2011 Annual Report - Italcementi Group

2011 Annual Report
Presentation 4
General information 15
Annual Report Consolidated Annual Report Directors’ report 28
Extraordinary session Italcementi S.p.A. Annual Report Consolidated financial statements 63
22.3.2 Fair value – hierarchy
In determining and documenting the fair value of financial instruments, the Group uses the following hierarchy
based on different measurement methods:
level 1: financial instruments with prices quoted on active markets;
level 2: prices quoted on active markets for similar financial instruments, or fair value determined with other
measurement methods where all significant inputs are based on observable market data;
level 3: fair value determined with measurement methods where no significant input is based on observable
market data.
At December 31, 2011, financial assets and liabilities stated at fair value were subdivided as follows:
December 31,
2011
Level 1 Level 2 Level 3
(in millions of euro)
Mutual funds (note 38.1) 252.0 252.0
Derivatives - assets (note 22.3.1) 101.2 101.2
Equity investments, bonds and financial assets 9.1 9.1
Other equity investments (note 9) 88.2 35.1 53.1
Derivatives - liabilities (note 22.3.1) 37.3 37.3
Purchase commitments on non-controlling interests (note 23) 67.8 67.8
No portfolio reclassifications of financial assets from categories measured at fair value to categories measured
at amortized cost were made by the Group, either in 2011 or in 2010.
22.4 Interest-rate risk management
The Group interest-rate risk management policy is designed to minimize the cost of net financial liabilities and
reduce exposure to fluctuation risks. It hedges two types of risk:
1. The risk of variations in the market value of fixed-rate borrowing and lending transactions. Group fixed-rate
debt is exposed to an “opportunity cost” risk in the event of a fall in interest rates. A change in interest rates will
affect the market value of fixed-rate assets and liabilities and impact the consolidated profit or loss in the event
of liquidation or early repayment of these instruments;
2. The risk linked to future flows arising from floating-rate borrowing and lending transactions. A change in
interest rates will have a negligible impact on the market value of floating-rate financial assets and liabilities but
will affect finance costs and, consequently, future profits.
The Group manages this dual risk as part of its general policy, performance targets and risk reduction targets
by giving priority to hedges on future flows over the short- and medium-term and to hedges against the market
value risk over the long term, within the specified limits.
It hedges interest-rate risks mainly by arranging interest-rate swaps, forward-rate agreements and interest-rate
options with top-ranking banks. Exposure in derivatives may never exceed the value of the underlying.
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