ANNUAL REPORT 2011 - DONG Energy

notes
40 Description of accounting policies
statement of cash flows
The statement of cash flows shows cash flows for the year from
operating, investing and financing activities, the year’s changes
in cash and cash equivalents, and cash and cash equivalents at
the beginning and end of the year.
The cash flow effect of acquisitions and disposals of enterprises
is disclosed separately under cash flows from investing activities.
Cash flows relating to acquired enterprises are recognised
in the statement of cash flows from the date of acquisition, and
cash flows relating to enterprises disposed of are recognised up
to the date of disposal.
Cash flows from operating activities are determined using the
indirect method as operating profit adjusted for non-cash operating
items, changes in net working capital, interest received
and interest paid, and income tax paid. Change in trade payables
relating to purchases of intangible assets and property,
plant and equipment are not recognised in net working capital
Cash flows from investing activities comprise payments in
connection with acquisition and disposal of enterprises and activities;
purchase and sale of intangible assets, property, plant
and equipment and other non-current assets; and purchase
and sale of securities that are not recognised as cash and cash
equivalents.
Finance leases are accounted for as non-cash transactions.
Cash flows from financing activities comprise changes in the
size or composition of the share capital and costs associated
with such changes as well as the raising of loans, repayment of
interest-bearing debt and payment of dividends to owners and
coupon payments relating to hybrid capital.
Cash flows relating to assets held under finance leases are recognised
as payment of interest and repayment of debt.
Cash and cash equivalents comprise cash as well as securities
that form part of the ongoing cash management, are readily
convertible to cash and are subject to an insignificant risk of
changes in value.
Cash flows in currencies other than the functional currency
are translated at the average exchange rates for the month in
question, unless these differ significantly from the rates at the
transaction date.
140 COnsOliDatED finanCial statEmEnts – DONG ENERGY ANNUAL REPORT 2011
segment information
Operating segments are reported in accordance with the
Group’s internal management reporting, which is presented
to the Group’s chief operating decision maker. The operating
decision maker is the Group Executive Management.
In the segment reporting, hedging transactions relating to
commodity risks and related foreign exchange exposures are
recognised at the same time as the hedged transaction, so that
the hedged transaction is recognised at the hedged value. This
is the same method of accounting for hedging transactions
as presented in the business performance column in the consolidated
financial statements. Apart from this, the accounting
policy is consistent with the accounting policy applied in the
consolidated financial statements.
Segment income, segment expense, segment assets and
segment liabilities are those items that have been directly attributed
to the individual segment or indirectly allocated to
the individual segment on a reliable basis. Unallocated items
are included in other activities and comprise primarily assets,
liabilities, revenue and expense relating to the Group’s administrative
functions, investing activities, income taxes, etc.
The Group’s primary measure of performance is EBITDA.
EBITDA is defined as earnings before interest, tax, depreciation
and amortisation.
The Group’s secondary measure of performance is EBIT. EBIT is
defined as earnings before interest and tax.
Segment assets comprise those assets that are directly employed
by a segment in its operating activities. Current tax and
deferred tax are not allocated to individual segments, as they
are not directly employed by the individual segment in its operating
activities.
Segment information in respect of geographical markets is
determined by breaking revenue down, as far as possible, by
customer location based on supply point. When delivery is
made directly from production platforms in the North Sea, the
final supply point is not known to DONG Energy. In such cases,
customer location is defined on the basis of invoicing address.
Non-current assets are broken down geographically based on
the physical location of the assets and comprise intangible assets
and property, plant and equipment.
Intersegment transactions are priced on arm’s length terms.