ETX-10829_Etex-AR2017_WEB_2018_DEF2 (2)

6.1
Financial report
Consolidated financial statements
Etex Annual Report 2017
Financial report
Consolidated financial statements
Cash flow hedge
Changes in the fair value of derivatives that are designated and qualify as cash flow hedges and that are effective are recognised in
equity. Where the firm commitment results in the recognition of a non-financial asset, for example property, plant equipment or inventory,
or a non-financial liability, the gains or losses previously recognised in equity are transferred from equity and included in the initial
measurement of the non-financial asset or liability. Otherwise, amounts recognised in equity are transferred to the income statement and
classified as revenue or expense in the same periods during which the cash flows, such as interest payments, or hedged firm
commitments, affect the income statement. Any ineffective portion is reported immediately in the income statement. When a hedging
instrument is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at
that time remains in equity and is recognised when the committed transaction ultimately is recognised in the income statement. However,
if a committed transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately
transferred to the income statement.
Net investment hedge
Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in a foreign
operation that are effective, are recognised in equity and included in cumulative translation differences. The amounts deferred in equity
are transferred to the income statement on disposal of the foreign entity.
Certain derivative transactions, while providing effective economic hedges under the Group’s risk management policies, may not qualify
for hedge accounting. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognised
immediately in the income statement. The changes in fair value that are recognised in profit and loss of the period are classified in
operating result if the derivative relates to a non-financial asset and in financial result if the derivative relates to a financing transaction.
T - Income taxes
Income taxes include current and deferred income taxes.
Current income taxes
Current tax is the expected tax payable on taxable income for the year, and any adjustment to tax payable in respect of previous years.
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or
paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively
enacted at the reporting date.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related
dividend.
Deferred income taxes
Deferred income taxes are calculated, using the balance sheet liability method, on all temporary differences arising between the carrying
amounts of assets and liabilities in the consolidated statement of financial position and their tax base. The amount of deferred tax provided
is based on the expected manner of realisation of the carrying amount of assets and liabilities, using the tax rates enacted or substantially
enacted at the reporting date.
Deferred tax liabilities are recognised, except:
– where the temporary differences arise from the initial recognition of goodwill or the initial recognition of an asset or liability in a
transaction that affects neither accounting profit nor taxable profit on that date.
– in respect of taxable temporary differences associated with investments in subsidiaries, equity accounted investees and interest
in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognised only when it is probable that taxable profits will be available in the coming 3 years, against which the
deductible temporary difference or the tax loss to be carried forward can be utilised, except:
– where the temporary differences arise from the initial recognition of an asset or liability in a transaction that affects neither
accounting profit nor taxable profit on that date.
– in respect of deductible temporary differences associated with investments in subsidiaries, equity accounted investees and
interest in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences
will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
Deferred tax assets are reviewed at each reporting date to assess the probability that sufficient taxable profit will be available to allow
deferred taxes to be utilised.
Deferred tax is recognised in the income statement, except when it relates to items credited or charged directly to equity, in which case
the deferred tax is treated accordingly.
Deferred tax assets and liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities
and the deferred taxes relate to the same taxable entity and the same tax authority.
U - Revenue
Revenue is recognised at the amount that reflects the consideration to which the Group expects to be entitled in exchange for transferring
goods or services to a customer.
Sales of goods
Revenue from sales of goods is recognised in the income statement net of sales taxes and discounts when revenue recognition occurs,
being at a point in time when control of the asset is transferred to the customer, generally on delivery of the goods.
Construction contracts
A limited number of activities of the Group are construction contract driven. Consequently contract revenue and contract costs are
recognised in the income statement on the percentage-of-completion method, with the stage of completion being measured by reference
to actual work performed to date. When the outcome of a construction contract cannot be estimated reliably, contract revenue is
recognised only to the extent of the contract expenses that are recoverable. In the period in which it is determined that a loss will result
from the performance of a contract, the entire amount of the estimated ultimate loss is charged to the income statement.
Rental income
Rental income arising on investment properties is accounted for on a straight-line basis over the lease terms on ongoing leases.
Interest income
Interest is recognised on a time proportion basis that reflects the effective yield on the asset.
Dividends
Dividends are recognised when the Group’s right to receive payment is established.
Etex Annual Report 2017 p. 19
Etex Annual Report 2017 p. 20
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