Audi 2012 Annual Report Download - page 220

223
Consolidated Financial
Statements
202 Income Statement
203 Statement of Recognized
Income and Expense
204 Balance Sheet
205 Cash Flow Statement
206 Statement of Changes in Equity
Notes to the Consolidated
Financial Statements
208 Development of fixed assets
in the 2012 fiscal year
210 Development of fixed assets
in the 2011 fiscal year
212 General information
218 Recognition and
measurement principles
218 Recognition of income
and expenses
218 Intangible assets
219 Property, plant
and equipment
220 Leasing and rental assets
220 Investment property
220 Investments accounted for
using the equity method
220 Impairment tests
221 Financial instruments
224 Other financial assets and
other receivables
224 Deferred tax
224 Inventories
225 Securities, cash and
cash equivalents
225 Provisions for pensions
225 Other provisions
225 Liabilities
226 Government grants
226 Management’s estimates
and assessments
227 Notes to the Income Statement
233 Notes to the Balance Sheet
244 Additional disclosures
266 Events occurring subsequent to
the balance sheet date
267 Statement of Interests
held by the Audi Group
“Available-for-sale financial assets” are impaired if there is objective evidence of a long-term
loss of value. In the case of equity instruments, a permanent value reduction is deemed to have
occurred if the market value falls below the cost of purchase on a significant basis (more than
20 percent) or on a long-term basis (more than 10 percent of the average market prices
throughout a year). Debt instruments are impaired if future payment flows from the financial
asset are expected to fall. Any rise in risk-free interest rates or credit spreads, however, does not
constitute objective evidence of a loss in value. As soon as impairment occurs, the cumulative
loss is removed from the reserve for the market valuation of securities and recognized in the
Income Statement. Reversals of impairments – provided that the securities affected are equity
instruments – are recognized without affecting income. If, on the other hand, the securities
concerned are debt instruments, impairment losses are reversed with an effect on income if the
increase in the fair value, when viewed objectively, is based on an event that occurred after the
impairment loss was recorded with an effect on income.
As well as securities, the item “Available-for-sale financial assets” also contains other long-term
investments that are not valued according to the equity method. As there is no active market for
the other financial assets, with the result that their fair value cannot be reliably ascertained,
they are carried at their cost of purchase. Where there is evidence that the fair value is lower,
corresponding value adjustments are carried out.
Derivative financial instruments and hedge accounting
Derivative financial instruments are used as a hedge against foreign exchange and commodity
price risks for items on the Balance Sheet and for future cash flows (underlying transactions).
Futures, as well as options in the case of foreign exchange risks, are taken out for this purpose.
Additionally, under the rules of IAS 39, some contracts are classed as derivative financial in-
struments:
– rights to acquire shares in companies,
– agreements entered into by the Audi Group with approved dealers with a view to hedging
against potential losses from buy-back obligations for leased vehicles.
A requirement of hedge accounting is that a clear hedging relationship between the underlying
transaction and the hedge must be documented and its effectiveness demonstrated.
Recognition of the fair value changes in hedges depends on the nature of the hedging relationship.
When hedging against exchange rate risks from future cash flows (cash flow hedges), the fluctua-
tions in the market value of the effective portion of a derivative financial instrument are initially
reported within equity in the reserve for cash flow hedges, with no effect on income, and are
only recognized as income or expense under operating profit once the hedged item is due. The
ineffective portion of a hedge is recognized immediately in income. Derivative financial instru-
ments that are used to hedge market risks according to commercial criteria but that do not fully
meet the requirements of IAS 39 with regard to effectiveness of hedging relationships are cate-
gorized as “measured at fair value through profit or loss.” Rights to acquire shares in companies,
and the model for dealer hedging against potential losses from buy-back obligations for leased
vehicles, are also reported in accordance with the rules for “financial instruments measured at
fair value through profit or loss” and disclosed under operating profit.