Asset Buyout Partners Annual Report 2020

reporting periods and have not been early adopted by the group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. 2.3. Consolidation Subsidiaries When the Group has control over an investee, the investee is classified as a subsidiary. The Group controls an investee if all the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. Subsidiaries are deconsolidated from the date control ceases. When a property is acquired, through corporate acquisitions or otherwise, management considers the substance of the transaction in determining whether the acquisition represents an acquisition of a business or a purchase of an asset. All transactions up until the balance sheet date have been treated as purchase of assets. These transactions are not considered to be acquisition of businesses. The cost to purchase such assets is capitalized as a part of the cost for the acquired assets. Elimination of transactions Intercompany transactions, balances and unrealized gains and losses on transactions between group companies are eliminated. Unrealized losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. 2.4. Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The group has defined the Board of Directors as the chief decision maker, and further defined the groups’ activities as one single operating segment. 2.5. Classification of assets and debt Current assets and short-term debt expected to be settled within 12 months, and other items that are included in the Group’s normal operating cycle are classified as current. Strategic investments are classified as fixed assets. First year instalments of long-term debt are classified as short-term. 2.6. Impairment Tangible assets and intangible assets with definite life are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an assets’ fair value less costs of disposal and value in use. For the purposes of impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or group of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. 2.7. Investment property Measurement at recognition Property held with the purpose of achieving rental income, increase in value, or both are classified as investment property. Investment property is initially recognized at cost including transaction costs. Transaction costs includes legal fees and due diligence costs. Investment property is normally acquired through the purchase of shares in a company that owns the property. When shares are acquired there is no change in the tax base of the property, resulting in lower tax deductions for depreciations for the acquirer. The purchase price in these transactions normally includes a tax compensation. The effect of this is that the property acquired will initially be recorded at a cost lower than fair value. Measurement after recognition After initial recognition, the investment property is measured at fair value, which reflects market conditions at the reporting date. Gains or losses from changes in fair value are presented in profit and loss when they arise, under the line item “Fair value adjustments investment property”. Subsequent capital expenditure relating to investment property is included in the carrying amount if it is probable that they will result in future economic benefits for the investment property and the costs can be measured reliably. Expenses relating to operations and maintenance of the investment property are charged to the income statement during the financial period in which they are incurred. Tax compensation and transaction costs relating to the acquisition of an investment property (single purpose entities) are recognized in the income statement as part of the value adjustment on investment property in the period after the acquisition. Derecognition Investment properties are derecognized when sold or permanently out of operation and no future economic benefit is expected. All gains or losses related to sales or disposals are presented in the income statement in the same year as the disposal. Gains or losses from the disposal of investment property is the difference between net selling price and the carrying amount of the asset. Gains or losses are included in the line item “Fair value adjustments investment property”. 2.8. Leases The group has entered a limited amount of lease agreements as a lessee, mainly for land and office buildings. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used by the group as security for borrowing purposes. Asset Buyout Partners | Annual Report 2020 21