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ePaper created 2014-04-29, 17:58:02 | version 1.30.00
DEUTSCHEEUROSHOPANNUALREPORT2013/CONSOLIDATEDFINANCIALSTATEMENTS 160 For financial instruments regularly recorded at fair value, a reassessment at the end of the financial year determines whether there has been a regrouping between the hierarchy levels. For financial instruments recognised at amortised cost the fair value is determined on the basis of expected cash flows, using the risk and maturity-congruent reference interest rates prevailing on the balance sheet date. A. DERIVATIVE FINANCIAL INSTRUMENTS Derivatives that qualify for hedge accounting in accordance with IAS 39 are used to hedge interest rate risks. These are fixed-rate swaps to limit the interest rate risk of variable interest rate loans, which have terms extending to 2026. The interest rate hedges are recognised at fair value (recurring fair value assessment) under “Other assets” or “Other liabilities”. Changes are recognised directly in equity, provided that the conditions of the underlying and hedge trans- action are identical. Hedge effectiveness tests are regularly conducted. If the effectiveness between the basic and the hedging transaction is absent, the hedging instrument will be recognised as a derivative in profit or loss at fair value. Present value is calculated based on discounted cash flows using current market interest rates. The final maturities of the interest rate hedges and loan agreements are identical. B. NON-CURRENT FINANCIAL ASSETS Non-current financial assets are classified as available for sale and include an investment in a Dutch corporation that is a joint venture controlled by Deutsche EuroShop jointly with partner companies. As Deutsche EuroShop, under the provisions of the shareholders’ agreement, exercises neither significant influence nor control over this company, the investment is measured at fair value (recurring fair value assessment) in line with the provisions of IAS 39. The holding company has sold its major assets in the year under review. The carrying amount of the investment is essentially the pro rata credit balance with banks. C. RECEIVABLES AND OTHER CURRENT ASSETS Receivables and other current assets are recognised at amortised cost less write-downs. Allowances are established for trade receivables if it is no longer certain that payment will be received. This is reviewed on a case-by-case basis on the balance sheet date. They are written off if the receivable becomes uncollectable. D. RIGHT TO REDEEM OF LIMITED PARTNERS The distinction between equity and liabilities is set out in IAS 32 Financial Instruments: Disclosure and Presentation. In accordance with this standard, the equity interests of third-party shareholders in commercial partnerships are reclassified as liabilities due to the shareholders’ potential right of redemption. According to sections 131 et seq. HGB, shareholders in commercial partnerships have an ordinary legal right of termination of six months with effect from the end of the financial year, which the shareholders’ agreement can define in greater detail, but not exclude. As a result of this stipulation, a liability rather than equity is recognised in the balance sheet. This liability must be meas- ured at fair value. E. FINANCIAL LIABILITIES Liabilities to banks/bank loans and overdrafts are reported at amortised cost. Discounts are deducted, which under IAS 39 must be amortised over the term of the loan agreement and recognised annually as an expense. The debt component of convertible bonds is measured using the market interest rate for a similar, non-convertible bond. This debt component is measured as a liability at amortised cost using the effective interest method until converted or repayment becomes due. The remaining proceeds from the issue represent the value of the conversion right. This is recognised in equity within the capital reserves. The financial liability increases over time, with an effect on net income, and comes to an amount equalling the difference between the actual interest expense and the nominal interest rate.