Annual Report 2011 - Kongsberg Maritime - Kongsberg Gruppen

of materials, direct payroll expenses and a portion of directly attributable
overhead costs. Capitalised development costs are recognised on the
balance sheet at acquisition cost less accumulated amortisation and
impairment loss. Amortisation is based on expected useful life, based on
the total production units or number of years. The remaining expected
useful life and expected residual value are reviewed annually.
The estimation of financial benefits is based on the same principles
and methods as for the impairment testing. This is based on long-term
budgets approved by the Board. For more details about estimation, see
Note 11 “Intangible assets”.
Assessments of the fulfillment of the criteria for capitalising development
costs take place on an ongoing basis throughout the completion
of the development projects. Based on technical success and market
assessments, a decision is made during the development phase whether
to complete development and start capitalisation.
Maintenance
Maintenance is the work that must be performed on products or
systems to ensure their expected useful life. If a significant improvement
is made on the product or system that leads, for example, to a prolongation
of the life cycle, or if the customer is willing to pay more for the
improvement, this is to be considered as development. Expenses related
to maintenance are expensed as incurred.
Technology and other intangible assets
Technology and other intangible assets acquired and which have determin
ed useful life are measured at cost less accumulated amortisation,
as well as accumulated impairment losses. Amortisation is determined on
expected useful life based on total production units or number of years.
The expected useful life and the stipulated amortisation rate are
reviewed during each period.
G) Property, plant and equipment
Property, plant and equipment are recognised at cost, net of accumulated
depreciation and/or any accumulated impairment losses. Such cost
includes expenses that are directly attributable to the acquisition of the
assets. Property, plant and equipment are depreciated on a straight-line
basis over their expected useful life. When individual parts of a property,
a plant or equipment have different useful lives, and the cost is significant
in relation to total cost, these are depreciated separately. Expected
residual value is taken into account when stipulating the depreciation
schedule.
The remaining expected useful life and expected residual value are
reviewed annually. Gains or losses upon disposal of property, plant and
equipment are stipulated as the difference between the sales price and
the carrying amount of the unit, and recognised net as other income in
profit and loss. Expenses incurred after the asset is in use, e.g.
day - to -day maintenance, are expensed as they are incurred. Other
expenses which are expected to result in future economic benefits and
can be measured reliably, are capitalised.
H) Leases, sale and leaseback
Leases or sales with leaseback where KONGSBERG generally takes over
all risk and all benefits related to ownership, are classified as financial
leases. On initial recognition, the asset is measured at the lower of fair
value and net present value of the agreed minimum rent. After initial
recognition, the same accounting policies are used as for the corresponding
asset.
Other leases are operational leasing agreements and are not recognised
on the Group’s balance sheet. KONGSBERG’s sale and leaseback
agreements are considered to satisfy the criteria for operational leasing
agreements. Where a sale and leaseback agreement is defined as a
onerous contract according to IAS 37, the present value is added into the
expected loss.
I) Impairment of non-financial assets
All non-financial assets are reviewed for each reporting period to
de termine whether there are indications of impairment. Where indications
of impairment exist, recoverable amounts are calculated.
The recoverable amount of an asset or cash-generating unit is the
highest of its value in use or fair value less net cost to sell. Value in use is
calculated as the net present value of future cash flows. The calculation
of net present value is based on a discount rate before tax and reflects
current market assessments of the time value of money and the risks
specific to the asset.
Impairment is recognised if the carrying amount of an asset or
cash- generating unit exceeds its recoverable amount. A cash-generating
unit is the smallest identifiable group that generates a cash inflow that is
largely independent of other assets or groups. Impairment related to
cash-generating units is intended first to reduce the carrying amount of
any goodwill allocated to the unit and then to reduce the carrying
amount of the other assets in the unit on a pro rata basis. These assets
will normally be property, plant and equipment, and other intangible
assets. Where the individual asset does not generate independent cash
inflows, the asset is grouped with other assets that generate independent
cash inflows.
Non-financial assets which have been subject to impairment losses
are reviewed during each period to determine whether there are indications
that the impairment loss has been reduced or no longer exists.
Reversal of previous impairment is limited to the carrying value the asset
would have had after depreciation and amortisation, if no impairment loss
had been recognised.
J) Financial instruments
Financial assets and liabilities
Financial assets and liabilities consist of derivatives, investments in
shares, accounts receivable and other receivables, cash and cash
equivalents, loans, accounts payable and other liabilities. A financial
instrument is recognised when the Group becomes party to the instrument’s
contractual provisions. Upon initial recognition, financial assets
and liabilities are assessed at fair value plus directly attributable expenses.
The exception is financial instruments, where changes in fair value are
recognised through profit and loss, and directly attributable costs are
expensed. An ordinary purchase or sale of financial assets is recognised
and derecognised from the time an agreement is signed. Financial assets
are derecognised when the Group’s contractual rights to receive cash
flows from the assets expire, or when the Group transfers the asset to
another party and does not retain control, or transfers practically all risks
and rewards associated with the asset. Financial liabilities are derecognised
when the Group’s contractual obligation has been satisfied,
discharged or cancelled.
Classification
The Group classifies assets and liabilities upon initial recognition based on
the intended purpose of the instrument. The Group classifies financial
assets in the following categories:
i) Fair value through profit and loss
ii) Loans and receivables
iii) Available-for-sale financial assets
Financial derivatives are included in the category ‘fair value through profit
and loss’, also if the derivative has a negative value.
Receivables and liabilities related to operations are measured at their
amortised cost, which in practice implies their nominal value and provision
for expected losses.
Except for investments in subsidiaries, joint ventures or associates in
the statement of financial position on the date of the balance sheet, all
shares are defined as financial instruments available for sale. Availablefor-sale
financial assets are measured at fair value on the date of
report ing. Changes in the value of available-for-sale financial assets are
recognised in the statement of comprehensive income (OCI), except for
impairments, which are recognised through profit/ (loss). See Note 4
“Fair value” for a more detailed description of how fair value is measured
for financial assets and liabilities.
The company’s financial liabilities are recognised at amortised cost,
except for financial derivatives, which are recognised at fair value
through profit and loss.
Impairments on financial assets
When there is objective evidence that a financial asset’s value is lower
than its cost, the asset will be written down through profit/(loss).
Impairment in the value of assets measured at amortised cost is
calculated as the difference between the carrying amount and the net
present value of the estimated future cash flow discounted by the
2 INTRODUCTION
7 DIRECTORS’ REPORT AND
18 FINANCIAL STATEMENTS
64 CORPORATE GOVERNANCE
76 FINANCIAL CALENDAR AND ADDRESSES
KONGSBERG Annual Report 2011 25