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The fair values of quoted investments are based on current bid prices.If the market for a financial asset is not active or if the assets compriseunlisted securities, the Group establishes fair value by using valuationtechniques which include the use of recent arm’s-length transactions,reference to other instruments that are substantially the same anddiscounted cash flow analysis refined to reflect the issuer’s specificcircumstances.(b) Loans and receivablesLoans and receivables are non-derivative financial assets held with nointention of trading and which have fixed or determinable paymentsthat are not quoted in an active market. They are included in trade andother receivables within current assets, except for maturities greaterthan twelve months which are classified as other non-current assets.(c) Held-to-maturity investmentsHeld-to-maturity investments are non-derivative financial assets withfixed or determinable payments and fixed maturities that the Grouphas the intention and ability to hold to maturity. The Group did nothold any investments in this category during the year.2.9. Other non-current assetsThe Group holds a collection of jewellery and watch pieces primarilyfor presentation purposes to promote the Maisons and their history.They are not intended for sale.Maisons’ collection pieces are held as non-current assets at cost lessany permanent impairment in value.2.10. InventoriesInventories are stated at the lower of cost or net realisable value. Netrealisable value is the estimated selling price in the ordinary course ofbusiness, less applicable variable selling expenses. Cost is determinedusing either a weighted average or specific identification basis dependingon the nature of the inventory. The cost of finished goods and workin progress comprises raw materials, direct labour, related productionoverheads and, where applicable, duties and taxes. It excludesborrowing costs.2.11. Trade and other receivablesTrade and other receivables are recognised initially at fair value andsubsequently measured at amortised cost using the effective interestmethod, less provision for impairment. A provision for impairmentof trade receivables is established when there is objective evidence thatthe Group will not be able to collect all amounts due according to theoriginal terms of the receivables. The amount of the provision is thedifference between the asset’s carrying amount and the present valueof estimated future cash flows, discounted at the effective interest rate.The movement of the provision is recognised in the income statement.2.12. Cash and cash equivalentsCash and cash equivalents includes cash on hand, deposits held at callwith banks, other short-term highly liquid investments with originalmaturities of three months or less and bank overdrafts.2.13. Equity(a) Share capitalOrdinary shares are classified as equity. Incremental costs directlyattributable to the issue of new shares are recognised as a deductionfrom equity, net of any tax effects.(b) Treasury sharesAll consideration paid by the Group in the acquisition of treasuryshares and received by the Group on the disposal of treasury sharesis recognised directly in shareholders’ equity. The cost of treasuryshares held at each balance sheet date is deducted from shareholders’equity. Gains or losses arising on the disposal of treasury shares arerecognised within retained earnings directly in shareholders’ equity.2.14. BorrowingsBorrowings are recognised initially at fair value, net of transactioncosts incurred. Borrowings are subsequently stated at amortised cost;any difference between the proceeds (net of transaction costs) andthe redemption value is recognised in the income statement overthe period of the borrowings using the effective interest method.Borrowings are classified as current liabilities unless the Group hasan unconditional right to defer settlement of the liability for at leasttwelve months after the balance sheet date.2.15. Current and deferred income taxTaxes on income are provided in the same period as the revenue andexpenses to which they relate. Current taxes include capital taxes ofsome jurisdictions.Deferred income tax is provided using the liability method, ontemporary differences arising between the tax bases of assets andliabilities and their carrying amounts in the consolidated financialstatements. Deferred income tax is not accounted for if it arises frominitial recognition of an asset or liability in a transaction, other thana business combination, that at the time of the transaction affectsneither accounting nor taxable profit or loss. Deferred income taxis determined using tax rates (and laws) that have been enacted orsubstantially enacted by the balance sheet date and are expected toapply when the related deferred income tax asset is realised or thedeferred income tax liability is settled.Deferred income tax assets are recognised to the extent that it isprobable that future taxable profit will be available against whichthe temporary differences and the carry forward of unused tax lossescan be utilised.Deferred income tax is provided on temporary differences arisingon investments in subsidiaries, joint ventures and associates, exceptwhere the Group controls the timing of the reversal of the temporarydifference and it is probable that the temporary difference will notreverse in the foreseeable future.2.16. Employee benefits(a) Retirement benefit obligationsThe Group operates a number of defined benefit and definedcontribution post-employment benefit plans throughout theworld. The plans are generally funded through payments to trusteeadministeredfunds by both employees and relevant Group companiestaking into account periodic actuarial calculations. A defined benefitplan is a pension plan that defines an amount of pension benefit thatan employee will receive post-employment, usually dependent on oneor more factors such as age, years of service and compensation.Richemont Annual Report and Accounts 2009 63Consolidated financial statements