Hydro Annual Report 2011b

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F68 FINANCIAL STATEMENTS Note 1 - Summary of significant accounting policies Research and development Research costs are expensed as incurred. Development costs are capitalized as an intangible asset at cost if, and only if, (a) it is probable that the future economic benefit that is attributable to the asset will flow to the enterprise; and (b) the cost of the asset can be measured reliably. To the extent development costs are directly contributing to the construction of a fixed asset, the development costs are capitalized as part of the asset provided all criteria for capitalization are met. Derivative instruments Forward currency contracts and currency options are recognized in the financial statements and measured at fair value at each balance sheet date with the resulting unrealized gain or loss recorded in Financial income, net. Contingencies and guarantees Norsk Hydro ASA recognizes a liability for the fair value of obligations it has undertaken in issuing guarantees. Contingencies are recognized in the financial statements when probable of occurrence and can be estimated reliably. Share-based compensation Norsk Hydro ASA accounts for share-based payment in accordance with NRS 15A Share-Based Payment. NRS requires sharebased payments to be accounted for as required by IFRS 2 Share-based Payment, see note 1 Significant accounting policies and reporting entity to the consolidated accounts for additional information. Risk management For information about risk management in Norsk Hydro ASA see note 6 Financial and commercial risk management to the consolidated financial statements. Income taxes Deferred income tax expense is calculated using the liability method in accordance with the NRS's preliminary standard on Income Taxes. Under the liability method, deferred tax assets and liabilities are measured based on the differences between the carrying values of assets and liabilities for financial reporting and their tax basis which are considered temporary in nature. Deferred income tax expense represents the change in deferred tax assets and liability balances during the year. Changes resulting from amendments and revisions in tax laws and tax rates are recognized when the new tax laws or rates become effective. The tax effect of equity transactions, such as group contribution given, is recognized as a part of the equity transaction and do not affect the income tax expense. Note 2 - Employee retirement plans Norsk Hydro ASA is affiliated with the Hydro Group's Norwegian pension plans. The defined benefit plans are administered by Norsk Hydro's independent pension trust. The defined benefit plans were closed as of March 1, 2010 for new employees who became members of the new defined contribution plans. Employees who were members of the defined benefit plans were given a choice to change to the defined contribution plans as of June 1, 2010, of which approximately 25 percent chose the new plans. A settlement gain was recognized in the accounts in 2010. The defined contribution plans are administered by the external Norwegian pension provider Storebrand. Norsk Hydro ASA's defined benefit plans covered 5,001 participants as of December 31, 2011 and 5,212 participants as of December 31, 2010, while the defined contribution plans covered 179 participants as of December 31, 2011 and 202 participants as of December 31, 2010. The plans comply with minimum requirements for pension plans in Norway. Norsk Hydro ASA participates in a pension plan that entitles its employees life-long benefits in addition to other plans, starting at the employees choice between the age of 62 and 75 years. The benefits are financed through a pooled arrangement by private sector employers ("avtalefestet pensjon, AFP") where also The Norwegian state contributes. The plan, which came into effect from January 1, 2011, is a defined benefit plan with limited funding and where plan assets are not segregated. The information required to calculate a proportional share of the plan and account for the plan as a defined benefit plan is not available from the plan administrator. Hydro therefore accounts for the plan as if it were a defined contribution plan. The employer contributions are included in Multiemployer plans. A previous plan providing early retirement benefits from the age of 62 until the age of 67 years for the same group of employees was closed as of December 31, 2010. Estimated remaining employer contributions to cover the plan deficit have been provided for.
Net periodic pension cost Amounts in NOK million 2011 2010 Defined benefit plans Benefits earned during the year 89 94 Interest cost on prior period benefit obligation 211 248 Expected return on plan assets (278) (300) Recognized (gain) loss Past service cost 6 8 Curtailment/settlement (gain) loss (16) Net periodic pension cost 27 35 Defined contribution plans 7 4 Multiemployer plans 6 6 Termination benefits and other 20 46 Total net periodic pension cost 61 92 Change in projected benefit obligation (PBO) Amounts in NOK million 2011 2010 Projected benefit obligation at beginning of year (5 778) (5 738) Benefits earned during the year (89) (94) Interest cost on prior period benefit obligation (211) (248) Actuarial gain (loss) (627) (179) Plan amendments (1) (16) Benefits paid 324 325 Curtailment/settlement gain (loss) 173 Special termination benefits (18) (1) Projected benefit obligation at end of year (6 400) (5 778) Change in pension plan assets FINANCIAL STATEMENTS Note 2 - Employee retirement plans F69 Amounts in NOK million 2011 2010 Fair value of plan assets at beginning of year 5 499 5 300 Actual return on plan assets 120 484 Company contributions 51 Benefits paid (249) (255) Settlements (81) Fair value of plan assets at end of year 5 370 5 499
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Annual Report - 2011
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Annual Report - 2011 HyDRO’S REPO
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Aluminium market price weakens LME
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cost renewable energy production, w
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Corporate Management Board AnnuAl r
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• Secure stable production and fi
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Key financial information NOK milli
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for foundry alloys continued to be
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• Using viable energy sources •
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Share of non-Norwegian leaders Perc
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Capital employed - - upstream focus
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petitive supply of standard alumini
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Further improved bauxite and alumin
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Alumina production Million mt 7 6 5
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and Hydro - but both have also rest
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Operations Hydro’s primary alumin
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Plant Country Employees (per Dec. 3
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Active risk management We have deve
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Contribution margin to profit EUR p
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Flat rolled products consumption We
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Build on the high performance of ou
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European extrusion consumption (tot
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Operations Hydro is a global energy
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expected remediation costs relating
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Direct greenhouse gas emissions fro
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The Qatalum aluminium plant, in whi
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postponed in 2011 due to the market
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Water management Enough clean water
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The annual business planning proces
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Total payments (taxes, fees, etc.)
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Qatalum, where Hydro holds a 50 per
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Effective organization Hydro had 22
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Cooperating for safety at Slovalco
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from a 10-year perspective, we redu
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In 2011, we established an electron
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sold or demerged during the year ha
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vIABIlItY perForMAnCe Auditor’s R
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Current income tax tax vIABIlItY pe
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Environment Greenhouse gases gases
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Total waste vIABIlItY perForMAnCe F
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81 FInAnCIAl AnD operAtInG perForMA
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FINANCIAL AND OPERATING PERFORMANCE
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Market developments and outlook Mar
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Items excluded from underlying EBIT
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Items excluded from underlying EBIT
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Financial income (expense), net Yea
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Primary Metal Operational and finan
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Liquidity and capital resources The
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3) Including provisions for pension
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108 RISK REVIEW Risk factors Risk f
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110 RISK REVIEW Risk factors or var
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112 RISK REVIEW Risk factors leadin
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Share price development in 2011 Sha
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Major shareholders and voting right
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Key figures for the Hydro share Key
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Tittel Hydro present Based in Norwa
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Corporate directives and code of co
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Pre-approval of audit services The
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Billy Fredagsvik, employee represen
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Hans-Joachim Kock Key experience: H
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Description Developments and events
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Topic Comments References Transacti
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Topic Comments References 8 Corpora
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Topic Comments References 13 Inform
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F2 FINANCIAL STATEMENTS Consolidate
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F8 FINANCIAL STATEMENTS Note 1 - Si
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F10 FINANCIAL STATEMENTS Note 1 - S
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F16 FINANCIAL STATEMENTS Note 3 - B
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Hydro Annual Report 2011b

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