Accounting Policies
The 2003 annual accounts have been prepared in accordance with Danish accounting legislation, Danish accounting standards, the Copenhagen Stock Exchange financial reporting requirements for listed companies, and generally accepted accounting policies as applied in Denmark. The Company’s accounting policies are the same as applied last year. Revenue recognition Revenue from the sale of goods and services is included in the profit and loss account as at the date of delivery.Development costs
Development costs are generally expensed when incurred. Development projects that meet the belowmentioned criteria for capitalisation are shown in the balance sheet at the costs incurred.
The criterias for capitalisation are:
1. The product is clearly defined, and the costs attributable to the product can be specifically identified.
2. The technical feasibility of the product has been demonstrated.
3. The Management’s intentions are to manufacture and market the product.
4. There is a future market for the product.
5. The Company has adequate resources to complete the project and market the product.
The development projects are amortised over the expected lifetime of the projects’ outcome, starting upon completion of the projects.
Development grants
Grants for approved development activities are deducted from the applicable development costs and taken to income as and when such costs are incurred. Grants related to capitalised development projects are set off against the expenses incurred.
Corporation tax and deferred tax
Tax for the year consists of the corporation tax payable for the year and movements in deferred tax for the year. Interest premiums or discounts are recorded as financial items in the period to which they pertain.
Current tax liabilities are carried on the balance sheet as current liabilities to the extent such items have not been paid.
Deferred tax liabilities are carried on the balance sheet as a provision. Deferred tax liabilities are carried as the tax on all temporary differences. Deferred tax liabilities are calculated using the current tax rate. Deferred tax assets are carried on the balance sheet as long-term financial assets to the extent they are expected to crystallise.
Intangible fixed assets
Capitalised development projects include the direct and indirect cost of materials, salaries and other expenses incurred less development grants received and accumulated amortisation.
Tangible fixed assets
Tangible fixed assets are recorded at historical cost or acquisition cost less accumulated depreciation and write-offs.
Acquisition cost includes the purchase price and the costs directly attributable to the purchase plus costs attributable to commissioning the asset.
Financial leases are recorded in the balance sheet at the lower of the fair value of the leased asset or the present value of the minimum lease payments. Financial leases are depreciated in accordance with the Company’s general accounting policies. Capitalised residual values of financial leases are recorded as a liability in the balance sheet, and the financial charge is expensed in the profit and loss account.
The basis of depreciation is calculated as the historical cost less any scrap value and allocated on a straight-line basis over the estimated useful life of the asset, as follows:
| Land and buildings | 20 years |
| Machinery and equipment | 4 - 8 years |
| Other tangible assets, operating equipment, fixtures and fittings | 4 years |
New equipment with a purchase price of less than DKK 25,000 is fully depreciated in the year of acquisition.
Investment in subsidiaries
Investments in subsidiaries are valued in the parent company accounts in accordance with the equity method, which means that they are stated in the balance sheet at a proportionate share of the equity. The profit and loss account includes a proportionate share of the profit or loss.
Inventories
Inventories are stated at the lower of acquisition cost/ historical cost based on the FIFO method or net realisable prices.
The acquisition cost of goods and the acquisition cost of raw materials and consumables includes the invoice price plus transport costs.
The historical cost price of manufactured goods and work in progress includes the cost of materials, direct labour costs and indirect production costs. Net realisable value for inventories is calculated as the sales price less commissioning costs and costs in connection with making the sale; this value is fixed in consideration of marketability, obsolescence and changes in expected sales price.
Accounts receivable
The Company makes provisions for accounts receivable on the basis of an individual evaluation of each account.
Foreign currency
Transactions denominated in foreign currency are translated at the rates of exchange ruling on the transaction date.
Outstanding balances denominated in foreign currency are stated at the official rates of exchange ruling on the balance sheet date. Derivative financial instruments are used to reduce the currency exposure for current assets, current liabilities and certain contracted future transactions. Such financial instruments are normally stated at market value as at the balance sheet date. Realised and unrealised gains and losses are reflected in the profit and loss account. Gains or losses from financial instruments that are initially individually designated as hedges of future transactions are reflected in the profit and loss account symmetrically with the position hedged.
Cash flow statement
The cash flow statement shows the cash flows for the year in connection with operating activities, investing activities and financing activities for the year, increase/decrease in cash and cash equivalents for the year, and cash and cash equivalents at the beginning and end of the year.
Net cash used for operating activities
Net cash used for operating activities is calculated as income/loss before financial items and tax adjusted for non-cash operating items, change in working capital and corporation tax paid.
Net cash used for investing activities
Net cash used for investing activities includes payments made in connection with the purchase or sale of intangible, tangible or financial fixed assets.
Net cash provided by financing activities
Net cash provided by financing activities includes changes in the size or composition of share capital and the costs in connection herewith, plus borrowings, payment of instalments on interestbearing debt and payment of dividend.
