Note 1 - Accounting policies

Dampskibsselskabet ”NORDEN” A/S with its subsidiaries is one of Denmark’s oldest internationally operating shipping companies. NORDEN operates in dry cargo and tankers worldwide.

Dampskibsselskabet ”NORDEN” A/S is a public limited company incorporated in Denmark and is listed on the OMX Nordic Exchange, Copenhagen.

The Annual Report of Dampskibsselskabet ”NORDEN” A/S for 2007 has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and additional Danish disclosure requirements for annual reports of listed companies.

The Annual Report has also been prepared in accordance with the IFRS issued by IASB.

The Annual Report for the period 1 January – 31 December 2007 with comparative figures comprises the consolidated financial statements of Dampskibsselskabet ”NORDEN” A/S and its subsidiaries and the Annual Report of the parent company.

USD is the functional currency of all enterprises in the Group as well as the parent company. In the Annual Report, USD is used as the presentation currency, and amounts are presented rounded off to the nearest USD 1,000.

Implementation of new international financial reporting standards (IAS/IFRS) and interpretations (IFRIC)

Effective as from 1 January 2007, the Group and the parent company have implemented IFRS 7 ”Financial Instruments: Disclosures” and IAS 1 (revised 2005) ”Presentation of financial statements”.

IFRS 7 ”Disclosure of financial instruments” and the changes to IAS 1 on capital disclosures have required a few additional disclosures on the Group’s and the parent company’s financial risks and capital.

The new financial reporting standards do not affect recognition or measurement and, consequently, the accounting policies are consistent with those applied last year. The new standards only result in changes to disclosures in the notes to the financial statements. Comparative figures in the notes to the financial statements have been restated. IFRIC 7, 8, 9 and 10, which became effective in 2007, are not relevant to the Group or the parent company.

New financial reporting standards (IAS/IFRS) and interpretations (IFRIC) approved

The EU has adopted the following new financial reporting standards and interpretations, which will come into force in the Company’s next financial year, and which are relevant to the Group or the parent company:

IFRS 8 ”Operating segments”, which is effective for financial years beginning on or after 1 January 2009. The Company will conduct a detailed analysis of the resulting changes to segment disclosures.
IFRIC 11 ”Group and treasury share transactions”. The interpretation, which is effective for financial years beginning on or after 1 March 2007, is not expected to affect the Group’s or the parent company’s future results or equity or result in any material changes to disclosures in the Annual Report.

IASB has approved the following new financial reporting standards and interpretations which had not been adopted by the EU at 31 December 2007 and which are deemed to be relevant to the Group or the parent company:

Amendments to IAS 1 requiring a different presentation of the consolidated financial statements.
Amendments to IAS 23 requiring borrowing costs to be included in the cost of certain assets with longer production times. The amended standard does not affect recognition or measurement, as the Group’s practice is already consistent with the standard.

The following new interpretations (IFRIC), which will come into force in the Company’s next financial year, are not relevant to the Group or the parent company:

IFRIC 12 ”Service Concession Arrangements”, which becomes effective for financial years beginning on or after 1 August 2008.
IFRIC 13 ”Customer Loyalty Programmes”, which becomes effective for financial years beginning on or after 1 July 2008.
IFRIC 14, IAS 19 ”The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction”, which becomes effective for financial years beginning on or after 1 January 2008.

In general

The Annual Report is prepared on the basis of the historical cost principle. Assets and liabilities are measured as described below in respect of each individual item.

Critical choices and judgments in the accounting policies

The Group’s choice of historical cost rather than fair value as the basis for measuring tangible assets – vessels – has a material impact on the calculation of the Group’s and the parent company’s results and equity. See the below section on ”Tangible assets” for a more detailed description of the Group’s and the parent company’s accounting policies. The fair value of vessels, based on external broker assessments, is disclosed in the note to the item ”Vessels”.

Management’s judgments of whether leases regarding vessels should be classified as financial leases or operating leases for accounting purposes are based on an overall assessment of the individual leases. A finance lease is recognised as a tangible asset and as a liability. For leases classified as operating leases, lease payments are recognised over the term of the lease. See the below section on ”Leases” for a more detailed description of the Group’s and the parent company’s accounting policies.

On recognition of freight income and income from pool arrangements upon delivery of the freight services (percentage of completion), management has made decisions as to the start and end dates of journeys, etc. See the below section on ”Revenue” for a more detailed description of the Group’s and the parent company’s accounting policies.

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