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Consolidated Financial Report |
EXPLANATORY NOTES
2014 Annual Report
Prysmian Group
146
(b) Loans and receivables
Loans and receivables are non-derivative financial instru-
ments with fixed or determinable payments that are not
quoted in an active market. Loans and receivables are
classified in the statement of financial position as “Trade
and other receivables” and treated as current assets, except
for those with contractual due dates of more than twelve
months from the reporting date, which are classified as
non-current (See Note 5. Trade and other receivables).
These assets are valued at amortised cost, using the
effective interest rate. The process of assessment to
identify any impairment of trade and other receivables is
described in Note 5.
(c) Available-for-sale financial assets
Available-for-sale assets are non-derivative financial instru-
ments that are explicitly designated as available for sale, or
that cannot be classified in any of the previous categories;
they are classified as non-current assets, unless manage-
ment intends to dispose of them within twelve months of
the end of the reporting period.
All the financial assets in this category are initially recorded
at fair value plus any related transaction costs. Subsequen-
tly, available-for-sale financial assets are measured at fair
value and gains or losses on valuation are recorded in an
equity reserve. “Finance income” and “Finance costs” are
recognised in the income statement only when the financial
asset is effectively disposed of.
The fair value of listed financial instruments is based on the
current bid price; these instruments belong to Level 1 of the
fair value hierarchy.
If the market for a financial asset is not active (or refers to
unlisted securities), the Group measures fair value using
valuation techniques whose inputs are based on observable
market-based data (Level 2) or unobservable data (Level 3).
More details can be found in Section D.2 Fair value.
When performing such valuations, the Group gives preferen-
ce to market data rather than to internal data specifically
connected to the nature of the business in which the Group
operates.
Any dividends arising from investments recorded as
available-for-sale financial assets are recognised as revenue
when the Group’s right to receive payment is established
and are classified in the income statement under “Share of
net profit/(loss) of equity-accounted companies”.
The Group assesses at every reporting date if there is
objective evidence of impairment of its financial assets.
In the case of investments classified as available-for-sale
financial assets, a prolonged or significant reduction in the
fair value of the investment below initial cost is treated as
an indicator of impairment. Should such evidence exist,
the accumulated loss relating to the available-for-sale
financial assets - calculated as the difference between their
acquisition cost and fair value at the reporting date, net of
any impairment losses previously recognised in profit or
loss - is transferred from equity and reported in the income
statement as “Finance costs”. Such losses are realised ones
and therefore cannot be subsequently reversed.
For debt securities, the related yields are recognised using
the amortised cost method and are recorded in the income
statement as “Finance income”, together with any exchange
rate effects, while exchange rate effects relating to in-
vestments classified as available-for-sale financial assets
are recognised in the specific equity reserve.