The Consolidated Financial Statements for the year ended 30 September 2010 incorporate the Financial Statements of Demag Cranes AG and 37 (2008/2009: 37) domestic and foreign subsidiaries.

Subsidiaries are companies that are controlled by Demag Cranes AG, meaning that Demag Cranes AG, by virtue of holding a majority of their voting rights or through other means, has the power to govern their financial and operating policies so as to obtain benefits from their activities. Subsidiaries are consolidated from the date Demag Cranes AG obtains control and cease to be included in the Consolidated Financial Statements when control is lost. The results of subsidiaries acquired and disposed of during the year are included in the Statement of Comprehensive Income from the effective date of acquisition and up to the effective date of disposal.

The Consolidated Financial Statements are prepared on the basis of uniform accounting policies. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Non-controlling interests in the net assets (excluding goodwill) of consolidated subsidiaries are identified separately from the equity attributable to shareholders of Demag Cranes AG. The same item includes non-controlling interests in period net income and in each component of comprehensive income. This allocation of annual changes in net assets is made even if it results in the non-controlling interests having a deficit balance.

Investments in subsidiaries that are of minor overall significance to the presentation of the financial position and financial performance of the Group are measured at cost less any impairments and accounted for under other investments as investments in associates.

All subsidiaries of Demag Cranes AG as at 30 September 2010 are listed after the Notes.

Demag Cranes AG includes one joint venture (MHE-Demag (S) Pte. Ltd., Singapore) in its Consolidated Financial Statements. A joint venture is a contractual arrangement whereby Demag Cranes AG and other parties directly or indirectly undertake an economic activity that is subject to joint control.

The Group’s investment in the joint venture is accounted for in the Consolidated Financial Statements using the equity method.

Under the equity method, the interest in a joint venture is initially recognised in the Consolidated Statement of Financial Position at cost. The carrying amount is subsequently increased or decreased by changes in Demag Cranes AG’s share of the net assets of the joint venture after the date of acquisition and by any impairment of its interest in the joint venture. Transactions with the joint venture are eliminated in proportion with Demag Cranes AG’s interests in it. Losses of the joint venture that exceed Demag Cranes AG’s interest in the joint venture are provided for only to the extent that Demag Cranes AG has incurred legal or constructive obligations to cover them. The joint venture’s financial year is the calendar year. The figures included are based on consolidated interim financial statements whose reporting date is set back by one month.

The profit or loss from investments accounted for using the equity method reported in the Statement of Comprehensive Income is Demag Cranes AG’s share of profit or loss from the joint venture.

The joint venture is shown in the list of subsidiaries, joint ventures and investments as at 30 September 2010, after the notes.

The Consolidated Financial Statements are prepared in euros, the functional currency of Demag Cranes AG. The financial statements of foreign companies included in the Consolidated Financial Statements are prepared in local currency, which is the functional currency of the companies concerned. Transactions in currencies other than the applicable functional currency are translated at the spot exchange rate prevailing at the date of the transaction. Monetary items (such as payables and receivables) denominated in foreign currencies are translated into euros at the spot exchange rate prevailing on the balance sheet date. Non-monetary items are translated at historical exchange rates. Exchange differences arising on the translation of balance sheet items into functional currency are recognised under other operating income or under other operating expenses. Gains and losses on foreign currency transactions relating to financing activities are recognised in “Interest and Similar Income” and “Interest and Similar Expenses”.

The financial statements of foreign Group member companies included in the Consolidated Financial Statements with functional currencies other than the euro are translated from local currency into the Group presentation currency (euros). The assets and liabilities of foreign subsidiaries are translated using the exchange rates prevailing at the balance sheet date. Equity items are translated at the historical exchange rates prevailing at their recognition date. Income and expenses are translated at the average exchange rates for the period. Net gains or losses arising on currency translation are reported in equity as a net amount under "Accumulated other comprehensive income". On disposal of a foreign operation, any accumulated net gains or losses are reclassified to profit or loss. The exchange differences as at 30 September 2010 mainly relate to the Group’s companies in the USA, the United Kingdom, South Africa, the Czech Republic and China.

The exchange rates used for major currencies in the Consolidated Financial Statements are as follows (in foreign currency units per euro):

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have transferred to the buyer, the amount of revenue can be measured reliably, and it is probable that the economic benefits associated with the transaction will flow to the Group. Revenue from the sale of goods subject to installation where installation is a significant part of the contract is not recognised until the goods have been delivered to the customer and installed. Revenue from the sale of spare parts is recognised on delivery. In multiple-element sales transactions, Demag Cranes AG applies separate recognition criteria to revenue from the sale of goods and revenue from rendering services. Revenue from rendering services is recognised, subject to the satisfaction of recognition criteria, by reference to the stage of completion of the transaction at the balance sheet date. In certain instances involving revenue from construction contracts, profit is recognised on a percentage of completion basis. Demag Cranes AG determines the percentage of completion for this purpose according to contract costs incurred to date as a percentage of total contract costs (the cost-to-cost method). Expected contract losses are recognised as an expense in the period in which estimated total contract costs are found to exceed total contract revenues. Revenue is reported after deducting any trade discounts and rebates.

Rentals from investment properties and other operating leases are recognised under other income in profit or loss on a straight-line basis over the duration of the tenancy. Any premium paid for an operating lease is allocated to accounting periods as part of total lease income.

The portion of the gain or loss on a hedging instrument that is determined to be an effective cash flow hedge is initially recognised directly in equity and is reclassified to revenue in profit or loss when the forecast transaction occurs.

Dividend revenue on investments is recognised when the right to receive payment is established. Interest revenue is recognised in the amount of the effective yield on invested capital. The effective yield is the rate of interest required to discount the stream of future cash receipts expected over the life of a financial asset to equate to the net carrying amount of the asset.

On disposal of an asset, any difference between the proceeds from the sale and the carrying amount is recognised in profit and loss.

The cost of sales reported in the Statement of Comprehensive Income consists of all costs directly attributable to the production process. These include direct material, direct labour, indirect costs such as depreciation and impairments of production plant and production-related intangible assets, write-downs on inventories, and production-related administrative overheads as appropriate.

Research expenses are recognised in the period in which they are incurred.

Expenditure is incurred for development activities when research findings or other knowledge are applied to a plan or design for the production of new or substantially improved products or processes. An intangible asset arising from development is recognised if the outcome is technically and commercially feasible, it is considered probable that the product or process to be developed will generate future economic benefits, and Demag Cranes AG has adequate resources to complete the development. The development expenditure recognised as an intangible asset includes direct material, direct labour and allocated overheads. Other development expenses are recognised as expense when incurred. Further information is provided in Note 8.

Capitalised development expenses are presented in the Statement of Financial Position net of cumulative amortisation and impairments. Development expenses recognised as assets are amortised on a straight-line basis over the estimated period in which products based on the intangible asset will be marketed. Demag Cranes AG subjects internally generated intangible assets to annual impairment testing during the development phase and at other times only when there are indications of impairment. Development costs capitalised in the financial year are stated in Note 14.

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities, using the tax rates that have been enacted by the end of the reporting period. Current tax relating to items recognised directly in equity is likewise recognised directly in equity.

Deferred tax is accounted for using the temporary difference approach. It is measured by applying the applicable tax rate to temporary differences between the carrying amounts of assets and liabilities in the Statement of Financial Position and the tax bases used in the computation of taxable profit for each company. The applicable tax rate is the rate prevailing at the balance sheet date or the rate expected to apply when the temporary differences reverse, based on tax laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax assets are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits. The carrying amount of deferred tax assets is reviewed at each balance sheet date and adjusted to reflect any change in the probability that the benefits can be utilised. The carrying amount of each deferred tax asset is reviewed at each balance sheet date and is reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the deferred tax asset to be utilised. Any unrecognised deferred tax assets are reassessed at each balance sheet date and recognised to the extent that it has become probable that future taxable profit will be available to allow the deferred tax asset to be recovered. Deferred tax liabilities are recognised for all taxable temporary differences.

Deferred tax liabilities are not recognised for taxable temporary differences resulting from the initial recognition of goodwill or the initial recognition of another asset or liability in a transaction which is not a business combination and, at the time of the transaction, affects neither taxable profit nor net income. Deferred tax liabilities are not recognised for taxable temporary differences associated with investments in subsidiaries and associates or with interests in joint ventures if it is probable that the temporary difference will not reverse in the foreseeable future, if the Company is able to control the timing of the reversal, or if it is not probable that sufficient taxable profits will be available against which a loss arising on reversal of the temporary difference can be utilised.

Demag Cranes AG sets off current tax assets and current tax liabilities if it has a legally enforceable right to do so relating to income taxes levied by the same taxation authority.

Further information on deferred taxes is provided in Note 29.

Value-added tax refundable by or payable to the taxation authority is accounted for by Demag Cranes AG as part of other non-financial assets and other non-financial liabilities respectively.

Goodwill arising on acquisition is the excess of the consideration transferred to achieve control, the fair value of any previously held interests in the acquiree and the amount measured for any non-controlling interest over the remeasured net assets of the acquiree. Goodwill is subsequently measured at cost less any accumulated impairment losses.

For the purpose of impairment testing, which is done at least annually, Demag Cranes AG allocates goodwill to the cash-generating units – the three segments – that are expected to reap synergies from the business combination. On disposal of part of a cash-generating unit to which goodwill has been allocated, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Goodwill recognised on acquisition of an investment accounted for using the equity method is included in the carrying amount of the Group’s investment and is not assessed for impairment separately. Further information on impairment testing in accordance with IAS 36 is provided in Note 14.

If Demag Cranes AG’s share in the acquired assets and liabilities of a subsidiary exceeds the cost of the business combination, Demag Cranes AG, after reassessing the amounts, recognises the excess (negative goodwill) immediately in profit or loss.

Other intangible assets comprise patents, trademarks, software, service agreements, technology, customer relations, supplier relations and capitalised development projects.

Separately acquired intangible assets are recognised at cost less accumulated amortisation and accumulated impairment losses. Intangible assets acquired by Demag Cranes AG in a business combination are initially recognised at fair value at the acquisition date. Expenditure on internally generated intangible assets is capitalised if the criteria for recognition of an asset are satisfied. Subsequent expenditure on intangible assets is added to the carrying amount of the intangible asset if, and only if, it substantially increases the future economic benefits embodied in the asset and the cost can be reliably estimated. Borrowing costs that are directly attributable to a qualifying asset form part of the cost of that asset. All other expenditure in connection with intangible assets is immediately recognised in profit or loss.

Intangible assets with finite useful lives are amortised on a straight-line basis over the period of any contractual rights or the period over which they are expected to be used, whichever is the shorter. Demag Cranes AG additionally reviews such assets at least annually for indications of impairment.

Estimated useful lives of intangible assets:

Intangible assets with indefinite useful lives are not amortised. Instead, Demag Cranes AG tests such assets at least annually for impairment. Trademarks are not amortised if they are established trademarks and there is no foreseeable limit to their useful lives.

Estimated useful lives are reviewed at each year-end and changed if necessary. Changes in accounting estimates are applied prospectively in profit and loss in accordance with IAS 8.

Intangible assets are derecognised on disposal or when no future economic benefits are expected for Demag Cranes AG. The gain or loss arising from the derecognition of an intangible asset is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the asset. It is recognised in profit or loss in the period of disposal.

Changes in other intangible assets are presented in Note 14.

Property, plant and equipment consists of land, land rights and buildings, including buildings on third-party land, plant and machinery, prepayments and assets under construction, tools and equipment, and other assets.

Property, plant and equipment is carried at cost less any accumulated depreciation and any accumulated impairment losses. The revaluation method is not used. Expenditure for major repairs and servicing work increases the carrying amount of an item of property, plant and equipment if it is probable that the additional economic benefits resulting from the work will flow to Demag Cranes AG and the cost can be reliably estimated. Demolition, removal, restoration and recultivation expenses for which Demag Cranes AG recognises provisions likewise form part of the cost of property, plant and equipment. Borrowing costs that are directly attributable to a qualifying asset form part of the cost of that asset. All other expenses, such as for maintenance or modernisation, are recognised immediately in profit or loss.

Parts of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item and a useful life significantly different to that of other parts are depreciated separately.

Depreciation is charged on a straight-line basis over the useful life of an item of property, plant and equipment. Demag Cranes AG estimates the useful lives as follows:

Estimated useful lives and depreciation methods are reviewed at each year-end and changed as necessary. Changes in accounting estimates are applied prospectively in profit and loss in accordance with IAS 8.

Items of property, plant and equipment are derecognised on disposal (e.g. sale, scrapping or demolition) or when no future economic benefits are expected for Demag Cranes AG. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the asset. It is recognised in profit or loss in the period of disposal.

The investment property item consists of one site and one building held to earn rentals and/or for capital appreciation.

Investment property is measured at cost less any accumulated depreciation and any accumulated impairment losses (cost model). Depreciation is charged as for property, plant and equipment. Rental income is recognised as other operating income in the Statement of Comprehensive Income and depreciation as other expenses.

Investment property is derecognised on disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal.

Demag Cranes AG assesses at least at each balance sheet date whether there is any indication that goodwill, other intangible assets, property, plant and equipment and investment properties are impaired. If any such indication exists, the asset is tested for impairment.

Goodwill, other intangible assets with indefinite useful lives and intangible assets not yet available for use at the balance sheet date are also tested for impairment at each balance sheet date irrespective of whether there is any indication that they are impaired. If the recoverable amount of an asset or the cash-generating unit to which it belongs is less than its carrying amount, the difference is recognised in profit or loss as an impairment loss. An impairment loss recognised for a cash-generating unit is first allocated to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. If there is an indication that an impairment may no longer exist, Demag Cranes AG remeasures the recoverable amount. If this exceeds the carrying amount of the asset or cash-generating unit, the impairment loss is reversed up to a maximum of cost less any accumulated depreciation or amortisation. Impairment losses recognised for goodwill are not reversed.

Other non-current assets are tested for impairment if there is any indication that the assets are impaired or that an impairment loss recognised in prior periods may no longer exist. An impairment loss recognised in prior periods is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. The increased carrying amount attributable to a reversal of an impairment loss may not exceed the recoverable amount or the carrying amount that would have been determined, net of amortisation or depreciation, had no impairment loss been recognised in prior years. A reversal of an impairment loss is recognised in profit or loss.

Leases that transfer to Demag Cranes AG (as lessee) substantially all the risks and rewards incidental to ownership of an asset are classified as finance leases. At the commencement of the lease term, finance leases are recognised as assets at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments. The future lease payments are recognised in the Statement of Financial Position under loans and borrowings.

Lease payments are apportioned in accordance with the effective interest method between the finance charge and the reduction of the outstanding liability so as to produce a constant periodic rate of interest on the remaining balance of the liability. Interest expenses are recognised in interest and similar expenses.

Lease payments under an operating lease are recognised as an expense on a straight-line basis over the lease term unless another allocation to periods is more representative of the time pattern of Demag Cranes AG’s benefit from the use of the leased asset. Contingent payments under an operating lease are recognised as an expense in the period in which they are incurred. The benefit of incentives to enter into an operating lease is recognised as a reduction of rental expense over the lease term, on a straight-line basis unless another systematic basis is more representative of the time pattern of Demag Cranes AG’s benefit from the use of the leased asset.

Inventories are measured at the lower of cost and net realisable value. Cost meaning "acquisition costs" is measured according to the moving average method while cost meaning "manufacturing costs" is measured according to the standard cost method. Costs of conversion include direct production costs such as direct material and direct labour, and allocated production overheads including depreciation on factory buildings and equipment. Borrowing costs that are directly attributable to a qualifying asset form part of the cost of that asset. Inventory write-downs include appropriate deductions for long holding periods and obsolescence.

Construction contracts that meet the criteria in IAS 11 are accounted for using the percentage-of-completion method. The percentage of completion is normally determined for this purpose according to contract costs incurred to date as a percentage of expected contract cost (the cost-to-cost method). Where the outcome of a construction contract cannot be measured reliably, revenue is recognised only to the extent of contract costs incurred that it is probable will be recoverable (the zero-profit method). The gross amount due from or to customers for contract work is presented under trade receivables or trade payables as appropriate. The gross amount due is equal to cost incurred plus recognised profits, less any recognised losses and progress billings up to a maximum of work performed. Amounts paid by customers in excess of amounts due are reported in liabilities as advance payments received. Any anticipated contract losses are recognised immediately in full in profit or loss. Further information is provided in Note 19.

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Demag Cranes AG recognises a financial instrument in the Statement of Financial Position when it becomes a party to the contractual provisions of the instrument. Financial instruments are recognised and derecognised on the settlement date.

As in the previous year, there were no reclassifications of financial instruments during the year under review.

Financial assets and financial liabilities are initially recognised at fair value plus directly attributable transaction costs, except financial instruments at fair value through profit or loss, which are recognised at fair value without transaction costs. Financial assets not at fair value through profit or loss are tested at each balance sheet date for impairment. The fair value of financial instruments traded on organised markets is determined using the quoted price on the balance sheet date. If Demag Cranes AG has financial instruments for which there is not an active market, their fair value is determined by using a valuation technique. Subsequent measurement is carried out in accordance with the classification of financial instruments into categories as follows:

• Held to Maturity
  This category consists of financial assets quoted in an active market with fixed or determinable payments and fixed maturity that Demag Cranes AG has the intention and ability to hold to maturity. Financial assets held to maturity are measured at amortised cost using the effective interest method, less any impairment losses. Demag Cranes AG does not have any financial instruments held to maturity.
• Loans and Receivables
  Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. This category mainly consists of trade receivables and cash and cash equivalents. These are measured at amortised cost using the effective interest method less accumulated impairment losses. Receivables that carry no interest or that bear an off-market interest rate are measured at the discounted present value of future cash receipts. Loans and receivables are derecognised on settlement.
• At Fair Value Through Profit or Loss
  This category contains two subcategories: held for trading, and designated as at fair value through profit or loss. These assets are measured at fair value. Changes in their fair value are recognised in profit or loss. The held for trading subcategory contains the fair value of currency and interest rate derivatives (further information is provided in Notes 19, 27 and 32). Demag Cranes AG has no financial instruments in the “designated as at fair value through profit or loss” category.
• Financial Assets Available For Sale
  This category encompasses all financial assets which, based on objective criteria, are not classified in any other IAS 39 category or which Demag Cranes AG has designated as available for sale. Available-for-sale financial assets at Demag Cranes AG mainly comprise long-term securities and associates. Long-term securities are measured at fair value. Gains and losses arising from changes in their fair value are recognised directly in equity under available-for-sale financial assets, except for impairment losses and foreign exchange gains and losses on monetary items, which are recognised directly as income or expense in profit or loss. When the assets are derecognised, the cumulative gain or loss previously recognised in equity is recognised in profit or loss. Associates are measured at cost less any accumulated impairment losses as their fair value cannot be reliably determined. Further information on this category is provided in Notes 18 and 32.
• Financial Liabilities Measured at Amortised Cost
  Financial liabilities in this category are measured using the effective interest method, recognising the interest expense in accordance with the effective interest rate for the period. At Demag Cranes AG, the category comprises loans and borrowings (Notes 26 and 32), trade payables and a portion of other financial liabilities (Notes 27 and 32).

Hedging is used to manage interest and exchange rate risk. The hedging instruments used by Demag Cranes AG mainly consist of foreign exchange contracts and interest rate swaps.

All derivative financial instruments are accounted for as financial assets or financial liabilities and measured at fair value at the balance sheet date. Changes in the fair value of derivative financial instruments are normally recognised as income or expense in profit or loss, with the exception that the portion of the gain or loss on a derivative that is determined to be an effective cash flow hedge is recognised directly in equity. The ineffective portion is recognised immediately in profit or loss. The gains or losses recognised in equity are reclassified to profit or loss in the same period or periods during which the forecast transaction generates the hedged cash flows. If the hedge of a forecast transaction results in the recognition of a non-financial asset or a non-financial liability, the gains and losses recognised in equity comprise the cost of the asset or liability on initial recognition. If hedge accounting is discontinued (for example, because a hedging instrument expires or is otherwise terminated without replacement or rollover into another hedging instrument, or the hedge no longer meets the criteria for hedge accounting), the cumulative gain or loss recognised in equity remains separately in equity until the forecast transaction or firm commitment occurs. If the forecast transaction is no longer expected to occur, the cumulative gain or loss recognised in equity is reclassified to profit or loss. Where Demag Cranes AG uses a derivative financial instrument as a fair value hedge, gains and losses on the hedging instrument and the hedged item are recognised in profit or loss. When the hedging instrument terminates or no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of the hedged item attributable to the hedged risk is reversed to profit or loss from that date. Derivatives to which hedge accounting is not applied are given the same accounting treatment as the “at fair value through profit or loss” category.

Financial assets classified as loans and receivables or available for sale are tested for impairment at each balance sheet date. A financial asset is impaired if there are indications that Demag Cranes AG may not recover part of its initial investment and the present value of the future cash flows or the fair value of the financial asset is less than its carrying amount. On an available-for-sale equity instrument, a significant or prolonged decline in the fair value of the financial instrument below its cost is to be considered objective evidence of impairment. Financial assets are assessed for impairment individually or on a portfolio basis. Demag Cranes AG recognises allowances as appropriate for all identifiable credit risks. The remaining credit risk from financial instruments corresponds to their carrying amounts. The impairment loss on a financial instrument measured at amortised cost is the difference between the asset’s carrying amount and the present value of estimated future cash flows from the asset discounted at its original effective interest rate. An impairment loss directly reduces the carrying amount of all affected financial instruments except for trade receivables, where impairment losses are recognised through an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are accounted for by reversing the allowance account to profit or loss.

If in a subsequent period the fair value of an available-for-sale financial instrument other than an equity instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised, the impairment loss is reversed through profit or loss and any amount in excess of amortised cost is recognised directly in equity. Impairment losses recognised in profit or loss for an investment in an equity instrument classified as available for sale are not reversed. Any increase in fair value after recognition of an impairment loss is recognised directly in equity.

A financial asset is derecognised when the contractual rights to the cash flows from the asset expire or it is transferred to another party with all the risks and rewards of ownership. If on formal transfer of a financial asset Demag Cranes AG neither transfers nor retains substantially all the risks and rewards of ownership and retains control of the transferred asset, it continues to recognise the financial asset to the extent of its continuing involvement and recognises as a liability any obligations created in the transfer. If Demag Cranes AG retains substantially all the risks and rewards of ownership of a transferred financial asset, it continues to recognise the asset and recognises a secured loan for the consideration received.

Demag Cranes AG derecognises a financial liability when, and only when, the underlying obligation is discharged or cancelled or expires.

The other investments item consists of two sub-items – associates and long-term securities – and is classified as available for sale. Long-term securities are measured at fair value. This is determined by prices quoted in an active market. Gains and losses arising from changes in fair value are recognised directly in equity, taking account of any deferred tax. On disposal, the cumulative gain or loss previously recognised directly in equity is recognised in profit or loss. The appropriate classification of securities is determined on purchase and reviewed at each balance sheet date. There were no reclassifications in the year under review.

Investments in associates are measured at cost less accumulated impairment losses, as their fair value cannot be reliably determined. There were no indications of impairment in the year under review.

Further information on the other investments item is provided in Note 18.

Trade receivables are classified in the loans and receivables category. They are initially recognised at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method, less accumulated impairment losses. Non-current receivables are measured at the present value of the estimated future cash flows discounted at the effective interest rate.

Other financial assets other than derivative financial instruments are measured at amortised cost less accumulated impairment losses. These assets are classified in the loans and receivables category. The measurement of derivative financial instruments is explained in a separate section (Derivative Financial Instruments).

Cash and cash equivalents include cash on hand and in banks, bank deposits on up to one-day notice and securities with a residual maturity of up to three months at the acquisition date. These holdings are classified in the loans and receivables category. Demag Cranes AG measures cash and cash equivalents at amortised cost.

Demag Cranes AG has an equity-settled share-based payment scheme (Matching Stock Program) for executives and managerial employees. The amount of the equity-settled payment obligation is the fair value of the options at the grant date. This is independently assessed using Monte Carlo simulation. Demag Cranes AG recognises share-based payments in personnel expenses on a straight-line basis over the vesting period with a matching increase in additional paid-in capital.

Pension obligations consist of defined contribution and defined benefit plans. Contributions to defined contribution plans are recognised as an expense in profit or loss in the year employees have rendered service entitling them to the contributions.

The present value of the obligation under defined benefit plans is measured separately for each plan using the projected unit credit method, based on the estimated amount of benefit employees have earned up to the balance sheet date. Demag Cranes AG obtains an actuarial valuation to determine the amount of its obligation each year. Demag Cranes AG’s net obligation is determined by subtracting the fair value of plan assets from the present value of the defined benefit obligation. The discount rate used is the yield at the balance sheet date on senior corporate bonds with maturities approximating to the duration of the benefit. Experience adjustments and changes in actuarial assumptions over time can result in differences between the actual and expected benefit obligation and the actual and expected return on plan assets. The resulting actuarial gains and losses are recognised directly in equity (in retained earnings) and presented separately in the Statement of Comprehensive Income. If plan benefits are subsequently increased, the share of the present value of the increased benefits that relates to employees’ past service (the past service cost) is recognised as expense on a straight-line basis over the period until the benefits become vested. The past service cost for benefits that are vested immediately is recognised immediately in profit or loss.

Interest-bearing loans and borrowings are initially recognised at fair value plus transaction costs incurred on inception. Subsequent to initial recognition, interest-bearing loans and borrowings are measured at amortised cost, with the difference between the initial amount and the repayment amount being recognised as interest expense over the loan term using the effective interest method. The gain or loss arising from extinguishment and derecognition of a financial liability is recognised immediately in profit or loss.

Financial guarantee contracts are initially measured at fair values plus any transaction costs directly attributable to their issue. They are subsequently measured at the higher of the amount of the provision measured in accordance with IAS 37 and the amount initially recognised less cumulative amortisation.

Trade payables are financial liabilities that Demag Cranes AG measures at amortised cost using the effective interest method.

Other financial liabilities mainly consist of derivative financial instruments, both in designated hedging relationships and otherwise. Their measurement is explained in a separate Derivative Financial Instruments section.

A contingent liability is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events, or a present obligation where it is possible but not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability.