Annual Report 2014

Etex Annual Report 2014
Financial report
Consolidated financial statements
The significant estimates made by
management concerning the future and
other key sources of estimation uncertainty
at the balance sheet date that have a
significant risk of causing a material
adjustment to the carrying amount of
assets and liabilities within the next
financial year are discussed below.
Impairment of non-financial assets The
recoverable amount of the cash-generating
units tested for impairment is the higher of
its fair value less costs to sell and its value
in use. Both calculations are based on a
discounted cash-flow model. The cash flows
are derived from the budget for the next
three to ten years. The recoverable amount
is most sensitive to the discount rate used
for the discounted cash flow model as well
as the expected future cash inflows and the
growth rate used for extrapolation purposes.
The key assumptions used to determine
the recoverable amount for the different
cash-generating units, including a sensitivity
analysis, are further explained in Note 8.
Provisions The assumptions that have
significant influence on the amount of
the provisions are the estimated costs,
the timing of the cash outflows and the
discount rate. These assumptions are
determined based on the most appropriate
available information at reporting date.
Further details about the assumptions
used are given in Note 19.
Employee benefits The measurement of
the employee benefits is based on actuarial
assumptions. Management believes that
the assumptions about discount rates,
expected rates of return on assets, future
salary increases, mortality rates and future
pension increases used for these actuarial
valuations are appropriate and justified.
They are reviewed at each balance-sheet
date. However, given the long-term nature
of these benefits, any change in certain of
these assumptions could have a significant
impact on the measurement of the
related obligations. Further details about
assumptions used are given in Note 21.
Recognition of deferred tax assets
on tax losses carried forward Deferred
tax assets are recognised for all unused
tax losses to the extent that it is probable
that taxable profit will be available against
which the losses can be utilised. Significant
management judgment is required to
determine the amount of the deferred tax
assets that can be recognised, based upon
the likely timing and the level of future
taxable profits together with future tax
planning strategies. The potential utilisation
of tax losses carried forward is based on
budgets and forecasts existing at reporting
date. Actual results could differ from these
budgets with an impact on the utilisation of
tax losses carried forward.
Cash-settled share-based payment
transaction The Group measures the
cost of cash-settled transactions with
employees by reference to the fair value
of the equity instruments at each reporting
date. Estimating fair value for share-based
payment transactions requires determining
the most appropriate valuation model,
which is dependent on the terms and
conditions of the grant. This estimate also
requires determining the most appropriate
inputs to the valuation model including the
expected life of the share option, volatility
and dividend yield and making assumptions
about them. The assumptions and model
used for estimating fair value for
share-based payment transactions
are disclosed in Note 22.
Financial instruments To measure the
fair value of financial assets that cannot be
derived from active markets, management
uses a valuation technique based on
discounted future expected cash flows.
The inputs of this model require determining
a certain number of assumptions, including
discount rate, liquidity risk and volatility,
subject to uncertainty. Changes in these
assumptions could have an impact on the
measurement of the fair value.
Further details are given in Note 16.
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