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Hamon Annual Report 2012
value, without however being higher than the carrying
amount which would have been determined if no impairment
had been recognized for this asset (cash flow
generating unit) during previous periods.
3.4.3 Lease Agreements
Capital Leases
A lease is classified as a finance lease if it substantially
transfers the entire risks and rewards incidental to
ownership to the lessee. The other lease agreements
are classified as operating leases.
At the commencement of the lease term, the Group
recognizes finance leases as assets and liabilities in its
balance sheet at amounts equal to the lower of fair
value of the leased property or the present value of
the minimum lease payments, each determined at the
inception of the lease. The corresponding liability is
posted in the obligations under finance leases. The
minimum lease payments are apportioned between the
finance charge and the reduction of the outstanding
liability. The finance charge is allocated to each period
during the lease term so as to obtain a constant periodic
interest rate on the remaining balance of the liability.
Leased assets are depreciated over their estimated
useful live consistently with the method applicable to
similar depreciable assets owned by the Group.
Operating Leases
Lease agreements that do not substantially transfer the
entire risks and rewards incidental to ownership to the
lessee are classified as operating leases. The lease
payments are recognized as an expense on a straightline
basis over the period of the rental agreement.
3.4.4 Financial Assets and Liabilities
Financial assets or liabilities are recognized on the
balance sheet at the date of the transaction, which
corresponds to the date on which the entity contractually
commits to buy or sell an asset.
When a financial asset or financial liability is recognized
initially, it is measured at its fair value plus (in case of
financial asset) or minus (in case of financial liability)
transaction costs except for financial assets at fair
value through income statement.
Fair value is defined as the amount for which an asset
could be exchanged or a liability settled between
knowledgeable willing parties in an arm’s length
transaction. Fair value of a financial liability will be for
instance, the cash received from the lenders when the
liability is issued.
There are four categories of financial assets:
■ Financial assets at fair value through profit or loss
(designated by the entity or classified as held for
trading);
■ Held-to-maturity investments;
■ Loans and receivables;
■ Available-for-sale financial assets.
There are two categories of financial liabilities:
■ Financial liabilities at fair value through profit or loss;
■ Other financial liabilities measured at amortized cost.
Subsequently,
■ the fair value changes in financial assets and liabilities
at fair value through profit or loss are recognized
through the income statement.
■ the fair value changes in available for sale assets are
recognized directly in the equity until the asset is sold
or is identified as impaired. Then the cumulative gain/
loss that had been recognized in equity shall be r
emoved and recognized in income statement.
■ investments in equity instruments that are not quoted
in an active market and whose fair value cannot be
reliably measured by an alternative pricing method
are evaluated at cost.
■ loans and receivables, held-to-maturity Investments
and other financial liabilities are measured at amortized
cost using the effective interest rate method, except
for fixed term/time deposits, which are valued at cost.
The effective interest rate is the rate that exactly
discounts estimated future net cash settlements or
receipts through the expected life of the financial asset
or liability to its net carrying amount.
Trade and Other Receivables (Payables)
Receivables and payables are recognized using the
amortized cost method i.e. the discounted value of the
receivable. Appropriate impairment losses are recognized
on receivables in case of expected default of payments.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and
demand deposits together with short-term, highly liquid
investments, that are readily convertible into a known
amount of cash, that have a maturity of three months or
less, and that are subject to an insignificant risk of
change in value. These elements are taken into the
Balance Sheet at their nominal value. Bank overdrafts
are included in the current financial liabilities.
Equity Instruments
Any contract that evidences a residual interest in the
assets of an entity after deducting all of its liabilities is
an equity instrument. Equity instruments issued by the