Hydro Annual Report 2011b

F8
FINANCIAL STATEMENTS
Note 1 - Significant accounting policies and reporting entity
Transactions between minority shareholders and the group
Sales and purchases of share interests and equity contributions not resulting in Hydro gaining or losing control of a subsidiary
are reported as equity transactions in accordance with IAS 27. No gain, loss or change of recognized assets, liabilities or
goodwill is recognized as result of such transactions.
Investments in associates and jointly controlled entities
An associate is an equity investment in which Hydro has the ability to exercise significant influence, which is the power to
participate in the financial and operating policy decisions of the entity. Significant influence is assumed to exist when Hydro
owns between 20 to 50 percent of the voting rights unless other terms and conditions affects Hydro's ability to exercise
significant influence. Currently, one equity investment of less than 20 percent ownership is classified as an associate.
A joint venture is an entity, asset or operation that is subject to contractually established joint control. Special voting rights may
extend control beyond what is conveyed through the owners' proportional ownership interest. Such rights may take the form of
a specified number of board representatives, the right of refusal for important decisions, or the requirement of a qualified
majority for important decisions which effectively results in joint control with the specific ownership situation.
Hydro accounts for investments in associates and participation in a joint venture which is conducted in an entity using the
equity method. This involves recognizing Hydro's interest based on its proportional share of the entity's equity, including any
excess values or goodwill. Hydro recognizes its share of net income, including depreciation and amortization of excess values
and any impairment losses, in Share of the profit (loss) in equity accounted investments. Other comprehensive income derived
from associates and joint ventures is included in Hydro's Other comprehensive income. Hydro's proportional share of
unrealized profits resulting from transactions with associate and joint ventures is eliminated.
Accounting policies used by associates and joint ventures may differ from the accounting policies adopted by Hydro.
Differences in recognition or measurement are adjusted for prior to equity accounting described above.
Investments in associates and joint ventures are tested for impairment when there are indications of a possible loss in value. An
impairment loss is recognized if the recoverable amount, estimated as the higher of fair value less cost to sell or value in use is
below Hydro's carrying value. Impairment losses are reversed if circumstances change and the impairment situation is no longer
deemed to exist.
Investments in jointly controlled and jointly owned assets
Jointly owned assets are arrangements where Hydro and the other partners have a direct ownership in specifically identified
assets. Jointly controlled assets or operations are such assets or a direct participation in certain operations that are under
contractually joint control. Hydro uses the proportional method of accounting for both jointly controlled and jointly owned
assets or operations. Under the proportional method, Hydro's relative share of the assets, liabilities, income and expense for
these arrangements is included on a line-by-line basis in the group financial statements.
Assets held for sale and Income from discontinued operations
Assets held for sale are reported separately in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations, provided that the sale is highly probable, which includes the criteria that management is committed to the sale,
and that the sale will be completed within one year. Assets held for sale are not depreciated, but are measured at the lower of
carrying value and the fair value less costs to sell. Assets are not reclassified in prior period balance sheets. Immaterial disposal
groups are not reclassified.
A discontinued operation is a component of Hydro that is held for sale or has been disposed of and that can be clearly
distinguished both operationally and for financial reporting purposes. A discontinued operation is a separate major line of
business or geographical area of operations. Related cash flows, results of operations and gain or loss from disposal are reported
separately as Income from discontinued operations.
Foreign currency transactions
Transactions in foreign currencies are initially recorded in the functional currency of the entity by applying the rate of exchange
as of the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the
functional currency at the rate of exchange at the balance sheet date. Realized and unrealized currency gains or losses are
included in financial expense.