Annual report 2010 - Aker Solutions

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24 Aker Solutions annual report 2010Annual accounts – groupAker Solutions groupNotes to the financial statementsNote 1Corporate informationAker Solutions ASA (the company) is a limited liabilitycompany incorporated and domiciled atFornebu in Bærum, Norway. The consolidatedfinancial statements of Aker Solutions ASA incorporatethe financial statements of the companyand its subsidiaries (referred to collectively as “thegroup” and separately as group companies) andthe group’s interest in associates and jointly controlledentities.Aker Solutions provides engineering solutions,product solutions, field life solutions and executeslarge and complex field development projects forthe oil and gas industry.The company is listed on the Oslo Stock Exchangeunder the ticker AKSO.Note 2Basis for preparationStatement of complianceThe consolidated financial statements have beenprepared in accordance with International FinancialReporting Standards (IFRS) as approved by theEuropean Union, their interpretations adopted bythe International Accounting Standards Board(IASB) and the additional requirements of the NorwegianAccounting Act as of 31 December 2010.The consolidated financial statements wereapproved by the Board of Directors and President& CFO as shown on the dated and signed balancesheet. The consolidated financial statements willbe authorised by the Annual General Meeting on 6May 2011. Until the latter date the Board of Directorshave the authority to amend the financialstatements.Basis of measurementThe consolidated financial statements have beenprepared on the historical cost basis exceptfor the following material items in the statement offinancial position:■■Derivative financial instruments are measuredat fair value■■The defined benefit asset is recognised as thenet total of the plan assets, plus unrecognisedpast service cost and unrecognised actuariallosses, less unrecognised actuarial gainsand the present value of the defined benefitobligation.Functional and presentation currencyThese consolidated financial statements are presentedin NOK, which is Aker Solutions ASA’s functionalcurrency. All financial information presentedin NOK has been rounded to the nearestmillion (NOK million), except when otherwise indicated.Use of estimates and judgementsThe preparation of financial statements in conformitywith IFRS requires management to make judgements,estimates and assumptions that affect theapplication of policies and reported amounts ofassets and liabilities, income and expenses.Although management believes these assumptionsto be reasonable, given historical experience,actual amounts and results could differ from theseestimates. The items involving a higher degree ofjudgement or complexity, and items whereassumptions and estimates are material to the consolidatedfinancial statements are disclosed in note4 Accounting estimates and judgements.The estimates and underlying assumptions arereviewed on an ongoing basis. Revisions toaccounting estimates are recognised in the periodin which the estimate is revised and in any futureperiods affected.Changes in accounting policiesThe group has not made any changes in accountingpolicies in 2010.The group early adopted IFRS 3 Business Combinations(2008) and IAS 27 Consolidation and SeparateFinancial Statements (2008) for all businesscombinations occurring in the financial year starting1 January 2009. The impacts of these adoptionswere provided in the annual report for 2009.IFRIC 16 ‘Hedges of a net investment in a foreignoperation’ was effective 1 July 2009. This amendmentstates that, in a hedge of a net investment ina foreign operation, qualifying hedging instrumentsmay be held by any entity or entities within thegroup, including the foreign operation itself, as longas the designation, documentation and effectivenessrequirements of IAS 39 that relate to a netinvestment hedge are satisfied. IFRIC 16 is implemented,but does not have a significant effect onthe consolidated financial statements.Note 3Accounting principlesSummary of significant accounting policiesThe principal accounting policies applied in thepreparation of these consolidated financial statementsare set out below. These policies have beenconsistently applied to all the years presented,unless otherwise stated.ConsolidationSubsidiariesSubsidiaries are entities controlled by the company.Control exists when the company has thepower, directly or indirectly, to govern the financialand operating policies of an entity so as to obtainbenefits from its activities. When assessing control,voting rights that are exercisable or convertible aretaken into account. The financial statements ofsubsidiaries are included in the consolidated financialstatements from the date that control commencesuntil the date that control ceases.Investments in associates and jointly controlledentitiesAssociates are those entities in which the grouphas significant influence, but not control, over thefinancial and operating policies. Significant influenceis presumed to exist when the group holdsbetween 20 and 50 percent of the voting power ofanother entity. Joint ventures are those entitiesover whose activities the group has joint control,established by contractual agreement and requiringunanimous consent of the venturers for strategic,financial and operating decisions.Investments in associates and jointly controlledentities are accounted for using the equity methodand are recognised initially at cost. The group’sinvestment includes goodwill identified on acquisition,net of any accumulated impairment losses.The consolidated financial statements include thegroup’s share of the income and expenses andother comprehensive income, after adjustments toalign the accounting policies with those of thegroup, from the date that significant influence orjoint control commences until the date that significantinfluence or joint control ceases. The purposeof the investment determines where the investmentis presented in the income statement. When entitiesare formed to share risk in executing a projector are closely related to Aker Solutions operatingactivities, the share of the profit or loss is reportedas part of Other income in operating profit. Shareof the profit or loss on financial investments isreported as part of Financial items.When the group’s share of losses exceeds its interestin an equity-accounted investee, the carryingamount of that interest, including any long-terminvestments, is reduced to zero, and further lossesare not recognised except to the extent that thegroup incurred legal or constructive obligations orhas made payments on behalf of the investee.Jointly controlled operationsJointly controlled operations involve the use ofassets and other resources of the venturers ratherthan the establishment of a corporation, partnershipor other entity. Each venturer uses its ownassets and incurs liabilities which represents itsown obligations under the agreement. The agreementalso determines how the revenues are sharedamong the venturers.Transactions eliminated on consolidationIntra-group balances and transactions, and anyunrealised gains and losses or income andexpenses arising from intra-group transactions, areeliminated in preparing the consolidated financialstatements. Unrealised gains arising from transactionswith associates and jointly controlled entitiesare eliminated to the extent of the group’s interestin the entity. Unrealised losses are eliminated in thesame way as unrealised gains, but only to theextent that there is no evidence of impairment.
Aker Solutions annual report 2010Annual accounts – group25Non-current assets and disposal groupsheld for saleNon-current assets and disposal groups are classifiedas held for sale when their carrying amountswill be recovered principally through a sale transactionrather than through continuing use. Thiscondition is regarded as met only when the sale ishighly probable and the asset or disposal group isavailable for immediate sale in its present condition.Management must be committed to the sale,which should be expected to qualify for recognitionas a completed sale within one year from the dateof classification.Non-current assets and disposal groups classifiedas held for sale are measured at the lower of theircarrying amount and fair value less costs to sell.Property, plant and equipment and intangibleassets once classified as held for sale are notdepreciated or amortised, but are considered in theoverall impairment testing of the disposal group.No reclassifications are made for years prior to theyear a business is first classified as a held for sale.Discontinued operationsA discontinued operation is a component of thegroup’s business that represents a separate majorline of business or geographical area of operationsthat has been disposed of or is held for sale ordistribution, or is a subsidiary acquired exclusivelywith a view to resale. Classification as a discontinuedoperation occurs upon disposal or when theoperation meets the criteria to be classified as heldfor sale, if earlier.In the consolidated income statement income andexpenses from discontinued operations arereported separately from income and expensesfrom continuing operations, down to the level ofprofit after taxes. When an operation is classifiedas a discontinued operation, the comparativeincome statement is re-presented as if the operationhad been discontinued from the start of thecomparative year.Foreign currencyForeign currency transactions and balancesTransactions in foreign currencies are translated atthe exchange rate at the date of the transaction.Monetary assets and liabilities denominated inforeign currencies at the balance sheet date aretranslated to the functional currency at theexchange rate on that date. Foreign exchange differencesarising on translation are recognised inthe income statement. Non-monetary assets andliabilities measured in terms of historical cost in aforeign currency are translated using the exchangerate on the date of the transaction. Non-monetaryassets and liabilities denominated in foreign currenciesthat are stated at fair value are translated tothe functional currency at the exchange rates onthe date the fair value was determined.Investments in foreign operationsItems included in the financial statements of eachof the group’s entities are measured using the currencyof the primary economic environment inwhich the entity operates. The results and financialposition of all the group entities that have a functionalcurrency different from the group’s presentationcurrency are translated into the presentationcurrency as follows:■■Assets and liabilities, including goodwill andfair value adjustments, for each balance sheetpresented are translated at the closing rate on■■the date of that balance sheet.Income and expenses for each incomestatement are translated at average exchangerates for the year, calculated on the basis of 12monthly rates.Exchange differences arising from the translationof the net investment in foreign operations, and ofrelated hedges, are included in comprehensiveincome as a translation reserve. These translationdifferences are reclassified to the income statementupon disposal of the related operations orwhen settlement is likely to occur in the nearfuture.Exchange differences arising on a non-currentmonetary item where settlement in the near futureis not probable forms part of the net investment inthat entity. Such exchange differences are recognisedin comprehensive income.Hedging activitiesDerivatives are either:■■Hedges of the fair value of assets or liabilities(fair value hedge)■■Hedges of a particular risk associated with arecognised liability or a highly probable forecast■■transaction (cash flow hedge)Hedges of a net investment in a foreignoperation (net investment hedge).Fair value hedgesThe change in fair value of the hedging instrumentis recognised in the consolidated income statement.The change in fair value of the hedged itemattributable to the risk hedged is recorded as partof the carrying value of the hedged item. When anunrecognised firm commitment is designated as ahedged item, the subsequent cumulative change infair value of the firm commitment attributable to thehedged risk is recognised as an asset or liabilitywith corresponding gain or loss recognised in theincome statement.Cash flow hedgesThe effective portion of changes in the fair value ofderivatives that are designated and qualifying ascash flow hedges is recognised in comprehensiveincome as a hedge reserve. The gain or loss relatingto the ineffective portion of derivative hedging instrumentsis recognised immediately in the incomestatement within net financial items. Amounts accumulatedin hedge reserves are reclassified to theincome statement in the periods when the hedgeditem is recognised in the income statement.Hedge accounting is discontinued when the grouprevokes the hedging relationship, or when thehedging instrument expires or is sold, terminated,or exercised, or no longer qualifies for hedgeaccounting. Any cumulative gain or loss deferred incomprehensive income as a hedge reserve at thattime remains in the hedge reserve and is recognisedin income statement when the forecast transactionis ultimately recognised in the income statement.When a forecast transaction is no longerexpected to occur, the cumulative gain or loss thatwas deferred in the hedge reserve is recognisedimmediately in the income statement.Net investment hedgeGains or losses arising from the hedging instrumentsrelating to the effective portions of the netinvestment hedges are recognised in comprehensiveincome as translation reserves. These translationreserves are reclassified to the income statementupon disposal of the hedged net investments,offsetting the translation differences fromthese net investments. Any ineffective portion isrecognised immediately in the income statementwithin net financial items.Gains and losses accumulated in equity areincluded in the income statement when the foreignoperation is partially disposed of or sold.Revenue recognitionConstruction contractsEngineering and construction contract revenuesare recognised using the percentage of completionmethod, based primarily on contract costs incurredto date compared to estimated total contractcosts. When the final outcome of a contract cannotbe reliably estimated, contract revenue is recognisedonly to the extent of costs incurred that areexpected to be recoverable. The revenue recognisedin one period will be the revenues attributableto the period’s progress and the progress todate effect of any changes to the estimated finaloutcome. Losses on contracts are fully recognisedwhen identified.Contract revenues include variation orders andincentive bonuses when it is probable that they willresult in revenue that can be measured reliably.Disputed amounts and claims are recognised whenit is probable the customer will accept the claimand the amount can be measured reliably. Contractcosts include costs that relate directly to the specificcontract and allocated costs that are attributableto general contract activity. Costs that cannotbe attributed to contract activity are expensed.Bidding costs are capitalised when it is probablethat the company will obtain the contract. All otherbidding costs are expensed as incurred.See note 4 Accounting estimates and judgementsfor further description of recognition of constructioncontract revenue.Goods sold and services renderedRevenue from the sale of goods is recognised inthe income statement when the significant risksand rewards of ownership have been transferred tothe buyer, which is usually when goods areshipped to customers. Revenue from services renderedis recognised in the income statement inproportion to the stage of completion of the transactionat the balance sheet date or is invoicedbased on hours performed at agreed rates. Thestage of completion is normally assessed based onthe proportion of costs incurred for work performedto date compared to the estimated totalcontract costs. No revenue is recognised if there issignificant uncertainty regarding recovery of considerationdue.Other incomeGains and losses resulting from acquisitions anddisposal of businesses which do not represent
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