AnnuAl report 2010 - ZSSK Cargo

there is no active market, fair value is
determined using valuation techniques.
Such techniques may include using recent
arm’s length market transactions;
reference to the current fair vale of another
instrument that is substantially the
same; discounted cash flow analysis or
other valuation models.
Impairment of financial assets
The Company assesses at each balance
sheet date whether there is any objective
evidence that a financial asset or
a group of financial assets is impaired.
a financial asset or a group of financial
assets is deemed to be impaired if, and
only if, there is objective evidence of
impairment as a result of one or more
events that has occurred after the initial
recognition of the asset (an incurred
‘loss event’) and that loss event has an
impact on the estimated future cash
flows of the financial asset or the group
of financial assets that can be reliably
estimated. Evidence of impairment may
include indications that the debtors
or a group of debtors is experiencing
significant financial difficulty, default
or delinquency in interest or principal
payments, the probability that they
will enter bankruptcy or other financial
reorganisation and where observable
data indicate that there is a measurable
decrease in the estimated future
cash flows, such as changes in arrears
or economic conditions that correlate
with defaults.
Classification and derecognition of
financial instruments
Financial assets and financial liabilities
carried on the balance sheet include
cash and cash equivalents, trade and
other accounts receivable and payable
and loans and borrowings. The accounting
policies on recognition and measurement
of these items are disclosed in the
respective accounting policies found in
this Note.
Financial instruments (including compound
financial instruments) are classified
as assets, liabilities or equity
in accordance with the substance of
the contractual agreement. Interest,
dividends, gains, and losses relating
to a financial instrument classified as
a liability, are reported as expense or
income as incurred. Distributions to
holders of financial instruments classified
as equity are charged directly to
equity. In case of compound financial
instruments the liability component is
valued first, with the equity component
being determined as a residual value.
Financial instruments are offset when
the Company has a legally enforceable
right to offset and intends to settle either
on a net basis or to realize the asset
and settle the liability simultaneously.
The derecognition of a financial asset
takes place when the Company no longer
controls the contractual rights that
comprise the financial asset, which is
normally the case when the instrument
is sold, or all the cash flows attributable
to the instrument are passed through to
an independent third party. a financial
liability is derecognized when the obligation
under the liability is discharged or
cancelled or expires.
Derivative financial instruments and
hedging activities
The Company uses derivative financial
instruments such as forwards, options
and swaps to hedge its risks related to
foreign currency fluctuations. Such derivative
financial instruments are initially
recognized at fair value on the date on
which a derivative contract is entered
into and are subsequently remeasured
at fair value. Derivatives are carried as
assets when the fair value is positive
and as liabilities when the fair value is
negative. any gains or losses arising from
changes in the fair value of derivatives
are taken directly to the income statement
as finance income or costs.
The fair value of forward currency
contracts is calculated by reference
to current forward exchange rates for
contracts with similar maturity profiles.
an embedded derivative is separated
from the host contract and accounted
for as a derivative if all of the following
conditions are met:
• The economic characteristics and
the risks of the embedded derivative
are not closely related to the
economic characteristics of the host
contract.
• a separate instrument with the same
terms as the embedded derivative
would meet the definition of a derivative.
• a hybrid (combined) instrument is not
measured at fair value with changes
in fair value reported in current
period net profit.
Hedging
Hedge accounting recognizes the offsetting
effects of changes in the fair
values of the hedging instrument and
the hedged item in profit/loss for the
period. For the purpose of hedge accounting,
hedges are classified as:
• Fair value hedge,
• Cash flow hedge
at the inception of the hedge the Company
formally designates and documents
the hedging relationship to which it wishes
to apply hedge accounting and the
risk management objective and strategy
for undertaking the hedge. The docu-
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