Annual report 2019

86

transaction, the transaction should be deemed highly probable to occur and present an exposure to cash flow variations that could ultimately affect reported net income. The application of hedge accounting means that movements in the market value of cash flow hedges not yet settled – including results realized on the ‘rolling forward’ of existing hedges as a result of differences between the duration of the hedges concerned and the underlying cash flows – will be directly added or charged to the hedging reserve in group equity, taking into account the applicable taxation. If a cash flow hedge expires, is closed or settled, or if the hedge relationship with the underlying cash flows can no longer be considered effective, the accumulated result will continue to be recognized in group equity as long as the underlying cash flow is still expected to take place. If and when the underlying cash flow actually takes place, the accumulated result is included directly in the Statement of Profit or Loss. Movements in the market value of cash flow hedges to which no hedge accounting is applied (ineffective cash flow hedges and the ineffective portion of effective cash flow hedges) are included in the Statement of Profit or Loss for the reporting period. Results from settled cash flow hedges and movements in the market value of ineffective cash flow hedges insofar these relate to non-current receivables, loans and other borrowings are recognized as finance income and finance expenses and otherwise in the related items within operating result. The purchase or sale of financial instruments is generally recorded at transaction rate. Derivatives are stated at fair value; attributable transaction costs are recognized in the Statement of Profit or Loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value and changes therein are accounted for as described. NET INVESTMENT HEDGING Foreign currency differences on loans and other borrowings that are assigned to net investment hedging of Group companies that have a functional currency other than the euro are treated similarly to cash flow hedges. These translation differences are recognized in other comprehensive income and are accumulated in the currency translation reserve. A possible ineffective portion is included in the profit or loss. When the relevant Group company is disposed or sold the IMPAIRMENT At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than inventories and deferred tax assets) to determine whether there is any indication of impairment. If an indication of impairment exists, then the recoverable amount of the asset is estimated. Goodwill and intangible assets with an indefinite useful life are tested annually for impairment. The recoverable amount of an asset or cash-generating unit (or group of units) is the higher of its value in use and its fair value less cost of disposal. Value in use is based on the estimated future cash flows, discounted to their present value using a pre- tax discount rate that reflects the current market assessments, the time value of money and the risks specific to the asset or the cash-generating unit. accompanying portion in the accumulated Currency Translation Reserve is reclassified to profit or loss.

An impairment charge is recognized when the carrying amount of an asset or the cash generating unit to which it belongs exceeds its recoverable amount. Impairment charges are recognized in the statement of profit or loss. Impairment charges recognized in respect of a cash generating unit are allocated first to reduce the carrying amount of any goodwill allocated to that cash-generating unit and, if applicable, subsequently to reduce the carrying amounts of the other assets of that cash-generating unit on a pro rata basis. An impairment charge on goodwill is not reversed. For other assets an impairment charge is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment charge had been recognized. For unbilled revenue and financial assets measured at amortized cost the Group recognizes a loss allowance based on the expected loss on unbilled revenue and on receivables. The Group assesses unbilled revenue, the aging of the receivables and specific information to establish a provision matrix that is adjusted if necessary for specific forward-looking information about the receivables and the economic environment. The Group applies the simplified method to determine its loss allowance for current trade receivables and unbilled revenue. In the event that objective evidence for impairment of a joint venture or an associate exists, the Group determines the recoverable amount. An impairment charge is measured by comparing the recoverable amount of the investment with the carrying amount. An impairment charge is recognized in the Statement of Profit or Loss and is reversed if there has been a favorable change in the estimates used to determine the recoverable amount. INTANGIBLE ASSETS Goodwill arises upon acquiring Group companies and joint operations and is calculated as the difference between the acquisition price and the fair value of the assets acquired and liabilities assumed, according to the accounting principles of the Company. Goodwill is allocated to the relevant cash- generating unit. These cash-generating units represent the lowest level within the Group at which goodwill is monitored for internal management purposes and not exceeding the level of the Group’s operational segments. Goodwill and other Amortization of trademarks valued at acquisition takes place over 10 years, while the amortization of customer portfolios and contracts valued at acquisition takes place over the remaining useful life (at acquisition date, determined to be between 7 and 22 years). Methods for determining amortization and useful life are reassessed at the end of each financial year and amended if necessary. intangible assets are presented net of accumulated amortization and accumulated impairment charges.

ANNUAL REPORT 2019 – BOSKALIS FINANCIAL STATEMENTS 2019 N E 9 -- BOSKALIS FINANCIAL STATEMENTS 2019 3.4.3

Goodwill and intangible assets with an indefinite useful life are not amortized, but are tested for impairment every year or