ANNUAL REPORT 2011 - DONG Energy

notes
02 Critical accounting estimates and judgments
international fi nancial reporting standards (IFRS 10 and 11) relating
to consolidation and jointly controlled assets will become
effective from and including 2013. The new standards mean
that the option to apply proportionate consolidation to jointly
controlled entities will cease in some cases. In such cases, profi t
must instead be presented as one aggregate amount, in the
same way as the share of profi t (loss) of associates. In the balance
sheet, assets and liabilities relating to jointly controlled
entities must also be presented as a net amount in future, like
investments in associates. This will mainly affect property, plant
and equipment. The new standards are expected to have a limited
effect on DONG Energy’s fi nancial statements.
Business combinations
In connection with acquisitions, the Group makes judgements
of the contracts concluded in order to determine whether
the acquiree should be classifi ed as a subsidiary, a jointly
controlled entity or an associate. Such judgements are made
on an acquisition-by-acquisition basis based on purchase
contracts concluded, shareholders’ agreements and similar
03 Segment information
Segmentation
Management has defi ned the Group’s operating segments based
on the reporting regularly presented to the Group Executive
Management, and which forms the basis for management’s
strategic decisions. The Group Executive Management adopts a
product-driven approach to the management of activities, managing
each segment differently from a commercial point of view.
With effect from 1 January 2011, DONG Energy has elected to no
longer apply the provisions on cash fl ow hedge accounting for
certain derivative fi nancial instruments, see note 40 in the complete
annual report. Accordingly, IFRS no longer refl ects the way
in which management manages the business, and the Group’s
internal management reporting has therefore been adjusted by
the implementation of business performance results. The comparative
fi gures for 2010 have been restated accordingly.
Adjustments between business performance and IFRS consist
of timing differences relating to movements in the market value
of contracts, including hedging transactions, that are deferred to
the period in which they are to be recognised. The adjustments
column will accumulate to nil over time.
Segment income, segment expense, segment assets and segment
liabilities are those items that, in the internal management
agreements, which determine the extent to which control of
the acquiree has been transferred. The classifi cation is important,
as the recognition of proportionately consolidated jointly
controlled entities has a different effect on the fi nancial statements
than full consolidation of a subsidiary or recognition of
an associate using the equity method.
No business combinations were recognised in 2010 and 2011.
Transactions with non-controlling interests are accounted for as
transactions with the group of owners. If the acquisition of further
ownership interests in a subsidiary results in a difference between
the purchase price and the carrying amount of the acquired
non-controlling interest, the difference is taken directly to equity.
Gains and losses on disposal of equity investments to non-controlling
interests are also recognised in equity to the extent that
the sale does not result in a loss of control. The determination of
whether a sale results in a loss of control relies on judgements on
a case-by-case basis based on contracts concluded.
reporting, are directly attributable to the individual segment
or can be indirectly allocated to the individual segment on a
reliable basis. Other activities primarily comprise income and
expense, assets and liabilities, investing activities, income taxes,
etc., relating to the Group’s administrative functions and certain
initial stages of research and development that do not relate to
the Group’s primary activities.
The Group operates with two performance measures, with
EBITDA as the primary performance measure and EBIT as the
secondary performance measure. For defi nitions of gross investments,
net working capital and capital employed, reference is
made to the explanations of these terms. Intersegment transactions
are priced on arm’s length terms.
Reportable segments comprise the following products and
services:
72 76 COnsOliDatED finanCial statEmEnts – DONG ENERGY GROUP ANNUAL ANNUAL REPORT REPORT 2011
2011
• Exploration & production: Oil and gas exploration and production
in Denmark, Norway, the UK, the Faroe Islands and
Greenland as well as an ownership interest in the Gassled
natural gas pipeline network connecting the Norwegian
fi elds with the European continent and the UK.