Porsche 2008 Annual Report Download - page 166

To our shareholders The Company
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A fair value hedge hedges the exposure to changes in fair value of a recognized asset or liability or
an unrecognized firm commitment. Gains or losses arising from marking derivative financial instru-
ments to market and the secured portion of the risk of the hedged transaction are recognized in
profit or loss. If the fair value hedge ends, the adjustment of the carrying amount from the fair
value hedge accounting of financial instruments measured at amortized cost is released to profit
or loss over the remaining term of the hedged transaction.
In the case of fair value portfolio hedges performed, the accounting for changes in fair value
corresponds to the accounting for fair value hedges. Gains or losses from changes in measure-
ment are recognized in the income statement.
A cash flow hedge is used to hedge highly probable future cash flows. Hedges are only included
in hedge accounting to the extent that they offset changes in the value of the cash flows of the
hedged transaction. When included in cash flow hedge accounting, changes in are recorded
directly in other comprehensive income, taking deferred taxes into account. When the hedged
transaction occurs, the change in value is reclassified from other comprehensive income to profit
or loss. As a result of harmonizing the accounting policies with those of the Volkswagen group,
such reclassifications are presented in the income statement in other operating income or
expenses.
The stock options held by Porsche generally are not traded on a public market. In such cases,
IAS 39.48 et seq. requires that a suitable valuation technique or recent transaction be used for
measurement purposes. As a large volume of the stock options were sold shortly after the balance
sheet date, Porsche assumes that this sales price was the best estimate for fair value at the
balance sheet date.
Cash and cash equivalents
The cash and cash equivalents include checks, cash on hand and at banks. This item also includes
cash and cash equivalents that are not available for use by the Porsche group.
Deferred taxes
Deferred tax assets are generally recognized for deductible temporary differences between the tax
base and carrying amounts in the consolidated balance sheet as well as on unused tax losses and
tax credits if it is probable that they will be used. Deferred tax liabilities are generally recognized
for all taxable temporary differences between the tax base and the carrying amounts in the con-
solidated balance sheet (temporary concept). Deferred tax liabilities for taxable temporary differ-
ences associated with investments in subsidiaries, associates and interests in joint ventures are
not recognized if the timing of the reversal of the temporary differences can be controlled and it is
probable that the temporary differences will not reverse in the foreseeable future.