75
2013
Annual Report
11
3.5.
Financial assets
a)
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. The assets are recognised under current assets (unless they mature in more than
12 months after the reporting date, in which case they are booked as non-current assets) under loans to
companies and trade and other receivables.
These financial assets are initially carried at fair value, including directly attributable transaction costs, and
are subsequently measured at amortised cost, recognising accrued interest at the effective interest rate, which
is the discount rate that matches the instrument’s carrying amount to all estimated cash flows to maturity.
Nevertheless, trade receivables falling due in less than one year are carried at their face value at both initial
recognition and subsequent measurement, provided the effect of not updating is immaterial.
The impairment loss is calculated as the difference between the carrying amount of the asset and the present
value of the estimated future cash flows, discounted at the effective interest rate upon initial recognition.
Impairment losses are recognised and reversed in profit or loss. Amounts covered by the provision for
impairment are derecognised when their recovery is no longer expected by the Company.
b)
Investments in equity instruments of Group companies and associates
Investments in Group companies and associates are measured at cost net of any accumulated impairment
losses. If there is objective evidence that the carrying amount is not recoverable, the amount of the
impairment loss is measured as the difference between the carrying amount and the recoverable amount, the
latter of which is understood as the higher of the fair value less costs to sell and the present value of estimated
future cash flows from the investment. Impairment losses are recognised and reversed in profit or loss.
c)
Derecognition of financial assets
A financial asset is derecognised from the balance sheet if all the risks and rewards of ownership are
substantially transferred. In the case of receivables, this is generally understood to be when insolvency and
default risks have been transferred.
3.6.
Hedge accounting
Derivative financial instruments which qualify for hedge accounting are initially measured at fair value, plus
any transaction costs that are directly attributable to the acquisition.
At the inception of the hedge the Company formally designates and documents the hedging relationships and
the objective and strategy for undertaking the hedges. Hedge accounting is only applicable when the hedge is
expected to be highly effective at the inception of the hedge and throughout the period for which the hedge
was designated. A hedge is considered to be highly effective if at inception and during its life, changes in fair
value or cash flows attributable to the hedged risk are prospectively expected to be offset almost entirely by
changes in the fair value or cash flows of the hedging instrument, and that, retrospectively, gains or losses on
the hedging transaction have been within the range of 80% and 125% with respect to those of the hedged item.
