LensCrafters 2012 Annual Report Download - page 196

ANNUAL REPORT 2012> 110 |
market. If the market for a financial asset is not active (or if it refers to non-listed securities),
the Group defines the fair value by utilizing valuation techniques. These techniques include
using recent arms-length market transactions between knowledgeable willing parties, if
available, reference to the current fair value of another instrument that is substantially the
same, discounted cash flows analysis, and pricing models based on observable market
inputs, which are consistent with the instruments under valuation.
The valuation techniques are primarily based on observable market data as opposed to
internal sources of information.
At each reporting date, the Group assesses whether there is objective evidence that a
financial asset is impaired. In the case of investments classified as financial assets held
for sale, a prolonged or significant decline in the fair value of the investment below its
cost is also considered an indicator that the asset is impaired. If any such evidence exists
for an available-for-sale financial asset, the cumulative loss, measured as the difference
between the cost of acquisition and the current fair value, net any impairment loss
previously recognized in the consolidated statement of income, is removed from equity
and recognized in the consolidated statement of income.
Any impairment loss recognized on an investment classified as an available-for-sale
financial asset is not reversed.
Derivative financial instruments
Derivative financial instruments are accounted for in accordance with IAS 39 - Financial
Instruments: Recognition and Measurement.
At the date the derivative contract is entered into, derivative instruments are accounted for
at their fair value and, if they are not designated as hedging instruments, any changes in
fair value after initial recognition are recognized as components of net income for the year.
If, on the other hand, derivative instruments meet the requirements for being classified as
hedging instruments, any subsequent changes in fair value are recognized according to
the following criteria, as illustrated below.
The Group designates certain derivatives as instruments for hedging specific risks
associated with highly probable transactions (cash flow hedges).
For each derivative financial instrument designated as a hedging instrument, the Group
documents the relationship between the hedging instrument and the hedged item, as well
as the risk management objectives, the hedging strategy and the methodology to measure
the hedging effectiveness. The hedging effectiveness of the instruments is assessed both
at the hedge inception date and on an ongoing basis. A hedging instrument is considered
highly effective when both at the inception date and during the life of the instrument, any
changes in fair value of the derivative instrument offset the changes in fair value or cash
flows attributable to the hedged items.
If the derivative instruments are eligible for hedge accounting, the following accounting
criteria are applicable: