Report - Kongsberg Gruppen 2007 - Kongsberg Maritime ...

THE GROUP VISION, OBJECTIVES AND DIRECTORS' REPORT & ACCOUNTS BUSINESS ACTIVITIES CORPORATE GOVERNANCE AND SUSTAINABILITY REPORT
1–11 STRATEGY 12–19 20–75 76–101 FINANCIAL STATEMENTS 102–125 126–160 41
Onerous (loss-making) contracts
Provisions for onerous contracts are recognised when Kongsberg's expected
benefits from a contract are lower than the unavoidable expenses of meetings its
obligations under the contract.
Kongsberg has signed sale and leaseback agreements on several pieces of real
estate. The Group carries no risk and enjoys no benefits related to the ownership
of the buildings sold. The leasing situation is therefore considered to refer to operational
leases. Rent is expensed on a straight-line basis over the term of the lease.
In connection with the sale and leaseback, subleases were signed at a lower rent
than indicated on the agreement. In addition, the Group has undertaken opera -
tional and maintenance responsibilities for subleased buildings. This net loss is
considered an onerous contract under IAS 37, and the net current value of future
losses is provided for in the accounts. The remaining provision is subject to annual
review.
q) Employee benefits
Defined benefit pension plans
The Group's Norwegian companies have collective service pension schemes that
entitle employees to certain future pension benefits in accordance with defined
benefit plans. Pension benefits depend on the individual employee's number of
years of service and salary level upon retirement age. There are also early retirement
plans for some executives. To ensure uniform calculation of Kongsberg's
pension liabilities, all corporate entities have used the same actuary. In the income
statement, the year's net pension expenses, after a deduction for the expected
return on pension plan assets, have been recorded as "Personnel expenses". The
balance sheet shows net pension liabilities incl. social security contributions.
Changes in actuarial gains/losses on pension expenses for obligations and pension
plan assets are recognised directly in equity. The financial and actuarial assump -
tions are subject to annual review. The discount rate is based on the long-term
government bond interest rate, plus a supplement that reflects the duration of the
pension liability.
Actuarial gains or losses attached to changes in the basis data, estimates and
changes in assumptions are recognised directly in equity.
The Group's legal liability is not affected by the treatment of pensions in the
accounts.
Defined contribution pension plans
In addition to the defined benefit plan described above, the Group's companies
outside Norway and a few companies in Norway contribute to local pension plans.
The premiums are expensed as they accrue.
Transition from a defined benefit plan to a defined contribution plan
In connection with the transition from a defined benefit plan to a defined con tri -
bution plan, a gain/loss was calculated on the share of the pension liability that
was discontinued in connection with the settlement. The settlement was imple -
ment ed on 31 Dec. 2007. Net pension liabilities related to the individuals who
have switched to a defined contribution plan are estimated as their present
value for each individual employee, based on the calculation assumptions at
31 Dec. 2007.
Share transactions with employees
For a number of years, the Group has been conducting a share programme for
all employees, i.e. offering shares at a discount and with options attached to the
shares if the employee owns them for more than two years. Discounts on the sale
of shares, as well as on the value of the options, are calculated on the date of
balance sheet recognition and expensed as personnel expenses. These options are
for cash settlement, and the value of the options is measured at fair value. The fair
value of the options is distributed over the period until the options are exercised,
and recognised as a liability on the balance sheet. Liability is assessed for each
period until the options are exercised, and recognised through profit or loss as
personnel expenses.
r) Discontinued operations and non-current assets held for sale
A discontinued operation is a component of a Group business that represents a
major part of the Group's business or a geographical area which has been disposed
of or made available for sale. Classification as a discontinued operation occurs
upon disposal or at an earlier point in time if the operation satisfies the criteria for
being classified as being held for sale. When an operation is classified as a discontinued
operation, the comparable figures are adjusted as though the operation had
been discontinued/sold at the beginning of the period in question. The Group has
chosen to present information about discontinued operations in Note 5 "Changes
in Group structure".
s) Segments
Business segments
The Group is organised into two business areas: Kongsberg Defence & Aerospace
and Kongsberg Maritime.
The business areas constitute the basis for primary reporting by segment.
Transactions between segments are based on market terms. In segmental reports,
transactions within the individual segments are eliminated. Further, intra-Group
profits on sales between the various segments are eliminated.
Shareholder costs and certain overheads are not allocated to the segments.
The same applies to taxes, cash and short-term deposits, interest-bearing debt and
properties occupied by parties other than the Group's own units.
Geographical segments
The presentations of geographical segments break down segmental revenues
based on the customers' geographical location.
Financial information on the business segments and the geographical segments
is presented in Note 7 "Information by segment".
t) Earnings per share
The Group presents ordinary earnings per share and earnings per share after
dilution. Ordinary earnings per share are calculated as the ratio between the net
profit/(loss) for the year that accrues to the ordinary shareholders and the weight -
ed average number of ordinary shares outstanding. The figure for diluted earnings
per share is the result that accrues to the ordinary shareholders, and the number
of weighted number of shares outstanding, adjusted for all diluting effects related
to share options.
u) IFRS and IFRIC have been adopted by the EU/EEA but not yet
implemented
IFRS and interpretations approved by EU/EEA up until 11 March 2008 and which
were not mandatory at 31 December 2007, have not been applied by Kongsberg.
This applies to IFRS 8, revised IAS 23, new IAS 1, IFRIC 11, 12, 13 and 14. Based
on the assessments made thus far, it is assumed that these standards and interpretation
statements would have no material effect on the reported figures.
v) New IFRS and IFRIC adopted for use in the 2007 accounts
Kongsberg has adopted IFRS 7, revised IAS 1, IFRIC 7, 8, 9 and 10 without
material effect on the reported figures. However, the standards in IFRS 7 and
revised IAS 1 have entailed a number of new disclosures in the notes.
Kongsberg – Annual Report and Sustainability Report 2007