The Group KD Group and KD Group dd

The Group KD Group Annual Report 2009
Notes to Consolidated Financial Statements as at and for the year ended 31 December 2009
2.15 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at
amortised cost; any difference between the amount at initial recognition and the redemption value is recognised in the income
statement over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for
at least 12 months after the balance sheet date.
If the Group purchases its own debt, it is removed from the balance sheet and the difference between the carrying amount of
the liability and the consideration paid is included in investment income.
2.16 Derivative financial instruments and accounting point of hedging
Derivative financial instruments including futures and forwards, swaps and options are initially recognised at fair value on the
balance sheet date. Fair values are obtained from quoted market prices on active markets, including recent market
transactions, and valuation techniques, including discounted cash flow models and options pricing models, as appropriate. All
derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative.
The method of recognising the resulting fair value gain or loss depends on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged. The Group uses derivative financial instruments for hedging future
cash flows which are attributable to assets, liabilities and future business.
From an accounting point of view, hedging is used only under specific conditions.
The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as
well as its risk management objective and strategy for undertaking various hedging transactions. The Group also documents
its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging
transactions are expected to be and have been highly effective in offsetting changes in fair values or cash flows of hedged
items. The Group assesses the success of hedging at the time of transaction and for the duration of hedging.
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is
recognised in other comprehensive income. The gain or loss relating to any ineffective portion is recognised immediately in
the income statement within net fair value gains on financial assets at fair value through profit or loss.
Amounts recognised directly in other comprehensive income are recycled into the income statement in the periods in which
the hedged item affects profit or loss.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any
cumulative gain or loss existing in equity at that time remains in other comprehensive income and is recognised when the
forecast transaction is ultimately recognised in the income statement. However, when a forecast transaction is no longer
expected to occur, the cumulative gain or loss that was reported in other comprehensive income is immediately transferred to
the income statement.
2.17 Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
rate method.
2.18 Income tax
2.18.1 Current tax
The Group charges taxes in accordance with the provisions of the legislation applicable in individual countries in which the
Group’s subsidiaries are located. In Slovenia, the corporate income tax rate for the year 2009 is 21%. In the year 2010 the tax
rate will be 20%.
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