Audi 2013 Annual Report Download - page 238

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
RECOGNITION AND MEASUREMENT PRINCIPLES
CONSOLIDATED FINANCIAL STATEMENTS
235
B
“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, how-
ever, does not constitute objective evidence of a loss in value.
As soon as impairment occurs, the cumulative loss is removed
from the reserve for fair value measurement of securities and
recognized in the Income Statement. Reversals of impairments –
provided that the securities affected are equity instruments –
are recognized without affecting profit or loss. If, on the other
hand, the securities concerned are debt instruments, impair-
ment losses are reversed with an effect on profit or loss 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 profit or loss.
As well as securities, the item “Available-for-sale financial assets”
also contains other long-term financial investments that are
not valued according to the equity method. As there is no active
market for the other long-term financial investments and 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. None
of these financial assets were disposed of during the current
fiscal year. There is no intention to sell.
// 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 transac-
tions). 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 instruments:
>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.
According to the rules, hedge accounting is used if a clear
hedging relationship between the underlying transaction and
the hedge is 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 fluctuations 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 profit or loss, and are only recog-
nized as income or expense under operating profit once the
hedged item is due. The ineffective portion of a hedge is rec-
ognized immediately in profit or loss. Derivative financial
instruments 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 categorized 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 obliga-
tions for leased vehicles, are also reported in accordance with
the rules for “financial instruments measured at fair value
through profit or loss.” The results from “financial instruments
measured at fair value through profit or loss” are now reported
under the financial result. No adjustment of the previous
year’s figures was required given the small impact of the
change in reporting.
/ OTHER FINANCIAL ASSETS AND
OTHER RECEIVABLES
Financial assets (except for derivatives) and other receivables
are recognized at amortized cost. Provision is made for discern-
ible non-recurring risks and general credit risks in the form of
corresponding value adjustments.
/ DEFERRED TAX
Pursuant to IAS 12, deferred tax is determined according to the
liability method in combination with the temporary concept.
With this concept, deferred taxes are recognized for all tempo-
rary differences arising from the different valuations of assets
and liabilities in the Balance Sheet for tax purposes and in the
Consolidated Balance Sheet. Deferred tax assets relating to tax
loss carryforwards must also be recognized.