come statement. This choice is made for each asset. At the time of subsequent measurement, the measurement made at the time of recognition is updated and any changes in fair val- ue are recognised in the statement of comprehensive income. As for the category above, these assets are subject to the impairment model described in the paragraph Trade receivables, financial as- sets and other current and non-current receivables.

All financial assets not classified as valued at amortised cost or at FVOCI, as indicated above, are valued at FVTPL. All de- rivative financial instruments are included. On initial recognition, the Group may irrevocably designate the financial asset as meas- ured at fair value through profit/(loss) for the period if this elimi- nates or significantly reduces a misalignment in accounting that would otherwise result from measuring the financial asset at am- ortised cost or at FVOCI.

At the time of subsequent measurement, financial assets measured at FVTPL are valued at fair value. Gains or losses aris- ing from changes in fair value are recognised in the consolidated income statement in the period in which they are recognised un- der financial income/expenses.

Financial assets are derecognised from the financial state- ments when the contractual rights to receive cash flows from them expire, when the contractual rights to receive cash flows from a transaction in which all the risks and rewards of ownership of the financial asset are materially transferred or when the Group neither transfers nor retains materially all the risks and rewards of ownership of the financial asset and does not retain control of the financial asset.

Financial liabilities are classified as valued at amortised cost or at FVTPL. A financial liability is classified at FVTPL when it is held for trading, it represents a derivative or is designated as such on initial recognition. Financial liabilities at FVTPL are meas- ured at fair value and any changes, including interest expense, are recognised in profit or loss for the period. Other financial liabili- ties are measured at amortised cost using the effective interest method. Interest expense and exchange rate gains/(losses) are recognised in profit/(loss) for the period, as are any gains or loss- es from derecognition.

The Group s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, other current and non-current assets and liabilities, investments, borrowings and derivative financial instruments.

CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash and short-term deposits held with banks and most liquid assets that are readily convertible into cash and that have insignificant risk of change in value. Bank overdrafts are recorded under current liabilities on the Group s consolidated statement of financial position.

TRADE RECEIVABLES, FINANCIAL ASSETS AND OTHER CURRENT AND NON-CURRENT RECEIVABLES Trade and other receivables, generated when the Group provides money, goods or services directly to a third party, are classified as current assets, except for items with maturity dates greater than twelve months after the reporting date.

Current and non-current fi nancial assets, other current and non-current assets, trade receivables, excluding derivatives, with fi xed maturity or determinable payment terms, are recognised at amortised cost calculated using the effective interest method. Notes receivable (due date greater than a year) with interest rate be- low that of the market rate are valued using the current market rate.

The financial assets listed above are valued based on the impairment model introduced by IFRS 9 or by adopting an expect- ed loss model, replacing the IAS 39 framework, which is typically based on the valuation of the incurred loss.

For trade receivables, the Group adopts the so-called sim- plified approach, which does not require the recognition of period- ic changes in credit risk, but rather the accounting of an Expected Credit Loss ( ECL ) calculated over the entire life of the credit (so- called lifetime ECL).

In particular, the policy implemented by the Group provides for the stratification of trade receivables based on the days past

due and an assessment of the solvency of the counterparty and applies different write-down rates that reflect the relative expec- tations of recovery. The Group then applies an analytical valuation of impaired receivables based on a debtor s reliability and ability to pay the due amounts.

The value of receivables is shown in the statement of finan- cial position net of the related bad debt provision. Write-downs, made in accordance with IFRS 9, are recognised in the consolidat- ed income statement net of any positive effects associated with reversals of impairment.

FINANCIAL LIABILITIES, TRADE PAYABLES AND OTHER CURRENT AND NON-CURRENT PAYABLES Trade and other payables arise when the Group acquires money, goods or services directly from a supplier. They are included with- in current liabilities, except for items with maturity dates greater than twelve months after the reporting date.

Financial liabilities, excluding derivatives, are recognised initially at fair value which represents the amount at which the as- set was bought in a current transaction between willing parties, and subsequently measured at amortised cost using the effec- tive interest method. Financial liabilities that are designated as hedged items are subject to the hedge accounting requirements.

DERIVATIVES INSTRUMENTS Consistent with the provisions of IFRS 9, derivative financial in- struments may be accounted for using hedge accounting only when: the hedged items and the hedging instruments meet the el-

igibility requirements; at the beginning of the hedging relationship, there is a for-

mal designation and documentation of the hedging rela- tionship, of the Group s risk management objectives and the hedging strategy;

the hedging relationship meets all of the following effec- tiveness requirements: there is an economic relationship between the hedged

item and the hedging instrument; the effect of credit risk is not dominant with respect to

the changes associated with the hedged risk; the hedge ratio defined in the hedging relationship

is met, including through rebalancing actions, and is consistent with the risk management strategy adopt- ed by the Group.

FAIR VALUE HEDGE A derivative instrument is designated as fair value hedge when it hedges the exposure to changes in fair value of a recognised as- set or liability, that is attributable to a particular risk and could affect profit or loss. The gain or loss on the hedged item, attributa- ble to the hedged risk, adjusts the carrying amount of the hedged item and is recognised in the consolidated income statement.

CASH FLOW HEDGE When a derivative financial instrument is designated as a hedging instrument for exposure to variability in cash flows, the effective portion of changes in fair value of the derivative financial instru- ment is recognised among the other components of the com- prehensive income statement and stated in the cash flow hedge reserve. The effective portion of changes in fair value of the de- rivative financial instrument that is recognised in the other com- ponents of the comprehensive income statement is limited to the cumulative change in the fair value of the hedged instrument (at present value) since the inception of the hedge. The ineffective portion of changes in fair value of the derivative financial instru- ment is recognised immediately in the profit/(loss) for the period.

If the hedge ceases to meet the eligibility criteria or the hedging instrument is sold, matures or is exercised, hedge ac- counting ceases prospectively. When hedge accounting for cash flow hedges ceases, the accrued amount in the cash flow hedge reserve remains in equity until, in the case of a hedge of a trans- action that results in the recognition of a non-financial asset or non-financial liability, it is included in the cost of the non-financial

CONSOLIDATED FINANCIAL STATEMENTS116 117CONSOLIDATED FINANCIAL STATEMENTS MONCLER GROUP

2021