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