FY 2010 Annual Report - Part II - Orascom Development

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ODH Annual Report 2010 IAS 28 Investments in Associates – The consequential amendments to IAS 28 (as amended in 2008) arising from amendments to IFRS 3 have resulted in changes in the Group’s accounting policies so that a loss of control is recognized as a disposal and re-acquisition of any retained interest at fair value. This change was applicable to the sale of the six percent stake in the former Garranah subsidiaries. IAS 31 Interests in Joint Ventures – Consequential amendments arising from amendments to IFRS 3 have resulted in that when an investor ceases to have joint control over an entity, it shall account for any remaining investment in accordance with IAS 39 from that date, provided that the former jointly controlled entity does not become a subsidiary or associate. From the date when a jointly controlled entity becomes a subsidiary of an investor, the investor shall account for its interest in accordance with IAS 27 (as amended in 2008) and IFRS 3 (as revised in 2008). From the date when a jointly controlled entity becomes an associate of an investor, the investor shall account for its interest in accordance with IAS 28 (as amended in 2008). IAS 39 Financial Instruments: Recognition and Measurement – The amendments for eligible hedged items provide clarification on two aspects of hedge accounting: identifying inflation as a hedged risk or portion, and hedging with options. IAS 39 Financial Instruments: Recognition and Measurement – Amendments for reassessment of embedded derivatives when reclassifying financial instruments. These amendments to IFRIC 9 and IAS 39 issued in March 2009 set up two exceptions to the general rule that prohibits an entity from reassessing whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative subsequent to the date on which the entity first becomes a party to the contract. Now such subsequent reassessment is required when an entity reclassifies financial asset out of the fair value through profit or loss category on the basis of circumstances that existed on the later date of: (i) when an entity first becomes a party to the contract; and (ii) a change in the terms of the contract that significantly modified the cash flows that otherwise would have been required. Various - The application of Improvements to IFRSs issued in 2009. (iii) New Interpretations IFRIC 17 Distributions of Non-cash Assets to Owners – The Interpretation provides guidance on the appropriate accounting treatment when an entity distributes assets other than cash as dividends to its shareholders and its effective date is 1 July 2009. IFRIC 18 Transfers of Assets from Customers – The Interpretation addresses the accounting by recipients for transfers of property, plant and equipment from ‘customers’ and concludes that when the item of property, plant and equipment transferred meets the definition of an asset from the perspective of the recipient, the recipient should recognise the asset at its fair value on the date of the transfer, with the credit being recognised as revenue in accordance with IAS 18 Revenue. The Interpretation effective date is 1 Jul 2009. The adoption of these Standards and Interpretations has led to changes in the Group’s accounting policies for business combinations, basis of consolidation and investments in associates as outlined in paragraph 3.5 Compulsory changes in accounting policies. The other amendments have not had any material impact on the presentation, disclosure or amounts reported for the current and prior years but may affect the accounting for future transactions or arrangements. 2.2 Standards and Interpretations in issue but not yet effective At the date of authorisation of these financial statements, the Group has not adopted the following Standards and Interpretations that have been issued but are not yet effective. They will be effective on or after the dates described below. (i) New, amended and revised Standards IFRS 7 Amendments to IFRS 7 Financial Instruments: Disclosures; require disclosures about credit risk and collateral held and provide relief from disclosures previously required regarding renegotiated loans (as part of Improvements to IFRSs issued in 2010). IFRS 3 As part of Improvements to IFRSs issued in 2010, IFRS 3 (revised in 2008) was amended to clarify that the measurement choice regarding noncontrolling interests at the date of acquisition is only available in respect of non-controlling interests that are present ownership interests and that entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation. All other types of non-controlling interests are measured at their acquisition-date fair value, unless another measurement basis is required by other Standards. In addition, as part of Improvements to IFRSs issued in 2010, IFRS 3 (revised in 2008) was amended to give more guidance regarding the accounting for share-based payment awards held by the acquiree’s employees. Specifically, the amendments specify that sharebased payment transactions of the acquiree that are not replaced should be measured in accordance with IFRS 2 Share-based Payment at the acquisition date (‘market-based measure’). IFRS 1 Severe Hyperinflation and Removal of Fixed Dates for First Time Adopters IFRS 7 IAS 12 Financial Instruments: Disclosures was amended in regard of the disclosure requirements for transfers of financial assets. Income tax: Amendment in deferred tax recovery for underlying assets effective from Annual periods beginning on or after 1 January 2011 Annual periods beginning on or after 1 July 2010 Annual periods beginning on or after 1 July 2011 Annual periods beginning on or after 1 July 2011 Annual periods beginning on or after 1 January 2012 F-10
Orascom Development Holding (Consolidated Financial Statement) IFRS 9 IAS 24 Financial Instruments: Recognition and Measurement was issued in 2009 and amended in 2010 to cover classification and measurement of financial assets and financial liabilities, as the first part of its project to replace IAS 39. Related Party Disclosures – Revised definition of related parties. Annual periods beginning on or after 1 January 2013 Annual periods beginning on or after 1 January 2011 3.2 Basis of preparation The consolidated financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair value or amortized cost, as appropriate and investment properties that are measured at fair value as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for assets. 3.3 New accounting policies IAS 32 Financial Instruments: Presentation – Amendments relating to classification of rights issues. Various Improvements to IFRSs issued in 2010 (except for the amendments to IFRS 3(2008), IFRS 7, IAS 1 and IAS 28 described earlier. (ii) New Interpretations IFRIC Prepayments of a Minimum Funding 14 Requirement: Amendment with respect to voluntary prepaid contributions. IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments. The Interpretation addresses the accounting by an entity where the terms of a financial liability are renegotiated and result in the entity issuing equity instruments to extinguish all or part of the financial liability, the transactions that are referred to sometimes as ‘debt for equity swaps’. It does not address the accounting by the creditor. Annual periods beginning on or after 1 February 2010 Annual periods beginning on or after 1 July 2010 and 1 January 2011, as appropriate effective from Annual periods beginning on or after 1 January 2011 Annual periods beginning on or after 1 July 2010 Currently the Group is assessing whether these changes will impact the consolidated financial statements in the period of initial application. 3 SIGNIFICANT ACCOUNTING POLICIES _______________________________________________________________________________________ 3.1 Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). Investment property The Group has historically classified all its property as property, plant and equipment and measured them at cost less accumulated depreciation and / or accumulated impairment losses in accordance with IAS 16 Property, Plant and Equipment. During the first half of 2010, the Group reperformed a detailed review of its contracts and concluded that its resort on Mauritius as well as selected premises in El Gouna (Egypt) should have been retrospectively accounted for as investment property in accordance with IAS 40 Investment Property rather than as property, plant and equipment in accordance with IAS 16 because these properties are earning rental income and held for that purpose. During the third quarter of 2010, the Group has voluntarily changed its accounting policy for measuring their investment property by replacing the cost model that had been applied until the first half of 2010 by the fair value model. The Group believes that this change provides reliable and more relevant information about their financial position, financial performance and cash flow in accordance with IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. The application of this new accounting policy for investment property including the change from the cost to the fair value model resulted in a restatement for its resort on Mauritius and an adjustment to prior-year figures with the corresponding differences as of 1 January 2009 being charged to retained earnings. The impact of this accounting policy change on the consolidated statement of comprehensive income, consolidated statement of financial position, consolidated cash flow statement for the 2009 financial year is as follows: Consolidated statement of financial position CHF 31 December 1 January 2009 2009 Property, plant and +1,426,234 -54,743,908 equipment Investment properties +5,952,266 +65,834,078 Deferred tax liability +1,106,775 +1,663,525 Retained earnings +808,828 +1,153,468 Non-controlling interests +5,462,896 +8,273,177 F-11
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FY 2010 Annual Report - Part II - Orascom Development

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