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Notes Consolidated Financial Statements
Deutsche Post World Net Annual Report 2007
Finance leases
A lease nancing transaction is an agreement in which the lessor con-
veys to the lessee the right to use an asset for a speci ed period in return
for a payment or a number of payments. In accordance with IAS , ben-
e cial ownership of leased assets is attributed to the lessee if the lessee
bears substantially all the risk and rewards incident to ownership of the
leased asset. To the extent that bene cial ownership is attributable to
Deutsche Post World Net, the asset is capitalised at the date on which
use starts, either at fair value or at the present value of the minimum
lease payments if this is less than the fair value. A lease liability in the
same amount is recognised under non-current liabilities. e lease is
measured subsequently at amortised cost using the e ective interest
method. e depreciation methods and estimated useful lives corre-
spond to those of comparable purchased assets.
Fair value option
Deutsche Post World Net applied the fair value option for the rst time
for nancial year 00. Under this option, nancial assets or nancial
liabilities may be measured at fair value through pro t or loss on initial
recognition if this eliminates or signi cantly reduces a measurement or
recognition inconsistency (accounting mismatch). e Group made use
of the option in two instances in order to avoid accounting mismatches.
e Deutsche Postbank Group applies the fair value option solely in rela-
tion to speci c building nance loan portfolios that are hedged by inter-
est rate derivatives. e use of the fair value option avoids an accounting
mismatch that arises from reporting the loans at amortised cost whilst
changes in the fair value of the hedging instruments are recognised in
pro t or loss. In another case, the fair value option has been applied in
order to neutralise the e ects on the income statement of a liability in-
dexed to share prices that is linked to nancial instruments which would
originally have been classi ed as available for sale. e cash ows arising
from the contract vary depending on the movement in the index. Under
the terms of IAS , changes in the fair value of the related nancial
assets would have had to be reported directly in equity. As a result of
applying the fair value option, the e ects of changes in the fair value of
both nancial instruments o set each other in the income statement.
Investments in associates
Investments in associates are carried at equity in accordance with IAS
(Accounting for Investments in Associates). Based on the cost of acquisi-
tion at the time of purchase of the investments, the carrying amount of
the investment is increased or reduced to re ect the share of earnings,
dividends distributed and other changes in the equity of the associates
attributable to the investments of Deutsche Post AG or its consolidated
subsidiaries. e goodwill contained in the carrying amounts of the
investments is accounted for in accordance with IFRS . Investments in
companies accounted for using the equity method are written down as
impaired if the recoverable amount falls below the carrying amount.
Financial instruments
A nancial instrument is any contract that gives rise to a nancial asset
of one entity and a nancial liability or equity instrument of another
entity. Financial assets include in particular cash and cash equivalents,
trade receivables, originated loans and receivables, and primary and
derivative nancial assets held for trading. Financial liabilities include
contractual obligations to deliver cash or another nancial asset to an-
other entity. ese mainly comprise trade payables, liabilities to banks,
liabilities arising from bonds and nance leases, and derivative nancial
liabilities.
Financial assets
Financial assets are accounted for in accordance with the provisions of
IAS which distinguishes between four categories of nancial instru-
ments.
Available-for-sale nancial instruments are non-derivative nancial
assets and are carried at their fair value where this can be measured
reliably. If a fair value cannot be determined, they are carried at cost.
Changes in fair value between reporting dates are generally recognised
in the revaluation reserve in equity. e reserve is reversed to income
either upon disposal or if the fair value falls below cost more than
temporarily. If, at a subsequent balance sheet date, the fair value has
increased objectively as a result of events occurring a er the impairment
loss was recognised, the impairment loss is reversed in the appropriate
amount. Impairment losses recognised in respect of unquoted equity in-
struments may not be reversed. Available-for-sale nancial instruments
are allocated to non-current assets unless the intention is to dispose
of them within twelve months of the balance sheet date. In particular,
investments in unconsolidated subsidiaries, nancial instruments and
other equity investments are reported in this category.
Financial instruments are classi ed as held to maturity if there is an
intention to hold the instrument to maturity and the economic condi-
tions for doing so are met. Held-to-maturity nancial instruments are
non-derivative nancial assets that are measured at amortised cost using
the e ective interest method.
Loans and receivables are non-derivative nancial assets with xed
or determinable payments which are not quoted on an active market.
Unless held for trading, they are recognised at cost or amortised cost at
the balance sheet date. e carrying amounts of money market place-
ments correspond approximately to their fair values due to their short
maturity. Loans and receivables are considered current assets if their
maturity is not more than twelve months a er the balance sheet date;
otherwise, they are recognised as non-current assets. If the recover-
ability of receivables is in doubt, they are recognised at amortised cost,
less appropriate speci c allowances. A write-down on trade receivables
is recognised if there are objective indications that the amount of the
outstanding receivable cannot be collected in full. e amount of the
write-down is recognised in income.
All nancial instruments held for trading and derivatives that do not
satisfy the criteria for hedge accounting are assigned to the category “at
fair value through pro t and loss”. ey are generally measured at fair
value. All changes in fair value are recognised in income. All nancial
instruments in this category are accounted for at the trade date. Assets
in this category are recognised as current assets if they are either held
for trading or will likely be realised within twelve months of the balance
sheet date.
To avoid variations in net pro t resulting from changes in the fair value
of derivative nancial instruments, hedge accounting is applied where
possible and economically useful. Gains and losses from the derivative
and the related hedged item are simultaneously recognised in income.
Depending on the hedged item and the risk to be hedged, Deutsche Post
World Net uses fair value hedges and cash ow hedges.