Notes to the consolidated financial statements - Efacec

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2.2 Accounting for financial instruments – derivatives and hedging Derivatives are initially recognised at fair value and subsequently readjusted to their fair value. The method for recognising changes in fair value depends on whether the derivative is defi ned as a hedge instrument and if so, the nature of the asset/liability to be covered. The group arranges certain derivatives as: (1) fair value cover of recognised assets and liabilities or of commitments (fair value cover); (2) cover of highly probable forecast transactions (cash fl ow hedging). For each transaction, the Group prepares documentation to justify the relationship between the hedge instruments and the related assets/liabilities covered, as well as the objective of risk management and the strategy for taking out cover. The Group also documents its evaluation, both at the start of the cover and on a continuous basis, as to whether the derivatives used for cover effectively compensate for fl uctuations in fair value or in the cash fl ows of the items covered. The fair value of derivatives used to take out cover is disclosed in note 6, as well as the movements that took place in Shareholders’ Funds. a) Fair value hedging Changes in the fair value of derivatives that are arranged and qualifi ed for fair value hedging are recognised in the profi t and loss account, together with changes to the fair value of the assets and liabilities covered (in the covered position) attributable to covered risk. b) Cash fl ow hedging The effective part of the change in fair value of derivatives that are arranged and qualifi ed for cash fl ow hedging is recognised in shareholders’ funds. The gain or loss related to the ineffective part is immediately recognised in the profi t and loss account. As pertains cover strategies that use options, in accordance with IAS 39 and complying with the effi ciency test, the strategy value is split into the intrinsic value and the time value. In accordance with the treatment referred above, the intrinsic value should be presented in shareholders’ funds (assuming the strategy is effi cient), while the temporal value should be booked to the profi t and loss account. The cumulative amounts in shareholders’ funds are reclassifi ed to profi t and loss in the same period in which the item covered generates gains and losses (for instance, when the covered sales forecast occurs). However, when the covered forecast transaction results in the recognition of a non-fi nancial asset (for example, stocks) or non-fi nancial liability, the previously deferred gains and losses in shareholders’ funds are transferred and included in the initial measurement of that asset or liability. When a hedge instrument expires or is sold, or when a hedging does not comply with the accounting and qualifi cation criteria, any cumulative gain or loss existing at that moment in shareholders’ funds, remains in shareholders’ funds and is recognised when the forecast transaction is fi nally refl ected in the profi t and loss account. When the expected occurrence of a forecast transaction is no longer highly probable, the cumulative gains or losses refl ected in shareholders’ funds are immediately transferred to profi t and loss. c) Non-qualifi ed derivatives for hedging purposes Certain derivatives do not comply with hedging accounting and qualifi cation criteria. Changes in fair value of these derivatives are immediately recognised in the profi t and loss account. 2.3 Estimates of fair value The fair value of fi nancial instruments available on the current market (for instance publicly negotiated derivatives, negotiable instruments available for sale) is determined on the basis of quoted market prices at balance sheet date. The quoted market price used for fi nancial assets of the Group is the price received by shareholders on the current market; the quoted market price for fi nancial liabilities is the price paid on the current market. The fair value of fi nancial instruments not traded on the current market (for instance unquoted derivatives) is determined using enhancement techniques. The Group uses a variety of methods and reaches its conclusions based on market conditions at each balance sheet date. Quoted market prices or negotiation quotas for similar instruments are used for long-term debts. Other techniques, such as estimates of discounted cash fl ows, are used to determine the fair value of other fi nancial instruments. The fair value of interest rate swaps is calculated based on the present value of estimated future cash fl ows. The fair value of interest rate futures contracts is determined using market exchange rates at the balance sheet date. The nominal value less estimated credit adjustments of receivable and payable accounts is assumed to be close to their fair value. The fair value of fi nancial liabilities is estimated by updating future contractual cash fl ows at the current market interest rate available for similar fi nancial instruments. 58
C. Notes on the Balance Sheets as at 31 December 2008 and 2007 3. Tangible fixed assets 3.1 Movements that took place in the period Financial Year 2008 Land and buildings Vehicles and equipment 59 Office equipment Other Total Opening balance 20,542,974 200 26,694 1,920,742 22,490,612 Merger 0 0 0 0 0 Revaluation 572,900 0 0 0 572,900 Accrual 2,269,291 0 12,738 1,256,918 3,538,947 Decreases 0 0 0 0 0 Depreciation charges -830,903 -200 -15,492 0 -846,595 Adjustments 1,875,462 46,233 776 -1,918,243 4,228 Closing balance 24,429,724 46,233 24,716 1,259,417 25,760,092 2008. December Cost or fair value 61,290,670 303,020 957,712 1,295,941 63,847,343 Cumulative depreciation -36,860,946 -256,787 -932,995 -36,523 -38,087,251 Net value 24,429,724 46,233 24,717 1,259,418 25,760,092 Financial Year 2007 Opening balance 21,387,051 1,531 42,932 1,605 21,433,119 Merger 0 0 0 0 0 Revaluation 0 0 0 0 0 Accrual 0 0 4,371 1,920,742 1,925,113 Decreases 0 0 0 0 0 Depreciation charges -844,077 -1,330 -22,214 0 -867,621 Adjustments 0 0 1,605 -1,605 0 Closing balance 20,542,974 201 26,694 1,920,742 22,490,611 2007, December Cost or fair value 56,573,017 258,390 944,198 1,961,494 59,737,099 Cumulative depreciation -36,030,043 -258,189 -917,503 -40,752 -37,246,487 Net value 20,542,974 201 26,694 1,920,742 22,490,612 3.2 Revaluations Buildings and other tangible fi xed assets of the Group were re-valued on 1 January 2004, using the monetary revaluation coeffi cients as part of the transition to IFRS (IFRS 1). The land included in the company assets is booked as fair value. The value of the land was subject to update on 31 December 2008, based on an evaluation carried out by independent external consultants resulting in an enhancement of around 421 thousand Euro, whose compensation was recognised in equity less the respective deferred tax. If tangible assets were shown at historical cost, the values in the balance sheet would be: 3.3 Guarantees 31.12.2008 31.12.2007 Acquisition value 20,891,129 17,353,785 Cumulative depreciation 10,799,118 10,145,458 Historic net value 10,092,011 7,208,327 No pledges or guarantees exist on any assets. 2008 Consolidated and Individual Financial Statements
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1 2 Index Consolidated Financial St
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Non-current assets EFACEC Capital,
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Page 55 and 56: in the profi t and loss account of
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Notes to the consolidated financial statements - Efacec

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