4NotesCONSOLIDATED FINANCIAL STATEMENTSto the consolidated financial statements1.5.15 Financial liabilitiesFinancial liabilities include borrowings and fi nancial debts, tradepayables, derivative instruments and other current and non-currentliabilities.All borrowings are initially recorded at fair value less directlychargeable transaction costs.After the initial accounting, interest-bearing loans are measured atamortized cost, using the effective interest rate method.Profi ts and losses are recorded on the income statement when thedebts are derecognized, and through the amortized cost mechanism.Derivative instruments are carried at their fair value at the closingdate. The accounting methods for derivative instruments aredescribed in note 1.5.19.1.5.16 Finance leasesAssets held under fi nance leases are recognized as assets of theGroup, i.e. when in substance, the contract grants to the Groupmost of the risks and benefi ts related to the asset. These assetsare measured at the fair value or, if lower, at the present value ofthe minimum lease payments. The asset is depreciated using theGroup’s depreciation methods as defi ned in note 1.5.6.1.5.17 RevenueRevenue is recognized when it is probable that the future economicbenefi ts will fl ow to the Group and when the amount of revenue canbe measured reliably. Revenue is measured at the fair value of theconsideration received, excluding discounts, rebates, other taxes onsales and customs duties.Income from ordinary activities includes, in particular, charteringrevenues and related services as well as assistance services.1.5.18 Current income tax and deferred taxThe income tax expense for the year includes:3 the current income tax expense less tax credits and tax lossesactually used;3 deferred tax, booked in the consolidated fi nancial statementsbased on the tax situation of each company.Deferred taxes result from:3 temporary differences between taxable profi t and accountingprofi t,3 consolidation restatements and eliminations,3 and tax defi cits that can be carried forward, which are likely tobe recovered in the future.These taxes are calculated and adjusted using the balance sheetliability method in its broadest sense. Deferred tax assets andliabilities are not discounted.Deferred tax and current income tax relating to items booked directlyas shareholders’ equity are recognized as shareholders’ equity andnot in the income statement.1.5.19 Derivative instruments and hedge accountingThe Group uses derivative instruments such as forward exchangecontracts, interest rate swaps, cross currency swaps and exchangeoptions to manage its exposure to movements in interest rates andforeign exchange rates. These derivative instruments are initiallyrecognized at fair value on the date on which the contracts take effectand are subsequently measured at fair value. Derivative instrumentsare booked as assets when the fair value is positive and as liabilitieswhen the fair value is negative.All gains and losses from changes in the fair value of the derivativeinstruments which are not classifi ed as hedging instruments arerecognized directly in the income statement for the year.The fair value of buying forward exchange contracts is calculated byreference to the current forward exchange rates for contracts withsimilar maturities. The fair value of interest rate swaps is generallydetermined using rate curves based on the market interest ratesobserved on the closing date.For the purposes of hedge accounting, hedges are classifi ed as:3 fair value hedges when they hedge the exposure to changes in thefair value of a recognized asset or liability, or a fi rm commitment(except for the exchange risk);3 cash fl ow hedges when they hedge the exposure to variabilityin cash fl ows that is attributable either to a specifi c riskassociated with a recognized asset or liability, or to a highlyprobable forecasted transaction or to the exchange risk on a fi rmcommitment;3 hedges of a net investment in a foreign operation.The hedge on the foreign currency risk of a fi rm commitment isrecognized as a cash fl ow hedge.At inception of a hedge relationship, the Group formally designatesand documents the hedge relationship to which the Group wantsto apply the hedge accounting and the objective desired for riskmanagement hedge strategy. The documentation includes theidentifi cation of the hedging instrument, the item or transactionhedged, the nature of the risk being hedged and how the Groupwill assess the effectiveness of the hedging instrument in offsettingthe exposure to the changes in fair value of the item hedged or cashfl ows attributable to the hedged risk. The Group expects that thehedge will be highly effective in offsetting changes in fair value or76BOURBON - 2011 Registration Document
CONSOLIDATED FINANCIAL STATEMENTS4Notes to the consolidated financial statementsin cash fl ows. The hedge is assessed on an ongoing basis in orderto demonstrate that it has actually been highly effective during allthe years covered by the fi nancial statements for which it has beendesignated.The hedging instruments that meet the strict criteria for hedgeaccounting are recognized as follows:Fair value hedgesFair value hedges are hedges on the Group’s exposure to changesin the fair value of a recognized asset or liability or an unrecognizedfi rm commitment, or an identifi ed portion of such fi nancial assets orliabilities, which is attributable to a specifi c risk and which can affectthe result for fair value hedges. The gain or loss on the hedged itemattributable to the hedged risk adjusts the carrying amount of theitem hedged, the hedging instrument is remeasured at fair value, andthe resulting gains and losses are recognized for the two items onthe income statement.When an unrecognized fi rm commitment is designated as a hedgeditem, the subsequent cumulative change in the fair value of thefi rm commitment attributable to the hedged risk is accounted foras an asset or a liability, and the corresponding profi t or loss isrecognized on the income statement. The changes in the fair valueof the hedging instrument are also accounted for as income/loss.The Group ceases to use hedge accounting if the hedge instrumentreaches maturity or is sold, terminated or exercised, if the hedge nolonger meets the criteria for hedge accounting, or when the Groupcancels the designation.Cash flow hedgeA cash fl ow hedge is a hedge on the exposure to changes in cashfl ow attributable to a specifi c risk associated with a recognized assetor liability or with a highly probably planned transaction, which canaffect the results. The profi t or loss corresponding to the effectivepart of the hedging instrument is recognized directly as shareholders’equity whereas the ineffective part is recognized as income/loss.The amounts recognized directly in shareholders’ equity shall berecognized in profi t or loss in the same period or periods duringwhich the hedged item affects profi t or loss (for example, for assetsthat are hedged, at the rate of the amortization made).If the hedging instrument reaching maturity is sold, terminated orexercised without being replaced or renewed, or if its designation asa hedging instrument is revoked, the amounts previously recognizedas shareholders’ equity are maintained as such until the execution ofthe planned transaction. If the transaction is no longer planned, thisamount is recognized as income/loss.1.6 TRANSLATION OF THE FINANCIAL STATEMENTS OF THE FOREIGN SUBSIDIARIESThe exchange rates used are as follows:CurrenciesAverage rate for theyear 2011Closing rate as of Dec.31, 2011Closing rate as of Dec.31, 2010AUD Australian Dollar 1.3481 1.2723 1.3136BRL Brazilian Real 2.3270 2.4159 2.2177CHF Swiss Franc 1.2326 1.2156 1.2504CNY Yuan 8.9917 8.1588 8.8220INR Indian Rupee 64.9022 68.7130 59.7580MXP Mexican Peso 17.2922 18.0512 16.5475NGN Nigerian Naira 219.0739 212.4490 203.2240NOK Norwegian Kroner 7.7935 7.7540 7.8000QAR Qatari Riyal 5.0752 4.7063 4.8282RUB Ruble 40.8841 41.7650 40.4437SGD Singapore Dollar 1.7485 1.6819 1.7136TRY Turkish Lira 2.3385 2.4432 2.0694UAH Ukrainian Hryvnia 11.2516 10.5085 10.6933USD American Dollar 1.3914 1.2939 1.3362VND Vietnamese Dong 28933.9800 27268.8000 25970.6000BOURBON - 2011 Registration Document 77