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of more than twelve months; if the maturity of the hedged
item is less than twelve months, the fair value of the hedge is
classified as a current asset or liability.
Derivatives not designated as hedges are classified as
current or non-current assets or liabilities according to their
contractual due dates.
Cash flow hedges
In the case of hedges intended to neutralise the risk of
changes in cash flows arising from the future execution of
contractual obligations existing at the reporting date (“cash
flow hedges”), changes in the fair value of the derivative
following initial recognition are recorded in equity “Reserves”,
but only to the extent that they relate to the effective
portion of the hedge. When the effects of the hedged item
are reported in profit or loss, the reserve is transferred to the
income statement and classified in the same line items that
report the effects of the hedged item. If a hedge is not fully
effective, the change in fair value of its ineffective portion is
immediately recognised in the income statement as “Finance
income” or “Finance costs”. If, during the life of a derivative,
the hedged forecast cash flows are no longer considered to
be highly probable, the portion of the “Reserves” relating to
the derivative is taken to the period’s income statement and
treated as “Finance income” or “Finance costs”. Conversely,
if the derivative is disposed of or no longer qualifies as an
effective hedge, the portion of “Reserves” representing the
changes in the instrument’s fair value recorded up to then
remains in equity until the original hedged transaction occurs,
at which point it is then taken to the income statement, where
it is classified on the basis described above.
When the economic effects of the hedged items occur, the gains and losses from the hedging instruments are taken to the
following lines in the income statement:
Sales of goods and
Finance income
services/Raw materials and
(costs)
consumables used
Exchange rate risk on construction contracts
Exchange rate risk on intercompany financial transactions
Interest rate risk
At 31 December 2012, the Group had designated derivatives to
hedge the following risks:
• exchange rate risk on construction contracts or orders:
these hedges aim to reduce the volatility of cash flows
due to changes in exchange rates on future transactions.
In particular, the hedged item is the amount of the cash
flow expressed in another currency that is expected to
be received/paid in relation to a contract or an order for
amounts above the minimum limits identified by the
Group Finance Committee: all cash flows thus identified
are therefore designated as hedged items in the hedging
relationship. The reserve originating from changes in the fair
value of derivatives is transferred to the income statement
according to the stage of completion of the contract itself,
where it is classified as contract revenue/costs;
• exchange rate risk on intercompany financial transactions:
these hedges aim to reduce volatility arising from changes
in exchange rates on intercompany transactions, when such
transactions create an exposure to exchange rate gains or
losses that are not completely eliminated on consolidation.
The economic effects of the hedged item and the related
transfer of the reserve to the income statement occur at
the same time as recognising the exchange gains and losses
on intercompany positions in the consolidated financial
statements;
• interest rate risk: these hedges aim to reduce the volatility
of cash flows relating to finance costs arising on variable
rate debt.
