LensCrafters 2011 Annual Report Download - page 192

ANNUAL REPORT 2011> 116 |
and exchange rate fluctuations. In the future, the Group may use other derivative
financial instruments should they be considered appropriate for adequately hedging
risks. Despite the fact that certain currency swap contracts are used as an economic
hedge of the exchange rate risk, these instruments may not fully meet the criteria for
hedge accounting pursuant to IAS 39. If so, the instruments are marked to market
at the end of each reporting period and changes in fair value are recognized in the
consolidated statement of income.
Accounts payable and other payables
Accounts payable are obligations to pay for goods or services that have been acquired in
the ordinary course of business from suppliers. Accounts payable are classified as current
liabilities if payment is due within one year or less from the reporting date. If not, they are
presented as non-current liabilities.
Accounts payable are recognized initially at fair value and subsequently measured at
amortized cost using the effective interest method.
Long–term debt
Long-term debt is initially recorded at fair value, less directly attributable transaction
costs, and subsequently measured at its amortized cost by applying the effective
interest method. If there is a change in expected cash flows, the carrying amount of
the long-term debt is recalculated by computing the present value of estimated future
cash flows at the financial instrument’s original effective interest rate. Long-term debt
is classified under non-current liabilities when the Group retains the unconditional
right to defer the payment for at least 12 months after the balance sheet date and
under current liabilities when payment is due within 12 months from the balance sheet
date.
Long-term debt is removed from the statement of financial position when it is extinguished,
i.e. when the obligation specified in the contract is discharged, canceled or expires.
Current and deferred taxes
The tax expense for the period comprises current and deferred tax.
Tax expenses are recognized in the consolidated statement of income, except to the
extent that they relate to items recognized in other comprehensive income or directly in
equity. In this case, tax is also recognized in other comprehensive income or directly in
equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or
substantially enacted at the balance sheet date in the countries where the Group operates
and generates taxable income. Management periodically evaluates positions taken
in tax returns with respect to situations in which applicable tax regulation is subject to
interpretation and establishes provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.