Page 174 - ENAV eng_Relazione_Finanziaria_Annuale_2014

172 ENAV – 2014 Financial Statements

Inventories

Inventories, mainly consisting of spare parts for specific use relating
to facilities and equipment for flight control, are measured at weighted
average cost. If items can no longer be used because they are obsolete,
they are written down through the allowance for inventory losses as a
direct deduction from the item.

Cash and cash equivalents

Cash and cash equivalents consist of available or very short-term bank
deposits and cash on hand. Cash and cash equivalents are recognized at
nominal value which corresponds to fair value.

Derivative financial instruments

The derivative financial instruments acquired by ENAV consist of forward
foreign exchange contracts hedging currency risk. Derivative financial
instruments are recognized at fair value initially at the contract date and
then subsequently at each reporting date. Derivatives are accounted for as
financial assets if their fair value is positive and as financial liabilities if their
fair value is negative.

Derivative financial instruments used for hedging purposes, the only kind
acquired by ENAV, qualify for hedge accounting if and only if the following
conditions are met:

l at the inception of the hedge there is formal designation and
documentation of the hedging relationship, ENAV’s risk management
objective and the strategy for undertaking the hedge;

l the hedge is expected to be highly effective;
l the effectiveness of the hedge can be reliably measured;
l the hedge is highly effective throughout the various periods for which

it was designated.

If all the above conditions are met for the transaction arranged by ENAV
the hedge is accounted for as a cash flow hedge and accordingly the
portion of the gain or loss on the hedging instrument that is determined
to be an effective hedge is classified as a change in other comprehensive
income and recognized in the cash flow hedge reserve in equity, while
the ineffective portion of the gain or loss on the hedging instrument is
recognized in profit or loss.

The amounts recognized as part of other comprehensive income are
reclassified to profit or loss in the period in which the hedged transaction
affects profit or loss, for example if a sale occurs or if there is a write-down.