General notes / Accounting principles

Investments in companies in which Vedior N.V. has significant influence, but no control over the financial and operating policies, are accounted for using the equity method. Generally, significant influence is presumed to exist if at least 20% of the voting power is owned. The consolidated financial statements include the Group’s share of the total recognised gains and losses of associates on an equity accounting basis, from the date the significant influence commences until the date the significant influence ceases. If Vedior’s share in the losses of any of these companies exceeds the interest in the associate, the carrying amount of the investment is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Goodwill also arises from the acquisition of associates and represents any excess of the cost of acquisition over the share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition. The goodwill arising on associates is included in the carrying amount and is assessed for impairment as part of the investment.

5.7 Derivative financial instruments

Derivative financial instruments are measured at fair value when they are initially recognised. The fair value is reflected by the market price at the date of inception. Subsequently the derivative financial instruments are measured at fair value, reflected by the market price at reporting date. The profit or loss arising on re-measurement at fair value is recognised directly to the income statement except when hedge accounting is applied.

5.8 Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. These assets are carried at amortised cost. Non interest bearing loans and receivables are carried at amortised cost, which represents the net present value determined using the effective interest method.

5.9 Deferred taxes

Deferred tax assets and liabilities arising from taxable or deductible temporary differences between the value of assets and liabilities for financial reporting purposes and for tax purposes are stated at nominal value and are calculated on the basis of corporate income tax rates ruling at the balance sheet date. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which these assets can be utilised. Deferred tax assets and liabilities with the same terms and relating to the same fiscal entities are set off against each other.

The following temporary differences are not provided for: goodwill not deductible for tax purposes, the initial recognition of assets and liabilities that affect neither accounting nor taxable profit, as well as differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.

5.10 Trade and other receivables

Trade and other receivables are initially recognised at fair value, and subsequently measured at amortised cost less a provision for impairment.

5.11 Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

5.12 Impairment of assets excluding goodwill

At each balance sheet date, Vedior reviews the carrying amounts of tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If such an indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, Vedior estimates the recoverable amount of the cash-generating unit to which the asset belongs. Assets are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing the value in use, the estimated future cash flows are discounted to the present value using a discount rate that reflects assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

5.13 Equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

When Vedior purchases its own equity share capital, the consideration paid is deducted from equity. Where such shares are subsequently sold or reissued, any consideration received is included in equity attributable to the Company’s equity holders.

Preference share capital is classified as equity if it is non redeemable and any dividends are discretionary, or is redeemable but only at the Company’s option. Dividends on preference share capital classified as equity are recognised as distributions within equity.

Dividends are recognised as a liability in the period in which they are approved by the Annual General Meeting of shareholders.

5.14 Interest-bearing borrowings

Interest-bearing bank loans and overdrafts are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the fair value and the settlement or redemption of borrowings is recognised over the term of the borrowings.

Borrowings are classified as current liabilities unless Vedior has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.