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140 Consolidated

Financial Statements

at 31 December 2013

Notes

Hedges of a net investment – If a derivative ﬁnancial instrument is designated as a hedging instrument for a net investment in a foreign

operation, the effective portion of the gain or loss on the derivative ﬁnancial instrument is recognized in Other comprehensive income/

(losses). The cumulative gain or loss is reclassiﬁed from Other comprehensive income/(losses) to Income statement on the disposal of the

foreign operation.

For further information on the effects arising on Income statement on derivative ﬁnancial instruments refers to Note 20.

If hedge accounting cannot be applied, the gains or losses from the fair value measurement of derivative ﬁnancial instruments are recognized

immediately in the Income statement.

Transfers of ﬁnancial assets

The Group derecognizes ﬁnancial assets when, and only when, the contractual rights to the cash ﬂows arising from the asset are no longer

held or if it transfers the ﬁnancial asset. In case of a transfer of ﬁnancial asset:

if the Group transfers substantially all the risks and rewards of ownership of the ﬁnancial asset, it derecognizes the ﬁnancial asset and

recognizes separately as assets or liabilities any rights and obligations created or retained in the transfer;

if the Group retains substantially all the risks and rewards of ownership of the ﬁnancial asset, it continues to recognize the ﬁnancial asset;

if the Group neither transfers nor retains substantially all the risks and rewards of ownership of the ﬁnancial asset, it determines whether it

has retained control of the ﬁnancial asset. In this case:

if it has not maintained control, it derecognizes the ﬁnancial asset and recognizes separately as assets and liabilities any rights and

obligations created or retained in the transfer;

if it has retained control, it continues to recognize the ﬁnancial asset to the extent of its continuing involvement in the ﬁnancial asset.

On derecognition of ﬁnancial assets, the difference between the carrying amount of the asset and the consideration received or receivable for

the transfer of the asset is recognized in the Income statement.

Inventories

Inventories of raw materials, semi-ﬁnished products and ﬁnished goods are stated at the lower of cost and net realizable value, cost being

determined on a ﬁrst in-ﬁrst-out (FIFO) basis. The measurement of Inventories includes the direct costs of materials, labor and indirect costs

(variable and ﬁxed). Provision is made for obsolete and slow-moving raw materials, ﬁnished goods, spare parts and other supplies based on

their expected future use and realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the

estimated costs of completion and the estimated costs for sale and distribution.

The measurement of production systems construction contracts is based on the stage of completion determined as the proportion of cost

incurred to the balance sheet date over the estimated total contract cost. These items are presented net of progress billings received from

customers. Any losses on such contracts are fully recorded in the Income statement when they become known.