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CONSOLIDATED FINANCIAL REPORT | EXPLANATORY NOTES
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hedging strategy and the methods for checking the hedge's effectiveness. The effectiveness of each hedge
is reviewed both at the derivative's inception and during its life cycle. In general, a cash flow hedge is
considered highly "effective" if, both at its inception and during its life cycle, the changes in the cash flows
expected in the future from the hedged item are largely offset by changes in the fair value of the hedge.
The fair values of the various derivatives used as hedges are presented in Note 8. Derivatives. Movements
in the "Cash flow hedge reserve" forming part of equity are reported in Note 11. Share capital and reserves.
The fair value of a hedging derivative is classified as a non-current asset or liability if the hedged item has a
maturity of more than twelve months; if the maturity of the hedged item is less than twelve months, the fair
value of the hedge is classified as a current asset or liability.
Derivatives not designated as hedges are classified as current or non-current assets or liabilities according
to their contractual due dates.
Cash flow hedges
In the case of hedges intended to neutralise the risk of changes in cash flows arising from the future
execution of contractual obligations existing at the reporting date ("cash flow hedges"), changes in the fair
value of the derivative following initial recognition are recorded in equity under the "Cash flow hedge reserve",
but only to the extent that they relate to the effective portion of the hedge. When the effects of the hedged
item are reported in profit or loss, the reserve is transferred to the income statement and classified in the
same line items that report the effects of the hedged item. If a hedge is not fully effective, the change in fair
value of its ineffective portion is immediately recognised in the income statement as "Finance income" or
"Finance costs". If, during the life of a derivative, the hedged forecast cash flows are no longer considered to
be highly probable, the portion of the "Cash flow hedge reserve" relating to the derivative is taken to the
period's income statement and treated as "Finance income" or "Finance costs". Conversely, if the derivative
is disposed of or no longer qualifies as an effective hedge, the portion of the "Cash flow hedge reserve"
representing the changes in the instrument's fair value recorded up to then remains in equity until the original
hedged transaction occurs, at which point it is then taken to the income statement, where it is classified on
the basis described above.
At 31 December 2015, the Group had designated derivatives to hedge the following risks:
exchange rate risk on construction contracts or orders:
these hedges aim to reduce the volatility
of cash flows due to changes in exchange rates on future transactions. In particular, the hedged item
is the amount of the cash flow expressed in another currency that is expected to be received/paid in
relation to a contract or an order for amounts above the minimum limits identified by the Group
Finance Committee: all cash flows thus identified are therefore designated as hedged items in the
hedging relationship. The reserve originating from changes in the fair value of derivatives is
transferred to the income statement according to the stage of completion of the contract itself, where
it is classified as contract revenue/costs;