Annual report 2005 - Xeikon

Financial liabilities
The group classifies its financial liabilities into one of two
categories, depending on the purpose for which the
liability was acquired. Other than financial liabilities in a
qualifying hedging relationship, the group’s accounting
policy for each category is as follows:
Fair value through profit or loss
This category comprises only out-of-the-money derivatives.They
are carried in the balance sheet at fair
value with changes in fair value recognised in the
income statement.
Other financial liabilities
Other financial liabilities include the following items:
Trade payables and other short-term monetary
liabilities, which are recognised at amortised cost. Bank
borrowings drawn by the group are initially recognised
at the amount advanced net of any transaction costs
directly attributable to the issue of the instrument.
Such interest bearing liabilities are subsequently
measured at amortised cost using the effective
interest rate method, which ensures that any interest
expense over the period to repayment is at a constant
rate on the balance of the liability carried in the balance
sheet. “Interest expense” in this context includes initial
transaction costs and premiums payable on redemption,
as well as any interest or coupon payable while the
liability is outstanding.
Share-based payments
Where share options are awarded to employees, the fair
value of the options at the date of grant is charged to the
income statement over the vesting period. Non-market
vesting conditions are taken into account by adjusting
the number of equity instruments expected to vest at
each balance sheet so that, ultimately, the cumulative
amount recognised over the vesting period is based
on the number of options that eventually vest. Market
vesting conditions are factored into the fair value
of the options granted. As long as all other vesting
conditions are satisfied, a charge is made irrespective of
whether the market vesting conditions are satisfied. The
cumulative expense is not adjusted for failure to achieve
a market vesting condition.
Where the terms and conditions of options are modified
before they vest, the increase in the fair value of the
options, measured immediately before and after the
modification, is also charged to the income statement
over the remaining vesting period.
On December 31, 2005 the group did not apply the
principles of hedge accounting.
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