Classification criteria

These are financial assets, which are not classified as loans and receivables, held-to-maturity investments, or financial assets held for trading. They are held for an undetermined period of time and can include available-for-sale financial investments, money market securities, other debt instruments and shares.

Recognition criteria

Financial investments available for sale are initially recognised at fair value, which corresponds to the cost of the transaction including expenses.

For interest bearing instruments, interest is recognised at amortised cost, using the effective interest method.

Measurement criteria

Subsequent to their initial recognition, these investments are measured at fair value at the closure of the reporting period. The fair value is calculated based on the same criteria as those used for financial assets held for trading. The profit and loss resulting from the fair value changes is recognised under equity until the financial asset is sold or transferred, at which time the accumulated profit or loss is recognised in the income statement. The fair value changes recognised in the item ‘fair value reserve’ are also included in the statement of comprehensive income under item 20 ‘Available for sale financial assets ’.

If there is objective proof that the asset has undergone a permanent reduction in value, the impairment loss, which was recognised directly to equity, is transferred to the income statement. The amount of this loss is equal to the difference between the carrying amount (acquisition cost, net of any impairment losses previously taken to profit or loss) and the fair value.

In respect of debt instruments, any circumstances indicating that the borrower is experiencing financial difficulties which could negatively affect the collection of the principal or interest, represent an impairment loss.

As far as concern equity instruments, the existence of impairment losses is assessed on the basis of indicators such as fair value below cost and adverse changes in the environment in which the company operates, as well as the issuer’s debt servicing difficulties. A significant or lasting fall in the fair value of an equity instrument below its cost is considered an impairment loss. The impairment loss is considered ‘significant’ if the fall in fair value below cost is more than 20%, and is considered ‘lasting’ if it lasts for more than 9 months.

If, at a later date, the fair value of a debt instrument increases and such an increase can be objectively related to an event occurring after the period in which the impairment loss was recognised in the income statement, the impairment loss is reversed with recognition of a corresponding amount in the income statement.

In cases of securities, instead, if the reasons for having impaired them no longer exist, the impairment losses are later reversed with effect on equity.

Derecognition criteria

Available for sale financial assets are derecognised the moment in which all the financial asset’s risks and rewards have been transferred. If the risks and rewards are maintained, these financial assets continue to be recognised, even though the ownership has actually been transferred to a third party. In such cases, a financial liability is recognised equal to the amount collected at the moment of transfer.

Where it is not possible to ascertain the substantial transfer of the risks and rewards, financial assets are only derecognised if all control of the asset has been transferred. If, instead, control has been maintained, the financial assets are recognised proportionally to the entity’s continuing involvement in the asset, measured according to the exposure to changes in value in the transferred assets and by changes in the cash flows from the same.

Lastly, as far as concerns the transfer of rights to collect on the financial asset, the cash assets are derecognised even if contractual rights to receive cash flows are maintained but an obligation to pay such flows to one or more companies is taken on.