Annual Report 2010 - Falck

66 Falck Annual Report 2010 | Group
Notes to the Group financial statements
Note
2 Accounting estimates and judgments
The calculation of the carrying amounts of certain assets and
liabilities relies on judgments, estimates and assumptions
about future events.
The estimates and assumptions applied are based on historical
experience and other factors that Management considers
reasonable under the circumstances, but which are inherently
uncertain and unpredictable. Such assumptions may be
incomplete or inaccurate, and unexpected events or circumstances
may occur. In addition, the Group is subject to risks
and uncertainties that may cause actual outcomes to deviate
from such estimates.
Estimates material to the financial reporting are made in
the calculation of, inter alia, depreciation, amortisation and
impairment losses, pensions and similar liabilities, provisions,
the determination of fair values, share-based compensation as
well as contingent liabilities and assets.
Amortisation and depreciation periods and scrap values
In the determination of the carrying amount of intangible
assets and property, plant and equipment, estimates are
required of the estimated economic lives of the assets and of
scrap values.
Goodwill impairment test
In the annual goodwill impairment test or in case of any
indication of an impairment requirement, an assessment is
made of how the parts of the Group (cash-generating units) to
which the goodwill relates will be able to generate sufficient
cash flows in future to support the value of goodwill and other
net assets in the relevant part of the Group.
As a result of the nature of the company’s business, expected
cash flows must be estimated over a period of a number of
years, which inherently produces some degree of uncertainty.
This uncertainty is reflected in the discount rate applied.
The impairment test of goodwill and the associated particularly
sensitive factors and sensitivity analyses are described in
note 15 to the consolidated financial statements.
Provisions for acquisition of non-controlling interests
In the determination of the fair value of issued put options
under which the Group assumes an obligation to buy shares
in subsidiaries held by non-controlling shareholders, Management
makes certain estimates, including of the future
financial performance of the subsidiaries, the probability that
the option holders exercise their right to sell and the time
of exercise. These factors are of material importance to the
determination of the fair value, which is therefore subject to
uncertainty.
Purchase price allocation in business combinations
In connection with the allocation of the purchase price in business
combinations, a determination is made of the fair values
of the assets and liabilities acquired. As this determination
is based on expected future cash flows related to the assets
and liabilities acquired, the realisation of such cash flows as anticipated
is subject to an inherent uncertainty. In accordance
with IFRS 3, the allocation of the purchase price in business
combinations may be adjusted for up to 12 months from the
date of acquisition.