Annual report 2008, 1.19 MB - Telenor

Rentals payable under operating leases are charged to profi t or
loss on a straight-line basis over the term of the relevant lease.
Benefi ts received and incentives to enter into an operating lease are
also amortised on a straight-line basis over the lease term. Prepaid
lease payments made on entering into operating leases or acquiring
leaseholds are amortised over the lease term in accordance with the
pattern of benefi ts provided and included in the line item “depreciation
and amortisation” in the income statement.
Financial Instruments
A fi nancial instrument is defi ned as any contract that gives rise
to a fi nancial asset of one entity and a fi nancial liability or equity
instrument of another entity. Telenor has grouped fi nancial assets
and liabilities into the following classes: trade receivables and other
current and non-current fi nancial assets, equity securities, cash and
cash equivalents, trade payables and other non-interest bearing
fi nancial liabilities, interest-bearing liabilities and derivatives, see
also note 30.
Financial assets are classifi ed in the following categories: at fair
value through profi t or loss (FVTPL), held-to-maturity investments
(HTM), loans and receivables (LAR) and available-for-sale (AFS).
Financial assets at fair value through profi t or loss consist of assets
held for trading and include derivatives. Loans and receivables consist
of unquoted non-derivative assets with fi xed or determinable
payments. Financial assets available-for-sale consist of assets designated
as available for sale or assets that are not classifi ed in one
of the other categories. Telenor has no fi nancial assets classifi ed as
held-to-maturity investments.
Financial liabilities are classifi ed as fi nancial liabilities at fair value
through profi t or loss and fi nancial liabilities at amortised cost.
Financial liabilities at fair value through profi t or loss consist of
liabilities held for trading and include derivatives. Financial liabilities
at amortised cost consist of liabilities that are not a part of the category
at fair value through profi t or loss.
The classifi cation of the fi nancial instrument is done based on the
nature and purpose of the fi nancial instrument and is determined at
the initial recognition. Telenor has not used the fair value option that
exists in IAS 39, to upon initial recognition designating a fi nancial
asset or liability as an instrument at fair value through profi t and loss.
The fi nancial instruments are recognised in Telenor’s balance sheet
as soon as Telenor become a party to the contractual provisions of
the instrument, using trade date accounting. Financial assets and
liabilities are offset and the net amount presented in the the balance
sheet when Telenor has the intention and legally enforceable
right to settle the contracts net, otherwise the fi nancial assets and
liabilities are presented gross.
Trade receivables and other current and non-current
fi nancial assets
Trade and other current and non-current fi nancial assets include
trade receivables, other fi nancial non-current interest-bearing and
non-interest-bearing assets (except capital contribution to Telenor
Pension Fund) and bonds and commercial papers with original
maturity beyond three months, see note 22 and 23. These assets
are a part of the category loans and receivables and are measured
on initial recognition at fair value and subsequently measured at
amortised cost using the effective interest rate method adjusted for
provision for any impairment. Impairment for estimated irrecoverable
amounts is recognised in profi t or loss when a loss event and
objective evidence that the asset is impaired, exists. The impairment
is calculated by taking into account the historic evidence of the level
of bad debt experienced for customer types and the aging of the
receivable balance. Individual trade receivables are impaired when
management assess them not to be collectible.
NOTES TO THE FINANCIAL STATEMENTS
Telenor Group
Equity securities
Equity securities include available for sale investments and capital
contribution to Telenor Pension Fund that are a part of the category
fi nancial assets available-for-sale, and assets held for trading that
are a part of the category fi nancial assets at fair value through profi t
or loss, see note 23.
Equity securities in the category fi nancial assets available-for-sale
are initially measured at fair value plus directly attributable transaction
costs, and are subsequently measured at fair value. Gains and
losses arising from changes in fair value are recognised directly in
equity, until the investment is disposed of or is determined to be
impaired, at which time the cumulative gain or loss previously recognised
in equity is included in the profi t or loss for the period. For
equity securities where the recognised value is lower than fair value,
and impairment is made through profi t or loss if the reduction in
value is substantial or prolonged. Impairment losses recognised in
profi t or loss for equity investments classifi ed as available-for-sale
are not subsequently reversed through profi t or loss.
Equity securities in the category fi nancial assets at fair value
through profi t or loss are initially and subsequently measured at fair
value. Gains and losses arising from changes in fair value are recognised
in profi t or loss on the line net change in fair value of fi nancial
instruments at fair value through profi t or loss.
Dividends on equity securities in both categories are recognised as
fi nancial income in profi t or loss when the right to receive the dividend
is established (normally when dividends are declared by the
General Assembly).
Cash and cash equivalents
Cash and cash equivalents include cash, bank deposits, fi xed rate
bonds and commercial paper with original maturity of three months
or less. Cash and cash equivalents are initially measured at fair value.
Trade payables and other non-interest bearing fi nancial
liabilities
Trade payables and other non-interest bearing fi nancial liabilities
include trade payables, liabilities to associated companies and other
current and non-current non-interest bearing fi nancial liabilities,
see note 29. These liabilities are a part of the category fi nancial
liabilities at amortised cost and are initially recognised in the balance
sheet at fair value, and subsequently measured at amortised
cost using the effective interest rate method.
Interest-bearing liabilities
Interest-bearing liabilities include bonds and commercial papers,
bank loans and overdrafts, and are classifi ed in the category fi nancial
liabilities at amortised cost. These liabilities are initially measured
at fair value net of transaction costs, and are subsequently
measured at amortised cost using the effective interest-rate
method. In addition, where fair value hedge accounting is applied
the hedged liabilities are also adjusted for gains and losses attributable
to the risk being hedged. On extinguishment of debt, in whole or
in part, the difference between the carrying amount of the liability
and the consideration paid is recognised in profi t or loss.
Derivatives
The Group uses derivative fi nancial instruments such as forward currency
contracts, interest rate swaps, cross currency interest rate swaps
and to small extent interest rate options, to hedge its risks associated
with interest rate and foreign currency fl uctuations. The Group does
not use derivative fi nancial instruments for trading purposes.
The derivative fi nancial instruments are initially and subsequently
measured at fair value. Any gains or losses arising from changes in
fair value on derivatives that do not qualify for hedge accounting
ANNUAL REPORT 2008 PAGE 21