Porsche 2008 Annual Report Download - page 164

To our shareholders The Company
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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 valuation techniques such as generally accepted option price models or dis-
counting future cash flows with the market interest rate, or by referring to the most recent busi-
ness transactions between knowledgeable, willing and independent business partners for one and
the same financial instrument, if necessary confirmed by the banks processing the transactions.
Amortized cost corresponds to costs less redemption, impairment losses and the release of any
difference between costs and the amount repayable upon maturity calculated by applying the
effective interest method. Financial instruments are recognized as soon as Porsche becomes a
party to the contractual provisions of the financial instrument. They are generally derecognized
when the contractual right to the cash flows expires or this right is transferred to a third party.
Non-derivative financial instruments
Financial instruments accounted for at fair value include securities held-for-trading and financial
assets recognized at fair value through profit or loss. Gains and losses from subsequent meas-
urement are recognized in profit or loss. The financial assets recognized at fair value through profit
or loss represents index certificates. The classification in this category reflects the risk manage-
ment and investment strategy.
Financial instruments held to maturity are accounted for at amortized cost. Gains and losses from
the subsequent measurement are recognized in profit or loss.
Financial instruments available for sale are measured at fair value. Non-derivative financial assets
are allocated to this category that is classified as available for sale and that cannot be allocated to
any other category. Unrealized gains and losses from subsequent measurement are recognized in
equity after considering deferred taxes until the securities are derecognized or an objective im-
pairment occurs. Investments presented as non-current financial assets that are not accounted for
at equity also constitute available-for-sale financial instruments and are generally measured at fair
value. If, however, no active market exists and fair value cannot be reliably estimated, they are
measured at cost.
Loans and receivables originated by the entity, held-to-maturity financial instruments and financial
liabilities are measured at amortized cost unless they are related to hedging instruments. In par-
ticular, these include trade receivables and payables, receivables from financial services, other
financial receivables, financial liabilities and other financial liabilities. The financial receivables and
liabilities related to fair value hedge accounting are accounted for at fair value with respect to the
hedged risk.