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Notes to the consolidated financial
statements, REC Group
REC Annual Report 2011
requirements for financial assets. Financial assets will be
held at either fair value or amortised cost, except for equity
investments not held for trading which may be held at fair value
through equity. Requirements for financial liabilities were added
to IFRS 9 in October 2010. Most of the requirements for
financial liabilities were carried forward unchanged from IAS 39.
However, some changes were made to the fair value option for
financial liabilities to address the issue of own credit risk.
Gains and losses on own credit arising fromfinancial liabilities
designated at fair value through profit or loss will be excluded
from the statement of income and instead taken to other
comprehensive income. In December 2011, the Board amended
IFRS 9 to require application for annual periods beginning on or
after January 1, 2015 and to not require the restatement of
comparative-period financial statements upon initial application.
In November 2011, the Board tentatively decided to consider
making limited modifications to IFRS 9.
• Phase two:
Impairment methodology
. The supplementary
document
Financial Instruments: Impairment
was published in
January 2011. The comment period closed on April 1, 2011
and redeliberations are on-going.
• Phase three:
Hedge accounting
. The exposuredraft
Hedge
Accounting
was published inDecember 2010.The comment period
closedon9March2011and redeliberations have concluded.
The potential impact of the standard on the REC Group’s
consolidated financial statements has not been concluded.
However, as the REC Group accounts for a EUR convertible bond at
fair value through profit or loss, gains and losses on own credit will
according to phase one be excluded from the statement of income
and instead taken to other comprehensive income.
IAS 12
Deferred tax: Recovery of Underlying Assets - amendments
(effective from annual periods beginning on or after January 1,
2012, but not yet approved by the EU). IAS 12 requires an entity to
measure the deferred tax relating to an asset depending on whether
the entity expects to recover the carrying amount of the asset
through use or sale. It can be difficult to assess when the asset is
measured using the fair value model in IAS 40. The amendment
provides a practical solution by introducing a presumption that
recovery of the carrying amount will, normally be through sale.
The same applies to non-depreciable asset measured using the
revaluation model in IAS 16.
The evaluation is that the RECGroup has no such assets, and the
amendments should have no effect for the RECGroup.
Improvements to IFRSs
(effective for annual periods beginning on
or after January 1, 2012). The changes are primarily in order to
remove inconsistencies and to clarify the wording of standards and
interpretations. There are separate transition provisions for each
standard. These changes have limited effect for the REC Group.
IFRS 10 Consolidated Financial Statements
(effective from January
1, 2013. Earlier application is permitted, but it is not yet approved
by the EU). IFRS 10 builds on existing principles by identifying the
concept of control as the determining factor in whether an entity
should be included within the consolidated financial statements of
the parent company. IFRS 10 introduces a single control model to
assess whether an investee should be consolidated. This control
model requires entities to perform the following in determining
whether control exists;
• Identify how decisions about the relevant activities are made;
• Assess whether the entity has power over the relevant activities
by considering only the entity’s substantive rights;
• Assess whether the entity is exposed to variability in returns; and
• Assess whether the entity is able to use its power over the
investee to affect returns for its own benefit;
• Control should be assessed on a continuous basis and should be
reassessed as facts and circumstances change.
REC believes it has no significant entities for which the determination
of control is difficult to assess, and that entities that are jointly
controlled are not included in scope of IFRS 10, and as such believes
that IFRS 10will have limited effect for the RECGroup.
IFRS 11
Joint Arrangements
(effective from January 1, 2013.
Earlier application is permitted, but it is not yet approved by the
EU). The IFRS supersedes IAS 31
Interests in Joint Ventures
and
SIC‑13
Jointly Controlled Entities—Non-Monetary Contributions
by Venturers.
IFRS 11 establishes that classification of the joint
arrangement depends on whether parties have rights to and
obligations for the underlying assets and liabilities. According to
IFRS 11, joint arrangements are divided into two types, each having
its own accounting model.
• Joint operations whereby the jointly controlling parties, known
as joint operators, have rights to assets and obligations for the
liabilities, relating to the arrangement;
• Joint ventures whereby the joint controlling parties, known as
joint venturers, have rights to the net assets of the arrangement.
In terms of IFRS 11, all joint ventures will have to be equity
accounted.
The REC Group currently accounts for jointly controlled entities
(joint ventures) using proportionate consolidation. After the sale of
Sovello in the beginning of 2010, REC currently has limited jointly
controlled entities (see note 8). When implementing IFRS 11 and
IAS 28 (2011), REC Group’s jointly controlled entities need to be
accounted for according to the equity method, with restatement of
comparative figures.
IAS 28
Investments in Associates and Joint Ventures
(2011)
(effective from January 1, 2013. Earlier application is permitted,
but it is not yet approved by the EU). IAS 28 (2011) supersedes