Please activate JavaScript!
Please install Adobe Flash Player, click here for download

DES GB2012 E

Level 2: If there is no active market for an instrument, a company determines the fair value using measurement models. These models include use of the most recent arm’s-length transactions between knowledgeable and willing parties, comparison with the current fair value of another, essentially identical financial instrument, use of the discounted cash flow method and option pricing models. The fair value is estimated on the basis of the results of a method of measurement that uses data from the market to the greatest possible extent and is based as little as possible on company-specific data. Level 3: The measurement models used for this level are also based on parameters that are not observable on the market. A. DERIVATIVE FINANCIAL INSTRUMENTS Derivatives that qualify for hedge accounting in accordance with IAS 39 are used to hedge interest rate risks. These are fixed-rate swaps to limit the interest rate risk of variable interest rate loans, which have terms extending to 2026. The interest rate hedges are recognised at fair value under “Other assets” or “Other liabilities”. Changes are recognised directly in equity, provided that the conditions of the underlying and hedge transaction are identical. Hedge effec- tiveness tests are regularly conducted. Present value is calculated based on discounted cash flows using current market interest rates. The final maturities of the interest rate hedges and loan agreements are identical. B. NON-CURRENT FINANCIAL ASSETS Non-current financial assets are classified as available for sale and include an investment in a Polish corporation that is a joint venture controlled by Deutsche EuroShop jointly with partner companies. As Deutsche EuroShop, under the provisions of the shareholders’ agreement, exercises neither significant influence nor control over this company, the investment is measured at fair value in line with the provisions of IAS 39. Measurement gains and losses are rec- ognised directly in equity. Fair values of financial instruments for which there are no quoted market prices are esti- mated on the basis of the market values of the properties determined by appraisals, less net debt. The determination of fair value assumes the existence of a going concern. C. RECEIVABLES AND OTHER CURRENT ASSETS Receivables and other current assets are recognised at amortised cost less write-downs. Allowances are established for trade receivables if it is no longer certain that payment will be received. This is reviewed on a case-by-case basis at the balance sheet date. They are written off if the receivable becomes uncollectible. D. RIGHT TO REDEEM OF LIMITED PARTNERS The distinction between equity and liabilities is set out in IAS 32 Financial Instruments: Disclosure and Presenta- tion. In accordance with this standard, the equity interests of third-party shareholders in commercial partnerships are reclassified as liabilities due to the shareholders’ potential right of redemption. According to sections 131 et seq. HGB, shareholders in commercial partnerships have an ordinary legal right of termination of six months with effect from the end of the financial year, which the shareholders’ agreement can define in greater detail, but not exclude. As a result of this stipulation, a liability rather than equity is recognised in the balance sheet. This liability must be measured at fair value. { 155 } DES ANNUAL REPORT 2012 CONSOLIDATED FINANCIAL STATEMENTS Financial instruments