57
sales and purchase contracts. The gain or loss attributable to the ineffective portion is recognized with immediate effect in
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Cash flow hedges
The effective portion of changes in fair value in a derivative instrument, identified as a cash flow hedge and that fulfils the
conditions for hedge accounting, is recognized in other comprehensive income. The gain or loss attributable to the ineffective
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Amounts in equity are reversed to the income statement. for those periods during which the hedged item affects profit or loss
(e.g. when the forecast sale that is hedged takes place). The gain or loss that is attributable to the effective portion of an interest
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transaction subsequently leads to the recognition of a non-financial asset (e.g. inventory or property, plant and equipment), the
gains and losses previously recognized in equity are transferred from equity and included in the initial cost of the asset. Such
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relate to non-current assets.
When a hedging instrument matures or is sold, or when the hedge no longer qualifies for hedge accounting and accumulated
gains or losses relating to the hedge are booked in equity, these gains/losses remain in equity and are recognized in profit or
loss when the forecast transaction is ultimately recognized in the income statement. When a forecast transaction is no longer
expected to take place, the accumulated profit or loss recognized in equity is immediately transferred to the “Other operating
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Determining fair value
The fair value of instruments that do not have listed prices is determined using valuation techniques such as discounted cash
flow models, in which all assessed and determined cash flows are discounted using a zero coupon yield curve.
The fair value of derivatives is determined using valuation techniques. The valuation is based on models that discount cash
flows using forward curves for underlying variables such as raw materials and exchange rates. The assessed and determined
cash flows are discounted by a zero coupon interest rate curve. The Group’s credit risk is taken into consideration in the valuation
at fair value.
Accounts receivables
Accounts receivables are recognized initially at fair value and thereafter at amortized cost using the effective interest method,
less provisions for impairment. Provision for impairment of accounts receivables is recognized when there is objective evidence
that the Group will not receive all the cash flow due according to the original amounts of the receivables. Provisions are measured
as the difference between the assets’ carrying amount and the present value of future cash flows discounted at the financial
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Equity
Ordinary shares are classified as share capital. Transaction expenses that are directly attributable to new share issues or options
are recognized, net of tax, in equity as a deduction from the proceeds.
Premium received for share warrants issued at market price has been recognized as an increase in funds brought forward in
equity as the options will be redeemed with equity instruments. Information on outstanding subscription warrants is available in
Note 8.
Liabilities to banks and credit institutions
Borrowings are initially recognized at fair value, net of transaction costs. Borrowings are subsequently stated at amortized cost
and any difference between proceeds (net of transaction costs) and redemption value is recognized in the income statement,
allocated over the period of the borrowing using the effective interest method.
Accounts payables
Accounts payables are initially recognized at fair value and subsequently at amortized cost using the effective interest method.
Provisions
Provisions are recognized in the balance sheet when the Group has a present legal or constructive obligation as a result of past
events, and it is more likely than not that an outflow of resources will be required to settle the obligations and the amount can be
estimated reliably. No provisions are made for future operating losses. If the effect of when in time payment is made is significant,
provisions are calculated through discounting the expected future cash flow at an interest rate before tax that reflects current
market assessments of the time value of money and, if applicable, the risks associated with the debt.
A provision for restructuring is recognized when the Group has adopted a comprehensive and formal restructuring plan, and
the restructuring has either been started or published.
Income tax
Tax expenses for the period comprise both current tax due and deferred income tax. Tax is recognized in the income statement,
apart from when tax is attributable to items recognized in other comprehensive income or directly in equity. In such cases, tax
is also recognized in other comprehensive income and equity. Income tax is determined using the tax rules that have been
enacted or announced by the balance sheet date and are expected to apply when the related deferred tax asset is realized or the
deferred tax liability is settled. Tax expenses stated include both current tax due and deferred income tax.
Deferred tax is provided in full, using the liability method, on all temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the balance sheet. The principal temporary differences arise from depreciation of
property, plant and equipment, provisions for pensions and other post-retirement benefits and tax losses carried forward. The tax
rates enacted in each country are used in determining deferred income tax.
Deferred income tax assets for tax-deductible temporary differences and loss carry-forwards are recognized only to the extent
it is likely that it will be possible to utilize these items. The value of deferred tax assets is derecognized when it is no longer
deemed likely that they can be utilized.
Deferred income tax assets are recognized on temporary differences arising from investments in subsidiaries, except where
the timing of the reversal of the temporary differences is controlled by the Group and it is probable that the difference will not be
reversed in the foreseeable future.