Annual Report 2010 - AdP

derivatives is revalued on a regular basis, and the ensuing gains or losses of this revaluation are recorded directly under results for
the period, except with respect to hedging derivatives. Recognition of changes in the fair value of hedging derivatives depends on
the nature of the hedged risk and the hedging model used.
Hedging
Hedging is used whenever there is a relationship between the hedged element and the hedging instrument whenever the following
conditions exist:
i) at the date of the start of the hedging relationship, the latter is identified and formally documented;
ii) it is expected that the hedging relationship will be highly effective, at the date of the start of the transaction (prospectively) and
over the course of the operation (retrospectively);
iii) for cash flow hedging operations, it must be highly probable that they will occur;
iv) hedging is valued on an ongoing basis and considered to have been highly effective during the entire financial reporting period
for which the hedging was used.
AAt 31 December 2010 and 31 December 2009, although hedging derivatives existed, the bureaucratic requirements under IAS 39
that allow them to be classified as hedging instruments are not present.
2.12 Fair value hierarchy
Financial assets and liabilities of AdP Group valued at fair value are classified according to the following fair value hierarchy levels
stipulated in IFRS 7:
Level 1: fair value of financial instruments is based on the quotes of the liquid markets active at the balance sheet date. This level
essentially includes capital instruments, debt (e.g. NYSE Euronext) and futures quoted on active markets;
Level 2: the fair value of financial instruments is not based on active markets, but rather on the basis of valuation models. The main
inputs of the models used can be observed on the market. This level includes, for instance, over-the-counter derivatives; and
Level 3: the fair value of financial instruments is not based on active market quotes, but rather on the basis of valuation models
whose main inputs are not observable on the market.
The table listing financial assets and liabilities at fair value classified according to level is included in note 7.2.
2.13 Customers and other accounts receivable
The balances of customers and other accounts receivable are values that are to be received from the sale of goods or services
rendered by the group during the normal course of its activities. They are initially recorded at fair value and are subsequently valued
at amortized cost, in accordance with the effective interest rate method, less impairment losses.
2.14 Inventory
Inventories are valued at the lowest acquisition cost (including all expenses up until the time they enter the warehouse) and the net
realizable value. The net realizable value results from the sale price estimated during the course of the company’s normal activity, less
the variable sales expenses. Average cost is the costing method adopted for valuing warehouse outflows.
2.15 Cash and cash equivalents
Cash and cash equivalents include cash, bank deposits, and other short-term investments with high liquidity and initial maturities of
up to three months and bank overdrafts, without significant risk of changing in value. Bank overdrafts are stated in the balance sheet
under current liabilities in the “Amounts owed to credit institutions - short-term” item and are also considered in when drafting the
cash flow statements.
2.16 Impairment
2.16.1 Impairment of financial assets
At each balance sheet date, the group analyzes whether there is objective evidence that a financial asset or group of financial assets
has been impaired.