288 / 488
Chapter
25 /
Financial In struments: Recognition and Measurement
(l AS
39)
9. EXCERPTS FROM FINANCIAL STATEMENTS
9.1 FRANCE TELECOM, Annual Report 2006
279
2.3 Significant Accounting Policies
2.3.11 Financial Assets and Liabilities
Financial assets include available-for-sale assets, held-to-maturity asse ts, asse ts held for trading, de–
rivative instruments, cash collate ral paid on derivative instruments, loans and receivables, and cash and
cash equivalents.
Financial liabilities include borrowi ngs, other financing and bank overdrafts , derivative instruments,
cash collateral received on derivative instrumen ts, and accounts payable.
Financial assets and liabilities are measured and recognized in accordance with lAS 39,
Financial
Instruments: Recognition and Measurement.
• Measurement and recognition of financial assets
Held-to-maturityassets
Held-to-matu rity assets are nonderivative financial asse ts with fixed or determinable pay–
ments and fixed maturity, other than loans and receivables, that the Group has the positive inten–
tion and ability
to
hold to maturity. They are recognized initially at fair value and are subse–
quently measured at amortized cost by the effective interest method.
At each balance sheet date, the Group assesses whether there is any objective evidenc e that
held-to-maturity assets are impaired. If any such evidence exists, the asset's recoverable amount
is calculated. If the recoverable amount is less than the asset's book value, an impairment loss is
recognized in the income statement.
Asse ts ava ilable fo r sale
Assets available for sale consist mainly of shares in nonconsolidated companies and market–
able securities that do not fulfill the criteria for classification in any of the other categories of fi–
nancial assets. They are measured at fair value and ga ins and losses arising from remeasurement
at fair value are recognized in equity.
Fair value corresponds to market price for listed securities and estimated fair value for
unlisted securities, determined according to the most appropriate financial criteria in each case.
When there is objective evidence that available-for-sale asse ts are impaired, the cumul ative
impairment loss included in equity is taken to income.
Loans and receivables
Loans and receivables include loans to and receivables from nonconsolidated companies,
other loans and receivables, and trade receivables. They are recog nized at fair value upon origi–
nation and are subsequently measured at amortized cost by the effect ive interest method. Short–
term receivables with no stated interest rate are measured at the original invoice amount if the ef–
fect of discounting is immaterial. Cash flows on loans and receivables at variable rates of intere st
are remeasured periodically, to take into account changes in market interest rates.
At each balance sheet date, the Group assesses whether there is any objective evidence that
loans or receivables are impaired. If any such evidence exists, the asset's recoverable amount is
calculated. If the recoverable amount is less than the asset' s book value, an impairment loss is
recognized in the income statement.
Asse ts at fair value through profit or loss
Assets at fair value through profit or loss are assets held for trading that the Group acquired
principally for the purpose of selling them in the near term in order to realized a profit, that form
part of a portfo lio of identified financial instruments that are managed together and for which
there is evidence of a recent actual pattern of short-term profit-taking. This catego ry also includes
assets not fulfilling the above criteria that the Group has opted to measure using the fair value op–
tion.
Assets at fair value through profit or loss are carried in the balance sheet under "Other finan–
cial and current assets."
Cash and cash equivalents
Cash equivalents are held primarily to meet the Group ' s short-term cash needs rather than for
investment or other purposes. They consist of instruments that are readily convertible into known
amounts of cash and are not exposed to any material risk of change in value.
• Measurement and recognition of financial liabilities