Annual Report Gorenje Group 2009

Cash flow hedges
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows
attributable to a particular risk associated with a recognised asset or liability or a highly probable
forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of
the derivative is recognised in other comprehensive income and presented in the hedging reserve in
equity. The amount recognised in other comprehensive income is removed and included in profit or
loss in the same period as the hedged cash flows affect profit or loss under the same line item in the
statement of comprehensive income as the hedged item. Any ineffective portion of changes in the fair
value of the derivative is recognised immediately in profit or loss. If the hedging instrument no longer
meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is
revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously
recognised in other comprehensive income and presented in the hedging reserve in equity remains
there until the forecast transaction affects profit or loss. 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 asset is recognised. If the forecast transaction is no longer expected to occur, then the
balance in other comprehensive income is recognised immediately in profit or loss. In other cases the
amount recognised in other comprehensive income is transferred to profit or loss in the same period
that the hedged item affects profit or loss.
Changes in the fair value of separable embedded derivatives designated as a cash flow hedge are
recognised immediately in other comprehensive income.
Hedge accounting is discontinued if the hedge no longer meets the hedge accounting criteria, and the
hedging instrument expires or is sold, terminated, or exercised. The cumulative gain or loss previously
recognised in other comprehensive income is retained in other comprehensive income until the
forecast transaction occurs. If the hedged item is a non-financial asset, the amount previously
recognised in other comprehensive income is transferred to the carrying amount of the non-financial
asset upon its recognition. In other cases, the amount recognised in other comprehensive income is
transferred to profit or loss in the same period in which the hedged asset affects profit or loss.
(iv) Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary
shares and share options are recognised as a deduction from equity.
Repurchase of share capital (treasury shares)
When share capital recognised as equity is repurchased, the amount of the consideration paid, which
includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity.
Repurchased shares are classified as treasury shares and are presented as a deduction from total
equity. When treasury shares are sold or reissued subsequently, the amount received is recognised as
an increase in equity, and the resulting surplus or deficit on the transaction is transferred to retained
earnings or share premium.
Dividends are recognised as a liability on the day of transaction.
c) Subsidiaries
Investments in subsidiaries are valued at cost. Incremental costs directly attributable to the acquisition
of a subsidiary are recognized as an increase in the cost of equity investment. Share of profit is
recognized as income when a resolution on dividend payment is adopted by the Shareholders’
Meeting.
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Annual Report Gorenje Group 2009