Annual Report 2012 - Investor Relations

Notes to the consolidated financial statements531.4 Recognition of revenueRevenue consists of all the proceeds from sales derived from thedelivery of products and services to third parties less price reductionsand rebates, discounts, transport costs and value added tax.As a general principle, proceeds from sales are recognised in theincome statement as soon as products have been shipped andthe associated benefits and risks have passed to the purchaseror the service has been provided. Revenues that reduce the costof goods and services sold are offset against the respective item.1.8 Trade accounts receivableTrade accounts receivable are recognised at the original invoicedamounts less allowances for bad debts. Allowances for bad debtsare established for receivables when there is an objective indicationthat they cannot be recovered. The carrying amount of tradeaccounts receivable is reduced by the allowances, and the respectiveprojected loss is expensed to net revenue in the consolidatedincome statement. Trade accounts receivable that are uncollectibleare derecognised via allowances or via the income statement.1.5 Cash and cash equivalentsCash and cash equivalents comprise cash on hand, cash in bankaccounts and postal accounts as well as short-term bank depositssuch as call money and time-deposit investments with an originaltime to maturity of three months or less and which are convertibleto known amounts of cash at any time. This definition is also usedfor the consolidated cash flow statement. Cash and cash equivalentsare reported at nominal values.1.6 SecuritiesThe securities of current assets are reported at fair value. For listedsecurities, this corresponds to the stock market price on thebalance sheet reporting date. Non-listed securities of current assetsare presented at acquisition cost less any value adjustments.Changes in value are shown in the result for the period.1.7 Derivative financial instruments and hedging transactionsThe Group uses derivative financial instruments primarily to hedgerisks related to changes in interest rates, foreign currencies andpulp prices. Derivative financial instruments primarily comprise forwardexchange contracts, interest futures and pulp swaps.Derivative financial instruments are differentiated according to variousmotives: Derivatives held for trading purposes are reportedat the value prevailing on the reporting date. The changes in valuesince the last valuation are recognised in the result for the period.Derivatives held for hedging purposes are also valued at fairvalues. The changes in value of derivatives classified as hedginginstruments for future cash flows are recognised in shareholders’equity in the “Fair value reserves” item without any impact on income.The changes in value of the hedging transaction recognisedin shareholders’ equity are recognised in the income statementfor the period in which the cash flow from the hedged underlyingtransaction is recognised.1.9 InventoriesInventories are carried at the lower of acquisition or productioncost or net market value. The measurement is based on the averagevalue method. The production costs of work in progress andfinished goods include raw and ancillary materials, direct labourcosts, other directly allocatable costs as well as production overheadsassociated with manufacturing. Financing costs are not includedin production costs. Discounts are recognised as procurementprice reductions. The net market value is the estimated salesproceeds less the product’s costs of completion and sale. The valuesof inventories that are difficult to sell and inventories with alower net market value are adjusted. The Group determines thevalue adjustments for inventories that are difficult to sell using pastexperience. The corresponding expected loss is expensed to the“cost of goods and services sold” item in the consolidated incomestatement. If it is foreseeable that the value-adjusted inventoriescan be used, their value is retroactively adjusted by writing up theinventory asset to the lower of the estimated net market value orthe original acquisition or production cost.Prepayments received from customers for inventories are reportedunder “other current liabilities”. Prepayments effected for thedelivery of inventory asset items are recognised under “inventories”.1.10 Financial assetsFinancial assets are shown at historical cost less impairments. Impairmentsare recognised in the period result in income.