50 Group companies The results and financial position of foreign subsidiaries (none of which has the currency of a hyperinflationary economy) that have a functional currency other than the presentation currency are translated into the Group’s presentation currency as follows: Assets and liabilities are translated at the closing day rate. Income and expenses are translated at average exchange rates. All exchange rate differences are charged directly to comprehensive income and are recognised as a separate item. When a foreign subsidiary is sold, any exchange differences are recognised in the income statement as part of the gain or loss on the sale. Goodwill and fair value adjustments arising in the acquisition of foreign operations are treated as assets and liabilities of the entity and translated at the closing day rate. Exchange rates The following rates were used to translate currency: Currency Average rate Closing rate EUR 9.35 9.18 DKK 1.25 1.23 GBP 12.86 12.46 MXN 0.53 0.49 USD 8.42 8.45 Segment reporting An operating segment is the part of the group that conducts business operations from which it may generate revenue and incur expenses for which discrete financial information is available. The operating results of an operating segment are followed up by the group’s chief operating decision-maker in order to evaluate its performance and allocate resources to the operating segment. The Group’s operations are divided up into operating segments based on which parts of the operations the group’s chief operating decision-maker monitors, that is, according to the management approach. AAK’s business operations are organised in such a way that the group’s highest executive decision-maker, that is the CEO, monitors earnings, returns and cash flows generated by the Group’s various products. Each operating segment has a manager who is responsible for day-to-day operations and who regularly reports to the CEO on the outcome of the operating segment’s performance and its resource requirements. Where the CEO monitors profit/loss and determines resource allocations based on the product that the Group produces and sells, these constitute the Group’s operating segments. The Group’s operations are organically divided into business segments based on product. The marketing organization also reflects this structure. Segment reporting is submitted in accordance with IFRS 8 for the Group only. For each segment, the results, assets and liabilities directly attributable to or items that can reliably be attributed to the segment are included in that segment. Items not attributable in this way include interest and dividend revenues, gains and losses from the sale of financial investments, interest expenses, and tax expenses. Assets and liabilities not attributed to a segment include tax assets and tax liabilities, financial investments and financial liabilities. Revenue recognition Revenue comprises the fair value of goods sold excluding VAT and discounts after eliminating intra-group sales. Sales are recognised on delivery of the goods, after customer acceptance and after the receivable can reasonably be deemed safe. Interest income is recognised allocated over the maturity of the security using the effective interest method. Insurance compensation is recognised as revenue when the amount can be measured in a reliable way and it is probable that the revenue will flow to the Group. Employee benefits a) Pension liabilities A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate legal entity. The group has no legal or constructive obligations to pay further contributions if this legal entity does not hold sufficient assets to pay all employee benefits relating to employee service in the current or prior periods. A defined benefit pension plan is a pension plan that is not a defined contribution plan. The characteristic feature of a defined benefit plan is that it defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and remuneration. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash flows using interest rates of high-quality mortgage bonds that are denominated in the same currency in which the benefits will be paid, and that have terms of maturity approximating the terms in the related pension commitment. Past-service costs are recognised immediately in the income statement. The net interest rate is calculated by the discount rate being applied to defined benefit plans and to the fair value of plan assets. This expense is included in the personnel costs in the income statement. Actuarial gains and losses as a result of experience-based adjustments and changes in actuarial assumptions are recognised in other comprehensive income in the period in which they arise. b) Termination benefits Employees receive compensation on termination before normal retirement age or when they voluntarily accept termination in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed, formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy.
AAK Annual Report 2015
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