Carlsberg Annual Report - Carlsberg Group

Carlsberg Annual Report 2011 119
NOTE 41 Accounting policies – continued
The useful life is reassessed annually. When changing the amortisation
period due to a change in the useful life, the effect on the amortisation is
recognised prospectively as a change in accounting estimates.
Amortisation is recognised in the income statement under cost of sales,
sales and distribution costs, and administrative expenses to the extent that
amortisation is not included in the cost of self-constructed assets.
Impairment losses of a non-recurring nature are recognised in the income
statement under special items.
Tangible assets
Property, plant and equipment. Land and buildings, plant and machinery,
fixtures and fittings, and other property, plant and equipment are measured
at cost less accumulated depreciation and impairment losses.
Cost comprises the purchase price and any costs directly attributable to
the acquisition until the date when the asset is available for use. The cost
of self-constructed assets comprises direct and indirect costs of materials,
components, subsuppliers, wages and salaries, and capitalised borrowing
costs on specific or general borrowing attributable to the construction of the
asset. The present value of estimated liabilities related to dismantling and
removing the asset and restoring the site on which the asset is located is
added to the cost of self-constructed assets if the liabilities are provided for.
Where individual components of an item of property, plant and equipment
have different useful lives, they are accounted for as separate items, which
are depreciated separately.
The cost of assets held under finance leases is stated at the lower of fair
value of the assets and the present value of the future minimum lease payments.
For the calculation of the net present value, the interest rate implicit
in the lease or an approximation thereof is used as the discount rate.
Subsequent costs, e.g. in connection with replacement of components of
property, plant and equipment, are recognised in the carrying amount of the
asset if it is probable that the costs will result in future economic benefits
for the Group. The replaced components are derecognised in the statement
of financial position and recognised as an expense in the income statement.
Costs incurred for ordinary repairs and maintenance are recognised in the
income statement as incurred.
Property, plant and equipment, including assets held under finance leases,
are depreciated on a straight-line basis over the expected useful lives of the
assets. The expected useful lives are as follows:
Buildings
Technical installations
Brewery equipment
Filling and bottling equipment
Technical installations in warehouses
On-trade and distribution equipment
Fixtures and fittings, other plant and equipment
Returnable packaging
Hardware
Land is not depreciated.
20-40 years
15 years
15 years
8-15 years
8 years
5 years
5-8 years
3-10 years
3-5 years
The basis of depreciation is calculated on the basis of the cost less the
residual value and impairment losses. The residual value is determined at
the acquisition date and reassessed annually. If the residual value exceeds
the carrying amount, depreciation is discontinued.
When changing the depreciation period or the residual value, the effect
on the depreciation is recognised prospectively as a change in accounting
estimates.
Depreciation and minor impairment losses are recognised in the income
statement under cost of sales, sales and distribution costs, and administrative
expenses to the extent that depreciation is not included in the cost of
self-constructed assets.
Significant impairment losses of a non-recurring nature are recognised in the
income statement under special items.
Investments in associates. Investments in associates are recognised according
to the equity method and measured at the proportionate share of the entities’
net asset values calculated in accordance with the Group’s accounting policies
minus or plus the proportionate share of unrealised intra-Group profits and
losses and plus the carrying amount of goodwill.
Investments in associates with negative net asset values are measured at
DKK 0. If the Group has a legal or constructive obligation to cover a deficit
in the associate, the deficit is recognised under provisions.
Any amounts owed by associates are written down to the extent that the
amount owed is deemed irrecoverable.
On acquisition of investments in associates, the acquisition method is used,
cf. the description under Business combinations.
Inventories. Inventories are measured at the lower of weighted average
cost and net realisable value.
Goods for resale and raw materials and consumables are measured at cost,
comprising purchase price and delivery costs.
Finished goods and work in progress are measured at cost, comprising the
cost of raw materials, consumables, direct wages and salaries and indirect
production overheads. Indirect production overheads comprise indirect materials
and wages and salaries, and maintenance and depreciation of production
machinery, buildings and equipment, and production administration and
management.
The net realisable value of inventories is calculated as the sales amount less
costs of completion and costs necessary to make the sale, and is determined
taking into account marketability, obsolescence and development in expected
sales price.
Receivables. Receivables are measured at amortised cost less impairment
losses. Receivables are written down for bad debt losses on the basis of
customers’ anticipated ability to pay and expectations of any changes to this
ability, taking into account historical payment patterns, terms of payment,
customer segment, creditworthiness and prevailing market conditions in the
individual markets.
Objective indication of impairment is assessed for a portfolio of receivables
when no objective indication of individual impairment losses exists. The portfolios
are based on on-trade and off-trade customers and on-trade receivables
and on-trade loans. The objective indications used for portfolios are based on
historical experiences and actual market developments.
Impairment losses are calculated as the difference between carrying amount
and net realisable value, including the expected net realisable value of any
collateral provided.
Regarding loans to the on-trade, any difference between present value and
the nominal amount at the loan date is treated as a prepaid discount to the
customer, which is recognised in the income statement in accordance with
the terms of the agreement. The market interest rate is used as the discount
rate, corresponding to the money market rate based on the maturity of the
loan with the addition of a risk premium. The effective interest rate on these
loans is recognised in other operating income. The amortisation of the difference
between the discount rate and the effective interest rate is included as a
discount in revenue.
Construction contracts. Construction contracts (real estate projects) are
measured at the contract revenue of the work performed less progress billings
and anticipated losses.
The contract revenue is measured by reference to the percentage of completion
at the end of the reporting period and total expected revenue from the
contract. The percentage of completion is determined on the basis of an