Porsche 2008 Annual Report Download - page 165

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Financial assets are subject to an impairment test if there is an indication that the asset is perma-
nently impaired. An impairment loss is immediately recorded as an expense.
Specific and portfolio-based valuation allowances are recognized for the risk of default inherent in
receivables and loans from financial.
For significant individual receivables (for example receivables from dealer financing or from fleet
customers). Specific valuation allowances are recognized in accordance with group-wide standards
for the amount of incurred losses. Indicators of a potential impairment include delayed payments
over a certain period of time, the institution of enforcement measures, the threat of insolvency or
over-indebtedness, application for or the opening of insolvency proceedings or the failure of finan-
cial reorganization measures.
In the case of non-significant receivables (such as receivables from customer financing), a general-
ized procedure is used to calculate the specific valuation allowances after the impairment has
been identified.
Portfolio-based valuation allowances are recognized by grouping together non-significant receiv-
ables and significant individual receivables for which there is no indication of impairment into
homogeneous portfolios on the basis of comparable credit risk features and allocating them by
risk class. As long as no definite information is available about which receivable is in default, aver-
age historical default probabilities for the portfolio concerned are used to calculate the amount of
the valuation allowances.
As a matter of principle, specific valuation allowances are recognized for receivables in the auto-
motive sector.
Allowances are generally recognized in separate allowance accounts.
An impairment loss is recognized on available-for-sale financial assets if there is objective evidence
of permanent impairment. In the case of equity instruments, evidence of impairment is taken to
exist, among other things, if the fair value decreases significantly below cost or the decrease in
fair value is prolonged. Any loss previously recognized in equity for available-for-sale securities is
recognized in profit or loss when the impairment is permanent. Any increase in the value of debt
securities at a later date is accounted as a reversal of the impairment loss recognized in profit or
loss. In the case of equity instruments, reversals of impairment losses are recognized in equity.
Derivative financial instruments
Derivative financial instruments held by the Porsche group primarily relate to foreign currency
forwards and options, swaps, interest derivatives, commodity futures and stock options. They are
used to hedge interest and currency risks from existing balance sheet items or highly probable
forecast transactions as well as to secure commodity and stock prices. Derivative financial instru-
ments are generally valued at fair value through profit or loss. As soon as the criteria of IAS 39 for
hedge accounting are satisfied, the derivative financial instruments are designated either as fair
value or cash flow hedges. Otherwise, they are allocated to the category financial assets or liabili-
ties held for trading.