Annual Report and Consolidated Account
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are initially recognised at the fair value, including trans-
action costs, when the financial assets are not shown at
the fair value through results (in this case, they are also
recognised at the fair value, but the transaction costs
are recorded in costs in the year at the time they are in-
curred). Financial investments are derecognised when
the rights to receive cash from themexpire or have been
transferred and the group has substantially transferred
all the risks and benefits from its possession. Financial
assets available for sale and financial assets at the fair
value through results are subsequently valuated at the
fair value. Loans granted and accounts receivable and
investments held until maturity are valuated at the
amortised cost, using the effective rate method. Gains
and losses - either realised or not realised and arising
from alterations to the fair value of the category of the
financial assets at their fair value through results - are in-
cluded in the consolidated statement of comprehensive
income in the year in which they arise. Unrealised gains
and losses, resulting from alterations to the fair value of
non-monetary securities, classified as available for sale,
are recognised in the equity. When the securities clas-
sified as available for sale are sold or are under impair-
ment, the accumulated adjustments to the fair value are
included in the consolidated statement of comprehen-
sive income as gains or losses in securities investments.
The fair value of listed investments is based on current
market prices.
If there is no active market for a financial asset (and for
non-listed securities), the group determines the fair
value using evaluation techniques, which include us-
ing recent transactions between independent parties,
reference to other instruments that are substantially
identical, an analysis of the discounted cash flow and
refined options price models that reflect the specific
emission circumstances.
2.8.3 Impairment
On each consolidated statement of financial posi-
tion, the group checks for objective evidence showing
whether any group of financial assets is subject to im-
pairment. In the event of equity securities classified as
available for sale, a significant or lasting decrease in the
fair value falling below the cost value is determinant for
knowing if there is impairment. If there is evidence of
impairment applicable to financial assets available for
sale, the accumulated loss – calculated by the differ-
ence between the acquisition cost and the current fair
value, minus any impairment loss of that financial as-
set previously recognised in results – is removed from
equity and recognised in the consolidated statement of
comprehensive income. Impairment losses from capi-
tal instruments recognised in results are not reversible.
The group complies with the guidelines of IAS 39 (re-
viewed in 2004) to determine the permanent impair-
ment of investments. This measure requires that the
group valuate, among other factors, the duration and
the extent to which the fair value of an investment is
less than its cost, the financial health and business
outlook for the subsidiary, including factors such as
the industry’s and sector’s performance, technological
alterations and flows of operating cash and financing.
2.9 STOCKS
Stocks are presented at the lowest value between
their cost and the net realisation value. The cost is cal-
culated using the weighted mean cost.
The net realisation value corresponds to the estimat-
ed sale price during normal business operations, mi-
nus variable sale costs.
