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B.9
FINANCIAL ASSETS
Financial assets are initially recorded at fair value and
classified in one of the following categories on the basis of
their nature and the purpose for which they were acquired:
(a) Financial assets at fair value through profit or loss;
(b) Loans and receivables;
(c) Available-for-sale financial assets.
Purchases and sales of financial assets are accounted for at
the settlement date.
Financial assets are derecognised when the right to receive
cash flows from the instrument expires and the Group has
substantially transferred all the risks and rewards relating to
the instrument and its control.
(a) Financial assets at fair value through profit or loss
Financial assets classified in this category are represented
by securities held for trading, having been acquired with
the purpose of selling them in the short term. Derivatives
are treated as securities held for trading, unless they are
designated as hedging instruments and are therefore
classified under “Derivatives”. Financial assets at fair value
through profit or loss are initially recorded at fair value and
the related transaction costs are expensed immediately to the
income statement.
Subsequently, financial assets at fair value through profit or
loss are measured at fair value. Assets in this category are
classified as current assets (except for Derivatives falling due
after more than 12 months). Gains and losses from changes
in the fair value of financial assets at fair value through profit
or loss are reported in the income statement as “Finance
income” and “Finance costs”, in the period in which they
arise. This does not apply to metal derivatives, whose fair
value changes are reported in “Fair value change in metal
derivatives”. Any dividends from financial assets at fair
value through profit or loss 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 associates and dividends from other companies”.
(b) Loans and receivables
Loans and receivables are non-derivative financial
instruments 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
(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
instruments 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
management 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. Subsequently,
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 preference
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 associates and dividends from other
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.
