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Notes

Note 1 Accounting principles

General

Statnett SF (the parent company) is a Norwegian state-owned enterprise that was formed on 20 December 1991. The sole owner of Statnett SF is the Norwegian State, represented by the Ministry of Petroleum and Energy (MPE). Statnett has issued bond loans listed on the Oslo Stock Exchange. The head office is located at Nydalen allé 33, 0423 Oslo.

Basis for preparation of the financial statements

The consolidated financial statements for the Statnett Group and the financial statements for the parent company, Statnett SF, have been prepared in compliance with the current International Financial Reporting Standards (IFRS), as adopted by the EU.

All subsequent references to “IFRS” imply references to IFRS as adopted by the EU.

The financial statements have been prepared on the basis of the historical cost principle, with the following exceptions:

  • All derivatives, and all financial assets and liabilities classified as “fair value carried through profit or loss” or “available for sale”, are carried at fair value.
  • The book value of hedged assets and liabilities is adjusted in order to register changes in fair value as a result of the hedging.
  • Assets are measured at each reporting date with a view to impairment. If the recoverable amount of the asset is less than the book value, the asset is written down to the recoverable amount.

Comparative figures in the balance sheet and statement of comprehensive income

As a result of Statnett's implementation of amendments in IAS 19 Employee Benefits, a third balance sheet statement is presented at the beginning of the year 2012. The balance sheet and statement of comprehensive income for 2012 have been restated.

New accounting standards

Below follows a list of new/revised/additional standards and interpretations that had come into effect as at 31 December 2013 for the fiscal year 1 January - 31 December 2013. Only matters assumed to be relevant for Statnett, have been included.

IAS 1 – Amendment: Presentation of items of Other Comprehensive Income

The amendment to IAS 1 requires companies to group together items under "Other Comprehensive Income (OCI), based on whether the items in subsequent periods can be reclassified to profit or loss.

IFRS 13 - Fair Value Measurement

IFRS 13 consolidates and clarifies the guidance on how to measure fair value. A number of standards require or allow companies to measure or provide additional information about the fair value of assets, liabilities or equity instruments. Prior to the introduction of IFRS 13, there was limited guidance on fair value measurement and in some cases inconsistencies in the guidance.

Important accounting estimates and assumptions

The preparation of the financial statements in compliance with IFRS requires that the management carries out assessments and prepares estimates and assumptions that affect the application of accounting principles. This affects recognised amounts for assets and liabilities on the balance sheet date, reporting of contingent assets and liabilities, as well as the reported revenues and costs for the period.

Accounting estimates are used to determine some amounts that have an impact on Statnett's financial statements. This requires that Statnett prepares assumptions relating to values or uncertain conditions at the time of preparation. Key accounting estimates are estimates that are important to the Group’s financial performance and results, requiring the management’s subjective and complex assessment, often based on a need to prepare estimates on factors encumbered by uncertainty. Statnett assesses such estimates continuously on the basis of previous results and experiences, consultations with experts, trends, prognoses and other methods which Statnett deems appropriate in the individual case.

Provisions for liabilities relating to disputes and legal claims are recognised in the income statement when the Group has an existing liability, legal or self-imposed, as a result of an event that has taken place. Furthermore, it must be possible to measure the amount reliably and it must be demonstrated as probable that the liability will be settled The provisions are measured to the best of the management's ability on the balance sheet date.

Insurance claims are considered a contingent asset and are not recognised as income until the income is virtually certain. In connection with development projects where additional costs relating to the repair of damage constitute part of the facility’s cost price, and there is no basis for write-down, insurance claims are recognised as a reduction of the project’s acquisition costs. Such a reduction is contingent on the insurance company having acknowledged the damage and that the amount can be reliably estimated.

Significant items relating to Statnett's use of estimates:

Note 1 Regnskapspost ENG

Depreciation / Amortisation

Tangible fixed assets
Depreciation is based on the management’s assessment of the useful life of property, plant and equipment. The assessments may change owing, for example, to technological developments and historical experience. This may entail changes in the estimated useful life of the asset and thus the depreciation. It is difficult to predict technological developments, and Statnett’s view of how quickly changes will come may change over time. If expectations change significantly, the depreciation will be adjusted with effect for future periods. Please refer to the more detailed discussion under “Tangible fixed assets” below.

Goodwill and other intangible assets
Goodwill arising in a business combination is not amortised. Intangible assets with a fixed useful life are amortised over the asset's useful life which is assessed at least once a year. Intangible assets are amortised in a straight line as this best reflects the use of the asset.

Write-downs

Tangible fixed assets
Statnett has made significant investments in tangible fixed assets. The value of these assets is assessed when there is an indication of impairment in value. Tangible fixed assets in the parent company are regarded as one cash-generating unit and are assessed collectively since Statnett SF has one collective revenue cap. In subsidiaries, each fixed asset is assessed individually.

Statnett expects to make substantial investments in the future. These will largely take place in the form of projects under the company’s own direction which are recorded in the balance sheet as plants under construction until the fixed asset is ready to be put into operation. Projects under execution are valued individually on indications of impairment in value.

Estimates of the recoverable amounts for assets must be based in part on the management’s assessments, including the calculation of the assets’ revenue-generating capacity and the probability of licences being granted for development projects. Changes in circumstances and the management’s assumptions may result in write-downs for the relevant periods.

Goodwill
Goodwill is evaluated for write-down annually, or more often if there are any indications of impairment in value, based on the cash-generating unit to which goodwill is allocated. If the recoverable amount (the higher of net sales and utility value) for the cash-generating unit is lower than the carrying value, the write-downs will first reduce the carrying value of any goodwill and then the carrying value of the unit's other assets, proportionally based on the carrying value of the individual assets in the unit. The carrying value of individual assets is not reduced below the recoverable amount or zero. Write-downs of goodwill cannot be reversed in a subsequent period if the fair value of the cash-generating unit increases. Impairment of value is included in the income statement as a part of write-downs.

Other intangible assets
On each reporting date, the Group considers whether there are any indications of impairment in value for intangible assets. If there are any indications of impairment in value, the Group will estimate the recoverable amount for the assets and evaluate potential write-down.

Pension costs, pension liabilities and pension assets

As of 1 January 2013, the Group has implemented the amendments in IAS 19 Employee Benefits (adopted by the EU in June 2012) (”IAS 19R”) and changed its basis for calculation of pension liabilities and pension costs. The Group previously applied the corridor method for recognition of unamortised actuarial gains and losses. According to IAS 19R, the use of the corridor method is no longer permitted, and all actuarial gains and losses must be recognised under other comprehensive income in the statement of comprehensive income. Reference is made to the statement of changes in equity and Note 5 Pensions and pension liabilities.

The calculation of pension costs and net pension liabilities (the difference between pension liabilities and pension assets) is performed on the basis of a number of estimates and assumptions. All actuarial gains and losses must be recognised under other comprehensive income in the statement of comprehensive income.

Consolidation policies

Consolidated companies

The consolidated financial statements comprise Statnett SF and subsidiaries in which Statnett SF has a controlling influence. These will normally be companies where Statnett SF owns more than 50 per cent of the voting shares, either directly or indirectly through subsidiaries.

The consolidated financial statements have been prepared using uniform accounting principles for equivalent transactions and other events under otherwise equal circumstances. The classification of items in the income statement and balance sheet has taken place in accordance with uniform definitions. The consolidated financial statements are prepared in accordance with the acquisition method of accounting and show the Group as if it was a single entity. Balances and internal transactions between companies within the Group are eliminated in the consolidated financial statements.

The cost price of shares in subsidiaries is offset against equity at the time of acquisition. Any excess value beyond the underlying equity of the subsidiaries is allocated to the asset and liability items to which the excess value can be attributed. The portion of the cost price that cannot be attributed to specific assets represents goodwill.

Statnett SF's Pension Fund is not part of the Statnett Group. Contributed equity in the pension fund is measured at fair value and classified as financial fixed assets.

Investments in joint ventures
Joint ventures are defined as entities in which there are contractual agreements that give joint control together with one or more parties. Result, assets and liabilities of joint ventures are recorded in the financial statements in accordance with the equity method. This means that the Group’s share of the result for the year after tax and amortisation of any excess value is reported on a separate line in the income statement between operating profit/loss and financial items. The accounts of joint ventures are restated in accordance with IFRS. Ownership interests in joint ventures are presented as fixed asset investments at original cost plus accumulated profit shares and less dividends in the consolidated balance sheet.

Investment in associated companies
Associates are entities where the Group has a significant, but not controlling influence over the financial and operational management. Normally these will be companies where the Group owns between 20 and 50 percent of the voting shares. Earnings, assets and liabilities of associates are recorded in the financial statements in accordance with the equity method. This means that the Group’s share of the result for the year after tax and amortisation of any excess value is reported on a separate line in the income statement between operating profit/loss and financial items. The accounts of associates are restated in accordance with IFRS. Ownership interests in associates are carried as financial fixed assets at original cost plus accumulated profit shares and less dividends in the consolidated balance sheet.

Purchase/sale of subsidiaries, joint ventures and associates
In the case of acquisition or sale of subsidiaries, joint ventures and associates, they are included in the consolidated financial statements for the portion of the year they have been a part of or associated with the Group.

Investments in other companies
Investments in companies in which the Group owns less than 20 per cent of the voting capital are classified as “available for sale” and are carried at fair value in the balance sheet if they can be reliably measured. Value changes are recognised under other comprehensive income in the statement of comprehensive income.

Investments in subsidiaries, joint ventures and associates in Statnett SF (parent company accounts)

Investments in subsidiaries, joint ventures and associates are accounted for in accordance with the cost method in the parent company accounts. The group contribution paid (net after tax) is added to the cost price of investments in subsidiaries. Group contributions and dividends received are recorded in the income statement as financial income as long as the dividends and Group contributions are within the earnings accrued during the period of ownership. Dividends in excess of earnings during the ownership period are accounted for as a reduction in the share investment. Group contributions and dividends are recorded in the year they are decided.

Business combinations

Business combinations are recognised according to the acquisition method. Acquisition costs are the total of the fair value on the acquisition date of assets acquired, liabilities incurred or taken over as compensation for control of the acquired enterprise, as well as costs which can be directly attributed to business combinations.

The acquired enterprise's identifiable assets, liabilities and contingent liabilities which satisfy the conditions for accounting according to IFRS 3, are recognised at fair value on the acquisition date. Goodwill arising as a result of acquisitions is recognised as an asset measured as the excess of the total consideration transferred and the value of the minority interests in the acquired company beyond the net value of acquired identifiable assets and assumed liabilities. If the Group's share of the net fair value of the acquired enterprise's identifiable assets, liabilities and contingent liabilities exceeds the total consideration after re-assessment, the surplus amount is immediately recognised in the income statement.

Segment reporting

The company has identified its reporting segment based on the risk and rate of return that affect the operations. Based on IFRS' definition, there is, according to the company's assessment, only one segment. The business is followed up as a single geographical segment. Subsidiaries do not qualify as separate business segments subject to reporting based on IFRS criteria. The parent company and the Group are reported as one a single business segment.

Cash flow statement

The cash flow statement has been prepared based on the indirect method. Cash includes cash in hand and bank deposits. Cash equivalents are short-term liquid investments that can be converted immediately to a known amount of cash, and with a maximum term of three months.

Revenue recognition principles

Operating revenues are measured at fair value and recognised when they are accrued on a net basis after government taxes. Operating revenues are reported on a gross basis, except in cases where Statnett acts primarily as a settlement function in connection with common grids and power trading.

Interest income is recognised over time as it is accrued. Dividends from investments are recorded as income when the dividends are adopted.

Permitted revenue, tariffs and higher/lower revenue

General
Statnett is the operator of the main national grid and two common regional grids. As the operator, Statnett is responsible for setting the annual tariffs for each common grid. The main national grid is a common grid. In a fiscal year, the actual revenues will deviate from the regulated revenues.

Permitted revenue - monopoly-regulated operations
Statnett owns transmission facilities and is a transmission system operator. These are monopoly-regulated operations. This means that the Norwegian Water Resources and Energy Directorate (NVE) sets an annual limit – a revenue cap – for the grid owner's maximum revenues. The basis for Statnett's permitted revenue is the revenue cap. The revenue cap is based on expenditure, including capital expenditure, for a retrospective period of two years. Furthermore, system operation costs are included. Statnett's revenue cap is regulated to ensure that the enterprise has incentives for efficient operation. In addition to the revenue cap, Statnett's permitted revenue consists of the following: Actual property tax, transit costs and a supplement for investments. The supplement for investments shall ensure that the year's investments are reflected in the permitted revenue for the year the investment is put into operation. Furthermore, Statnett's permitted revenue is adjusted for interruptions through KILE (quality-adjusted revenue cap for energy not supplied). There can be uncertainty attached to measuring the individual amounts included in the permitted revenue. Increased revenue as a result of conditions that require an application for adjustment of the revenue caps or interpretation of the regulations on the part of the Norwegian Water Resources and Energy Directorate (NVE), are only included in the accounts if it is considered virtually certain that the revenue will be realised.

Revenue cap transmission losses

Revenues
Transmission losses in the regional and main grid are a part of Statnett's revenue cap. The reported revenue cap for transmission losses during the fiscal year consists of the actual measured loss in MWh for a retrospective period of two years valued at a regulated reference price based on the electricity spot market price in the fiscal year.

Discrepancies between the revenue cap for transmission losses and actual costs of purchases of transmission losses in the fiscal year are, in accordance with the guidelines, apportioned among the grid owners in each common grid where Statnett is the operator.

Transmission losses
Transmission losses occur as a result of measured discrepancies between the input and outtake of power in the grid. The size of the loss will vary with the temperature, the load in the grid and the electricity price. Actual loss in the fiscal year is purchased externally at spot market price. Losses arising during transmission of power in the main national grid and the common regional grids are covered by the grid’s operator and are reported under "transmission losses".

Tariff-setting and higher/lower revenue for the year

Tariff revenues
As the operator of the main national grid and two common regional grids, Statnett is responsible for invoicing the users for the services they receive. The invoicing takes place on the basis of a tariff model, in accordance with guidelines provided by the NVE. The price system consists of fixed elements and variable elements; energy elements. Fixed elements are invoiced evenly throughout the year, while the energy element is invoiced concurrently with the customers' measured input or outtake of power from the grid.

Higher/lower revenue
The tariff for the year is set with a view to ensuring that the higher/lower revenue is offset over time. Tariffs are set in September preceding the fiscal year. Statnett has established a strategy for adjustment of the tariff basis including offsetting of the accumulated higher/lower revenue. Some quantities and parameters, including the price of energy, included in the calculation basis for the year's revenue cap, are based on estimates. Discrepancies will occur between tariff revenues and the permitted revenue. This is indicated in Note 2.

Higher/lower revenue interest calculations
Interest is calculated on accumulated higher/lower revenue in accordance with the rules stipulated by the NVE, based on the site deposit rate set by the Central Bank of Norway. The amount of interest is included in the balance for higher/lower revenue and is expressed in the financial reporting through regulation of future tariffs. This is indicated in Note 2

Power purchases and sales

Statnett is the Transmission System Operator (TSO) and is responsible for the regulating power market system and balance settlement system. Responsibility for the balance settlement system means that Statnett subsequently compares the measured and agreed energy volumes, calculates any discrepancies, and carries out the financial settlement between the market participants. The settlement is based on the prices in the regulating power market. The purchase and sale of regulating power must be balanced. Statnett receives a fee covering Statnett's costs as responsible for the balance settlement. If the settlement is across national borders in the Nordic region, a marginal price difference will arise based on the average of the Norwegian and foreign regulating power price, which is passed on to or charged to Statnett as the TSO.

Statnett has a separate licence as responsible for the balance settlement. This activity is recorded in the financial statement through fee revenues and costs relating to the execution of the balance settlement responsibility. Power purchases and sales are recognised net and are therefore not expressed in the statement of comprehensive income.

Power sales/purchases are recorded in the income statement when they are accrued/incurred, i.e. at the time of delivery.

Customer projects

Project revenue is recognised on a current basis based on the measurement of the estimated fair value. This means that revenue is recognised as the work is performed based on the degree of completion. The degree of completion is determined on the basis of the accrued costs of the executed work and estimated total project expenditure. Revenue is included in other operating revenues. Invoiced and accrued project revenues are included in trade accounts receivable.

Where projects are expected to make a loss, the entire expected loss is recognised as an expense.

Taxes

Tax costs in the income statement encompass both the tax payable for the period and changes in the deferred tax liabilities/assets. Taxes payable are calculated on the basis of the taxable income for the year. Net deferred tax assets/liabilities are calculated on the basis of temporary differences between the accounting and tax values, and the tax loss carried forward.

Tax-increasing or tax-reducing temporary differences that are reversed or may be reversed are offset. Deferred tax assets are recorded when it is probable that the company will have a sufficient taxable profit to benefit from the tax asset. Deferred tax liabilities/assets that can be recorded in the balance sheet are carried at their nominal value on a net basis.

Property taxes are recorded in the income statement and paid during the tax year. They are classified as other operating expenses.

Classification of items in the balance sheet

An asset is classified as short-term (current asset) when it is related to the flow of goods, receivables paid within one year, and “assets that are not intended for permanent ownership or use in the operations”. Other assets are fixed assets. The distinction between short-term and long-term loans is drawn one year before maturity. The first year’s instalments on long-term loans are reclassified as current liabilities.

Plants under construction

Plants under construction are recognised in the balance sheet at acquisition cost less any accumulated losses from impairments. Plants under construction are not depreciated.

Development projects start off with a feasibility and alternative study. The project is recognised in the balance sheet when the conclusion from the study is available, and the main development concept has been selected. At this point, a licence has not been granted and no final investment decision has been made. Statnett’s experience is that once a main concept has been selected for development, it is highly likely that the project will be implemented.

Ongoing assessments are made of whether licensing conditions or other causes necessitate a full or partial write-down of the project expenses incurred. Write-downs are reversed when there is no longer any basis for the write-down.

Interest during the construction period

Construction loan costs related to the company’s own plants under construction are capitalised in the balance sheet. The interest is calculated based on the average borrowing interest rate and scope of the investment, as the funding is not identified specifically for individual projects. Interest is recorded in the income statement through depreciation based on the associated asset's anticipated economic life.

Tangible fixed assets

Tangible fixed assets are carried at cost less accumulated depreciation and write-downs. The depreciation reduces the carrying value of tangible fixed assets excluding building lots, to the estimated residual value at the end of the expected useful life. Ordinary straight-line depreciation is implemented from the point in time when the asset was ready for operation, and is calculated based on the expected useful life of the asset. This applies correspondingly to fixed assets acquired from other grid owners. The cost price is decomposed when the fixed asset consists of components with differing useful lives.

The estimated useful life, depreciation method and residual value are assessed once a year. The value is assessed when there is an indication of impairment in value.Tangible fixed assets in the parent company are regarded as one cash-generating unit and are assessed collectively since Statnett SF has a collective revenue cap. In subsidiaries, each fixed asset is assessed individually. For most assets, the residual value is estimated at zero at the end of the useful life.

Gains or losses on the divestment or scrapping of tangible fixed assets are calculated as the difference between the sales proceeds and the fixed assets’ carrying value. Gains/losses on divestment are recorded in the income statement as other operating revenues/expenses. Losses on scrapping are recognised in the income statement as depreciation/write-downs.

Compensation

Lump sum payments in connection with the acquisition of land etc. are included in the cost price of the fixed asset.

Ongoing payments are minor amounts and are recognised in the income statement in the year in which the payment is disbursed.

Maintenance/upgrades

Maintenance expenses are recognised in the income statement when they are incurred. No provisions are made for the periodic maintenance of the grid (transformer stations or power lines/cables). Even though maintenance is periodic for the individual transformer station or power line, it is not considered to be periodic for the entire grid as the grid as a whole is regarded as a single cash-generating unit. If the fixed asset is replaced, any residual financial value will be recorded in the income statement as a loss on scrapping.

Expenses that significantly extend the life of the fixed asset and/or increase its capacity are capitalised.

Intangible assets

Intangible assets bought separately are measured at acquisition cost on initial recognition. For intangible assets included in a business combination, acquisition cost is measured at fair value on the transaction date. In later periods, intangible assets are recognised at acquisition cost less accumulated amortisations and write-downs. Intangible assets with a fixed useful life are amortised over the asset's useful life which is assessed at least once a year. Intangible assets are amortised in a straight line as this best reflects the use of the asset.

Goodwill

Goodwill is not amortised. Goodwill does not generate cash flows independently of other assets or groups of assets, and is allocated to the cash-generating units expected to benefit from the synergy effects of the business combination that generated the goodwill. Cash-generating units allocated goodwill are evaluated for write-down annually, or more often if there are any indications of impairment in value. If the recoverable amount (the higher of the net sales and utility value) for the cash-generating unit is lower than the carrying value, the write-downs will first reduce the carrying value of any goodwill and then the carrying value of the unit's other assets, proportionally based on the carrying value of the individual assets in the unit. The carrying value of individual assets is not reduced below the recoverable amount or zero. Write-downs of goodwill cannot be reversed in a subsequent period if the fair value of the cash-generating unit increases. Impairment of value is included in the income statement as a part of write-downs.

Write-down of tangible fixed assets and intangible assets other than goodwill

On each reporting date, the Group considers whether there are any indications of impairment in value for tangible fixed assets and intangible assets. If there are any indications of impairment in value, the Group will estimate the recoverable amount for the assets and evaluate potential write-down.

The recoverable amount is the higher of the net sales and utility value. To assess the utility value, estimated future cash flows are discounted to present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and risks specific to the asset.

If the recoverable amount for a fixed asset (or cash-generating unit) is estimated to be lower than the carrying value, the carrying value of the fixed asset (or cash-generating unit) will be reduced to the recoverable amount. If an impairment in value is subsequently reversed, the carrying value of the fixed asset (cash-generating unit) will be increased to the revised estimate of the recoverable amount, but limited to the value that would be the carrying value if the fixed asset (or cash-generating unit) had not been written down in a prior year.

Leasing

The Group as lessor

Financial lease agreements
Financial lease agreements are lease agreements where the lessee takes over the major part of the risk and return associated with the ownership of the asset. The Group presents leased assets as receivables equal to the net investment in the lease agreements. The Group’s financial income is determined so that a constant rate of return is achieved on the outstanding receivables over the term of the agreement period. Direct expenses incurred in connection with the establishment of the lease agreement are included in the receivable.

Operating leases
The Group presents leased assets as fixed assets in the balance sheet. The lease revenue is recognised in a straight line over the term of the lease period. Direct expenses incurred to establish the operating lease agreement are added to the leased asset’s carrying value and recognised as expenses during the term of the lease on the same basis as the lease revenue.

The Group as lessee

Financial lease agreements
Financial lease agreements are lease agreements where the Group takes over the major part of the risk and return associated with the ownership of the asset. At the beginning of the lease term, financial lease agreements are capitalised at an amount corresponding to the lower of fair value and the present value of the minimum rent, less accumulated depreciation and write-downs. When calculating the lease agreement’s present value, the implicit interest charge in the lease agreement is used if this can be estimated. Otherwise the company’s marginal borrowing rate is used. Direct expenses related to establishing the lease agreement are included in the asset’s cost price.

The same depreciation period is used as for the company’s other depreciable assets. If it is not reasonably certain that the company will acquire ownership at the end of the lease period, the asset will be depreciated over the shorter of the lease agreement’s duration and the asset’s useful life.

Operating leases
Leases where the major part of the risk and return associated with ownership of the asset is not transferred to the Group, are classified as operating leases. The rent payments are classified as operating expenses and are recorded in a straight line in the income statement over the duration of the agreement.

Research & development

Research expenses are recognised on a current basis. Research is an internal process that does not give rise to independent intangible assets that generate future economic benefits.

Expenses related to development activities are capitalised in the balance sheet if the product or process is technically and commercially feasible and the Group has adequate resources to complete the development. Expenses capitalised in the balance sheet include material expenses, direct wage costs and a percentage of directly attributable overhead expenses. Capitalised development expenses are recorded at acquisition cost, less any accumulated depreciation and write-downs

Capitalised development expenses are depreciated in a straight line over the estimated useful life of the asset.

Trade receivables

Trade accounts are recorded in the accounts at nominal value less any losses from impairment in value.

Contingent assets and liabilities

Contingent liabilities are not recorded in the annual financial statements. Significant contingent liabilities are disclosed unless the probability of the liability is low.

Contingent assets will not be recorded in the annual financial statements, but will be disclosed if there is a certain degree of probability that it will benefit the Group.

Higher/lower revenues are contingent liabilities/assets in accordance with IFRS and are not recorded in the balance sheet.

Dividend (from the parent company)

Dividends paid are recorded in the Group’s financial statements during the period in which they are approved by the General Meeting. If the approval and payment occur in different periods, the amount will be allocated to current liabilities until payment is made.

Pensions and pension liabilities

The Group's liability relating to pension schemes, defined as defined-benefit pension schemes, is recognised at the present value of the future retirement benefits accrued at the end of the reporting period. Pension assets are evaluated at fair value. The accumulated effect of estimate changes and changes in financial and actuarial assumptions, actuarial gains and losses, are recognised under other comprehensive income in the statement of comprehensive income. Net pension costs for the period are presented as wage and staff costs. The Group has chosen to present the net interest expenses element as wage and personnel costs, as this provides the best information about the Group's pension costs.

The contributions to contribution-based pension plans are recognised as costs as they occur.

Loans

Interest-bearing loans are recorded in the income statement as the proceeds that are received, net of any transaction costs. Loans are subsequently accounted for at amortised cost using the effective interest rate method, where the difference between net proceeds and redemption value is recognised in the income statement over the term of the loan.

Financial instruments

In accordance with IAS 39 (Financial Instruments: Recognition and Measurement), financial instruments are classified in the following categories: fair value through profit or loss, held to maturity, available for sale, loans/receivables and other liabilities. The initial measurement of financial instruments is at fair value on the settlement date, normally at the transaction price.

  • Financial assets and liabilities held for the purpose of profiting from short-term price fluctuations (held for trading purposes) or accounted for according to the fair value option are classified at fair value through profit or loss.
  • All other financial assets with the exception of loans and receivables issued by the company are classified as available for sale.
  • All other financial liabilities are classified as other liabilities and accounted for at amortised cost.

Gains or losses attributed to changes in fair value of financial instruments classified as available for sale are recognised as other comprehensive income until the disposal of the investment. The cumulative gain or loss on the financial instrument previously recognised in other comprehensive income will be reversed, and the gain or loss will be recognised in the income statement.

Changes in the fair value of financial instruments classified at fair value through profit or loss (held for trading purposes or fair value option) are recognised in the income statement and presented as financial income/expenses.

Financial instruments are included in the balance sheet when the Group becomes a party to the instrument’s contractual terms. Financial instruments are eliminated from the balance sheet when the contractual rights or obligations have been fulfilled, cancelled, or transferred, or they have expired. Financial instruments are classified as long-term when they are expected to be realised more than 12 months after the balance sheet date. Other financial instruments are classified as short-term.

Pursuant to IAS 32 financial assets are offset against financial liabilities if there is a legally enforceable right to set off the recognised amounts and the enterprise intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Derivatives and hedging

The Group utilises derivatives such as future interest rate swaps and currency swaps to hedge its interest rate and currency risks. Such derivatives are recognised initially at fair value on the date when the contract is entered into and then measured at fair value on a current basis. Derivatives are accounted for as assets when the fair value is positive and as liabilities when the fair value is negative, provided that Statnett has no right or intention to settle the contracts net. Gains and losses resulting from changes in the fair value of derivatives that do not meet the conditions for hedge accounting are recorded in the income statement.

Derivatives that are embedded in other financial instruments or non-financial contracts are treated as separate derivatives when their risk and properties are not closely related to the contracts, and the contracts are not recorded at fair value with the change in value carried through profit or loss.

When entering into a hedging contract, the Group will formally identify and document the hedging contract that the Group will use hedge accounting for, as well as the risk that is hedged and the strategy for the hedge. Documentation includes identification of the hedging instrument, or the item or transaction that is hedged, the type of risk that is hedged, and how the Group will assess the effectiveness of the hedging instrument to counteract the exposure to changes in the hedged item’s fair value or cash flows that can be attributed to the hedged risk. Such hedges are expected to be highly effective in counteracting changes in fair value or cash flows, i.e. the hedging efficiency must be expected to be within 80-125 per cent. Moreover, it must be possible to reliably measure the efficiency of the hedges, and to assess them on a current basis to determine whether they actually have been highly effective throughout the entire accounting period they are intended to cover.

Hedges that fulfil the strict conditions for hedge accounting are accounted for as follows:

Fair value hedging
Fair value hedging is hedging of the Group’s exposure to changes in the fair value of a recorded asset or liability or an unrecognised liability, or an identified portion of such, that can be attributed to a specific risk and can affect earnings. For fair value hedging the carrying value of the hedged item is adjusted for gains or losses from the risk that is hedged. Derivatives are re-measured at fair value, and gains or losses from both are recorded in the income statement.

For fair value hedging of items that are accounted for at amortised cost, the change in value is amortised in the income statement over the remaining period until maturity.

The Group discontinues fair value hedging if the hedging instrument expires or is sold, or is terminated or exercised, and the hedging no longer fulfils the conditions for hedge accounting or the Group cancels the hedging.

The Group uses fair value hedging primarily to hedge the interest rate risk for fixed interest rate loans and the currency risk for interest-bearing liabilities. Fair value hedging is also performed for specific acquisitions in foreign currencies for investment projects. Unrealised hedging gains/losses (currency futures) reduce/increase the cost price of the investments upon realisation.

Cash flow hedging
Cash flow hedging is hedging of the exposure to the variations in cash flow that is attributable to a particular risk associated with a recognised asset or liability, or a highly probable future transaction that could affect profit or loss. The effective portion of the gain or loss on the hedging instrument is recognised as other comprehensive income, while the ineffective portion is recognised as financial income or cost.

Amounts that are initially recognised as other comprehensive income, are reclassified and recognised in the income statement as financial income or cost when the hedged transaction affects the profit or loss.

If the expected future transaction is no longer expected to take place, amounts recognised earlier as other comprehensive income will be recognised in the income statement as financial income or cost. If the hedging instrument expires, or is sold, terminated or used, without being replaced or continued, or when the hedging is cancelled, the amount recognised previously as other comprehensive income is retained until the future transaction is executed. If it is not expected that the related transaction will be executed, the amount will be recognised in the income statement as financial income or cost.

The Group uses cash flow hedging primarily to hedge the interest rate risk in respect of loans with floating interest rates.

Financial risk management

Financial risk management is performed by the central finance department in accordance with guidelines approved by the Board of Directors. The Board of Directors lays down principles for general financial risk management in addition to guidelines that cover specific financial risks.

Currency

The consolidated financial statements are presented in Norwegian Kroner (NOK), which is also Statnett SF’s functional currency. All Group companies use NOK as their functional currency.

As all the companies in the Group have the same functional currency, no translation differences arise upon consolidation of the group companies.

Transactions in foreign currency are translated at the rate in effect on the transaction date. Monetary items in foreign currencies are translated into NOK at the exchange rate in effect on the balance sheet date. Non-monetary items that are measured at historical cost expressed in foreign currency are translated into NOK using the exchange rate in effect on the transaction date. Non-monetary items that are measured at fair value expressed in foreign currency are translated at the exchange rate in effect on the balance sheet date. Changes in exchange rates are recorded on a current basis in the income statement during the reporting period.

Long-term interest-bearing debt in foreign currency is related to interest rate and currency swaps and treated as borrowings in NOK.

Provisions

Provisions for liabilities are recognised in the income statement when the Group has an existing liability (legal or assumed) as a result of an event that has taken place and it can be demonstrated as probable (more likely than not) that a financial settlement will be made as a result of the liability, and the amount can be reliably measured. Provisions are reviewed on each balance sheet date and the level reflects the best estimate of the liability. If there is a substantial time effect, the liability will be accounted for at the present value of future liabilities.

Government grants

Government grants are not recorded in the accounts until it is reasonably certain that the Group will meet the conditions stipulated for receipt of the grants and that the grants will be received. Grants are recorded as a deduction in the expenses that they are meant to cover. Grants that are received for investment projects are recorded in the balance sheet as a reduction of the cost price.

Events since the balance sheet date

New information on the company’s positions on the balance sheet date is incorporated into the annual financial statements. Events after the balance sheet date that do not affect the company’s position on the balance sheet date, but will affect the company’s position in the future, are disclosed if they are material.

Note 2 Operating revenues

Operating revenues regulated operations

Statnett's revenues are mainly derive from activities regulated by the NVE. Statnett's actual operating revenues from regulated operations come from fixed and variable tariff revenues in the main grid and regional grid, as well as congestion revenues.

Each year the NVE set an upper limit, or cap, for Statnett's permitted revenue. This item corresponds to Statnett's revenue cap including amendment in the revenue cap for each year.

A discrepancy arises annually between Statnett's actual operating revenues from regulated operations (the total of the tariff and congestion revenues) and Statnett's permitted revenue determined by the NVE. This discrepancy is called higher or lower revenue. Higher revenue means that Statnett has had higher actual operating revenues than the revenue cap set by the NVE for a particular year. Lower revenue means that Statnett's actual operating revenues have been lower than the permitted revenue cap.

Pursuant to NVE regulations any higher revenues, including interest, must be returned to the customers in the form of lower prices in subsequent years. Correspondingly lower revenues, including interest, can be recouped by charging higher prices in subsequent years. The obligation to reduce future tariffs and the opportunity to collect increased tariffs do not qualify for capitalisation according to IFRS, consequently representing a latent obligation (in the event of accumulated higher revenue) and a latent receivable (in the event of accumulated lower revenue). Consequently, an annual change in these items will not be included in the income statement.

Statnett's actual operating revenues from regulated operations equal the total of Statnett's permitted revenue set by the NVE and the higher/lower revenue the same year.

Specification of income by regional grid (R Grid) and the main grid (M Grid)

Note 2 Driftsinntekter Tabell 1 ENG

Total operating revenues from regulated operations fell by NOK 687 million from 2012 to 2013, mainly due to lower tariff revenues as a result of lower stipulated tariffs for 2013 compared with 2012.

Statnett is expecting to receive a decision relating to an adjustment in the higher/lower revenue balance as of 31 December 2013 of NOK 143 million. The adjustment will compensate for the equity effect of implementing amended rules for recognition of pension liabilities. This entails a reduction of the main grid higher revenue balance of NOK 139 million. For the regional grid the expected adjustment will result in an increase in the lower revenue of NOK 4 million.

Impact of grid outages on profit

Following the outages at Nyhamna, for the period up to 2012, Statnett is in dialogue with NVE regarding the treatment of system services costs and classification in the KILE scheme related to this incident. The financial consequences for Statnett of such a grid outage have therefore not been clarified. As a result of the March 2013 outage on the Viklandet - Fræna power line, provision have been made in the accounts following the same principle as for past events.

Other operating revenue

Other operating revenues are revenues outside of the regulated operations and consist of mainly external consultancy commissions and rental income.

External assignments within the rest of the group are carried out by Statnett Transport AS.  

Balance settlement

Statnett SF holds a separate licence to settle the regulating power settlement system in Norway. This involves effectuating a financial settlement of the difference the balance responsible market players have between planned acquisitions and liabilities and the actual measured values. The balance responsible market players are financial counterparties in the settlements and must provide collateral in accordance with the Balance Agreement. The collateral requirement is calculated weekly based on trading volume and market prices. Collateral is posted as a guarantee on demand or as a cash deposit in a pledged bank account. The amount of collateral posted totalled NOK 1 078 million at year-end. The collateral posting for balance responsible market players on the same date was NOK 535 million. All balance responsible market players had posted satisfactory collateral under the Balance Agreement.

In 2013, income for the balance settlement responsibility amounted to NOK 74 million, of which NOK 23 million were fee revenues. Outstanding trade accounts receivables relating to the balance accounting totalled NOK 25 million at 31 December 2013 and are disclosed as trade accounts and other short-term receivables.

Operating profit within and outside grid activities

Note 2 Driftsinntekter Tabell 2 ENG

Basis for return on invested grid capital

The regulatory asset base is defined as the average of the incoming and outgoing balance for invested grid capital, plus one per cent for net working capital. The invested grid capital is given as the initial historical acquisition cost.

The share of common fixed assets is included.

Note 2 Driftsinntekter Tabell 3 ENG

Return on invested grid capital

Return is defined as the operating profit/loss viewed in relation to the regulatory asset base. The operating profit/loss is given as the annual permitted revenue from own grid less costs of own grid.

Note 2 Driftsinntekter Tabell 4 ENG

Note 3 System services and transmission losses

Note 3 Systemtjenester og overføringstap Tabell 1 ENG

System services are costs relating to the exercise of Statnett's system responsibility as defined in the Regulations relating to the system responsibility in the power system (FoS).

The frequency in the power grid must be 50Hz. Statnett, as Transmission System Operator (TSO), is responsible for ensuring that this frequency remains stable. The requirement to maintain a reserve capacity for regulating purposes imposes limitations on the producers as they are unable to generate and sell the full generator capacity. We distinguish between three different forms of reserve capacity.

Primary regulation
The primary regulation is automatic and is activated immediately if any changes occur in the power grid frequency. This takes place by using a pre-agreed reserve capacity. The requirement to maintain a reserve capacity for regulating purposes imposes limitations on the producers as they are unable to generate and sell the full generator capacity. Primary reserves are costs Statnett incurs by buying reserve capacity from the producers. The extent of primary reserves is determined by agreements at Nordic level and the reserves are acquired through market solutions.

Secondary reserves
Automatic secondary reserves are activated to release the primary reserves so that they in turn can quickly handle any new faults or imbalances. Automatic secondary reserves function by the TSO sending a signal to a market player/power plant, which will then change the plant's generation. Secondary reserves are also referred to as Load Frequency Control (LFC) and in the Nordic countries they are mainly used to handle frequency deviations. The extent of secondary reserves is determined by agreements at Nordic level and the reserves are acquired through market solutions.

Tertiary regulation
In Norway there is an options market for regulating power. This is used to ensure that we have sufficient regulating resources available in the Norwegian section of the regulating power market, also during periods of demand for increased output, such as in the winter months. In the winter, the TSO sets up a market where they purchase a guarantee ensuring that market members submit bids for the regulating power lists for the subsequent week. The guarantees can apply for both consumption and production.

Transit costs
Transit costs are compensation for the use of grids abroad. The power system in Europe is connected through transmission lines/cables crossing international borders.

Special adjustments
In some cases there are restrictions in the transmission capacity (bottlenecks) which may entail that the bids in the regulating power market cannot be utilised in the "correct" price order. Activated regulations that are not in price order are categorised as special adjustments and are compensated for by the associated price of the bid without this affecting the stipulation of the regulating power price. Thus, Statnett will incur a cost equal to the difference between the price of activated bids used for special adjustments and the current hourly price mainly aimed at the regulating power market multiplied by the especially adjusted volume.

Transmission losses

Statnett buys transmission losses (volume) from external suppliers at spot price (market price) for the hour the transmission loss applies.

The main grid transmission loss result is distributed between the grid owners in accordance with their proportionate shareholding in the main grid. 6.7 per cent of the facilities are owned by other companies than Statnett SF.

Note 3 Systemtjenester og overføringstap Tabell 2 ENG

Note 4 Salaries and personnel costs

Note 4 Lønns- og personalkostnader Tabell ENG

Loans to employees

Employees had loans in the company totalling NOK to million as at 31 December 2013. The loans are repaid by salary deductions over a period of up to two years. The loans are interest-free for the employee. The interest gain of loans exceeding 3/5 of the basic amount is taxed in relation to the current standard interest rate set by the authorities.

Note 5 Pensions and pension liabilities

The parent company and subsidiaries have pension schemes entitling the employees to future pension benefits in the form of defined benefit schemes. The Group's pension schemes meet the requirements in the Norwegian Mandatory Occupational Pension Act.

The pension benefits are based on the number of service years and final wage at retirement age. The full retirement is 70 per cent of pensionable income less calculated disbursements under the Norwegian National Insurance Scheme. The pensionable income is limited upward to 12 times the basic amount under the National Insurance Scheme. The full contribution period is 30 years and the normal retirement age is 67. The pension scheme also includes disability pensions, spouse pensions and children's pensions.

Accrued pension rights are secured chiefly through pension schemes in Statnett SF's pensjonskasse. In addition, the parent company has early retirement pension obligations that are funded through operations.

Contributions to the pension fund are made in accordance with actuarial calculations. The pension assets in Statnett Pensjonskasse are invested primarily in securities. See the table relating to percentage distribution of pension assets in investment categories.

The Group management has separate additional agreements under which the normal retirement age is 65, but with the possibility of retirement after reaching the age of 62. The retirement pension is 66 per cent of the pensionable income. The pensionable income also includes incomes that exceeds 12 times the basic amount under the National Insurance Scheme.

For personnel employed after 1 March 2011, additional agreements will be entered into exceeding 12 times the Norwegian national insurance scheme's basic amount within the framework of the Guidelines relating to terms of employment for senior executives in state-owned enterprises and companies, stipulated on 31 March 2011.

For more information, cf. Note 14 Remuneration/benefits to the Group management. Annual premium payments will be limited to 30 per cent of the salary exceeding 12 G.

The Group is a member of the private contractual early retirement scheme (AFP scheme) that came into force in 2011. The scheme entails that employees will receive a lifelong supplement to the national insurance retirement pension. The pension can be drawn from age 62, also if an employee decides to keep working. The AFP scheme is a defined-benefit multi-company scheme organised through a general office and financed through premiums stipulated as a percentage of the salaries. There is no reliable way of measuring and allocating liabilities and assets under the scheme. Consequently, the scheme is treated as a defined contribution scheme, according to the accounting rules, and premium payments are recognised on a current basis, and no provisions are made in the accounts. The premium for 2012 is 1.75 per cent of overall wage payments between 1G and 7.1G to the company's employees, estimated at NOK 8 million. There is currently no accumulation of funds under the scheme, and premiums are therefore expected to increase in the time ahead.

The old AFP scheme will be discontinued from 1 January 2011. Spekter will remain the Group's contracting party under the scheme which now only applies to personnel born before 1 December 1948 who drew a pension from the scheme on 1 December 2010 at the latest.

Pension liabilities are calculated in accordance with IAS 19 "Employee Benefits". The mortality risk table K2013 , based on the best estimates for the populations in Norway, is applied for 2013 (K2005 for 2012).

The net pension liabilities in the balance sheet are determined after adjustment for deferred recognition in the income statement of the effect of changes in estimates and pension schemes, as well as discrepancies between the actual and expected return on pension assets that have not yet been realised in the income statement. The net pension liabilities are reported as provisions for liabilities.

Employees who leave the enterprise before retirement age receive a paid-up policy. The paid-up policies are managed by the life insurance company Storebrand Livsforsikring AS. From the date the paid-up policy is issued, Statnett is exempt from any obligation to employees to which the paid-up policies apply. Assets and liabilities are measured at the date of issue of the paid-up policies, and are separated from pension assets and liabilities.

An independent actuary calculated the pension liabilities in January 2014 as en estimate of the situation at 31 December 2013.

When calculating the pension liabilities, the National Insurance contributions that the enterprise is required to pay on the payment of direct pensions or the payment of premiums for fund-based schemes are taken into account. The National Insurance contribution is a component of the enterprise's benefit and is recorded as part of the pension liabilities.

Implementation of IAS 19R

As of 1 January 2013, the Group has implemented the amendments in IAS 19 Employee Benefits (adopted by the EU in June 2012 (”IAS 19R”)) and changed its basis for calculation of pension liabilities and pension costs. The Group previously applied the corridor method for recognition of unamortised actuarial gains and losses. According to IAS 19R, the use of the corridor method is no longer permitted, and all actuarial gains and losses must be recognised under other comprehensive income in the income statement. Actuarial gains and losses, as at 1 January 2012 amounting to NOK 771 million, have been set to zero (NOK 144 million as at 1 January 2013). Consequently, pension liabilities increased by NOK 771 million as at 1 January 2012, whereas equity was reduced by NOK 555 million (after tax).

The Group has chosen to present the net interest expenses element as wage and personnel costs, as this provides the best information about the Group’s pension costs.

Return on pension assets was previously calculated using the long-term projected yield on pension assets. Pursuant to IAS 19R, net interest expenses associated with the pension scheme consist of interest on the liability less the return on the assets, both calculated using the discount rate. The difference between actual and recognised return on pension assets is recognised consecutively in other comprehensive income.

The change in recognition principle for unamortised actuarial gains and losses has resulted in virtually unchanged recog- nised pension costs in 2012. The change in actuarial gains/losses of NOK 627 million was recorded as income in other comprehensive income in the fourth quarter of 2012.

Below is an overview of the effects on the accounts as a result of the implementation:

Note 5 Pensjoner og pensjonsforpliktelser Tabell 1 ENG

Note 5 Pensjoner og pensjonsforpliktelser Tabell 2 ENG

Note 5 Pensjoner og pensjonsforpliktelser Tabell 2b ENG
The expected pension premium for 2014 is NOK 180 million for the parent company and NOK 182 million for the Group

Secured and unsecured pension liabilities and pension assets

Note 5 Pensjoner og pensjonsforpliktelser Tabell 3 ENG

Sensitivity analysis

The figures below give an estimate of the potential effect of a change in certain assumptions for defined-benefit pension schemes in Norway for Statnett.

The following estimates and estimated pension costs for 2013 are based on the facts and circumstances at 31 December 2013. Actual results may differ significantly from these estimates.

Note 5 Pensjoner og pensjonsforpliktelser Tabell 4 ENG

Risk tables for mortality and disability are based on tables in general use in Norway updated with historical data from the life companies' population. These data entail an adjustment of available tables in the form of increased life expectancy and increased disability probability. The average life expectancy for all age groups in the tables used is 80 years for men and 84 years for women. An extract from these tables is shown below. The table shows life expectancy and probability of disability and death within one year for different age groups. 

Note 5 Pensjoner og pensjonsforpliktelser Tabell 5 ENG

Pension disbursement flow Statnett SF

The average weighted maturity for pension liabilities, related to the main scheme in Statnett SF, is estimated at 21 years based on the pension assumptions at 31 Dec. 2013. Average weighted maturity has been taken into account when choosing discount rate.

Note 6 Tangible fixed assets and other intangible fixed assets

Note 6 Varige driftsmidler og andre immaterielle eiendeler Tabell ENG

The category electro-technical equipment mainly comprises installations in transformer and switching stations, overhead lines and earth and subsea cables.

Installations in transformer and switching stations have varing depreciation periods. Transformers and other main components have a depreciation period of 30-50 years. Control systems normally have a depreciation period of 15 years.

Overhead lines have a depreciation period of 55 years. Earth/subsea cables have a 40-55-year depreciation period.

Financial leasing is paid for in full in advance. This means that there are no future lease obligations related to financial leasing.

Note 9 Financial items - balance sheet

Financial assets and liabilities

The fair value of forward exchange contracts is determined by applying the forward exchange rate on the balance sheet date.

The fair value of currency swaps and interest rate swap is calculated as the present value of future cash flows.

Fair value is mainly confirmed by the financial institution with which Statnett has entered into such contracts.

The fair value of financial assets and long-term liabilities accounted for at amortised cost has been calculated:
- using quoted market prices,
- using interest rate terms for liabilities with a corresponding maturity and credit risk, or
- using the present value of estimated cash flows discounted by the interest rate that applies to corresponding liabilities and assets on the balance sheet date.

In the case of financial instruments such as financial assets available for sale, trade account receivables and other short-term receivables, liquid assets, trade accounts payable and other current liabilities, it is assumed that the book value is a good estimate of fair value, due to the short-term nature of the items.

Included in liquid assets as at 31 December 2013 are reserved tax withholdings of NOK 47 million and securities to Nord Pool Spot AS of NOK 33 million in the parent company. Corresponding figures of the group are NOK 48 million and NOK 56 million respectively.

Note 9 Finansposter - balanse tabell 1 ENG

Fair value hierarchy

Level 1: Fair value is used for quoted prices from active markets for identical financial instruments. No adjustments are made with regard to these prices.
Level 2: Fair value is measured using other observable input than for Level 1, either direct (prices) or indirect (derived from prices).
Level 3: Fair value is measured using input based on non observable market data. 

Financial assets and liabilities are measured at fair value according to the following valuation method:

Note 9 Finansposter - balanse Tabell 9.2.1 ENG

There has been no transactions between level 1 og 2 during the periode.

Reconciliation of level 3 in fair value measurements.

Note 9 Finansposter - balanse Tabell 9.2. 2 ENG

Interest-bearing assets and liabilities

Repayment profile for interest-bearing debt for the parent company.
The loans are measured at amortised cost adjusted for the effect of fair value hedging.

Note 9 Finansposter - balanse Tabell 9.3. 1 ENG

* Statnett SF intra-group loans of NOK 693 million, payable on demand.

Loans by currency as at 31 Dec. 2013

Note 9 Finansposter - balanse Tabell 9.3. 2 ENG

* Amounts in EUR are linked to collateral under CSA (Credit Support Annex) agreements, which reflect higher/lower value of derivatives.
** EONIA overnight - daily interest rates announced by the European Banking Federation (EBF)

1) All loans in foreign currency are converted into NOK using cross currency interest swap agreements.
The average interest rate for the loans includes interest swap agreements. The average interest rate is the average rate as at 31 Dec. 2012.

Note 9 Finansposter - balanse tabell 9.3.3 ENG

Note 9 Finansposter - balanse Tabell 9.4 ENG

All market based securitres are terminated in Norwegian kroner (NOK).
Unrealised interest gain/losses changed from NOK 3 million to NOK 0 during the period.
Which resulted in a loss of NOK -3 million, recognised in Other financial income.

Age distribution trade receivable   

Note 9 Finansposter - balanse Tabell 9.5 ENG

Derivatives

Interest rate and currency swaps
These are agreements where the contracting parties exchange currency and/or interest rate terms for an agreed amount over a defined future period.

All interest rate and currency swaps are related to underlying loans. Any loss/gain on the swap will therefore correspond to the gain/loss on the loan.

Note 9 Finansposter - balanse Tabell 9.6.1 ENG

* Accrued interest is not included in the market value. In the case of combined interest rate and currency swaps, the unrealised currency effect is included in the market value.
** Free-standing derivatives of NOK 1.100 million are related to underlying loans, but hedge accounting is not used.
*** Changes in market value includes cash flow for 2013.
**** Changes in value in fair value hedges have no effect on the result.

Interest rate options:
Statnett had no interest rate options as at 31 December 2013.

Forward exchange options:
Statnett makes use of forward exchange contracts in order to the currency risk on transactions in currencies other than NOK. 

Note 9 Finansposter - balanse tabell 9.6.3 ENG

*Average forward rate.

All contracts are related to capital expenditure on plants in foreign currency. Unrealised gains/losses on forward exchange contracts reduce/increase the cost price of the investments upon disposal.

Commodity contracts:
Statnett had no commodity contracts at 31 December 2013.

Set-off

Statnett has no financial instruments that are set off and presented net in the balance sheet statement.

Statnett has entered into CSA (Credit Support Annex) agreements with most major banks. This entails that the market value of derivaties entered into between Statnett and a counterparty is settled on a weekly basis, and that monetary security is received or given for any outstanding amounts. Master netting agreements allow set-offs of other outstanding accounts with customers if certain conditions arise. The amounts have not been set off in the balance sheet as the transactions will not normally be settled on a net basis.

Note 10 Financial risk management

Financial risk

The object of Statnett SF's financial policy is to ensure that the enterprise achieves the necessary financing of planned operational and investment programmes at the lowest possible cost, risk included. Statnett SF's financial policy also comprises aims and frameworks for minimising the enterprise's credit, interest rate and foreign exchange risks. Statnett SF uses financial derivatives to manage the financial risk.

Capital management

The enterprise has liabilities and equity as specific in the balance sheet. The loan agreements do not impose any capital requirements on the enterprise which are expected to restrict the capital structure of the enterprise. Nor are there any explicit equity requirements other than those stipulated in applicable laws and regulations. The main objective of Statnett's capital management structure is to ensure that the enterprise has a sound financial position, which enables the enterprise to operate and develop the main grid in a socio-economically profitable manner in line with plans and the owner's expectations. It is a priority with the Statnett Board of Directors to maintain a robust A rating or better. In September 2013, Statnett requested more equity from the owner and a lower dividend share. The request was granted through the 2014 fiscal budget. The owner has changed the dividend policy for the fiscal years 2013-2016 in line with the request for equity to zero dividend for 2013, and subsequently to 25 per cent of the Group's net profit for the year, adjusted for the changed balance for higher/lower revenues after tax. Moreover, the capital structure is managed by raising and paying off short-term and long-term debt, as well as through changes in liquid assets. There have been no changes to capital management guidelines or objectives in 2013.

Overview of capital included in capital structure management:

Note 10 Finansiell risikostyring Tabell 10.1 ENG

Liquidity risk

Statnett SF aims to be able to carry out 12 months of operations, investments and refinancing without raising any new debt. This will make Statnett less vulnerable during periods of low access to capital in the financial markets and periods with unfavourable borrowing conditions.

Statnett reduces liquidity risk related to maturity of financial liabilities by having an evenly distributed maturity structure, access to several sources of financing in Norway and abroad, as well as sufficient liquidity to cover scheduled operations, investment and financing needs without incurring any new debt within a time horizon of 12 months. The liquidity comprises of existing cash and cash equivalents (bank/time deposits, certificates and bonds) and a credit facility of NOK 6.5 billion running until January 2018. Statnett has also entered into a long-term loan agreement with the European Investment Bank (EIB) for a maximum borrowing of EUR 200 million. The loan can be drawn in several tranches. As of 27 March 2014, the loan from EIB remains undrawn and the credit facility had not been utilised. Liquidity is followed up continuously with weekly reporting.

Statnett SF has a high credit rating. Standard & Poor's og Moody's Investor Service have given Statnett SF credit ratings for long-term borrowings of A+ and A2 respectively. The high credit ratings provides Statnett SF good borrowing opportunities.

The table below shows all gross cash flows related to financial liabilities. The cash flows have not been discounted and are based on interest rates and exchange rates at 31 Dec. 2012.

Note 10 Finansiell risikostyring Tabell 10.2 ENG

Credit risk

Statnett SF is exposed to credit risk through the investment of surplus liquidity with issuers of securities and through the use of various interest rate and currency derivatives. In order to limit this risk, Statnett has set credit limits based on the creditworthiness of counterparties and the maximum exposure for each counterparty. Creditworthiness is assessed at least once a year, and the counterparty risk is continuously monitored to ensure that Statnett's exposure does not exceed the set credit limits and complies with internal rules.

Note 10 Finansiell risikostyring Tabell 10.3 ENG

Foreign exchange risk

Foreign exchange risk is the risk of fluctuations in foreign exchange rates that will result in changes in Statnett's income statement and balance sheet. To minimise foreign exchange risk, all foreign currency loans are converted into Norwegian Kroner (NOK) using cross currency swaps. The liabilities undertaken by Statnett in foreign currencies in connection with investment projects are mainly hedged using currency swaps. Other currency exposure as at 31 Des 2013 that had not been swapped or reserved to future payments or bank deposits in foreign currency totalled NOK 389 million for the parent company and for the Group. Foreign equity funds and shares totalled NOK 29 million for the Group.

Note 10 Finansiell risikostyring Tabell 10.4 ENG

The table shows the sensitivity of the company to potential changes in the exchange rate of the Norwegian Krone, if all other factors remain constant. The calculation is based on an identical change in relation to all relevant currencies. The effect on the result is due to a change in the value of monetary items that are not fully hedged. Other monetary items and all foreign currency debt are hedged, and the change in value is matched by a change in the value of the derivative.

Interest rate risk

The Group is exposed to interest rate risk through its loan portfolio, liquid assets and financial hedges. Statnett SF is also exposed to interest rate levels on which the revenue cap for the grid operations is based (the NVE interest rate).

In order to reduce the interest rate risk and minimise fluctuations in the result, the interest rate on Statnett's debt must correlate to the extent possible with the NVE interest rate. The NVE interest rate is calculated on the basis of daily averages of the five-year swap interest rate. In addition, the NVE interest rate comprises some fixed interest rates with the addition of inflation and a surcharge for credit risk. To achieve the desired fixed-interest period on the enterprise's debt, interest rate swap agreements linked to the underlying debt are used.

Interest rate sensitivity

The following table shows the sensitivity of the parent company and the Group to potential changes the in interest rate. The calculation takes into account all interest-bearing instruments and associated interest rate derivatives. It shows the effect on the result of a change in the interest rate levels as at 31 December 2013.

Note 10 Finansiell risikostyring Tabell 10.5.1 ENG

It has been assumed that a change of one percentage point in the short-term interest rate level will result in a change in the Group's average borrowing rate of approx.0.37 percentage points over a six-month period. Net borrowing costs will then change approx. NOK136 million, annualy.

Average effective interest rate

The table below shows the average effective interest rate for the individual financial instruments for the full years 2012 and 2013. 

Statnett has had lower interest yield on deposits as a result of lower short-term interest rates.

Note 10 Finansiell risikostyring Tabell 10.5.2 ENG

Note 11 Taxes

Note 11 Skatter Tabell 1 ENG

* As of the fiscal year 2014, the tax rate for ordinary income in Norway has been reduced to 27%. Assets and liabilities in connection with deferred tax have been valued as of 31 December 2013 using the new tax rate. The effect on the tax expense for the period is NOK 16 million in Statnett SF and NOK 21 million in the Group.

Note 11 Skatter Tabell 1b ENG

Deferred tax(-)/tax asset in the balance sheet

Note 11 Skatter tabell 1c ENG

** As of 1 January 2013, the Group has implemented the amendments in IAS 19 Employee Benefits (adopted by the EU in June 2012) (IAS 19R) and changed its basis for calculation of pension liabilities and pension costs. The Group previously applied the corridor method for recognition of unamortised actuarial gains and losses. The corridor method is no longer permitted under IAS 19R. Reference is made to Note 5 Pensions and pension liabilities.
Actuarial gains and losses as of 1 January 2012 amounting to NOK 771 million have been set at zero (NOK 144 million as at 1 January 2013). As a result, the deferred tax increased by NOK 216 million as of 1 January 2012 (NOK 41 million as of 1 January 2013).  

Changes in temporary differences

Note 11 Skatter Tabell 2 ENG

A group contribution of NOK 89 million has been disbursed from Nydalen Bygg C AS to Statnett SF, reducing the tax loss carried forward in Statnett SF.

Note 12 Investments in subsidiaries, joint ventures and associates

Statnett SF had the following investments at 31 December 2013:

Note 12 - Investeringer i datterselskap, felleskontrollert virksomhet og tilknyttede selskaper Tabell 1 ENG

*) In connection with a private placement in Nord Pool Spot AS as at 31 Augsut 2013, Statnett's ownership interest was reduced from 28.8% to 28.2%. The profit for the year includes the Group's gain due to the reduced ownership interest through a private placing.
**) eSett OY was established in November 2013.

Purchase of subsidiary

On 22 May 2013, Statnett SF purchased all shares in Nydalshøyden Bygg C AS that owned Nydalen Allé 33.

Nydalshøyden Bygg C AS owned Statnett's head office and has no other business activities. The acquisition is regarded as an asset purchase, and all identified excess value has been allocated to the building.

On the acquisition date, the following identifiable assets and liabilities were included in the consolidated accounts:

Note 12 - Investeringer i datterselskap, felleskontrollert virksomhet og tilknyttede selskaper Tabell 2 ENG

Note 13 Related parties

As at 31 December 2013, Statnett SF was wholly-owned by the Norwegian State through the Ministry of Petroleum and Energy (MPE). Statnett has the following relations with MPE both as owner and regulatory authority:

Regulatory authority

The Norwegian parliament (Storting) is the legislative authority that passes legislation based on bills put forward by the government. Regulations are adopted by the King in Council. The MPE administers its areas of responsibilities and delegates the administration of the greater part of the Energy Act to the NVE. Pursuant to the Norwegian Public Administration Act, any administrative decision made by the NVE can be appealed to the MPE as the superior authority.

Other related parties:

Note 13 Nærstående parter Tabell 1 ENG

The subsidiaries are all wholly-owned by Statnett SF, though so that Statnett owns 100 per cent of the shares in NorGer AS and 90 per cent of the shares in NorGer KS. In addition, NorGer AS owns 10 per cent of the shares in NorGer KS. This entails that Statnett SF, including indirect ownership, also controls 100 per cent of the shares in NorGer KS.

Statnett SF has an ownership interest in Nord Pool Spot AS of 28.2 per cent. The ownership interest was reduced from 28,8 per cent following a private placement in August 2013. Statnett SF has an ownership in eSett OY of 33,3 per cent, corporated in November 2013.

Related party transaction

Statnett SF and its subsidiaries have entered into loan agreements and agreements relating to the purchase and sale of services. All transactions are made as part of the normal commercial operations and at current market prices. The most important transactions were:

Statnett Forsikring AS is licensed to provide cover for risks associated with companies in the Statnett Group, and operates both as a direct personal insurance company and a non-life insurance company. The company is also a reinsurer of Statnett's risks covered by other insurers.

Statnett Transport AS operates a heavy transport business on land and sea and supplies transport services to Statnett SF, including preparedness services relating to cables. These services are valued by an external party.

Statnett SF purchases transmission losses on Nord Pool Spot AS on a daily basis. The purchase and sale of energy is settled at the power exchange's market prices.

Statnett SF performs administrative services for its subsidiaries. Agreements have been entered into which specify these services, and they are priced at market terms.

In 2013, Statnett SF received dividends totalling NOK 3,6 million from subsidiaries and associates.

Statnett SF has purched Nydalen Allè 33 from Nydalshøyden Bygg C AS. The purchase price is valued by an external part.

Joint venture parties

TenneT TSO BV and Statnett SF have constructed a subsea cable to transport energy between Norway and the Netherlands, known as the NorNed cable. Each party owns its physical half of the cable, with Statnett owning the northern part and TenneT the southern part. The NorNed cable became operational in May 2008. Costs and revenues from the operation of the NorNed cable are shared equally between TenneT and Statnett.

Statnett SF owns Skagerrak cables 1-3 whereas the Danish system operator Energinet.dk holds a long-term lease agreement for half of the cable capacity. Operating costs and revenues related to the operation of the cable are shared equally between Energinet.dk and Statnett. Energinet.dk and Statnett have also been granted a licence to install another cable for transmission of energy between Norway and Denmark, called Skagerrak 4. Each party will own its physical half of the cable, with Statnett owning the northern part and Energinet the southern part. The cable is currently being constructed and is scheduled to come online towards the end of 2014.

Statnett signed in autumn 2012 a cooperation agreement with the German companies TenneT and KfW in order to realize an HVDC interconnector between Norway (Tonstad) and Germany ( Wilster). The project's name is NordLink. NordLink has a transmission capacity of 1400 MW. The interconnector consists of 53 km overhead line on the Norwegian side, a 514 km submarine cable and a 55 km land cable on the German side. The ownership is shared, where Statnett owns the Northern part and TenneT and KfW owns the Southern part through a jointly owned German company. Costs and trading revenue are shared equally between Germany and Norway. In 2013, NordLink applied the Norwegian authorities for a trade license. The interconnector is planned to come into operation end of 2018.

National Grid NSN Link Ltd (NLL) and Statnett plan to realize an HVDC interconnector between Kvilldal in Norway and Blyth in North-East England, referred to as NSN. The transmission capacity will be 1400 MW. Each party will hold 50% of the interconnector, with Statnett as the owner of the Eastern part and NLL the Western part. All costs and trading revenues shall be shared equally between the partners. NSN holds a technical license in Norway and a trade license in England. In 2013, NSN applied the Norwegian authorities for a trade license and the British authorities for the technical license. NSN is planned to come into operation in 2020.

Statnett SF inter-company accounts

Note 13 Nærstående parter Tabell 2 ENG

Interest rates

Interest rates on long-term borrowing and lending have been agreed at six months' NIBOR with a mark-up in the interval 0,7% - 1.75%

Statnett SF's intra-group trading

Note 13 Nærstående parter Tabell 3 ENG

Note 14 Remuneration/benefits to the Group management

The Board's declaration on determination of salary and other remuneration for the Group management.

The statement concerning remuneration to the President and CEO and the Group management has been prepared in accordance with the provisions in the Public Limited Liability Companies Act, the Norwegian Accounting Act, the Norwegian Code of Practice for Corporate Governance and the Guidelines relating to state-owned companies, which include an approach to executive pay, as well as the Norwegian Ministry of Petroleum and Energy's compliance expectations stipulated in its letter of 29 November 2011.

The Board of Directors has established a remuneration committee, consisting of two owner-appointed board members and one employee representative. Unless otherwise agreed, the HR Director will act as committee secretary. The remuneration committee is an advisory and preparatory body for the Board of Directors, and will put forward proposals for salary adjustments in accordance with the guidelines specified below.

In addition to a fixed salary the Group management is entitled to a company car and pension benefits. There is no bonus scheme for senior employees. The retirement age for the President and CEO and the Group senior management is 65. The President and CEO is entitled to 12 months' severance pay in the event of dismissal from the company. No other senior employees have agreements for saleries after the termination of employment.

The Group's guiding principle for 2011 and 2012 has been to keep remuneration and other benefits for the Group management at a competitive level to ensure that the Group attracts and retains high-quality senior executives. The fixed salary does not need to be at the top of the pay scale. However, it must be competitive for our industry and compared to other companies recruiting in the same market as Statnett SF. At the same time, the salary must reflect individual experience, area of responsibility and achieved results.

The Board of Directors approves the annual salary adjustment for the company's president/CEO, and adopts a framework which the president/CEO uses to adjust the salaries for the rest of the Group management team.

The same guidelines specified above will be used as a basis for the next fiscal year.

Note 14 Ytelser til ledelsen Tabell 1 ENG

All figures are exclusive of employer's NICs.

Deputy board members and observers do not receive remuneration.
Some board members receive compensation for their participation in the audit committee or remuneration committee. Board remunerations may therefore vary.

*) In the case of employee representatives, only board members' fees are stated.

Note 14 Ytelser til ledelsen Tabell 2 ENG riktig

All figures are exclusive of employer's NICs.

Terms and conditions, senior executives

Title/name Terms and conditions for retirement age/early retirement pension/retirement pension
President and CEO:
Auke Lont
From the age of 65, the full annual retirement pension is 66 per cent of the pension base, i.e. of the fixed, normal annual salary at retirement. The pension base is adjusted annually by the same percentage increase as in the basic amount under the National Insurance Scheme. From the age of 67, the annual retirement pension of 66 per cent will be co-ordinated with the retirement pension disbursed from Statnett SF's Group Pension Fund and the Norwegian National Insurance Scheme.

Upon death, any surviving spouse and children under the age of 21 will receive a pension.

Should the President become disabled before the age of 65, he or she will receive a disability pension. The full disability pension equals the retirement pension awarded at the age of 65. The disability pension disbursement will be reduced according to disability.
Executive vice presidents:
Håkon Borgen
Bente Hagem
Øivind Kristian Rue
The retirement age is 65, but with the right to retire with an early retirement pension at any time after the age of 62. In the event of retirement between 62 and 65 an annual payment of 66 per cent of the pension base will be disbursed. The pension base is the fixed, normal annual salary at retirement. The pension base is adjusted annually by the same percentage increase as in the basic amount under the National Insurance Scheme. In the event that income is received from others and this, together with the early retirement pension disbursed by Statnett, exceeds the final salary the early retirement pension will be reduced by 50 per cent of the amount that exceeds the final salary.

From the age of 65, the full annual retirement pension is 66 per cent of the pension base, i.e. of the fixed, normal annual salary retirement. The pension base is adjusted annually by the same percentage increase as in the basic amount under the National Insurance Scheme. From the age of 67, the annual retirement pension will be coordinated with the retirement pension disbursed from Statnett SF's Pension Fund and the Norwegian National Insurance Scheme.

Upon death, any surviving spouse and children under the age of 21 will receive a pension.

The above persons' entitlements to pension benefits over and above paid-up policies from Statnett SF's Group Pension Fund from the age of 62 will lapse if they are no longer employed by Statnett SF on their 62nd birthday.

Should any of the above persons become disabled before reaching the age of 65, he or she will receive a disability pension. The full disability pension equals the retirement pension awarded at the age of 65. The disability pension disbursement will be reduced according to disability.
Executive vice presidents:
Gunnar G Løvås
Peer Olav Østli
The retirement age is 65, with the right to retire with an early retirement pension at any time after 62. The full contribution period is 30 years. In the event of retirement between ages 62 and 65, an annual payment shall be disbursed of 66 per cent of the pension base, less one percentage point for each year between 62 and 65. The pension base is the fixed, normal annual salary at retirement. The pension base is adjusted annually by the same percentage increase as in the basic amount under the National Insurance Scheme. Pension disbursement may be reduced if the member receives any salary, pension or remuneration from other companies in the Statnett Group.

From the age of 65, the full annual retirement is 66 per cent of the pension base. The pension base is the fixed, normal annual salary at retirement. The pension base is adjusted annually by the same percentage increase as in the basic amount under the National Insurance Scheme. From the age of 67, the annual retirement pension is covered through the National Insurance Scheme and Statnett's group pension scheme, plus 66 per cent of the part of the pension base that exceeds 12 times the basic amount, provided that there is a full contribution period (30 years).

Upon death, any children under the age of 21 will receive a children's pension.

If the member leaves the company before retirement age, a pension rights certificate will be issued, which will secure retirement pension benefits from age 65. The pension rights certificate will be adjusted by 75 per cent of the increase in the basic amount for each year until retirement.

Should any of the above persons become disabled before reaching the age of 65, he or she will receive a disability pension. The full disability pension equals the retirement pension awarded at the age of 67, based on the pension base at the time the disability occurred. The disability pension will be reduced according to disability.
Executive vice president:
Knut Hundhammer
The retirement age for executive positions is 65. A pension agreement has been entered into in addition to the ordinary membership in the enterprise's group pension scheme. The pension is secured through the accrued savings balance, including interest, disbursed to Hundhammer as taxable income. Statnett holds the rights to the Guarantee Account up to the moment of disbursement. The guarantee account will be disbursed to Statnett SF at retirement at the latest. The guarantee account, including interest, is used to finance the benefits which will be disbursed to Hundhammer at retirement. The pension base is the permanent ordinary salary. Statnett will, each year until retirement or resignation, pay up to 30 per cent of the difference between the ordinary salary and 12 times the Norwegian national insurance scheme basic amount to the pension fund scheme. For 2013, payments of NOK 306 480 were made. For subsequent years, this amount will be adjusted with a corresponding salary increase, with a minimum increase corresponding to the increase in G. Upon death, the surviving spouse or spouse equivalent will receive an amount corresponding to the remaining savings balance including interest from Statnett SF. This lump sum will be taxable for the spouse/spouse equivalent.

Note 15 Events after the balance sheet date

We are not aware of any events occurring after the balance sheet date that may be of significance for the evaluation of the financial statements. 

Note 16 Secured debt, guarantees

The parent company may not pledge the enterprise's assets or provide other security, apart from providing security to financial institutions in connection with day-to-day banking transactions, and providing the customary security as part of the day-to-day operations.

Note 17 Disputes

From time to time Statnett is involved in minor disputes with landowners, customers and others with regard to the interpretation of signed contracts, statutory obligations, including property tax, discretionary assessments and disagreements related to ordinary operations and building of power lines and cable connections. Disputes of this nature are regarded as part of regular operations.

The contractor to one of Statnett's ICT projects has filed a claim for compensation grounded in increased expenses incurred due to circumstances which they believe Statnett is responsible for. Based on the documentation of the claim, Statnett has made no accounting provisions at this point.

Note 18 Other operating costs

Note 18 Andre driftskostnader Tabell 1 ENG

Operational lease agreements falling due later than one year from balance sheet date

The Group has entered into several minor lease agreements for buildings, communication and other operating equipment in our long and narrow country relating to ordinary onsite operations and implementation of our projects. The leases vary from a few months to 15 years. Leases are paid and carried to expense in accordance with the terms of each contract

Auditor's fee

Note 18 Andre driftskostnader Tabell 2 ENG

Auditor's fees are exclusive of VAT.

Note 19 Comparative figures for the Statnett Group

All amounts in the income statement, balance sheet, cash flow and supplementary information are presented showing one year comparative figures.

Below, comparative figures for selected amounts have been cited for four years. 

Note 19 Sammenligningstall for Statnett konsern tabell 1 ENG

Statnett SF has implemented changes to IAS 19R, and the numers for 2012 and 2013 have be re-classifised with the effect of these changes.

Note 20 Decided, non-registered contributed capital

On 17 December 2013, Statnett held an extraordinary enterprise general meeting where it was decided to increase Statnett's equity by NOK 3 250 million, and the entity's articles of association were changed accordingly. The change of capital was registered in the Register of Business Enterprises on 18 January 2014.

Note 21 New and amended accounting standards

The standards and interpretations that were adopted before submission of the consolidated accounts, but where the effective date is in the future, are stated below. The Group intends to implement the relevant amendments at the effective date, provided that the EU approves the amendments before the group accounts are presented. Only matters assumed to be relevant for Statnett, have been included. However, none of the amendments below are considered to imply substantial changes in the Group’s application of accounting principles or notes.

Adopted IFRS and IFRIC standards with future implementation dates

IAS 19 Employee Benefits

The amendment introduces the option to recognise contributions from employees or third parties as a reduction in pension cost in the same period in which they are payable if, and only if, they are linked solely to the employee’s "services" rendered in that period.

IAS 27 Separate Financial Statements

As a consequence of the publication of IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities, IASB has amended IAS 27. IAS 27 now only deals with accounting in the separate financial statement. The title of the standard was also changed in this connection. The amendments have been approved by the EU, with effect from the fiscal year starting on 1 January 2014 or later.

IAS 28 Investments in Associates and Joint Ventures

As a consequence of the new standards IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities, the title of IAS 28 has been changed to Investments in Associates and Joint Ventures. IAS 28 now describes the use of the equity method for investments in joint ventures, in addition to associates. The amendments have been adopted by the EU, with effect from the fiscal year starting on 1 January 2014 or later.

IAS 32 Financial Instruments - presentation

IAS 32 has been amended to clarify the content of "currently has a legally enforceable right to set-off" and the use of IAS 32's set-off criteria for settlement systems such as clearing house systems which apply gross settlement systems that are not simultaneous. The amendments will be effective for fiscal years starting on 1 January 2014 or later.

IAS 36 – Impairment of Assets

The amendment addresses the disclosure of information about the recoverable amount of impaired assets, if this is based on fair value less costs of disposal. The amendment must be regarded in the context of IFRS 13 Fair Value Measurement. The amendments will be effective for fiscal years starting on 1 January 2014 or later.

IAS 39 Financial Instruments - Recognition and Measurement

IASB has adopted changes relating to amendments of the hedge accounting rules pursuant to IFRS. Under the amendments there would be no need to discontinue hedge accounting if a hedging derivative was novated to effect clearing with a central counterparty - CCP) as a consequence of existing or newly introduced laws or regulations, provided certain criteria are met. The amendments will be effective for fiscal years starting on 1 January 2014 or later.

IFRS 10 Consolidated Financial Statements

IFRS 10 replaces the portions of IAS 27 Consolidated and Separate Financial Statements that address consolidated financial statements, and SIC-12 Consolidation - Special Purpose Entities.

IFRS 10 is based on a single control model that applies to all entities including special purpose entities (SPE). The changes introduced by IFRS 10 will require management to exercise significant judgement to determine which entities are controlled by the parent company, where all enterprises that are to be controlled must be consolidated. The decisive factor in determining whether a company is to be included in the consolidated accounts under IFRS 10 is whether there is control. Control over another entity exists when the investor is exposed to, or has rights to, variable returns from his involvement with the entity, and the ability to use power to control the activities in the entity which, to a significant degree, affect the returns. Within the EU/EEA, IFRS 10 is effective for fiscal years starting on or after 1 January 2014.

IFRS 11 Joint Arrangements

This standard replaces IAS 31 Interests in Joint Ventures, as well as SIC-13 Jointly Controlled Entities - Non-monetary Contributions by Venturers. IFRS 11 removes the option to account for joint ventures using the proportional consolidation method. Instead, all entities that meet the definition of joint ventures must be accounted for using the equity method. In the EU/EEA area, IFRS 11 will apply for the fiscal year starting on 1 January 2014 or later.

IFRS 12 Disclosure of Interests in Other Entities

IFRS 12 applies to enterprises with interests in subsidiaries, joint arrangements, associates or unconsolidated structured entities. IFRS 12 replaces the disclosure requirements that were previously included in IAS 27 Consolidated and Separate Financial Statements, IAS 28 Investments in Associates and IAS 31 Interests in Joint Ventures. A number of new disclosures are also required. In the EU/EEA area, IFRS 12 will apply for the fiscal year starting on 1 January 2014 or later.

Amendments not approved by the EU

IFRS 9 – Financial Instruments

IFRS 9 will replace IAS 39. IASB has divided the project into several phases. The relevant sections of IAS 39 will be deleted as the individual phases of IFRS 9 are completed. The Group will evaluate potential effects of IFRS 9 in keeping with the other phases, as soon as the final standard, including all phases, is published.

IFRIC 21 - Levies

IFRIC 21 is an interpretation of IAS 37 Provisions, Contingent Liabilities and Contingent Assets. The standard stipulates criteria for when an entity should recognise a liability. One such criterion is that the entity has a present obligation as a result of a past event, also known as an obligating event. The interpretation clarifies that the obligating event that gives rise to a liability to pay government levies is the activity described in the relevant legislation that triggers the payment of the levy. The interpretation also includes guidance illustrating how it should be applied.

IASB 2010 - 2012 annual improvement project

The IASB's annual improvement project for 2010 – 2012 contains amendments to several standards:

IFRS 3 – Business Combinations

Contingent consideration in a business combination that is not classified as equity must subsequently be measured at fair value through profit or loss regardless of whether or not it is within the scope of IFRS 9 “Financial instruments”.

IFRS 13 Fair Value Measurement

IASB clarifies that non-interest-bearing short-term receivables and payables can be measured at invoice amount if the impact of discounting is not material.

IAS 24 – Related Party Disclosures

The amendment clarifies that a management entity that supplies key personnel to the management is a related party covered by the information requirements relating to related parties. In addition, an entity that makes use of such services must disclose any costs accrued for management services. The amendments have not yet been approved by the EU.

2011-2013 annual improvement project

The IASB's annual improvement project for 2011 – 2013 contains amendments to several standards:

IFRS 3 – Business Combinations

The amendment clarifies that:

  • Joint arrangements are outside the scope of IFRS 3, not just joint ventures
  • The scope exception only applies to the financial statements of the joint venture or the joint operation.

IFRS 13 Fair Value Measurement

The amendment clarifies that the portfolio exception in IFRS 13.52 applies to financial assets, financial liabilities and other contracts.

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