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Notes to the consolidated financial
statements, REC Group
REC Annual Report 2011
The amended IAS 19 also made some changes to the definition and
recognition of termination benefits. It clarified that benefits
payable in exchange for services are not termination benefits.
Termination benefits shall not be recognized before the earlier of
when the entity no longer is able to withdraw an offer of those
benefits and when recognizing restructuring costs.
The REC Group recognized termination benefits and restructuring
costs at the end of 2011. Some of these costs will be incurred in
2012 for conducting the restructuring and close downs of the cell
and parts of the wafer production activities in Norway, both costs
for employees and for external parties. The REC Group’s current
interpretation is that these services to be performed in 2012 in
relation to the restructurings do not provide any future economic
benefits, as they are to perform the close down of the operations,
and as such should not be deferred according to the amended
IAS 19. Assuming this current evaluation is correct, the REC Group’s
current evaluation is that the amendments to IAS 19 in relation to
termination benefits should not have significant effects on the
financial statements as of December 31, 2011.
Amendments to IAS 1
Presentation of Financial Statements
(effective for financial years beginning on or after July 1, 2012.
Earlier application is permitted, but it is not yet approved by the EU).
The amendments to IAS 1 require companies preparing financial
statements in accordancewith IFRSs to group together items within
other comprehensive income that may be reclassified to the profit or
loss section of the statement of income. The changes do not address
the issue of which items of income and expense should be included in
profit or loss or other comprehensive income.
The preliminary evaluation is that the RECGroup expects tomake
some adjustments in its presentation of other comprehensive income
at implementation of the amended IAS 1.
Amendments to IAS 32
Financial Instruments- Presentation:
Offsetting Financial Assets and Financial Liabilities
(effective
for annual periods beginning on or after January 1, 2014. Earlier
application is permitted, but it is not yet approved by the EU).
The amendments clarify:
• The meaning of ‘currently has a legally enforceable right of
set-off’; and
• That some gross settlement systems may be considered
equivalent to net settlement.
The preliminary evaluation is that these clarifications have no
significant effect for the REC Group.
Amendments to IFRS 7
Financial Instruments – Disclosures:
Offsetting Financial Assets and Financial Liabilities
(effective
retrospectively for annual reporting periods beginning on or after
January 1, 2013, and interim periods within those annual periods.
Earlier application is permitted, but it is not yet approved by the
EU). It amends the required disclosures to include information that
will enable users of an entity’s financial statements to evaluate the
effect or potential effect of netting arrangements, including rights
of set-off associated with the entity’s recognised financial assets
and recognised financial liabilities, on the entity’s financial position.
The preliminary evaluation is that these amendments have no
significant effect for the REC Group.
The management anticipates that these standards and
interpretations will be adopted at the dates stated above provided
that the standards and interpretations are approved by the EU.
FINANCIAL RISK MANAGEMENT
3.1 FINANCIAL RISK FACTORS
The REC Group’s activities expose it to a variety of financial risks,
including currency risk, interest-rate risk, liquidity risk, credit risk,
refinancing risk and others.
The goals for the REC Group finance policy and the treasury
operations are primarily to minimize the risk for financial distress,
secure long term funding, reduce refinancing risk, hedge currency
risk of expected future net cash flows and manage interest rate
risk. REC’s finance policy sets the framework and limits for hedging
activities in the REC Group. It defines risk management objectives,
responsibilities and operational requirements. The REC Group
finance policy was revised in December 2011 with limited changes
from2010.
All hedging transactions are undertaken in order to reducing
negative impacts of changes in financial markets on net cash flow.
The RECGroup uses financial instruments to hedge net exposures
arising fromoperating, financing and investment activities. The
RECGroup has centralized its treasury function to RECASA. By
concentrating financial management and operations in RECASA,
economies of scale and better control of financial risks are achieved.
The disclosures that are required regarding financial risks below
focus on the risks that arise fromfinancial instruments and how
they have been managed. However, frommanagement’s perspective
some of the financial instruments, especially currency derivatives,
are entered into with the purpose of reducing risks from
commercial transactions while the existence of these financial
instruments expose the company for risks.
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