The annual accounts have been prepared in accordance with the provisions of the Norwegian Accounting Act and with generally accepted accounting principles.
Management has used estimates and assumptions that have affected the income statement and the valuation of assets and liabilities, as well as uncertain assets and obligations on the date of balance in the preparation of the annual accounts in accordance with good accounting practice.
Foreign exchange transactions are calculated at the exchange rate prevailing at the time of the transaction. Monetary items in foreign currency are converted to Norwegian kroner by using the rate of exchange on the balance date. Non-monetary items which are measured at historical exchange rates expressed in foreign currency are converted to Norwegian kroner by using the exchange rate at the time of transaction. Non-monetary items which are measured at fair value expressed in foreign currency are converted to the exchange rate determined at the time of measurement. Exchange rate changes are entered on the income statement as they occur during the accounting period under other financial items.
The operating revenues consist mainly of division of joint costs among the subsidiaries. Sales are invoiced as the services occur.
Tax costs consist of payable tax and changes in deferred tax. Deferred tax/tax benefits are calculated on all differences between book and taxable values of assets and liabilities. Deferred tax is calculated at 25% of the temporary differences between the book and taxable values, as well as tax losses carried forward at the end of the reporting year. Net deferred tax benefits are entered on the balance sheet to the extent that it is probable they can be utilised.
Payable tax and deferred tax are entered directly against equity to the extent that the tax entries relate to equity items.
Current assets and short-term debt include items which become due for payment within a year after the date of acquisition and items associated with the goods cycle. Other items are classified as fixed assets/long-term liabilities.
Current assets are valued at the lower of acquisition cost and fair value. Short-term debt is recognised on the balance sheet at the nominal amount at the time it is taken out.
Fixed assets are measured at acquisition cost, less depreciations and write downs. Long-term debt is recognised in the balance sheet at the nominal amount at the time of establishment.
Research and development expenses are entered on the balance sheet to the extent to which a future financial benefit can be identified that is linked to the development of an identifiable intangible asset and the expenses can be reliably measured. Otherwise, such expenses are recognised as costs on an ongoing basis. Development that is entered on the balance sheet is depreciated on a straight line basis over the financial lifetime. Research expenses are recognised as costs on an ongoing basis.
Tangible fixed assets are entered on the balance sheet and depreciated on a straight line basis over the asset's expected lifetime. Major assets that consist of significant components having different lifetimes are depreciated with different depreciation times for the different components. Direct maintenance of equipment is recognised continuously as an expense under operating expenses, while increased costs or improvements are added to the equipment's price and amortised concurrently. If the recoverable value of the asset is lower than book value, it is written down to recoverable value. Recoverable value is the higher of net sales value and value in use. Value in use is the present value of the future cash flow that the asset is expected to generate.
Subsidiary and associated companies are assessed by the cost method in the company accounts. The investment is valued at acquisition cost for the shares unless write down has been necessary. Write down to fair value is been done when the decrease in value is due to causes that cannot be considered to be transitory and where this must be considered necessary according to good accounting practice. Write downs are reversed when the reason for write down no longer exists.
Dividends, group contributions and other payments from subsidiaries are entered as revenue during the same year as provision is made for them in the subsidiary's accounts. If the dividend/group contribution exceeds the proportion of earned profit after the date of acquisition, the surplus represents part repayment of invested capital and is deducted from the value of the investment on the parent company's balance sheet.
Trade accounts receivable and other receivables are recognised in the balance sheet at their nominal value after deductions for provision for expected loss. Provision for losses is made on the basis of individual assessment of each debt.
Short-term investments (shares assessed as current assets) are valued at the lower of acquisition cost and fair value on the date of balance. Dividends received and other payments from the companies are entered as other financial income.
The company has collective, contribution-based pension schemes. These are schemes with a savings portion and a risk portion with earnings right. Pension premiums are entered as costs as they occur.
The company's defined benefit plan that was closed in 2015, per 31.12.2015 discontinued with issue of free policies. The defined benefit plan with a pension of approximately 60 per cent of final salary at age 67 and full service period of 30 years, was replaced with a new deposit scheme from 1.1.2016 valid for all employees. Deposit Scheme provides risk coverage for disability. Earlier risk-pension with policy earnings is also completed with the issuance of free policies per. 31.12.2015. Of defined benefit plans, the company still have an on-going taxable joint annuity policy valid for a limited number of people.
Defined-benefit pension schemes
Defined-benefit pension schemes are valued at present value of the future pension benefits that have been earned on the date of balance. Pension funds are valued at fair value.
Changes in defined-benefit pension commitments that are due to changes in pension plans are distributed over the estimated average remaining earnings period. Estimate changes and changes in financial and actuarial assumptions (actuarial gains and losses) are entered against equity (OCI). The period's net pension costs are classified as payroll and personnel costs.
The cash flow statement has been prepared according to the indirect method. Cash and cash equivalents comprise cash, bank deposits and other short-term liquid investments.
According to company specification in note 17, revenues from our subsidiaries total 98.6 million NOK. Total revenues from Norwegian companies amounts 47.8 mill. NOK, Swedish companies 49.9 million NOK and Danish company 0.9 million. NOK.
The table below shows the tax effects of the various temporary differences between accounting and tax values.
Other short-term liabilities consist mainly of accrued costs not yet due for payment.
The loans have been taken with negative security declaration and have normal clauses relating to equity, equity ratio and debt ratio. The bonds are issued with a negative pledge and have standard terms linked to equity, equity ratio and debt ratio. The company signed a new agreement on long-term debt financing in June 2016. This is described in report of the Board of Directors and Note 5.1.5 to the consolidated financial statements.
In addition to the long-term access to liquidity, the group has loan facilities that are renewed each year. As at 31.12.2016 these were NOK 312 million. As a result of normal seasonal variations, the group's net interest-bearing debt was at its highest in March 2016, NOK 1 368.7 million. The long term loan facilities as at 31.12.2016 are expected to be sufficient to cover liquidity needs for the coming 2.5 years.
Assets with associated financial market risk consist of loans in foreign currency to subsidiaries, mainly in SEK. Exchange rate exposure is eliminated in that the loans are financed with debts in the same currency. Interest rate risk connected with the same receivables and liabilities is reduced by using rate swaps. In order to assist subsidiaries in covering risks associated with buying and selling currency, and within limits defined by the Board, currency positions may be used for internal exchanges. The company also carry out the the hedging of the Group's consumption of electricity. For the Swedish part of the Group this is done through trading financial contracts on the Nasdaq OMX Commodities. The realized hedging income is distrbuted on subsidiaries according to consumption, resulting in no net impact for Moelven Industrier ASA.
After valuation of the subsidiary, shares are carried amortization of the cost price of shares to a total of NOK 12 million. In addition, a provision is made for risks on loans and guarantee obligations to group companies with NOK 62,4 mill.
The company has no restricted bank deposits. The company's cash credit accounts are included in the group's account systems. The company can thus be collectively responsible for more than the company's withdrawals. The employees' tax deduction funds are secured with guarantees furnished by an external credit institution.
Currency future contracts
Structured forward buying of currency
Future contracts for electric power
*) Power derivatives are entered on the lowest value principle in the parent company and with hedge accounting and deferred entry on the income statement in the group.
The Group has no hedging instruments not traded in functional markets. Fair value is calculated based on observable market prices for similar instruments.
The group's defined benefit scheme was closed in 2005 and ended in 2015. The defined benefit scheme which had a pension coverage of about 60% of final pay at age 67 and a full earning period of 30 years is replaced with a contribution based pension scheme. The contribution scheme has a risk coverage with disability of about 60 per cent (with paid-up pension) and is a solution that is better than the statutory minimum pension solution. Over half of the company's employees are now covered by the contribution based scheme.
All obligations related to previous AFP schemes has ceased. Remaining uncecured schemes are related to other guaranteed obligations applicable to a limited number of people.
The new AFP scheme which came into force in 2011 is defined as a defined-benefit multi-employer plan, but accounted for as a defined contribution scheme until reliable and sufficient information enabling the companies to account for its proportionate share of pension costs, pension obligations and pension funds in the scheme. The company's obligations related to the new AFP scheme is therefore not recorded as a liability.
For information regarding developments in share capital, summary of shareholders, shareholder agreements and closely related parties, shares owned by members of the board of Directors, corporate assembly and group management, declaration on fixing of salary and other remuneration to group management and also remuneration to the board of directors and corporate assembly, see notes 27, 28 and 29 to the consolidated accounts.
No loans or guarantees have been given to the company management.
See note 28 to the consolidated accounts for fixing of salary and other benefits for group management.
1) Included to show the total amounts