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Part 3 - Financial Statements
65
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
removed 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
Company are measured at their fair value net of
issuance costs.
Loans & borrowings
Loans and borrowings are initially recognized at fair
value, plus or minus transaction costs. They are
subsequently measured at amortized cost using the
effective interest method. Any subsequent change in
value between the fair value and the settlement value
(including the redemption premium to be received or
paid) is recognized in the income statement over the
period of the borrowing (effective interest rate method).
The borrowing issuance costs related to mixed facilities
including debt and bank guarantee lines agreement
are prorated between the different lines and presented
in deduction of the financial liabilities on the balance
sheet.
Amounts borrowed as part of the “Credit Revolving
Facility” are accounted for under ‘Non-current Financial
Liabilities’ when the maturity of those borrowing are
above one year and the Group has the possibility to
roll-over them at its discretion.
Derivative Financial Instruments
The Group enters into derivative financial instruments to
manage its exposure to interest rate risks arising from
financing activities and foreign exchange rate risks
arising from operational activities (cash flow hedges).
The Group’s policy is not to enter into speculative
transactions nor issue or hold financial instruments for
negotiation purposes.