English version - Hexagon Composites ASA

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COMROD COMMUNICATION <strong>ASA</strong> – LISTING ON THE OSLO STOCK EXCHANGE 7.1.4 Basis for consolidation The consolidated financial statements comprise Comrod AS and companies where Comrod AS has a controlling interest. A controlling interest is normally attained when the group owns, either directly or indirectly, more than 50% of the shares in a company, and the group is in a position to exercise actual control over the company. The purchase method is applied when accounting for business combinations. Companies which have been acquired or sold during the year are consolidated from/until the date when control is obtained/ceases. Intra-company transactions and balances, including internal earnings and unrealised profits/losses, are eliminated. Unrealised losses are correspondingly eliminated, provided there is no evidence of any impairment of the asset sold internally. The consolidated financial statements are prepared using uniform accounting policies for identical transactions and events in similar circumstances. 7.1.5 Cash & cash equivalents Cash includes bank and cash balances. The cash-flow statement is prepared using the indirect method. 7.1.6 Trade receivables Trade receivables are carried at amortised cost. The interest element is disregarded if it is insignificant. Should there be objective evidence of a fall in value, the difference between the carrying amount and the present value of future cash flows is recognised as a loss, discounted by the receivable amount’s effective interest rate. 7.1.7 Hedging Before any hedging transaction is undertaken, the financial director will assess whether a derivative is to be used to hedge a) the fair value of an asset or liability, b) future cash flows from an investment, debt payment or future identified transaction or c) a net investment in a foreign operation. The group uses the following criteria to classify a derivative as a hedging instrument: (1) the hedge is expected to be highly effective in offsetting changes in fair value or cash flows attributable to an identified asset, and hedge effectiveness is expected to lie within the range 80%-125%, (2) hedge effectiveness can be measured reliably, (3) there is adequate documentation at the inception of the hedge to demonstrate that the hedge is highly effective, (4) in the case of cash flow hedges, the impending transaction must be highly probable, and (5) the hedge is regularly assessed and has proved to be effective throughout the reporting periods for which it is designated. (i) Fair value hedge Changes in the fair value of derivatives that are designated as fair value hedges are recognised in the income statement. Correspondingly, a change in the fair value of the hedged object is recognised in the income statement, as is the net gain or loss. Hedge accounting discontinues when: (a) The hedging instrument expires, is sold, terminated or exercised; or (b) The hedge no longer meets the criteria for hedging stated above. When hedge accounting is discontinued, the adjustments made to the carrying amount of the hedged object are amortized over the remaining life using the effective interest rate. (ii) Cash flow hedges 57
COMROD COMMUNICATION <strong>ASA</strong> – LISTING ON THE OSLO STOCK EXCHANGE The portion of gain or loss on a hedging instrument that is determined to be a highly effective cash flow hedge is recognised directly in equity. The ineffective portion of the gain or loss on the hedging instrument is recognised in the income statement. If the hedge of a cash flow results in an asset or liability being recognised, all former gains and losses recognised directly in equity are transferred from equity and included in the initial measurement of the asset or liability. For other cash flow hedges, associated gains and losses recognised directly in equity are recognised in the income statement in the same period as the cash flow which comprises the hedged object is recognised in the income statement. When a hedging instrument ceases to be highly effective, hedge accounting is discontinued prospectively. In this case, the cumulative gain or loss on the hedging instrument recognised directly in equity remains separately recognised in equity until the future identified transaction occurs. If the hedge transaction is no longer expected to occur, any previously accumulated gain or loss on the hedging instrument that has been recognised directly in equity will be recognised in profit or loss. (iii) Hedges of a net investment in a foreign operation The company has taken positions in EUR in order to hedge its net investment in foreign operations. Changes in the currency derivatives designated for hedging are reported as exchange differences in the Group’s equity until the investment is disposed of, after which accumulated exchange differences relating to the investment are recognised in the income statement. The ineffective portion of the hedge is recognised in profit or loss. 7.1.8 Inventories Inventories, including work in progress, are carried at the lower of cost and fair value less costs to sell. The fair value less cost to sell is the estimated selling price in the ordinary course of business less the estimated costs of completion, and estimated costs necessary to make the sale. Inventories are measured by using the weighted average cost formula. Finished goods and work in progress include variable costs and fixed costs that can be allocated to goods based on normal capacity. Obsolete inventories have been fully recognised as impairment losses. 7.1.9 Non-current assets Non-current assets are measured at cost less accumulated depreciation and impairment losses. When assets are sold or disposed of, the gross carrying amount and accumulated depreciation are derecognised, and any gain or loss on the sale or disposal is recognised in the income statement. The cost of a non-current asset comprises its purchase price, including duties/taxes, and any directly attributable costs of bringing the asset to working condition for its intended use. Subsequent cost on repairs or maintenance of assets is recognised as an expense when incurred. Subsequent expenditure on repair and maintenance of property, plant or equipment which will generate future economic benefits is capitalised. Depreciable amounts are calculated using the straight-line method over the following periods: Buildings ..................................................... 6 - 40 years Plant and equipment ................................... 3 - 8 years Fixtures & fittings, motor vehicles.............. 4 - 10 years The depreciation period and method is assessed on an annual basis to ensure that the method and period used reflect the expected pattern of economic benefits from the asset. The same applies to scrap value. 58
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