Hexagon Annual Report 2019

The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. A long-term growth rate is calculated and applied to project future cash flows after the fifth year. Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable (more likely than not) that a financial settlement will take place as a result of this obligation and the size of the amount can be measured reliably. If the effect is significant, the provision is calculated by discounting estimated future cash flow using a discount rate before tax that reflects the market’s pricing of the time value of money and, if relevant, risks specifically associated with the obligation. 2.15 PROVISIONS A provision for guarantees is recognized when the underlying products or services are sold. The provision is based on historical information about guarantees and a weighting of possible outcomes according to the likelihood of their occurrence. A provision for onerous contracts is recognized when the Group’s expected economic benefits under the contract are lower than the unavoidable costs of meeting the obligations under the contract. Financial instruments are classified as financial assets, liabilities or equity in accordance with the underlying economic realities. Interest, dividend, gains and losses relating to a financial instrument classified as an asset or liability will be presented as an expense or income in the income statement. Amounts distributed to holders of financial instruments that are classified as equity will be recorded directly in equity. 2.16 EQUITY In the event of a purchase of own shares, the purchase price and any directly associated costs are recognized as a change in equity. Own shares are reported as a reduction in equity. Gains or losses related to own share transactions are recognized directly in equity. (I) Own shares Transaction costs directly related to an equity transaction are recognized directly in equity. (II) Costs arising from equity transactions Translation differences arising in connection with exchange-rate differences on consolidation of foreign entities are recognized in other comprehensive income. Exchange-rate differences in monetary amounts (liabilities or receivables) which are in reality a part of a company’s net investment in a foreign entity, are also included as translation differences. (III) Other equity (A) TRANSLATION DIFFERENCES If a foreign entity is sold, the accumulated translation differences linked to the entity are reversed and recognized in profit or loss in the same period in which the gain or loss on sale is recognized. Actuarial gains or losses resulting from changes in assumptions and basic data are recognized directly in other comprehensive income. (B) CHANGE IN ACTUARIAL GAINS/LOSSES (PENSION COMMITMENTS) Proposed dividends are classified as other equity until they are approved by the general assembly of Hexagon Composites ASA. (C) DIVIDENDS The Group has a share-based program for the senior executives. The fair value of the share instruments is measured at the date of the grant using the Black & Scholes model. The fair value of the issued options, performance share units (PSUs) and restricted share units (RSUs) is expensed as an employee cost with a corresponding increase in other paid in capital over the vesting period, which is over the agreed-upon future service time. (IV) Other paid-in capital – Share-based payments Forward exchange contracts and interest rate derivatives that qualify as hedging instruments (cash flow hedges) are recognized at fair value, with a corresponding entry in total comprehensive income, and transferred to the revaluation reserve (net of tax). Realized gains or losses are recognized in profit or loss to offset gains or losses on the items that were hedged. (V) Hedging reserve The Group’s main revenues come from the sale of its own mass-produced standard products in the different segments: 2.17 REVENUE FROM CONTRACTS WITH CUSTOMERS 1. Agility Fuel Solutions 2. Hexagon Purus (Hydrogen & CNG LDV) 3. Hexagon Mobile Pipeline & Other 4. Hexagon Ragasco LPG 16 102 2019 AT A GLANCE FROM THE BOARD ROOM FINANCIAL STATEMENTS