Consolidation
The consolidated financial statements comprise the financial statements of Novozymes A/S (the parent company) and all the companies in which the Group owns more than 50% of the voting rights or otherwise has a controlling influence (subsidiaries), as well as joint ventures.
The consolidated financial statements are based on the financial statements for the parent company and for the subsidiaries, and are prepared by combining items of a uniform nature and subsequently eliminating intercompany transactions, internal shareholdings and balances, and unrealised intercompany profits and losses. All the financial statements used for consolidation are prepared in accordance with the Group’s accounting policies.
The Group’s holdings in joint ventures regarded as jointly controlled entities are consolidated using the proportionate consolidation method by including its proportional share of their assets, liabilities, revenues and costs line by line.
Business combinations
On acquisition of new companies, the assets, liabilities and contingent liabilities of each new company are recognised at fair value at the time of acquisition. Goodwill is adjusted for changes in the purchase price after acquisition and changes in the fair value of the identifiable assets, liabilities and contingent liabilities acquired since the acquisition date until 12 months afterwards. Newly acquired companies are recognised as from the date of acquisition, and no adjustment is made to comparative figures.
Translation of foreign currencies
The consolidated financial statements are presented in Danish kroner (DKK). Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the transaction date. Monetary items denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the balance sheet date. Financial statements of foreign subsidiaries are translated into Danish kroner at the exchange rates prevailing at the balance sheet date for assets and liabilities, and at average exchange rates for income statement items.
Goodwill arising on the acquisition of new companies is treated as an asset belonging to the foreign subsidiaries and translated into Danish kroner at the exchange rates prevailing at the balance sheet date.
Realised and unrealised foreign exchange gains and losses are recognised in the income statement under financial items, with the exception of unrealised gains and losses relating to hedging of future cash flows, which are recognised in Shareholders’ equity under Cash flow hedges. The following exchange rate differences are also recognised directly in Shareholders’ equity under Currency translations, translated at the exchange rates prevailing at the balance sheet date:
-
Translation of foreign subsidiaries’ net assets at beginning of year
-
Translation of foreign subsidiaries’ income statements from average exchange rates to the exchange rates prevailing at the balance sheet date
-
Translation of long-term intercompany receivables, which are considered to be an addition to net assets in subsidiaries
-
Fair value adjustment of currency swaps that qualify for hedging of net assets in subsidiaries
Derivative financial instruments
Derivative financial instruments used to hedge receivables and liabilities are measured at fair value on the balance sheet date, and value adjustments are recognised in the income statement under financial items.
Derivative financial instruments used to hedge expected future transactions are measured at fair value on the balance sheet date, and value adjustments are recognised directly in Shareholders’ equity.
Currency swaps are used to hedge net investments in subsidiaries. Currency swaps are measured on the basis of the difference between the swap rate and the rate on the balance sheet date, and the value adjustment is recognised directly in Shareholders’ equity.
Income and costs relating to cash flow hedges and hedging of net investments in subsidiaries are transferred from Shareholders’ equity on realisation of the hedged asset and are recognised in the income statement.
Positive and negative fair values of derivative financial instruments are recognised under Other receivables and Other current liabilities respectively.
The fair value of derivative financial instruments is calculated using rates obtained from stock exchanges or other reliable data sources. All share options are valued using the Black--Scholes model.
Derivative financial instruments are recognised on the settlement date, while other financial instruments are recognised on the transaction date.
Share-based payment
Most of the Group’s employees are covered by share option programmes and there is also a share-based incentive programme for Executive Management. The programmes comprise both equity-settled and cash-settled programmes.
The fair value of the employee services received in exchange for the grant of share options is computed using the value of the granted share options. The fair value of the granted share options is calculated using the Black-Scholes model, and the fair value of the share-based incentive programme is calculated using the share price on the grant date less the expected dividend in the binding period.
The fair value of share-based payment on the grant date is recognised as an employee cost over the period in which the right to the share options is accrued. In measuring the fair value, account is taken of the number of employees expected to gain entitlement to the options, and this estimate is adjusted at the end of the period such that only the number of options to which employees are entitled is recognised.
The value of equity-settled programmes is offset against Shareholders’ equity. The value of cash-settled programmes, which are offset against Other current liabilities, is adjusted to fair value at the end of each period, and the subsequent adjustment in fair value is recognised in the income statement under financial items.
Goverment grants
Goverment grants received which relate to research and development costs are recognised under Licence fees and Other operating income, net, based on the percentage completion of the projects. Grants received which relate to investments in fixed assets are offset against the cost price of the assets for which the grants are made.
Segment information
The consolidated accounts provide information on the Group’s geographical segments, which is the secondary segment. Novozymes’ business activities are considered to be integrated, as a result of which most of the production facilities and most research and development activities are common to the Group as a whole. A small number of business segments are not a fully integrated part of the business, but these do not exceed the limits set in IAS 14 concerning disclosure requirements and therefore information is not provided separately.
Leasing
Operating lease costs are recognised in the income statement on a straight-line basis over the period of the lease. Liabilities relating to non-cancellable contracts are specified in the notes.
Key figures
Key figures are mainly prepared in accordance with the "Recommendations and Key Figures 2005" of the Danish Society of Financial Analysts, although certain key figures are adapted to the Novozymes Group.
