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Notes to the consolidated financial
statements, REC Group
REC Annual Report 2011
of the acquisition when applicable (see note 2.7). Subsequent to
the sale of Sovello AG in 2010 and the reporting of the same as
discontinued operations (see note 9), REC has only limited interests
in jointly controlled entities in the PV systems area (see note 8).
(C) Associates
Associates are entities over which the REC Group has significant
influence but not control or joint control, generally encompassing a
shareholding of between 20 percent and 50 percent of the voting
rights. Investments in associates are accounted for by the equity
method of accounting and are initially recognized at cost (see note
2.7). The REC Group’s share of its associates’ post-investment
profits or losses and amortization and impairment of fair value
adjustments are recognized in the statement of income. The
cumulative post-investment movements are adjusted against the
carrying amount of the investment. When the REC Group’s share
of losses in an associate equals or exceeds its interest in the
associate, including any other unsecured receivables, the
REC Group does not recognize further losses, unless it has
incurred obligations or made payments on behalf of the associate.
Unrealized gains on transactions between the REC Group and its
associates are eliminated to the extent of the REC Group’s interest
in the associates. The only associate of any significance for the
periods presented is Mainstream Energy Inc. (see note 8).
2.3 SEGMENT REPORTING
An operating segment is a distinguishable component of the
REC Group that is engaged in providing products that are subject to
risks and returns that are different from those of other operating
segments; this also corresponds to the internal management
reporting in the REC Group. The GroupManagement is headed
by the Chief Executive Officer (CEO), and the CEO is the one that
makes decisions across segments. Consequently, REC regards
the CEO as the chief operating decision maker. Geographical
information breakdown is based on the REC Group’s major markets
and site locations (see note 5).
2.4 FOREIGN CURRENCYTRANSLATION
(A) Functional and presentation currency
Items included in the financial statements of each of the
REC Group’s entities are measured using the currency of the
primary economic environment in which the entity operates (“the
functional currency”). The consolidated financial statements are
presented in NOK which is the parent company’s functional and
presentation currency.
(B) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Monetary assets and liabilities denominated in
foreign currencies are translated at the reporting date exchange
rates. Foreign exchange gains and losses resulting from the
settlement or the translation of monetary assets and liabilities are
recognized in the statement of income, except when deferred in
equity as qualifying cash flow hedges, qualifying net investment
hedges or as a part of a net investment.
(C) Group companies
The results and financial position of all the REC Group entities that
have a functional currency different from the presentation currency
are translated into the presentation currency as follows:
(i) Assets and liabilities for each statement of financial position
presented are translated at the closing rate;
(ii) Income and expenses for each statement of income are
translated at average exchange rates for the year; and
(iii) All resulting exchange differences from translation are recognized
as a separate component of other comprehensive income (OCI).
On consolidation, exchange differences arising from the translation
of the net investment in foreign entities, includingmonetary items
that are regarded as a part of the net investment, and of borrowings
and other currency instruments designated as hedges of such
investments, are included in other comprehensive income (OCI).
When a foreign operation is disposed, such exchange differences are
recognized in the statement of income as part of the gain or loss on
sale. The RECGroup did not at December 31, 2011 or 2010 hold any
borrowings or other currency instruments accounted for as net
investment hedges. At December 31, 2011 and 2010, REC regarded
approximately USD130million loans to RECSilicon as a part of the
net investment in RECSilicon.
2.5 CURRENT/NON-CURRENT
An asset/liability is classified as current when it is expected/due to
be realized or settled within 12months after the reporting date.
2.6 PROPERTY, PLANT AND EQUIPMENT
Land and buildings consist primarily of operating plants and offices.
All property, plant and equipment are stated at historical cost less
accumulated depreciation and un-reversed impairment losses.
Historical cost includes expenditures that are directly attributable
to the acquisition, construction or installation of the items.
Subsequent costs are included in the asset’s carrying amount or
recognized as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the REC Group and the cost of the item can be measured
reliably. All other costs are charged to the statement of income
during the financial period in which they are incurred. Borrowing
costs incurred for the construction of any qualifying asset are
capitalized during the period of time that is required to complete
and prepare the asset for its intended use. For the REC Group,
capitalization of borrowing costs is limited to the total amount of
external borrowing costs incurred for the parent company and
subsidiaries during the relevant periods. Land is not depreciated.
Depreciation on other assets is calculated using the straight-line
method, to their residual values over their estimated useful lives.
The assets’ residual values, if any, depreciation method and useful
lives are reviewed at least annually and related depreciation rates
are adjusted prospectively. Depreciation commences when the
assets are ready for their intended use.