INDUSTRIAL HOLDING BULGARIA PLC

NOTES TO THE FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 31 MARCH 2013

#### 2.2 Summary of significant accounting policies (continued)

########## d) Financial instruments – initial recognition and subsequent measurement Financial assets

########## Initial recognition

Financial assets within the scope of IAS 39 Financial Instruments: Recognition and Measurement are classified as financial assets at fair value through profit or loss, or loans and receivables or held to maturity investments or financial assets available for sale or as derivatives designated as hedging instruments in an effective hedge, as is appropriate. The Company determines the classification of its financial assets at initial recognition. All financial assets are recognized initially at fair value plus, in the case of investments not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the marketplace (regular purchases) are recognized on the trade date (the transaction), ie on the date on which the Company has committed to purchase or sell the asset.

########## Subsequent measurement

Subsequent measurement of financial assets depends on their classification as follows:

########## Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition, loans and receivables are measured at amortized cost using the method of effective interest rate (ELP), less provision for impairment. Amortized cost is calculated taking into account any discounts or premium on acquisition and fees or costs that are an integral part of the ELP. Depreciation ELP is included in finance income in the statement of comprehensive income. Losses arising from impairment are recognized in other comprehensive income as expenses.

########## Investments in subsidiaries and associates

In the separate financial statements of the Company, investments in subsidiaries and associates are stated at cost less impairment losses (according to IAS 27, paragraph 37 (a)). Investments in subsidiaries and associated companies are derecognised and the net result (proceeds of disposal less the carrying amount of the investment) are recognized in profit or loss when the Company loses control or significant influence over the company in which it has invested. Additional information is provided in Note 12 and Note 13.

########## Derecognition

Financial asset (or, where applicable, a part of a financial asset or a group of similar financial assets) is derecognised when: • the rights to receive cash flows from the asset have expired; • the rights to receive cash flows from the asset transferred or the Company has a duty to fully pay the cash flows without material delay to a third party through an agreement to transfer, in which (a) has transferred substantially all risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has not retained control.

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