116770 Project Obelix Pt1.qxp - Carlsberg Group

Carlsberg Breweries GroupOn recognition in the consolidated financial statements of entities with a functional currency other than the presentationcurrency of Carlsberg Breweries A/S (DKK), the income statements and cash flow statements are translatedat the exchange rates at the transaction date and the balance sheet items are translated at the exchangerates at the balance sheet date. An average exchange rate for the month is used as the exchange rate at thetransaction date to the extent that this does not significantly deviate from the exchange rate at the transactiondate. Foreign exchange differences arising on translation of the opening balance of equity of foreign entities atthe exchange rates at the balance sheet date and on translation of the income statements from the exchangerates at the transaction date to the exchange rates at the balance sheet date are recognised directly in equityunder a separate translation reserve.Foreign exchange adjustment of balances with foreign entities which are considered part of the investment in theentity are recognised in the consolidated financial statements directly in equity if the balance is denominated inthe functional currency of the Parent Company or the foreign entity. Correspondingly, foreign exchange gainsand losses on the part of loans and derivative financial instruments which are designated as hedges of investmentsin foreign entities with a functional currency different from Carlsberg Breweries A/S and which effectivelyhedge against corresponding foreign exchange gains and losses on the investment in the entity are also recogniseddirectly in a separate translation reserve in equity.On recognition in the consolidated financial statements of associates with a functional currency other than thepresentation currency of Carlsberg Breweries A/S, the share of profit/loss for the year is translated at averageexchange rates and the share of equity, including goodwill, is translated at the exchange rates at the balancesheet date. Foreign exchange differences arising on the translation of the share of the opening balance of equityof foreign associates at the exchange rates at the balance sheet date, and on translation of the share ofprofit/loss for the year from average exchange rates to the exchange rates at the balance sheet date, are recogniseddirectly in a separate translation reserve in equity.On complete or partial disposal of a foreign entity or on repayment of balances which constitute part of the netinvestment in the foreign entity, the share of the cumulative amount of the exchange differences recognised directlyin equity relating to that foreign entity is recognised in the income statement when the gain or loss on disposalis recognised.Prior to translation of the financial statements of foreign entities in countries with hyperinflation, the financialstatements (including comparative figures) are inflation-adjusted for changes in purchasing power in the localcurrency. Inflation adjustment is based on relevant price indexes at the balance sheet date.Derivative financial instrumentsDerivative financial instruments are recognised in the balance sheet at cost on the transaction date and subsequentlyat fair value.The fair values of derivative financial instruments are included in other receivables and other payables respectively,and set-off of positive and negative values is only made when the Company has the right and the intentionto settle several financial instruments net. Fair values of derivative financial instruments are computed on thebasis of current market data and generally accepted valuation methods.Changes in the fair value of derivative financial instruments designated as and qualifying for recognition as a fairvalue hedge of recognised assets and liabilities are recognised in the income statement together with changes inthe value of the hedged asset or liability with respect to the hedged portion. Hedging of future cash flows accordingto agreement, except for foreign currency hedges, is treated as a fair value hedge of a recognised asset orliability.Changes in the portion of the fair value of derivative financial instruments designated as and qualifying as a cashflow hedge and which effectively hedge changes in the value of the hedged item are recognised in equity. If thehedged transaction results in gains or losses, amounts previously recognised in equity are transferred to thesame item as the hedged item. Gains or losses from hedges of proceeds from future borrowings are, however,transferred from equity over the term of the loan.F-154