össur annual report2009 - Euroland

3.16 inventories
Inventories are stated at the lower of cost and net realisable
value. Costs, including an appropriate portion of fixed
and variable overhead expenses, are assigned to inventories
held by the method most appropriate to the particular
class of inventory, with the majority being valued on a
standard cost basis. Net realisable value represents the
estimated selling price for inventories less all estimated
costs of completion and costs necessary to make the sale.
3.17 provisions
Provisions are recognised when the Company has a present
obligation as a result of a past event, it is probable
that the Company will be required to settle the obligation,
and a reliable estimate can be made of the amount of the
obligation.
The amount recognised as a provision is the best estimate
of the consideration required to settle the present obligation
at the balance sheet date, taking into account the
risks and uncertainties surrounding the obligation. Where
a provision is measured using the cash flows estimated
to settle the present obligation, its carrying amount is the
present value of those cash flows.
When some or all of the economic benefits required to
settle a provision are expected to be recovered from a
third party, the receivable is recognised as an asset if it
is virtually certain that reimbursement will be received
and the amount of the receivable can be measured
reliably.
RESTRUCTURINGS
A restructuring provision is recognised when the Company
has developed a detailed formal plan for the restructuring
and has started to implement it. The measurement of a
restructuring provision includes only the direct expenditures
arising from the restructuring, which are those
amounts that are both necessarily entailed by the restructuring
and not associated with the ongoing activities of
the entity.
WARRANTIES
Provisions for warranty costs are recognised at the date
of sale of the relevant products, at the directors’ best estimate
of the expenditure required to settle the Company’s
obligation.
3.18 risk ManageMent
Financial risk management is governed by the Company’s
Financial Risk Management Policy, approved by the Board
of Directors. The policy sets limits to the extent of financial
risks and guidelines for financial transactions in general.
The general policy is to apply natural currency hedging to
the extent possible and prohibit any speculative trading of
financial instruments.
Long term financing is managed from the Company´s
Corporate Finance function and individual subsidiaries do
not engage in substantial external financing contracts with
banks and/or credit institutions.
The Company is outset for normal business risk in collecting
accounts receivable. Adequate allowance is made for
bad debt expenses.
3.19 financial assets
All financial assets are recognised and derecognised on
a trade date where the purchase or sale of an investment
is under a contract whose terms require delivery of the
investment within the timeframe established by the market
concerned, and are initially measured at fair value, net
of transaction costs, except for those financial assets classified
at fair value through profit or loss, which are initially
measured at fair value.
Financial assets are classified into the following specified
categories: financial assets as ‘at fair value through
profit or loss’ (FvTPL), ‘held-to-maturity investments’,
‘available-for-sale’ (AFS) financial assets and ‘loans and
receivables’. The classification depends on the nature and
purpose of the financial assets and is determined at the
time of initial recognition.
EFFECTIvE INTEREST METHOD
The effective interest method is a method of calculating
the amortised cost of a debt instrument and of allocating
interest income over the relevant period. The effective
interest rate is the rate that exactly discounts estimated
future cash receipts (including all fees on 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 debt instrument, or, where
appropriate, a shorter period to the net carrying amount
on initial recognition.
Income is recognised on an effective interest basis for
debt instruments other than those financial assets classified
as at fair value through profit or loss.
FINANCIAL ASSETS AT FAIR vALUE THROUGH
PROFIT OR LOSS
Financial assets are classified as at fair value through profit
or loss where the financial asset is either held for trading
or it is designated as at fair value through profit or loss.
Financial assets at fair value through profit or loss are stated
at fair value, with any resultant gain or loss recognised
in profit or loss. The net gain or loss recognised in profit
All amounts in thousands of USD 71 annual report 09
Össur hf. consolidated financial stateMents 2009