ANNUAL REPORT 2011 - DONG Energy

notes
40 Description of accounting policies
plant and equipment are determined as the selling price less
costs to sell and the carrying amount at the date of disposal.
Government grants
Government grants comprise grants for eco-friendly generation
and grants for and funding of research and development projects.
Government grants are recognised when there is reasonable
assurance that they will be received.
Grants for electricity generation are recognised as revenue as
the related electricity revenue is recognised.
Grants for research and development costs, which are recognised
directly in profit for the year, are recognised as other
operating income as the costs to which the grants relate are
incurred.
Grants for production assets and development projects are
recognised in the balance sheet as liabilities and transferred
to other operating income in profit for the year as the assets to
which the grants relate are depreciated.
Allocated CO 2 emissions allowances are recognised as rights
within intangible assets. Reference is made to the description
of the accounting policies under the relevant sections.
share of profit (loss) of associates
The proportionate share of associates’ profit after tax and noncontrolling
interests and after elimination of the proportionate
share of intragroup profits/losses is recognised in profit for the
year.
finance income and costs
Finance income and costs comprise interest income and expense,
capital gains and losses and impairment losses relating
to securities, payables and transactions denominated in foreign
currencies, amortisation of financial assets and liabilities,
including lease commitments under finance leases, as well as
surcharges and refunds under the on-account tax scheme, etc.
Finance income and costs also include realised and unrealised
gains and losses relating to hedging of interest rate and currency
risks that have not been entered into to hedge revenue,
fuel and energy or non-current assets. Interest is recognised
under the accrual basis of accounting. Dividends from other
equity investments are recognised as they are received.
Borrowing costs relating to general borrowing or loans directly
attributable to the acquisition, construction or development of
qualifying assets form part of the cost of such assets.
136 COnsOliDatED finanCial statEmEnts – DONG ENERGY ANNUAL REPORT 2011
income tax expense
The Group is subject to the Danish rules on compulsory joint
taxation and has also elected international joint taxation with
the Group’s foreign subsidiaries. The Group’s subsidiaries are
included in the joint taxation from the date they are included
in the consolidation in the consolidated financial statements
and up to the date on which they are no longer included in the
consolidation.
The current Danish income tax is allocated among the jointly
taxed Danish subsidiaries in proportion to their taxable income.
In this connection Danish subsidiaries with tax losses
receive joint taxation contributions from the parent company
equivalent to the tax base of the tax losses utilised (full allocation),
while companies that utilise tax losses in other Danish
companies pay joint taxation contributions to the parent company
equivalent to the tax base of the utilised losses.
Income tax expense, which consists of current tax, joint taxation
contribution for the year and changes in deferred tax, is
recognised in profit for the year to the extent that it relates to
profit for the year, and directly in other comprehensive income
to the extent that it relates to entries directly to other comprehensive
income.
The Group is registered for the Danish on-account tax scheme.
Tax refunds/tax surcharges are allocated between the jointly
taxed Danish companies in accordance with the allocation of
the Danish income tax and recognised as finance income and
finance costs respectively.
Subsidiaries that are engaged in oil and gas recovery (hydrocarbons)
are subject to the hydrocarbon tax legislation in the
countries in which they operate. Hydrocarbon taxes are calculated
on the basis of taxable hydrocarbon income and comprise
taxes calculated applying the respective country’s ordinary
income tax rate as well as taxes calculated applying increased
tax rates. Hydrocarbon taxes are recognised within income tax
expense.
intangible assets
Goodwill
Goodwill is recognised initially in the balance sheet at cost as
described under business combinations. Subsequent to initial
recognition, goodwill is measured at cost less accumulated
impairment losses. Goodwill is not amortised. The carrying
amount of goodwill is allocated to the Group’s cash-generating
units at the acquisition date. The determination of cash-generating
units follows the Group’s organisational and internal
reporting structure.