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INA d.d. interest-free liabilities longer than 5 years alsocomprise long-term reserves for closing wells in the amountof 1,069 million HRK in 2007 (942 million HRK in 2006).The interest liabilities also show the liabilities on the basisof short-term and long-term loans, as well as liabilities tosuppliers for oil.The same applies to the Group.INA d.d. usually imports crude oil and derivatives throughits foreign branches, Interine London and InterineGuernsey. In accordance with standard internationalpractice, the purchase of oil is realized by openingirrevocable documentary letters of credit to the benefitof the supplier, with first-rate business banks and usingtrade financing.Fair value of financial instrumentsFair values of financial assets and financial liabilities aredetermined as follows:• fair value of financial assets and financial liabilitiestraded on active solvent markets, under standardconditions, is determined according to the prices listedon the market• fair value of other financial assets and otherfinancial liabilities (excluding derivative instruments)is determined according to the price determinationmodels, and based on the analysis of discountedmoney flows, using prices from known transactions onthe market and prices offered for similar instrumentsIn accordance with IAS 39, “Financial Instruments: Recognitionand Measurement”, the derived financial instrumentsare shown in the balance sheet at fair value, including thechanges to this value in the profit and loss account.The Group has concluded specific long-term purchaseand sale contracts which, in accordance with IAS 39,contain incorporated derived financial instruments. Anincorporated derived financial instrument is a part of thecontract which influences the change of the money flowsarising from the contract, partially, in a similar way toindependent derived financial instruments. IAS 39 requiresthat such incorporated derived financial instrumentsbe separated from the basic contracts and that they areregistered as derived financial instruments, listed as assetsintended for trade and entered at fair value, includingbooking the changes to the fair value at the expense orto the benefit of the profit and loss account. Fair valueof incorporated forward contracts in foreign currency isdetermined on the basis of current exchange rates forforeign currencies on the balance sheet date. This valueis defined as the difference of the cumulative inflationindex between the contracted inflation escalator and theinflation in the country where the contract is executed.The long-term effect of these incorporated derivedfinancial instruments is discounted, using discount ratesimilar to the interest rate on government bonds.Fair value of incorporated derived financial instrumentsincluded in the balance sheet under short-term assetsand net trends throughout the year is as follows:INA Group & INA d.d.2007 2006Fair value as at 1 January 328 289Financial income/expenditure referring to the net change of fair value ofincorporated derived financial instruments in the current year(notes 6 and 7)(5) 39Fair value as at 31 December 323 328Annual report 2007163