Porsche 2006 Annual Report Download - page 137

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Fair value corresponds to market price provided the financial instruments measured are traded on an
active market. If there is no active market for a financial instrument, fair value is calculated using
appropriate actuarial methods such as recognized option price models or discounting future cash flows
with the market interest rate.
Amortized cost corresponds to costs of purchase less redemption, impairment losses and the reversal
of any difference between costs of purchase and the amount repayable upon maturity.
Financial instruments are recognized as soon as Porsche becomes a party to the financial instrument.
They are generally derecognized when the contract right to cash flow expires or this right is transferred
to a third party.
Primary financial instruments
Financial instruments which are recognized at fair value contain securities in the held-for-trading
category and financial assets which are initially recognized as financial assets at fair value through profit
or loss. Gains and losses from subsequent measurement are recognized in the net profit or loss. Financial
instruments that classified upon initial recognition at fair value through profit or loss include embedded
securities, index and discount certificates.
Financial instruments which are held to maturity are accounted for at cost.
Gains and losses from subsequent measurement are recognized in the net profit or loss.
Financial instruments categorized as available for sale are measured at fair value.
Unrealized gains and losses from subsequent measurement are recognized in equity after considering
deferred taxes until the investment is disposed of or an objective impairment occurs.
Equity investments which are disclosed in financial assets and not measured at equity also represent
available-for-sale financial instruments and are measured at fair value. If no active market is available and fair
value cannot reasonably be expected to be determined, they are measured at cost.
Financial assets are tested for impairment if there is an indication that the value of the asset may be
permanently impaired. An impairment loss is immediately recorded as an expense. Any loss previously
recorded in equity for available-for-sale investments is then also posted to the income statement.
Any increase in value at a later date is accounted for debt instruments by reversal of the impairment
loss with an effect on income.
Loans issued and receivables, held-to-maturity investments and financial liabilities
are measured at amortized cost unless they are associated with hedging instruments. In particular,
these include trade receivables and payables, receivables from financial services, other receivables and
assets, held-to-maturity investments, financial liabilities and other liabilities. The liabilities which constitute
financial instruments within the meaning of IAS 39 are disclosed at fair value or amortized cost. Bonds
which were not issued in fiscal year 2005/06 and financial liabilities which are associated with fair value
hedge accounting are accounted for at fair value; all other liabilities as defined by IAS 39 are carried at
amortized cost. The liabilities from finance leases which are also disclosed under financial liabilities are
recognized at present value in accordance with IAS 17.