22
JOTUN GROUP
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
GENERAL
The Jotun Group consist of Jotun A/S and its subsidiaries. The consolidated
financial statements consist of the Group as well as the Group’s net
interests in associated companies and jointly controlled entities.
Jotun A/S is a limited company incorporated in Norway. The Jotun Group’s
headquarter is in Sandefjord, Norway, and the Group including associated
companies and jointly controlled entities employs around 9 800 people in
45 countries.
1. STATEMENT OF COMPLIANCE
The Jotun Group’s consolidated financial statements have been prepared
in accordance with International Financial Reporting Standards (IFRS) and
interpretations as adopted by the International Accounting Standards
Board (IASB) and approved by the European Union (EU).
2. BASIS FOR PREPARATION OF THE ANNUAL ACCOUNTS
The consolidated financial statements are based on historical cost, with the
exception of financial instruments at fair value and loans, receivables and
other financial liabilities which are recognised at amortised cost.
The consolidated financial statements have been prepared on the basis of
going concern.
3. BASIS FOR CONSOLIDATION
The Jotun Group’s consolidated financial statements comprise Jotun A/S
and companies in which Jotun A/S has a controlling interest. The financial
statements of subsidiaries are included in the consolidated financial
statement from the date that control commences until the date that
control ceases.
Control is achieved when the Jotun Group is exposed, or has rights, to
variable returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee. Specifically, the
Group controls an investee only if the Jotun Group has:
• Power over the investee, i.e. has existing rights to direct the relevant
activities of the investee
• Exposure, or rights, to variable returns from its involvement with the
investee
• The ability to use its power over the investee to affect its returns
Generally, there is a presumption that a majority of voting rights result in
control. To support this presumption and when the Group has less than a
majority of the voting or similar rights of an investee, the Group considers
all relevant facts and circumstances in assessing whether it has power over
an investee, including:
• Contractual arrangements with other vote holders of the investee
• Rights arising from other contractual arrangements
• The Group’s voting rights and potential voting rights
The Group reassesses whether or not it controls an investee if facts and
circumstances indicate that there are changes to one or more of the three
elements of control.
A change in the ownership interest of a subsidiary, without a loss of
control, is accounted for as an equity transaction. The financial statements
of the subsidiaries are prepared for the same reporting period as the
parent company. All intra-group assets and liabilities, equity, income,
expenses and cash flows relating to transactions between members of the
Group are eliminated in full on consolidation.
Total comprehensive income within a subsidiary is attributed to the noncontrolling
interest even if that results in a deficit balance.
INTERESTS IN JOINT VENTURES AND ASSOCIATES
The Group has interests in joint ventures, which are jointly controlled
entities, whereby the ventures have contractual arrangements that
establish joint control over the economic activities of the entities. The
agreements require unanimous agreements for financial and operating
decisions among the ventures.
The Group’s investments in its associates and joint ventures are accounted
for using the equity method. An associate is an entity in which the
Group has significant, but not controlling influence over. Under the
equity method, the Group’s investments in joint ventures and associated
companies are recognised in the statement of financial position at cost
plus post-acquisition changes in the Group’s share of net assets of the joint
ventures and associates. Goodwill relating to the associates is included in
the carrying amount of the investment and is not amortised or individually
tested for impairment. The income statement reflects the Group’s share of
the results of operations for the joint ventures and associated companies.
This is the profit attributable to equity holders of the joint ventures and
associated companies, after tax and non-controlling interests in subsidiaries
of the joint ventures and associated companies.
The financial statements of the associates are prepared for the same
reporting period as the Group. When necessary, adjustments are made to
bring the accounting policies in line with those of the Group.
After application of the equity method, the Group determines whether it
is necessary to recognise an additional impairment loss on its investment
in associates. The Group determines at each reporting date whether there
is any objective evidence that the investment in any of the associates
is impaired. If so, the Group calculates the amount of impairment as
the difference between the recoverable amount of the associate and
its carrying value, and recognises the amount in ‘share of profit from
associated companies in the consolidated income statement.
NON-CONTROLLING INTERESTS
The non-controlling interests in the consolidated financial statements are
the minority’s share of the carrying amount of the equity. In a business
combination the non-controlling interests are measured at the noncontrolling
interest’s proportionate share of the acquirer’s identifiable net
assets.
4. FOREIGN CURRENCY
The Jotun Group’s presentation currency is Norwegian krone (NOK). This
is also the parent company’s functional currency. Each entity in the Group
determines its own functional currency and items included in the financial
statement of each entity are measured using that functional currency.
TRANSACTIONS IN FOREIGN CURRENCY
Transactions in foreign currency are initially recorded by the Group entities
at the functional currency rates prevailing at the date of transaction.
Monetary items in a foreign currency are translated into functional
currency using the exchange rate applicable at the balance sheet date.
Non-monetary items in foreign currency are translated into functional
currency using the exchange rate applicable at the transaction date. Nonmonetary
items that are measured at their fair value expressed in a foreign
currency are translated at the exchange rate applicable at the balance
sheet date. Changes to exchange rates are recognised in the consolidated
income statement as they occur during the accounting period.
TRANSLATION TO NOK OF FOREIGN OPERATIONS
Assets and liabilities in entities with other functional currencies than NOK
are translated into NOK using the exchange rate applicable at the balance
sheet date. Their income statements are translated at exchange rates
prevailing at the date of the transaction. Exchange rate differences are
recognised in other comprehensive income.
On disposal of a foreign operation, the component of other
comprehensive income relating to that particular foreign operation is
recognised in the income statement.