Consolidated Financial Statements
2.20 DERIVATIVES FINANCIAL INSTRUMENTS
The Group uses derivatives financial instruments, such as exchange forwards and interest
rate swaps, only to cover the financial risk which the Group is exposed to. The Group doesn’t
use derivatives financial instruments for speculation. For the carrying amount of derivatives
financial instruments, the Group uses hedge accounting policies under the terms of the legis-
lation in force. Derivatives financial instruments negotiation is carried out by the Group, on
behalf of their subsidiaries, by the financial department under the policies approved by the
Board of directors. Derivative financial instruments are initially measured at the transaction
date fair value, being subsequently measured at each reporting date fair value. Gains or losses
of fair value changes are recognised as follows:
Fair value hedge
In an operation to hedge the exposure to fair value of an asset or liability (“fair value hedge”)
determined as effective hedges, the fair value changes are recognised in the income statement
jointly with the fair value changes of the risk component of the hedged item.
Cash flow hedge
In an operation to hedge the exposure to future cash-flows of an asset or liability (“cash-flow
hedge”), the effective part of the fair value changes in the hedging derivative are recognized
in equity; the ineffective part of the hedging is recognized in the income statement when it
occurs.
Net investment hedge
Currently there are no foreign operational units (subsidiaries) in currencies other than the
euro, therefore the Group is not exposed to foreign currency exchange-rate risks.
The Group has well identified the nature of the involved risks, guarantees through its software
that each hedge instrument is followed under the Group’s risk policy, recording thorough and
formally the hedges relationships; the hedges goal and strategy; classification of the hedges
relationship; description of the nature of the risk that’s being cover; identification of the hedge
instrument and covered item; description of initial measure and future effectiveness of the
hedge; identification of the excluded, if any, part of the hedge instrument.
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