Terma A/S Annual Report 2010/11
Terma A/S Annual Report 2010/11
Terma A/S Annual Report 2010/11
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Company has a legal or constructive<br />
obligation to cover a negative net asset<br />
value which exceeds the amount owed<br />
in a subsidiary, the remaining amount is<br />
recognized under provisions.<br />
Net revaluation of equity interests in<br />
subsidiaries is shown as a reserve for<br />
net revaluation according to the equity<br />
method under equity to the extent that<br />
the carrying value exceeds the cost.<br />
Subsidiary dividends that are expected<br />
to be adopted prior to the approval of<br />
the Parent Company <strong>Annual</strong> <strong>Report</strong><br />
are not entered into the reserve for net<br />
revaluation.<br />
On acquisition of subsidiaries, the<br />
purchase method is applied, cf.<br />
Consolidated Financial Statements above.<br />
Impairment of Assets<br />
The carrying value of intangibles and<br />
property, plant, and equipment as well<br />
as equity interests in subsidiaries are<br />
assessed annually for indications of<br />
impairment in addition to amortization and<br />
depreciation.<br />
If indications of impairments exist,<br />
impairment tests are conducted relative<br />
to the individual asset or groups of assets,<br />
respectively. Assets are written down to<br />
the recoverable amount if this is lower<br />
than the carrying value.<br />
The recoverable amount of an asset is the<br />
higher of the asset’s value in use and its<br />
selling price. The value in use is calculated<br />
as the present value of the expected net<br />
cash flows from the use of the asset or<br />
groups of assets and the expected net cash<br />
flows from the sale of the asset or groups<br />
of assets at the end of the useful life.<br />
Inventories<br />
Inventories are measured at cost in<br />
accordance with the FIFO method. Where<br />
the net realizable value is lower than the<br />
cost, inventories are written down to this<br />
lower value. Cost comprises purchase<br />
price plus delivery costs.<br />
Finished goods and work in process are<br />
measured at cost, comprising the cost of<br />
raw materials, consumables, direct wages<br />
and salaries, and indirect production<br />
costs. Indirect production costs comprise<br />
indirect materials and wages and<br />
salaries as well as maintenance and<br />
depreciation of production machinery,<br />
buildings, and equipment as well as<br />
factory administration and management.<br />
Borrowing costs are not included in the<br />
cost.<br />
The net realizable value of inventories is<br />
calculated as the sales amount less costs<br />
of completion and costs necessary to<br />
make the sale, and is determined taking<br />
into account marketability, obsolescence,<br />
and development in expected sales price.<br />
Receivables<br />
Receivables are measured at amortized<br />
cost. Write-down is made to meet<br />
expected losses.<br />
Construction Contracts<br />
Construction contracts are measured at the<br />
sales price of the work performed. The sales<br />
price is measured on the basis of the stage<br />
of completion at the Balance Sheet date and<br />
total expected income from the individual<br />
contract work. When the sales price of a<br />
contract cannot be measured reliably, the<br />
sales price is measured at the costs incurred<br />
or at net realizable value, if this is lower.<br />
The individual construction contract is<br />
recognized in the Balance Sheet under either<br />
receivables or liabilities, depending on the net<br />
amount of the sales price less prepayments.<br />
Net assets are constituted by the sum of the<br />
construction contracts where the sales price<br />
of the work performed exceeds the amount<br />
which has been invoiced on account. Net<br />
liabilities are constituted by the sum of the<br />
construction contracts where the amount<br />
which has been invoiced on account exceeds<br />
the sales price.<br />
Sales costs and costs incurred in securing<br />
contracts are recognized in the Statement of<br />
Income when incurred.<br />
Prepayments and Deferred Charges<br />
Prepayments and deferred charges,<br />
recognized under current assets, comprise<br />
costs incurred concerning subsequent<br />
fiscal years.<br />
Equity – Dividends<br />
Dividends are recognized as a liability<br />
at the date when they are adopted at<br />
the annual general meeting (time of<br />
announcement). The expected dividend<br />
payment for the year is disclosed as a<br />
separate item under equity.<br />
Current Tax and Deferred Tax<br />
According to the joint taxation method,<br />
as the administrative company, Thrige<br />
Holding A/S assumes the liability to the<br />
tax authorities for the corporate tax of<br />
the Danish subsidiaries, concurrently<br />
with the subsidiaries paying their joint tax<br />
contribution.<br />
Current tax payable and receivable is<br />
recognized in the Balance Sheet as tax<br />
calculated on the taxable income for<br />
the year, adjusted for tax on the taxable<br />
income of previous years, and for tax paid<br />
on account.<br />
Payable and receivable joint tax<br />
contributions are recognized in the<br />
Balance Sheet under balances for the<br />
Parent Company.<br />
Accounting Policies<br />
Deferred tax is measured under the<br />
Balance Sheet liability method on all<br />
temporary differences between the<br />
carrying value and the tax base of assets<br />
and liabilities. However, deferred tax is<br />
not recognized on temporary differences<br />
relative to amortization of goodwill<br />
disallowed for tax purposes and other<br />
items where temporary differences –<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong> 21