Annual Accounts and Report as at 30 June 2011 Draft - Mediobanca

Section 3Significant accounting policiesFinancial assets held for tradingThis category comprises debt securities, equities, and the positive value ofderivatives held for trading including those embedded in complex instrumentssuch as structured bonds (recorded separately).At the settlement date for securities and subscription date for derivatives,such assets are recognized at fair value not including any transaction expenses orincome directly attributable to the asset concerned, which are taken through theprofit and loss account.After initial recognition they continue to be measured at fair value, which forlisted instruments is calculated on the basis of market prices ruling at thereporting date (Level 1 assets). If no market prices are available, other valuationmodels are used (Level 2 assets) based on market-derived data, e.g. valuations oflisted instruments with similar features, discounted cash flow analysis, optionprice calculation methods, or valuations used in comparable transactions, oralternatively valuations based on internal estimates (Level 3 assets). Equities andlinked derivatives for which it is not possible to reliably determine fair valueusing the methods described above are stated at cost (these too qualify as Level 3assets). If the assets suffer impairment, they are written down to their currentvalue.Gains and losses upon disposal and/or redemption and the positive andnegative effects of changes in fair value over time are reflected in the profit andloss account under the heading Net trading income.AFS securitiesThis category includes all financial assets apart from derivatives not bookedunder the headings Financial assets held for trading, Financial assets held tomaturity or Loans and receivables.292 –