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Notes to the Consolidated Financial Statements of the Enav Group 89

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.

Capital management

For capital management purposes, capital consists of share capital and all
other capital and revenue reserves attributable to the parent company’s
shareholder. The main objective of capital management is to maximize
shareholder value. The Group manages its balance sheet structure
and makes adjustments on the basis of economic conditions and the
requirements of covenants. For the purpose of maintaining or adjusting its
balance sheet structure, the Group may take action on dividends paid or
repay capital to the shareholder.

To achieve the above objective, the aim of capital management is among
other thingsto ensure that the Group satisfies the loan covenants that
determine its balance sheet structure requirements. A breach of the
covenants would allow the lending banks to request immediate repayment
of loans and other forms of financing.

Reference should be made to notes 33 and 32 of the consolidated financial
statements and the separate financial statements respectively for a
description of outstanding covenants.

Derivative financial instruments

The derivative financial instruments acquired by the ENAV Group 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 the ENAV Group, qualify for hedge accounting if and only if the