ANNUAL REPORT 2011 REGISTRATION DOCUMENT - Saft

6 Notes
2011 CONSOLIDATED FINANCIAL STATEMENTS
to the Consolidated Financial Statements
Financial expenses also include the fi nancial component of
pension costs and the effect of unwinding of discount on assets
and liabilities.
Interest income and expense is accounted for on a timeproportion
basis in accordance with the effective interest rate
method.
2.28 DERIVATIVE FINANCIAL
INSTRUMENTS
The Group may, from time to time, use fi nancial derivatives to
manage and reduce exposure to risks of movements in interest
rates, exchange rates and the prices of certain metals.
Financial derivatives that qualify for hedge accounting
according to IAS 39 are classifi ed as hedges. The fi nancial
derivatives that do not qualify for hedge accounting, although
set up for the purpose of managing risk, are designated as and
accounted for as trading instruments.
Financial derivatives are measured at fair value.
The fair value of a fi nancial derivative is classifi ed as a noncurrent
asset or liability when the outstanding maturity of the
related hedged item is greater than twelve months. When the
outstanding maturity of the related hedged item is less than
twelve months, the fi nancial derivative is classifi ed as a current
asset or liability.
Financial derivatives held for trading are classifi ed as current
assets or liabilities.
2.29 HEDGE ACCOUNTING
Cash flow hedges
A cash fl ow hedge makes it possible for the Group to protect
itself against the risk of future changes in one or more cash
fl ows affecting consolidated income. The hedged cash fl ows
may derive from contracts on fi nancial or non-fi nancial assets
already translated in the statement of fi nancial position, or
future transactions not yet translated in the statement of fi nancial
position, when these transactions are highly probable.
When a derivative fi nancial instrument is designated as a
hedge of the variability in cash fl ows of a recognised asset
or liability, or a highly probable forecasted transaction, the
effective part of any gain or loss on the fi nancial derivative
is recognised directly in equity and the ineffective part of any
gain or loss is recognised immediately in profi t or loss.
Changes in the fair value of the derivative fi nancial derivatives
are taken to other comprehensive income for the effective
part and profi t or loss for the ineffective part. Gains or losses
accumulated in equity must be reclassifi ed in income, in the
same section as the element hedged - namely operating profi t
for hedges of operating fl ows and fi nancial income for other
140 / SAFT - ANNUAL REPORT 2011
hedges - during the same periods in which the hedged cash
fl ow affects income.
When a hedging instrument expires or is sold, terminated or
exercised, or the Group revokes the designation of the hedge
relationship but the hedged forecast transaction is still expected
to occur, the cumulative gain or loss at that point is retained in
equity and is recognised in accordance with the above policy
when the transaction occurs. If the hedged transaction is no
longer expected to take place, then the cumulative unrealised
gain or loss recognised in equity is recognised immediately in
profi t or loss.
Fair value hedge
A fair value hedge makes it possible for the Group to protect
itself against the risk deriving from changes in the fair value
of assets, liabilities, such as fi xed-rate loans and borrowings
or assets, liabilities or fi rm commitments in foreign currencies.
Fair value hedge accounting is used when a fi nancial derivative
is designated as a hedge of the variability of the fair value of a
recognised asset or liability (or fi rm commitment).
The hedging instrument is measured at fair value with changes
in fair value recognised in net profi t (loss) for the period. The
hedged item is re-measured symmetrically to its fair value. These
two re-measurements offset each other in the consolidated
income statement, with the exception of the ineffective part of
the hedge.
Hedge of net investments
A hedge of a net investment makes it possible for the Group
to protect itself against the currency risk of a net investment
(investments, long-term loans, provisions to branches,
unrepatriated income) in an entity consolidated abroad.
Hedges of net investments in foreign entities are recognised
in the same manner as cash fl ow hedges. The portion of the
gain or loss on the hedging instrument that is determined to
be an effective hedge is recognised directly in equity; the
ineffective portion of the gain or loss on the hedging instrument
is recognised in profi t or loss, as fi nancial income or expense.
Cumulative gains and losses recognised in equity are
recognised to profi t and loss when the foreign entity is sold.
2.30 FINANCE LEASES
Under IAS 17, leases, which transfer to the Group substantially
all the risks and rewards incident to ownership of the leased
asset, are classifi ed as fi nance leases. They are recognised as
assets on inception of the lease at the lower of the fair value
of the leased asset or the present value of the minimum lease
payments.
Lease payments are apportioned between the fi nance charge
and the reduction of the outstanding liability so as to produce
a constant periodic rate of interest on the remaining balance of
the liability for each period.