Ubisoft 2008 Annual Report Download - page 146

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UBISOFTANNUAL REPORT 2009
• Cash and cash equivalents (assets held for trading category)
Cash and cash equivalents include cash on hand and demand deposits, with maturity of generally under three months and that can
be easily liquidated or sold on very short notice, converted into cash and do not bear any signicant risk of loss in value. Short-term
investments are measured at liquidation value at each end of periods. Changes in this market value are recognised in nancial
prot and loss.
Bank overdrafts repayable on demand are an integral part of the Group’s cash management, and are included in “cash and cash
equivalents” for the purposes of the cash ow statement.
Recognition and measurement of nancial assets (excluding derivatives)
• Borrowings and other nancial liabilities
This category includes borrowings and bank overdrafts.
Bank borrowings and other nancial liabilities are measured at amortised cost calculated using the effective interest rate.
Financial interests accrued on borrowings are included in the "current nancial liabilities" in the balance sheet.
Trade and other debts are recorded at fair value, which is generally the same as nominal value.
Cash ows linked to short-term recoverable amounts are not discounted. Long-term ows are discounted whenever the impact
is signicant.
Recognition and measurement of nancial derivatives
Financial derivatives are held exclusively to manage its exposure to foreign-exchange risks. Ubisoft Entertainment hedges these
risks with forward sale contracts and currency options.
Derivatives are initially recorded at fair value; associated transaction costs are booked in prot and loss when incurred. After initial
recognition, derivatives are measured at fair value while changes in prot and loss are recorded using principles outlined below.
• Cash ow hedging
Since April 1, 2008, the Group has applied hedge accounting to transactions in US dollars. The management considers that this
method offers the best reection of its hedging policy in the nancial statements.
Hedge accounting applies if:
- the hedging relationship is clearly dened and documented on the date it is established,
- the effectiveness of the hedging relationship is proven from the outset and for as long as it lasts.
Application of cash ow hedge accounting has the following consequences:
- the effectively hedging portion of the change in the fair value of the hedging instrument is recognised directly in equity,
as the hedged item does not appear on the balance sheet,
- the ineffective part of the change in fair value is recognized as nancial result.
When the hedging instrument no longer meets the criteria for hedge accounting, reaches maturity, is sold, cancelled or exercised,
hedge accounting is no longer applied. The prot or loss accumulated is held in equity until the completion of the planned transaction.
When the hedged item is a non-nancial asset, the prot or loss accumulated is removed from equity and included in the initial
cost. In other cases, related prots and losses that have been recognised directly in equity are reclassied under prot and loss
for the period in which the hedged item impacts the result.
• Other derivatives
Derivatives for which documentation on the hedging relationship does not meet the requirements of IAS 39 are not referred to as
hedging instruments in the accounts. Changes in the fair value of these instruments are recognised on the income statement in
accordance with IAS 39. The same goes for certain types of derivatives (options) that are not eligible for hedge accounting. The fair
value of assets, liabilities and derivatives is determined on the basis of market prices on the closing date.