Annual report 2008 - Comrod

in the future can be used or sold;b) the management’s intention is to finish the asset and to use orsell it;c) it is possible to use or sell the asset;d) it can be demonstrated how the asset will generate futureincomee) technological and financial resources are available to finish theassetf) the costs can be reliably measuredOther development costs are expensed as incurred. Developmentcosts that have previously been expensed are not recognized inthe balance sheet in subsequent periods. Capitalized developmentcosts are depreciated on a straight line basis over the estimateduseful life of the asset.2.14. Impairment of non-financial assetsThe Group assesses at each reporting date whether there is anindication that an asset may be impaired. If any indication exists,or when annual impairment testing for an asset is required, theGroup estimates the asset’s recoverable amount. An asset’srecoverable amount is the higher of an asset’s or cash-generatingunit’s (CGU) fair value less costs to sell and its value in use andis determined for an individual asset, unless the asset does notgenerate cash inflows that are largely independent of those fromother assets or groups of assets. Where the carrying amountof an asset or CGU exceeds its recoverable amount, the assetis considered impaired and is written down to its recoverableamount. In assessing value in use, the estimated future cash flowsare discounted to their present value using a pre-tax discountrate that reflects current market assessments of the time value ofmoney and the risks specific to the asset. In determining fair valueless costs to sell, an appropriate valuation model is used. Thesecalculations are corroborated by valuation multiples, quoted shareprices for publicly traded subsidiaries or other available fair valueindicators.Impairment losses of continuing operations are recognised in theincome statement in those expense categories consistent with thefunction of the impaired asset.For assets excluding goodwill, an assessment is made ateach reporting date as to whether there is any indication thatpreviously recognised impairment losses may no longer existor may have decreased. If such indication exists, the Groupestimates the asset’s or cash-generating unit’s recoverableamount. A previously recognised impairment loss is reversed onlyif there has been a change in the assumptions used to determinethe asset’s recoverable amount since the last impairment loss wasrecognised. The reversal is limited so that the carrying amountof the asset does not exceed its recoverable amount, nor exceedthe carrying amount that would have been determined, net ofdepreciation, had no impairment loss been recognised for theasset in prior years. Such reversal is recognised in the incomestatement unless the asset is carried at revalued amount, in whichcase the reversal is treated as a revaluation increase.2.15 ProvisionsProvisions are recognized if the Group has an obligation (whetherlegal or self-imposed) as a result of a previous event, if it isprobable that the obligation will result in a financial settlement,and if the amount can be reliably estimated. If the impact of thetime value is significant, the provision is calculated by discountinganticipated future cash flow using a discount rate before tax thatreflects the market’s pricing of the present value of money and, ifrelevant, risks specifically associated with the obligation.A provision for guarantees is recognized when the underlyingproducts or services are supplied. The provision is based onhistorical information about guarantees and a weighting of allpossible outcomes by their associated probabilities.A provision for onerous contracts is recognized when the Group’sexpected economic benefits under the contract are lower than theunavoidable costs of meeting the obligations under the contract.2.16 Equity(i) Treasury sharesIn the event of a share buy-back, the purchase price and anydirectly associated costs are recognized as a change in equity.Treasury shares are reported as a reduction in equity. Gains orlosses on share buy-back transactions are recognized directly inequity.(ii) Costs arising from equity transactionsTransaction costs directly linked to an equity transaction arerecognized directly in equity after a deduction for tax.(iii) Other equity(a) Translation differencesTranslation differences arise in connection with currencydifferences on consolidation of foreign entities. Exchange ratefluctuations on liabilities that form part of the Company’shedging of net investments in foreign entities are included in thetranslation differences.On disposal of a foreign entity, cumulative translation differencesare reversed and recognized in the income statement in the sameperiod in which the gain or loss on the disposal is recognized.(b) Revaluation reserveForward exchange contracts that are considered hedginginstruments (cash flow hedges) are recognized in the balancesheet at fair value with a corresponding entry against equity (netafter tax) under the revaluation reserve.On realization, any losses or gains are taken to the incomestatement to offset gains or losses on the entries that werehedged.2.17 Revenue recognitionRevenue is recognized to the extent that it is probable that theeconomic benefits will flow to the Company and the revenuecan be measured reliably. Sales revenue is stated net of VAT anddiscounts.Revenue from the sale of goods and services is recognized whendelivery has taken place and the significant risks and rewards ofownership of the goods have passed to the buyer.Royalties are recognized in accordance with the substance of therelevant royalty agreement.Interest income is recognized as interest accrues.Dividends are recognized when the shareholders’ right to receivethe payment is established by the annual general meeting.2.18 Foreign currencyTransactions in foreign currencyTransactions in foreign currencies are translated at the exchangerates existing at the date of the transactions. Monetary itemsdenominated in foreign currencies are translated to NOK usingthe exchange rates at the balance sheet date. Non-monetary38 Comrod Communication Group Annual report 2007