Panalpina Annual Report 2006

Consolidated and Annual Financial Statements 2006
Available-for-sale financial assets
All non-derivative financial assets that are not categorized as held-for-trading or as originated loans and receivables
are classified as available-for-sale. Available-for-sale financial assets which include equity securities are presented as noncurrent
assets, unless they are expected to be sold within twelve months after the balance sheet date.
Purchases and sales of investments are recognized on the settlement date. Investments are initially recognized at fair
value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried
at fair value through profit and loss are initially recognized at fair value and transaction costs are expensed in the income
statement. Investments are derecognized when the rights to receive cash flows from the investments have expired or
have been transferred and the Group has substantially transferred all risks and rewards of ownership. Available-for-sale
financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Originated loans
and receivables are subsequently carried at amortized cost using the effective interest method.
Gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss category,
including interest and dividend income, are charged to the income statement in the period in which they arise.
Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale are
analyzed between translation differences resulting from changes in amortized cost of the security and other changes in
the carrying amount of the security. The translation differences are recognized in profit and loss, and other changes
in carrying amount are recognized in equity. Changes in the fair value of other monetary securities classified as availablefor-sale
and non-monetary securities classified as available-for-sale are recognized in equity.
When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognized in
equity are included in the income statement as gains and losses from investments. Interest on available-for-sale investments
calculated using the effective interest method is recognized in the income statement. Dividends on available-for-sale equity
instruments are recognized in the income statement when the Group’s right to receive payments is established.
The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of
financial assets is impaired. In case of equity securities classified as available-for-sale, a significant or prolonged decline
in the fair value of the security below its cost is considered an indicator that the securities are impaired. If any such evidence
exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost
and the current fair value less any impairment loss on that financial asset previously recognized in profit or loss – is removed
from equity and recognized in the income statement. Impairment losses of equity instruments recognized in the income
statement are not reversed through the income statement. Impairment testing of trade receivables is described in sections
the Trade receivables and Impairment of financial assets.
Fair values
The fair value of investments is based on quoted bid prices for exchange traded instruments. For unlisted securities or overthe-counter
transactions, the Group determines the fair value using appropriate valuation techniques (such as net present
value or option pricing models). Those equity investments for which fair values cannot be measured reliably are recognized at
cost less impairment. The Group’s impairment policy is outlined in greater detail in section Impairment of assets.
Impairment of financial assets
The Group assesses at each balance sheet date whether a financial asset or a group of financial assets is impaired.
Assets carried at amortized cost
If there is objective evidence that an impairment loss on loans and receivables carried at amortized cost has been
incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value
of future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is
reduced through use of an allowance account. The amount of the loss shall be recognized in the period of loss.
The Group first assesses whether objective evidence of impairment exists individually for financial assets that are
individually significant, and individually or collectively for financial assets that are not individually significant.
If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether
significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and the
group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment
and for which an impairment loss is or continues to be recognized are not included in a collective assessment of
impairment.
If within 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 recognized, the previously recognized impairment loss is reversed. Any
subsequent reversal of an impairment loss is recognized in profit or loss, to the extent that the carrying value of the asset
does not exceed its amortized cost at the reversal date.
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