Annual and Sustainability Report 2011 - Teracom

The Group uses forward contracts and loans in foreign currency to hedge
certain foreign net investments. Exchange rate differences arising as result of
these contracts and loans are transferred to consolidated other comprehensive
income to the extent they correspond to translation differences.
Following the divestment of a foreign subsidiary, the accumulated
exchange rate differences, which were previously transferred to Other comprehensive
income, are reported in the profit/loss for the period as a part of
the profit or loss attributable to the sale.
Segment reporting
For the Teracom Group, the Group management team has been identified
as the senior-most decision making body. The Group management team
has established operating segments based on the information used to make
strategic decisions. The operating segments are responsible for the operating
profit and the working capital that they manage. Financial expenses, financial
income and income tax are dealt with at the Group level. The "Other" item
comprises Group functions, including Group management. These functionbased
departments have income of insignificant amounts, which is why they
are not considered to be separate operating segments (in accordance with
IFRS 8).
The segments are reported in accordance with the same accounting principles
that are applied by the Group. Sales between segments occur at market
terms and prices that are fair estimates of current market prices.
Recognition of revenue
Revenue is recognized when it is probable that the financial benefits will flow
to the Group and the amount of revenue can be measured reliably. Revenue
from fixed-price contracts for all segments is reported in the Parent Company
in accordance with the percentage of completion method. Profit is thus
recorded at the same rate as the work is completed, provided that the costs
incurred or to be incurred in respect of the transaction can be measured reliably.
Any expected loss on such contracts is recognized as an expense as soon
as such loss is probable. For subscription contracts that provide the customer
access to TV programs, revenue is recognized on a linear basis over the course
of the contract term. This also applies to direct costs associated with such
contracts, which are also recognized on a linear basis over the course of the
contract term. Costs and income for program cards (which are needed to see
the coded channels via a box and antenna) are not distributed over the course
of the contract term since these cards cannot be returned. Both the income
and costs for program cards are reported at the time card fee is invoiced to
the customer.
Net sales
Net sales pertains to revenue from services that have been sold and subscriptions
that are part of the Group's ordinary operations, less any discounts and
value-added tax.
Other income/other operating income
Other income is income obtained from activities that are not part of the
Group's ordinary operations.
Borrowing costs
Borrowing costs, i.e. interest rates and other costs incurred in connection with
the borrowing of funds, are recognized in the income statement for the period
to which they refer. There are no loan expenses that are directly attributable
to the purchase, performance or production of a qualified asset and thereby
should be capitalized in the asset's cost of acquisition.
Taxes
Reported tax is made up of current tax and deferred tax. Current tax refers to
the profit or loss for the period and is valued at the tax rate prevailing on the
balance sheet date. Deferred tax is comprised of amounts to be paid in the
future or a reduction of future tax. Deferred tax is calculated in accordance
with the tax rates decided or announced on the balance sheet date.
Deferred tax is based on all identifiable temporary differences that exist on
the balance sheet date. Temporary differences are defined as the difference
between the carrying amount of an asset or liability and its tax base. Deferred
tax assets on deficit deductions and temporary differences are reported as
assets to the extent it is probable they will be utilized in the future. Deferred
tax assets and deferred tax liabilities are reported net when they are attributable
to a single tax authority and when a company or a group of companies,
for example via a Group contribution, is legally entitled to net tax assets
against tax liabilities.
The carrying amount of deferred tax assets is reviewed at the end of each
reporting period and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow the benefit of part or all
of that deferred tax asset to be utilized. Any such reduction is subsequently
reversed to the extent that it becomes probable that sufficient taxable profit
will be available.
Property, plant and equipment
Items of property, plant, and equipment are recognized as assets when it is
probable that the future economic benefits associated with the asset will flow
to the Group, and the cost of the asset can be measured reliably. Property,
plant and equipment are reported at historic cost with deductions for linear,
accumulated depreciation and any impairment. Depreciation is calculated
from the point when an asset is acquired or a new plant is put into operation.
Estimated useful lives are applied to both groups of assets and individual
assets. Land is not depreciated since its useful life is judged to be unlimited. In
all other cases, depreciation is calculated on a linear basis and is based on the
following expected useful lives:
Assets
Land and buildings
Buildings
Land improvements
Plant and machinery
Permanent equipment in buildings
Distribution equipment
Radio equipment
Power generating equipment
Antenna sites
Mast installations
Equipment, tools, fixtures and fittings
Vehicles
Other equipment
Useful life, years
20-40 years
10-20 years
10-15 years
3-10 years
7-15 years
10-15 years
10-20 years
20-30 years
3-6 years
3-5 years
Construction-in-progress
Construction in progress refers primarily to facilities that are being built.
Construction-in-progress is valued in the same way as acquired assets, i.e. in
accordance with the cost method at the cost of acquisition including directly
attributable expenses – that is, valuation in accordance with the actual costs
incurred.
Intangible assets
Goodwill
Goodwill is reported as an intangible asset with an uncertain useful life at
cost with deductions for accumulated impairment.
Brands
Acquired brands refers to Teracom's entitlement to use the Plus TV brand,
which was acquired in June 2009, in Finland. The brand is reported as an
intangible asset that is considered to have an uncertain useful life and is not
amortized.
Customer agreements
The acquisition of Teracom A/S in September 2010 included customer agreements,
which were reported as an intangible asset. Acquired customer agreements
are amortized on a linear basis over their useful life, which is 3 years.
Customer relations
Both the acquisition of Digi-TV Plus Oy in June 2009 and the acquisition of
Teracom A/S in September 2010 included customer relationships that were
reported as intangible assets. These acquired customer relationships are
amortized on a linear basis over their useful lives, which are judged to be 8
and 9 years, respectively.
Patents, licenses and similar rights
Intangible assets are recognized when it is probable that the future economic
benefits that are attributable to the asset will flow to the Group and the cost
of the asset can be measured reliably. Acquired patents, licenses and similar
rights are reported at cost with deductions for accumulated amortization and
any impairment. Patents, licenses and similar rights are amortized on a linear
basis over the useful life, which is 3 years. The network activities include
capacity rights that are amortized over a useful life of 10 years.
Test of impairment on fixed assets
The Group assesses at each balance sheet date if there is any indication that
the value of a non-current asset has depreciated. If such an indication arises,
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