2012 Annual Report - Italcementi Group

1.23. Derivatives
The company uses derivatives such as foreign currency forward contracts, swaps and options to hedge
currency and interest-rate risks. Derivatives are measured and recognized at fair value.
The fair value of foreign currency forward contracts is determined on the basis of the current forward exchange
rates for contracts with similar maturity profiles.
The fair value of interest-rate contracts is determined on the basis of discounted flows using the zero coupon
curve.
Hedging transactions
Derivatives are designated as hedging instruments or as non-hedging instruments. Transactions that qualify for
application of hedge accounting are classified as hedging transactions; other transactions are designated as
trading transactions, even if they are performed for the purposes of risk management.
For accounting purposes, hedging transactions are classified as “fair value hedges” if they cover the risk of
changes in the fair value of the underlying asset or liability; or as "cash flow hedges” if they hedge cash flows
arising from an existing asset or liability or from a future transaction, which are exposed to variability.
With regard to fair value hedges, fair value gains and losses on the derivatives are taken to the income
statement immediately. Similarly, the underlying assets or liabilities are measured at fair value and any gain or
loss attributable to the hedged risk is recognized as an income or expense balancing entry.
If the movement refers to an interest-bearing financial instrument, it is amortized in the income statement until
maturity.
With regard to cash flow hedges (foreign currency forward contracts, fixed-rate interest swaps), the effective
component of a change in the fair value of the hedging instrument is reflected in a separate equity item, while
time-based changes and the non-effective hedge component are recognized in the income statement. The
effective component and non-effective component are calculated using the methods indicated in IAS 39.
Gains or losses arising from changes in the fair value of derivatives designated for trading are recorded as
income or expense.
When the financial instrument matures, is sold, settled, exercised or no longer qualifies for hedge accounting,
the derivative is no longer treated as a hedging contract. In this case, gains or losses on the derivative are
retained in equity until the hedged transaction takes place. If the company no longer expects the hedged
transaction to take place, the net gain or loss in equity is taken to the income statement.
1.24. Revenue, other revenue, interest income and dividends
Sale of goods and services
Revenue is recognized to the extent that it is probable that the economic benefits associated with the sale of
goods or rendering of services are collected by the company and the amount in question can be reliably
determined.
Revenue is recognized at the fair value of the consideration received or due, taking account of any trade
discounts given and volume discounts.
Revenues from the sale of goods is recognized when the company transfers the material risks and rewards
incidental to ownership of the goods to the purchaser.
Rental income
Rental income is recognized as other revenue, as received.
Interest income
Interest income is classified as finance income on an accruals basis using the effective interest method.
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