167 348
167
D.1 CAPITAL RISK MANAGEMENT
The Group’s objective in capital risk management is mainly
to safeguard business continuity in order to guarantee
returns for shareholders and benefits for other stakehol-
ders. The Group also aims to maintain an optimal capital
structure in order to reduce the cost of debt and to comply
with a series of covenants required by the various Credit
Agreements (Note 32. Financial covenants).
The Group also monitors capital on the basis of its gearing
ratio (i.e. the ratio between net financial position and
capital). Details of how the net financial position is de-
termined can be found in Note 12. Borrowings from banks
and other lenders. Capital is equal to the sum of equity, as
reported in the Group consolidated financial statements,
and the net financial position.
The gearing ratios at 31 December 2014 and 31 December
2013 are shown below:
D.2 FAIR VALUE
With reference to assets and liabilities recognised in the
statement of financial position, IFRS 13 requires such
amounts to be classified according to a hierarchy that reflects
the significance of the inputs used in determining fair value.
Financial instruments are classified according to the
following fair value hierarchy:
Level 1:
fair value is determined with reference to quoted
prices (unadjusted) in active markets for identical financial
instruments. Therefore, the emphasis within Level 1 is on
determining both of the following:
(a) the principal market for the asset or liability or, in the
absence of a principal market, the most advantageous
market for the asset or liability;
(b) whether the entity can enter into a transaction for the
asset or liability at the price in that market at the mea-
surement date.
Level 2:
fair value is determined using valuation techniques
where the input is based on observable market data. The
inputs for this level include:
(a) quoted prices for similar assets or liabilities in active
markets;
(b) quoted prices for identical or similar assets or liabilities
in markets that are not active;
(c) inputs other than quoted prices that are observable for
the asset or liability, for example:
i. interest rate and yield curves observable at commonly
quoted intervals;
ii. implied volatilities;
iii. credit spreads;
(d) market-corroborated inputs.
Level 3:
fair value is determined using valuation techniques
where the input is not based on observable market data.
2014
2013 (*)
Net financial position
802
805
Equity
1,183
1,183
Total capital
1,985
1,988
Gearing ratio
40.40%
40.49%
(*) The previously published prior year consolidated financial statements have been restated following the adoption of IFRS 10 and IFRS 11. Further details can
be found in Section C. Restatement of comparative figures.
(in millions of Euro)