## 4.8  SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS 

When entering into financial instruments, management assesses whether the instru- ment is an effective hedge of recognised assets and liabilities, expected future cash flows or financial investments. The effectiveness of recognised hedge instru- ments is assessed at least quarterly. Any ineffectiveness is recognised in the income statement. 

## 4.8 ACCOUNTING POLICIES 

Derivative financial instruments are initially recog- nised in the statement of financial position at fair value on the trade date and subsequently measured at fair value. Attributable transaction costs are recognised in the income statement. 

The fair values of derivative financial instruments are included in other receivables and other paya- bles, and positive and negative values are offset only when the Group has the right and the intention to settle several financial instruments net. Fair val- ues of derivative financial instruments are computed on the basis of current market data and generally accepted valuation methods. 

Changes in the fair value of derivative financial in- struments designated as and qualifying for recogni- tion as a fair value hedge of recognised assets and liabilities are recognised in the income statement, together with changes in the value of the hedged asset or liability with respect to the hedged portion. Except for foreign currency hedges, hedging of future cash flows according to a firm agreement is treated as a fair value hedge of a recognised asset or liability. 

Changes in the portion of the fair value of derivative financial instruments which are designated and qualify as a cash flow hedge and which effectively hedge changes in the value of the hedged item are recognised in other comprehensive income and attributed to a separate reserve in equity. When the hedged transaction results in gains or losses, amounts previously recognised in other compre- hensive income are transferred to the same item as the hedged item when the hedged risk impacts the income statement. When the hedged item is a 

non-financial asset, the amount recognised in other comprehensive income is transferred to the carrying amount of the asset when the non-financial asset is recognised. 

Derivatives designated as and qualifying for recog- nition as a cash flow hedge of financial investments are recognised in other comprehensive income. On complete or partial disposal of the financial invest- ment, the portion of the hedging instrument that is recognised in other comprehensive income and relates to that financial investment is recognised in the income statement when the gain or loss on disposal is recognised. 

For derivative financial instruments that do not qualify for hedge accounting, changes in fair value are recognised in the income statement as financial income or financial expenses. 

Changes in the fair value of derivative financial instruments used to hedge net investments in foreign subsidiaries, joint ventures or associates and which ef- fectively hedge currency fluctuations in these entities are recognised in other comprehensive income and at- tributed to a separate translation reserve in equity. 

Embedded derivatives are recognised separately from the host contract and measured at fair value if their economic characteristics and risks are not closely related to those of the host contract, as a separate instrument with the same terms would meet the definition of a derivative, and the entire combined instrument is not measured at fair value through profit and loss. Separated embedded de- rivatives are subsequently measured at fair value. 

