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Notes to the consolidated financial
statements, REC Group
REC Annual Report 2011
According to IFRIC 4 Determining whether an arrangement contains
a lease the REC Group may enter into an arrangement that does not
take the legal form of a lease but conveys a right to use an asset in
return for a payment or series of payments. Determining whether
an arrangement is, or contains, a lease shall be based on the
substance of the arrangement and requires an assessment of
whether: (a) fulfillment of the arrangement is dependent on the use
of a specific asset; and (b) the arrangement conveys a right to use
the asset (see note 4).
Assets held under finance leases are recognized as assets of the
RECGroup at their estimated fair values at the inception of the lease
or, if lower, at the present value of theminimum lease payments. The
leased assets are depreciated over the shorter of the useful life of
the asset or the lease term. The corresponding liability to the lessor is
included in the statement of financial position as an interest bearing
liability. Paymentsmade under operating leases (net of any incentives
received from the lessor) are charged to the statement of income on
a straight-line basis over the period of the lease.
Significant prepayments made in an operating lease for the REC
Group as the lessee are amortized over the minimum lease term and
included as a part of amortization in the statement of income.
2.22 GOVERNMENT GRANTS
Government grants are recognized at their fair values when there
is reasonable assurance that the grants will be received and the
REC Group will comply with all attached conditions (see note 21).
Government grants related to assets are presented in the
statement of financial position as a reduction to the carrying
amount of the assets and reduce depreciation in the statement of
income. Government grants relating to income are deducted in
reporting the related expenses.
2.23 STATEMENTOF CASH FLOWS
The Group presents the statement of cash flows using the indirect
method. Cash inflows and outflows are shown separately for
investing and financing activities, while operating activities include
both cash and non-cash line items. Interest received and paid and
dividends received are reported as a part of operating activities,
except interest costs capitalized as part of the construction of a non-
current asset, that are included in investing activities. The statement
of cash flows includes discontinued operations prior to their disposal.
Operating activities include all cash floweffects fromderivatives, and
the difference between the amounts reported as gains or losses in
the statement of income and net amounts paid or received is
reported in the line item “change in derivatives”. RECGroup is
sensitive to changes in currency exchange rates and recognize
currency gains and losses in the statement of income, primarily
reported by RECASA. The net currency gains or losses are split into
items estimated to relate to borrowings (finance activities), non-
current financial assets and investments (investing activities) and
unrealized gains or losses on cash and cash equivalents held at the
end of the periods. These amounts are included in the line itemunder
operating activities “currency effects not cash flowor not related to
operating activities” as an adjustment to the amount reported in the
statement of income and reclassified as relevant. The remaining
currency gains or losses are consequently included as part of
operating activities.
Investing activities include cash flows related to non-current
receivables and non-current prepayments (assets), even if these
relates to purchase or sale of goods and services.
Financing activities include cash flows related to issue of new shares,
net of costs for the capital increase. The income tax effect on these
costs does not materialize as cash flow in the same period, and is
included in the separate line under operating activities for income
taxes paid/received. Proceeds fromborrowings include prepayments
received fromcustomers on which interest is calculated. Payments of
borrowing include themain parts of payments of up-front andwaiver
loan fees and costs for loan and guarantee facilities.
2.24 ADOPTION OF NEWAND REVISED STANDARDS AND
INTERPRETATIONS
The accounting policies adopted are consistent with those of the
previous financial year. In addition, the REC Group has adopted the
following new and amended standards and interpretations issued
by the IASB and approved by the EU that are relevant to its
operations and effective for annual reporting periods beginning on
January 1, 2011, none of which has impacted the Group’s
consolidated financial statements for 2011:
• IFRS 7
Financial Instruments – Disclosure requirements for the
transfer of financial assets
• IAS 24
Related Party Disclosures – revised
• IAS 32
Financial Instruments: Presentation – Classification of
Rights Issues
• IFRIC 14
Prepayments of a Minimum Funding Requirement –
amended
• IFRIC 19
Extinguishing Financial Liabilities with Equity
Instruments
• Improvements to IFRSs issuedMay 2010
The Group has not early adopted any standards or interpretations
in 2011.
At the date of authorisation of these financial statements, the
following standards and interpretations that could affect the Group
were issued but not effective:
IFRS 9
Financial Instruments and related amendments
to IFRS 7
regarding transition (effective from January 1, 2015, but not yet
approved by the EU). The present IFRS 9 is phase one of the IASB’s
project plan for the replacement of IAS 39, that consists of three
main phases. The three phases are:
• Phase one:
Classification and measurement. IFRS 9 Financial
Instruments
was published in November 2009 and contained