Accounting Policies  |  continued the hedged item which is attributable to the hedged risk is adjusted against the  carrying amount of the hedged item and reflected in the Consolidated Income  Statement. Where the adjustment is to the carrying amount of a hedged interest- bearing financial instrument, the adjustment is amortised to the Consolidated  Income Statement with the objective of achieving full amortisation by maturity. Where a derivative financial instrument is designated as a hedge of the variability  in cash flows of a recognised asset or liability or a highly probable forecast  transaction that could affect profit or loss, the effective part of any gain or loss  on the derivative financial instrument is recognised as other comprehensive  income, net of the income tax effect, with the ineffective portion being reported  in the Consolidated Income Statement. The associated gains or losses that had  previously been recognised as other comprehensive income are transferred to  the Consolidated Income Statement contemporaneously with the materialisation  of the hedged transaction. Any gain or loss arising in respect of changes in the  time value of the derivative financial instrument is excluded from the measurement  of hedge effectiveness and is recognised immediately in the Consolidated  Income Statement. Hedge accounting is discontinued when the hedging instrument expires or is  sold, terminated or exercised, or no longer qualifies for hedge accounting. At  that point in time, any cumulative gain or loss on the hedging instrument  recognised as other comprehensive income remains there until the forecast  transaction occurs. If a hedged transaction is no longer anticipated to occur, the  net cumulative gain or loss previously recognised as other comprehensive  income is transferred to the Consolidated Income Statement in the period. Where foreign currency borrowings provide a hedge against a net investment in  a foreign operation, and the hedge is deemed to be effective, foreign exchange  differences are taken directly to a foreign currency translation reserve. The  ineffective portion of any gain or loss on the hedging instrument is recognised  immediately in the Consolidated Income Statement. Cumulative gains and  losses remain in equity until disposal of the net investment in the foreign  operation at which point the related differences are transferred to the  Consolidated Income Statement as part of the overall gain or loss on sale. All loans and borrowings are initially recorded at the fair value of the consideration  received net of directly attributable transaction costs. Subsequent to initial  recognition, current and non-current interest-bearing loans and borrowings are,  in general, measured at amortised cost employing the effective interest  methodology. Fixed rate term loans, which have been hedged to floating rates  (using interest rate swaps), are measured at amortised cost adjusted for  changes in value attributable to the hedged risks arising from changes in  underlying market interest rates. The computation of amortised cost includes  any issue costs and any discount or premium materialising on settlement.  Borrowings are classified as current liabilities unless the Group has an  unconditional right to defer settlement of the liability for at least 12 months after  the balance sheet date. Gains and losses are recognised in the Consolidated Income Statement through  amortisation on the basis of the period of the loans and borrowings. Borrowing costs arising on financial instruments are recognised as an expense  in the period in which they are incurred (unless capitalised as part of the cost of  property, plant and equipment). Ordinary Shares acquired by the Parent Company or purchased by the Employee  Benefit Trust on behalf of the Parent Company under the terms of the Performance  Share Plan are deducted from equity and presented on the face of the Consolidated  Balance Sheet. No gain or loss is recognised in profit or loss on the purchase,  sale, issue or cancellation of the Parent Company’s Ordinary Shares. Dividends on Ordinary Shares are recognised as a liability in the Consolidated  Financial Statements in the period in which they are declared by the Parent  Company. Emission rights are accounted for such that a liability is recognised only in  circumstances where emission rights have been exceeded from the perspective  of the Group as a whole and the differential between actual and permitted  emissions will have to be remedied through the purchase of the required  additional rights at fair value; assets and liabilities arising in respect of under and  over-utilisation of emission credits respectively are accordingly netted against  one another in the preparation of the Consolidated Financial Statements. To the  extent that excess emission rights are disposed of during a financial period, the  profit or loss materialising thereon is recognised immediately within cost of sales  in the Consolidated Income Statement.  Items included in the financial statements of each of the Group’s entities are  measured using the currency of the primary economic environment in which the  entity operates (“the functional currency”). The Consolidated Financial Statements  are presented in euro, which is the presentation currency of the Group and the  functional currency of the Parent Company. Transactions in foreign currencies are recorded at the rate ruling at the date of the  transaction. Monetary assets and liabilities denominated in foreign currencies are  retranslated at the rate of exchange ruling at the balance sheet date. All currency  translation differences are taken to the Consolidated Income Statement with the  exception of all monetary items that provide an effective hedge for a net  investment in a foreign operation. These are recognised in other comprehensive  income until the disposal of the net investment, at which time they are recognised  in the Consolidated Income Statement. Results and cash flows of subsidiaries, joint ventures and associates with non- euro functional currencies have been translated into euro at average exchange  rates for the year, and the related balance sheets have been translated at the  rates of exchange ruling at the balance sheet date. Adjustments arising on  translation of the results of non-euro subsidiaries, joint ventures and associates  at average rates, and on restatement of the opening net assets at closing rates,  are recognised in a separate translation reserve within equity, net of differences  on related currency borrowings. All other translation differences are taken to the  Consolidated Income Statement. On disposal of a foreign operation, accumulated currency translation differences  are recognised in the Consolidated Income Statement as part of the overall gain  or loss on disposal. Goodwill and fair value adjustments arising on acquisition of  a foreign operation are regarded as assets and liabilities of the foreign operation,  are expressed in the functional currency of the foreign operation, are recorded in  euro at the exchange rate at the date of the transaction and are subsequently  retranslated at the applicable closing rates. The principal exchange rates used for the translation of results, cash flows and  balance sheets into euro were as follows: Average Year-end euro 1 = 2012 2011 2012 2011 US Dollar 1.2848 1.3922 1.3194 1.2939 Pound Sterling 0.8109 0.8679 0.8161 0.8353 Polish Zloty 4.1847 4.1212 4.0740 4.4580 Ukrainian Hryvnya 10.3933 11.1202 10.6259 10.3752 Swiss Franc 1.2053 1.2326 1.2072 1.2156 Canadian Dollar 1.2842 1.3763 1.3137 1.3215 Argentine Peso 5.8492 5.7508 6.4890 5.5746 Turkish Lira 2.3135 2.3388 2.3551 2.4432 Indian Rupee 68.5973 64.9067 72.5600 68.7130 Chinese Renminbi 8.1052 8.9968 8.2207 8.1588 Net investment hedges Interest-bearing loans and borrowings – Note 24  Share capital and dividends – Notes 12 and 29 Treasury Shares and own shares Dividends Emission rights Foreign currency translation 82 CRH