ANNUAL REPORT 2011 - DONG Energy

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notes 01 Basis of reporting DONG Energy A/S is a public limited company with its registered offi ce in Denmark. The annual report for the period 1 January – 31 December 2011 comprises the consolidated fi nancial statements of DONG Energy A/S and its subsidiaries (the Group) as well as separate fi nancial statements for the parent company, DONG Energy A/S. The annual report has been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and also complies with International Financial Reporting Standards issued by the IASB. The annual report has been prepared in accordance with Danish disclosure requirements for annual reports of listed and State-owned public limited companies, see the statutory order on adoption of IFRS issued pursuant to the Danish Financial Statements Act. The annual report is presented in Danish kroner (DKK), rounded to the nearest million, unless otherwise stated. The annual report has been prepared on the historical cost basis except that derivative fi nancial instruments, fi nancial instruments held for trading, fi nancial instruments classifi ed as available for sale and CO2 emissions allowances held for trading are measured at fair value. Non-current assets and disposal groups classifi ed as held for sale are stated at the lower of carrying amount before the reclassifi cation and fair value less costs to sell. The accounting policies described in note 40 in the complete annual report have been applied consistently to the fi nancial year and the comparative fi gures. Implementation of new standards and interpretations In 2011, DONG Energy implemented the following standards (IASs and IFRSs) and interpretations (IFRICs), which are relevant to DONG Energy and will apply to reporting periods beginning on or after 1 January 2011: • Revised IAS 24 Related Party Disclosures • Improvements to IFRSs May 2010 The implementation has not had a material effect on the annual report for 2011. New International Financial Reporting Standards and IFRIC Interpretations 68 72 COnsOliDatED finanCial statEmEnts – DONG ENERGY GROUP ANNUAL ANNUAL REPORT REPORT 2011 2011 The IASB has issued the following new or amended standards and interpretations that have not yet become effective and are consequently not mandatory in connection with the preparation of DONG Energy’s annual report for 2011: adopted by the Eu • Amendments to IFRS 7 Financial Instruments: Disclosures DONG Energy has considered the effect of this fi nancial reporting standard. This amended standard is not expected to have a material effect on DONG Energy’s fi nancial reporting. not adopted by the Eu • Amendments to IFRS 7 Disclosures - Offsetting Financial Assets and Financial Liabilities • IFRS 9 Financial Instruments • IFRS 10 Consolidated Financial Statements • IFRS 11 Joint Arrangements • IFRS 12 Disclosures of Interests in Other Entities • IFRS 13 Fair Value Measurement • IAS 27 Separate Financial Statements • IAS 28 Investments in Associates and Joint Ventures • Deferred Tax: Recovery of Underlying Assets: Disclosure (Amendments to IAS 12) • Presentation of Items of Other Comprehensive Income (Amendments to IAS 1) • Amendments to IAS 19 Employee Benefi ts • Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities • IFRIC 20: Stripping Costs in the Production Phase of a Surface Mine DONG Energy has started assessing the effect of these fi nancial reporting standards and expects that IFRS 10 and 11 will have limited effect on the fi nancial reporting. IFRS 10 and 11 become effective on 1 January 2013. DONG Energy expects to implement the new standards and interpretations from their mandatory effective dates.
02 Critical accounting estimates and judgements In the process of preparing the consolidated fi nancial statements, management makes a number of estimates and judgements that affect the reported amounts of assets and liabilities at the balance sheet date, the reported amounts of income and expenses in the reporting period and disclosures on contingent assets and contingent liabilities at the balance sheet date. Estimation uncertainties Estimates made are based on historical experience and other factors that are believed by management to be reasonable under the circumstances, but that, by their nature, are uncertain and unpredictable. The effect of such estimates and judgements may lead to results that differ signifi cantly from those that would result from the use of other judgements and assumptions. Again in 2011, the international fi nancial crisis led to heightened focus on the estimates made in respect of, for example, discount rates and expectations concerning the future development of energy prices and exchange rates to ensure that the consolidated fi nancial statements are not affected by short-term fl uctuations that are not expected to apply in the long term. Estimates and judgements relating to impairment testing of intangible assets and property, plant and equipment, and relating to recoverable oil and gas reserves, have had a signifi - cant effect on the consolidated fi nancial statements for 2011. These areas are described in the following. impairment testing DONG Energy has signifi cant investments in intangible assets and property, plant and equipment, including primarily production assets, DKK 65.4 billion (2010: DKK 57.5 billion), the values of which are sensitive to various factors, including changes in energy prices, exchange rates, interest rates and regulatory provisions. Goodwill and in-process development projects, DKK 0.4 billion (2010: DKK 0.7 billion), are tested annually for impairment. Other intangible assets and property, plant and equipment are tested if there are any indications of impairment. Such indications may include, for example, long-term changes in future market conditions, market prices of oil, gas, electricity, fuel and CO2 , changes in the weighted average cost of capital, reductions in estimated reserves, or changes in regulatory provisions. If a specifi c judgement indicates a possible impairment, and neither quoted market prices in active markets nor prices of similar assets are available, discounted cash fl ows are used to measure the recoverable amount to determine whether the value of the assets is impaired. The assumptions and criteria applied to determine the assets’ recoverable amounts constitute management’s best estimates based on the available information such as market prices, cost levels, revenue growth rates and reserve estimates. Determination of oil and gas reserves The evaluation of oil and gas reserves affects the assessment of the recoverable amount and depreciation profi le for DONG Energy’s Exploration & Production’s assets, DKK 33.1 billion (2010: DKK 29.0 billion). The assessment of oil and gas reserves is based on estimates of both proved and probable reserves (Proved and Probable/2P). Proved reserves are the estimated volumes of oil and gas that, under existing economic conditions, are recoverable using known technology from reservoirs in which oil or gas has been proved. Oil and gas exploration and extraction technology is undergoing continuous development. Probable reserves are those additional reserves that are less likely to be recovered than proved reserves. DONG Energy conducts an annual internal evaluation and review of the Group’s reserves. An independent valuer has reviewed DONG Energy’s reserves classifi cation system and guidelines and has verifi ed that the internal guidelines are in agreement with the SPE-PRMS directives. useful lives and residual values for production assets The expected useful lives and residual values of production assets, DKK 65.4 billion (2010: DKK 57.5 billion), are determined based on historical experience and expectations concerning the future use of these assets. The depreciation profi le for production assets depends on the type of production asset and is described in note 40 in the complete annual report. The expected future applications and residual values may subsequently prove not to be realisable, which may require useful lives and residual values to be reviewed and may result in a need for the recognition of impairment losses or the charging of a loss on disposal of the assets. The depreciation periods applied are set out in note 40 in the complete annual report. investments in associates, other securities and equity investments, and other non-current investments Investments in associates, other securities and equity investments, and other non-current investments, DKK 7.1 billion in total (2010: DKK 6.6 billion), are tested for impairment if there are indications of impairment. Such indications may include changes in regulatory, fi nancial and technological factors and general market conditions. DONG ENERGY DONG ENERGY GROUP ANNUAL REPORT 2011 – COnsOliDatED finanCial statEmEnts 69 73 notes
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MOVING ENERGY FORWARD ANNUAL REPORT
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More reliable and clean energy DONG
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More reliable and clean energy Mode
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Q3 17 August signing of Eur 1.3 bil
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ifrs statement of comprehensive inc
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un Global Compact principle Climate
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Spearheading the development of the
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Waste is a valuable resource It is
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DONG Energy involves local operator
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The ambitious business strategy mea
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DONG Energy contributes to green gr
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The photo shows the Siri platform i
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Page 61 and 62: lars nØrBy JOHansEn Deputy Chairma
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Page 93 and 94: DKK million Goodwill Cost at 1 Janu
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Page 97 and 98: DKK million Land and Impairment tes
Page 99 and 100: 17 Associates and other securities
Page 101 and 102: 19 Receivables DKK million 2011 201
Page 103 and 104: 20 Construction contracts DKK milli
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35 Lease commitments 2011 DKK milli
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As a condition for approval of its
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39 Events after the reporting perio
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Regulated companies that operate ac
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do not satisfy the criteria for hed
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translation reserve The translation
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eporting enterprise operates. Trans
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CO 2 emissions allowances Allocated
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Deferred tax is measured using the
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Definitions of performance highligh
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significant licences and hydrocarbo
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42 Company overview Segment/company
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Segment/company Type 1 Registered o
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Segment/company Type 1 Registered o
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DONG ENERGY ANNUAL REPORT 2011 - CO
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Accounting policies for data collec
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significant environmental incidents
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fInancIal stateMents 2011 PARENT CO
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DKK million Note 2011 2010 profit f
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Equity and liabilities DKK million
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DKK million Share capital Hedging r
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01 Basis of reporting The parent co
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04 Staff costs DKK million 2011 201
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06 Finance income DKK million 2011
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09 Property, plant and equipment DK
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12 Equity Share capital composition
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14 Loans and borrowings DKK million
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18 Financial risks DONG Energy A/S
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19 Financial instruments maturity a
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fair value hierarchy of financial i
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22 Related party transactions tradi
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Independent Auditor’s Report To t
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coMPany announceMents IN 2011 Compa
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glossaRy relatively low (off-peak).
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ANNUAL REPORT 2011 - DONG Energy

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