FINANCIAL AND ACCOUNTING INFORMATION Fair value measurement or liability assumed affects profit or loss (i.e., when Level 1 interest income or expense is recognized). The fair value of financial instruments traded in For cash flow hedges, other than those described in active markets (such as publicly traded derivatives the previous paragraph, the associated cumulative and securities) is based on quoted market prices at gain (loss) is removed from the cash flow hedge the balance sheet date. The quoted market price reserve and recognized in profit or loss in the same used for financial assets held by the Group is the period or periods during which the hedged forecast current bid price; the appropriate quoted market transaction affects profit or loss. The ineffective price for financial liabilities is the current ask price. part of any gain or loss is recognized immediately in This valuation method is referred to as Level 1 in the profit or loss. hierarchy established by IFRS 13. If the hedged transaction is no longer expected to take place, then the cumulative unrealized gain Level 2 (loss) recognized as other comprehensive income is The fair value of financial instruments that are not immediately reclassified to profit or loss. traded in an active market (for example, over-the- Fair value hedges counter derivatives) is determined by using valuation models incorporating various inputs including the Fair value hedge accounting is used when a derivative credit quality of counterparties, foreign exchange financial instrument is designated as a hedge of the spot and forward rates and forward interest rate variability of the fair value of a recognized asset or curves. The assumptions used are observable either liability (or firm commitment), including fixed rate directly (i.e. as prices) or indirectly (i.e. derived indebtedness such as indexed bonds and other from prices). This valuation method is referred to as fixed rate borrowings. Level 2 in the hierarchy established by IFRS 13. The hedging instrument is measured at fair value 5 Whether a financial instrument is valued using with changes in fair value recognized in the income one or the other of these methods is indicated in statement. The hedged item is remeasured to fair the summary of financial assets (note 15) and the value in respect of the hedged risk. Any resulting summary of financial liabilities (note 24). adjustment to the carrying amount of the hedged item related to the hedged risk is recognized in the 3.8.5 Hedge accounting income statement. Cash flow hedges Hedge of net investment in foreign operations When a derivative financial instrument is designated The portion of the gain or loss on an instrument used as a hedge of the variabi l ity in cash flows of a to hedge a net investment in a foreign operation recognized asset or liability, or a highly probable that is determined to be an effective hedge is forecasted transaction, the effective part of any recognized directly in other comprehensive income. gain or loss on the derivative financial instrument is The ineffective portion is recognized immediately in recognized in the cash flow hedge reserve as other profit or loss. Gains and losses accumulated in equity comprehensive income. are recognized in the income statement when the foreign operation is disposed of. When the forecasted transaction subsequently results in the recognition of a non-financial asset or 3.8.6 Trade accounts payable non-financial liability, the associated cumulative gain Trade accounts payable include exclusively payables (loss) is removed from the cash flow hedge reserve due to suppliers of goods held for resale. Invoices and included in the initial cost or other carrying payable to general and administrative suppliers are amount of the non-financial asset or liability. If a presented in other current liabilities. hedge of a forecasted transaction subsequently results in the recognition of a financial asset or a 3.8.7 Cash and cash equivalents financial l iabil ity, then the associated gains and Cash and cash equivalents comprise cash balances losses that were recognized as other comprehensive and demand deposits with banks and other income are reclassified into profit or loss in the same short-term highly liquid investments subject to an period or periods during which the asset acquired insignificant risk of changes in value. REXEL 2017 – REGISTRATION DOCUMENT 225