Annual Report 2005 (6 MB) - Lundin Petroleum

ACCOUNTING PRINCIPLES
Introduction
In June 2002 the European Union (EU) adopted International
Financial Reporting Standards (IFRS) for all companies listed on
a stock exchange within the European Union with eff ect from
1 January 2005, the adoption date. Lundin Petroleum’s Annual
Report for 2005 has been prepared in full compliance with IFRS,
including one year of comparative fi gures in line with IFRS 1. As
a result, Lundin Petroleum’s date of transition is 1 January 2004.
The fi nancial statements of the group have been prepared in
accordance with prevailing IFRS standards and International
Financial Reporting Standards Committee (IFRIC) interpretations
adopted by the EU Commission at the end of December 2005. The
consolidated fi nancial statements have been prepared under the
historical cost convention, as modifi ed by the revaluation of held
for sale fi nancial assets.
The preparation of fi nancial statements in conformity with IFRS
requires the use of certain critical accounting estimates and also
requires management to exercise its judgement in the process
of applying the Group’s accounting policies. The areas involving
a higher degree of judgement or complexity, or areas where
assumptions and estimates are signifi cant to the consolidated
fi nancial statements, are disclosed under the headline “Critical
accounting estimates and judgements”.
The fi nancial statements of the Parent Company are prepared
in accordance with accounting principles generally accepted
in Sweden, applying RR 32 issued by the Swedish Financial
Accounting Standards Council and the Annual Accounts Act. RR 32
requires the Parent Company to use similar accounting principles
as for the Group, i.e. IFRS to the extent allowed by RR 32. The
Parent Company’s accounting principles deviate from the Group’s
in respect of Pensions where FAR 4 is applied and valuation of
shares in subsidiaries, which are valued at cost.
IFRS Transition
IFRS 1 provides fi rst time adopters of IFRS with exemptions from
full retrospective application of the newly adopted standards.
Lundin Petroleum has utilised the following exemptions:
IFRS 2 – Shared based payments. This standard will not be applied
to the Group’s incentive warrants programme granted before 7
November 2002. The 2004 programme granted after 7 November
2002 and not yet vested before 1 January 2005 will be recognised
in line with this standard.
IFRS 3 – Business Combinations. This standard has not been applied
to business combinations prior to 31 March 2004.
IFRS 5 – Non Current assets held-for-sale and discontinued operations.
This standard has been adopted prospectively as from 1 January
2005 and therefore the comparative numbers have not been
restated.
IAS 21 – The eff ect of changes in foreign exchange rates. At the date
of transition to IFRS the cumulative historic translation diff erences
are deemed to be zero. The gain or loss on a subsequent disposal
of any foreign operation will exclude translation diff erences
> 50 <
that arose before the date of transition to IFRS but will include
translation diff erences arising after this date.
IAS 39 – Financial Instruments, as adopted by the EU, has been
applied as from 1 January 2005 and therefore the comparative
numbers have not been restated.
Changes in accounting principles on the adoption of IFRS
IFRS 2 – Shared based payments
Under Swedish GAAP Lundin Petroleum did not recognise
employee incentive warrants issued as compensation cost
when the exercise price was equal to or at a premium to the
market price at the time of issue. IFRS 2 requires a charge to be
recorded in the income statement to record the issue of employee
incentive warrants as well as a liability in relation to the employee
incentive warrants programme. As a result of the transition to IFRS,
shareholders equity as at 31 December 2004 included a credit of
MSEK 10.7. The result for the year 2004 included a charge of MSEK
10.7 in the personnel costs.
IFRS 3 – Business combinations
This statement deals with the business combinations and the
treatment of any excess purchase price over the allocated asset
values. Under IFRS 3 the excess purchase price is recorded as
goodwill whereas under Swedish GAAP the excess value was
allocated to the acquired assets. There was no change required to
the treatment of assets currently recorded by Lundin Petroleum.
IAS 1 – Presentation of fi nancial statements
In accordance with this standard some classifi cation and layout
changes have been implemented in the annual report 2005. Below
the signifi cant ones are disclosed:
Minority interests are included in shareholders’ equity as a separate
component and are included in the net result for the year in the
income statement. The shares in Associated companies has been
removed from Other shares and participations and are shown on a
separate line in the Balance Sheet.
Changes in fair values and revaluation of assets have been
specifi ed in the statement of changes in equity and in the notes.
IAS 21 – The eff ect of changes in foreign exchange rates
This statement deals with the eff ects of foreign exchange rates.
The eff ects of recording a change in functional currency of
certain subsidiaries within the Lundin Petroleum Group are in
line with the requirements of this standard, related to the oil and
gas assets recognised in these companies. The negative eff ect
on shareholders’ equity net of deferred tax at 1 January 2004
amounted to MSEK 11.5 and MSEK 4.6 at 31 December 2004. The
positive eff ect net of deferred tax on the result for the year ended
31 December 2004 amounted to MSEK 8.2.
At the date of transition to IFRS the cumulative historic
translation diff erences are deemed to be zero. The gain or loss
on a subsequent disposal of any foreign operation will exclude
translation diff erences that arose before the date of transition to
IFRS but will include translation diff erences arising after this date.