Annual Report 2011 - Kongsberg Maritime - Kongsberg Gruppen

2 INTRODUCTION
7 DIRECTORS’ REPORT AND
18 FINANCIAL STATEMENTS
64 CORPORATE GOVERNANCE
76 FINANCIAL CALENDAR AND ADDRESSES
19
40 KONGSBERG Annual Report 2011
CONSTRUCTION CONTRACTS IN PROGRESS
The Group’s main business activity is to develop and manufacture
products and systems based on signed orders. For recognition and
classification of construction contracts, see note 3C “Construction
contracts/ system deliveries”.
Projects in progress in the table below are the net amount of
accumulated earned operating revenues less accumulated invoicing for
all current contracts, where accumulated operating revenues exceed
accumulated invoicing. Prepayments from customers are the net
amount of accumulated earned operating income less accumulated
invoicing for all current contracts where accumulated invoicing exceeds
accumulated operating income. Project accruals are the net amount of
costs incurred based on the project’s percent of completion less
accumulated costs charged to the construction contract.
Net construction contracts in progress
Amounts in MNOK 31 Dec 11 31 Dec 10
Projects in progress 1 239 1 783
Prepayments from customers (2 371) (2 096)
Project accruals, assets 663 386
Project accruals, liabilities (1 435) (1 832)
Net construction contracts in progress (1 904) (1 759)
Amounts in MNOK 31 Dec 11 31 Dec 10
Construction contracts in progress, assets 799 936
Construction contracts in progress, liabilities (2 703) (2 695)
Net construction contracts in progress (1 904) (1 759)
20
FINANCIAL INSTRUMENTS
A) Derivatives
The Group has long-term construction contracts in three of its business
areas. Most of the projects executed by Kongsberg Maritime and
Kongsberg Oil & Gas Technologies have a duration of less than two
years, and earnings on the individual projects account for a limited share
of consolidated earnings. The projects performed by Kongsberg Defence
Systems are of longer duration and the overall earnings from each
individual project make a significant contribution to the Group’s
operations.
Summary of important contract data below:
Amounts in MNOK 2011 2010
Total orders 30 464 27 851
Operating revenues for the year 6 786 6 205
Accumulated operating revenues 19 914 17 677
Accumulated variable expenses 14 476 12 979
Remaining operating revenues 10 551 10 173
Prepayments received 2 371 2 096
Remaining variable costs on onerous
contracts 113 125
Significant accounting estimates
Income related to construction contracts is recognised in line with the
estimated percentage of completion. Percentage of completion is
normally calculated as accrued production costs as a percentage of total
expected production costs. In certain cases, progress is calculated as a
function of accrued hourly costs, or milestones achieved. The contracts’
revenues are agreed. Total anticipated production costs are estimated
based on a combination of empirical data, systematic estimation
procedures, monitoring of efficiency targets and best judgement. In
general, the number of remaining manhours necessary to develop or
complete a project will constitute a large part of total project costs. The
uncertainty of the estimates is influenced by a project’s duration and
technical complexity. Principles have been established for categorising
projects in terms of technological complexity and the content of the
development. This constitutes the basis for risk assessments and
recognition of project profits. The projects are reviewed on a quarterly
basis at the minimum.
Amounts in MNOK 31 Dec 11 31 Dec 10
Current assets
Fair value forward contracts, cash flow hedges 78 314
Fair value currency options, cash flow hedges 310 483
Less value, loan hedges (3) 8
Total derivatives, current assets 385 805
Non-current liabilities
Interest rate swaps related to sale and lease-back 6 6
Total derivatives, non-current liabilities 6 6
Current liabilities
Fair value forward contracts, cash flow hedges 54 45
Fair value forward contracts, project hedges 279 120
Interest rate swaps and loan hedges (3) 8
Total derivatives, current liabilities 330 173