ONE ROOF

Notes to the Consolidated Financial Statements
*See glossary on page 198.
138 Annual Report 2009
All other financial assets, comprising interests in non-con-
solidated subsidiaries, other participating interests and noncurrent
securities, are classed as held for sale and are measured
at fair value where a fair value can be reliably estimated.
In the case of publicly listed financial assets, fair value is determined
as the market price. If there is no active market, fair
value is calculated using the most recent market transactions
or a valuation method such as the discounted cash flow method.
In cases where fair value cannot be measured reliably, financial
assets are reported at amortized cost. Initial measurement
is performed as of the settlement date. Unrealized gains
or losses are accounted for, after adjusting for deferred taxation,
in other comprehensive income and are reversed to income
or expense on disposal of the asset. If there is objective
evidence of impairment, the carrying amount of a financial
asset is reduced and the impairment loss recognized as an
expense. Such evidence includes a significant or prolonged
decline in fair value below cost.
Receivables and other assets are measured at amortized
cost using the effective interest rate method (accounting for
factors such as premiums and discounts). An impairment loss
is recognized if there is any objective material evidence that a
financial asset may be impaired. Objective evidence for impairment
includes, for example, downgrading of a debtor’s
credit rating and related interruptions in payment or potential
insolvency. Impairment losses are recognized according to
actual credit risk. “Receivables” comprise financial receivables,
trade receivables and other receivables. Sales are shown net
of VAT and other taxes and expected reductions such as trade
discounts and rebates. Sales of goods are recognized when:
• The significant risks and rewards of ownership of the goods
have been transferred to the buyer
• The HOCHTIEF Group retains neither continuing managerial
involvement to the degree usually associated with ownership
nor effective control over the goods sold
• The amount of revenue and the costs incurred or to be incurred
in respect of the transaction can be measured reliably
• It is probable that the economic benefits associated with the
transaction will flow to the HOCHTIEF Group.
Revenue from transactions involving the rendering of services
is recognized by reference to the stage of completion. Revenue
under construction contracts is recognized as described below.
Long-term loans (with a term of more than one year) are stated
at amortized cost. Loans yielding interest at normal market
rates are reported at face value, and non-interest-bearing and
low-interest-bearing loans are discounted to present value.
Discounting is always done using a risk-adjusted discount rate.
The accounting policies for derivatives with a positive fair value
accounted for under other assets are explained separately.
Construction contracts are reported using the percentage
of completion* (POC) method. Cumulative work done to date,
including the Group’s share of net profit, is reported under sales
on a pro rata basis according to the percentage completed.
The percentage of completion is measured as the ratio of contract
costs incurred for work performed so far to total contract
costs (cost-to-cost method). Construction contracts are reported
in trade receivables and trade payables, as “Gross
amount due from/to customers for/from contract work (POC)”.
If cumulative work done to date (contract costs plus contract
net profit) of contracts in progress exceeds progress payments
received, the difference is recognized as an asset and included
in amounts due from customers for contract work. If the net
amount after deduction of progress payments received is negative,
the difference is recognized as a liability and included in
amounts due to customers from contract work. Anticipated
losses on specific contracts are accounted for on the basis of
the identifiable risks. Construction contracts handled by construction
joint ventures are also accounted for using the POC
method. Trade receivables from construction joint ventures include
pro rata entitlements to contract net profit. Anticipated
losses are immediately recognized in full in contract net profit.
Contract income on construction contracts undertaken by the
Group independently or in construction joint ventures is recognized
in accordance with IAS 11 as the income stipulated in
the contract plus any claims and variation orders. Construction
contract receivables are realized as part of the HOCHTIEF
Group’s operating cycle. In accordance with IAS 1, they are
therefore included in current assets even though they are not
expected to be realized within twelve months of the balance
sheet date.