Derivative instruments are measured at fair value.
The Group uses derivatives mainly to hedge risks, in particular interest rate, foreign exchange and commodity price risks. The hedging purpose of the derivative is formally documented and the degree of “effectiveness” of the hedge is specified.
For accounting purposes hedging transactions can be classified as:
- fair value hedges – where the effects of the hedge are recognized to the income statement.
- cash flow hedges – where the effective portion of the hedge is recognized directly to shareholders’ equity while the non-effective part is recognized to income statement.
- hedges of a net investment in a foreign operation – where the effective portion of the hedge is recognized directly to shareholders’ equity while the non-effective part is recognized to the income statement.