Arla Foods Annual Report 2020
Management Review Our Strategy
Our Brands and Commercial Segments Our Responsibility Our Governance
Our Performance Review Our Consolidated Financial Statements
Our Consolidated Environmental, Social and Governance Data
Funding
4.3 NET INTEREST-BEARING DEBT
Accounting policies
Financial instruments
Financial instruments are recognised at the date of
trade. The group ceases to recognise financial assets
when the contractual rights to the underlying cash
flows either cease to exist or are transferred to the
purchaser of the financial asset, and substantially all risk
and reward related to ownership are also transferred to
the purchaser.
Financial assets and liabilities are offset, and the net
amount is presented in the balance sheet when, and
only when, the group obtains a legal right of offsetting
and either intends to offset or settle the financial asset
and the liability simultaneously.
Financial assets
Financial assets are classified at initial recognition and
subsequently measured at: amortised cost, fair value
through other comprehensive income or fair value
through the income statement.
The classification of financial assets at initial recognition
depends on the financial asset's contractual cash flow
characteristics and how these are managed.
Financial assets where the group intends to collect the
contractual cashflow are classified and measured at
amortised cost.
Financial assets that are part of liquidity management
are classified and measured at fair value through other
comprehensive income. All other financial assets are
classified and measured at fair value through the
income statement.
Financial assets measured at amortised cost
Financial assets measured at amortised cost consist of
readily available cash at bank and deposits, together
with exchange-listed debt securities with an original
maturity of three months or less, which have an
insignificant risk of change in value and can be readily
converted to cash or cash equivalents.
Financial assets measured at fair value
through other comprehensive income
Financial assets measured at fair value through other
comprehensive income consist of mortgage credit
bonds, which correspond in part to raised mortgage
debt.
Financial assets are measured on first-time recognition
at fair value plus transaction costs. The financial assets
are subsequently measured at fair value with adjustments
made in other comprehensive income and accumulated
in the fair value reserve in equity.
Interest income, impairment and foreign currency
translation adjustments of debt instruments are
recognised in the income statement on a continuous
basis, under financial income and financial costs. In
connection with the sale of financial assets classified at
fair value through other comprehensive income,
accumulated gains or losses, previously recognised in
the fair value reserve, are recycled to financial income
and financial costs.
Financial assets measured at fair value
through profit or loss
Securities classified at fair value through the income
statement consist primarily of listed securities which
are monitored, measured and reported continuously,
in accordance with the group's treasury and funding
policy. Changes in fair value are recognised in the
income statement under financial income and financial
costs.
Liabilities
Debts to mortgage and credit institutions, as well as
issued bonds, are measured at the trade date upon first
recognition at fair value plus transaction costs.
Subsequently, liabilities are measured at amortised cost
with the difference between loan proceeds and the
nominal value recognised in the income statement
over the expected life of the loan.
Capitalised residual lease obligations related to lease
agreements are recognised under liabilities, measured
at amortised cost. Other financial liabilities are
measured at amortised cost. For details on pension
liabilities, refer to Note 4.7.
104 ARLA FOODS ANNUAL REPORT 2020View entire presentation