DHL 2008 Annual Report Download - page 145

Deutsche Post World Net Annual Report 2008
Consolidated Financial Statements
Notes
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, the Group uses fair value hedges and cash  ow hedges.
 e carrying amounts of  nancial assets not carried at fair
value through pro t or loss are tested for impairment at each bal-
ance sheet date and whenever there are indications of impairment.
 e amount of any impairment loss is determined by comparing the
carrying amount and the fair value. If there are objective indications
of impairment, an impairment loss is recognised in the income state-
ment under other operating expenses or net  nance costs. Impair-
ment losses are reversed if there are objective reasons arising a er
the balance sheet date indicating that the reasons for impairment
no longer exist.  e increased carrying amount resulting from the
reversal of the impairment loss may not exceed the carrying amount
that would have been determined (net of amortisation or deprecia-
tion) if the impairment loss had not been recognised.
Impairment losses are recognised within the Group if the
debtor is experiencing signi cant  nancial di culties, it is highly
probable that the debtor will be the subject of bankruptcy proceed-
ings, there ceases to be an active market for a  nancial instrument,
there are material changes in the issuer’s technological, economic,
legal or market environment, or the fair value of a  nancial instru-
ment falls below its amortised cost for a signi cant period.
A fair value hedge hedges the fair value of recognised assets
and liabilities. Changes in the fair value of both the derivatives and
the hedged item are simultaneously recognised in income.
A cash  ow hedge hedges the  uctuations in future cash
 ows from recognised assets and liabilities (in the case of interest
rate risks), highly probable forecast transactions as well as unrec-
ognised  rm commitments that entail a currency risk.  e e ective
portion of a cash  ow hedge is recognised in the hedging reserve in
equity. Ine ective portions resulting from changes in the fair value
of the hedging instrument are recognised directly in income.  e
gains and losses generated by the hedging transactions are initially
recognised in equity and are then reclassi ed into pro t or loss in the
period in which the asset acquired or liability assumed a ects pro t
or loss. If a hedge of a  rm commitment subsequently results in the
recognition of a non- nancial asset, the gains and losses recognised
directly in equity are included in the initial carrying amount of the
asset (basis adjustment).
Hedges of net investments (net investment hedges) in for-
eign entities are treated in the same way as cash  ow hedges.  e
gain or loss from the e ective portion of the hedge is recognised in
equity, whilst the gain or loss attributable to the ine ective portion
is recognised directly in income.  e gains or losses taken directly to
equity continue to be recognised in equity until the disposal or par-
tial disposal of the net investment. Detailed information on hedging
transactions can be found in Note 51.2.
Regular way purchases and sales of  nancial assets are rec-
ognised at the settlement date. A  nancial asset is derecognised if
the rights to receive the cash  ows from the asset have expired. Upon
transfer of a  nancial asset, a review is made under the disposal rules
pursuant to   as to whether the asset should be derecognised.
A disposal gain/loss arises upon disposal.  e remeasurement gains/
losses recognised directly in equity in prior periods must be reversed
as at the disposal date. Financial liabilities are derecognised if the
payment obligations arising from them have expired.
Investment property
In accordance with  , investment property is property
held to earn rentals or for capital appreciation or both, rather than
for use in the supply of services or for administrative purposes or for
sale in the normal course of the company’s business. It is measured
in accordance with the cost model. Depreciable investment property
is depreciated over a period of between  and  years.  e fair value
is determined on the basis of expert opinions. Impairment losses are
recognised in accordance with the principles described under the
section headed “Impairment”.
Inventories
Inventories are assets that are held for sale in the ordinary
course of business, are in the process of production, or are consumed
in the production process or in the rendering of services.  ey are
measured at the lower of cost and net realisable value. Valuation
allowances are charged for obsolete inventories and slow-moving
goods.
Government grants
In accordance with  , government grants are recog-
nised at their fair value only when there is reasonable assurance that
the conditions attaching to them will be complied with and that the
grants will be received.  e grants are reported in the income state-
ment and are generally recognised as income over the periods in
which the costs which they are intended to compensate are incurred.
Where the grants relate to the purchase or production of assets, they
are reported as deferred income and recognised in the income state-
ment over the useful lives of the assets.
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