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C.1
CAPITAL RISK MANAGEMENT
C.2 FAIR VALUE
The Company’s objective in capital risk management is mainly
to safeguard business continuity in order to guarantee returns
for shareholders and benefits for other stakeholders. The
Company also aims to maintain an optimal capital structure
in order to reduce the cost of debt and to comply with a series
of covenants under the various credit agreements (Note
10. Borrowings from banks and other lenders and Note 29.
Financial covenants).
The fair value of financial instruments listed on an active
market is based on market price at the reporting date. The
market price used for derivatives is the bid price, while for
financial liabilities the ask price is used.
The fair value of instruments not listed on an active market
is determined using valuation techniques based on a series
of methods and assumptions linked to market conditions at
the reporting date.
The Company 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 determined can be
found in Note 10. Borrowings from banks and other lenders.
Capital is defined as the sum of equity and the Net financial
position.
The gearing ratios at 31 December 2013 and 31 December 2012
are shown below:
The change in the gearing ratio is largely attributable to:
• an improvement of Euro 307,920 thousand in the net
financial position, mainly due to the Company’s higher
level of cash and cash equivalents after issuing the
convertible bond;
• an increase of Euro 149,464 thousand in equity, reflecting
higher net profit and recognition of a reserve for the
convertible bond, further details of which can be found in
Note 9. Share capital and reserves.
Other techniques, such as that of estimating discounted cash
flows, are used for the purposes of determining the fair value
of other financial instruments.
Given the short-term nature of trade receivables and
payables, their book values, net of any allowance for doubtful
accounts, are treated as a good approximation of fair value.
(in thousands of Euro)
31 December 2013 31 December 2012
Net financial position
612,667
920,587
Equity
1,021,052
871,588
Total capital
1,633,719
1,792,175
Gearing ratio
38%
51%
The preparation of financial statements requires management
to apply accounting policies and methods which, at times,
rely on subjective judgements and estimates based on past
experience and assumptions deemed to be reasonable and
D.
ESTIMATES AND ASSUMPTIONS
realistic according to the circumstances. The application of
these estimates and assumptions influences the amounts
reported in the financial statements, meaning the statement
of financial position, the income statement, the statement
