Note 1 - Beerenberg

Note 3 | Accounting principles
work. It is normal for contracts to contain provisions for
how such changes should be handled. At any given time
there will be unapproved variations in contract work and
requirements included in the contract revenues. Although
the management has extensive experience in assessing the
outcome of such negotiations, there will always be an element
of uncertainty.
The cost of completion depends on both productivity factors
and salary levels. Factors that may substantially affect
cost estimates, requirements and variations in contract
work include weather conditions, access to work sites, the
price of raw materials and other circumstances that may
have an effect on time use.
Revenue recognition of contracts with mobilisation and
demobilisation costs requires assumptions to be made
about the duration of the contract, including potential extension
options, in order to allocate expenses and revenues
from the mobilisation/demobilisation period over the
delivery period. Changes in the delivery period may result
in adjustments being made to the accrued amount.
iii) Income tax – On some projects, the company will
operate outside Norway and must then comply with local
legislation. On operations taking place abroad, the company
will primarily operate as a sub-contractor to a customer
with an established business in the country in question and
will normally not incur any tax liabilities, as these will be
assumed by the customer. Tax incurred in a third country
will in some cases be income tax and in other cases operating
expenses. An assessment of potential tax liabilities has
been made, with the conclusion that the Group has no latent
overseas tax liabilities as at 31.12.2012.
Capitalised tax assets usually arise as a result of loss
carryforwards that can be used to reduce income tax on
future profits. Recognition of such assets is based on having
sufficient basis for assuming that such future profits
will be available against which the loss carryforwards
can be utilised. When the final outcome deviates from the
original provision, the deviation will affect the tax payable
and the provision for deferred tax in the period that the
outcome becomes clear. Specific information about the
Group’s tax situation can be found in Note 10 Tax.
General assessments have been carried out of potential
tax liabilities, but to date they have not resulted in any
income tax being paid or provided for. Such assessments
may be challenged and lead to tax being paid. The company
normally hedges its contracts with customers so that
the customer assumes the tax risk. However, there may be
elements of uncertainty in relation to the extent of any tax
refund and the cost of processing any tax claims.
iv) Pensions – The present value of pension obligations
is based on a number of assumptions and depends on a
number of factors determined on an actuarial basis. The
assumptions used to determine the net pension cost include
economic factors such as the discount rate, expected
future wage inflation, inflation and the return on plan assets
as well as demographic factors such as life expectancy,
disability, early retirement and voluntary retirement.
Any change in the assumptions will affect the estimated
pension obligations. Changes in the estimated pension
obligations will affect the accounting figures gradually
over a relatively long period in that the amended figure is
amortised over a number of years. For further information
see Note 20 Employee benefits – pensions.
v) Warranties – The warranty period is normally two years.
At the end of a project, a provision is usually made to meet
any warranty claims and complaints. It is normal for such
provisions to be one per cent of the contract value, but a
larger or smaller provision may be made depending on the
specific assessment of individual projects. Experience from
previous projects provides the best basis for making both
general and specific warranty provisions.
vi) Goodwill – In accordance with the accounting principles,
the Group performs tests annually, or more frequently
if necessary, to determine whether goodwill recognised
in the statement of financial position should be written
down. The estimated recoverable amount is calculated
on the basis of the present value of budgeted cash flows
for the cash-generating unit. The calculations require
the use of estimates and that they are consistent with the
market valuation of the Group. Specific information about
goodwill and the testing of carrying amounts is provided
in Note 12 Intangible assets.
vi) Research and development – In accordance with the
accounting principles, the Group performs tests annually,
or more frequently if necessary, to determine whether
recognised research and development should be written
down. The estimated recoverable amount is calculated
on the basis of the present value of budgeted cash flows
for the cash-generating unit. The calculations require
the use of estimates and that they are consistent with the
market valuation of the Group. Specific information about
research and development and the testing of recognised
amounts is provided in Note 12 Intangible assets.
Segment reporting
Operating segments are reported in the same way as internal
reporting to the company’s chief operating decision makers.
The company’s chief operating decision makers, who
are responsible for allocating resources to and assessing the
earnings of the operating segments, are defined as the Group
management team.
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Beerenberg CORP. AS Group group accounts 2012