Note 1 - Beerenberg

Note 4
As a global supplier of oil services, the Group is exposed
to market risks (exchange rate risk and interest rate risk),
credit risk, inflation risk and liquidity risk.
The Group has established procedures and guidelines for setting
appropriate risk levels for its main risks and for monitoring
its risk exposure. The Group’s objectives for capital management
are to sustain the Group’s position as a going concern
in order to generate a return for shareholders, to be of benefit
to other interested parties, and to maintain an optimal capital
structure in order to reduce the cost of capital.
Risk management for the Group is undertaken centrally in accordance
with guidelines approved by the board of directors.
The Group identifies, measures, manages and reports financial
risks in collaboration with the various operating units.
Managing the capital structure involves actively monitoring
and adjusting the composition in accordance with changes in
financial and economic circumstances and in the risk linked
to underlying assets. In order to maintain the desired capital
structure, the Group may refinance debts, buy or issue new
shares or debt instruments, or it may sell assets.
The Group continuously monitors counterparties in order to
reduce risk relating to financing, investing excess liquidity,
bank balances from operations and derivatives. The Group’s
guidelines impose limitations on exposure to individual
counterparties and contain procedures for identifying risk
factors when they occur.
The board produces written principles for the overarching
risk management policy and issues written guidelines for
specific areas such as exchange rate risk, interest rate risk,
credit risk, the use of financial derivatives and other financial
instruments and for investing excess liquidity.
Market risk
Exchange rate risk
The Group predominantly operates in Norway, but some of
its activities are international and thus exposed to exchange
rate risks in several currencies. This risk is particularly
relevant in relation to USD and EUR. Exchange rate risks
emerge from current and future assignments and from
recognised assets. The Group is exposed to exchange rate
fluctuations because some of the Group’s revenue is in USD
and EUR, while its functional currency is NOK. Costs are
incurred in various currencies: NOK, USD and EUR. Only
one company in the Group uses a functional currency other
than NOK: Beerenberg Inc. (USD).
The management has drawn up guidelines instructing the
Group entities to manage exchange rate risk relating to
the entities’ functional currencies. The Group entities are
obliged to clear all significant exchange rate risks with the
Group centrally. In order to manage the exchange rate risk
arising from future commercial transactions and recognised
assets and liabilities, the Group normally uses forward
exchange contracts with its bank as hedging against all
substantial, committed and expected cash flows.
In 2012 the parent company used NOK as its functional
currency. An assessment is made annually as to what is the
actual functional currency of each entity in the Group.
The company has relatively insignificant investments in
overseas subsidiaries where net assets are exposed to exchange
rate risks upon translation.
Sensitivity analyzes related to exchange rate fluctuations is
described in note 13
Price risk
The Group is indirectly exposed to risks relating to oil prices
in that the price of the company’s services over time will
normally have some correlation with changes in oil prices.
The Group has not invested in listed or unlisted shares.
Cash flows and fair value interest rate risk
Variable rate loans pose an interest rate risk to the Group’s
cash flows. The Group is exposed to interest rate risks relating
to debts, including financial leasing. The weighted average
effective rate of interest in relation to variable rate debt,
including financial leasing, was 6.6 % as at 31 December 2012
(2011: 8,1 %). Since the Group does not own any significant
interest-bearing assets, the Group’s profit/loss and cash
flows from operations are predominantly independent of
changes in market interest rates.
Interest rate risks are continually reviewed by looking at
potential refinancing, renewal of existing contracts, alternative
financing and hedging. Please see the note on loans. The
Groups calculation of interest on contracts is entirely linked
to liabilities.
If interest rates had been 1% (percentage point) higher/lower
on loans in NOK as at 31 December 2012 and all other variables
were constant, this would have resulted in a reduction/
increase in profit/loss after tax of NOK 0.7 million in 2012.
Equity would have been similarly affected.
46
Beerenberg CORP. AS Group group accounts 2012