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CONSOLIDATED FINANCIAL REPORT | EXPLANATORY NOTES
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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; such 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 C.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 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 investments classified as available-for-sale financial assets are recognised in the specific
equity reserve.
B.10 DERIVATIVES
Derivatives are accounted for at fair value at the contract inception date and, unless accounted for as
hedging instruments, any changes in the fair value following initial recognition are recorded as finance
income or costs for the period, except for fair value changes in metal derivatives. If derivatives satisfy the
requirements for classification as hedging instruments, the subsequent changes in fair value are accounted
for using the specific criteria set out below.
The Group designates some derivatives as hedging instruments for particular risks associated with highly
probable transactions ("cash flow hedges"). For each derivative that qualifies for hedge accounting, there is
documentation on its relationship to the item being hedged, including the risk management objectives, the