The new Danish Financial Statements Act of 7 June 2001 entails a number of changes to the accounting policies of the Carlsberg Group applied up to now.
The new accounting policies will be applied for the first time in the Q1 Financial Statement 2002, which will also include the effects of the new accounting policies on the outlook for 2002.
As announced in the Annual Report and Accounts for 2001, the present announcement provides a separate explanation of the effects of the new accounting policies on the past four financial years.
When assessing the effects of the changes, the treatment of consolidated goodwill should be highlighted as it is measured according to the following criteria:
- Investments in subsidiaries and associated undertakings are treated in accordance with the purchase accounting method, and consolidated goodwill of net DKK 5,357m is included as at 31 December 2001. The principle for the assessment has been to capitalise goodwill and amortise it over estimated useful life, however not exceeding 20 years. In the event of impairment in excess of the annual amortisation, write-down is made. A conservative valuation has been made.
- Total write-downs for the financial years 1997/98 - 1999/2000 have been made in the financial year 1999/2000, where the structure of the Carlsberg Group was changed significantly as a result of the agreement to establish Carlsberg Breweries A/S.
- Carlsberg's and Orkla's establishment of Carlsberg Breweries A/S on 1 January 2001 was made at carrying values as only a relative ownership structure was negotiated and agreed upon.
- Similarly, investments in pro rata consolidated undertakings are recognised at carrying values stated in accordance with the Group's accounting policies.
The recognition of consolidated goodwill does not reflect changes to the financial outlook for the underlying businesses in 2002.
As appears from the attached appendices, other significant changes to the accounting policies relate to the following areas:
- Restructuring provisions, etc. are recognised when the final decision to implement the restructuring is made and announced to the parties involved, which is a specification in terms of time compared to previous practice. Restructuring provisions, which have been decided at the time of acquisition, in undertakings that have been taken over are included in the computation of goodwill.
- Securities such as bonds and shares, including portfolio investments, are recognised at fair value on the balance sheet date and value adjustments are recorded under financials. Securities were previously recognised at cost or at a lower value on the balance sheet date.
- Indirect production costs are recognised as part of the cost of inventories, etc.
- Returnable packaging is recognised at cost under property, plant & equipment and depreciated over expected useful life. Returnables were previously charged to the income statement at acquisition.
- Own shares, which were previously recorded under fixed asset investments, are recognised directly in capital and reserves.
- Proposed dividends for the year are not recognised as a liability at the balance sheet date but are shown as a separate capital and reserves item.
Other changes relate primarily to the recognition of certain other intangible assets and property, plant & equipment, including finance lease assets and derivative financial instruments in the balance sheet as well as the recognition of borrowing and lending at amortised cost.
In addition to the changes to the accounting policies, certain changes have been made to the layout of the statement as well as the contents and designation of items (reclassifications).
The Group's main activity is production and sale of beer and other beverages, which accounts for more than 90% of the consolidated revenue. In accordance with the Group's management structure, beverage activities are segmented according to the geographic regions where production takes place.
Presentation of goodwill
As appears from the appendices, amortisation and write-down of goodwill are shown as separate items at the bottom of the income statement. The reason for this approach is the implementation of new policies for the treatment of goodwill, etc. in the USA in 2001. According to these policies, annual amortisation of good-will over the expected useful life should not be applied. Instead, it should be assessed on a current basis whether the value of the capitalised goodwill can be maintained or whether a write-down to a lower net present value (NPV) or net sales price should be made.
The IASB has indicated that the international accounting standards are expected to be adjusted to match the new US policies, as the international standards on this key area should be uniform. If it becomes certain that the IASB will change the standards for accounting treatment of goodwill, etc. before the publication of the Financial Statement 2002, the company will reevaluate the policy applied in the quarterly financial statements for 2002 in order to avoid changes to the accounting policies governing this key area twice within a short period of time, if possible.
To view appendix 1-5 please download PDF version (placed top right).
Appendix 1shows the profit and capital and reserves related effects of the new policies on the comparative figures for the past four years.
Appendix 2also shows the effect of the changed accounting policies on highlights and key figures for the past four years.
Appendices 3 and 4show the income statements by segments for 2001, prepared in accordance with the new policies, as well as an overview by quarters.
Appendix 5shows an outline of the new accounting policies of the Carlsberg Group. A comprehensive account of the new accounting policies is available.
This announcement is available in Danish and English. In case of doubt, the Danish version shall apply.
Jørn P. Jensen, CEO +45 33 27 27 27
Per Brøndum Andersen, CFO +45 33 27 27 27
International telephone conference
International telephone conference for analysts on Tuesday 16 April 2002 at 16.00 CET for technical Q&A. Please e-mail register with Jeanette Dyekjær (firstname.lastname@example.org