Illustrative condensed interim financial report

Transcription

1 IFRS Illustrative condensed interim financial report May 2012 kpmg.com/ifrs

2 Contents Independent auditors report on review of interim financial information 5 Condensed consolidated interim financial report Condensed consolidated statement of financial position 9 Condensed consolidated statement of comprehensive income singlestatement approach 11 Condensed consolidated statement of changes in equity 15 Condensed consolidated statement of cash flows 21 Notes to the condensed consolidated interim financial report 25 Appendices I Condensed consolidated income statement and condensed consolidated statement of comprehensive income twostatement approach 61 II Condensed consolidated statement of comprehensive income quarterly reporter 65 III Example disclosures for distributions of noncurrent assets and noncurrent liabilities to owners 69 IV Example disclosures for governmentrelated entities under IAS 24 Related Party Disclosures 71 V Example disclosures for entities that early adopt IAS 19 Employee Benefits (June 2011) 75 VI Example disclosures for entities that early adopt IFRS 9 Financial Instruments (October 2010) 79 Technical guide 92

3 Illustrative condensed interim financial report 1 What s new? This illustrative interim financial report has been updated to take account of Deferred Tax: Recovery of Underlying Assets Amendments to IAS 12, which is effective for annual periods beginning on or after 1 January In addition, the IASB issued several amendments to its standards during the past year, which are not yet effective for annual periods beginning on 1 January 2012 but are available for early adoption. Two new appendices are therefore introduced to illustrate disclosures for entities that early adopt IAS 19 Employee Benefits (June 2011) and IFRS 9 Financial Instruments (October 2010), which has been updated to reflect Mandatory Effective Date and Transition Disclosures Amendments to IFRS 9 and IFRS 7. Major changes compared to the previous edition of this publication are highlighted by a double line running down the left margin of the text within this publication.

4 2 Illustrative condensed interim financial report This page has been left blank intentionally.

5 Illustrative condensed interim financial report 3 About this publication Content This publication helps you in preparing condensed consolidated interim financial reports in accordance with IFRS in particular, IAS 34 Interim Financial Reporting. It illustrates one possible format based on a fictitious multinational corporation involved in general business; the corporation is not a firsttime adopter of IFRS (see technical guide at the end of this publication). It is based on standards and interpretations that have been issued by the IASB by 20 May 2012 and that are required to be applied by an entity with an annual reporting period beginning on 1 January 2012 ( currently effective requirements). IFRSs that are effective for annual periods beginning after 1 January 2012 have not been adopted early. However, example disclosures for the early adoption of IAS 19 Employee Benefits (June 2011) and IFRS 9 Financial Instruments (October 2010) are included in appendices V and VI respectively. This publication focuses on compliance with IAS 34, but does not repeat all of that standard s requirements and related implementation guidance. In addition, IFRSs other than IAS 34 are not discussed in this publication, except in the context of disclosure in interim financial reports. The impacts of any requirements that may result from exposure drafts or other current projects of the IASB or the IFRS Interpretations Committee are not illustrated. This publication does not consider legal or regulatory requirements for interim financial reports. An entity should consider its local legal and regulatory requirements, which may require additional disclosures to be made in interim financial reports. For example, IFRS does not require the parent entity to present separate financial statements, and this illustrative interim financial report includes only consolidated interim financial information. However, in some jurisdictions parent entity interim financial information may also be required. IAS 34 addresses only the financial statement component of an interim report, and this publication illustrates only that component. However, an interim report will typically include at least some additional commentary by management, either in accordance with local laws and regulations or at the election of the entity. Although this illustrative interim financial report helps to understand international reporting requirements, it is not intended to be seen as a complete and exhaustive summary of all disclosure requirements that are applicable under IFRS. Also, it should not be used as a substitute for referring to the standards and interpretations themselves, particularly when a specific requirement is not addressed in this publication or when there is uncertainty regarding the correct interpretation of an IFRS. References The illustrative interim financial report is presented on the oddnumbered pages of this publication. The evennumbered pages contain explanatory comments and notes. The interim financial report also includes references to Insights into IFRS (8 th edition). References in the lefthand margin identify the relevant paragraphs of the standards and interpretations e.g. IAS is IAS 34 paragraph 15. Generally, the references relate only to disclosure requirements. Halfyear vs quarterly interim report This illustrative interim financial report assumes that the entity prepares a halfyear interim report, but does not prepare quarterly interim reports. If the entity illustrated in this publication also prepared quarterly interim reports, then an additional statement of comprehensive income for the period from 1 April to 30 June 2012 (and comparatives for the period from 1 April to 30 June 2011) would have been presented. Appendix II includes an example condensed consolidated statement of comprehensive income for a quarterly reporter.

6 4 Illustrative condensed interim financial report Explanatory note 1. The report on review of condensed consolidated interim financial information has been prepared based on International Standards on Review Engagements 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity. The format of the report does not reflect any other requirements in the legal framework of particular jurisdictions.

7 Illustrative condensed interim financial report 5 Independent auditors report on review of interim financial information 1 [Addressee] [Name] Introduction We have reviewed the accompanying condensed consolidated statement of financial position of [name of company] as at 30 June 2012, the condensed consolidated statements of comprehensive income, changes in equity and cash flows for the six month period then ended, and notes to the interim financial information ( the condensed consolidated interim financial information ). Management is responsible for the preparation and presentation of this condensed consolidated interim financial information in accordance with IAS 34 Interim Financial Reporting. Our responsibility is to express a conclusion on this condensed consolidated interim financial information based on our review. Scope of review We conducted our review in accordance with the International Standard on Review Engagements 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial information as at 30 June 2012 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting. KPMG [Date of report] [Address]

8 6 Illustrative condensed interim financial report This page has been left blank intentionally.

9 Illustrative condensed interim financial report 7 [Name] Condensed consolidated interim financial report 30 June 2012

10 8 Illustrative condensed interim financial report Explanatory notes 1. When an interim financial report is unaudited, this fact may, in practice, be disclosed. This may also be a requirement in some jurisdictions. 2. IAS 1.BC33, 34.8, 16A(a), 20 The minimum components of a condensed interim financial report do not include a statement of financial position as at the beginning of the earliest comparative period when comparative information is restated following a retrospective change in accounting policy, correction of an error or reclassification of items. However, disclosure is required in respect of a change of accounting policy or a material prior period error. This issue is discussed in our publication Insights into IFRS ( ). 3. Although not mentioned specifically in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, the standard s implementation guidance shows the restated comparative financial information with the heading restated. In our view, this is necessary to highlight that the comparative financial information is not the same as the financial information published previously. This issue is discussed in our publication Insights into IFRS ( ). In some cases, it may be appropriate to change the classification or presentation of items in the interim financial report even though there has been no change in accounting policy in order to achieve a more appropriate presentation. In such cases, the comparatives are restated unless impracticable, and appropriate explanatory disclosures are included in the interim financial report. This issue is discussed in our publication Insights into IFRS (2.8.70). 4. IAS Although not specifically required by IAS 34, in our view noncurrent assets or assets and liabilities of a disposal group classified as held for sale or distribution at the end of the interim reporting period are presented separately from other assets and liabilities in the condensed interim statement of financial position. This issue is discussed in our publication Insights into IFRS ( ). IFRS 5.38, 40, IAS 1.66 Comparatives are not restated to reflect classification as held for sale at the end of the current reporting period. In our view, noncurrent assets, assets of disposal groups and liabilities of disposal groups classified as held for sale or distribution are classified as current in the statement of financial position, because they are expected to be realised within 12 months of the date of classification as held for sale or distribution. Consequently, the presentation of a three column statement of financial position with the headings of: Assets/Liabilities not for sale ; Assets/Liabilities held for sale ; and Total would not generally be appropriate if the assets and liabilities held for sale continued to be included in noncurrent line items. This issue is discussed in our publication Insights into IFRS ( ).

11 Illustrative condensed interim financial report 9 IAS 34.8(a), 10, Condensed consolidated statement of financial position 1, 2 20(a) 30 June 31 December In thousands of euro Note Restated* 3 Assets Property, plant and equipment 13 24,235 31,049 Intangible assets and goodwill 14 6,290 4,661 Biological assets 7,629 8,716 Trade and other receivables 171 Investment property 1,405 1,050 Equityaccounted investees 1,791 1,558 Other investments, including derivatives 3,767 3,525 Deferred tax assets 1,568 1,376 Employee benefits Noncurrent assets 47,156 52,666 Inventories 11 12,005 12,119 Biological assets Other investments, including derivatives 267 1,032 Current tax assets 228 Trade and other receivables 21,700 17,999 Prepayments 1,200 Cash and cash equivalents 2,356 1,850 IFRS 5.38, 40 Assets held for sale ,891 Current assets 49,375 34,568 Total assets 96,531 87,234 Equity Share capital 15 14,979 14,550 Share premium 15 4,777 3,500 Reserves 1, Retained earnings 16,141 14,006 Equity attributable to owners of the Company 37,067 32,505 Noncontrolling interests 1, Total equity 38,319 33,347 Liabilities Loans and borrowings 16 19,218 19,206 Derivatives 5 Employee benefits 17, Deferred income/revenue 1,172 1,462 Provisions 19 1, Other payables Deferred tax liabilities 2,587 1,567 Noncurrent liabilities 24,935 23,481 Bank overdraft Current tax liabilities 209 Loans and borrowings 16 6,559 4,386 Trade payables 22,531 24,363 Other payables 20 7 Deferred income/revenue Provisions 9, ,200 IFRS 5.38, 40 Liabilities held for sale 4 8 3,650 Current liabilities 33,277 30,406 Total liabilities 58,212 53,887 Total equity and liabilities 96,531 87,234 * See notes 3 and 7. The notes on pages 25 to 59 are an integral part of this condensed consolidated interim financial report.

12 10 Illustrative condensed interim financial report Explanatory notes 1. IAS 34.8(b), 8A, 20(b) A condensed statement of comprehensive income is presented either in: one statement i.e. a condensed statement of comprehensive income; or two statements i.e. a condensed separate income statement, displaying components of profit or loss, and a condensed statement of comprehensive income, beginning with profit or loss and displaying components of other comprehensive income. The presentation of comprehensive income should be consistent between the interim financial report and the annual financial statements. Appendix I provides an illustration of the twostatement approach. IAS 34.10, 1.99 The condensed statement of comprehensive income includes, at the minimum, each of the headings and subtotals that were included in the most recent annual financial statements. An entity presents in its annual financial statements an analysis of expenses recognised based on either their function or their nature. In this interim financial report, this analysis is based on functions within the entity; this is because the entity s most recent annual financial statements also presented the analysis by function. 2. IFRS 5.30, IAS 34.10, 15C Although not specifically required by IAS 34, in our view operations that are: discontinued at the end of the interim period; or disposed of during the interim period are presented separately in the condensed statement of comprehensive income, following the principles in IFRS 5 Noncurrent Assets Held for Sale and Discontinued Operations. This issue is discussed in our publication Insights into IFRS ( ). 3. IAS 1.82(g), (h) An entity presents each component of other comprehensive income by nature. The only exception to this principle relates to equityaccounted investees. An entity s share of other comprehensive income of an equityaccounted investee is presented as a single line item, separately from the other components of other comprehensive income. 4. IAS 1.94 An entity may present reclassification adjustments either in the statement of comprehensive income or in the notes. In this interim financial report, we have illustrated the first approach. 5. IAS 34.16A(d), C4 IAS , BC58, BC6064 (June 2011), 34.28, 29 An entity may elect to recognise actuarial gains and losses in other comprehensive income in the periods in which they occur. If an entity elects to recognise actuarial gains and losses in other comprehensive income and does not update its actuarial valuation at the end of the interim reporting period, then it should disclose the reason why no actuarial gains and losses are recognised in the interim period. This issue is discussed in our publication Insights into IFRS ( ). When IAS 19 Employee Benefits was revised in 2011, the IASB decided not to make any amendments regarding interim reporting. However, it clarified that full remeasurement of plan assets and the defined benefit obligation is not always required in each interim period under the current IAS 19 and IAS 34, since both standards indicate that an entity needs to exercise judgement in determining whether such a remeasurement is required. The IASB notes that entities recognising actuarial gains and losses in full immediately are more likely to judge that remeasurement is required for interim reporting than those deferring recognition of some gains and losses. Furthermore, the IASB notes that to update the assumptions at any interim remeasurement would be inconsistent with the requirements of IAS 34. In particular, under IAS 34 the frequency of reporting should not affect the measurement of the entity s annual amounts. The amendments clarify that the starting point for the calculations is the start of the annual period. These issues are discussed in our publication First Impressions: Employee Benefits (July 2011). In this interim financial report, the actuarial valuation of the defined benefit plan is updated due to a curtailment, and limited note disclosure is provided. The appropriate level of disclosure for an interim reporting period may vary depending on the materiality of the changes in the actuarial valuation. 6. IAS 1.91 Individual components of other comprehensive income may be presented either: net of related tax effects; or before related tax effects with an aggregate amount presented for income tax. In this interim financial report, we have illustrated the latter approach.

13 Illustrative condensed interim financial report 11 Condensed consolidated statement of comprehensive income 1 IAS 34.8(b)(i), 10, 20(b) For the six months ended 30 June In thousands of euro Note Restated* Continuing operations Revenue 52,536 51,593 Cost of sales 11, 13, 14, 19 (31,460) (31,920) Gross profit 21,076 19,673 Other income Selling and distribution expenses (7,698) (7,498) Administrative expenses 9 (8,474) (8,358) Research and development expenses (605) (349) Other expenses 8, 9, 10 (710) Results from operating activities 4,209 3,658 Finance income Finance costs (880) (1,004) Net finance costs (424) (659) Share of profit of equityaccounted investees, net of tax Profit before tax 5 4,018 3,277 Tax expense 12 (1,147) (744) Profit from continuing operations 2,871 2,533 Discontinued operation 2 Profit (loss) from discontinued operation, net of tax (422) Profit for the period 3,250 2,111 Other comprehensive income Foreign currency translation differences foreign operations Share of other comprehensive income of equityaccounted investees 3 10 Net loss on hedge of net investment in foreign operation (3) (8) Revaluation of property, plant and equipment 200 Effective portion of changes in fair value of cash flow hedges (93) 97 Net change in fair value of cash flow hedges reclassified to profit or loss 4 (17) (11) Net change in fair value of availableforsale financial assets Net change in fair value of availableforsale financial assets reclassified to profit or loss (47) Defined benefit plan actuarial gains (losses) 5 72 (15) Income tax on other comprehensive income 6 (104) (48) Other comprehensive income for the period, net of tax Total comprehensive income for the period 3,924 2,530 * See notes 3 and 7. The notes on pages 25 to 59 are an integral part of this condensed consolidated interim financial report.

14 12 Illustrative condensed interim financial report Explanatory notes 1. IAS 33.2(b), An entity within the scope of IAS 33 Earnings per Share i.e. whose ordinary shares or potential ordinary shares are publicly traded or which is in the process of issuing ordinary shares in a public market presents basic and diluted earnings per share for an interim period in the statement that presents the components of profit or loss for that period. The additional disclosure requirements of IAS 33 are not specifically required in interim financial reports. 2. Although not specifically required, in this interim financial report we have illustrated: the earnings per share from continuing operations on the face of the condensed consolidated statement of comprehensive income; and the earnings per share from discontinued operations in the notes (see note 7). The appropriate level of disclosure for an interim reporting period may vary depending on materiality. This issue is discussed in our publication Insights into IFRS ( ).

15 Illustrative condensed interim financial report 13 IAS 34.8(b)(i), 10, 20(b) Condensed consolidated statement of comprehensive income (continued) For the six months ended 30 June In thousands of euro Note Restated* Profit attributable to: Owners of the Company 3,053 2,023 Noncontrolling interests Profit for the period 3,250 2,111 Total comprehensive income attributable to: Owners of the Company 3,703 2,396 Noncontrolling interests Total comprehensive income for the period 3,924 2,530 Earnings per share 1 IAS Basic earnings per share (euro) IAS Diluted earnings per share (euro) Earnings per share continuing operations 2 Basic earnings per share (euro) Diluted earnings per share (euro) * See notes 3 and 7. The notes on pages 25 to 59 are an integral part of this condensed consolidated interim financial report.

16 14 Illustrative condensed interim financial report Explanatory notes 1. IAS 1.106(b) When a change in accounting policy (either voluntarily or as a result of the initial application of a standard or an amendment) affects the current period or any prior period, an entity presents the effects of retrospective application or retrospective restatement recognised in accordance with IAS 8 in the statement of changes in equity. The illustrative examples to IAS 1 Presentation of Financial Statements illustrate this in relation to a change in accounting policy; our publication Insights into IFRS ( ) illustrates this in relation to an error. 2. IFRS 2 Sharebased Payment does not specifically address how sharebased payment transactions are presented within equity e.g. whether an increase in equity in connection with a sharebased payment transaction should be presented in a separate line item within equity or within retained earnings. In our view, either approach would be allowed under IFRS. In this interim financial report, the increase in equity recognised in connection with a sharebased payment transaction is presented within retained earnings. This issue is discussed in our publication Insights into IFRS ( ).

17 Illustrative condensed interim financial report 15 IAS 34.8(c), 10, 20(c) Condensed consolidated st atement of c hanges in equit y F or the six months ended 30 J une At tr ibutable t o o wners of the Compan y In thousands of euro Not e Shar capital e pr Shar e emium alua T ranslation reserve Hedging r eserv e r F air v alue eserv e Rev tion reserv e Reserv e for o wn shar es Con v ertible not es Retained ear nings T otal Noncon tr olling int er ests T otal equity B alance at 1 J anuar y , as pre viously reported Impact of c hange in accounting policy Restat ed balance at 1 J anuary ,550 4,550 3,50 3, (1 29) (129) , , , , , ,573 T otal comprehensiv the period e income f P rofit f or the period, as rest ated T ot al other comprehensiv e income Total compr ehensiv e income f or the per iod or ,023 (1 0) 2, , , , ,530 T ransactions with o wner s of the Company, recognised directl y in eq uity Dividends to o wners of the Compan y Sharebased pa yment transactions 2 Total tr ansactions with o wners of the Compan y Restat ed balance at 30 June , ,500 ( ) (351) 12,262 ( ) (351) 31, ( ) (351) 31,752 The notes on pages 25 to 59 are an integral part of this condensed consolidated interim financial report.

18 16 Illustrative condensed interim financial report Explanatory note 1. IFRS does not mandate a specific method of presenting treasury shares within equity. Local laws may prescribe the allocation method. Therefore, an entity should take into account its legal environment when choosing how to present its own shares within equity. Whichever method is selected, it should be applied consistently to all treasury shares. In this interim financial report, treasury shares are presented in a separate category of equity. This issue and other presentation alternatives are discussed in our publication Insights into IFRS ( ). In addition, depending on the legislation of the jurisdiction in which an entity is domiciled, an entity may or may not be allowed to recognise a portion of the treasury shares transaction against share premium. In this interim financial report, we have assumed that recognising a portion of the transaction against share premium is allowed.

19 Illustrative condensed interim financial report 17 IAS 34.8(c), 10, 20(c) Condensed consolidated st atement of c hanges in equit y (continued) F or the six months ended 30 J une 2012 At tr ibutable t o o wners of the Compan y In thousands of euro Not e Shar e capital pr Share emium alua T r anse lation reserv Hedging reserv e r Fair v alue eserve Rev r Nonconests tr olling inter tion eserv e Reserve for o shar wn es Con v not er t ible es Retained ear nings T otal T otal equity B alance at 1 J anuar y , as pre viously reported Impact of c hange in accounting policy Restat ed balance at 1 J anuary ,550 14,550 3,50 3, (280) (280) 13, ,006 32, , , ,347 T otal comprehensiv e income f the period P rofi t for the period T ot al other comprehensiv e income Total compr ehensiv e income f or the per iod or (89) (89) , , , , , ,924 T ransactions with o wner s of the, recognised directl y Compan in eq Contr to o y uity ibutions b y and distr ibutions wners of the Compan y y shares related to Issue of ordinar business combinations Issue of ordinar y shares Issue of con vertible notes, net of t ax O wn shares sold Dividends to o wners of the Compan y Sharebased pa yment transactions Share options e xercised Total contr ibutions b y and distr ibutions to o wners of the Compan y , , (1,243) 361 (882) 87 1, (1,243) , (1,243) T he notes on pages 25 to 59 are an integral part of this condensed consolidated interim financial report.

20 18 Illustrative condensed interim financial report This page has been left blank intentionally.

21 Illustrative condensed interim financial report 19 IAS 34.8(c), 10, 20(c) Condensed consolidated st atement of c hanges in equit y (continued) F or the six months ended 30 J une 2012 At tr ibutable t o o wners of the Compan y In thousands of euro Not e Shar e capital pr Share emium r Rev aluation r eserv e Transeserve lation Hedging reserv e r F air v alue eserv e Noncon Reserv e for o wn shar es Con v er t ible not es Retained ear nings T otal tr olling inter ests T otal equity es in o wnership int er ests in ies cquisition of noncontrolling interests Chang subsidiar A without a c y with hange in control cquisition of subsidiar noncontrolling interests A Total c hang es in o wnership int in subsidiar ies T otal tr ansactions with o wners of the Company Balance at 30 June er ests ,979 1,277 4, (269) (93) (93) (967) 16,141 (85) (85) ,067 (115) ,252 (200) ,048 38,319 The notes on pages 25 to 59 are an integral part of this condensed consolidated interim financial report.

22 20 Illustrative condensed interim financial report Explanatory notes 1. In this interim financial report, we have presented cash flows from operating activities using the indirect method, whereby profit or loss is adjusted for the effects of: noncash transactions; accruals and deferrals; and items of income or expense associated with investing or financing cash flows. An entity may also present operating cash flows using the direct method, disclosing major classes of gross cash receipts and payments related to operating activities. An example of such presentation is illustrated in Appendix II to our publication Illustrative financial statements (September 2011). 2. IAS 7.22 Cash flows from operating, investing or financing activities may be reported on a net basis if: the cash receipts and payments are on behalf of customers and the cash flows reflect the activities of the customer; or when the cash receipts and payments for items concerned turn over quickly, the amounts are large and the maturities are short. 3. IAS 7.18, 20, App A For an entity that elects to present operating cash flows using the indirect method, there is often confusion about the correct starting point: should it be profit or loss, or can a different figure, such as profit before income tax, be used? IAS 7 Statement of Cash Flows refers to profit or loss, but the example provided in the appendix to the standard starts with a different figure i.e. profit before tax. Because an appendix is illustrative only and therefore does not have the same status as the standard, it would be more appropriate to follow the standard. This issue is discussed in our publication Insights into IFRS ( ). 4. IAS 7.31 IFRS does not specify the classification of cash flows from interest and dividends received and paid. An entity is required to choose its own policy for classifying: interest and dividends paid as either operating or financing activities; and interest and dividends received as either operating or investing activities. The presentation selected is applied consistently. This issue is discussed in our publication Insights into IFRS (2.3.50). 5. In our view, to the extent that borrowing costs are capitalised in respect of qualifying assets, the cost of acquiring those assets, which would include borrowing costs, should be split in the statement of cash flows. In such circumstances, the interest paid will be included in operating or financing activities, depending on the entity s accounting policy for presenting interest paid in the statement of cash flows. This is consistent with the requirement to classify separately the different components of a single transaction. This issue is discussed in our publication Insights into IFRS ( ). 6. IAS 7.35 Taxes paid are classified as operating activities unless it is practicable to identify them with, and therefore classify them as, financing or investing activities. This issue is discussed in our publication Insights into IFRS ( ). 7. In this interim financial report, we have presented a condensed consolidated statement of cash flows that includes an analysis of all cash flows in total i.e. including both continuing and discontinued operations. Amounts related to discontinued operations by operating, investing and financing activities are disclosed in the notes (see note 7). However, in our view cash flows from discontinued operations may be presented in other ways. This issue is discussed in our publication Insights into IFRS ( ). 8. In some cases, significant judgement may be needed to classify certain cash flows that relate to business combinations. In particular, an entity may need to consider: whether the cash flow relates to obtaining control; and whether the expenditure results in a recognised asset in the statement of financial position. This issue is discussed in our publication Insights into IFRS ( ).

23 Illustrative condensed interim financial report 21 IAS 34.8(d), 20(d) Condensed consolidated statement of cash flows 1, 2 For the six months ended 30 June In thousands of euro Note Restated* Cash flows from operating activities Profit for the period 3 3,250 2,111 Adjustments for: Depreciation 2,435 2,490 Amortisation of intangible assets (Reversal of) impairment losses on property, plant and equipment 13 (393) 643 Impairment losses on intangible assets and goodwill Reversal of impairment losses on intangible assets and goodwill 14 (100) Impairment losses on remeasurement of disposal group 8 25 Change in fair value of biological assets 67 (30) Net increase in biological assets due to births (7) (8) Change in fair value of investment property (55) (50) Net finance costs Share of profit of equityaccounted investees, net of income tax (233) (278) Gain on sale of property, plant and equipment 13 (26) (25) Gain on sale of discontinued operation, net of income tax 7 (516) Equitysettled sharebased payment transactions Gain on curtailment 18 (100) Income tax expense 1, ,665 6,740 Change in: inventories (3,012) 1,215 trade and other receivables (117) 2,126 prepayments 1,200 (1,200) trade and other payables (841) (1,765) provisions and employee benefits, excluding gain on curtailment (735) 132 deferred income/revenue, including government grant (420) Cash generated from operating activities 2,740 7,248 Interest paid 4, 5 (920) (800) Income taxes paid 6 (200) (950) Net cash from operating activities 1,620 5,498 Cash flows from investing activities Interest received Dividends received Proceeds from sale of property, plant and equipment 1, Proceeds from sale of investments Disposal of discontinued operation, net of cash disposed of ,890 Acquisition of subsidiary, net of cash acquired 8 9 (2,125) Acquisition of property, plant and equipment 13 (11,983) (2,315) Acquisition of investment property (300) Plantations and acquisition of noncurrent biological assets (155) (219) Acquisition of other investments (215) Development expenditure (846) (881) Net cash used in investing activities (2,895) (2,465) * See notes 3 and 7. The notes on pages 25 to 59 are an integral part of this condensed consolidated interim financial report.

24 22 Illustrative condensed interim financial report Explanatory notes 1. IAS 7.16(h) When a hedging instrument is accounted for as a hedge of an identifiable position, the cash flows of the hedging instrument are classified in the same manner as the cash flows of the position being hedged. This issue is discussed in our publication Insights into IFRS ( ). 2. See explanatory note 4 on page 20.

25 Illustrative condensed interim financial report 23 Condensed consolidated statement of cash flows (continued) IAS 34.8(d), 20(d) For the six months ended 30 June In thousands of euro Note Restated* Cash flows from financing activities Proceeds from the issue of share capital 15 1,550 Proceeds from the issue of convertible notes 16 5,000 Proceeds from the issue of redeemable preference shares 16 2,000 Proceeds from the sale of own shares 30 Proceeds from exercise of share options Proceeds from settlement of derivatives Payment of transaction costs related to loans and borrowings 16 (311) Acquisition of noncontrolling interests 9 (200) Repayment of borrowings 16 (4,811) (3,408) Payment of finance lease liabilities 16 (130) (123) Dividends paid 2 15 (1,243) (524) Net cash from (used in) financing activities 1,941 (4,044) Net increase (decrease) in cash and cash equivalents 666 (1,011) Cash and cash equivalents at 1 January 1,568 2,226 Effect of exchange rate fluctuations on cash held 2 7 Cash and cash equivalents at 30 June 2,236 1,222 * See notes 3 and 7. The notes on pages 25 to 59 are an integral part of this condensed consolidated interim financial report.

26 24 Illustrative condensed interim financial report Explanatory notes 1. IAS An interim financial report is prepared on a consolidated basis if the most recent annual financial statements were prepared on a consolidated basis. If the most recent annual report included the parent s separate financial statements, then an entity is neither required to include nor prohibited from including separate financial statements of the parent in its interim financial report. 2. IAS 1.4, 25, 10.16(b), An entity discloses explanations of events and transactions that are significant to understanding the changes in its financial position and performance since the end of the last annual reporting period. It considers whether it is relevant to disclose the adoption of a going concern basis in its interim financial report. Taking account of specific requirements in its jurisdiction, an entity discloses any material uncertainties related to events or conditions that may cast significant doubt upon its ability to continue as a going concern, whether they arise during the period or after the end of the reporting period. See Appendix V to our publication Illustrative financial statements (September 2011) for example disclosures for entities that require going concern disclosures. 3. IAS 34.3 To state compliance with IAS 34, an interim financial report must comply with all of the requirements of the standard. 4. IAS Unlike in a complete set of financial statements, for condensed interim financial reports there is no explicit requirement to disclose: the date on which the condensed interim financial report was authorised for issue; and who gave such authorisation. However, such disclosure may be required by local laws. It may be relevant to a user s understanding to disclose the date of authorisation in the condensed interim financial report, since any event that occurs after that date is not disclosed or adjusted in the condensed interim financial report of the current interim period. 5. IAS 34.26, 35, 36 Revisions to accounting estimates are recognised: in the interim period in which the estimate is revised, if the revision affects only that period; or in the period of the revision and future periods, if the revision affects both current and future periods. Prior interim periods are not restated. Material changes are disclosed. Any significant changes in estimates made during the final interim period of a financial year should be disclosed in the annual financial statements for that financial year, unless a separate interim financial report is published for this period. 6. IAS 34.16A(d), IAS 34.16A(a), 28 An entity discloses the nature and amount of material changes in estimates of amounts reported in prior interim periods or in prior financial years. Also, any significant changes in estimates made during the final interim period should be disclosed in the annual financial statements, unless a separate interim financial report is published for this period. The interim financial report should reflect the same accounting policies as in the most recent annual financial statements except for: changes in accounting policy that will be reflected in the next annual financial statements; or the application of accounting policies for transactions or events that did not occur previously. When an entity changes its accounting policy or methods as compared to the previous annual financial statements, it discloses a description of the nature and effect of this change. 8. IAS 34.15B(g) This interim financial report does not illustrate disclosures for the correction of an error, which would be required by IAS 34 if significant. Our publication Insights into IFRS ( ) illustrates the disclosures for the correction of an error. 9. See explanatory notes 1 and 2 on page 26.

27 Illustrative condensed interim financial report 25 IAS 34.8(e) Notes to the condensed consolidated interim financial report 1. Reporting entity 1 [Name] (the Company ) is a company domiciled in [country]. The condensed consolidated interim financial report of the Company as at and for the six months ended 30 June 2012 comprises the Company and its subsidiaries (together referred to as the Group ) and the Group s interests in associates and jointly controlled entities. The Group is primarily involved in manufacturing paper and paperrelated products, cultivating trees and selling wood (see note 5). IAS 34.10, 15, 19 IAS IAS 34.16A(d), Basis of preparation 2 (a) Statement of compliance 3 This condensed consolidated interim financial report has been prepared in accordance with IAS 34 Interim Financial Reporting. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last annual consolidated financial statements as at and for the year ended 31 December This condensed consolidated interim financial report does not include all the information required for full annual financial statements prepared in accordance with International Financial Reporting Standards. This condensed consolidated interim financial report was approved by the Board of Directors on [date]. 4 (b) Judgements and estimates 5, 6 Preparing the interim financial report requires Management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing this condensed consolidated interim financial report, significant judgements made by Management in applying the Group s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December IAS 34.16A(a) 3. Significant accounting policies 7, 8 Except as described below, the accounting policies applied by the Group in this condensed consolidated interim financial report are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December The following change in accounting policy is also expected to be reflected in the Group s consolidated financial statements as at and for the year ending 31 December Change in accounting policy 9 Deferred tax associated with investment property IAS 8.28, 34.16A(a) From 1 January 2012, the Group adopted Deferred Tax: Recovery of Underlying Assets Amendments to IAS 12 and changed its accounting policy on measuring deferred tax arising from investment property that is measured using the fair value model in IAS 40 Investment Property. As a result of the change, the Group now measures any deferred tax arising from investment property using a rebuttable presumption that the carrying amount of the property will be recovered entirely through sale. The presumption is rebutted if the property is depreciable and is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the properties over time. Previously, the Group measured deferred tax for investment property using a blended rate approach that reflected the dual intention of sale and use.

28 26 Illustrative condensed interim financial report Explanatory notes 1. IAS 8.28, 29 A change in accounting policy might not be applied retrospectively to a particular prior period because it is impracticable to do so. In this case, an entity discloses: the reasons for impracticability; and how and as of what date the change in accounting policy has been applied. 2. IAS 8.19 When a change in accounting policy arises from the adoption of a new, revised or amended IFRS, an entity applies the specific transitional requirements in that IFRS. However, in our view an entity nonetheless should also comply with the disclosure requirements of IAS 8 to the extent that the transitional requirements do not include disclosure requirements. Even though it could be argued that the disclosures are not required because they are set out in the IAS 8 requirements for voluntary changes in accounting policy, we believe that they are necessary to give a fair presentation. This issue is discussed in our publication Insights into IFRS ( ). 3. IAS 34.10, 15 The appropriate level of disclosure around financial instruments will depend on the circumstances of the individual entity. An entity considers whether: disclosures required by IFRS 7 Financial Instruments: Disclosures in annual financial statements, including any changes in the entity s financial risk management objectives and policies or to the nature and extent of risks arising from financial instruments during the interim period, are significant to an understanding of the entity s financial position and performance during the interim reporting period; or omission of them would make the condensed interim financial report misleading. In such circumstances, appropriate disclosure would be included in the condensed interim financial report. Also refer to paragraph 15B of IAS 34 and our publication Disclosure checklist: Interim financial reports for specific examples of events and transactions that would require disclosure if significant. 4. IAS 34.15B(h), 15B(k) The following examples are some of the disclosures that, if significant, are required by IAS 34: changes in the business and economic circumstances that affect the fair value of the entity s financial assets and financial liabilities, such as the listing of an equity investment; and transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments.

29 Illustrative condensed interim financial report 27 Notes to the condensed consolidated interim financial report (continued) 3. Significant accounting policies (continued) Change in accounting policy (continued) 1, 2 Deferred tax associated with investment property (continued) Impact of change in accounting policy The change in accounting policy has been applied retrospectively. It reduced the deferred tax liability and increased the retained earnings as at 1 January 2011 by 33 thousand and by a further 47 thousand for the year ended 31 December The effect on the condensed consolidated statement of comprehensive income in the current period was to recognise a gain of 25 thousand (six months ended 30 June 2011: 18 thousand). The change in accounting policy had an immaterial impact on earnings per share for the current and comparative period. IAS 34.15B(h), 15B(k) 4. Financial instruments 3 Financial risk management Credit risk of trade and other receivables As a result of the improving economic circumstances in 2012, certain purchase limits have been raised, particularly for customers operating in the Standard and Recycled Papers segments. This is because, in the Group s experience, the economic recovery has had a greater impact in these segments than in the Group s other segments. The Group will continue to monitor and adjust limits as appropriate. Other aspects of the Group s financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as at and for the year ended 31 December Fair value hierarchy The Group holds an investment in equity shares of MSE Limited with a fair value of 100 thousand at 30 June 2012 (31 December 2011: 90 thousand). The fair value of the investment was previously determined to be Level 3 under the fair value hierarchy at 31 December The fair value of the investment was then determined using a valuation technique that used significant unobservable inputs including the forecast earnings of MSE Limited and an appropriate priceearnings ratio. This was because the shares were not listed on an exchange, and there were no recent observable arm s length transactions in the shares. During the current period, MSE Limited listed its equity shares on an exchange and they are currently actively traded in that market. Because the equity shares now have a published price quotation in an active market, the fair value measurement was transferred from Level 3 to Level 1 of the fair value hierarchy during the period. 4

30 28 Illustrative condensed interim financial report Explanatory notes 1. IAS 34.16A(g) If IFRS 8 Operating Segments requires an entity to disclose segment information in its annual financial statements, then the entity discloses segment information in its interim financial report. 2. IAS 34.16A(g)(v) In this interim financial report, the Packaging segment, which is also a discontinued operation, is presented as an operating segment. If it no longer met the definition of an operating segment, then it would not have been included in the segment disclosures; however, a description of the difference from the last annual financial statements in the basis of segmentation would have been provided. 3. IFRS 8.16 Information about other business activities and operating segments that are not reportable is combined and disclosed in an all other segments category separate from other reconciling items in the reconciliations required by paragraph 28 of IFRS 8.

31 Illustrative condensed interim financial report 29 IA IA IA IA S 34.1 S 34.1 S 34.1 S A(g) 6A(g)(i) 6A(g)(ii) 6A(g)(iii) Notes to the condensed consolidated interim financial report (continued) 5. Operating segments Inf ormation about repor table segments 1 F or the six months ended 30 J une Standard Recy cled Pac kaging Papers Papers (Discontinued)* 2 Timber Resear ch and F orestry Pr oducts Dev elopment Other 3 T otal In thousands of euro External re v enues Inter segment re venue R eport able segment profit bef ore t ax 34,315 1,847 36,821 2,382 13, , , , , (162) 23,1 93 2,835 (466) 1,984 1, ,823 1, , (120) 1, , ,079 4,245 6, ,786 6, ,278 * See note 7