ANNUAL REPORT 2011 - DONG Energy

Regulated companies that operate according to a principle of
self-financing and where DONG Energy does not have direct
or indirect access to receive a return or other benefits are not
included in the consolidation, but are instead measured at fair
value as investments within other equity investments.
Enterprises over which the Group exercises significant influence,
but not control, are accounted for as associates.
Significant influence is typically achieved by holding or having
the ability to exercise, directly or indirectly, more than 20% but
less than 50% of the voting rights. However, this is based on
a specific assessment of the possibility of exercising influence.
Any such enterprises that satisfy the criteria for joint control
are instead accounted for as investments in jointly controlled
entities, see the description under Investments in jointly controlled
assets and entities.
Potential voting rights exercisable at the balance sheet date
are taken into account in assessing whether DONG Energy has
control, joint control or significant influence.
The consolidated financial statements have been prepared as
a consolidation of the parent company’s and the individual
subsidiaries’ financial statements, in accordance with the
Group’s accounting policies. Intragroup income and expenses,
shareholdings, balances and dividends as well as realised and
unrealised gains and losses arising from intragroup transactions
are eliminated on consolidation. Unrealised gains resulting
from transactions with associates and entities under joint
control are eliminated to the extent of the Group’s investment
in the enterprise. Unrealised losses are eliminated in the same
way as unrealised gains, but only to the extent that there is no
evidence of impairment.
The items in the subsidiaries’ financial statements are recognised
in full in the consolidated financial statements. For subsidiaries
that are not wholly owned, the share of profit for the
year and equity that is attributable to non-controlling interests
is recognised as part of the Group’s profit and equity respectively,
but disclosed separately.
Significant accounting policies
investments in jointly controlled assets and entities
Investments in jointly controlled assets and entities comprise
natural gas and oil exploration and production licences, wind
farms and a power station, etc.
Recognition of an investment as a jointly controlled asset or
entity is conditional upon the existence of a contractual arrangement
between the parties stipulating joint control. The
contractual arrangement must also stipulate whether the
parties are jointly and severally liable or liable for their proportionate
interests only.
Investments in jointly controlled assets and entities are recognised
in the consolidated balance sheet using proportionate
consolidation as a share of assets and liabilities in the jointly
controlled assets and entities. Shares of income and expenses
from jointly controlled assets and entities are recognised on a
proportionate basis in profit for the year, classified by nature.
Own liabilities and expenses incurred in respect of jointly controlled
assets and entities are also recognised.
In connection with proportionate consolidation, intragroup
income and expenses, balances and realised and unrealised
gains and losses arising from intragroup transactions between
fully consolidated enterprises and proportionately consolidated
assets and entities are eliminated to the extent of the Group’s
investment.
Deferred tax on temporary differences at the acquisition date
between the carrying amount and the tax base of jointly controlled
assets is not provided for, see the description under
Income tax and deferred tax.
Derivative financial instruments
Derivative financial instruments and loans are used to hedge
currency and interest rate risks and risks related to the price of
oil, gas, electricity, coal and CO2 emissions allowances.
Derivative financial instruments are recognised from the trade
date as receivables (positive fair values) and other payables
(negative fair values) respectively and are measured in the balance
sheet at fair value. Transaction costs are added to the fair
value on initial recognition, unless the financial asset or the
financial liability is measured at fair value with recognition of
fair value adjustments in profit for the year.
Positive and negative fair values are only offset if the enterprise
is entitled to and intends to settle several financial instruments
net (in cash).
The fair value of derivative financial instruments is determined
on the basis of current market data and assumptions, and recognised
valuation methods.
Value adjustments of derivative financial instruments that act
as economic hedges of the Group’s primary activities but do
not satisfy the criteria for hedge accounting are recognised
as revenue and fuel and energy respectively. Likewise, value
adjustments of financial contracts offered to customers with
a view to price hedging are recognised as revenue. Value
DONG ENERGY ANNUAL REPORT 2011 – COnsOliDatED finanCial statEmEnts
129
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