Page 38 - Hoftex Annual Report 2018 EN

Letter to Shareholders
Supervisory Board Report
Group Management Report Consolidated Financial Statements Annexes
Other provisions must be recognised for uncertain liabilities and impending losses from ongoing transactions. Provisions must also be set aside for deferred maintenance, which is to be completed within three months after the start of the subsequent fiscal year, and for warranties granted with no legal obligation. Provisions are recognised in the amount required to meet these obligations as determined by prudent business judgement, taking all foreseeable risks into account. We have allowed for future price and cost increases where they seemed likely to occur based on objective evidence. Provisions with a remaining term of more than one year were discounted using the relevant average market interest rate from the past seven fiscal years in accordance with the remaining term.
Liabilities are recognised at their settlement amount as of the balance sheet date. Contingencies from liability agreements correspond to the loan amounts actually drawn down at the balance sheet date.
Where hedge accounting is applied pursuant to Section 254 HGB, the amounts are reported using the so-called “net hedge presentation method” (Einfrierungsmethode).
(5) Currency translation
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Assets and liabilities denominated in foreign currency were translated using the average spot market rate on the balance sheet date. Where the residual term is less than one year, the acquisition cost no longer represents the upper value limit and gains must be recognised in income. The assets and liabilities of all companies within the Group are translated using the period-end closing rate. Historic exchange rates are used for all equity items. Expenses and income are translated at the fiscal-year average exchange rate.