Note 1 - Accounting policies (continued)

In the preparation of financial statements in accordance with IFRS, the management is required to apply estimates and assumptions that may affect the accounting policies applied as well as the carrying amounts of assets and liabilities, income and expenses. These include, among other things, estimates of the useful lives and scrap values of tangible assets and impairment losses. The carrying amounts of these items are disclosed in notes 17-20.

 

Estimates and underlying assumptions are based on historical data and a number of other factors that the management considers relevant under the given circumstances.

 

Estimates and underlying assumptions are reassessed on a regular basis. Changes to accounting estimates are recognised in the period when the estimate is changed if the change affects this period only or in the current and future periods if the change affects the current as well as future periods.

 

The consolidated financial statements comprise the parent company, Dampskibsselskabet ”NORDEN” A/S, and undertakings in which the parent company controls the operational and financial decisions, usually by directly or indirectly holding the majority of the voting rights (subsidiaries). In the determination of voting rights, share options exercisable by the Group at the balance sheet date are included.

 

On consolidation, intra-group income and expenses, shareholdings, dividends and accounts as well as unrealised intragroup gains and losses on transactions between the consolidated undertakings are eliminated.

 

The financial statements used in the consolidation are prepared in accordance with the Group’s accounting policies. The Group’s Annual Report is prepared on the basis of the financial statements of the parent company and the subsidiaries by aggregating items of a uniform nature.

 

Newly acquired or newly established undertakings are recognised in the consolidated financial statements from the date of acquisition using the purchase method. Undertakings divested or wound up are included in the consolidated income statement until the date of disposal. Comparative figures are not restated to reflect acquisitions, divestments or companies wound up.

 

Undertakings which are contractually operated jointly with one or more other undertakings (joint ventures) and which are thus jointly controlled are recognised according to the equity method.

 

Agreements to charter vessels and to lease other tangible assets where substantially all risks and rewards of ownership have been transferred to the Group and the parent company (finance leases) are recognised in the balance sheet. Vessels and other tangible assets are recognised at the delivery date at a value corresponding to the present value of the finance charges set out in the agreements, including any purchase options expected to be exercised. For the purpose of calculating the present value, the zero-coupon rate with the addition of an interest margin is used as discount factor. Vessels and other tangible assets acquired under finance leases are depreciated and written down for impairment according to the same accounting policy as assets owned by the Group.

 

The capitalised residual lease liability is recognised in the balance sheet as a liability, and the interest element of the lease payment is charged to the income statement as incurred.

 

Other agreements to charter vessels and other leases are considered operating leases. Payments in connection with operating leases are recognised in the income statement over the terms of the leases.

 

Agreements to charter out vessels on timecharters where substantially all risks and rewards of ownership have been transferred to the lessee (finance leases) are recognised as a receivable in the balance sheet. The receivable is measured in the same way as the lease liability in cases where the Group or the parent company is the lessee, as described above.

 

Other agreements to charter out vessels are considered operating leases. Payments in connection with operating leases are recognised in the income statement over the terms of the leases.

 

A functional currency is determined for each of the reporting entities in the Group. The functional currency is the currency in the primary economic environment in which the reporting entity operates. Transactions in currencies other than the functional currency are transactions in foreign currencies.

 

Transactions in foreign currencies during the year are translated at the exchange rates at the transaction date. Gains and losses arising between the exchange rate at the transaction date and the exchange rate at the date of payment are recognised in the income statement as ”Financial income” or ”Financial costs”.

 

Receivables, payables and other monetary items denominated in foreign currencies that have not been settled at the balance sheet date are translated at the exchange rates at the balance sheet date. Differences between the exchange rates at the transaction date and the exchange rates at the balance sheet date are recognised in the income statement as ”Financial income” or ”Financial costs”.