Annual Report 2010 - Falck

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Notes to the Group financial statements Note 1 Accounting policies (continued) The line items of the financial statements of subsidiaries are fully consolidated in the consolidated financial statements. Profit for the year and equity attributable to non-controlling interests in subsidiaries that are not fully controlled are included in the consolidated profit and equity and stated as separate line items. Associates Enterprises in which the Falck Group exercises significant influence but not control are classified as associates. Significant influence is generally achieved by directly or indirectly holding or controlling more than 20%, but less than 50%, of the voting rights. Unrealised gains on transactions with associates are eliminated in proportion to the Group’s share of the enterprise. BUSINESS COmBINATIONS Companies acquired or established during the financial year are recognised as from the date of acquisition or inception. Companies divested or discontinued are recognised in the income statement until the date of divestment. The comparative figures are not restated to reflect companies acquired, divested or discontinued. Acquisitions of subsidiaries or associates are accounted for applying the acquisition method. Identifiable assets, liabilities and contingent liabilities of acquirees are stated at their fair value at the date of acquisition. Identifiable intangible assets are recognised if they are separable or derive from a contractual right. Deferred tax on revaluations is recognised. The acquisition date is the date on which the Group obtains control of the acquiree. Any positive difference between the consideration and the value of non-controlling interests in the acquiree and the fair value of the previously held interests in the acquiree, on the one hand, and the fair value of the identifiable assets, liabilities and contingent liabilities, on the other hand, is recognised in the balance sheet as goodwill. Goodwill is not amortised, but is tested for impairment at least once a year. On acquisition, goodwill is allocated to the cash-generating units which will subsequently form the basis for future impairment tests. Any goodwill arising and any fair value adjustments made on the acquisition of a foreign company whose functional currency is not the same as the presentation currency used by the Group are treated as assets and liabilities of the foreign company and are translated on initial recognition to the foreign company’s Group | Falck Annual Report 2010 57 functional currency at the exchange rate ruling at the transaction date. Any negative difference is recognised in the income statement on the date of acquisition. The consideration in a business combination consists of the fair value of the agreed purchase price. For business combinations in which the agreement includes a provision on adjustment of the consideration conditional on future events (earn-out), the fair value of this part of the consideration is recognised at the date of acquisition. Any changes in the fair value of the contingent consideration after initial recognition are recognised in the income statement. Put options issued in connection with acquisitions, the value of which is contingent on future events, are recognised as part of the consideration at the date of acquisition. The put options issued are subsequently measured at fair value. Any changes in the fair value of the issued put options after initial recognition are recognised in equity. Acquisition costs directly attributable to the acquisition are recognised in the income statement. Adjustments of liabilities in connection with contingent consideration and issued put options, the value of which is conditional on future events relating to business combinations with an acquisition date prior to 1 January 2010, will continue to be recognised in accordance with IFRS 3 (2004), i.e. adjustments are recognised in goodwill until the conditions have been met or the issued put options are exercised. If uncertainties regarding the measurement of acquired identifiable assets, liabilities, contingent liabilities or the consideration for the business combination exist at the acquisition date, initial recognition takes place on the basis of preliminary fair values. If identifiable assets, liabilities, contingent liabilities and the consideration for the business combination are subsequently determined to have had a different fair value at the acquisition date than first assumed, goodwill is adjusted until 12 months after the acquisition date. The effect of the adjustments is recognised in the opening equity, and the comparative figures are restated accordingly. Goodwill is not adjusted subsequently except in the event of material errors. Gains or losses on divestment or winding up of subsidiaries and associates are stated as the difference between the sales or disposal amount and the carrying amount of the net assets including goodwill at the time of sale plus sales or winding up costs. In addition, any retained non-controlling interests are measured at fair value. Gains or losses on the divestment or winding up of subsidiaries and associates and the effect of renewed measurement of any non-controlling interests are recognised in the income statement.
58 Falck Annual Report 2010 | Group Notes to the Group financial statements Note 1 Accounting policies (continued) Non-controlling interests On initial recognition, non-controlling interests are measured either at fair value (including the fair value of goodwill related to non-controlling interests in the acquiree) or as non-controlling interests’ share of the acquiree’s identifiable assets, liabilities and contingent liabilities measured at fair value (excluding the fair value of goodwill related to non-controlling interests’ share of the acquiree). The basis of measurement of non-controlling interests is chosen on a transaction-bytransaction basis. Acquisition and divestment of non-controlling interests Any increase and reduction of non-controlling interests is accounted for as transactions with owners in their capacity as owners. As a consequence of this, any differences between the adjustment to the carrying amount of non-controlling interests and the fair value of the consideration received or paid is recognised directly in equity. When put options are issued as part of the consideration for business combinations, the non-controlling interests receiving put options are considered to have been redeemed on the acquisition date. The non-controlling interests are removed and a liability is recognised at fair value on initial measurement. The fair value is determined as the present value of the exercise price of the option. The subsequent measurement is at fair value with recognition in equity of value changes as they arise. Issued put options related to business combinations with an acquisition date prior to 1 January 2010 will continue to be recognised in accordance with IFRS 3 (2004), i.e. subsequent measurement takes place at amortised cost with recognition of interest expenses in the income statement and value changes in goodwill as they arise. Any subsequent dividend payments to option holders are recognised as a financial expense in the income statement in the cases where the option price is independent of the dividend payment. Dividend payments are included in the determination of the cost of the put options in cases where the option price is adjusted for dividend payments received. FOREIGN CURRENCY TRANSLATION A functional currency is determined for each of the reporting entities of the Group. The functional currency is the currency in the primary economic environment in which the reporting entity operates. Transactions in currencies other than the functional currency are transactions in foreign currencies. On initial recognition, transactions denominated in foreign currencies are translated to the functional currency at the exchange rates ruling at the transaction date. Exchange differences arising between the exchange rate ruling at the transaction date and the exchange rate ruling at the date of actual payment are recognised in the income statement under financial income or financial expenses. Receivables, payables and other monetary items denominated in foreign currency are translated into the functional currency at the exchange rate ruling at the balance sheet date. The difference between the exchange rate ruling at the balance sheet date and the exchange rate ruling at the date when the receivable or payable arose or the exchange rate applied in the most recent financial statements is recognised in the income statement under financial items. The income statements of foreign subsidiaries are translated at the exchange rates ruling at the transaction dates, and the balance sheet is translated at the exchange rates ruling at the balance sheet date. An average exchange rate for the month is used as the exchange rate ruling at the transaction date to the extent that this does not significantly change the presentation of the underlying transactions. Exchange differences arising on the translation of the equity of foreign subsidiaries at the beginning of the year to the exchange rates ruling at the balance sheet date and on the translation of income statements from the exchange rate ruling at the transaction date to the exchange rate ruling at the balance sheet date are recognised directly in other comprehensive income and are classified in equity in a separate currency translation reserve. Exchange differences are allocated between the parent company’s and the non-controlling interests shares of equity. Foreign exchange adjustments of balances that are considered part of the overall net investment in companies with functional currencies other than DKK are recognised in the consolidated financial statements directly in other comprehensive income and classified in equity in a separate currency translation reserve. Similarly, exchange gains and losses on the part of loans and derivative financial instruments effectively hedging the net investment in such companies and which effectively hedge against corresponding exchange gains/losses on the net investment in the company are recognised directly in other comprehensive income and are classified in equity in a separate currency translation reserve. On recognition in the consolidated financial statements of associates with a functional currency other than Danish kroner, the share of results for the year is translated at average exchange rates, and the share of equity including goodwill is translated at the exchange rates ruling at the balance sheet date. Exchange adjustments arising on the translation of the share of the opening equity of foreign associates at exchange
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Annual Report 2010 - Falck

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