UNBOUNCE - EXAMPLE PAGE-REPORT-ENTERPRISE DOCUMENT-KINGSPAN - Flipbook - Page 139
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2021 (continued)
1
Statement of Accounting Policies (continued)
Specific provisions will generally be
aged as a current liability, reflecting the
assessment that a current liability exists to
replace or repair product sold on foot of an
accepted valid warranty issue. Only where
the liability is reasonably certain not to be
settled within the next 12 months, will a
specific provision be categorised as a longterm obligation. Risk-based provisions will
generally be aged as a non-current liability,
reflecting the fact that no warranty claim
has yet been made by the customer.
The Group designates all of its derivatives
in one or more of the following types
of relationships:
Provisions which are not expected to
give rise to a cash outflow within 12
months of the reporting date are, where
material, determined by discounting
the expected future cash flows. The
unwinding of the discount is recognised as
a finance expense.
iii.
i.
ii.
Fair value hedge: Hedges the exposure
to movements in fair value of
recognised assets or liabilities that are
attributable to hedged risks.
Cash flow hedge: Hedges the Group’s
exposures to fluctuations in future
cash flow derived from a particular
risk associated with recognised assets
or liabilities or forecast transactions.
Net investment hedge: Hedges the
exchange rate fluctuations of a net
investment in a foreign operation.
Final dividends on ordinary shares are
recognised as a liability in the financial
statements only after they have been
approved at the Annual General Meeting
of the Company. Interim dividends on
ordinary shares are recognised when they
are paid.
At inception of the transaction, the Group
documents the relationship between
the hedging instruments and hedged
items, including the risk management
objectives and strategy in undertaking
the hedge transactions. The Group also
documents its assessment, both at
inception and on an ongoing basis, as to
whether the derivatives that are used in
hedging transactions are highly effective
in offsetting changes in fair values or cash
flows of hedged items.
Cash and cash equivalents
Fair value hedge
Cash and cash equivalents principally
comprise cash at bank and in hand and
short term deposits with an original
maturity of three months or less.
Any gain or loss resulting from the remeasurement of the hedging instrument
to fair value is reported in the Consolidated
Income Statement, together with any
changes in the fair value of the hedged
asset or liability that are attributable to
the hedged risk. The gains or losses of a
hedging instrument that are in hedge
relationships with borrowings are included
within Finance Income or Finance Expense
in the Consolidated Income Statement. In
the case of the related hedged borrowings,
any gain or loss on the hedged item
which is attributable to the hedged risk
is adjusted against the carrying amount
of the hedged item and is also included
within Finance Income or Finance Expense
in the Consolidated Income Statement.
Dividends
Derivative financial instruments
Derivative financial instruments, principally
interest rate and currency swaps, are used
to hedge the Group’s foreign exchange and
interest rate risk exposures.
Derivative financial instruments are
recognised initially at fair value and
thereafter are subsequently remeasured
at their fair value. Fair value is the price
that would be received to sell an asset
or paid to transfer a liability in an orderly
transaction between market participants
at the measurement date. The fair value
of these instruments is the estimated
amount that the Group would receive
or pay to terminate the swap at the
reporting date, taking into account current
interest and currency exchange rates
and the current creditworthiness of the
swap counterparties.
If the hedge no longer meets the criteria
for hedge accounting, the adjustment to
the carrying amount of the hedged item is
amortised on an effective interest basis to
the Consolidated Income Statement with
the objective of achieving full amortisation
by maturity of the hedged item.
Kingspan Group plc Annual Report & Financial Statements 2021
Cash flow hedge
The effective part of any gain or loss
on the derivative financial instrument
is recognised in other comprehensive
income and presented in the Cash
Flow Hedge Reserve in equity with the
ineffective portion being recognised
within Finance Income or Finance Expense
in the Consolidated Income Statement.
If a hedge of a forecasted transaction
subsequently results in the recognition
of a financial asset or a financial liability,
the associated gains and losses that were
recognised directly in other comprehensive
income are reclassified into profit or loss in
the same period or periods during which
the asset acquired or liability assumed
affects profit or loss. For cash flow hedges,
other than those covered by the preceding
statements, the associated cumulative
gain or loss is removed from other
comprehensive income and recognised in
the Consolidated Income Statement in the
same period or periods during which the
hedged forecast transaction affects profit
or loss. The ineffective part of any gain
or loss is recognised immediately in the
Consolidated Income Statement.
Hedge accounting is discontinued when
a hedging instrument expires or is sold,
terminated or exercised, or no longer
qualifies for hedge accounting. The
cumulative gain or loss at that point
remains in other comprehensive income
and is recognised when the transaction
occurs. If a hedged transaction is no longer
expected to occur, the net cumulative gain
or loss recognised in other comprehensive
income is transferred to the Income
Statement in the period.
Net investment hedge
Any gain or loss on the hedging
instrument relating to the effective
portion of the hedge is recognised in other
comprehensive income and presented
in the Translation Reserve in equity. The
gain or loss relating to the ineffective
portion is recognised immediately in
either Finance Income or Finance Expense
in the Consolidated Income Statement.
Cumulative gains or losses remain in equity
until disposal of the net investment in
the foreign operation at which point the
related differences are reclassified to the
Consolidated Income Statement as part of
the overall gain or loss on sale.
Financial Statements
