Ubisoft 2012 Annual Report Download - page 98

Financial Statements
2012
93
 Long-term securities (available-for-sale assets category)
These include the Group’s equity in companies that are not consolidated due to a lack of control or
significant influence.
Gameloft shares are classed as held-for-sale current assets.
As this involves an interest in a listed company, the shares are recorded in the balance sheet at their
fair value, determined on the basis of the share price on the closing date. Changes in fair value are
recognized directly in others items of comprehensive income, except when there is a significant or
prolonged drop in fair value.
In accordance with IAS 39, “Financial Instruments: Recognition and Measurement”, if there is a
significant or prolonged decline in the value of the equity security to below its cost that results in an
unrealized material loss, permanent impairment is recognized in financial income.
 Cash and cash equivalents (assets held for trading category)
Cash and cash equivalents include cash on hand and deposit accounts with maturity generally under
three months which can be easily liquidated or sold on very short notice, can be converted into cash
and present negligible risks of change in value. Short-term investments are measured at net asset
value at each balance sheet date. Changes in this market value are recognized in financial profit or
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 flow statement.
Recognition and measurement of financial liabilities (excluding derivatives)
 Borrowings and other financial liabilities
This category includes borrowings and bank overdrafts.
Bank borrowings and other financial liabilities are measured at amortized cost calculated using the
effective interest rate.
Financial interests accrued on borrowings are included in the “current financial liabilities” in the
balance sheet.
Trade payables and other liabilities are recorded at amortized cost.
Cash flows linked to short-term recoverable amounts are not discounted. Long-term flows are
discounted whenever the impact is significant.
Recognition and measurement of financial derivatives
The Group holds financial derivatives exclusively to manage its exposure to foreign exchange risks.
Ubisoft Entertainment SA hedges these risks with forward sale contracts and currency options.
Derivatives are initially recorded at fair value; associated transaction costs are booked in profit or loss
when incurred. After initial recognition, derivatives are measured at fair value while resulting changes
are recorded using the principles outlined below.
 Cash flow hedging
The Group applies hedge accounting for transactions in US dollars and pounds sterling. Management
believes this method better reflects its hedging policy in the financial statements.
Hedge accounting applies if:
- The hedging relationship is clearly defined 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.