ANNUAL FINANCIAL REPORT 2010 2010 - TiGenix

future against which they may be applied. In this regard, in thebalance sheet, Cellerix did not record any deferred tax asset ortax credit arising from tax loss carry forward or tax deductionspending application, given that Cellerix has not initiated theproduct marketing phase, and therefore, to date does not haverevenues from its core business on which to base forecasts oflikely future financial earnings.Equity instrumentsAn equity instrument represents a share in the net assetsof Cellerix after deducting all of its liabilities. The capitalinstruments issued by Cellerix are recorded under equity at theamount received net of the costs of the issue.Own shares acquired by Cellerix are recorded directly as areduction in equity, at the value of the consideration paid. Gainsor losses arising on the purchase, sale, issue or amortisation ofown equity instruments are booked directly to equity and noamount is ever recorded in this respect in the comprehensiveincome statement.Derivative instrumentsCellerix does not have any derivative financial instruments.Share-based paymentsThe shares option plans granted to certain directors, managersand employees are recorded under equity as the operationwill be carried out, where applicable, through the purchase ofCellerix’ own shares.Both the services provided and the increase in equity aremeasured at the fair value of the equity instruments granted(share options) at the date the award is agreed.Foreign currency translationTransactions in foreign currencies are converted to euro at therate of exchange in effect on the date of the transaction.Monetary assets and liabilities held in foreign currencies areconverted to euro at the rate of exchange in effect at the closeof the financial year.Exchange differences arising from the settlement oftransactions in foreign currencies and the conversion to euro ofassets and liabilities recorded in foreign currencies are taken tothe statement of comprehensive income.Financial risk managementThe financial management function is responsible for themanagement of financial risks, having established the necessarymechanisms to monitor exposure to interest rate and exchangerate fluctuations and to credit and liquidity risks.The main financial risks affecting Cellerix are detailed below:Interest risk:Both Cellerx’ cash and cash equivalents, and its financial debtare exposed to interest rate risk, which could have an adverseeffect on its net finance income and on cash flows.Cellerix has carried out a sensitivity analysis to measure theimpact on equity and net income (loss) of a 1% increase ordecrease in market interest rates in a scenario where all othervariables remain constant. The main hypotheses of this analysisare:• Changes in market interest rates affect financial costs andincome on the financial assets and liabilities arranged byCellerix at variable interest rates.• Changes in the fair value of financial assets and liabilitiesare estimated on the basis of future discounted cash flows,using market interest rates prevailing at the end of eachfinancial year.On this basis, the effect of a 1% increase or decrease in marketinterest rates on Cellerix’ income before tax and its equitywould not have a significant effect.Credit risk:Cellerix’ cash and cash equivalents are held with financialentities with strong credit ratings. In addition its revenues areprincipally in the form of grants received mainly from publicbodies.Liquidity risk:In order to guarantee liquidity and to meet the paymentobligations derived from its operations, Cellerix maintains thecash and cash equivalents shown in its balance sheet andcontinuously monitories forecast and actual cash flows. Cellerixhas no derivative instruments.207 •