Other financial assets – Note 16 Intangible assets (other than goodwill) arising on business combinations  – Note 15 Leases – Notes 4 and 30  Inventories and construction contracts – Note 17 Fair value and cash flow hedges Derivative financial instruments and hedging practices – Note 25 Liquid investments – Note 23 Cash and cash equivalents – Note 23 Trade and other receivables – Note 18  An intangible asset is capitalised separately from goodwill as part of a business  combination at cost (fair value at date of acquisition) to the extent that it is  probable that the expected future economic benefits attributable to the asset will  flow to the Group and that its cost can be measured reliably.  Subsequent to initial recognition, intangible assets are carried at cost less any  accumulated amortisation and any accumulated impairment losses. The carrying  values of definite-lived intangible assets (the Group does not currently have any  indefinite-lived intangible assets other than goodwill) are reviewed for indicators  of impairment at each reporting date and are subject to impairment testing when  events or changes in circumstances indicate that the carrying values may not be  recoverable. The amortisation of intangible assets is calculated to write off the book value of  definite-lived intangible assets over their useful lives on a straight-line basis on the  assumption of zero residual value. In general, definite-lived intangible assets are  amortised over periods ranging from one to ten years, depending on the nature  of the intangible asset. Amortisation periods, useful lives, expected patterns of consumption and  residual values are reviewed at each financial year-end. Changes in the expected  useful life or the expected pattern of consumption of future economic benefits  embodied in the asset are accounted for by changing the amortisation period or  method as appropriate on a prospective basis.  All investments are initially recognised at the fair value of the consideration given  plus any directly attributable transaction costs. Where equity investments are  actively traded in organised financial markets, fair value is determined by  reference to Stock Exchange quoted market bid prices at the close of business  on the balance sheet date. Unquoted equity investments are recorded at  historical cost and are included within financial assets in the Consolidated  Balance Sheet given that it is impracticable to determine fair value in accordance  with IAS 39  Financial Instruments: Recognition and Measurement . Where non- derivative financial assets meet the definition of “loans and receivables” under  IAS 39, such balances are, following initial recognition, recorded at amortised  cost using the effective interest method less any allowance for impairment. Gains  and losses are recognised in profit or loss when the loans and receivables are  derecognised or impaired as well as through the amortisation process.  Leases where the lessor retains substantially all the risks and rewards of ownership  are classified as operating leases. Operating lease rentals are charged to the  Consolidated Income Statement on a straight-line basis over the lease term. Inventories are stated at the lower of cost and net realisable value. Cost is based  on the first-in, first-out principle (and weighted average, where appropriate) and  includes all expenditure incurred in acquiring the inventories and bringing them to  their present location and condition. Raw materials are valued on the basis of  purchase cost on a first-in, first-out basis. In the case of finished goods and  work-in-progress, cost includes direct materials, direct labour and attributable  overheads based on normal operating capacity and excludes borrowing costs.  Net realisable value is the estimated proceeds of sale less all further costs to  completion, and less all costs to be incurred in marketing, selling and distribution.  Estimates of net realisable value are based on the most reliable evidence available  at the time the estimates are made, taking into consideration fluctuations of price  or cost directly relating to events occurring after the end of the period, the  likelihood of short-term changes in buyer preferences, product obsolescence or  perishability (all of which are generally low given the nature of the Group’s  products) and the purpose for which the inventory is held. Materials and other  supplies held for use in the production of inventories are not written down below  cost if the finished goods, in which they will be incorporated, are expected to be  sold at or above cost.  Amounts recoverable on construction contracts, which are included in  receivables, are stated at the net invoiced value of the work done less amounts  received as progress payments on account. Cumulative costs incurred, net of  amounts transferred to cost of sales, after deducting foreseeable losses,  provisions for contingencies and payments on account not matched with  revenue, are included as construction contract balances in inventories. Cost  includes all expenditure directly related to specific projects and an allocation of  fixed and variable overheads incurred in the Group’s contract activities based on  normal operating capacity. Trade receivables are carried at original invoice amount less an allowance for  potentially uncollectible debts. Provision is made when there is objective evidence  that the Group will not be in a position to collect the associated debts. Bad debts  are written-off in the Consolidated Income Statement on identification.  Cash and cash equivalents comprise cash balances held for the purpose of  meeting short-term cash commitments and investments which are readily  convertible to a known amount of cash and are subject to an insignificant risk of  change in value. Bank overdrafts are included within current interest-bearing  loans and borrowings in the Consolidated Balance Sheet. Where the overdrafts  are repayable on demand and form an integral part of cash management, they  are netted against cash and cash equivalents for the purposes of the Consolidated  Statement of Cash Flows. Liquid investments comprise short-term deposits and current asset investments  which are held as readily disposable stores of value and include investments in  government gilts and commercial paper and deposits of less than one year in  duration. As the maturity of these investments is greater than three months,  these investments are treated as financial assets and are categorised as either  “held-for-trading” or “loans and receivables”. Where relevant, the fair value of  liquid investments is determined by reference to the traded value of actively  traded instruments. In order to manage interest rate, foreign currency and commodity risks and to  realise the desired currency profile of borrowings, the Group employs derivative  financial instruments (principally interest rate swaps, currency swaps and forward  foreign exchange contracts).  At the inception of a derivative transaction, the Group documents the relationship  between the hedged item and the hedging instrument together with its risk  management objective and the strategy underlying the proposed transaction.  The Group also documents its assessment, both at the inception of the hedging  relationship and subsequently on an ongoing basis, of the effectiveness of the  hedging instrument in offsetting movements in the fair values or cash flows of the  hedged items. Derivative financial instruments are stated at fair value. Where derivatives do not  fulfil the criteria for hedge accounting, changes in fair values are reported in the  Consolidated Income Statement. The fair value of interest rate and currency  swaps is the estimated amount the Group would pay or receive to terminate the  swap at the balance sheet date taking into account interest and currency rates  at that date and the creditworthiness of the swap counterparties. The fair value  of forward exchange contracts is calculated by reference to forward exchange  rates for contracts with similar maturity profiles and equates to the quoted market  price at the balance sheet date (being the present value of the quoted forward  price). The Group uses fair value hedges and cash flow hedges in its treasury activities.  For the purposes of hedge accounting, hedges are classified either as fair value  hedges (which entail hedging the exposure to movements in the fair value of a  recognised asset or liability or an unrecognised firm commitment that could affect  profit or loss) or cash flow hedges (which hedge exposure to fluctuations in future  cash flows derived from a particular risk associated with a recognised asset or  liability, or a highly probable forecast transaction that could affect profit or loss). Where the conditions for hedge accounting are satisfied and the hedging  instrument concerned is classified as a fair value hedge, any gain or loss  stemming from the re-measurement of the hedging instrument to fair value is  reported in the Consolidated Income Statement. In addition, any gain or loss on  CRH 81