General accounting principles and application of IFRS

Newly applicable standards/interpretations and changes in standards

IFRS 3 (revised 2008) “Business Combinations” and resulting changes to IAS 27 “Consolidated and Separate Financial Statements”, IAS 28 “Investments in Associates” and IAS 31 “Interests in Joint Ventures” are applicable to acquisitions in financial years beginning on or after 1 July 2009.

The revised standard (IFRS 3), which was ratified on 3 June 2009 by the EU, continues to require recognition of business combinations, albeit with some significant changes. For example, all considerations paid for corporate acquisitions are to be measured at fair value at the time of acquisition. In this context, contingent considerations are carried as a liability and changes are recognized in profit or loss upon remeasurement. An option is available on a transaction-by-transaction basis to recognize the non-controlling interest either at fair value or with the pro rata remeasured equity. All acquisition-related costs are expensed.

The standard was applied within the Group inter alia to the acquisition of the controlling interest in HDI Strakhovanie on 7 July 2010. Further details of the acquisition in the financial year are provided in the subsection of the Notes entitled “Business combinations in the reporting period”.

The revised IAS 27 requires the recognition of all effects of transactions with non-controlling interests in equity, insofar as there is no change in control and this transaction does not result in goodwill or in gains and losses. In case of a loss of control the standard provides detailed guidance on balance sheet recognition. The remaining interest is to be measured at fair value and any gain or loss arising upon remeasurement is to be carried as such. The revised standard had an effect on the reporting period, since inter alia transactions took place with non-controlling interests which are discussed in the section of the Notes entitled “Consolidation”, subsection “Scope of consolidation”.

The “Improvements to IFRss (2009)” contains various amendments affecting twelve existing IFRS (ten standards and two interpretations) and is the second such collective standard published in the context of the IASB annual improvement process, which has been ongoing since 2006. The amendments are for the most part applicable to financial years beginning on or after
1 January 2010 and had no significant implications for the Group.

In addition to the accounting standards described above, the following amendments to standards and interpretations were observed as at 1 January 2010:

  • IFRS 1 “First-time Adoption of International Financial Reporting Standards”: The new version of IFRS 1 contains the provisions of the previously applicable standard, but differs in its structure. In addition, the amendments to the standard “Additional Exemptions for First-time Adopters” introduce simplifications into IFRS 1, which relate inter alia to the oil and gas industry as well as the application of IFRIC 4 “Determining whether an Arrangement contains a Lease”. The revised standard had no effect on the consolidated financial statement.
  • IFRS 2 “Share-based Payment”: The changes relate to the scope of application of IFRS 2 and also clarify that the meaning of the term “group” in IFRS 2 is the same as in IAS 27.
  • IAS 39 “Financial Instruments: Recognition and Measurement – Eligible Hedged Items”: The amendments to IAS 39 clarify circumstances in which the inflation portion of financial instruments can be hedged and explain how to treat options contracts used as hedging instruments.
  • Amendments to IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations” (through the “Annual Improvements to IFRSs 2008” project): The amendments principally consist of specifications of disclosure requirements.
  • IFRIC 12 “Service Concession Arrangements”: IFRIC 12 clarifies how underlying infrastructure assets are to be recognized by the operator of a service concession arrangement. This new provision had no influence on the consolidated financial statement.
  • IFRIC 15 “Agreements for the Construction of Real Estate”: IFRIC 15 provides guidance as to the cases in which revenue from the construction of real estate is to be recognized in the financial statement and whether a contract for the construction of real estate falls within the scope of IAS 11 “Construction Contracts” or IAS 18 “Revenue”. This new interpretation had no relevance to the consolidated financial statement in the reporting period.
  • IFRIC 16 “Hedges of a Net Investment in a Foreign Operation”: This interpretation, which had no effect on the consolidated financial statement, clarifies possible hedges of a net investment in a foreign operation and the recognition thereof.
  • IFRIC 17 “Distributions of Non-cash Assets to Owners”: The interpretation provides guidance for the recognition of non-cash distributions to owners that were distributed either from reserves or as a dividend. The new interpretation had no effect on the consolidated financial statement.
  • IFRIC 18 “Transfer of Assets from Customers”: This interpretation, which is of no relevance to the Group, sets out how an entity shall recognize the transfer of items of property, plant and equipment from a customer. The scope of application of this interpretation includes, inter alia, contracts under which an entity receives an item of property, plant and equipment from a customer which it must then use to connect the customer to a network and/or provide the customer with ongoing access to a supply of goods or services (such as a supply of electricity, gas or water).

Insofar as they were of any practical relevance to the consolidated financial statement, the adoption of these amendments and interpretations had no material influence on the Group’s assets, financial position or net income in the reporting period.