The KELAG Group Annual report 2011
Annual report 2011 Table of contents Table of contents I. Consolidated financial statements... 3 Notes to the consolidated financial statements... 8 Exhibits... 77 II. Group management report... 79 III. Auditor s report... 114 2
Annual report 2011 Income statement of the KELAG group CONSOLIDATED FINANCIAL STATEMENTS 1. Income statement of the KELAG Group EUR k Note 1/1 31/12/2011 1/1 31/12/2010 Revenue (1) 1,660,270 1,528,044 Electricity/Gas 1,522,387 1,391,641 Heat 134,049 132,913 Investments/Misc. 3,834 3,491 Other income (2) 44,802 45,060 Cost of materials and supplies, and of purchased merchandise (3) -1,354,100-1,209,413 Personnel expenses (4) -124,302-126,569 Amortisation, depreciation and impairment (5) -62,593-73,363 Other expenses (6) -66,243-72,488 Operating result 97,834 91,271 Interest income (7) 2,274 2,344 Interest cost (7) -18,348-21,554 Other investment result (8) 32,083 34,035 Earnings from investments accounted for using the equity method (12) -217-490 Earnings before income taxes 113,627 105,606 Income taxes (9) -21,736-14,746 Consolidated net profit 91,890 90,860 Attributable to non-controlling interests 39-98 Attributable to the equity holders of the parent company 91,851 90,958 3
Annual report 2011 Statement of comprehensive income of the KELAG Group 2. Statement of comprehensive income of the KELAG Group 1/1 31/12/2011 1/1 31/12/2010 EUR k Note Consolidated net profit 91,890 90,860 Other comprehensive income from -820-22,339 exchange differences -436-78 available-for-sale financial instruments -13-127 actuarial gains and losses (22) -371-22,134 - Tax on the above 162 5,565 Other comprehensive income after income taxes -659-16,774 Total comprehensive income 91,232 74,086 Attributable to the equity holders of the parent company 91,193 74,184 Attributable to non-controlling interests 39-98 4
Annual report 2011 Statement of financial position of the KELAG Group 3. Statement of financial position of the KELAG Group EUR k Note 31/12/2011 31/12/2010 Non-current assets 1,322,807 1,200,306 Intangible assets (10) 292,255 239,003 Property, plant and equipment (11) 856,756 783,174 Investments accounted for using the equity method (12) 12,130 12,347 Other interests in other entities (13) 125,884 129,555 Other securities and book-entry securities (14) 28,071 28,312 Other non-current receivables and assets (15) 6,804 7,349 Deferred tax assets (16) 907 566 Current assets 184,851 222,131 Inventories (17) 18,158 17,111 Trade receivables and other receivables and assets (18) 79,078 88,955 Cash and cash equivalents (19) 87,614 116,065 Assets 1,507,657 1,422,437 Equity 587,956 526,758 Equity attributable to the equity holders of the parent company (20) 584,998 523,835 Equity attributable to non-controlling interests (21) 2,958 2,923 Non-current liabilities 699,626 674,659 Financial liabilities (22) 264,116 257,294 Provisions (23) 273,457 256,059 Deferred tax liabilities (16) 5,247 769 Construction cost subsidies (24) 95,365 95,479 Other liabilities (25) 61,442 65,058 Current liabilities 220,076 221,020 Financial liabilities (26) 13,403 18,901 Current tax provisions 53 222 Other provisions (27) 47,422 64,866 Trade payables and other liabilities (28) 159,197 137,032 Equity and liabilities 1,507,657 1,422,437 5
Annual report 2011 Statement of changes in equity of the KELAG Group 4. Statement of changes in equity of the KELAG Group EUR k Capital stock Capital reserves Accumulated profits/losses Exchange differences Actuarial gains and losses Available-for-sale financial instruments Total Equity attributable to noncontrolling interests Total equity As of 1 January 2010 58,160 276 426,681 7-10,743-347 474,035 6,387 480,421 Other comprehensive income 0 0 0-78 -22,134-127 -22,339 0-22,339 Tax on the above 0 0 0 0 5,533 32 5,565 0 5,565 Other comprehensive income after income taxes 0 0 0-78 -16,600-95 -16,774 0-16,774 Consolidated net profit 0 0 90,958 0 0 0 90,958-98 90,860 Total comprehensive income 0 0 90,958-78 -16,600-95 74,184-98 74,086 Dividends 0 0-25,000 0 0 0-25,000-25 -25,025 Other income and expenses recognised without effect on profit or loss 0-13 630 0 0 0 617-3,342-2,725 As of 31 December 2010 58,160 263 493,269-71 -27,343-442 523,836 2,923 526,758 As of 1 January 2011 58,160 263 493,269-71 -27,343-442 523,836 2,923 526,758 Other comprehensive income 0 0 0-436 -371-13 -820 0-820 Tax on the above 0 0 0 66 93 3 162 0 162 Other comprehensive income after income taxes 0 0 0-371 -278-10 -659 0-659 Consolidated net profit 0 0 91,851 0 0 0 91,851 39 91,890 Total comprehensive income 0 0 91,851-371 -278-10 91,193 39 91,232 Dividends 0 0-30,000 0 0 0-30,000-4 -30,004 Other income and expenses recognised without effect on profit or loss 0 0-31 0 0 0-31 0-31 As of 31 December 2011 58,160 263 555,090-442 -27,622-452 584,998 2,958 587,954 6
Annual report 2011 Statement of cash flows of the KELAG Group 5. Statement of cash flows of the KELAG Group EUR k 2011 2010 Earnings before income taxes 113,627 105,606 Non-cash adjustment to reconcile earnings before income taxes to net cash flow Write-ups and write-downs of intangible assets and property, plant and equipment Write-ups and write-downs of financial assets including share of profit/loss from investments accounted for using the equity method Gain/loss on the disposal of property, plant and equipment, and securities 62,593 73,363 1,317 7,828 3,035 1,744 Interest cost 18,348 21,554 Interest income -2,274-2,344 Sundry 82-1,270 Deconsolidation effect 0-2,349 Taxes paid -12,439-3,345 Interest received 2,274 2,806 Changes in non-current provisions 4,779-5,285 Changes in construction cost subsidies -2,241-1,318 Cash flow from operating activities before working capital adjustments 189,100 196,990 Changes in inventories -784 802 Changes in trade receivables and other receivables and assets 10,765-7,087 Changes in trade payables and other liabilities 8,874 17,973 Changes in current provisions -13,871 10,985 Cash flow from operating activities* 194,083 219,663 Investments in intangible assets and property, plant and equipment -168,961-154,570 Proceeds from the disposal of intangible assets and property, plant and equipment 2,266 703 Acquisition of subsidiaries, net of cash acquired -14,015-4,815 Investments in other securities and book-entry securities -520-2,860 Disposals of financial assets 2,500 1,319 Cash flow from investing activities -178,730-160,223 Repayment and proceeds from financial liabilities -395-10,730 Interest paid -14,098-14,776 Cash received and paid for non-current loans and financial receivables 693-629 Profit distribution -30,004-25,025 Cash flows from financing activities -43,805-51,160 Changes in cash and cash equivalents -28,450 8,279 Cash and cash equivalents at the beginning of the financial year 116,065 107,785 Cash and cash equivalents at the end of the financial year 87,614 116,065 Changes in cash and cash equivalents according to the statement of financial position -28,450 8,279 * Please refer to 6.8 in Section Notes to the consolidated financial statements 7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. The Company The KELAG Group is one of the leading energy service providers in Austria. The Company operates throughout Austria in the fields of electricity and natural gas, focusing on Carinthia. The subsidiary KELAG Wärme GmbH operates successfully in the heat business throughout Austria. The grids in Carinthia (electricity and natural gas) are operated by the subsidiary KELAG Netz GmbH. The hydroelectric and wind power activities and energy trading outside Austria are bundled at KI-KELAG International GmbH. The KELAG Group has decades of experience in the production and distribution of energy. 2. Accounting principles KELAG-Kärntner Elektrizitäts-Aktiengesellschaft (KELAG), with registered office at Arnulfplatz 2, A-9020 Klagenfurt am Wörthersee, commercial register court: regional and commercial court Klagenfurt 99133 i, and its subsidiaries form the KELAG Group for which the following IFRS financial statements for 2011 were prepared. These have an exempting effect pursuant to Sec. 245a UGB (Austrian Commercial Code). Information on its ultimate parent is presented in Section 6.9. 2.1. General information The consolidated financial statements of KELAG were prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The consolidated financial statements are generally prepared in accordance with the historical cost convention. This does not apply to derivative financial instruments and available-for-sale financial assets which are measured at fair value. The annual financial statements of entities included in the consolidated financial statements (whether fully consolidated or accounted for using the equity method) have been prepared on the basis of uniform accounting policies. The end of the reporting period for all fully consolidated entities is 31 December 2011. 8
The consolidated financial statements are prepared in thousands of euro (EUR k) (income statement, statement of comprehensive income, statement of financial position, statement of cash flows and statement of changes in equity) and millions of euro (EUR m) (notes). Rounding differences may arise from totalling rounded amounts and percentages using automatic calculation tools. Classification as current/non-current in the balance sheet has been performed pursuant to IAS 1.60 et seq. 9
2.2. Scope of consolidation and consolidation methods Financial assets KELAG s shareholding % Capital stock/ share capital EUR k Consolidation method* 1. KELAG Netz GmbH, Klagenfurt, Austria 100.00 35 FC 2. KELAG Wärme GmbH, Villach, Austria 100.00 1,820 FC 2.1. EKO-TOPLOTA Energetika d.o.o., Ljubljana, Slovenia** 100.00 9 FC 2.2. SWH Strom und Wärme aus Holz, Heizwerk Errichtungs-Betriebs GmbH, Purkersdorf, Austria** 50.00 200 EQ 2.2.1. Biowärme Imst GmbH, Imst, Austria** 45.00 100 EQ 2.2.2. SBH Biomasseheizkraftwerk GmbH, Enns, Austria** 25.50 36 EQ 2.3. Alternative Energie Salzburg GmbH, Salzburg, Austria** 100.00 75 FC 2.4. Biowärme Friesach GmbH, Friesach, Austria** 100.00 35 FC 2.5. Biofernwärme Fürstenfeld GmbH, Fürstenfeld, Austria** 50.00 218 EQ 2.6. KWH Kraft & Wärme aus Holz GmbH, St. Gertraud, Austria** 26.00 36 EQ 2.7. Bio-Teplo Czechia s.r.o., Znaim, Czech Republic** 100.00 7 FC 3. KELAG Finanzierungsvermittlungs GmbH, Klagenfurt, Austria** 100.00 254 FC 4. KI-KELAG International GmbH, Klagenfurt, Austria 100.00 10,000 FC 4.1. Interenergo d.o.o., Ljubljana, Slovenia** 100.00 10,200 FC 4.1.1. Interenergo d.o.o. Zagreb, Zagreb, Croatia** 100.00 41 FC 4.1.2. EHE d.o.o. Banja Luka, Banja Luka, Bosnia and Herzegovina** 100.00 1,001 FC 4.1.3. Interenergo d.o.o. Sarajevo, Sarajevo, Bosnia and Herzegovina** 100.00 511 FC 4.1.4. PLC Interenergo d.o.o. Beograd, Belgrade, Serbia** 100.00 533 FC 4.1.5. Hidrowatt d.o.o. Beograd, Belgrade, Serbia** 80.00 0 FC 4.1.6. Interenergo Makedonija d.o.o.e.l., Skopje, Macedonia** 100.00 115 FC 4.1.7. IEP energija d.o.o. Gornji Vakuf-Uskoplje, Gornji Vakuf Uskoplje, Bosnia and Herzegovina** 100.00 1 FC 4.2. Windfarm MV I s.r.l., Bucharest, Romania** 100.00 2,010 FC 4.3. Lumbardhi Beteiligungs GmbH, Klagenfurt, Austria** 90.00 35 FC 4.3.1. KelKos d.o.o., Pristina, Kosovo** 90.00 0 FC 4.4. Windfarm Balchik 1 OOD, Sofia, Bulgaria** 52.00 3 FC 4.5. Windfarm Balchik 2 OOD, Sofia, Bulgaria** 52.00 3 FC 4.6. Windfarm Balchik 4 OOD, Sofia, Bulgaria** 52.00 3 FC 4.7. KelaVENT Charly srl, Bucharest, Romania** 99.99 393 FC 10
Financial assets % Capital stock/ share capital EUR k KELAG s shareholding Consolidation method* 5. Wärmeversorgung Arnoldstein Errichtungs- und Betriebsgesellschaft mbh, Arnoldstein, Austria 99.00 36 FC 6. KRV Kärntner Restmüllverwertungs GmbH, Arnoldstein, Austria 42.87 44 EQ 7. Waldensteiner Kraftwerke GmbH, Waldenstein, Austria 40.00 36 EQ 8. Waldensteiner Kraftwerke GmbH & Co KG, Waldenstein (limited partner s interest) 40.00 7 EQ 9. Stadtwerke Kapfenberg GmbH, Kapfenberg, Austria 35.00 2,000 EQ * FC = full consolidation EQ = equity method ** Indirect interest The parent company is KELAG-Kärntner Elektrizitäts-Aktiengesellschaft. The consolidated financial statements include all entities ( subsidiaries ) that are controlled (controlling influence) by the parent company by means of full consolidation. Controlling influence is where the parent company is able, whether directly or indirectly, to determine the entity s financial and operating policy. The inclusion of a subsidiary begins when controlling influence is acquired and ends when controlling influence is lost. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Losses within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance. A change in the ownership interest of a subsidiary without involving the loss of control is accounted for as an equity transaction. If the Group loses control over a subsidiary, it: Derecognises the assets (including goodwill) and liabilities of the subsidiary Derecognises the carrying amount of any non-controlling interest Derecognises the cumulative translation differences recorded in equity Recognises the fair value of the consideration received Recognises the fair value of any investment retained Recognises any surplus or deficit in profit or loss Reclassifies the parent s share of components previously recognised in other comprehensive income to profit or loss or retained earnings, as appropriate. 11
In addition to KELAG as parent company, the consolidated financial statements include 24 subsidiaries (prior year: 19) and 9 associates (prior year: 11). 31/12/2011 31/12/2010 Scope of consolidation Full consolidation Equity method Full consolidation Equity method As of the beginning of the reporting period 20 11 39 24 Included in the financial statements for the first time in the reporting period 6 0 1 0 Merged in the reporting period 0 0-3 0 Deconsolidated in the reporting period -1-2 -17-13 As of the end of the reporting period 25 9 20 11 of which Austrian entities 9 9 6 11 of which non-austrian entities 16 0 14 0 For more details of business combinations, reference is made to Section 5. Notes to the statement of financial position. Entities on which the parent company can exercise significant influence, whether directly or indirectly, ( associates ) and shares in joint ventures are accounted for using the equity method. The same consolidation principles are applied. The financial statements of all material entities accounted for using the equity method are prepared using uniform accounting policies. Investments in associates and in joint ventures Under the equity method, the investment in the associate is carried on the statement of financial position at cost plus post acquisition changes in the Group s share of net assets of the associate. Goodwill relating to the associate is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. The income statement reflects the Group s share of the results of operations of the associate. When there has been a change recognised directly in the equity of the associate, the Group recognises its share of any changes and discloses this, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate. Losses by an associate exceeding the Group s share in this associate are only recognised to the extent that the Group has entered into legal or constructive obligations or makes payments on behalf of the associate. The share of profit of an associate is shown on the face of the income statement. This is the profit attributable to equity holders of the associate and therefore is profit after tax and non-controlling interests in the subsidiaries of the associate. 12
After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group s investment in its associate. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in the share of profit of an associate in the income statement. Upon loss of significant influence over the associate, the Group measures and recognises any retaining investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. Intercompany transactions, receivables, liabilities and intercompany profits are eliminated. The reversal of impairment and impairment on shares performed in separate financial statements are reversed. The acquisition of subsidiaries and businesses is accounted for using the acquisition method. The acquisition costs of a business combination are determined using the total of the fair values, as of the date of exchange, of the assets given as consideration and the liabilities entered into or assumed in exchange for control of the acquired entity. The identifiable assets, liabilities and contingent liabilities of the acquired entity that satisfy the recognition criteria of IFRS 3 Business combinations are recognised at their fair values as of the acquisition date. Any goodwill arising from a business acquisition is recorded as an asset and recognised at its cost at the time of initial recognition, its cost being the excess of the cost of the business combination over the net fair value of the identifiable assets, liabilities and contingent liabilities recognised by the Group. If, upon reassessment, the Group s share in the fair value of the identifiable assets, liabilities and contingent liabilities of the acquired entity exceed the acquisition cost of the business combination, the excess is recognised immediately through profit or loss. The share of non-controlling interests in the acquired entity is measured as of acquisition date at its shares in the net fair value of the assets, liabilities and contingent liabilities. The cost of a business combination is expensed as incurred. Business combinations and incorporations When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as of the acquisition date. If the business combination is achieved in stages, the acquisition date fair value of the acquirer s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss. 13
Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it is not remeasured and its subsequent settlement is accounted for within equity. Effective as of 27 October 2011, all of the shares in IEP energija d.o.o. were acquired for acquisition costs of EUR 4.0m. The entity s hydroelectric power stations at Duboki potok and Sastavci in the Bosnian Federation have 1.9 MW of installed capacity. For details of purchase price allocation, reference is made to Section 5. The purchase agreement for 99.99 % of the shares in KelaVENT Charlie SRL was signed on 22 December 2011. The basic purchase price was EUR 1.1m. Upon completion, the wind farm will have an installed capacity of 8 MW. An extension of the wind farm (KelaVENT Golf with a further 8 MW, KelaVENT Bravo with 26 MW) is planned. For details of the purchase price allocation, reference is made to Section 5. Strom und Wärme aus Holz, Heizwerke Errichtungs-Betriebs GmbH (SWH), a 50% subsidiary of KELAG Wärme GmbH and ÖBf Beteiligungs GmbH that generates heat and electricity from biomass, suffered difficulties in 2009 on account of the significant price rises on the biomass market. In 2010, the two shareholders of SWH agreed on a joint consolidation process that ended in an out-of-court settlement between SWH, its owners and the financing banks. This safeguarded supplies of heat to all of SWH s customers. Furthermore, as part of the settlement agreement, the decision was made to completely transfer four heating plants and two entities, Biowärme Friesach GmbH and Alternative Energie Salzburg GmbH, to KELAG Wärme GmbH (KWG). The entities and plants acquired were optimised and now make a positive contribution to KWG s results. The full organisational and technical integration of the former SWH plants and entities into KWG will be completed by the end of 2012. In addition, KWG has a 25% shareholding in a former equity interest of the SWH Group, Bioenergie Pongau GmbH. For details of purchase price allocation, reference is made to Section 5. 14
2.3. Accounting policies For the preparation of these consolidated financial statements all mandatory amendments to existing and new IAS and IFRSs as of 31 December 2011 as well as to IFRIC and SIC interpretations as adopted by the European Union were applied. New accounting policies Those IAS and IFRSs as well as those IFRIC and SIC interpretations already adopted by the European Union but not yet mandatory for the financial year 2011 are not early adopted. One exception to this is the early adoption of IAS 1. The following standards and interpretations were applied for the first time for the financial year 2011: Newly applied IFRSs/IFRICs Effective as of IAS 24 Related Party Disclosures 1/1/2011 IAS 32 Amendments: Classification of Rights Issues 1/1/2011 IFRS 1 IFRIC 14 First-time Adoption of IFRSs Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction 1/7/2010 1/1/2011 IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments 1/7/2010 Miscellaneous Improvements to IFRSs as of 1/1/2011 The IASB amended IAS 24 Related Party Disclosures, which includes a partial exemption from the disclosure requirements for government-related entities and provides guidance on the definitions of related parties. As these amendments affect the KELAG Group, where the government controls the majority shareholding, the new IAS 24 does not constitute a simplification where no details have to be disclosed of individual transactions with government-related entities unless they are significant. The amendments to IAS 32 clarify that rights issues in a foreign currency are reported as equity in the accounts of the issuer if the number and foreign currency amount of the equity instruments to be acquired are fixed and the rights are granted proportionately to all holders of equity instruments (of the same class). This standard amendment has not been adopted by the KELAG Group and thus does not have any effect on KELAG s consolidated financial statements. 15
IFRS 1 was amended to make it possible for first-time adopters to make use of the transitional requirements of IFRS 7 Financial Instruments: Disclosures. It exempts firsttime adopters from the duty to include the required comparative disclosures in the notes in the first year of adoption of IFRSs. As the KELAG Group is not a first-time adopter of IFRSs, these amendments did not have any effects. IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction provides general guidelines for determining the upper limit of a defined benefit asset recognised pursuant to IAS 19. Under IFRIC 14, employers do not have to report any further liability unless the amounts to be paid according to the minimum funding requirements cannot be repaid to the company. Where an entity subject to minimum funding requirements makes a prepayment of contributions, the amendment allows in future an entity to recognise the economic benefit from such prepayment as an asset. This amendment does not have any effect on the KELAG Group. The publication of IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments provides guidance on the requirements when an entity renegotiates the conditions of a financial liability with the creditor and the creditor accepts the shares or other equity instruments issued by the entity to extinguish all or part of the financial liability. The KELAG Group does not apply this interpretation. The Improvements to IFRSs include amendments to IFRS 3 Business Combinations, IFRS 7 Financial Instruments Disclosures, IAS 1 Presentation of Financial Statements, IAS 27 Consolidated and Separate Financial Statements and IAS 34 Interim Financial Reporting (retrospective), which do not have any impact on KELAG s consolidated financial statements. 16
Not yet applicable IFRSs/IFRICs Prospective effective date IAS 1 Amendments: Presentation of Items of Other Comprehensive Income 1/7/2012 IAS 12 Amendments: Deferred Tax Recovery of Underlying Assets 1/1/2012 IAS 19 Amendment: Employee Benefits 1/1/2013 IAS 27 Amendments: Separate Financial Statements 1/1/2013 IAS 28 Amendments: Investments in Associates 1/1/2013 IFRS 1 Amendments: Severe Hyperinflation and Removal of Fixed Dates 1/7/2011 IFRS 7 Amendments: Financial Instruments Disclosures 1/7/2011 IFRS 9 Financial Instruments 1/1/2015 IFRS 10 Consolidated Financial Statements 1/1/2013 IFRS 11 Joint Arrangements 1/1/2013 IFRS 12 Disclosures of Interests in Other Entities 1/1/2013 IFRS 13 Fair Value Measurement 1/1/2013 IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine 1/1/2013 Pursuant to the amendment in IAS 1 Presentation of Financial Statements entities must classify the items presented in other comprehensive income into two categories items that are subsequently posted through profit and loss (recycling) and those that are not. The amendment also affects the KELAG Group s statement of comprehensive income and was already implemented in the 2011 financial statements. The amendments to IAS 12 provide an exception to the existing regulation on the measurement of deferred tax assets and liabilities for certain non-financial assets measured at fair value. This essentially affects entities that measure investment properties, property, plant and equipment and intangible assets at fair value in their statement of financial position and originate from countries that stipulate different tax rates for investment income and gains on disposal. It can be assumed that the KELAG Group will not be affected. 17
There have been material amendments to IAS 19 Employee Benefits that relate to the recording and valuation of the expenses for defined benefit plans and post-employment benefits. Subsequently, the mandatory disclosures on employee benefits also change. Actuarial gains and losses must be recognised immediately in other comprehensive income. Recognition using the corridor approach and immediate recognition in profit and loss, which were permissible in the past, are no longer allowed. This does not affect the KELAG Group as it converted to the method allowed under the amended version of IAS 19 already in 2010. IAS 27 Consolidated and Separate Financial Statements has been renamed and in future only contains provision on separate financial statements. The existing guidelines for separate financial statements remain unchanged, however. IAS 28 Investments in Associates has been amended such that the disclosure requirements it contained have been transferred to IFRS 12 and are no longer part of IAS 28. The amendment to IFRS 1 relates to entities whose functional currency is subject to severe hyperinflation. As KELAG is not a first-time adopter of IFRSs, this amendment did not have any effect. The amendments to IFRS 7 Financial Instruments Disclosures relate to additional mandatory disclosures when derecognising financial assets. In contrast to the previous provisions, where financial assets are not fully derecognised despite the rights being transferred or there being an obligation to transfer cash inflows there is a requirement to make additional disclosures on the newly created liabilities. This includes in particular disclosure as to whether the financial assets that continue to be carried can be used without restriction or the acquiring party has an entitlement to the financial asset. The amendments affect entities that transfer financial assets to another party through sale, securitisation transaction, factoring or another form of transaction. As none of these kinds of transaction have been performed within the KELAG Group to date, no new disclosure requirements are expected to arise. IFRS 9 Financial Instruments provides new provisions on the classification and measurement of financial instruments and is intended to replace IAS 39. The new standard separates all financial assets into two categories for classification those that are measured at amortised cost and those that are measured at fair value. In addition, new provisions for accounting for financial liabilities were included and the provisions for the derecognition of financial assets and liabilities were adopted from IAS 39. There are plans to extend IFRS 9 by including new requirement for the impairment of financial assets that are measured at amortised cost and hedge accounting. The future impact of 18
IFRS 9 on the KELAG Group has yet to be reviewed; endorsement by the EU is still pending. IFRS 10 Consolidated Financial Statements will replace IAS 27 Consolidated and Separate Financial Statements and SIC 12 Consolidation Special Purpose Entities ; it contains guidelines on control and consolidation. The definition of control is amended such that the criterion of control is met where the controlling entity is able to exercise control over the relevant activities, leading to variable returns from the entity. Returns can be positive, negative or both. The provisions for consolidation are not affected. Within the KELAG it will be necessary to review each individual equity interest with a view to the new definition of control, but it may be assumed that there will be no material changes. Endorsement by the EU is still pending. According to IFRS 11 Joint Arrangements there will be two types of joint arrangement in future: joint operations and joint ventures. A joint operation is a joint arrangement where direct rights to the assets and liabilities are transferred to the partner entities in this joint arrangement. A partner entity in a joint operation records its share on the basis of its share in the joint operation instead of on the basis of the interest in the joint arrangement. A partner entity in a joint venture on the other hand does not have any rights to individual assets or liabilities. Partner entities of joint venture have a share in the net assets and thus in the results of the activities performed by the joint venture. Joint ventures are accounted for using the equity method; proportionate consolidation is now prohibited by IFRS 11. KELAG must review its existing or new agreements in order to decide whether it invested in a joint arrangement or a joint venture, pursuant to the new standard. Endorsement by the EU is still pending. IFRS 12 Disclosure of Interests in Other Entities stipulates the disclosures that have to be made by an entity on its interests in other entities. According to the new standard, entities must make disclosures that enable the users of the financial statements to assess the nature of the entity s interest in subsidiaries, associates, joint arrangements and unconsolidated structured entities (special purpose vehicles) and the associated risks and financial impact. Endorsement by the EU is still pending. IFRS 13 Fair Value Measurement specifies how the fair value is measures and expands the disclosures on fair value. The fair value is uniformly defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard, however, does not contain any details when fair value is to be applied. As almost all entities and thus also the KELAG Group perform measurements at fair value, the new requirements have to be 19
met. However, it is mainly the extended disclosure requirements that will affect the KELAG Group. Endorsement by the EU is still pending. The new IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine is not relevant for KELAG. Endorsement by the EU is still pending for the IFRSs/IFRICs that are not yet subject to adoption. Summary of significant accounting policies Those items in assets and equity and liabilities that are expected to be fulfilled or realised within a period of twelve months after the reporting date are reported as current items. Current versus non-current classification Those items in assets and equity and liabilities that are expected to be fulfilled or realised more than twelve months after the reporting date are reported as non-current items. In these financial statements, around EUR 3.5m of the Investments accounted for using the equity method were reclassified to the item Other interests in other entities in the statement of financial position in the comparative period 2010. These relate to investments in associates recognised pursuant to IAS 39 due to immateriality. In addition, trade receivables amounting to roughly EUR 3.8m were reclassified from the item Other non-current receivables and assets to current trade receivables. Reclassification of financial statements items When accounting for business combinations, differences can emerge between the cost and the (pro rata) remeasured net assets. If the difference is negative, the calculation of cost and the purchase price allocation must be rechecked. Any remaining negative difference is to be recorded directly in profit or loss. Goodwill Under IFRSs, any positive difference is recognised as goodwill. Pursuant to IFRS 3, the goodwill recognised in the statement of financial position is not amortised but must be tested for impairment at least once a year. For this purpose, the goodwill must be allocated to those cash-generating units that are expected to benefit from the synergies resulting from a business combination. These cash-generating units correspond to the lowest organisational level at which management monitors the goodwill for internal management purposes. The recoverability of goodwill is tested by comparing the recoverable amount of a cash-generating unit with its carrying amount including goodwill. If the recoverable amount falls below the carrying amount of the cash-generating unit, 20