MONCLER ANNUAL REPORT AT 31 DECEMBER 2020SEPARATE FINANCIAL STATEMENTS 153152

At the time of subsequent measurement, the measurement made at the time of recognition is updated and any changes in fair value 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 re- ceivables, financial assets 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 derivative financial instruments are included. On initial recog- nition, the Company may irrevocably designate the financial asset as measured at fair value through profit/(loss) for the pe- riod if this eliminates or significantly reduces a misalignment in accounting that would otherwise result from measuring the financial asset at amortised cost or at FVOCI.

At the time of subsequent measurement, financial assets measured at FVTPL are valued at fair value. Gains or losses arising from changes in fair value are recognised in the con- solidated income statement in the period in which they are recognised under financial income/expenses.

Financial assets are derecognised from the financial statements 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 Company 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 des- ignated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and any changes, including interest expense, are recognised in profit or loss for the peri- od. Other financial liabilities are measured at amortised cost using the effective interest method. Interest expense and ex- change rate gains/(losses) are recognised in profit or loss for the period, as are any gains or losses from derecognition.

The Company s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts pay- able, other current and non-current assets and liabilities, in- vestments, borrowings and derivative financial instruments.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash and short-term depos- its held with banks and most liquid assets that are readily con- vertible into cash and that have insignificant risk of change in value. Bank overdrafts are recorded under current liabilities on the Company s statement of financial position.

TRADE RECEIVABLES AND OTHER CURRENT AND NON-CURRENT RECEIVABLES

Trade and other receivables generated when the Company 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.

Receivables are valued if they have a fixed maturity, at amortised cost calculated using the effective interest method.

When financial assets do not have a fixed maturity, they are valued at cost. Receivables with a maturity of over one year, which are non-interest bearing or which accrue interest below market rates, are discounted using market rates.

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

For trade receivables, the Company adopts the so-called simplified approach, which does not require the recognition of periodic 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 Company 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 re- flect the relative expectations of recovery. The Company 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 fi- nancial position net of the related bad debt provision. Write- downs made in accordance with IFRS 9 are recognised in the consolidated income statement net of any positive effects as- sociated with reversals of impairment.

TRADE PAYABLES AND OTHER CURRENT AND NON-CURRENT PAYABLES

Trade and other payables arise when the Company acquires money, goods or services directly from a supplier. They are included in current liabilities, except for items with maturity dates greater than twelve months after the reporting date.

Payables are stated, at initial recognition, at fair value, which usually comprises the cost of the transaction, inclusive of transaction costs. Subsequently, they are stated at amor- tised cost using the effective interest method.

FINANCIAL LIABILITIES

The classification of financial liabilities has not changed since the introduction of IFRS 9. Amounts due to banks and other lenders are initially recognised at fair value, net of directly attributable incidental costs, and are subsequently measured at amortised cost, applying the effective interest rate meth- od. If there is a change in the expected cash flows, the value of the liabilities is recalculated to reflect this change on the basis of the present value of the new expected cash flows and the internal rate of return initially determined. Amounts due to banks and other lenders are classified as current liabilities, unless the Company has an unconditional right to defer their payment for at least 12 months after the reference date. Loans are classified as non-current when the company has an uncon- ditional right to defer payments for at least twelve months from the reporting date.

use asset is initially valued at cost, including the amount of the initial measurement of the lease liability, adjusted for the rent payments made on or before the commencement date, increased by the initial direct costs incurred and an estimate of costs to be incurred by the lessee in dismantling and re- moving the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, net of the received lease incentives.

The right of use asset is amortised on a straight-line basis from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Company at the end of the lease term. In this case, the right of use asset will be amortised over the useful life of the underlying asset, determined on the same basis as that of property and machinery. In addition, the right of use asset is regularly decreased for any impairment losses and adjusted to reflect any changes deriving from subsequent remeasurement of the lease liability.

The Company values the lease liability at the present val- ue of the payments due for unpaid leases at the commence- ment date, discounting them using the interest rate implicit in the lease. The payments due for the lease included in the measurement of the lease liability include: fixed payments (including substantially fixed payments); payments due for lease which depend on an index or rate,

initially measured using an index or rate on the com- mencement date;

amounts that are expected to be paid as a residual value guarantee; and

the payments due for the lease in an optional renewal period if the Company is reasonably certain to exercise the renewal option, and early termination cancellation penalties, unless the Company is reasonably certain not to terminate the lease in advance.

The lease liability is measured at amortised cost using the effective interest criterion and remeasured in the event of a change in the future payments due for the lease deriving from a change in the index or rate, in the event of a change in the amount that the Company expects to pay as a guaran- tee on the residual value or when the Company changes its measurement with reference to the exercise or otherwise of a purchase, extension or cancellation option or in the event of revision of in-substance fixed payments due.

When the lease liability is remeasured, the lessee makes a corresponding change in right of use asset. If the right of use asset carrying value is reduced to zero, the lessee recognises the change in profit/(loss) for the year.

In the statement of financial position, the Company re- ports right of use assets that do not meet the definition of real estate investments in the item Property, plant and equipment and lease liabilities in the item Borrowings. The Company recognises the related payments due for leases as a cost on a straight-line basis over the lease term. For contracts signed before 1 January 2019, the Company es- tablished whether the agreement was or contained a lease by checking if: fulfilment of the agreement depended on the use of one

or more specific assets; and the agreement transferred the right to use the asset. Other assets subject to leases are classified as operating

leases and are not recognised in the Company s statement of financial position. Payments relating to operating leases are recognised as a straight-line cost over the lease term, while incentives granted to the lessee are recognised as an integral part of the overall lease cost over the lease term.

2.7. FINANCIAL INSTRUMENTS

Trade receivables and debt securities issued are recognised when they are originated. All other financial assets and liabilities are initially recognised at the trade date, i.e., when the Company be- comes a contractual party to the financial instrument.

Except for trade receivables that do not comprise a signif- icant financing component, financial assets are initially meas- ured at fair value plus or minus, in the case of financial assets or liabilities not measured at FVTPL, the transaction costs di- rectly attributable to the acquisition or issue of the financial asset. At the time of initial recognition, trade receivables that do not have a significant financing component are valued at their transaction price.

On initial recognition, a financial asset is classified based on its valuation: at amortised cost, at fair value through other comprehensive income (FVOCI) and at fair value through prof- it/(loss) for the period (FVTPL).

Financial assets are not reclassified after initial recogni- tion, unless the Company changes its business model for man- aging financial assets. In that case, all the financial assets con- cerned are reclassified on the first day of the first reporting period following the change in business model. A financial asset shall be measured at amortised cost if both of the following conditions are met and if it is not designated at FVTPL: the financial asset is held as part of a business model

whose objective is to hold the financial assets in order to collect the related contractual cash flows; and

the contractual terms of the financial asset provide for cash flows at certain dates consisting solely of payments of principal and interest on the amount of principal to be repaid.

At the time of subsequent measurement, assets belonging to this category are valued at amortised cost, using the effec- tive interest rate. The effects of measurement are recognised among the financial income components. These assets are also subject to the impairment model described in the par- agraph Trade receivables, financial assets and other current and non-current receivables. A financial asset shall be measured at FVOCI if both of the fol- lowing conditions are met and if it is not designated at FVTPL: the financial asset is held as part of a business model

whose objective is achieved both through the collection of the contractual cash flows and through the sale of the financial assets; and

the contractual terms of the financial asset provide for cash flows at certain dates consisting solely of payments of prin- cipal and interest on the amount of principal to be repaid.

On initial recognition of a security not held for trading, the Company may make an irrevocable choice to present subse- quent changes in fair value in the other components of the comprehensive income statement. This choice is made for each asset.