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Notes to the consolidated financial
statements, REC Group
REC Annual Report 2011
NOTESTOTHECONSOLIDATEDFINANCIALSTATEMENTS
RECGROUP
GENERAL INFORMATION
Renewable Energy Corporation ASA (the Company/REC ASA) and
its subsidiaries (together REC/the REC Group) have a significant
presence in the international solar energy industry. The areas of
operation are principally the development and sale of products
related to the photovoltaic (PV) industry. The REC Group is engaged
in production of silane gas and polysilicon for the solar and
electronic industry, manufacturing of solar wafers, cells, and
modules, and development of PV systems. The Company is a public
limited liability company incorporated and domiciled in Norway. The
address of its registered office is Kjørboveien 29, Sandvika.
These consolidated financial statements have been approved for
issue by the Board of Directors on March 20, 2012 and are subject
to approval by the Annual General Meeting on May 22, 2012.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below. These policies
have been consistently applied to all years presented, unless
otherwise stated.
2.1 BASIS OF PREPARATION AND STATEMENTOF COMPLIANCE
The financial statements are presented in NOK, rounded to the
nearest million, unless otherwise stated. As a result of rounding
adjustments, the figures in one or more rows or columns included in
the financial statements and notes may not add up to the total of
that row or column.
The consolidated financial statements of the REC Group have been
prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the EU and the Norwegian
Accounting Act. The consolidated financial statements have been
prepared under the historical cost convention, as modified by
impairment of some assets, the revaluation of derivative
instruments and a EUR convertible bond loan measured at fair value
as well as fair value adjustments of parts of the fixed interest rate
NOK bond loans. The preparation of financial statements in
conformity with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise its judgment in
the process of applying the REC Group’s accounting policies. The
areas involving a higher degree of judgment or complexity, or areas
where assumptions and estimates are significant to the
consolidated financial statements are disclosed in note 4.
2.2 CONSOLIDATION
(A) Subsidiaries
Subsidiaries are all entities over which the REC Group has the
power to govern the financial and operating policies, generally
requiring a shareholding of more than one half of the voting rights.
Subsidiaries are fully consolidated from the date on which control is
transferred to the REC Group. They are de-consolidated from the
date that control ceases.
The acquisition method of accounting is used to account for the
acquisition of subsidiaries by the REC Group. The consideration
transferred of an acquisition is measured as the fair value of the
assets given, equity instruments issued and liabilities incurred or
assumed at the date of exchange. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the
acquisition date, irrespective of the extent of any non-controlling
interest. The excess of the consideration transferred over the fair
value of REC Group’s share of the identifiable net assets acquired is
recorded as goodwill (see note 2.7). If the consideration transferred
is less than the fair value of the net assets of the subsidiary
acquired, the difference is recognized directly in the statement of
income. Step acquisitions: an increase in ownership of a jointly
controlled entity or an associate that becomes a subsidiary is
accounted for using the acquisition method as at the date of
control. An increase in ownership in a subsidiary is accounted for in
accordance with the requirements of IAS 27
Consolidated and
Separate Financial Statements
as a transaction with equity holders
with no change in the carrying amounts of assets or liabilities. At
December 31, 2011 and 2010 and for the annual periods ending on
these dates, all REC Subsidiaries have been owned 100 percent by
REC, with no non-controlling interests.
Intercompany transactions, balances and unrealized gains on
transactions between group companies are eliminated. Unrealized
gains have been present on intercompany sales of intermediate
products.
(B) Jointly controlled entities
The REC Group’s interests in jointly controlled entities are
accounted for by proportionate consolidation. Accordingly, the
REC Group combines its share of the jointly controlled entities’
individual income and expenses, assets and liabilities and cash
flows on a line-by-line basis with similar items in the REC Group’s
financial statements. Unrealized gains on transactions between the
REC Group and its jointly controlled entities are eliminated to the
extent of REC Group’s interest in the entities. An increase in
ownership of a shareholding that becomes a jointly controlled entity
is accounted for in accordance with the requirements of IFRS 3
Business Combinations with goodwill being recognized at each step
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