Annual Report 2010 - Enel.com

Inventories also include purchases of nuclear fuel, whose
use is determined on the basis of the energy produced.
Construction contracts
Construction contracts are measured on the basis of the
contractual amounts accrued with reasonable certainty in
respect of the stage of completion of the works as determined
using the cost-to-cost method. Advances paid by
customers are deducted from the value of the construction
contracts up to the extent of the accrued amounts;
any excess is recognized under liabilities. Losses on individual
contracts are recognized in their entirety in the
period in which they become probable, regardless of the
stage of completion of the contract.
Financial instruments
Financial assets measured at fair value through
profit or loss
This category includes debt securities and equity investments
in entities other than subsidiaries, associates and
joint ventures held for trading and designated as at fair
value through profit or loss at the time of initial recognition.
Such assets are initially recognized at fair value. Gains and
losses from changes in their fair value are recognized in
the income statement
Financial assets held to maturity
This category comprises non-derivative financial instruments
with fixed or determinable payments and that do
not represent equity investments that are quoted on an
active market for which the Group has the positive intention
and ability to hold until maturity. They are initially
recognized at fair value as measured at the trade date,
including any transaction costs; subsequently, they are
measured at amortized cost using the effective interest
method, net of any impairment losses.
Impairment losses are calculated as the difference between
the carrying amount of the asset and the present value of
expected future cash flows, discounted using the original effective
interest rate.
Loans and receivables
This category includes non-derivative financial and trade
receivables, including debt securities, with fixed or determinable
payments that are not quoted on an active market
that the entity does not originally intend to sell.
Such assets are initially recognized at fair value, adjusted
for any transaction costs, and subsequently measured at
amortized cost using the effective interest method, net of
any impairment losses. Such impairment losses are calculated
as the difference between the carrying amount of
the asset and the present value of expected future cash
flows, discounted using the original effective interest rate.
Trade receivables falling due in line with generally accepted
trade terms are not discounted.
Financial assets available for sale
This category includes debt securities, equity investments
in other entities (not classified as “designated as at fair value
through profit or loss”) and financial assets that cannot
be classified in other categories. These instruments are
measured at fair value with changes recognized in shareholders’
equity.
At the time of sale, the cumulative gains and losses previously
recognized in equity are reversed to the income
statement.
Where there is objective evidence that such assets have incurred
an impairment loss, the cumulative loss previously
recognized in equity is eliminated through reversal to the
income statement. Such impairment losses, which cannot
be reversed, are calculated as the difference between the
carrying amount of the asset and its fair value, determined
on the basis of the market price at the balance sheet date
for financial assets listed on regulated markets or on the
basis of the present value of expected future cash flows,
discounted using the market interest rate for unlisted financial
assets.
When the fair value cannot be determined reliably, these
assets are recognized at cost adjusted for any impairment
losses.
Cash and cash equivalents
This category is used to record cash and cash equivalents
that are available on demand or at very short term, clear
successfully and do not incur collection costs.
Cash and cash equivalents are recognized net of bank
overdrafts at period-end in the consolidated statement of
cash flows.
Trade payables
Trade payables are initially recognized at fair value and
subsequently measured at amortized cost. Trade payables
falling due in line with generally accepted trade terms are
not discounted.
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