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Notes to the consolidated financial statements continued• IAS 28 (Amendment), Investments in Associates (and consequentialamendments to IAS 32, Financial Instruments: Presentation, andIFRS 7, Financial Instruments: Disclosures) (effective from 1 January2009). The amendment is part of the IASB’s annual improvementsproject published in May 2008. An investment in an associate istreated as a single asset for the purposes of impairment testing. Anyimpairment loss is not allocated to specific assets included withinthe investment, for example, goodwill. Reversals of impairment arerecorded as an adjustment to the investment balance to the extentthat the recoverable amount of the associate increases. The Groupwill apply the IAS 28 (Amendment) to impairment tests related toinvestments in associates and any related impairment losses from1 April 2009.• IAS 36 (Amendment), Impairment of Assets (effective from1 January 2009). The amendment is part of the IASB’s annualimprovements project published in May 2008. Where fair valueless costs to sell is calculated on the basis of discounted cash flows,disclosures equivalent to those for value-in-use calculation shouldbe made. The Group will apply the IAS 36 (Amendment) andprovide the required disclosure where applicable for impairmenttests from 1 April 2009.• IAS 19 (Amendment), Employee Benefits (effective from 1 January2009). The amendment is part of the IASB’s annual improvementsproject published in May 2008.– The amendment clarifies that a plan amendment that resultsin a change in the extent to which benefit promises are affectedby future salary increases is a curtailment, while an amendmentthat changes benefits attributable to past service gives rise to anegative past service cost if it results in a reduction in the presentvalue of the defined benefit obligation.– The definition of return on plan assets has been amended to statethat plan administration costs are deducted in the calculation ofreturn on plan assets only to the extent that such costs have beenexcluded from measurement of the defined benefit obligation.– The distinction between short-term and long-term employeebenefits will be based on whether benefits are due to be settledwithin or after twelve months of employee service being rendered.– IAS 37 Provisions, Contingent Liabilities and Contingent Assetsrequires contingent liabilities to be disclosed, not recognised.IAS 19 has been amended to be consistent.The Group will apply the IAS 19 (Amendment) from 1 April 2009.• IAS 39 (Amendment), Financial Instruments: Recognition andMeasurement (effective from 1 January 2009). The amendmentis part of the IASB’s annual improvements project published inMay 2008.– The definition of financial asset or financial liability at fair valuethrough profit or loss as it relates to items that are held for tradingis also amended. This clarifies that a financial asset or liabilitythat is part of a portfolio of financial instruments managedtogether with evidence of an actual recent pattern of short-termprofit-taking is included in such a portfolio on initial recognition.– The current guidance on designating and documenting hedgesstates that a hedging instrument needs to involve a party externalto the reporting entity and cites a segment as an example of areporting entity. This means that in order for hedge accounting tobe applied at segment level, the requirements for hedge accountingare currently required to be met by the applicable segment.The amendment removes the example of a segment so that theguidance is consistent with IFRS 8, Operating Segments whichrequires disclosure for segments to be based on informationreported to the chief operating decision-maker.– When re-measuring the carrying amount of a debt instrumenton cessation of fair value hedge accounting, the amendmentclarifies that a revised effective interest rate (calculated at thedate fair value hedge accounting ceases) is used.The Group will apply the IAS 39 (Amendment) from 1 April 2009.It is not expected to have an impact on the Group’s income statement.• IAS 1 (Amendment), Presentation of Financial Statements (effectivefrom 1 January 2009). The amendment is part of the IASB’s annualimprovements project published in May 2008. The amendmentclarifies that some rather than all financial assets and liabilitiesclassified as held for trading in accordance with IAS 39, FinancialInstruments: Recognition and Measurement, are examples ofcurrent assets and liabilities respectively. The Group will applythe IAS 1 (Amendment) from 1 April 2009. It is not expectedto have an impact on the Group’s financial statements.• IFRIC 13, Customer Loyalty Programmes addresses the accountingby entities that operate or otherwise participate in customer loyaltyprogrammes with their customers. This interpretation does not haveany impact on the consolidated financial statements.• IFRIC 16, Hedges of a Net Investment in a Foreign Operation(effective from 1 October 2008). IFRIC 16 clarifies the accountingtreatment in respect of net investment hedging. This includes thefact that net investment hedging relates to differences in functionalcurrency not presentation currency, and hedging instruments maybe held anywhere in the Group. The requirements of IAS 21,The Effects of Changes in Foreign Exchange Rates do apply tothe hedged item. The Group will apply IFRIC 16 from 1 April2009. It is not expected to have a material impact on the Group’sfinancial statements.– This amendment clarifies that it is possible for there to bemovements in to and out of the fair value through profit orloss category where a derivative commences or ceases to qualifyas a hedging instrument in cash flow or net investment hedge.66 Richemont Annual Report and Accounts 2009Consolidated financial statements
• IAS 28 (Amendment), Investments in Associates (and consequentialamendments to IAS 32, Financial Instruments: Presentation and IFRS 7,Financial Instruments: Disclosures) (effective from 1 January 2009).The amendment is part of the IASB’s annual improvements projectpublished in May 2008. Where an investment in associate is accountedfor in accordance with IAS 39, Financial Instruments: Recognitionand Measurement, only certain rather than all disclosure requirementsin IAS 28 need to be made in addition to disclosures required byIAS 32, Financial Instruments: Presentation and IFRS 7, FinancialInstruments: Disclosures. The amendment will not have an impacton the Group’s operations because it is the Group’s policy for aninvestment in an associate to be equity accounted in the Group’sconsolidated accounts.• IAS 38 (Amendment), Intangible Assets (effective from 1 January2009). The amendment is part of the IASB’s annual improvementproject published in May 2008. The amendment deletes the wordingthat states that there is rarely if ever support for use of a methodthat results in a lower rate of amortisation than the straight-linemethod. The amendment will not have an impact on the Group’soperations, as all intangible assets are amortised using the straightlinemethod.• IAS 20 (Amendment), Accounting for Government Grants andDisclosure of Government Assistance (effective from 1 January2009). The benefit of a below-market rate government loan ismeasured as the difference between the carrying amount inaccordance with IAS 39, Financial Instruments: Recognition andMeasurement and the proceeds received with the benefit accountedfor in accordance with IAS 20. The amendment will not have animpact on the Group’s operations as there are no loans receivedor other grants from the government.• IFRIC 15, Agreements for the Construction of Real Estateprovides guidance on how to determine whether an agreementor the construction of real estate is within the scope of IAS 11,Construction Contracts or IAS 18, Revenue and when revenue fromthe construction should be recognised. The Group will apply IFRIC15 from 1 April 2009. It is not expected to have any impact on theGroup’s financial statements.• IFRIC 17, Distribution of Non-cash Assets to Owners clarifiesthat non-cash distributions to owners should be measured at thefair value of the assets distributed. The Group will apply IFRIC 17from 1 April 2010. It is not expected to have a material impact onthe Group’s financial statements.• IFRIC 18, Transfer of Assets from Customers clarifies the treatmentof agreements in which an entity receives an item of property,plant and equipment from a customer to connect to an ongoingsupply of goods and services. The Group will apply IFRIC 18 from1 April 2010. It is not expected to have any impact on the Group’sfinancial statements.• IFRS 7 (Amendment), Improving Disclosures about FinancialInstruments. The amendment requires additional disclosures inrespect of financial instruments based on a three tier hierarchy forfair value measurement disclosures. It also clarifies and enhancesto ensure the existing requirements for liquidity risk disclosureso that users of the financial statements can evaluate the natureand extent of liquidity risk related to financial instruments. TheGroup will apply the amendments to IFRS 7 from 1 April 2010.It is expected to lead to changes in the disclosures relating tofinancial instruments.3. Financial risk management3.1. Financial risk factorsThe Group’s activities expose it to a variety of financial risks: marketrisk (including foreign exchange risk, price risk, cash flow and fairvalue interest rate risk), credit risk and liquidity risk. The Group’soverall risk management programme focuses on the unpredictabilityof financial markets and seeks to minimise potential adverse effectson the Group’s financial performance. The Group uses derivativefinancial instruments to hedge certain risk exposures.Financial risk management is carried out by a central treasurydepartment (‘Group Treasury’) under policies approved by theBoard. Group Treasury identifies, evaluates and hedges financialrisks in close co-operation with the Group’s operating units.The Board has approved formal written principles for overallrisk management, as well as written policies covering specificareas, such as foreign exchange risk, interest rate risk, credit risk,use of derivative and non-derivative financial instruments, andinvesting excess liquidity.(a) Market risk(i) Foreign exchange riskThe Group operates internationally and is exposed to foreign exchangerisk arising from various currency exposures, primarily with respectto the Swiss franc, US dollar, HK dollar and Japanese yen. Foreignexchange risk arises from future commercial transactions, recognisedassets and liabilities and net investments in foreign operations.Entities in the Group use forward contracts to manage theirforeign exchange risk arising from recognised assets and liabilities.Foreign exchange risk arises when recognised assets and liabilities aredenominated in a currency that is not the entity’s functional currency.Group Treasury oversees the management of the net position in eachforeign currency by using external forward currency contracts.External foreign exchange contracts are designated at Group level ashedges of foreign exchange risk on specific assets, liabilities or futuretransactions on a gross basis.The Group’s financial risk management policy is to hedge up to70 per cent of anticipated net cash flow exposure arising in USdollars, HK dollars, SG dollars and Japanese yen for the subsequenttwelve months. A significant portion of projected sales in each majorcurrency qualifies as ‘highly probable’ forecast transactions for hedgeaccounting purposes.Richemont Annual Report and Accounts 2009 67Consolidated financial statements
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Financial and operating highlights
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BUSINESS DEVELOPMENTWhilst the year
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JewelleryMaisonsKey resultsSales (
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Exceptional client service remains
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SpecialistWatchmakersKey resultsSal
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Established 1845Altenberger Strasse
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Page 29 and 30: Established 19837 rue de MoussyPari
Page 32 and 33: Financial reviewRICHARD LEPEU, GROU
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Page 36 and 37: Sales by distribution channelin €
Page 38 and 39: Summarised balance sheetin € mill
Page 40 and 41: Corporate responsibilityRichemont h
Page 42 and 43: Corporate governanceGENERAL PRINCIP
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Page 60 and 61: Consolidated statement of changes i
Page 62 and 63: Notes to the consolidated financial
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Page 112 and 113: Compagnie Financière Richemont SAN
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Notice of meetingThe Annual General
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www.richemont.com
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