ANNUAL REPORT 2011 - DONG Energy

notes
40 Description of accounting policies
Other bank loans include the capitalised residual lease commitment
under finance leases, measured at amortised cost.
Trade payables, payable income tax and other payables are
measured at net realisable value.
Other payables include negative fair values of derivative financial
instruments.
Financial liabilities the value of which has been effectively
hedged are adjusted to fair value to the extent of the hedged
risk. The value adjustment is recognised in profit for the year as
finance income or costs.
Other accounting policies
Business combinations
Enterprises acquired or formed during the year are recognised
in the consolidated financial statements from the date of acquisition
or formation. The acquisition date is the date on which
DONG Energy obtains control of the acquiree. On acquisition
of enterprises whereby the parent company obtains control of
the acquiree, the purchase method is applied. The acquiree’s
identifiable assets, liabilities and contingent liabilities are
measured at fair value at the acquisition date. Identifiable
intangible assets are recognised if they are separable or arise
from a contractual right, and the fair value can be measured
reliably. Deferred tax on revaluations is recognised.
The consideration transferred in exchange for an acquiree consists
of the fair value of the agreed consideration in the form of
assets acquired, liabilities assumed and issued equity instruments.
If parts of the consideration are contingent on future
events, these parts of the consideration are recognised in cost
at the acquisition-date fair value. Costs incurred in connection
with a business combination are recognised in profit for the
year as incurred.
The excess of the cost of the consideration transferred in exchange
for the acquiree, the amount of any non-controlling interests
in the acquiree and the fair value of the identifiable assets
acquired and liabilities and contingent liabilities assumed
(goodwill) is recognised as goodwill within intangible assets.
Goodwill is not amortised, but is tested for impairment, at least
annually. The first impairment test is carried out before the end
of the year of acquisition. On acquisition, goodwill is allocated
to the cash-generating units, which subsequently form the basis
for the impairment test.
Goodwill and fair value adjustments in connection with the
acquisition of a foreign entity with a functional currency that is
different from the Group’s presentation currency are accounted
for as assets and liabilities belonging to the foreign entity and
134 COnsOliDatED finanCial statEmEnts – DONG ENERGY ANNUAL REPORT 2011
translated on initial recognition into the foreign entity’s functional
currency at the exchange rate at the transaction date.
Any excess of the fair value over the cost of acquisition (negative
goodwill) is recognised in profit for the year at the date of
acquisition.
If there is any uncertainty, at the acquisition date, concerning
the measurement of identifiable assets acquired and liabilities
and contingent liabilities assumed, initial recognition is based
on provisional fair values. If the fair value of identifiable assets,
liabilities and contingent liabilities subsequently proves to differ
from the fair value assumed at the acquisition date, those
provisional values, including goodwill, are adjusted retrospectively
within 12 months of the acquisition date and comparative
figures are restated. Subsequently, goodwill is not adjusted.
Changes in estimates of contingent consideration are generally
recognised directly in profit for the year.
Non-controlling interests are measured on initial recognition
either at fair value or at their proportionate interest in
the fair value of the acquiree’s identifiable assets, liabilities
and contingent liabilities. In the former case, goodwill relating
to the non-controlling interests’ interest in the acquiree is
recognised, while, in the latter case, no goodwill is recognised
relating to non-controlling interests. The method of measuring
non-controlling interests is determined on an acquisition-byacquisition
basis and disclosed in the notes in connection with
the description of the acquiree.
The effect of acquisitions and disposals of non-controlling interests
after control is obtained is recognised directly in equity.
Net assets acquired are not revalued on acquisition.
Enterprises disposed of during the year are recognised in profit
for the year up to the date of disposal.
Gains or losses on disposal of enterprises and investments in
associates are determined as the difference between the selling
price and the carrying amount of net assets, including goodwill
at the date of disposal and costs necessary to make the sale.
Gains or losses are recognised in profit for the year as gain
(loss) on disposal of enterprises.
Comparative figures are not restated to reflect acquisitions
or disposals; however, discontinued operations are presented
separately.
foreign currency translation
For each of the reporting enterprises in the Group, a functional
currency is determined. The functional currency is the currency
of the primary economic environment in which the individual