4.7.3
Financial liabilities
Issues of debentures andother securities
Debt issues are initially booked at the fair value of the consideration received, less the costs directly attributable to the transaction. They are subsequently valued at their
amortised cost using the effective interest rate method. Bonds with a maturity date greater than twelve months are classified under non-current liabilities; those with a
maturity date of less than twelve months are included in current liabilities.
Convertible bond issues are recorded at the time of their issue, distributing the fair value of the consideration received between their equity and liability components,
assigning the residual value obtained after deducting the amount established separately for the liability component, from the fair value of these instruments as a whole,
to the equity instrument. The value of any derivative embedded in the compound financial instrument other than the equity component will be included in the liability
component.
Bank loans
Any loans received frombanking institutions are booked at the amount received, net of any costs incurred in the transaction. They are subsequently valued at depreciated
cost. Financial expenses are booked on an accrual basis in the consolidated comprehensive profit and loss statement using the effective interest rate method, and their
amount is added to liabilities to the extent to which they are not settled in the period they were produced.
Trade creditors andother accounts payable
Trade accounts payable are initially booked at fair value and are subsequently valued at depreciated cost using the effective interest rate method.
Derivative financial instruments andhedge accounting
Derivatives used to hedge against the risks the Group’s operations are exposed to, mainly exchange and interest rate risks, are valued at market value on the date they are
contracted. Any subsequent changes in their market value are booked as follows:
-
Concerning fair value hedges, the differences produced in both the hedging elements as well as in the hedged elements (regarding the kind of risk hedged) are
directly recognised in the consolidated comprehensive profit and loss statement.
-
For cash flow hedges, valuation differences in the effective part of the hedge elements are temporarily booked in the equity item “Equity valuation adjustments”
and not recognised as results until the losses or gains of the hedged element are booked in profit or loss or until the hedged element matures. The ineffective part
of the hedge is directly entered into the consolidated comprehensive profit and loss statement.
Hedge accounting is interrupted when the hedging instrument expires or is sold or finalised or exercised, or when it no longer meets the hedge accounting criteria. At
that time, any cumulative gain or loss corresponding to the hedging instrument that has been booked in equity is kept there until the expected transaction is undertaken.
When the transaction covered by the hedge is not expected to take place, the net cumulative gains or losses recognised in equity are transferred to the profit or loss for the
period. Any changes in the fair value of derivative financial instruments which fail to meet hedge accounting criteria are recognised in the consolidated comprehensive
profit and loss statement as they arise.
The derivatives involved in other financial instruments or in other important agreements are booked separately as derivatives only when their risks and characteristics
are not closely related to those of the important agreement and as long as such important agreements are not valued at fair value through the recognition of any changes
occurred to fair value in the consolidated comprehensive profit and loss statement.
Valuation techniques andhypotheses that apply to themeasurement of fair value
The fair values of financial assets and liabilities are determined as follows:
•
The fair value of financial assets and liabilities under standard terms and conditions which are traded in active liquid markets are based on market prices.
•
The fair value of other financial assets and liabilities (excluding derivatives) is determined in accordance with generally accepted valuation models on the basis of
cash flow discounting using the price of observable market transactions and contributor listings of similar instruments.
•
In order to determine the fair value of interest rate derivatives, cash flow discounting is used based on the implicit flow determined by the interest rate curve
according to market conditions. In order to determine the fair value of options, the Group uses the Black-Scholes valuation model and its variants, using for this
purpose market volatility for the strike and maturity prices of said options.
Any financial instruments valued after their initial recognition at fair value are classified as level 1 to 3 based on the extent to which fair value can be observed:
•
Level 1: Includes any instruments tied to listed prices (without adjustment) of identical assets or liabilities in active markets.
•
Level 2: Includes any instruments indexed to other observable inputs (which are not the listed prices included under Level 1) for assets or liabilities, be it directly
(
i.e., prices) or indirectly (i.e., derived from prices).
•
Level 3: Includes any instruments indexed to valuation techniques, which include inputs for assets or liabilities that are not based on observable market data
(
unobservable inputs).
4.7.4
Equity instruments
An equity instrument represents a residual interest in the equity of the Parent Company once all its liabilities are subtracted.
Equity instruments issued by the Parent Company are booked in equity for the amount received, net of the issue expenses.
REPORT ONTHE CONSOLIDATED FINANCIAL STATEMENTS
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