FY 2012 Annual Report - Orascom Development

F-9 Orascom Development 2012 Annual Report F-10
Index to the notes to the consolidated financial statements
Page
1 General information 10
2 Application of new and revised International Financial Reporting Standards 10
3 Significant accounting policies 15
4 Critical accounting judgments and key sources of estimation uncertainty 29
5 The group and major changes in group entities 32
6 Revenue 32
7 Segment information 33
8 Employee benefits expense 36
9 Investment income 37
10 Other gains and losses 37
11 Finance costs 38
12 Compensation of key management personnel 38
13 Income taxes relating to continuing operations 41
14 Discontinued operations 43
15 Earnings per share 44
16 Property, plant and equipment 45
17 Investment property 47
18 Goodwill 47
19 Subsidiaries 49
20 Investments in associates 51
21 Non-current receivables 52
22 Other financial assets 53
23 Other current assets 54
24 Inventories 55
25 Trade and other receivables 55
26 Finance lease receivables 56
27 Capital 57
28 Reserves (net of income tax) 58
29 Retained earnings and dividends on equity instruments 60
30 Non-controlling interests 60
31 Borrowings 61
32 Provisions 62
33 Other current liabilities 63
34 Trade and other payables 63
35 Other financial liabilities 63
36 Disposal of a subsidiary 64
37 Deemed loss of control of subsidiary 65
38 Retirement benefit plans 66
39 Risk assessment disclosure required by Swiss law 68
40 Financial instruments 68
41 Share-based payments 75
42 Related party transactions 76
43 Cash and cash equivalents 78
44 Non-cash transactions 79
45 Operating lease arrangements 79
46 Commitments for expenditure 80
47 Litigation 81
48 Other significant events that occurred during the reporting period 82
49 Subsequent events 82
50 Approval of financial statements 82
Notes to the consolidated financial
statements for the year ended 31 December
2012
1 GENERAL INFORMATION
Orascom Development Holding AG (“ODH” or “the Parent Company”), a limited company incorporated in Altdorf, Switzerland, is
a public company whose shares are traded on the SIX Swiss Exchange. In addition, Egyptian Depository Receipts (“EDRs”) of the
Parent Company are traded at the EGX Egyptian Exchange. One EDR represents 1/20 of an ODH share.
The Company and its subsidiaries (the “Group”) is a leading developer of fully integrated towns that include hotels, private villas
and apartments, leisure facilities such as golf courses, marinas and supporting infrastructure. The Group’s diversified portfolio of
projects is spread over nine jurisdictions, with primary focus on touristic towns and recently affordable housing. The Group
currently operates in Egypt, Jordan, UAE, Oman, Switzerland, Morocco, United Kingdom, Montenegro and Romania and is
continuously seeking development opportunities in untapped yet attractive locations all over the world. The Group has four
existing projects: El Gouna, the flagship project, a fully-fledged town on the Red Sea coast (Egypt); Taba Heights, on the Sinai
Peninsula (Egypt), the Group’s second tourism destination following El Gouna’s business model; the Cove (Ras Al Khaimah, UAE),
the Group’s first development experience outside Egypt; and Haram City, an integrated town dedicated to affordable housing in
Egypt, catering for the mass population.
The addresses of its registered office and principal place of business are disclosed in the introduction to the annual report.
2 Application of new and revised International Financial Reporting Standards
(“IFRSs”)
2.1 New and revised IFRSs affecting amounts reported in the current year and prior years
The following new and revised Standards and Interpretations have been applied in the current period and have affected these
financial statements. Details of other new and revised IFRSs applied in these financial statements that have had no material effect
on the financial statements are set out in note 2.2:
IFRS 9 Financial Instruments – Amendment of recognition and measurement requirements as the first part of the project to
replace IAS 39
In the current year, the Group has early applied IFRS 9 Financial Instruments (as issued in November 2009 and revised in October
2010) and the related consequential amendments. As the Standard is required to be applied retrospectively, the date of initial
application is 1 January 2011. Comparative amounts have been restated where appropriate. The main reason why the Group
decided to early apply IFRS 9 is the elimination of the available-for-sale (“AFS”) category of financial assets. AFS financial assets
needed to be assessed for impairment with any impairment losses recognised through profit or loss. Going forward any gains and
losses in financial assets previously classified as AFS will be shown either in profit or loss or, where the Group irrevocably
designates, other comprehensive income relating to equity instruments which are not held for trading and at initial recognition
have been classified as at fair value through other comprehensive income (FVTOCI) with no subsequent recycling to profit or loss
even in case of disposal or if they are impaired as indicated by significant or prolonged declines in fair values.
In its 2011 financial statements the group held equity instruments classified as AFS in the amount of CHF 56.4 million for which a
decline in fair value of CHF 35.8 million has been recognised in other comprehensive income. Although the decline in fair value was
significant and prolonged the group has assessed that the decline did not represent an impairment based on the reasons given in
Note 21.1 of the 2011 financial statements. During 2012 in the course of an investigation by SIX Exchange Regulation the company
agreed that the group should have deemed these investments impaired based on the requirements of IAS 39 and that this error
could be remediated through the early application of IFRS 9 in 2012. Had the requirements of IAS 39 been applied accordingly,
other gains and losses as well as loss for the period would have increased by the same amount and basic and diluted losses per
share would have been CHF 3.72. However, due to the early adoption of IFRS 9 the comparative period does not need to be
restated.
IFRS 9 introduces new classification and measurement requirements as set out below for financial assets and liabilities that before
were in the scope of IAS 39 Financial Instruments: Recognition and Measurement.
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