DRAVA, KUPA, RJE»INA, LOKVARKA, LI»ANKA LIKA, DOBRA ...

HEP ANNUAL REPORT 2010
82
CHAPTER 6 - FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS OF THE HEP GROUP (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2010
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
FINANCIAL ASSETS (continued)
Impairment of financial assets (continued)
With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event occurring after the impairment was recognised,
the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount
of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been
had the impairment not been recognised.
In respect of AFS equity securities, any increase in fair value subsequent to an impairment loss is recognised
directly in equity.
Investments
Investments in immaterial non-consolidated companies are generally recorded at cost less provisions for any
impairment.
FINANCIAL LIABILITIES
Other financial liabilities (including borrowings) are subsequently measured at amortised cost using the effective
interest method.
The effective interest method is a method of calculating the amortised cost of a financial liability and of
allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts
estimated future cash payments (including all fees and points paid or received that form an integral part of the
effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial
liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled
or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration
paid and payable is recognised in profit or loss.
DERIVATIVE FINANCIAL INSTRUMENTS
The Group entered into an interest rate swap to manage its exposure to interest rate. Further details of derivative
financial instruments are disclosed in Note 26.
Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are
subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised
in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which
event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.
EMBEDDED DERIVATIVES
During 2010 and 2009, the Group had no embedded derivative financial instruments.