMENTS AS OF DECEMBER 31, 2016

 

 

MEASURED AT FAIR VALUE

 

MEASURED AT AMORTIZED COST

 

DERIVATIVE FINANCIAL INSTRUMENTS WITHIN HEDGE ACCOUNTING

 

NOT WITHIN SCOPE OF IFRS 7

 

BALANCE SHEET ITEM AT DEC. 31, 2016

€ million

 

Carrying amount

 

Carrying amount

 

Fair value

 

Carrying amount

 

Carrying amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncurrent assets

 

 

 

 

 

 

 

 

 

 

 

 

Equity-accounted investments

 

 

 

 

 

8,616

 

8,616

Other equity investments

 

187

 

 

 

 

809

 

996

Financial services receivables

 

 

68,402

 

70,766

 

 

 

68,402

Other financial assets

 

251

 

4,982

 

5,008

 

3,023

 

 

8,256

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

Trade receivables

 

 

12,187

 

12,187

 

 

 

12,187

Financial services receivables

 

 

49,673

 

49,673

 

 

 

49,673

Other financial assets

 

740

 

9,527

 

9,527

 

1,577

 

 

11,844

Marketable securities

 

17,520

 

 

 

 

 

17,520

Cash, cash equivalents and time deposits

 

 

19,265

 

19,265

 

 

 

19,265

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncurrent liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Noncurrent financial liabilities

 

 

66,358

 

66,932

 

 

 

66,358

Other noncurrent financial liabilities

 

885

 

1,859

 

1,863

 

1,745

 

 

4,488

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Put options and compensation rights granted to noncontrolling interest shareholders

 

 

3,849

 

3,861

 

 

 

3,849

Current financial liabilities

 

 

88,461

 

88,461

 

 

 

88,461

Trade payables

 

 

22,794

 

22,794

 

 

 

22,794

Other current financial liabilities

 

1,473

 

6,010

 

6,010

 

1,956

 

 

9,438

Uniform valuation techniques and inputs are used to measure fair value. The fair value of Level 2 and 3 financial instruments is measured in the individual divisions on the basis of Group-wide specifications. The measurement techniques used are explained in the section on “Accounting policies”. The fair value of put options and compensation rights granted to noncontrolling interest shareholders is calculated using a present value model based on the cash settlement determined by the Munich Regional Court in the award proceedings, including cash compensation, as well as the minimum statutory interest rate and a risk-adjusted discount rate for a matching maturity. For further information, please see section entitled "Put options and compensation rights granted to noncontrolling interest shareholders”. The fair value of Level 3 receivables was measured by reference to individual expectations of losses; these are based to a significant extent on the Company’s assumptions about counterparty credit quality. Financial services receivables are allocated to Level 3 because their fair value was measured using inputs that are not observable in an active market.

The following table contains an overview of the financial assets and liabilities measured at fair value by level:

  (XLS:) Download

FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE BY LEVEL*

€ million

 

Dec. 31, 2015

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

*

Prior-year figures adjusted.

Noncurrent assets

 

 

 

 

 

 

 

 

Other equity investments

 

211

 

117

 

 

94

Other financial assets

 

996

 

 

976

 

20

Current assets

 

 

 

 

 

 

 

 

Other financial assets

 

885

 

 

879

 

6

Marketable securities

 

15,007

 

15,007

 

 

Noncurrent liabilities

 

 

 

 

 

 

 

 

Other noncurrent financial liabilities

 

1,325

 

 

1,142

 

183

Current liabilities

 

 

 

 

 

 

 

 

Other current financial liabilities

 

1,074

 

 

1,006

 

68

  (XLS:) Download

 

 

 

 

 

 

 

 

 

€ million

 

Dec. 31, 2016

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

Noncurrent assets

 

 

 

 

 

 

 

 

Other equity investments

 

187

 

76

 

 

111

Other financial assets

 

251

 

 

216

 

34

Current assets

 

 

 

 

 

 

 

 

Other financial assets

 

740

 

 

734

 

6

Marketable securities

 

17,520

 

17,520

 

 

Noncurrent liabilities

 

 

 

 

 

 

 

 

Other noncurrent financial liabilities

 

885

 

 

722

 

163

Current liabilities

 

 

 

 

 

 

 

 

Other current financial liabilities

 

1,473

 

 

1,406

 

67

  (XLS:) Download

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES MEASURED AT AMORTIZED COST BY LEVEL

€ million

 

Dec. 31, 2015

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

Fair value of financial assets measured at amortized cost

 

 

 

 

 

 

 

 

Financial services receivables

 

111,518

 

 

 

111,518

Trade receivables

 

11,132

 

 

10,975

 

157

Other financial assets

 

12,455

 

677

 

6,203

 

5,576

Cash, cash equivalents and time deposits

 

20,871

 

20,467

 

405

 

Fair value of financial assets measured at amortized cost

 

155,977

 

21,144

 

17,583

 

117,251

 

 

 

 

 

 

 

 

 

Fair value of financial liabilities measured at amortized cost

 

 

 

 

 

 

 

 

Put options and compensation rights granted to noncontrolling interest shareholders

 

3,783

 

 

 

3,783

Trade payables

 

20,460

 

 

20,460

 

Financial liabilities

 

146,156

 

23,675

 

122,420

 

61

Other financial liabilities

 

7,550

 

269

 

7,185

 

95

Fair value of financial liabilities measured at amortized cost

 

177,949

 

23,944

 

150,066

 

3,940

  (XLS:) Download

 

€ million

 

Dec. 31, 2016

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

Fair value of financial assets measured at amortized cost

 

 

 

 

 

 

 

 

Financial services receivables

 

120,438

 

 

 

120,438

Trade receivables

 

12,187

 

 

11,977

 

210

Other financial assets

 

14,535

 

550

 

6,695

 

7,289

Cash, cash equivalents and time deposits

 

19,265

 

18,838

 

426

 

Fair value of financial assets measured at amortized cost

 

166,915

 

19,389

 

19,099

 

128,427

 

 

 

 

 

 

 

 

 

Fair value of financial liabilities measured at amortized cost

 

 

 

 

 

 

 

 

Put options and compensation rights granted to noncontrolling interest shareholders

 

3,861

 

 

 

3,861

Trade payables

 

22,794

 

 

22,794

 

Financial liabilities

 

155,394

 

39,391

 

114,198

 

1,804

Other financial liabilities

 

7,873

 

537

 

7,159

 

177

Fair value of financial liabilities measured at amortized cost

 

189,921

 

39,928

 

144,151

 

5,842

  (XLS:) Download

DERIVATIVE FINANCIAL INSTRUMENTS WITHIN HEDGE ACCOUNTING BY LEVEL

€ million

 

Dec. 31, 2015

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

Noncurrent assets

 

 

 

 

 

 

 

 

Other financial assets

 

1,249

 

 

1,249

 

Current assets

 

 

 

 

 

 

 

 

Other financial assets

 

1,196

 

 

1,196

 

Noncurrent liabilities

 

 

 

 

 

 

 

 

Other noncurrent financial liabilities

 

2,580

 

 

2,573

 

7

Current liabilities

 

 

 

 

 

 

 

 

Other current financial liabilities

 

3,725

 

 

3,725

 

  (XLS:) Download

 

€ million

 

Dec. 31, 2016

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

Noncurrent assets

 

 

 

 

 

 

 

 

Other financial assets

 

3,023

 

 

3,019

 

4

Current assets

 

 

 

 

 

 

 

 

Other financial assets

 

1,577

 

 

1,577

 

Noncurrent liabilities

 

 

 

 

 

 

 

 

Other noncurrent financial liabilities

 

1,745

 

 

1,745

 

0

Current liabilities

 

 

 

 

 

 

 

 

Other current financial liabilities

 

1,956

 

 

1,956

 

The allocation of fair values to the three levels in the fair value hierarchy is based on the availability of observable market prices. Level 1 is used to report the fair value of financial instruments for which a price is directly available in an active market. Examples include marketable securities and other equity investments measured at fair value. Fair values in Level 2, for example of derivatives, are measured on the basis of observable market inputs using market-based valuation techniques. In particular, the inputs used include exchange rates, yield curves and commodity prices that are observable in the relevant markets and obtained through pricing services. Level 3 fair values are calculated using valuation techniques that incorporate inputs that are not observable in active markets. In the Volkswagen Group, long-term commodity futures are allocated to Level 3 because the prices available on the market must be extrapolated for measurement purposes. This is done on the basis of observable inputs obtained for the different commodities through pricing services. Options on equity instruments and residual value protection models are also reported in Level 3. Equity instruments are measured primarily using the relevant business plans and entity-specific discount rates. The significant inputs used to measure fair value for the residual value protection models include forecasts and estimates of used vehicle residual values for the appropriate models.

  (XLS:) Download

CHANGES IN BALANCE SHEET ITEMS MEASURED AT FAIR VALUE BASED ON LEVEL 3*

€ million

 

Financial assets measured at fair value

 

Financial liabilities measured at fair value

 

 

 

 

 

*

Prior-year figures adjusted.

Balance at Jan. 1, 2015

 

178

 

249

Foreign exchange differences

 

7

 

0

Total comprehensive income

 

0

 

157

recognized in profit or loss

 

−1

 

144

recognized in other comprehensive income

 

0

 

13

Additions (purchases)

 

−53

 

Sales and settlements

 

−12

 

−99

Transfers into Level 2

 

0

 

−56

Balance at Dec. 31, 2015

 

119

 

251

 

 

 

 

 

Total gains or losses recognized in profit or loss

 

−1

 

−144

Net other operating expense/income

 

 

of which attributable to assets/liabilities held at the reporting date

 

 

Financial result

 

−1

 

−144

of which attributable to assets/liabilities held at the reporting date

 

−1

 

−98

  (XLS:) Download

 

€ million

 

Financial assets measured at fair value

 

Financial liabilities measured at fair value

 

 

 

 

 

Balance at Jan. 1, 2016

 

119

 

251

Foreign exchange differences

 

0

 

0

Total comprehensive income

 

24

 

97

recognized in profit or loss

 

17

 

100

recognized in other comprehensive income

 

7

 

−3

Additions (purchases)

 

23

 

Sales and settlements

 

−9

 

−89

Transfers into Level 2

 

−6

 

−30

Balance at Dec. 31, 2016

 

152

 

230

 

 

 

 

 

Total gains or losses recognized in profit or loss

 

17

 

−100

Net other operating expense/income

 

 

of which attributable to assets/liabilities held at the reporting date

 

 

Financial result

 

17

 

−100

of which attributable to assets/liabilities held at the reporting date

 

14

 

−74

The transfers between the levels of the fair value hierarchy are reported at the respective reporting dates. The transfers out of Level 3 into Level 2 comprise commodity futures for which observable quoted prices are now available for measurement purposes due to the decline in their remaining maturities; consequently, no extrapolation is required. There were no transfers between other levels of the fair value hierarchy.

Commodity prices are the key risk variable for the fair value of commodity futures. Sensitivity analyses are used to present the effect of changes in commodity prices on earnings after tax and equity.

If commodity prices for commodity futures classified as Level 3 had been 10% higher (lower) as of December 31, 2016, earnings after tax would have been €6 million (previous year: €6 million) higher (lower) and equity would have been €3 million (previous year: €2 million) higher (lower).

The key risk variable for measuring options on equity instruments held by the Company is the relevant enterprise value. Sensitivity analyses are used to present the effect of changes in risk variables on earnings after tax.

If the assumed enterprise values had been 10% higher, earnings after tax would have been €1 million (previous year: €1 million) higher. If the assumed enterprise values had been 10% lower, earnings after tax would have been €1 million (previous year: €1 million) lower.

Residual value risks result from hedging agreements with dealers under which earnings effects caused by market-related fluctuations in residual values that arise from buy-back obligations under leases are borne in part by the Volkswagen Group.

The key risk variable influencing the fair value of the options relating to residual value risks is used car prices. Sensitivity analyses are used to quantify the effects of changes in used car prices on earnings after tax.

If the prices for the used cars covered by the residual value protection model had been 10% higher as of December 31, 2016, earnings after tax would have been €249 million higher. If the prices for the used cars covered by the residual value protection model had been 10% lower as of December 31, 2016, earnings after tax would have been €249 million lower.

OFFSETTING OF FINANCIAL ASSETS AND LIABILITIES

The following tables contain information about the effects of offsetting in the balance sheet and the potential financial effects of offsetting in the case of instruments that are subject to a legally enforceable master netting arrangement or a similar agreement.

  (XLS:) Download

 

 

 

 

 

AMOUNTS THAT ARE NOT SET OFF IN THE BALANCE SHEET

 

 

€ million

 

Gross amounts of recognized financial assets

 

Gross amounts of recognized financial liabilities set off in the balance sheet

 

Net amounts of financial assets presented in the balance sheet

 

Financial instru­ments

 

Collateral received

 

Net amount at Dec. 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives

 

4,326

 

 

4,326

 

−2,201

 

−123

 

2,002

Financial services receivables

 

110,396

 

−323

 

110,073

 

 

−16

 

110,057

Trade receivables

 

11,243

 

−111

 

11,132

 

0

 

−231

 

10,901

Marketable securities

 

15,007

 

 

15,007

 

 

 

15,007

Cash, cash equivalents and time deposits

 

20,871

 

 

20,871

 

 

 

20,871

Other financial assets

 

12,670

 

−11

 

12,658

 

 

 

12,658

  (XLS:) Download

 

 

 

 

 

 

 

 

 

AMOUNTS THAT ARE NOT SET OFF IN THE BALANCE SHEET

 

 

€ million

 

Gross amounts of recognized financial assets

 

Gross amounts of recognized financial liabilities set off in the balance sheet

 

Net amounts of financial assets presented in the balance sheet

 

Financial instru­ments

 

Collateral received

 

Net amount at Dec. 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives

 

5,591

 

 

5,591

 

−3,425

 

−175

 

1,990

Financial services receivables

 

118,470

 

−395

 

118,075

 

 

−65

 

118,010

Trade receivables

 

12,188

 

−2

 

12,187

 

0

 

−7

 

12,179

Marketable securities

 

17,520

 

 

17,520

 

 

 

17,520

Cash, cash equivalents and time deposits

 

19,265

 

 

19,265

 

 

 

19,265

Other financial assets

 

14,709

 

−14

 

14,695

 

0

 

 

14,695

  (XLS:) Download

 

 

 

 

 

 

 

 

 

AMOUNTS THAT ARE NOT SET OFF IN THE BALANCE SHEET

 

 

€ million

 

Gross amounts of recognized financial liabilities

 

Gross amounts of recognized financial assets set off in the balance sheet

 

Net amounts of financial liabilities presented in the balance sheet

 

Financial instru­ments

 

Collateral pledged

 

Net amount at Dec. 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Put options and compensation rights granted to noncontrolling interest shareholders

 

3,933

 

 

3,933

 

 

 

3,933

Derivatives

 

8,703

 

 

8,703

 

−2,178

 

−12

 

6,514

Financial liabilities

 

145,604

 

 

145,604

 

 

−3,587

 

142,018

Trade payables

 

20,571

 

−111

 

20,460

 

0

 

 

20,460

Other financial liabilities

 

7,882

 

−335

 

7,547

 

 

 

7,547

  (XLS:) Download

 

 

 

 

 

 

 

 

 

AMOUNTS THAT ARE NOT SET OFF IN THE BALANCE SHEET

 

 

€ million

 

Gross amounts of recognized financial liabilities

 

Gross amounts of recognized financial assets set off in the balance sheet

 

Net amounts of financial liabilities presented in the balance sheet

 

Financial instru­ments

 

Collateral pledged

 

Net amount at Dec. 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

Put options and compensation rights granted to noncontrolling interest shareholders

 

3,849

 

 

3,849

 

 

 

3,849

Derivatives

 

6,058

 

 

6,058

 

−3,427

 

−24

 

2,607

Financial liabilities

 

154,819

 

 

154,819

 

 

−3,041

 

151,778

Trade payables

 

22,796

 

−2

 

22,794

 

0

 

 

22,794

Other financial liabilities

 

8,278

 

−409

 

7,869

 

 

 

7,869

The “Financial instruments” column shows the amounts that are subject to a master netting arrangement but were not set off because they do not meet the criteria for offsetting in the balance sheet. The “Collateral received” and “Collateral pledged” columns show the amounts of cash collateral and collateral in the form of financial instruments received and pledged for the total assets and liabilities that do not meet the criteria for offsetting in the balance sheet.

  (XLS:) Download

CHANGES IN CREDIT RISK VALUATION ALLOWANCES ON FINANCIAL ASSETS

€ million

 

Specific valuation allowances

 

Portfolio-based valuation allowances

 

2016

 

Specific valuation allowances

 

Portfolio-based valuation allowances

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at Jan. 1

 

2,142

 

1,970

 

4,112

 

2,269

 

1,665

 

3,933

Exchange rate and other changes

 

90

 

−12

 

78

 

−115

 

−6

 

−121

Changes in consolidated Group

 

−25

 

0

 

−25

 

−19

 

−4

 

−23

Additions

 

663

 

727

 

1,390

 

702

 

628

 

1,330

Utilization

 

429

 

 

429

 

356

 

 

356

Reversals

 

404

 

453

 

857

 

362

 

290

 

652

Reclassification

 

56

 

−56

 

0

 

23

 

−23

 

0

Balance at Dec. 31

 

2,092

 

2,175

 

4,268

 

2,142

 

1,970

 

4,112

The valuation allowances mainly relate to the credit risks associated with receivables from the financial services business.

ASSET-BACKED SECURITIES TRANSACTIONS

Asset-backed securities transactions with financial assets amounting to €24,191 million (previous year: €23,245 million) entered into to refinance the financial services business are included in bonds, commercial paper and notes, and liabilities from loans. The corresponding carrying amount of the receivables from the customer and dealer financing and the finance lease business amounted to €26,184 million (previous year: €26,415 million). Collateral of €43,847 million (previous year: €34,717 million) in total was furnished as part of asset-backed securities transactions. The expected payments were assigned to structured entities and the equitable liens in the financed vehicles were transferred. These asset-backed securities transactions did not result in the receivables from financial services business being derecognized, as the Group retains nonpayment and late payment risks. The difference between the assigned receivables and the related liabilities is the result of different terms and conditions and the share of the securitized paper and notes held by the Volkswagen Group itself, as well as the proportion of vehicles financed within the Group.

Most of the public and private asset-backed securities transactions of the Volkswagen Group can be repaid in advance (clean-up call) if less than 9% or 10%, as appropriate, of the original transaction volume is outstanding. The assigned receivables cannot be assigned again or pledged elsewhere as collateral. The claims of the holders of commercial paper and notes are limited to the assigned receivables and the receipts from those receivables are earmarked for the repayment of the corresponding liability.

As of December 31, 2016, the fair value of the assigned receivables still recognized in the balance sheet was €27,856 million (previous year: €25,161 million). The fair value of the related liabilities was €24,424 million (previous year: €23,000 million) at that reporting date.

The Volkswagen Financial Services AG Group is contractually obliged under certain conditions to transfer funds to the structured entities that are included in its consolidated financial statements. Since the receivables are transferred to the special purpose entity by way of undisclosed assignment, the situation may occur in which the receivable has already been reduced in a legally binding manner at the originator, for example if the obligor effectively offsets it against receivables owed to it by a company belonging to the Volkswagen Group. In this case, collateral must be furnished for the resulting compensation claims against the special purpose entity, for example if the rating of the Group company concerned declines to a contractually agreed reference value.