Ordinary shares are recorded at nominal value. Costs directly attributable to the issuance of new shares are deducted from the shareholders’ equity reserves, net of any related tax benefit..
Own shares are classified in a special item which is deducted from reserves; any subsequent transaction of sale, re-issuance or cancellation will have no impact on the income statement but will affect only shareholders’ equity.
Unrealized gains and losses, net of tax, on financial assets classified as available for sale are recorded under equity in the fair value reserve.
The reserve is reversed to the income statement when the asset is realized or when a impairment loss is recognized.
The hedging reserve is formed when fair value changes are recognized on derivatives which, for the purposes of IAS 39, have been designated as “cash flow hedges” or as “hedges of net investments in foreign operations”.
The portion of gains and losses considered as “effective” is recognized to equity and is reversed to the income statement as and when the elements hedged are in turn recognized to the income statement, or when the subsidiary is sold.
When a subsidiary prepares its financial statements in a currency different from the Group’s functional currency, the subsidiary’s financial statements are translated accounting any differences resulting from such translation in a special reserve. When the subsidiary is sold the reserve is reversed to the income statement with a detail of any gains or losses resulting from its disposal.
The item “Retained earnings (losses)” includes accumulated income and losses and the transfer of balances from other equity reserves when these become free of any restrictions to which they have been subject.
This item also shows the cumulative effect of the changes in accounting principles and/or the correction of errors which are accounted for in accordance with IAS 8.