THE NATURE OF OUR BUSINESS – STABLE GROWTH - Symrise

If the requirements of IAS 39 with regard to hedge accounting are
fulfilled, Symrise AG designates and documents such hedging relationships
thereafter as cash flow hedges. In the case of a cash
flow hedge, variable cash flows to be paid or to be received relating
to a recognized asset or recognized liability or highly probable
future cash flows are hedged. The documentation of the hedging
relationship includes risk management objectives and strategies,
the nature of the hedging relationship, the nature of the risk being
hedged, the relationship between the hedging instrument and the
hedged item and also a description of the method used to assess
the effectiveness of the hedge. The hedging relationships are assessed
as being highly effective in achieving compensation for
risks deriving from changes in fair value or cash flows attributable
to the hedged risk and are regularly examined to ensure whether
they are highly effective during the whole reporting period for
which they are designated.
Changes in the fair value of the derivatives are either recognized
in the result or recognized in equity as a component of other reserves.
Changes in the fair value of derivative instruments that are
allocated to a cash flow hedge are initially recognized in equity in
the amount of the portion that is determined to be an effective
hedge. The ineffective portion of the change in fair value is recognized
directly as part of the financial result. The transfer to the income
statement occurs at the same time as the impact deriving
from the hedged item is recognized in profit or loss.
If derivative financial instruments are not part of, or are no longer
considered to be part of, a hedge accounting relationship because
the conditions for hedge accounting are not fulfilled, or are no
longer fulfilled, then these are classified as held for trading.
The fair value of interest swaps is calculated from the present value
of the future payments, based on publicly quoted interest rates,
using mathematical models for financial valuation.
Non-derivative financial instruments
Non-derivative financial instruments comprise share interests, trade
and other receivables, cash and cash equivalents, and loans as well
as trade and other payables.
Non-derivative financial instruments are initially recognized at their
fair value including any directly attributable transaction costs. This
does not apply to non-derivative financial instruments included in the
category “at fair value through profit and loss,” which are recognized
solely at their fair values, and the transaction costs of which are recognized
directly in profit or loss. Following their initial recognition, nonderivative
financial instruments are treated as follows:
Annual Report 2008 Symrise AG 105
Cash and cash equivalents comprise cash balances and call deposits.
Bank overdrafts, which make up a considerable part of the Group’s
cash management facilities are considered to be a component of cash
and cash equivalents for the purposes of the cash flow statement.
Available-for-sale financial assets
Symrise holds marketable securities and other available-for-sale
financial assets to a limited extent. Financial assets that are intended
to be held for an indefinite period and which are to be sold
in response to needs for liquidity or changes in interest rates are
classified as available-for-sale and included as noncurrent assets.
However, should management express the intention of selling the
financial assets within twelve months of the balance sheet date, or
should these need to be sold in order to generate liquid funds for
operational purposes, then they are classified as current assets.
Following their initial recognition, they are recorded at their fair
value; all changes in fair value, with the exception of impairment
losses (see note 8.11) and foreign exchange gains and losses on
available-for-sale financial assets (see note 8.6), are recognized
as a component of equity. If an asset is derecognized, the cumulative
gain or loss is transferred from equity to profit or loss.
Financial assets at fair value through profit or loss
A financial instrument is measured at fair value through profit or loss
if it is held for trading or it is designated as such upon initial recognition.
Financial instruments are measured at fair value through
profit and loss when the Group manages these assets and makes decisions
to purchase or sell them based on their value in accordance
with the Group’s documented risk management or investment strategy.
Financial instruments are recognized at their fair value and any
change in their fair value is recognized in profit or loss.
Loans and receivables
The Group’s loans and receivables are financial instruments with
fixed or determinable payments that are not quoted on an active
market. After initial recognition, loans and receivables are recognized
at amortized cost applying the effective interest method,
less any impairment. Amortized costs are determined under consideration
of any premiums or discounts granted at the time of acquisition
and include all charges that form an integral part of the
effective interest rate and transaction costs. Gains and losses are
recognized in the income statement if the loans and receivables
are derecognized, impaired or amortized.
Notes