ANNUAL REPORT 2021

63 11 Unrealised gains and losses on transactions between the Group and the associate are eliminated up to the amount of the Group’s share in the associate. The Group’s share in net assets of an associate is recognised as “Investments in associates” in the accompanying statement of financial position and its share in the net profit is recognised as “Share in profit of associates” in the accompanying statement of comprehensive income. The Group’s associates are listed below: Name Country of incorporation Effective ownership % Voting rights % Principal activity 2021 2020 2021 2020 TOM- FERR Zrt. Hungary 24.89% 24.89% 24.89% 24.89% Production of steel pipes and products Pipex Energy S.r.l. Italy 41.65% 0.00% 49.00% 0.00% Research and development Tále ski & golf resorts s.r.o. Slovakia 37.15% 37.86% 40.00% 40.00% Tourism (d) Foreign currency (i) Transactions in foreign currencies Cash itemsdenominated inaforeigncurrencyaretranslatedtoeurosusing thereferenceexchange rate determinedandannounced bytheEuropean Central Bank (ECB) or the National Bank of Slovakia (NBS) on the date preceding the transaction date. At each end of a reporting period, cash items denominated in a foreign currency are translated to euros using the reference exchange rate determined and announced by the European Central Bank (ECB) or the National Bank of Slovakia (NBS) on the reporting date. Non - refundable advances received and made in a foreign currency are not translated as at the reporting date. Non - cash items measured at a fair value and denominated in a foreign currency are translated using the exchange rate prevailing at the date of the fair value measurement. Non - cash items measured at a historical cost and denominated in a foreign currency are not translated. For foreign currency purchases and sales in euros, and upon the transfer of funds from an account established in a foreign currency to an account established in euros and from an account established in euros to an account established in a foreign currency, the exchange rates at which these amounts were purchased or sold were applied. If the sale or purchase of a foreign currency is performed at an exchange rate other than the one offered by a commercial bank in its foreign exchange list, the exchange rate offered by such commercial bank in its foreign exchange list on the transaction settlement date is used. If the sale or purchase is not performed with a commercial bank, the reference exchange rate determined and announced by the ECB or the NBS on the date preceding the transaction settlement date is used. (ii) Financial statements of foreign operation The individual financial statements of each entity within the Group are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of individual entities are expressed in EUR, which is the functional currency ofthe Group, and the presentationcurrency forthe consolidated financialstatements. Foreign operations are not considered an integral part of the operations of the parent company. The assets and liabilities of foreign operations, with functional currency other than euro, including goodwill and fairvalue adjustments on consolidation, are translated to EUR using the rate of exchange ruling at the reporting date. The income and expenses of these foreign operations are translated into EUR using the average exchange rate for the period, unless exchange rates fluctuated significantly during the period, in which case the exchange rates at the dates of transactions are used. Exchange rates arising are included in equity as a translation reserve. Such a translation reserve is recognised in the statement of comprehensive income in the period in which the foreign operation is disposed of. (e) Financial instruments Financial assets and financial liabilities are recognised in the Group’s statement of financial position when the Group becomes a party of the contractual provisions of the financial instrument. Financial instruments of the Group represent available - for - sale investments, receivables, interest - bearing loans and borrowings, payables and financial derivatives. (f) Derivative financial instruments The Group’s activities expose it primarily to the financial risks of changes in foreign exchange rates and interest rates. The Group uses derivative financial instruments (primarily foreign currency and interest rate forward contracts and options) to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and forecasted transactions. The Group fulfilled the conditions for accounting for its financial derivatives as hedging derivatives. Derivative financial instruments are initially measured at cost and are remeasured to fair value at the reporting date. The unrealised gain or loss from fixed - term transactions is calculated using the anticipated forward rate based on a standardmathematical formula which takes into account the NBS spot rate and interest rates effective as of the reporting date and is reported in the item “Other financial income, net” or “Other financial expenses” in the statement of comprehensive income and in the item “Hedging derivatives” in the shareholder’s equity. Hedging derivatives are defined as derivatives that comply with the Group’s risk management strategy, the hedging relationship is formally documented at the inception of the hedging relationship and the hedge is effective, that is, at inception and throughout the period, changes in the fair value or cash flows of the hedged and hedging items are almost fully offset and the results are within the range of 80% to 125%. The Group designates hedging derivativesas hedges of highly - probable future cash flowsattributable to a forecasted transaction (cash flow hedge). The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in equity. The gain or lossrelatingtothe ineffectiveportion isrecognised immediately inthestatementofcomprehensive income.Amountsaccumulated inequityarerecorded to the statement of comprehensive income in the periods in which the hedged item will affect the statement of comprehensive income (for example, when the forecast sale that is hedged takes place). When a hedging instrument expires or is sold, or when a hedge no longer meets the criteriafor hedge accounting,anycumulativefairvalueadjustmentsreported in equityatthattimeremain inequityandarerecognised in thestatementofcomprehensive income when the forecast transaction is ultimately recognised in the statement of comprehensive income. When a forecast transaction is no longer expected to occur, the cumulative fair value adjustments reported in equity are immediately recorded to the statement of comprehensive income. Certain derivative transactions, while providing effective economic hedges under the Group’s risk management positions, do not qualify for hedge accounting under the specific rules in IAS 39 and are therefore treated as derivatives held for trading with fair value gains and losses reported in “Other financial income” or “Other financial expenses” in the statement of comprehensive income. (g) Property, plant and equipment (i) Owned assets Property, plantand equipment(“non - currenttangibleassets”) arecarriedat cost lessanyaccumulateddepreciationand provisions (impairment loss). Cost includes all costs directly attributable to bringing the asset to working conditions for its intended use. Internally - generated non - current tangible assets are measured at own costs that include the cost of material, direct wages and overhead costs directly associated with the production of non - current tangible assets until the asset is put into use. Where some significant parts of non - current assets have different useful lives, they are accounted for and depreciated as separate items. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021 (IN EUROS)