Royalties are classified as cost of goods sold.
Finance costs comprise interest payable on borrowings, calculated using the effective interest rate method, foreign exchange losses, losses on currency hedging instruments offsetting currency gains, results on interest rate hedging instruments, losses on hedging instruments that are
not
part of a hedge accounting relationship, losses on financial assets classified as held for trading, impairment losses on financial assets classified as available for sale, as well as any losses from hedge ineffectiveness.
All interest costs incurred in connection with borrowings or financial transactions are expensed as incurred as part of finance costs, except when capitalized. Any difference between the initial amount and the maturity amount of interest bearing loans and borrowings, such as transaction costs and fair value adjustments, are recognized in the income statement over the expected life of the instrument on an effective interest rate method. The interest expense component of finance lease payments is also recognized in the income statement using the effective interest rate method.
