Annual Report 2006 ISS Global A/S

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NOTES TO THE FINANCIAL STATEMENTS OF THE PARENT COMPANY 1 January - 31 December 1. Significant accounting policies (continued) Other expenses comprises of expenses, both recurring and non-recurring, that ISS Global A/S does not consider to be normal ordinary operations. Income from subsidiaries and joint ventures comprises dividends declared in the year and gains and losses from divestment of subsidiaries and joint ventures. If dividends declared exceed the accumulated profit since take-over, the dividend is not recognised in the income statement but instead recognised as a write-down in the cost of the investment. Net finance costs comprises interest payable on borrowings calculated using the effective interest rate method, interest receivable on funds invested and foreign exchange gains and losses. Income taxes consists of income tax and changes in deferred tax. Deferred tax is recognised based on the balance sheet liability method and comprises all temporary differences between accounting and tax values of assets and liabilities. Where the tax base can be calculated using different tax regulations, deferred tax is measured based on the planned use of the asset or the unwinding of the liability, as applicable. Deferred tax is computed based on the tax rate expected to apply when the temporary differences are balanced out. No deferred tax provisions are made for undistributed profits of subsidiaries and goodwill not deductible for tax purposes. Deferred tax assets, including the tax value of losses carried forward, are recognised at the value at which they are expected to be applied either by eliminating tax on future earnings or by setting off deferred tax liabilities within the same legal tax unit and jurisdiction. The recognised income tax is allocated to Income taxes and Equity, as applicable. ISS Global A/S is jointly taxed with all Danish resident affiliates. The Danish income tax payable is allocated between the jointly taxed Danish companies based on their proportion of taxable income (full absorption including reimbursement of tax deficits). The jointly taxed companies are included in the Danish tax on account scheme. Additions, deductions and allowances are recognised under Net finance costs. CASH FLOW STATEMENT The cash flow statement shows ISS Global A/S's cash flows for the period stemming from operating, investing and financing activities, the change in cash position during the period as well as ISS Global A/S's cash position at the beginning and the end of the period. The cash flow statement is prepared using the indirect method based on Operating profit before other items. Cash flow from operating activities comprises Operating profit before other items adjusted for non-cash items, changes in working capital, income taxes and other income and expenses. Cash flow from investing activities comprises investments in or sale of subsidiaries and joint ventures and cash flow from purchase and sale of non-current assets. Cash flow from financing activities comprises proceeds from and repayment of loans, payments regarding interest, dividends and proceeds from share issues. Cash and cash equivalents comprises cash and marketable securities, with maturity of less than three months that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. BALANCE SHEET Financial assets Investments in subsidiaries and joint ventures are recognised at cost. Investments are written down to the recoverable amount if this is exceeded by the cost. Cost is written down to the extent that the dividends declared exceeds the accumulated profit since take-over. Receivables are measured at amortised cost less a provision for doubtful debts based on an individual assessment. Provisions and realised losses during the year are recognised under Other operating expenses. Securities are measured at fair value at the balance sheet date, with any resulting gains or losses recognised in the income statement. The fair value is the quoted bid price at the balance sheet date. Dividends are recognised in the period in which they are declared. Continues _____________________________________________________________________________________________________________ ANNUAL REPORT 2006 / Parent Company Financial Statements 108
NOTES TO THE FINANCIAL STATEMENTS OF THE PARENT COMPANY 1 January - 31 December 1. Significant accounting policies (continued) Financial liabilities are initially measured at the value of the proceeds received less related transaction costs. Subsequently, financial liabilities are measured at amortised cost, equal to the capitalised value when applying a constant effective rate of interest, and the difference between the proceeds initially received and the nominal value is recognised in the income statement over the loan period. Derivatives are measured at fair value calculated according to generally accepted valuation methods and recognised in Other receivables or Other liabilities. For derivatives hedging the fair value of recognised assets and liabilities the value of the hedged asset or hedged liability is also stated at fair value in respect of the risk being hedged. When a hedging instrument expires or is sold, terminated or exercised but the hedged asset or hedged liability with a determinable maturity still exist, the adjustment recorded as part of the carrying amount of the hedged item is amortised to the income statement from that date onwards using the effective interest method. The effective part of the changes in the fair value of derivatives hedging future transactions is recognised directly in equity, net of tax. On realisation of the hedged item, value changes recognised under equity are reversed and recognised together with the hedged item. When a hedging instrument expires or is sold terminated or exercised but the hedged future transactions are still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs. Derivatives that qualify as net investment hedges of subsidiaries, joint ventures and associates are recognised directly in equity, net of tax. For derivatives, which do not comply with the hedge accounting conditions, changes in fair value are recognised as Net finance costs in the income statement as they occur. _____________________________________________________________________________________________________________ ANNUAL REPORT 2006 / Parent Company Financial Statements 109
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ISS Global A/S Bredgade 30 DK - 126
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Key Figures Amounts in DKK millions
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growth. Furthermore, the effect of
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In 2006, ISS Global continued the p
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to costs related to a turnaround pl
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structure, ISS established an Opera
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Strategy ISS Global is a fully owne
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Geography ISS intends to increasing
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Openness and transparency In additi
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tors. The controllers perform follo
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Risk Factors ISS Global is a fully
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tual obligations could harm ISS’s
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If ISS fails to manage growth and i
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ISS may incur substantial liabiliti
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thus reduce or prevent dividend pay
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Independent Auditor’s Report To t
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Organic growth ISS Global uses esti
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2006 primarily related to redundanc
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Tempo as well as a number of smalle
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including non-interest-bearing debt
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CONSOLIDATED CASH FLOW STATEMENT 1
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CONSOLIDATED STATEMENT OF TOTAL REC
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NOTES TO THE CONSOLIDATED FINANCIAL
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Page 57 and 58: NOTES TO THE CONSOLIDATED FINANCIAL
Page 103 and 104: CASH FLOW STATEMENT OF THE PARENT C
Page 105 and 106: STATEMENT OF TOTAL RECOGNISED INCOM
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Page 123: Definitions EBITDA = Operating prof
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Annual Report 2006 ISS Global A/S

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