78
2013
Annual Report
14
In the case of prepaid mobile telephony, the amount of unused credit is recognised as an accrual until it is
consumed or, where applicable, ultimately cancelled. Free unused credit or free credit pending adjustment is
recognised as a prepayment.
Sales of merchandise mainly reflect user devices that are invoiced either directly to the end customer or the
distribution channel, as well as other goods sold to third parties.
Interest income is recognised using the effective interest method.
3.14.
Leases
a)
Finance leases
Leases of property, plant and equipment where the Company has substantially assumed all the risks and
rewards of ownership of leased assets are classified as finance leases. Finance leases are capitalised at the
lease’s inception at the lower of the fair value of the leased property and the present value of the minimum
lease payments. Present value is calculated using the interest rate implicit in the lease agreement and, if this
rate cannot be determined, the interest rate applied by the Company in similar transactions.
Each lease payment is distributed between the liability and finance charges. The total finance charge is
apportioned over the lease term and taken to the income statement in the period of accrual, using the
effective interest method. Contingent rents are expensed in the year they are incurred. Lease obligations, net
of finance charges, are recognised in finance lease payables. Property, plant and equipment acquired under
finance leases are depreciated over the shorter of the asset’s useful life and the lease term.
b)
Operating leases
Leases in which the lessor retains substantially all the risks and rewards incidental to ownership are classified
as operating leases. Operating lease payments (net of any incentive received from the lessor) are recognised in
profit or loss.
3.15.
Foreign currency transactions
a)
Functional and presentation currency
Except where otherwise stated, the figures disclosed in the annual accounts are expressed in thousands of
Euros, the Company’s functional currency.
b)
Foreign currency transactions and balances
Transactions in foreign currency are translated at the foreign exchange rate prevailing at the date of the
transaction. Foreign currency gains and losses resulting from the settlement of transactions and translation at
year-end exchange rates of monetary assets and liabilities denominated in foreign currency are recognised in
the income statement.
