71 AGL Energy Limited Annual Report 2011 expenditures arising from the restructuring, which are those  amounts that are both necessarily entailed by the restructuring and  not associated with the ongoing activities of the entity. change in the hedged item attributable to the hedged risk are  recognised in the line of the income statement relating to the  hedged item. Hedge accounting is discontinued when the consolidated entity  revokes the hedging relationship, when the hedging instrument  expires or is sold, terminated, or exercised, or when it no longer  qualifies for hedge accounting. The fair value adjustment to the  carrying amount of the hedged item arising from the hedged risk  is amortised to profit or loss from that date. Financial guarantee contracts are recognised as a financial liability  at the time the guarantee is issued. The liability is initially measured  at fair value and subsequently at the higher of the amount  determined in accordance with AASB 137  Provisions, Contingent  Liabilities and Contingent Assets  and the amount initially recognised  less cumulative amortisation, where appropriate. The consolidated entity enters into a variety of derivative financial  instruments to manage its exposure to interest rate, foreign  exchange rate and energy price risks arising in the normal course of  business. The use of derivatives is subject to policies, procedures  and limits approved by the Board of Directors. Further details of  derivative financial instruments are disclosed in Note 52. Derivatives are initially recognised at fair value at the date the  derivative contract is entered into and are subsequently  remeasured to their fair value at the end of each reporting period.  The resulting gain or loss is recognised in profit or loss immediately  unless the derivative is designated and effective as a hedging  instrument, in which event the timing of the recognition in profit or  loss depends on the nature of the hedge relationship. The consolidated entity designates certain derivatives as either  hedges of the fair value of recognised assets or liabilities or firm  commitments (fair value hedges), hedges of highly probable  forecast transactions or hedges of foreign currency risk of firm  commitments (cash flow hedges) or hedges of net investments  in foreign operations. The consolidated entity currently does not  have any net investment hedges. Derivatives that do not qualify  for hedge accounting are required to be accounted for as  trading instruments. The effective portion of changes in the fair value of derivatives that  are designated and qualify as cash flow hedges is recognised in  other comprehensive income. The gain or loss relating to the  ineffective portion is recognised immediately in profit or loss. Amounts previously recognised in other comprehensive income and  accumulated in equity are reclassified to profit or loss in the periods  when the hedged item is recognised in profit or loss, in the same  line of the income statement as the recognised hedged item.  However, when the forecast transaction that is hedged results in  the recognition of a non-financial asset or a non-financial liability,  the gains and losses previously accumulated in equity are  transferred from equity and included in the initial measurement of  the cost of the non-financial asset or non-financial liability. Hedge accounting is discontinued when the consolidated entity  revokes the hedging relationship, when the hedging instrument  expires or is sold, terminated, or exercised, or when it no longer  qualifies for hedge accounting. Any gain or loss accumulated in  equity at that time remains in equity and is recognised when the  forecast transaction is ultimately recognised in profit or loss. When a  forecast transaction is no longer expected to occur, the gain or loss  accumulated in equity is recognised immediately in profit or loss. At the inception of the hedge relationship, the consolidated entity  documents the relationship between the hedging instrument and  hedged item, along with its risk management objectives and its  strategy for undertaking various hedge transactions. Furthermore,  at the inception of the hedge and on an ongoing basis, the  consolidated entity documents whether the hedging instrument is  highly effective in offsetting changes in fair values or cash flows of  the hedged item. Hedges of net investments in foreign operations Hedges of net investments in foreign operations are accounted  for similarly to cash flow hedges. Any gain or loss on the hedging  instrument relating to the effective portion of the hedge is  recognised in other comprehensive income and accumulated in the  foreign currency translation reserve. The gain or loss relating to the  ineffective portion is recognised immediately in profit or loss. Gains and losses on the hedging instrument relating to the  effective portion of the hedge accumulated in the foreign currency  translation reserve are reclassified to profit or loss when the foreign  operation is disposed of. The consolidated entity has entered into certain derivative  instruments for economic hedging purposes under the Board  approved risk management policies which do not satisfy the  requirements for hedge accounting under AASB 139  Financial  Instruments: Recognition and Measurement . These derivatives are  therefore required to be categorised as held for trading and are  classified in the statement of financial position as economic hedges.  Changes in the fair value of any derivative instrument that does  not qualify for hedge accounting are recognised immediately in  profit or loss. A derivative with a positive fair value is recognised as a financial  asset; a derivative with a negative fair value is recognised as a  financial liability. A derivative is presented as a non-current asset or  a non-current liability if the remaining maturity of the instrument is  more than 12 months and it is not expected to be realised or  settled within 12 months. Other derivatives are presented as  current assets or current liabilities. Derivatives embedded in other financial instruments or other host  contracts are treated as separate derivatives when their risks and  characteristics are not closely related to those of the host  contracts and the host contracts are not measured at fair value  through profit or loss. Changes in the fair value of derivatives that are designated and  qualify as fair value hedges are recognised in profit or loss  immediately, together with any changes in the fair value of the  hedged asset or liability that are attributable to the hedged risk.  The change in the fair value of the hedging instrument and the  Ordinary shares are classified as equity. Ordinary shares issued by  the consolidated entity are recorded at the proceeds received, less  transaction costs directly attributable to the issue of new shares,  net of any tax effects. (aa) Financial guarantee contracts (ab) Derivative financial instruments and hedging Cash fl ow hedges Derivatives that do not qualify for hedge accounting –  economic hedges Embedded derivatives Fair value hedges (ac) Issued capital