ANNUAL REPORT 2011 - Kuehne + Nagel

6 Financial assets and liabilities
The accounting policy applied to financial instruments depends
on how they are classified. The Group’s financial assets and liabilities
are classified into the following categories:
— The category financial assets or liabilities at fair value
through profit or loss includes financial assets or liabilities
held for trading and financial assets designated as such upon
initial recognition. There are no financial liabilities that, upon
initial recognition, have been designated at fair value through
profit or loss.
— Loans and receivables are carried at amortised cost, calculated
using the effective interest rate method, less allowances
for impairment.
— Financial assets/investments available for sale include all
financial assets/investments not assigned to one of the above
mentioned categories. These could include investments in affiliates
that are not associates or joint ventures and investments
in bonds and notes. Financial assets/investments available for
sale are recognised at fair value, changes in value (after tax) are
recognised directly in other comprehensive income until the
assets are sold, at which time the amount reported in other
comprehensive income is transferred to the income statement.
As of December 31, 2011 and 2010, the Group did not have
any financial assets/investments available for sale.
— Financial liabilities that are not at fair value through profit
or loss, are carried at amortised cost calculated using the
effective interest rate method.
Derivatives and hedge accounting
Derivative financial instruments (foreign exchange contracts)
are used to hedge the foreign exchange exposures on outstanding
balances in the Group's internal clearing system, centralised
at head office. Given that the Group's hedging activities are limited
to hedges of recognised foreign currency monetary items,
the Group does not apply hedge accounting under IAS 39.
Derivatives are carried at fair value, and all changes in fair
value are recognised immediately in the income statement as
part of financial income or expenses. All derivatives with a positive
fair value are disclosed as derivative assets and included in
the line “financial investments” on the balance sheet, while all
derivatives with a negative fair value are disclosed as derivative
liabilities and included in the line current “other liabilities”.
Consolidated Financial Statements 2011 _ _ _ _ _ _ Accounting Policies
Impairment of financial assets
If there is any indication that a financial asset (loans and receivables)
or financial assets/investments available for sale may be
impaired, its recoverable amount is calculated. The recoverable
amount of the Group’s loans and receivables is calculated as the
present value of expected future cash flows, discounted at the
original effective interest rate inherent in the asset. Receivables
with a short duration are not discounted.
Trade receivables are reported at their anticipated recoverable
amounts. The allowance for bad debts is determined based on
an individual basis or on a portfolio basis, where there is objective
evidence that impairment losses have been incurred. The
allowance account is used to record impairment losses unless
the Group is satisfied that no recovery of the amount due is
possible; at that point the amount considered irrecoverable is
written off against the financial assets directly.
Where an asset’s recoverable amount is less than its carrying
amount, the asset is written down to its recoverable amount. All
resultant impairment losses (after reversing previous revaluations
recognised in other comprehensive income of available for
sale equity securities) are recognised in the income statement.
An impairment loss in respect of a financial asset is reversed if
there is a subsequent increase in recoverable amount that can
be related objectively to an event occurring after the impairment
loss was recognised. Reversals of impairment losses are
recognised in the income statement, with the exception for
reversals of impairment losses on available for sale equity securities,
for which any reversals are recognised in other comprehensive
income.
7 Segment reporting
An operating segment is a component of the Group that engages
in business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to transactions
with any of the Group’s other components. Refer to note 20
for additional information about the segments in the Group.
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