Arrow Prospectus - PGS

ARROW SEISMIC ASA – INITIAL PUBLIC OFFERING
Hedging
The Group has decided to not use hedging according to IAS 39, Financial Instruments; Recognition and
measurement.
Derivative financial instruments which are not classified as hedging instruments are classified as fair value
through profit or loss and are measured at fair value. Changes in fair value are recognised in profit and loss.
An embedded derivative will be separated from the host contract and classified as a derivative if the following
conditions are fulfilled:
• The economic characteristics and risks of embedded derivatives are not closely related to those of the
host contract.
• Separate instruments with similar terms as the embedded derivatives exists, which satisfy the conditions
for a derivative
• The combined instrument (host contract and embedded derivative) is not measured at fair value through
profit and loss.
8.3.10 Research and development
Expenses related to research and development are recognised in the profit and loss statement when they are
incurred. Expenses related to development are recognised in the profit and loss statement unless the following
criteria are met in full:
• the product or process is clearly defined and the cost elements can be identified and measured reliably;
• the technical solution for the product has been demonstrated;
• the product or process will be sold or used in the operations;
• the asset will generate future financial benefits; and
• there are adequate technical, financial and other resources to complete the project.
When all the above criteria have been met, the capitalisation of expenses related to development start. Expenses
that have been charged against income in earlier accounting periods are not capitalised. Expenses that are
capitalised include costs of material, direct wages and a part of direct assignable common expenses. Capitalised
development costs are measured at cost less accumulated depreciation costs and impairment losses.
Capitalised development costs are depreciated on a straight line basis over the estimated useful live.
8.3.11 Provisions
Provisions are accounted for in accordance with IAS 37, Provisions, Contingent Liabilities and Contingent
Assets. Provisions are recognised when, and only when, the company has an existing liability (legal or assumed)
as a result of events that have taken place, it can be demonstrated as probable (more likely than not) that a
financial settlement will be made as a result of the liability, and the amount can be measured reliably. Provisions
are reviewed at each balance sheet date and the level reflects the best estimate of the obligation. When the time
factor is insignificant, the size of the provisions will be equal to the size of the expense required for redemption
from the obligation. When the time factor is significant the provisions will be equal to the net present value of
future payments to cover the obligation. Increases in provisions due to the time factor will be presented as
interest expenses.
8.3.12 Equity
Liabilities and equity
Financial instruments are classified as liabilities or equity in accordance with the underlying financial realities.
Interest, dividends, gains and losses related to financial instruments classified as liabilities will be presented as
an expense or income. Distributions to the holders of financial instruments that are classified as equity will be
recorded directly against equity. When rights and obligations related to how distributions from financial
instruments are made are dependent on certain types of contingent events in the future that lie beyond the control
of the issuer and holder, the financial instrument will be classified as a liability unless the probability that the
issuer must contribute cash or other financial assets is remote at the time of issuance. In such cases the financial
instrument will be classified as equity.
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