Annual Report 2005

Notes - Ferd Holding Group
Financial current assets
Holdings of shares and other equity investments of strategic or industrial
character are classified as fixed assets. These investments are recognised in
the balance sheet at the cost of acquisition, and are written down to fair
value if a fall in value is assumed not to be of a temporary nature. Dividends
and other distributions of profit received are recognised to income as financial
income.
Investments of a financial nature are classified as current assets. Listed securities
with a good spread of ownership and good liquidity are included in the
trading portfolio and are valued at market value at the date of the balance
sheet. Other financial securities classified as current assets and managed as a
unified portfolio are adjusted for any fall in value if the total portfolio of such
financial securities has an estimated value lower than acquisition cost. Other
financial securities, including portfolio investments in Ferd Private Equity Fund,
are adjusted for any fall in value based on an individual assessment.
Interest bearing securities are recognised at actual value. Market value is calculated
theoretically, based on the yield curve for the respective market and
the issuer’s credit risk.
The net result of investment activities is included in operating revenue in the
profit and loss account.
Bank deposits
Bank deposits include, cash, bank deposits and other monetary instruments
with a maturity of less than three months at the date of purchase. The majority
of the subsidiaries are included in one of the group’s two cash pool
arrangements.
Liabilities
Liabilities that fall due for payment later than 12 months from the date of the
balance sheet and the first year’s instalment payment on such liabilities are
classified as long-term liabilities. Other liabilities are classified as current liabilities.
Liabilities are carried in the balance sheet at their nominal amount at
the time they are incurred. Unrealised gains or losses resulting from changes
in interest rates are not recognised to profit and loss.
Tax
Tax expenses are matched with operating income before tax. The tax expense
is made up of tax payable and change in deferred tax. Tax arising from equity
transactions is applied directly to equity.
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Deferred tax in the balance sheet is calculated on the basis of temporary
differences between taxation and accounting values and tax losses carried
forward at the close of the accounting year. Tax reducing temporary differences
and tax losses carried forward are netted against tax increasing temporary
differences that reverse in the same period. Full provision is made for
deferred tax in accordance with the liability method without discounting to
current value, and deferred tax and deferred tax assets are presented as a
net figure in the balance sheet after offset. Deferred tax assets that cannot
be offset are capitalised if it is likely that the benefit can be utilised in
respect of future earnings.
No provision is normally made for deferred tax on retained surpluses in subsidiaries
since it is assumed that such surpluses will remain invested in these
companies.
Pension costs and pension assets/liabilities
Liability in respect of pension commitments is calculated as the discounted
current value of the future pension benefits for which entitlement has been
earned at the date of the balance sheet, based on a linear accrual of pension
rights over the employee’s period of service. Pension assets are valued at
market value at the date of the balance sheet, and are recognised net of
pension liabilities in respect of each pension scheme.
Net pension assets are shown as long-term receivables and net pension liabilities
are shown as long-term liabilities. The calculation of pension assets and
pension liabilities is based on economic and actuarial assumptions as set out
in Note 15.
The net pension cost for the year forms part of salary and personnel costs,
and is made up of the discounted current value of pension rights earned in
the year, the interest accruing on pension liabilities, the expected return on
pension assets and the effect of changes in estimates and the terms of pension
schemes and accrued employers’ social security contributions. The accumulated
effect of changes in estimates and deviations between estimated
and actual return as of 1 January 2005, and the change in accounting principle
has been recorded to equity.
Reclassification
Some previous years’ figures have been reclassified to be comparable to the
2005 accounts.