Henkel Annual Report 2011 - Henkel AG & Co. KGaA Annual Report ...

128 Consolidated financial statements
Notes to the consolidated statement of financial position
Henkel Annual Report 2011
(21) Financial instruments report
Loans and
receivables
Amortized cost
Held to maturity
Financial instruments explained by category
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
Within the Henkel Group, financial instruments are reported
under trade accounts receivable, trade accounts payable, borrowings,
other financial assets and other financial liabilities,
and also cash and cash equivalents within the statement of
financial position.
Financial instruments are recognized once Henkel becomes
a party to the contractual provisions of the financial instrument.
The recognition of financial assets takes place at the
settlement date, with the exemption of derivative financial
instruments that are recognized on the transaction date.
All financial instruments are initially recognized at their fair
value. Incidental acquisition costs are only capitalized if the
financial instruments are not subsequently remeasured to
fair value through profit or loss.
For subsequent remeasurement, financial instruments are
divided into the following classes in accordance with IAS 39:
• Financial instruments measured at amortized cost
• Financial instruments measured at fair value
Different valuation categories are allocated to these two
classes. Financial instruments assigned to the valuation
categories “Available for sale” and “Held for trading” are essentially
measured at fair value. Securities and time deposits
recognized as other financial assets, and also financial
investments are categorized as “Held for sale.” Only the
Financial instruments
Financial assets Financial liabilities
Fair value option
Profit and loss
Categories used by Henkel
Equity
instruments
Fair value Amortized cost Fair value Cost
Held for trading
Comprehensive
income
Available for sale
derivative financial instruments held by the Henkel Group
which are not included in hedge accounting are designated as
“Held for trading.” All other financial instruments including
the financial assets categorized as “Loans and receivables”
are recognized at amortized cost using the effective interest
method. The measurement categories “Held to maturity” and
“Fair value option” are not used within the Henkel Group.
The financial instruments in the measurement category
“Loans and receivables” are non­derivative financial instruments.
They are characterized by fixed or determinable payments
and are not traded in an active market. Within the
Henkel Group, this category is mainly comprised of trade
accounts receivable, cash and cash equivalents, and other
financial assets with the exception of derivatives, securities
and time deposits. The carrying amounts of the financial
instruments categorized as loans and receivables approximate
to their fair value due to their predominantly short­term
nature. If there are doubts as to the realizability of these
financial instruments, they are recognized at amortized
cost less appropriate individual valuation allowances
or global valuation allowances for bad debts.
Financial instruments in the category “Available for sale”
are not derivative financial assets and are, provided that it
is reliably determinable, recognized at fair value. If the fair
value cannot be reliably determined, they are recognized at
cost. Value changes between the reporting dates are essentially
recognized in the consolidated statement of comprehensive
income (revaluation reserve) without affecting
revenue, unless the cause lies in permanent impairment.
Impairment losses are recognized through profit or loss. When
the asset is derecognized, the amounts recognized in the