Report 2010 - Italcementi Group

22.8 Hedge Accounting
The effects arising from application of hedge accounting rules are summarized below.
The specific equity reserve reflects fair value gains and losses on the effective component of cash flow hedges
only.
New derivative instruments recognized in equity totaled +2.2 million euro at December 31, 2010 (-2.7 million
euro at December 31, 2009). The eliminated portion of the reserve relating to instruments that expired in 2010
amounted to +21.4 million euro at December 31, 2010, compared with +11.5 million euro at December 31,
2009. The changes in equity relating to derivatives contracted in 2009 and still in portfolio at December 31,
2010, amounted to -12.0 million euro (-45.7 million euro at December 31, 2009).
The non-effective component of cash flow hedges in portfolio at December 31, 2010, recognized in profit and
loss was immaterial in 2010 (+0.4 million euro in 2009).
With reference to fair value hedges in portfolio at December 31, 2010, the amount taken to profit and loss
totaled +6.5 million euro for 2010 (-26.1 million euro for 2009). Recognized amounts attributable to underlying
risk hedged during the year totaled -6.7 million euro at December 31, 2010 (+26.1 million euro at December
31, 2009). These amounts are taken to profit and loss as gains and losses on interest- and exchange-rate
derivatives (note 30).
Liquidity risk
Credit risk
In compliance with Group procedures, customers electing extended terms of payment are vetted for credit
worthiness before and during the life of the contract. Credit checks take the form of customer-balance
monitoring by the administrative department, whose procedures also regulate provisions for overdue
receivables at regular intervals.
The concentration of trade credit risks is limited by virtue of the Group’s broadly based and uncorrelated
customer portfolio. For this reason, management believes that no further provisions for credit risks will be
necessary beyond the amounts normally provided for uncollectible and doubtful receivables.
Counterpart risk
Exchange- and interest-rate instruments are transacted only with counterparts with high ratings, selected on
the basis of a number of criteria: ratings attributed by specialist agencies, assets and equity as well as the
nature and maturity of transactions. The majority of counterparts are leading international banks.
No financial instruments are negotiated with counterparts in geographical regions exposed to political or
financial risks (all counterparts are in Western Europe or in the USA).
At December 31, 2010, the amount of 217.7 million euro due to Italcementi S.p.A. from the Calcestruzzi group
(on intercompany current accounts) presented no risks other than that already contemplated when the
Italcementi interest in the Calcestruzzi group was tested for impairment.
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