76
2013
Annual Report
12
The Company provisionally recognises the portion of the gain or loss on the measurement at fair value of a
hedging instrument that is determined to be an effective hedge in income and expense recognised in equity,
which is then transferred to the income statement in the year or years in which the hedge affects profit or
loss. Cash flows from the hedging instrument are recognised under the same income statement heading as the
hedged item. The ineffective portion of the hedge is recognised under change in fair value of financial
instruments.
3.7.
Inventories
Inventories are initially measured at the lower of cost (whether cost of acquisition or production) and net
realisable value, and any related impairment losses or reversals are recognised in the income statement.
Cost is determined using the weighted average cost method. Net realisable value is the estimated selling price
in the ordinary course of business, less estimated costs necessary to make the sale.
3.8.
Cash and cash equivalents
Cash and cash equivalents include cash on hand and demand deposits in financial institutions and other short-
term, highly liquid investments with original maturity of less than three months.
3.9.
Financial liabilities
All of the Company's financial liabilities are debts and payables.
Debts and payables include trade and non-trade payables. These liabilities are classified under current
liabilities unless they mature more than 12 months after the reporting date, in which case they are classified
under non-current liabilities.
Debts and payables are initially recognised at fair value, adjusted for directly attributable transaction costs,
and subsequently measured at amortised cost using the effective interest method. The effective interest rate
is the discount rate that matches the instrument’s carrying amount with the expected future flow of payments
to the maturity date of the liability.
Nevertheless, trade payables falling due in less than one year without a contractual interest rate are carried at
their face value on both initial recognition and subsequent measurement, provided the effect of not
discounting flows is not significant.
3.10.
Current and deferred taxes
The income tax expense or tax income is recognised in the income statement each year, calculated based on
the pre-tax profits disclosed in the annual accounts, adjusted for permanent differences with fiscal criteria. If
the profit is associated with an income or expense recognised directly in equity, the tax expense or tax income
is also recognised against equity. Deferred tax assets and liabilities arising from temporary differences deriving
from the application of fiscal criteria in the recognition of income and expenses, are recognised in the balance
sheet until they are reversed.
