Annual report 2008 - Altarea Cogedim

7.17. Trade receivables and other accounts
receivable
Trade receivables and other receivables are measured at
face value less any allowances for impairment to reflect
actual possibilities of recovery.
For long-term contracts accounted for using the percentageof-completion
method, this line item includes:
• calls for funds issued but not yet settled by acquirers, for
a completed percentage of work, and
• the “amounts to be invoiced”, which correspond to calls
for funds not yet issued under off-plan sale or property
development contracts.
7.18. Financial instruments
The ALTAREA group adopted IAS 32 and 39 on 1 January
2006 and IFRS 7 on 1 January 2007.
The ALTAREA group has elected not to apply the hedge
accounting proposed in IAS 39.
At 31 December 2007, the principles of application of IAS
32 and IAS 39 were as follows:
a) Measurement and recognition of financial assets
• The assets available for sale consist of equity securities of
non-consolidated companies and are carried at fair value.
If fair value cannot be determined reliably, the securities
are carried at cost. Changes in fair value are recognised
in equity, impairment losses in income and reversals in
equity.
• The portion of loans and advances to proportionately
consolidated entities not eliminated on consolidation is
recognised at amortised cost. If there is objective evidence
of impairment on such loans and advances, an impairment
loss is recognised in the income statement.
• Derivative financial instruments are considered to be held
for trading purposes. They are measured at fair value. The
change in fair value of derivatives is recognised in the
income statement.
• The Group has no held-to-maturity assets.
• Cash includes liquid assets in bank current accounts and
holdings in money-market funds that are redeemable or
tradable in the very short term (i.e., initial maturity of less
than three months) and carry no significant risk of loss
through fluctuations in interest rates. These assets are
carried on the balance sheet at fair value. Changes in the
fair value of these instruments are recognised in income,
with a corresponding adjustment to cash.
b) Measurement and recognition of financial liabilities
• All borrowings and interest-bearing liabilities are initially
recognised at the fair value of the amount received less
directly attributable transaction costs. Thereafter, they are
carried at amortised cost using the effective interest rate
method. For this purpose, no assumption of prepayment
before maturity was made. The initial effective interest
rates were determined by an actuary. The effective interest
rates were not reviewed given the backdrop of a decline in
interest rates because the impact on the effective interest
rates was not material.
• Derivative financial instruments are considered to be
held for trading purposes. They are measured at fair
value. Changes in the fair value of these instruments are
recognised in the income statement if the requirements
for hedge accounting are not met.
• The portion of borrowings and financial liabilities due in
less than one year is shown under current liabilities.
• Security deposits paid by shopping centre tenants are not
discounted.
c) Determination of the fair value of financial instruments
(other than interest-bearing debt)
Financial assets and liabilities are initially recognised at
cost, which corresponds to the fair value of the price paid
plus acquisition-related costs. After initial recognition, such
assets and liabilities are recognised at fair value.
For financial assets and liabilities such as listed shares that
are actively traded on organised financial markets, fair value
is determined by reference to the published market price at
the balance sheet date.
For other financial assets and liabilities such as OTC
derivatives, swaps, caps, etc. that are traded on active
markets (market composed of numerous transactions,
continuously displayed and traded prices), fair value is
estimated by an actuary using commonly accepted models.
A mathematical model is used to bring together calculation
methods based on recognised financial theories.
As a last resort, the Group measures financial assets and
liabilities at cost less potential impairment.
The net realisable value of financial instruments may differ
from the fair value calculated at the balance sheet date of
each financial year.
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