2013 Annual report

Income Statement and total comprehensive income

Income statement
     
       
NOK 1 000
Note
2013
2012
       
OPERATING INCOME AND EXPENSES
     
       
Sales revenue
10 958 333
10 465 326
Income from financial investments
2 694 153
3 238 952
Other income
141 334
483 836
Operating income
13 793 820
14 188 114
       
Costs of goods sold
 
6 701 261
6 618 237
Payroll costs
2 305 685
2 159 472
Depreciation and impairment
3,7,8,9
439 714
452 849
Other operating expenses
1 148 592
1 089 437
Operating expenses
 
10 595 252
10 319 995
       
Operating profit
3 198 568
3 868 119
       
Income from investments recognised by the equity method
83 164
87 010
Finance income
688 524
232 597
Finance expense
-1 027 435
- 575 046
Net finance items
 
- 255 747
- 255 439
Profit before tax
 
2 942 821
3 612 680
Income tax expense
267 426
186 615
       
PROFIT FOR THE YEAR
 
2 675 395
3 426 065
       
Non-controlling interests' share of the profit for the year
 
- 80
5 413
Parent company's shareholders' share of the profit for the year
 
2 675 475
3 420 652
       
Total comprehensive income
     
       
NOK 1 000
 
2013
2012
       
PROFIT FOR THE YEAR
 
2 675 395
3 426 065
Other income and expenses that can be reclassified to the income statement at at later date:
     
Currency translation of foreign subsidiaries
 
128 245
- 79 525
Effect of cash flow hedging
5 705
- 6 309
Tax on cash flow hedging
- 1 023
2 378
       
Other income and expenses not reclassified to the income statement at a later date:
     
Estimate deviation pensions
38 810
- 27 559
Tax on estimate deviation pension
- 3 627
959
       
TOTAL COMPREHENSIVE INCOME
 
2 843 505
3 316 009
       
Non-controlling interests' share of the profit for the year
 
84
7 135
Parent company's shareholders' share of the profit for the year
 
2 843 421
3 308 874
NOTE 1
GENERAL INFORMATION AND ACCOUNTING PRINCIPLES
 
           
General information
         
Ferd AS is a privately owned Norwegian investment company located in Strandveien 50, Lysaker. The Company is involved in long-term and active ownerships of companies with international potential, and financial activities through investments in a wide range of financial assets.
           
Ferd is owned by Johan H. Andresen and his family. Andresen is the Chair of the Board.
           
The Company's financial statements for 2013 were approved by the Board of Directors on 8 April 2014.
           
Basis for the preparation of the consolidated financial statements
         
Ferd AS' consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) as approved by the EU.
           
Summary of the most significant accounting principles
         
The most significant accounting principles applied in the preparation of the financial statements are described below. The accounting principles are consistent for similar transactions in the reporting periods presented, if not otherwise stated.
           
Consolidation and consolidated financial statements
         
The consolidated financial statements show the overall financial results and the overall financial position for the parent company Ferd AS and entities where Ferd has a direct or indirect controlling influence. A controlling interest normally exists when Ferd AS either directly or by other controlling entities has a stake exceeding 50 % of the voting capital.
           
Non-controlling interests in subsidiaries are disclosed as part of equity ,but separated from the equity that can be attributed to the shareholders of Ferd AS. The non-controlling interests are either measured at fair value or at the proportionate share of identified assets and liabilities.The principle for measuring non-controlling interests is determined separately for each business combination.
           
Subsidiaries are consolidated from the date when the Group achieves control, and are excluded when such control ceases. Should there be a change in ownership in a subsidiary without loss of control, the change is accounted for as an equity transaction. The difference between the compensation and the carrying value of the non-controlling interests are directly recognised in equity and allocated to the shareholders of Ferd AS. At a loss of control, the subsidiary's assets, liabilities, non-controlling interests and any accumulated currency differences are derecognised. Any remaining interests at the date of loss of control are measured at fair value, and gain or loss is recognised in the income statement.
           
Inter-company transactions, balances and unrealised internal gains are eliminated. When required, adjustments are made to the financial statements of subsidiaries to bring their accounting principles in line with those used by the Group.
           
Business combinations
         
Business combinations are accounted for by the acquisition method. This implies the identification of the acquiring company, the determination of the date for the take-over, the recognition and measurement of identifiable acquired assets, liabilities and any non-controlling interests in the acquired company, and the recognition and measurement of goodwill or gain from an acquisition made on favourable terms.
           
Assets, liabilities taken over and contingent liabilities taken over or incurred are measured at fair value at the acquisition date. Goodwill is recognised as the total of the fair value of the consideration, including the value of the non-controlling interests and the fair value of former owner’s share, less net identifiable assets in the business combination. Direct costs connected with the acquisition are recognised in the income statement.
           
Any contingent consideration from the Group is recognised at fair value at the acquisition date. Changes in the value of the contingent consideration considered to be a financial liability pursuant to IAS 39, are recognised in the income statement when incurred. At step-by-step business combinations, the Group’s former stake is measured at fair value at the date of the take-over. Any adjustments in value are recognised in the income statement.
           
Investments in associates and joint ventures
         
Associates are entities over which the Group has significant, but not controlling, influence. Significant influence implies that the Group is involved in strategic decisions concerning the company’s finances and operations without controlling these decisions. Significant influence normally exists for investments where the Group holds between 20 % and 50 % of the voting capital.
           
A joint venture is a contractual arrangement requiring unanimous agreement between the owners about strategic, financial and operational decisions.
           
Investments in associates and joint ventures are classified as non-current assets in the balance sheet.
           
The exemption clause in IAS 28 about using the equity method for investments in associated companies owned by investment entities, and the corresponding exemption in IAS 31 for joint ventures, is the basis for presenting the investments in the business area Ferd Capital. These associates are recognised at fair value with value changes through profit and loss, and are classified as current assets in the statement of financial position.
           
The Group reports other associates and joint ventures using the equity method of accounting, i.e., the Group’s share of the associates’ profit or loss is disclosed on a separate line in the income statement. The carrying amount of the investment includes the share of total comprehensive income in the associated company. The accounting principles are adjusted to bring them in line with those of the Group. The carrying amount of investments in associates is classified as “Investments recognised under the equity method” and includes goodwill identified at the date of acquisition, reduced by any subsequent impairments.
           
Revenue recognition
         
Revenue is recognised when earned. The Group’s consolidated revenue mainly includes selling goods, rendering IT services and delivering packing systems.
           
Revenue from the sale of goods is recognised when the Group has transferred to the buyer the significant risks and reward of the ownership, income from the sale can be expected and the amount can be reliably measured. Revenue from the sale of services is recognised according to the service’s level of completion, provided the progress of the service and its income and costs can be reliably measured. Should the contract contain several elements, revenue from each element is recognised separately, provided that the transfer of risk and control can be separately assessed. Contracts concerning the sale of filling machines and packing materials are commercially connected, and revenue is therefore recognised in total for the contract.
           
Revenue is measured at fair value and presented net of rebates, value added tax and similar taxes.
           
At the sale of intangible and tangible assets, gain or loss is calculated by comparing the proceeds with the residual value of the sold asset. Calculated gain/loss is included in operating income or expenses, respectively.
           
Foreign currency translation
         
Transactions in foreign currency in the individual Group entities are recognised and measured in the functional currency of the entity at the transaction date. Monetary items in foreign currency are translated into the functional currency at the exchange rate prevailing at the balance sheet date. Currency differences are recognised in the income statement with the exception of currency differences on loans in foreign currencies hedging a net investment and inter-company balances considered to be part of the net investment. These differences are recognised in total comprehensive income until the investment is disposed of.
           
The consolidated financial statements are presented in Norwegian kroner (NOK), which is the functional currency of the parent company. When a subsidiary in foreign currency is consolidated, income and expense items are translated into Norwegian kroner at an average weighted exchange rate throughout the year. For balance sheet items, including excess values and goodwill, the exchange rate prevailing at the balance sheet date is used. Exchange differences arising when consolidating foreign subsidiaries are recognised in total comprehensive income until the subsidiary is disposed of.
           
Classification of financial instruments
         
Financial instruments constitute a substantial part of Ferd’s consolidated accounts and are of considerable significance for the overall financial standing and result of the Group. Financial assets and liabilities are recognised when the Group becomes a party to the contractual obligations and rights of the instrument. Pursuant to IAS 39, all Ferd’s financial instruments are initially classified in the following categories:
           
1. Financial instruments at fair value and with changes in value recognised through profit and loss
2. Loans and receivables
3. Financial liabilities
           
Financial instruments are classified as held for trading and as part of category 1 if acquired primarily for benefiting from short-term price deviations. Derivatives are classified as held for trading unless they are part of a hedging instrument, another asset or liability. Assets held for trading are classified as current assets.
           
Financial instruments at fair value with value changes in the income statement pursuant to IAS 39 can also be classified in accordance with the "fair value option" in IAS 38 and IAS 31.The instrument must initially be recognised at fair value with value changes through profit and loss and also meet certain criteria. The key assumption for applying the “fair value option” is that a group of financial assets and liabilities are managed on a fair value basis, and that management evaluates the earnings following the same principle.
           
Loans and receivables are non-derivative financial assets with fixed or determinable payments not quoted in an active market. They are classified as current assets, unless they are expected to be realised more than 12 months after the balance sheet date. Loans and receivables are presented as trade receivables,other receivables and bank deposits in the balance sheet.
           
Financial liabilities that are not included in the category held for trading and not measured at “fair value through profit and loss” are classified as other liabilities.
           
Recognition, measurement and presentation of financial instruments in the income statement and statement of financial position
         
Purchases and sales of financial instrument transactions are recognised on the date of the agreement, which is when the Group has made a commitment to buy or dispose of the financial instrument. Financial instruments are derecognised when the contractual rights to the cash flows from the asset expire or have been transferred to another party. Correspondingly, financial instruments are derecognised when the Group on the whole has transferred the risk and reward of the ownership.
           
Financial instruments at “fair value through profit and loss” are initially measured at quoted prices at the balance sheet date or estimated on the basis of measurable market information available at the balance sheet date. Transaction costs are recognised in profit or loss. In subsequent periods, the financial instruments are presented at fair value based on market values or generally accepted calculation methods.
           
Loans and financial liabilities are initially measured at fair value with the addition of direct transactions costs. In subsequent periods, the assets and liabilities are measured at amortised cost by using the effective interest method. Loss on impairment of loans and receivables is recognised in the income statement.
           
Gain and loss from the realisation of financial instruments,changes in fair values and interest income are recognised in the income statement in the period they arise. Dividend income is recognised when the Group has established the right to receive payment. Net finance income related to financial instruments is classified as operating income and presented as “Income from financial investments” in the income statement.
           
Financial derivatives and hedge accounting
         
The Group applies financial derivatives to reduce any potential loss from exposures to unfavourable changes in exchange rates or interest rates. Financial derivatives related to a highly probable planned transaction (cash flow hedges) are recognised in accordance with the principles for hedge accounting when the hedge has been documented and meets the relevant requirements for effectiveness. Ferd is not applying hedge accounting for derivatives acquired to reduce risk in an asset or liabilities recognised in the balance sheet. Derivatives not qualified for hedge accounting are classified as financial instruments at fair value, and changes in value are recognised in the income statement.
           
Cash flow hedging is presented by recognising a change in fair value of the financial derivative applied as cash flow hedging in total comprehensive income until the underlying transaction is accounted for. The ineffective portion of the hedge is recognised immediately in profit or loss.
           
When the hedge instrument expires or is disposed of, the planned transaction is carried out,or when the hedge no longer meets the criteria for hedge accounting, the accumulated effect of the hedging is recognised in the income statement.
           
Income taxes
         
The income tax expense includes tax payable and changes in deferred tax. Income tax on balances recognised in other income and expenses in total comprehensive income is also set-off against other income and expenses in total comprehensive income, and tax on balances related to equity transactions are set off against equity.
           
The tax payable for the period is calculated according to the tax rates and regulations ruling at the end of the reporting period.
           
Deferred tax is calculated on temporary differences between book and tax values of assets and liabilities and the tax effects of losses to carry forward in the consolidated financial statements at the reporting date. Deferred tax liabilities associated with the initial recognition of goodwill in business combinations are not carried in the balance sheet. No deferred tax is recognised on those investment properties at fair value that are expected to be sold as limited companies and thereby not setting off any tax liability.
           
Deferred tax assets are only recognised in the balance sheet to the extent that it is probable that there will be sufficient taxable profits to utilise the benefits of the tax reducing temporary differences. Deferred tax liabilities and assets are calculated according to the tax rates and regulations ruling at the end of the reporting period and at nominal amounts. Deferred tax liabilities and assets are recognised net when the Group has a legal right to net assets and liabilities.
           
Goodwill
         
Goodwill is the difference between the cost of an acquisition and the fair value of the Group’s share of net assets in the acquired business at the acquisition date. Goodwill arising on the acquisition of subsidiaries is classified as intangible assets. Goodwill is tested for impairment annually, or more often if there are indications of impairment, and carried at cost less accumulated depreciation. Impairment losses are not reversed in subsequent periods. Goodwill arising on the acquisition of a share in an associate is included in the carrying amount of the investment and tested for impairment as part of the carrying amount of the investment. Gain or loss arising from the realisation of a business includes goodwill allocated to the business sold. For the purpose of impairment testing, goodwill is allocated to the relevant cash-generating units or groups of cash-generating units that are expected to benefit from the synergies of the combinations.
           
Intangible assets
         
Intangible assets acquired separately are initially carried at cost. Intangible assets acquired in a business combination are recognised at their fair value at the time of the combination. In subsequent periods, intangible costs are recognised at cost less accumulated depreciation and impairment.
           
Intangible assets with a definite economic life are depreciated over their expected useful life. Normally, straight-line depreciation methods are applied, as this generally reflects the use of the assets in the most appropriate manner. This applies for intangible assets like software,customer relations, patents and rights and capitalised development costs. Intangible assets with an indefinite life are not depreciated,but tested for impairment annually. Some of the Group’s capitalised brands have indefinite economic lives.
           
Research, development and other in-house generated intangible assets
         
Expenses relating to research activities are recognised in the income statement as they arise.
           
In-house generated intangible assets arising from development are recognised in the balance sheet only if the following conditions are met:
           
1. The asset can be identified
2. It is probable that the asset will generate future cash flows
3. The development costs can be reliably measured
           
In-house generated intangible assets are amortised over their estimated useful lives from the date when the assets are available for use. If the conditions for capitalisation are not met, the expenses are recognised in the income statement as incurred.
           
Property,plant and equipment
         
Property, plant and equipment are stated at cost less accumulated depreciation and impairment. The cost includes expenses directly attributable to the acquisition of the asset. Expenses incurred after the acquisition are recognised as assets when future economic benefits are expected to arise from the asset and can be reliably measured. Current maintenance is expensed.
           
Property, plant and equipment are depreciated systematically over their expected useful lives, normally on a straight-line basis. If indications of impairment exist, the asset is tested for impairment.
           
Impairment
         
Property, plant and equipment and intangible assets that are depreciated are considered for impairment when there are indications to the effect that future earnings cannot support the carrying amount. Intangible assets with undefined useful lives and goodwill are depreciated,but evaluated annually for impairment.
           
The difference between the carrying value and recoverable amount is charged to the income statement as a write-down. The recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. Fair value less costs to less is the amount that can be recovered at a sale of an asset in a transaction performed at arm’s length between well informed and voluntary parties, less costs to sell. The value in use is the present value of future cash flows expected to be generated by an asset or a cash-generating unit. Impairment losses are subsequently reversed when the impairment indicator no longer exists.
           
Leasing
         
Leases are classified either as operating or finance leases based on the actual content of the agreements. Leases under which the lessee assumes a substantial part of risk and return are classified as finance leases. Other leases are classified as operating leases.
           
The object and liability of finance leases with the Group as the lessee is initially recognised at the lower of the object’s fair value and the present value of the minimum lease. Lease payments are apportioned between the liability and finance cost in order to achieve a constant rate of interest on the remaining balance of the liability. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, provided that the Group will not assume ownership by the end of the lease term.
           
Finance leases with the Group as the lessor are initially recognised at the beginning of the period as a receivable equal to the Group’s net investment in the lease agreement. The lease payments are apportioned between the repayment of the main balance and finance income. The finance income is calculated and recognised as a constant periodical return on the net investment over the lease period. Direct costs incurred in connection with the lease agreement are included in the value of the asset.
           
Leasing costs in operating leases are charged to the income statement when incurred and are classified as other operating expenses.
           
Investment property
         
Investment properties are acquired to achieve long-term return on hiring or an increase in value, or both. Properties are measured at cost at the acquisition date, including transaction costs. In subsequent periods, investment properties are measured at their assumed fair value. Fair value is the price we would have achieved at a sale of the property in an well orgnised transaction to an external party, carried out on the balance sheet date. Fair value is either based on observable market values, which in reality requires a bid on the property, or a calculation considering rental income from closed lease contracts, an assumption of the future lease level based on the market situation on the balance sheet date and also all available information about the property and the market on which it will be sold, based on market prices. An assumption at the calculation is that the property is utilized in the best possible manner, i.e. in a manner achieving most profit.
           
Revenue from investment properties includes the period’s net change in value of the properties together with rental income of the period less property related costs in the same period.
           
Inventories
         
Inventories are stated at the lower of cost and net realisable value. The costs of inventories are determined on a first-in-first-out basis. The cost of finished goods and goods in progress consists of costs related to product design, consumption of materials, direct wages and other direct costs. The net realisable value is the estimated selling price less estimated variable expenses for completion and sale.
           
Accounts receivable and other receivables
         
Current receivables are initially recognised at fair value. In subsequent periods,provisions for actual and possible losses are considered. The Group reviews the receivables on a regular basis and prepares estimates for losses as a basis for the provisions in the balance sheet.
           
Cash and cash equivalents
         
Cash and cash equivalents include cash, bank deposits and other short-term and easily realisable investments that will fall due within 3 months. Restricted funds are also included. Drawings on bank overdraft are presented as current liabilities in the balance sheet. In the statement of cash flows,the overdraft facility is included in cash and cash equivalents.
           
Pension costs and pension funds/obligations
         
Defined benefit plans
         
A defined benefit plan is a pension scheme defining the pension payment an employee will receive at the time of retirement. The pension is normally determined as a part of the employee's salary. The Company's net obligation from defined benefit pension plans is calculated separately for each scheme. The obligation represents an estimate of future retirement benefits that the employees have earned at the balance sheet date as a consequence of their service in the present and former periods. The benefits are discounted to present value reduced by the fair value of the pension funds.
           
The portion of the period's net cost that comprises the current year's pension earnings, curtailment and settlement of pension schemes, plan changes and accrued social security tax is included in payroll costs, whereas the interest expense on the pension obligation less expected return on the pension funds is charged to the income statement as finance costs. Positive and negative estimate deviations are recognised as other income and costs in total comprehensive income.
           
Changes in defined benefit obligations due to changes in pension schemes are recognised over the estimated average remaining service period when the changes are not immediately recognised. Gain or loss on a curtailment or settlement of a plan is recognised in the income statement when the curtailment or settlement occurs. A curtailment occurs when the Company decides to reduce significantly the number of employees covered by a plan or amends the terms of a defined benefit plan to the effect that a significant part of the current employees’ future earnings no longer qualify for benefits or will qualify for reduced benefits only.
           
Defined contribution plans
         
Obligations to make contributions to contribution based pension plans are recognised as costs in the income statement when the employees have rendered services entitling them to the contribution.
           
Provisions
         
A provision is recognised when the Company has an obligation as a result of previous events, it is probable that a financial settlement will take place and the amount can be reliably measured. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, discounted at present value if the discount effect is significant.
           
Current liabilities
         
Accounts payable and other current liabilities are initially recognised at fair value and subsequently measured at amortised cost. Accounts payable and liabilities are classified as current when they fall due within 12 months after the balance sheet date or are integrated in the Company’s ordinary operating activities.
           
Dividend
         
Dividend and group contribution proposed by the Board is recognised as current liabilities pursuant to the exemption in the regulation to the Norwegian Accounting Act section 3-9.
           
Business areas
         
Ferd reports business areas in line with how the Group's management makes, monitors and evaluates its decisions. The operative areas are identified on the basis of the internally generated information that is periodically reviewed by management and utilised to the allocation of capital and resources as well as goal achievement.
           
Cash flow statement
         
The cash flow statement has been prepared using the indirect method,implying that the basis used is the Group’s profit before tax to present cash flows generated by operating activities, investing activities and financing activities respectively.
           
Related parties
         
Parties are considered to be related when one of the parties has the control,joint control or significant influence over another party. Parties are also related if they are subject to a third party’s control, or one party can be subject to significant influence and the other joint control. A person or member of a person’s family is related when he or she has control, joint control or significant influence over the business. Companies controlled by or being under joint control by key executives are also considered to be related parties. All related party transactions are completed in accordance with written agreements and established principles.
           
New accounting standards according to IFRS
         
           
The financial statements have been prepared in accordance with standards approved by the International Accounting Standards Board (IASB) and International Financial Reporting Standards - Interpretations Committee (IFRIC) effective for accounting years starting on 1 January 2013 or earlier.
           
New and amended standards implemented by Ferd effective from the accounting year 2013:
           
Amendments to IAS 19 Employee Benefits
         
In the changed IAS 19, the "corridor method” is not allowed for the recognition of estimate deviations. Estimate deviations shalI in their entirety be recognised in comprehensive income in the period they arise. Ferd has not applied the corridor method, and, accordingly, this change has had no impact for Ferd. The amended IAS 19 also has a new approach to presenting pensions. The pension earnings shall be presented in the income statement as salary expenses, whereas net interest can be included in the finance items. Ferd presents net interest as an interest expense from 2013. Comparable figures for 2012 have been restated. The effect, only a reclassification in the income statement, is shown in the note on pensions (note 17).
           
In addition, net interest in benefit schemes shall be calculated by applying the discount interest rate on the net obligation, i.e., the pension obligation less earned funds. This implies that the return on the pension funds no longer is relevant, as the return now is part of net interest cost.
           
Amendmend to IFRS 7 Financial Instruments – Disclosures
         
The amendment implies that enterprises must provide extensive quantitative information related to setting-off financial assets against financial liabilities. Ferd has implemented the amended standard from 1 January 2013. As no set-offs have been carried out this year, the change so far has not had any consequences for Ferd.
           
IFRS 13 Fair Value Measurement
         
The standard specifies principles and guidance for measuring fair value on assets and liabilities. The objective of the standard has been to establish a single source of guidance for measurements and information of fair value, with a view to ensuring a common definition of fair value across all other standards and provide a uniform guidance to measuring fair value. The clarifications in the standards have not implied changed models, assumptions for calculations or principles for Ferd's calculation of fair value.
           
The standard also lists a number of new disclosure requirements related to the use of fair value in the financial statements. The disclosure requirements have been incorporated in this year' notes to the accounts.
           
New and amended standards not yet implemented by Ferd:
         
           
IFRS 9 Financial instruments
         
IFRS 9 will replace the current IAS 39. The project is divided in several phases. The first phase concerns classification and measurement and has been finalised by IASB. The classification and measurement requirements for financial liabilities in IAS 39 are on the whole continued, with the exception of financial liabilities recognised at fair value with changes in value through profit and loss (the fair value option), where changes in value connected with the company’s own credit risk is separated and recognised in other income and expenses in total comprehensive income. Phase 2 concerns impairment of financial instruments and phase 3 hedge accounting, but neither has so far been completed by IASB. It is still not clear when IFRS 9 becomes mandatory, but the rules will be effective for the accounting year starting on 1 January 2017 at the earliest. The standard has not yet been approved by the EU. Ferd will implement IFRS 9 when it becomes mandatory. Those parts of IFRS 9 that have been finalized so far have relatively limited consequences for Ferd.
           
IFRS 10 Consolidated Financial Statements
         
IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses consolidated financial statements and SIC-12 Consolidation — Special Purpose Entities. IFRS 10 establishes a single control model that applies to all entities. The content of the term “control” is somewhat changed compared to IAS 27. IFRS 10 also has a consolidation exemption for investment companies, provided that certain criteria are met. IFRS 10 becomes effective for annual periods beginning on or after 1 January 2014 (earlier adoption is allowed), and the standard has been approved by the EU. Ferd expects to implement IFRS 10 starting on 1 January 2014. Ferd has reviewed its investments, both consolidated subsidiaries and other non-consolidated company investments, with the conclusion that the changes are expected to have very small consequences for Ferd. The amended control term will not change the conclusion about consolidation of any of Ferd's investments,and Ferd will not comply with the exemption criteria for investment companies.
           
IFRS 11 Joint Arrangements
         
This standard replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities — Non-monetary Contributions by Venturers. IFRS 11 concerns joint arrangements and have guidelines for accounting for two different types of joint arrangements – joint operations and joint ventures. According to IFRS 11, joint ventures shall be accounted for using the equity method pursuant to IAS 28, and joint operations by a recognition of the investor's share of assets, liabilities, income and costs in the jointly controlled activity. IFRS 11 becomes effective for annual periods beginning on or after 1 January 2014, and the EU has approved the standard. Ferd intends to implement IFRS 10 starting on 1 January 2014. Ferd has carried out an overall analysis of the Group's joint arrangements to clarify whether any of them qualify to be joint activities, but has identified none. Ferd applies the equity method on all jointly controlled arrangements today and expects that the consequences from applying IFRS 11 will be insignificant.
           
IFRS 12 Disclosure of Interests in Other Entities
         
IFRS 12 applies for enterprises with interests in companies that are consolidated, and companies not consolidated, but in which the enterprise nevertheless is engaged. IFRS 12 combines the disclosure requirements for subsidiaries, joint arrangements, associates and non-consolidated entities into one standard. IFRS 12 becomes effective for annual periods beginning on or after 1 January 2014 (earlier adoption is allowed), and the standard has been approved by the EU. Ferd expects to implement IFRS 12 starting on 1 January 2014, and the implementation will have an impact on Ferd's notes to the financial statements as a consequence of increased information requirements.
NOTE 2
ACCOUNTING ESTIMATES AND JUDGEMENTAL CONSIDERATIONS
             
Management has used estimates and assumptions in the preparation of the consolidated financial statements. This applies for assets, liabilities, expenses and disclosures. The underlying estimates and assumptions for valuations are based on historical experience and other factors considered to be relevant for the estimate on the balance sheet date. Estimates can differ from actual results. Changes in accounting estimates are recognised in the period they arise. The main balances where estimates have a significant impact on disclosed values are mentioned below. The methods for estimating fair value on financial assets are also described below.
             
In Ferd's opinion, the estimates of fair value reflect reasonable estimates and assumptions for all significant factors expected to be emphasised by the parties in an independent transaction, including those factors that have an impact on the expected cash flows, and by the degree of risk associated with them.
             
Determination of the fair value of financial assets
           
A large part of the Ferd Group's balance sheet comprises financial assets at fair value. The fair value assessment of financial assets will to varying degrees be influenced by estimates and assumptions related to factors like future cash flows, the required rate of return and interest rate level. The most significant uncertainty concerns the determination of fair value of the unlisted financial assets.
             
Listed shares and bonds
           
The fair value of financial assets traded in active and liquid markets is determined at noted market prices on the balance sheet date (the official closing price of the market). Accordingly, the determination of the value implies limited estimation uncertainty.
             
Unlisted shares and bonds
           
The class “Unlisted shares and bonds” comprises private shares and investments in private equity funds. The fair value is determined by applying well-known valuation models. The use of these models requires input of data that partly constitutes listed market prices (like interest) and partly estimates on the future development, as well as assessments of a number of factors existing on the balance sheet date.
             
Hedge funds
           
The hedge funds are managed by external parties providing Ferd with monthly, quarterly or half-yearly estimates of the fair value. The estimates are verified by independent administrators. In addition, the total return from the funds is assessed for reasonableness against benchmark indices. In addition, the reported value of the hedge funds managed in the SI (Special Investments) portfolio must normally be adjusted for an estimate on liquidity discount.
             
Interest investments
           
The fair value of interest investments is determined on the basis of quoted prices. If such prices are not available, the investment is valued in accordance with price models based on the current yield curve and external credit ratings.
             
Derivatives
           
The fair value of derivatives is based on quoted market prices. If such prices are not available, the investment is valued in accordance with price models based on the current yield curve and other relevant factors.
             
Determination of the fair value of investment properties
           
The Ferd Ggroup has several investment properties recognised at fair value. The fair value is based on the discounted value of future cash flows, and the estimate will be impacted by estimated future cash flows and the required rate of return. The main principles for deciding the cash flows and required rates of return are described below.
             
Future cash flows are based on the following factors:
1. Existing contracts
2. Expected future rentals
3. Expected vacancies
             
The required rate of return is based on a risk-free interest with the addition of a risk premium for the property.
             
The risk premium is based on:
1. Location
2. Standard
3. Expected market development
4. Rent level compared to the rest of the market
5. The tenant’s financial strength
6. Property specific knowledge
             
In the event that transactions concerning comparable properties close to the balance sheet date have taken place, these values are applied as a cross-reference for the valuation.
             
Business premises not hired out and properties included in development projects are normally valued by independent appraisals.
             
Impairment considerations of goodwill
           
Goodwill is tested annually for impairment by discounting expected future cash flows of the cash-generating unit to which goodwill is allocated. If the discounted value of future cash flows is lower than the carrying value, goodwill is written down to the recoverable amount. The impairment tests are based on assumptions of future expected cash flows and estimates of the discount interest rate.
             
Note 8 has details on the impairment considerations for goodwill.
             
Depreciation and impairment of tangible and intangible assets
           
Tangible and intangible assets with definite lives are recognised at cost. The acquisition cost less the residual value is depreciated over the expected useful economic life. The carrying values will depend on the the Group’s estimates on useful lives and residual values. These assumptions are estimated on the basis of experience, history and judgemental considerations. The estimates are adjusted if the expectations change.
             
Testing for impairment is undertaken when indicators of a permanent decline in value of tangible or intangible assets are identified. These tests are based on estimates and assumptions on future cash flows and discount interest rate.
             
Pension funds and obligations
           
The calculation of pension obligations implies the use of judgement and estimates on a number of financial and demographical assumptions. Note 17 has details on the assumptions used. Changes in assumptions can result in significant changes in pension obligations and funds in the balance sheet.
             
Deferred tax assets
           
Deferred tax assets of tax losses to carry forward and other tax-reducing differences are recognised in the balance sheet to the extent that it is probable that the deferred tax assets can be utilised against future taxable income. Management is required to use significant judgement to determine the size of the deferred tax assets recognised in the balance sheet. The assessment shall take into account expectations of future taxable income, the points in time for utilising the deferred tax asset and future tax planning strategies.
             
Provision for losses on receivables
           
The provision for losses on receivables is estimated on the risk for not recovering the outstanding amounts due. The assessment is based on historical experience, the aging of the receivable and the counterparty’s financial situation.
NOTE 3
BUSINESS AREAS
         
               
Ferd's segment reporting complies with IFRS 8. Ferd is an investment company, and the Company's management makes decisions and monitors and evaluates these decisions based on the fair value of the Company's investments and their changes in value. The operating segments are identified on the basis of capital and resource allocation. Ferd is operating the following five business areas:
               
Ferd Capital is an active and long-term investor in privately owned and listed companies. Ferd Capital has an overall approach to investments in the area going from an expansion phase to mature companies. Those companies controlled by Ferd Capital are consolidated into the consolidated financial statements. Accordingly, the business area reporting in the consolidated financial statements comprises the consolidated results from these companies, together with the value changes and administration costs of the non-consolidated companies. The value of the investments and value changes are included in the company accounts of Ferd AS, where Ferd Capital reports an operating result of MNOK 2 386. The value of Ferd Capital's portfolio constitutes MNOK 10 847 as at 31 December 2013 and MNOK 8 913 as at 31 December 2012 measured at fair value.
 
Ferd Capital prioritises investments in companies where we have the relevant expertise. The team comprises highly qualified staff with operational experience from finance, strategic consultancy and manufacturing. Ferd Capital manages the Group's long-term active equity investments, the largest investments being:
               
- Elopak (100 percent stake) is one of the world's leading manufacturers of packing systems for fluid food articles. With an organisation and cooperating partners in more than 40 countries, the company's products are sold and marketed in more than 100 countries on all continents.
               
- Aibel (49 percent stake) is a leading supplier to the international upstream and gas industry concentrating on the Norwegian shelf. The company is engaged in operating, maintaining and modifying offshore and land based plants, and is also supplying complete production and processing installations.
               
- TeleComputing (96 percent stake) is a leading supplier of IT services to small and medium-sized enterprises in Norway and Sweden. The company supplies a broad range of netbased applications and customised operating and outsourcing services in addition to system development, customer assistance and other consultancy services.
               
- Interwell (34 percent stakel) is a preeminent Norwegian supplier of high-tech well tools to the international oil and gas industry. The company's most important market is the Norwegian shelf, but it has in recent years also gained access to several significant markets internationally, both in Europe, the USA and the Middle-East.
               
- Swix Sport (100 percent stake) is developing, manufacturing and marketing ski wax, ski sticks, accessories and textiles for sporting and active leasure time use under the brands Swix, Ulvang, Toko, Original and Lundhags. The company has extensive operations in Norway as well as abroad through subsidiaries in, i.a., Sweden, USA, Japan and Germany.
               
- Mestergruppen (92 percent stake) is a prominent actor in the Norwegian building materials market concentrating on the professional part of the market. The company's operations include the sale of building materials and developing land and projects, housing and cottage chains.
               
- Servi (100 percent stake). Servi develops and manufactures customer specific hydraulics systems, cylinders and vents to the offshore, maritime and land based industries. The company offers a broad range of components within hydraulics, pneumatics and slide bearings in addition to service and maintenance of hydraulics systems.
               
Ferd Invest is an active investor managing a considerable portfolio of Nordic listed shares. The business area primarily invests in individual shares assumed to have a large potential. The portfolio is measured against a total Nordic index.
               
Ferd Special Investments (SI) has a wide mandate to make investments, but so far only hedge fund shares in the second-hand market have been purchased. SI makes investments where Ferd assumes there are opportunities within this niche.
               
Ferd Hedgefond invests in various types of hedge funds managed by hedge fund environments abroad. The business area shall give a satisfactory risk-adjusted return and ensure a diversification of risk for Ferd
               
Ferd Eiendom is an active property investor responsible for the Group's efforts concerning property. Operations focus on developing, leasing and managing office, warehouse and logistic properties and developing housing property for sale, mainly in the Oslo area. The projects are partly carried out in-house, partly together with selected external cooperating partners. Ferd Eiendom also invests in foreign property funds.
               
Other areas mainly comprises investments in externally managed private equity funds that do no require much daily follow-up and are monitored by management rather than allocated to a separate business area. Hence, these securities are part of Other areas. The "Small Caps" mandate, comprising individual stakes in listed companies, where the time perspective has a potential for being somewhat longer than for Invest, is also included in Other areas. In addition, Other areas comprises some financial instruments acquired by management to adjust the total risk exposure. Costs to the company's management, staff and internal bank are also included.
               
NOK 1 000
Ferd AS Group
Ferd Capital
Ferd Invest
Ferd Special Investments
Ferd Hedgefond
Ferd Eiendom
Other areas
Result 2013
             
Sales income
10 958 333
10 956 742
 
 
 
1 591
 
Income from financial investments
2 694 153
- 120 834
1 489 658
568 921
196 366
1 013
559 029
Other income
141 334
26 258
 
 
 
114 396
680
Operating income
13 793 820
10 862 166
1 489 658
568 921
196 366
117 000
559 709
               
Operating expenses excl. depreciation and impairment
10 155 537
9 998 504
18 378
21 367
4 802
33 485
79 001
EBITDA
3 638 283
863 663
1 471 280
547 553
191 564
83 515
480 708
               
Depreciation and impairment
439 714
437 719
77
 
92
923
904
Operating profit
3 198 568
425 944
1 471 203
547 553
191 472
82 592
479 804
               
Income on investments accounted for by the equity method
83 164
29 067
 
 
 
54 097
 
Profit before finance items and income tax expense
3 281 732
455 011
1 471 203
547 553
191 472
136 689
479 804
               
Statement of financial position 31 December 2013
             
Intangible assets
2 276 314
2 276 314
 
 
 
 
 
Tangible assets and investment properties
3 743 985
1 748 692
40
 
350
1 990 754
4 150
Investments accounted for by the equity method
647 167
294 414
 
 
 
352 753
 
Investments classified as current asset
15 064 922
2 651 290
4 985 020
2 008 553
2 227 204
13 592
3 179 263
Other assets (1)
5 642 951
5 662 475
54 678
340 135
55 812
303 580
- 773 729
Total assets
27 375 338
12 633 185
5 039 738
2 348 688
2 283 366
2 660 679
2 409 684
               
1) The business area's net drawings on the bank accounts are included here and deducted from the other assets.
               
NOK 1 000
Ferd AS Group
Ferd Capital
Ferd Invest
Ferd Special Investments
Ferd Hedgefond
Ferd Eiendom
Other areas
Result 2012
             
Sales income
10 465 326
10 464 382
 
 
 
944
 
Income from financial investments
3 238 952
1 081 221
654 655
182 447
137 678
- 48 813
1 231 764
Other income
483 836
39 445
 
 
 
444 082
310
Operating income
14 188 115
11 585 048
654 655
182 447
137 678
396 213
1 232 074
               
Operating expenses excl. depreciation and impairment
9 867 146
9 714 196
23 928
12 852
8 255
39 845
68 069
EBITDA
4 320 968
1 870 851
630 727
169 595
129 422
356 368
1 164 005
               
Depreciation and impairment
452 849
451 398
77
58
37
368
911
Operating profit
3 868 119
1 419 453
630 650
169 537
129 385
356 000
1 163 094
               
Income on investments accounted for by the equity method
87 010
56 965
 
 
 
30 045
 
Profit before finance items and income tax expense
3 955 129
1 476 418
630 650
169 537
129 385
386 044
1 163 094
               
Statement of financial position 31 December 2012
             
Intangible assets
1 731 348
1 731 348
 
 
 
 
 
Tangible assets and investment properties
3 377 888
1 381 850
117
 
442
1 991 498
3 981
Investments accounted for by the equity method
599 321
258 732
 
 
 
340 590
 
Investments classified as current asset
15 439 785
4 140 076
3 473 772
1 480 585
1 607 396
319
4 737 638
Other assets (1)
5 387 701
3 982 241
52 839
291 122
79 027
296 752
685 721
Total assets
26 536 044
11 494 246
3 526 728
1 771 707
1 686 865
2 629 158
5 427 340
               
1) The business area's net drawings on the bank accounts are included here and deducted from the other assets.
NOTE 4
GEOGRAPHICAL ALLOCATION OF REVENUE
         
NOK 1 000
2013
2012
   
Norway
4 344 143
4 084 030
   
Sweden
1 042 083
1 042 339
   
Germany
1 051 213
942 905
   
Netherlands
504 199
477 232
   
USA
417 983
385 779
   
Russia
445 504
376 298
   
Canada
358 719
365 511
   
Austria
365 165
349 948
   
Denmark
289 451
282 573
   
Spain
245 677
233 214
   
Great Britain
226 375
213 881
   
France
191 838
186 094
   
Rest of the world
1 475 983
1 525 522
   
Total revenue
10 958 333
10 465 326
   
         
Sales revenues are allocated on the basis of where the customers live.
   
NOTE 5
INFORMATION FROM FINANCIAL INVESTMENTS
         
Income from financial investments by the various investments categories:
   
         
NOK 1 000
2013
2012
   
Listed shares and bonds
1 554 631
576 907
   
Unlisted shares and bonds
364 188
2 323 642
   
Hedge funds
765 287
320 125
   
Interest investments
10 047
18 278
   
Total income from financial investments
2 694 153
3 238 952
   
NOTE 6
SALARIES AND REMUNERATIONS
       
                 
NOK 1 000
   
2013
2012
       
Salaries
   
1 950 286
1 797 351
       
Social security tax
   
227 665
230 146
       
Pension costs (note 17)
   
75 618
75 757
       
Other benefits
   
52 117
56 218
       
Total
   
2 305 685
2 159 472
       
                 
Average number of man-labour years
   
3 870
3 570
       
                 
Salary and remuneration to group management
               
 
2013
2012
NOK 1 000
Salary
Bonus
Benefits in kind
Pension
Salary
Bonus
Benefits in kind
Pension
Group CEO, John Giverholt
3 287
2 297
234
1 218
       
Other members of group management
4 637
7 898
421
1 664
       
Group CEO, Johan H. Andresen (from 1 January 2012 until 30 September 2012)
       
991
 
140
 
Group CEO, John Giverholt (from 1 October 2012 until 31 December 2013)
       
825
 
51
228
Other members of group management (from 1 January 2012 until 30 September 2012)
       
5 917
907
546
2 132
Other members of group management (from 1 October 2012 until 31 December 2012)
       
1 125
 
82
682
Total
7 924
10 195
655
2 882
8 858
907
819
3 042
                 
The Group CEO's bonus scheme is limited to one year's salary. Bonus is based on the results achieved in the Group.
                 
The Group CEO participates in Ferd's collective pension schemes for salaries below 12 G and is thereby in 2013 entitled to a defined benefit pension. From 2014, this scheme is replaced by a contribution scheme (cf. note 17). The Group CEO also has a benefit scheme for a pension basis higher than 12 G, but with an upper limit of appr. MNOK 2,2, together with an early retirement pension scheme giving him the opportunity to retire at 65 years.
                 
The Group CEO is entitled to 9 months pay after termination of employment if he has to resign from his position.
                 
Ferd AS has a receivable on the CEO of NOK 600 000, which is subject to interest on market based terms. Ferd AS has adequate security for this loan. The loan has no defined instalment plan.
                 
Ferd's group management changed considerably during 2012. Dag Opedal resigned from group management in the spring of 2012. Effective from 1 October, Ferd was reorganised, and Johan H. Andresen and Arthus Sletteberg resigned from group management. Tom Erik Myrland became Investment Director and Erik Rosness Finance Director. Former Finance Director John Giverholt became the new Group CEO. The above remunerations for 2012 represent payment up until 1 October for the former group management and after 1 October for the new.
                 
Fees to the Board
               
No specific fees have been paid for board positions in Ferd AS.
NOTE 7
INTANGIBLE ASSETS
       
             
NOK 1 000
       
2013
2012
Goodwill (note 8)
       
1 453 289
1 013 715
Other intangible assets
       
823 025
717 633
Carrying amount at 31 December
     
 
2 276 314
1 731 348
             
2013
           
NOK 1 000
Software
Brands
Patents
and rights
Capitalised
development
costs
Customer
relations
Total
             
Cost at 1 January
308 788
162 738
224 951
110 252
430 550
1 237 279
Additions
40 800
2 700
70
41 938
125 412
210 920
Disposals
- 16 623
 
 
 
 
- 16 623
Exchange difference
33 002
 
27 875
15 003
 
75 880
Cost at 31 December
365 967
165 438
252 896
167 193
555 962
1 507 456
             
Acc. amortisation and impairment at 1 January
254 085
6 700
188 738
2 234
67 889
519 646
Additions of amortisations at acquisitions
7 760
       
7 760
Current year amortisation charge
27 764
4 020
26 449
1 531
47 719
107 483
Disposals
- 7 797
 
 
 
2 652
- 5 145
Exchange differences
29 058
 
25 517
112
 
54 687
Accumulated amortisation at 31 December
310 870
10 720
240 704
3 877
118 260
684 431
Accumulated impairment at 31 December
3 387
       
3 387
           
 
Carrying amount at 31 December
55 097
154 718
12 192
163 316
437 702
823 025
             
Economic life
3-5 year
> 20 years to indefinite
3-10 years
10 years
10-15 years
 
             
Amortisation method
Straight-line
Straight-line
Straight-line
Straight-line
Straight-line
 
             
2012
           
NOK 1 000
Software
Brands
Patents
and rights
Capitalised
development
costs
Customer
relations
Total
             
Cost at 1 January
295 468
136 376
225 659
74 578
409 609
1 141 691
Additions
19 272
37 462
11 377
40 152
20 940
129 203
Disposals
- 1 836
- 11 100
 
 
 
- 12 936
Exchange difference
- 4 116
 
- 12 085
- 4 478
 
- 20 679
Cost at 31 December
308 788
162 738
224 951
110 252
430 550
1 237 279
             
Acc. amortisation and impairment at 1 January
231 853
2 680
169 730
8 832
21 250
434 345
Additions of amortisations at acquisitions
         
 
Current year amortisation charge
38 886
4 020
28 270
- 6 598
46 639
111 217
Disposals
- 1 836
 
122
 
 
- 1 714
Exchange differences
- 14 850
 
- 9 384
   
- 24 234
Accumulated amortisation at 31 December
254 085
6 700
188 738
2 234
67 889
519 646
Accumulated impairment at 31 December
3 008
       
3 008
           
 
Carrying amount at 31 December
54 703
156 038
36 213
108 018
362 661
717 633
             
Economic life
3-5 year
> 20 years to indefinite
3-10 years
10 years
10-15 years
 
             
Amortisation method
Straight-line
Straight-line
Straight-line
Straight-line
Straight-line
 
             
Research and development
Costs expensed to research and development in fiscal year 2013 totalled MNOK 138. The corresponding cost for 2012 was MNOK 118.
NOTE 8
GOODWILL AND INFORMATION ON BUSINESS COMBINATIONS
     
                 
Pursuant to IFRS 3 Business combinations, the net assets of acquired companies have been assessed at fair value at the acquisition date. The remaining part of the consideration after allocating the consideration to identifiable assets and liabilities, is recognised as goodwill. The tables below show the values and movements in the the various goodwill items in the Group.
 
2013
               
NOK 1 000
Servi
Norrwin AB
(Lundhags)
Alf Valde
Elopak
Europa
Seco Invest
(TeleComputing)
Total
   
Cost at 1 January
 
1 385
16 053
448 571
593 969
1 059 978
   
Additions
386 289
21
     
386 310
   
Disposals
   
- 779
   
- 779
   
Exchange differences
     
59 827
 
59 827
   
Cost at 31 December
386 289
1 406
15 274
508 398
593 969
1 505 336
   
                 
Accumulated impairment at 1 January
   
563
45 700
 
46 263
   
Impairment
       
 
 
   
Disposals
   
- 563
   
- 563
   
Exchange differences
     
6 347
 
6 347
   
Accumulated impairment at 31 December
 
 
 
52 047
 
52 047
   
                 
Carrying amount at 31 December
386 289
1 406
15 274
456 351
593 969
1 453 289
   
                 
Changes in 2013:
Effective from 1 August 2013 for accounting purposes, Ferd acquired Servi Group. Through the acquisition, Ferd has increased its customer relations by MNOK 120,7 (note 7), in addition to a goodwill of appr. MNOK 386. The cost of the shares in Servi Group AS constituted appr. MNOK 672, of which MNOK 288 are financed by loans. Servi's contribution to Ferd's consolidated financial statements amounted to MNOK 354 in operating income and MNOK 17 in EBITDA in 2013.
                 
The purchase analysis of Lundhags and Alf Valde (acquired in 2012) is only marginally changed in 2013. As a result, goodwill has been reduced by NOK 758 000.
                 
2012
               
NOK 1 000
 
Norrwin AB
(Lundhags)
Alf Valde
Elopak
Europa
Seco Invest
(TeleComputing)
Total
   
Cost at 1 January
     
470 719
621 776
1 092 495
   
Additions
 
1 385
16 053
 
 
17 438
   
Disposals
     
 
- 27 807
- 27 807
   
Exchange differences
     
- 22 148
 
- 22 148
   
Cost at 31 December
 
1 385
16 053
448 571
593 969
1 059 978
   
                 
Accumulated impairment at 1 January
     
48 393
 
48 393
   
Impairment
   
563
 
 
563
   
Disposal of subsidiary
     
 
 
 
   
Exchange differences
     
- 2 693
 
- 2 693
   
Accumulated impairment at 31 December
 
 
563
45 700
 
46 263
   
                 
Carrying amount at 31 December
 
1 385
15 490
402 871
593 969
1 013 715
   
                 
Changes in 2012:
In 2012, Ferd (through Swix) acquired Norrwin AB and Original Teamwear AS with accounting effect from 1 January 2012. The acquisitions have increased intangible assets (brands and patents) by a total of MNOK 37,6 (note 7), in addition to goodwill amounting to appr. one million. The cost of the shares in Norrwin AB constituted MNOK 66,8, whereas the shares in Original Teamwear AS were purchased in two steps. Original was an associate with a carrying value of MNOK 8,8 at the beginning of 2012, and in addition MNOK 28,4 were paid in 2012. The companies have contributed to Ferd's consolidated financial statements with MNOK 142 in turnover and MNOK 10 in profit before tax in 2012.
                 
In 2012, Ferd (through Mestergruppen) acquired Alf Valde AS with accounting effect from 1 July 2012. The acquisition has increased Ferd's goodwill by MNOK 16. The cost for the shares constituted MNOK 23. Alf Valde has contributed to Ferd's consolidated financial statements with MNOK 33 in turnover og MNOK 2 in profit before tax in 2012.
                 
There were minor changes in the purchase analyses of Mestergruppen and Telecomputing (acquisitions in 2011) in 2012. The changes have resulted in a reduction in goodwill of MNOK 28, whereas customer relations have increased by MNOK 20 (note 7).
                 
Impairment testing for goodwill:
                 
Goodwill is allocated to the Group's cash generating units, and is tested for impairment annually or more frequently if there are indications of impairment. Testing for impairment implies determining the recoverable amount of the cash generating unit. The recoverable amount is determined by discounting future expected cash flows, based on the cash generating unit's business plans. The discount rate applied to the future cash flows is based on the Group's weighted average cost of capital (WACC), adjusted to the market's appreciation of the risk factors for each cash generating unit. Growth rates are used to project cash flows beyond the periods covered by the business plans.
                 
Cash generating units
The goodwill items specified above are mainly related related to Elopak and Telecomputing, in addition to two minor goodwill items related to new acquisitions in 2012 in the sub-groups Swix and Mestergruppen. An additional goodwill of appr. MNOK 386 came as a result of the acquisition of Servi in 2013.
                 
Goodwill concerning Elopak is allocated to the cash generating unit Europe, which consists of Elopak's European markets, including the internal production and supply organisation. This goodwill has a carrying value of MNOK 456 at 31 December 2013. The rationale for determining Europe as one cash-generating unit is the inherent dynamics of this market. The trend is that customers are merging, and have easy access to the supplies all over Europe. Elopak adapts to its customers by distributing the production of cartons for the various markets according to the optimal production efficiency in Europe. The historical geographical criteria for production and demands from customers are no longer as important. As a consequence of this development, the split of margins along Elopak's value chain will be subject to change from one year to another. Hence, one European business unit will be the best indicator for assessing any impairment of goodwill.
                 
Goodwill related to Telecomputing concerns Telecomputing's operations in Norway and Sweden. The goodwill has a carrying amount of MNOK 594 as at 31 December 2013. For impairment purposes, Telecomputing is considered to be one cash generating unit due to similar activities.
                 
Goodwill in Mestergruppen relates to the acquisition of Alf Valde in 2012. The goodwill amounts to MNOK 15 and is considered as a separate cash generating unit when tested for impairment. The goodwill has been marginally adjusted in 2013 as a consequence of an updated excess value analysis.
                 
Goodwill in Swix concerns the acquisition of Norrwin AB, with the brand Lundhags in Sweden in 2012. The goodwill amounts to appr. one million as at 31 December 2013. In addition to manufacturing and selling Lundhags' products, Norrwin has taken over as Swix' distributor in the Swedish market, and the company is thereby very much integrated in Swix' operations. Accordingly, Norrwin is considered together with the rest of Swix as one joint cash generating unit for impairment purposes.
                 
Goodwill identified at the acquisition of Servi, carried out in 2013, is allocated to Servi in total as the cash generating unit. This is a consequence of Servi's co-ordinated and well integrated activities. The goodwill has not been tested for impairment in 2013.
                 
Impairment testing and assumptions
   
The recoverable amount for the cash generating unit is calculated on the basis of the present value of expected cash flows. The cash flows are based on assumptions about future sales volumes, selling prices and direct costs. The background for these assumptions is historical experience from the market, adopted budgets and the Group's expectations of market changes. Having carried out impairment testing, the Group does not expect significant changes in current trade. This implies that expected future cash flows mainly are a continuation of observed trends.
                 
Determined cash flows are discounted at a discount interest rate. The rate applied and other assumptions are shown below.
                 
Calculated recoverable amounts in the impairment tests are positive, and based on the tests, the conclusion is that no write-down for impairment is required in 2013. The inherent uncertainty connected with the assumptions on which the impairment testing is based is illustrated by sensitivity analyses. The conclusions are tested for changes in discount and growth rates. The sensitivity analyses show robust conclusions for impairment testing.
                 
Detailed description of the assumptions applied:
 
 
Discount rate after tax
Discount rate before tax
Growth rate 2-5 years
Long-term growh rate
 
2013
2012
2013
2012
2013
2012
2013
2012
Elopak Europa
4,9 %
4,5 %
6,9 %
6,3 %
2,0 %
2,0 %
0,0 %
0,0 %
Seco Invest
5,8 %
5,8 %
6,5 %
6,5 %
2,0 %
2,0 %
2,0 %
2,0 %
Alf Valde
8,9 %
 
12,0 %
 
2,5 %
 
2,5 %
 
Lundhags
7,5 %
 
10,0 %
 
2,5 %
 
2,5 %
 
The discount rate reflects the market's assessment of the risk specific to the cash generating unit. The rate is based on the weighted average cost of capital for the industry. This rate has been further adjusted to reflect the specific risk factors related to the cash generating unit, which has not been reflected in the cash flows.
 
The average growth rate in the period 2 to 5 years is based on Ferd's expectations for the development in the market in which the business operates. Ferd uses a stable growth rate to extrapolate the cash flows beyond 5 years.
 
EBITDA represents operating profit before depreciation and is based on the expected future market development. Committed operating efficiency improvement measures are taken into account. Changes in the outcomes for these initiatives may influence future estimated EBITDA.
 
Investment costs necessary to meet expected future growth are taken into account. Based on management's assessment, the estimated investment costs do not include investments that improve the current assets' performance. The related cash flows are treated correspondingly.
 
 
 
 
NOTE 9
TANGIBLE ASSETS
   
         
2013
       
NOK 1 000
Buildings and land
Machines and installations
Fixtures and equipment
Total
Cost at 1 January
410 487
3 697 636
230 510
4 338 633
Additions
208 482
541 726
23 866
774 074
Disposals
- 7 356
- 147 103
- 29 856
- 184 315
Exchange differences
40 848
411 503
55 238
507 589
Cost at 31 December
652 461
4 503 762
279 758
5 435 981
         
Accumulated depreciation and impairment at 1 January
248 148
2 505 978
188 472
2 942 598
Accumulated depreciation on acquisitions
10 926
30 426
3 521
44 873
Depreciation of the year
17 158
290 586
22 343
330 087
Impairment of the year
 
3 616
 
3 616
Derecognised depreciation
- 2 235
- 135 272
- 19 538
- 157 045
Exchange differences
28 380
295 551
32 853
356 784
Accumulated depreciation at 31 December
302 377
2 990 885
227 651
3 520 913
Accumulated impairment at 31 December
2 288
33 455
268
36 011
         
Carrying amount at 31 December
350 084
1 512 877
52 107
1 915 068
         
Estimated economic life of depreciable assets
5-50 years
5-15 years
3-13 years
 
Amortisation method
Straight-line
Straight-line
Straight-line
 
         
2012
       
NOK 1 000
Buildings and land
Machines and installations
Fixtures and equipment
Total
Cost at 1 January
416 174
3 699 376
230 081
4 345 631
Additions
34 771
361 125
15 204
411 100
Disposals
- 24 756
- 211 006
- 8 528
- 244 290
Exchange differences
- 15 702
- 151 859
- 6 247
- 173 808
Cost at 31 December
410 487
3 697 636
230 510
4 338 633
         
Accumulated depreciation and impairment at 1 January
262 631
2 462 125
179 288
2 904 044
Accumulated depreciation on acquisitions
     
 
Depreciation of the year
13 937
303 885
20 849
338 671
Impairment of the year
 
2 394
4
2 398
Derecognised depreciation
- 17 427
- 158 558
- 6 605
- 182 590
Exchange differences
- 10 993
- 103 868
- 5 064
- 119 925
Accumulated depreciation at 31 December
248 148
2 505 978
188 472
2 942 598
Accumulated impairment at 31 December
2 100
26 462
238
28 800
         
Carrying amount at 31 December
162 339
1 191 658
42 038
1 396 035
         
Estimated economic life of depreciable assets
5-50 years
5-15 years
3-13 years
 
Amortisation method
Straight-line
Straight-line
Straight-line
 
NOTE 10
OTHER OPERATING EXPENSES
       
NOK 1 000
2013
2012
 
Sales and administration costs
205 906
164 519
 
Lease of buildings etc.
249 407
213 686
 
Travel expenses
153 365
139 040
 
Loss and change in write-downs of trade receivables
28 052
16 362
 
Fees to auditors, lawyers, consultants
182 866
130 080
 
Other expenses
328 996
425 750
 
Total
1 148 592
1 089 437
 
NOTE 11
EXPENSED AUDIT FEES
     
           
Ernst & Young AS is Ferd's Group auditor. Some minor Group companies are audited by other audit firms.
           
NOK 1 000
Audit fees
Other assurance services
Tax services
Other non-audit services
Total
2013
         
Ernst & YoungAS
10 598
435
3 508
2 893
17 434
Others
1 340
461
886
227
2 914
Total
11 938
896
4 394
3 120
20 348
           
2012
         
Ernst & Young AS
8 891
451
790
2 271
12 403
Others
471
17
74
11
573
Total
9 362
468
864
2 282
12 976
           
Fees are exclusive of VAT
           
Other non-audit services mainly comprise due diligence services. All amounts are exclusive of VAT.
NOTE 12
INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD
     
                 
Investments in associates and joint ventures are in Ferd's consolidated accounts recognised BY the equity method.
                 
A specification of companies and shares is given in the statement of investments in associates and joint ventures in note 20.
                 
2013
NOK 1 000
 
Al-Obeikan Elopak factory for Packaging Co
Lala Elopak S.A. de C.V.
Tiedemanns-byen DA
Harbert European Real Estate Fund II
Harbert European Real Estate Fund III
Others
Total
Ownership and voting share
 
49%
49%
50%
26%
22%
   
                 
Cost at 1 January
 
54 100
153 093
106 768
112 002
51 141
101 074
578 177
Share of result at 1 January
 
76 742
100 900
8 973
54 093
11 052
- 5 721
246 039
Accumulated impairment of goodwill at 1 January
 
- 12 600
 
 
 
 
- 1 085
- 13 685
Transfer from the company
 
- 29 879
- 84 963
 
- 13 342
 
- 5 865
- 134 049
Exchange differences/eliminations
 
- 30 016
- 29 406
 
- 3 053
- 293
- 14 394
- 77 162
                 
Carrying amount at 1 January
 
58 347
139 624
115 741
149 700
61 900
74 009
599 321
                 
Additions
 
4 225
11 958
   
44 833
4 338
65 354
Disposals
           
- 8
- 8
Sales during the year
           
 
 
Share of the result of the year
 
6 132
17 086
14 029
28 884
11 184
6 346
83 661
Impairment of goodwill
           
- 497
- 497
Transfers from the company
   
- 13 915
- 12 765
- 50 484
- 23 517
 
- 100 681
Recognised directly in equity
 
- 1 333
- 184
     
 
- 1 517
Exchange differences/eliminations
 
1 550
1 556
     
- 1 572
1 534
                 
Carrying amount at 31 December
 
68 921
156 125
117 005
128 100
94 400
82 616
647 167
                 
2012
NOK 1 000
Al-Obeikan Elopak factory for Packaging Co
Elopak South Africa Ltd
Lala Elopak S.A. de C.V.
Tiedemanns-byen DA
Harbert European Real Estate Fund II
Harbert European Real Estate Fund III
Others
Total
Ownership and voting share
49%
50%
49%
50%
26%
22%
   
                 
Cost at 1 January
54 100
25 692
153 093
106 768
133 253
44 000
111 910
628 815
Share of result at 1 January*
62 782
55 316
83 685
2 332
37 020
4 721
- 3 106
242 750
Accumulated impairment of goodwill at 1 January
- 12 600
- 2 200
 
 
 
 
- 1 085
- 15 885
Transfer from the company
- 15 308
- 26 029
- 61 827
 
- 13 342
 
- 5 865
- 122 371
Exchange differences/eliminations
- 21 143
- 11 918
- 28 348
 
- 3 053
- 293
- 11 551
- 76 306
                 
Carrying amount at 1 January
67 831
40 861
146 603
109 100
153 877
48 428
90 303
657 004
                 
Additions
         
35 664
14 464
50 128
Disposals
 
- 41 373
   
- 21 251
- 28 523
- 25 300
- 116 447
Sales during the year
           
 
 
Share of the result of the year*
13 960
5 599
17 215
6 641
17 074
6 331
- 2 615
64 204
Impairment of goodwill
           
 
 
Transfers from the company
- 14 571
 
- 23 136
     
 
- 37 707
Recognised directly in equity
           
 
 
Exchange differences/eliminations
- 8 873
- 5 087
- 1 058
     
- 2 843
- 17 861
                 
Carrying amount at 31 December
58 347
 
139 624
115 741
149 700
61 900
74 009
599 321
                 
*) Gain on sale of Elopak South Africa Ltd constitutes 22 806.
                 
The table below shows a summary of financial information related to Ferd's largest investments in associates and joint ventures on a 100 percent basis. The stated figures represent fiscal year 2013. The figures are unaudited.
                 
NOK 1 000
 
Al-Obeikan Elopak factory for Packaging Co
Lala Elopak S.A. de C.V.
Tiedemanns-byen DA
Harbert European Real Estate Fund II
Harbert European Real Estate Fund III
   
Operating revenue
 
177 006
240 603
245 798
10 138
25 856
   
Operating profit
 
10 395
27 913
38 880
3 025
- 17 403
   
Profit after tax and minority
 
6 053
18 353
28 914
65 115
129 195
   
Total assets
 
147 773
183 808
403 929
524 894
1 038 887
   
Total liabilities
 
94 064
64 854
169 921
670
5 378
   
                 
Stake, transactions and balances with enterprises accounted for by the equity method:
 
Eierandel, transaksjoner og mellomværende med selskap behandlet etter egenkapitalmetoden
   
Stake/voting share
Sales from associates companies and joint ventures to Ferd
 
 
Ferd's net receivables/(payables) to associated companies and joint ventures
 
 
Ferd's guarantees for associated companies and joint ventures
 
 
NOK 1 000
 
2013
2013
2012
2013
2012
2013
2012
Al-Obeikan Elopak factory for Packaging Co
 
49,0 %
 
 
129
26 992
115 268
105 642
Boreal GmbH
 
20,0 %
 
 
 
 
 
 
Elocap Ltd.
 
50,0 %
253 820
94 249
- 8 513
- 8 419
   
Frogn Næringspark AS
 
50,0 %
           
Harbert European Real Estate Fund II
 
26,0 %
       
 
 
Harbert European Real Estate Fund III
 
22,0 %
       
 
 
Hunstad Sør Tomteselskap AS
 
31,6 %
425
 
 
 
 
 
Impresora Del Yaque
 
51,0 %
2 498
   
23 488
   
Kråkeland Hytteservice AS
 
33,5 %
 
 
 
 
 
 
Lala Elopak S.A. de C.V.
 
49,0 %
20 487
20 182
2 235
2 659
 
 
Lofoten Tomteselskap AS
 
35,0 %
32
 
 
 
 
 
Madla Byutvikling AS
 
33,3 %
 
 
 
 
 
 
Siriskjær AS
 
50,0 %
           
Solheim Byutviklingselskap AS
 
33,1 %
 
 
 
 
 
 
Sporafjell Utviklingsselskap AS
 
50,0 %
           
Tastarustå Byutvikling AS
 
33,3 %
 
 
 
 
 
 
Tiedemannsbyen DA
 
50,0 %
       
 
 
Total
   
277 262
114 431
- 6 149
44 720
115 268
105 642
NOTE 13
SPECIFICATION OF FINANCE INCOME AND EXPENSE
           
Finance income
         
NOK 1 000
2013
2012
     
Interest income from bank deposits
190 601
78 598
     
Interest income from related parties
11 453
63 794
     
Other interest income
1 032
23 893
     
Foreign exchange gain and other finance income
485 438
66 311
     
Total
688 524
232 597
     
           
Finance expense
         
NOK 1 000
2013
2012
     
Interest expense to finance institutions
266 069
210 701
     
Interest expense to related parties
35 797
17 658
     
Other interest expense
48 467
82 594
     
Foreign exchange loss and other finance expenses
677 102
264 092
     
Total
1 027 435
575 046
     
           
None of the financial items originate from financial instruments measured at fair value.
 
     
NOTE 14
INCOME TAXES
 
     
Specification of income tax expenses
NOK 1 000
2013
2012
     
Tax payable of net profit
   
Income tax payable for the year
185 767
138 917
Adjustments of prior periods
26 804
8 826
Total tax payable
212 571
147 743
     
Deferred tax expense
Change in deferred tax recognised in the income statement
49 067
34 990
Effects of changes in tax rates and prior years' taxes
5 788
3 881
Total deferred tax
54 855
38 872
     
Income tax expense
267 426
186 615
     
Tax payable in balance sheet
NOK 1 000
2013
2012
Tax payable of the year
185 767
138 917
Tax on rendered group contribution
- 7 000
 
Tax liability from prior years
84 290
9 121
Advance tax paid
- 89 170
- 44 224
Translation differences
- 6 838
 
Tax payable
167 049
103 814
     
Reconciliation of nominal to effective tax rate
NOK 1 000
2013
2012
Profit before tax
2 942 821
3 612 680
Estimated income tax expense at nominal tax rate (28%)
823 990
1 011 550
Losses and other deductions without any net tax effect
- 1 806
7 039
Non-taxable income elated to securities
- 556 833
- 810 164
Other non-taxable income, incl. value changes in investment property
- 40 876
- 26 049
Adjustment of prior periods
32 593
12 707
Tax effect of other permanent differences
10 358
- 8 469
Income tax expense
267 426
186 615
Effective tax rate
9,1 %
5,2 %
     
Tax recognised directly in equity
NOK 1 000
2013
2012
Actuarial loss on pension obligations
- 3 627
959
Cash flow hedges
- 1 023
2 378
Total tax recognised in total comprehensive income
- 4 650
3 337
     
Deferred tax assets and liabilities
NOK 1 000
2013
2012
Inventories
14 335
21 414
Receivables
8 416
6 678
Stocks and bonds
- 186 533
10 636
Other differences
13 714
32 266
Tangible assets
- 47 183
- 153 123
Intangible assets
- 146 318
- 128 457
Net pensions
46 635
65 931
Tax losses to carry forward
311 775
190 785
Total
14 841
46 130
Reassessment of deferred tax assets
- 243 927
- 233 373
Net carrying value at 31 December of deferred tax assets (+)/liabilities (-)
- 229 086
- 187 243
     
Deferred tax assets are reviewed on each balance sheet date, and is reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow for a part or all of the deferred tax asset to be utilised.
     
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the liability shall be settled or the asset be realised, based on tax rates and legislation prevailing at the balance sheet date.
     
Tax losses to carry forward, gross
NOK 1 000
2013
 
2013
9 632
 
2014
14 071
 
2015
15 675
 
After 2015
286 394
 
Without expiration
909 369
 
Total tax losses to carry forward
1 235 141
 
     
Change in net deferred tax in balance sheet
NOK 1 000
2013
2012
Net carrying value at 1 January
- 187 243
- 174 885
Translation differences
3 592
- 1 529
Acquisition and disposal of subsidiary
14 070
- 30 464
Recognised in income statement during the period
- 54 855
- 38 872
Tax recognised in comprehensive income
- 4 650
3 337
Other changes 1)
 
55 170
Net carrying value at 31 December
- 229 086
- 187 243
1) Other changes mainly relate to implementation effects, the tax effect of internal gains and corrections of previous years' errors.
 
 
NOTE 15
SHARES AND STAKES IN OTHER COMPANIES WITH OWNERSHIPS IN EXCESS OF 10 %
   
 
Business office
Stake
 
Subsidiary
     
Elopak AS med datterselskaper
Røyken
100,0 %
 
FC Well Invest AS
Bærum
100,0 %
 
FC-Invest AS med datterselskaper (Telecomputing)
Bærum
100,0 %
 
Ferd Aibel Holding AS
Bærum
100,0 %
 
1912 Top Holding AS med datterselskaper (Servi Gruppen)
Bærum
100,0 %
 
Ferd Eiendom AS med datterselskaper
Bærum
100,0 %
 
Ferd Malta Holdings Ltd
Malta
100,0 %
 
Ferd MG Holding AS med datterselskaper (Mestergruppen)
Bærum
96,6 %
 
Ferd Sosiale Entreprenører AS
Bærum
100,0 %
 
Norse Crown Company Ltd. AS
Bærum
100,0 %
 
Swix Sport AS med datterselskaper
Oslo
100,0 %
 
       
Joint ventures
     
Impresora del Yaque
The Dominican Republic
51,0 %
 
Elocap Ltd
Israel
50,0 %
 
Frogn Næringspark AS
Trondheim
50,0 %
 
       
Associated companies
     
Al-Obeikan Elopak factory for Packaging Co
Saudi-Arabia
49,0 %
 
Lala Elopak S.A. de C.V.
Mexico
49,0 %
 
Harbert European Real Estate Fund II
London
25,9 %
 
Harbert European Real Estate Fund III
London
22,2 %
 
Tiedemannsbyen DA
Oslo
50,0 %
 
Lofoten Tomteselskap AS
Bodø
35,0 %
 
Hunstad Sør Tomteselskap AS
Bodø
31,6 %
 
Tastarustå Byutvikling AS
Stavanger
33,3 %
 
Madla Byutvikling AS
Stavanger
33,3 %
 
Boreal GmbH
Tyskland
20,0 %
 
Solheim Byutviklingselskap AS
Stavanger
33,3 %
 
Kråkeland Hytteservice AS
Sirdal
33,5 %
 
       
Non-current shares with ownership > 10 %
     
Herkules Capital I AS
 
40,0 %
 
       
Current shares with ownership > 10 %
     
Aibel Holding I AS
 
49,0 %
 
ARKeX Ltd
 
18,2 %
 
CF Engine AS
 
37,9 %
 
Energy Ventures AS
 
31,8 %
 
Energy Ventures IS
 
19,1 %
 
Energy Ventures II AS
 
26,0 %
 
Energy Ventures II KS
 
22,1 %
 
Energy Ventures III AS
 
25,0 %
 
Energy Ventures III GP LP
 
25,0 %
 
Energy Ventures III LP
 
18,7 %
 
Eniram Ltd
 
27,6 %
 
Herkules Private Equity Fund I (GP-I) Ltd
 
40,0 %
 
Herkules Private Equity Fund I (GP-II) Ltd
 
40,0 %
 
Herkules Private Equity Fund I (LP-I) Limited
 
76,1 %
 
Herkules Private Equity Fund II (GP-I) Ltd
 
40,0 %
 
Herkules Private Equity Fund II (GP-II) Ltd
 
40,0 %
 
Herkules Private Equity Fund II (LP-I) Limited
 
74,5 %
 
Herkules Private Equity Fund III (GP-I) Ltd
 
4,2 %
 
Herkules Private Equity Fund III (GP-II) Ltd
 
4,2 %
 
Herkules Private Equity Fund III (LP-I) Limited
 
25,1 %
 
Intera Fund I
 
12,0 %
 
Interwell AS
 
34,0 %
 
Marical Inc
 
22,4 %
 
Napatech AS
 
22,3 %
 
NMI AS
 
12,5 %
 
NMI Fund III
 
31,3 %
 
NMI Global
 
12,5 %
 
NMI Frontier
 
12,5 %
 
NRP Fleetfinance IV D.I.S
 
20,0 %
 
SPV Herkules II LP
 
81,5 %
 
Streaming Media AS
 
17,2 %
 
Vensafe ASA
 
23,1 %
 
NOTE 16
INVESTMENT PROPERTY
     
Investment property
NOK 1 000
2013
2012
Balance at 1 January
1 981 853
1 514 927
Acquisitions
640 189
65 136
Acquisitions through improvements
1 219
65 418
Disposals
- 814 807
- 6 963
Net change in value of investment property
20 463
343 335
Carrying amount at 31 December
1 828 917
1 981 853
     
Income from investment property
NOK 1 000
2013
2012
Rental income from properties
92 071
98 850
Costs directly attributable to properties
- 11 449
- 6 472
Net change in value of investment property
20 463
343 335
Total
101 085
435 713
     
Fair value of investment property
The investment properties are measured at fair value. Fair value is the amount for which an asset can be traded in a transaction between knowledgeable, voluntary parties. Market prices are considered when determining the market rent and required rate of return.
     
All of the Group's investment properties are measured yearly based on cash flow models. Future cash flows are calculated on the basis of signed contracts, as well as future cash flows based on expected market prices. No external valuations have been obtained. Other investment properties than rental properties, primarily land for developing property and residential projects, are valued on the basis of appraisals. Note 2 gives a detailed description of the parameters used to calculate the fair value.
 
 
NOTE 17
PENSION COSTS AND LIABILITIES
       
THE GROUP'S PENSION PLANS
Ferd has established pension schemes in accordance with Norwegian legislation. The employees participate in defined benefit and defined contribution plans complying with the requirements of the mandatory occupational pension.
       
Defined benefit plans
Defined benefit plans provide employees with the right to defined future pension benefits. The Group's net obligation in respect of defined benefit pension plans is calculated separately for each pension plan. The amount is an estimate of future benefits that employees have earned based on years of service and salary at retirement. Benefits are discounted to present value, and the recognised obligation is reduced by the fair value of plan assets for funded pension schemes. Changes in assumptions, staff numbers and variances between estimated and actual salary increases and return on assets result in actuarial gains and losses. Actuarial gains and losses and gains and losses resulting from a curtailment or termination of pension plans, are recognised immediately in the income statement.
       
The defined benefit pension plans consist of group schemes as well as some additional arrangements, including employees with a retirement basis over 12 G, and AFP. For salaries exceeding 12 G, Ferd has established a pension scheme implying that the employees earn a pension right each year. The scheme was closed for new hires when established. The right comprises a share of the salary in excess of 12 G together with a return component depending on the employee's chosen risk profile. The pension plan has many similarities with a contribution scheme, but as Ferd is not making regular payments to a fund, but has elected to take the risk of return itself, the scheme shall be classified as a benefit scheme for accounting purposes. Ferd has recognised the obligation as a pension liabiity and is expensing the current deposits and the current return as incurred. The liability has not been discounted.
       
Defined contribution plans
For defined contribution plans, the Group's obligations are limited to making specific contributions. Payments to defined contribution pension plans are recognised as expenses in the income statement when the employees have rendered services entitling them to the contribution.
       
Other service related long-term benefits
In addition to the pension schemes described above, Ferd has obligations related to future health contributions for some groups of employees in the USA.
       
ECONOMIC ASSUMPTIONS
Ferd has defined benefit plans in several countries with varying economic conditions affecting the assumptions that are the basis for calculating pension obligations. The parameters are adapted to conditions in each country. The discount rate is determined as a weighted average of the yields at the reporting date on AA rated corporate bonds, or government bonds in cases where there is no market for AA rated corporate bonds. The government bond interest rate is applied for Norwegian schemes. To the extent that the bond does not have the same maturity as the obligation, the discount rate is adjusted. Actuarial assumptions for demographic factors and retirement are based on generally accepted principles in the insurance business. Future mortality rates are based on statistics and mortality tables (K2013).
       
From 2013, the pension liabilities are recognised net less the pension funds. Net pension liabilities are discounted, implying that the return (previously an mportant economic assumption) is no longer relevant.
       
Economic assumptions in Norwegian companies at 31 December
   
2013
2012
Discount rate
 
3,30%
2,20%
Expected wage growth
 
0-3,75%
0-3,25%
Future expected pension regulation
 
1,75%
1,75%
Expected regulation of base amount (G)
 
3,50%
3,00%
       
Interval for economic assumptions in foreign companies at 31 December
   
2013
2012
Discount rate
 
2.00 - 4.10
2.00 - 4.15
Expected wage growth
 
0.00 - 1.00
0.00 - 1.00
Future expected pension regulation
 
0.00 - 0,60
0.00 - 0.55
       
       
PENSION OBLIGATIONS
Reconciliation of net liability against balance sheet
NOK 1 000
 
2013
2012
Pension liabilities for defined benefit pension plans
 
- 146 973
- 211 528
Pension assets for defined benefit pension plans
 
9 805
9 505
Total defined benefit obligation recognised in the consolidated statement of financial position
 
- 137 168
- 202 023
       
DEFINED BENEFIT PLANS
Specification of recognised liability
NOK 1 000
 
2013
2012
Present value of unfunded pension liabilities
 
- 51 737
- 69 469
Present value of wholly or partly funded obligations
 
- 617 516
- 469 621
Total present value of defined benefit obligations
 
- 669 253
- 539 091
Fair value of pension assets
 
532 085
337 068
Total defined benefit obligation recognised in the consolidated statement of financial position
 
- 137 168
- 202 023
       
Movements in liabilities for defined benefit pension plans
NOK 1 000
 
2013
2012
Liability for defined benefit pension plans at 1 January
 
539 091
681 653
Present value of current service cost
 
25 031
24 635
Interest expenses on the pension liability
 
23 286
20 487
Demographic estimate deviation on the pension liability
 
28 063
 
Financial estimate deviation on the pension liability
 
- 40 622
12 768
Settlement of pension plans
 
- 42 097
- 17 936
Curtailment of pension plans
 
- 48 907
115
Plan changes
   
- 32 370
Change in liability due to acquisition/sale of subsidiaries
 
191 228
 
Benefits paid
 
- 40 255
- 128 361
Social security tax
 
1 148
113
Exchange differences on foreign plans
 
33 287
- 22 015
Liability for defined benefit pension plans at 31 December
 
669 253
539 091
       
Expected payments of defined pension liabilities
NOK 1 000
 
2013
 
Defined benefit pension expected to fall due year 1-5
 
222 144
 
Defined benefit pension expected to fall due year 6-10
 
194 134
 
Defined benefit pension expected to fall due year 11-20
 
191 241
 
Defined benefit pension expected to fall due year 21-30
 
50 144
 
Defined benefit pension expected to fall due year after 30 years
 
11 589
 
Total benefit pension due
 
669 253
 
       
Movement in fair value of pension assets for defined benefit pension plans
 
NOK 1 000
 
2013
2012
Fair value of pension assets at 1 January
 
337 068
442 221
Expected return from pension assets
 
15 976
14 725
Financial estimate deviation on the pension assets
 
26 251
- 14 791
Contributions from employer
 
34 826
22 212
Administration expenses
 
- 1 681
- 645
Contributions from employees
   
2 838
Increase in pension funds due to the acquisition of subsidiaries
 
157 744
 
Settlements
 
- 32 021
 
Benefits paid
 
- 34 896
- 114 239
Exchange difference on foreign plans
 
28 818
- 15 253
Fair value of pension assets at 31 December
 
532 085
337 068
       
Pension assets include the following
NOK 1 000
 
2013
2012
Equity instruments
93 007
100 459
54 630
Government stock
107 682
180 650
92 454
Corporate stock
18 045
78 653
46 227
Other debt instruments, including structured debt
 
57 814
41 604
Property investments
991
35 899
34 670
Bank deposits
13 713
21 415
16 179
Other assets
55 653
57 195
51 303
Total pension funds
289 090
532 085
337 068
       
Actuarial deviations recognised in comprehensive income
NOK 1 000
 
2013
2012
Current year actuarial deviation on pension liabilities (defined benefit schemes)
 
12 559
12 768
Current year actuarial deviation on pension funds (defined benefit schemes)
 
26 251
14 791
Net actuarial deviation on defined benefit schemes recognised in comprehensive income
 
38 810
27 559
       
PENSION COSTS
NOK 1 000
 
2013
2012
Defined benefit plans
 
- 24 824
- 8 344
Defined contribution plans
 
100 442
85 028
Early retirement and other schemes
 
 
- 927
Total pension costs recognised in current year payroll costs
 
75 618
75 757
       
DEFINED BENEFIT PLAN PENSION COSTS
Pension costs recognised in income statement
NOK 1 000
 
2013
2012
Present value of this year's pension earned
 
25 031
24 635
Contribution from employees
 
 
- 2 838
Curtailment of pension schemes and plan changes
 
- 52 684
- 32 255
Social security tax
 
1 148
113
Administration costs
 
1 681
1 999
Total pension costs frm benefit schemes recognised in salary costs
 
- 24 824
- 8 344
       
Interest expense on the pension liability
 
23 286
20 487
Expected return on pension funds
 
- 15 976
- 14 725
Total pension costs from recognised in finance costs
 
7 310
5 762
NOTE 18
INVENTORIES
     
         
2013
       
NOK 1 000
Raw materials
Work in progress
Finished goods
Total
Cost at 31 December
447 337
643 456
1 105 324
2 196 117
Provision for obsolescence at 1 January
13 017
1 280
126 027
140 324
Write-down
3 843
 
36 307
40 150
Reversal of write-down
- 8 600
- 1 280
- 52 678
- 62 558
Currency translation
1 268
 
12 935
14 203
Provision for obsolescence at 31 December
9 528
 
122 591
132 119
         
Carrying value at 31 December
437 809
643 456
982 733
2 063 998
         
2012
       
NOK 1 000
Raw materials
Work in progress
Finished goods
Total
Cost at 31 December
334 416
434 828
980 334
1 749 578
Provision for obsolescence at 1 January
10 777
 
123 273
134 050
Write-down
2 240
1 280
2 754
6 274
Reversal of write-down
     
 
Provision for obsolescence at 31 December
13 017
1 280
126 027
140 324
         
Carrying value at 31 December
321 399
433 548
854 307
1 609 254
NOTE 19
CURRENT ASSETS
     
NOK 1 000
2013
2012
Prepayments
75 337
85 835
VAT and tax receivables
125 235
111 049
Current interest-bearing receivables
41 764
52 121
Other current receivables
475 538
391 260
Carrying amount at 31 December
717 874
640 265
     
NOK 1 000
2013
2012
Accounts receivable, gross
1 257 292
1 020 040
Allowances
- 51 539
- 33 295
Carrying amount at 31 December
1 205 753
986 745
     
Total current receivables
1 923 627
1 627 010
     
Accounts receivable by age
   
     
NOK 1 000
2013
2012
Up to 30 days
171 445
111 522
30-60 days
53 778
30 274
60-90 days
72 235
21 026
Over 90 days
41 301
30 147
Total
338 759
192 970
NOTE 20
THE USE OF FAIR VALUE AND FINANCIAL INSTRUMENTS
 
       
Ferd applies the following principles in the measurement of fair value in the financial statements:
               
Ferd applies the valuation method that is considered to be the most representative estimate of an assumed sales value. Such a sale is assumed to be carried out in an orderly transaction at the balance sheet date. As a consequence, all assets for which there is observable market information, or where a transaction recently has been carried out, these prices are applied (the market method). When a price for an identical asset is not observable, the fair value is calculated by another valuation method. In the valuatons, Ferd applies relevant and observable data at the largest possible extent.
               
For all investments where the value is determined by another method than the market method, analyses of changes in value from period to period are carried out. Thorough analyses on several levels are made, both by business area management, by Ferd's group management and finally by Ferd's Board. Sensitivity analyses for the most central and critical input data in the valuation model are prepared, and in some instances recalculations of the valuation are made by using alternative valuation methods in order to confirm the calculated value.
               
Ferd is consistent in the application of valuation method and normally does not change the valuation principles. A change of principles will deteriorate the reliability of the reporting and weaken the comparability between periods. The principle for the valuation and use of method is determined for the investment before it is carried out, and is changed only exceptionally and if the change results in a measurement that under the circumstances is more representative for the fair value.

Valuation methods

           
Investments in listed shares are valued through the application of the market method. The quoted price of the last transaction carried out at the stock exchange, is used.
 
Investments in unlisted shares managed in-house are normally valued on the basis of an earnings multiple. In calculating the value (Enterprise Value - EV),  EV/EBITDA, EV/EBITA and EV/EBIT can be applied, adjusted by a liquidity discount reduction and the addition of a control premium. In companies where Ferd has significant influence on the decisions made, the liquidity discount and control premium normally counterbalance. The corrections are made directly on the multiple. The company's income figure applied in the valuation is normalised for non-recurring effects. Finally, the equity value is calculated by deducting net interest-bearing debt. In the event that an independent transaction has taken place in the security, this is often used as a basis for our valuation.
               
Several of the venture investments constitute companies with no positive cash flows. This implies a greater degree of uncertainty in the valuations of the companies. The assessments are based on international valuation principles (EVCA guidelines). The investment is measured at cost, but the pricing is adjusted for progress in accordance with a business plan or if a transaction has taken place.
               
The valuation of investments in externally managed private equity and hedge funds is based on value reports received from the funds (NAV). Ferd makes a critical assessment of whether the reported NAV can be used as fair value, based on the characteristics of the fund. In many instances, the reported NAV must be adjusted, at a liquidity discount, as an example. Special Investments purchase hedge funds in the secondary market, often with a considerable discount compared to the reported value from the funds (NAV). In measuring these hedge funds, estimates from external brokers are obtained in order to assess the discount used at the trading of these hedge funds, compared to the most recently reported NAV.
               
Rental properties are valued by discounting future expected cash flows. The value of properties that are part of building projects is valued at an assumed sales value on a continuous basis. There is often a shift in value at achieved milestones. In the calculation, it is assumed that the property is utilised in the best possible way. Other properties are valued on the basis of independent appraisals.
               
The table below is an overview of carrying and fair value of the Company's financial instruments and how they are valued in the financial statements. It is the starting point for additional information on the Company's financial risk and refers to notes to follow.
               
Financial instruments measured at amortised cost
NOK 1 000
 
Investments at fair value over profit and loss
Investments at fair value over extended result
Loans
and receivables
Financial
liability
Other valuation methods
TOTAL
Non-current assets
           
Intangible assets
       
2 276 314
2 276 314
Deferred tax assets
       
150 634
150 634
Tangible assets
         
1 915 068
1 915 068
Investments at the equity method
       
647 167
647 167
Investment property
1 828 917
       
1 828 917
Pension funds
         
9 805
9 805
Other financial non-current assets
   
58 270
 
104 521
162 791
Total 2013
 
1 828 917
 
58 270
 
5 103 509
6 990 696
Total 2012
 
1 981 853
 
233 660
 
3 960 485
6 175 998
               
Current asssets
             
Inventories
         
2 063 998
2 063 998
Short-term receivables
16 704
11 710
1 895 213
   
1 923 627
Listed shares and bonds
5 241 213
       
5 241 213
Unlisted shares and bonds
5 446 096
       
5 446 096
Hedge funds
 
4 377 613
       
4 377 613
Interest investments
 
       
 
Bank deposits
     
1 332 095
   
1 332 095
Total 2013
 
15 081 626
11 710
3 227 308
 
2 063 998
20 384 642
Total 2012
 
15 439 785
15 434
3 295 573
 
1 609 254
20 360 046
               
Non-current liabilities
           
Pension obligation
   
 
 
146 973
146 973
Deferred tax
         
379 720
379 720
Long-term interest-bearing debt
     
3 516 977
- 8 373
3 508 604
Other long-term debt
 
42 239
 
251 554
7 411
301 204
Total 2013
 
 
42 239
 
3 768 531
525 731
4 336 501
Total 2012
   
30 612
 
5 633 412
592 434
6 256 458
               
Current liablities
             
Short-term interest-bearing debt
   
 
525 844
 
525 844
Tax payable
         
167 049
167 049
Other short-term debt
 
49 842
 
2 066 133
348 590
2 464 565
Total 2013
 
 
49 842
 
2 591 977
515 639
3 157 458
Total 2012
   
45 917
 
2 218 133
230 688
2 494 738
               
Fair value herarchy - financial assets and liabilities
               
Ferd classifies assets and liabilities measured at fair value by a hierarchy based on the underlying basis for the valuation. The hierarchy has the following levels:
               
Level 1: Valuation based on quoted prices in active markets for identical assets without adjustments. An active market is characterised by the fact that the security is traded with adequate frequency and volume in the market. The price information shall be continuously updated and represent expected sales proceeds. Only listed shares owned by Ferd Invest and allocated to the Small Caps mandate are considered to be level 1 investments.
               
Level 2: Level 2 comprises  investments where there are quoted prices , but the markets do not meet the requirements for being characterised as active. Also included are investments where the valuation can be fully derived from the value of other quoted prices, including the value of underlying securities, interest rate level, exchange rate etc. In addition, financial derivatives like interest rate swaps and currency futures are considered to be level 2 investments. Some funds in Ferd's hedge fund portfolio are considered to meet the requirements of level 2. These funds comprise composite portfolios of shares, unit trust funds, interest securities, commodities and other negotiable derivatives. For such funds the value (NAV) is reported on a continuous basis, and the reported NAV is applied on transactions in the fund.
               
Level 3: All Ferd's other securities are valued on level 3. The valuation is based on valuation models where parts of the utilised information cannot be observed in the market. Securities valued on the basis of quoted prices or reported value (NAV), but where significant adjustments are required, are assessed on level 3. Shares with little or no trading, where an internal valuation is required to determine the fair value, are assessed on level 3. For Ferd this concerns all venture investments, private equity investments and funds investments where reported NAV has to be adjusted. A reconciliation of the movements of assets on level 3 is shown in a separate table.
               
Ferd allocates each investment to its respective hiearchy at the acquisition. Transfers from one level to another are made only exceptionally and only if there have been changes of significance for the level classification concerning the financial asset. This can be the case when an unlisted share has been listed or correspondingly. A transfer between levels will then take place when Ferd has become aware of the change.
               
The table shows at what level in the valuation hierarchy the different measurement methods for the Group's financial instruments at fair value is considered to be:
               
NOK 1 000
     
Level 1
Level 2
Level 3
Total 2013
Assets
             
Investment property
       
1 828 917
1 828 917
Short-term receivables
     
16 704
11 710
28 414
Listed shares and bonds
   
5 241 213
   
5 241 213
Unlisted shares and bonds
       
5 446 096
5 446 096
Hedge funds
       
2 360 531
2 017 082
4 377 613
Liabilities
             
Other long-term debt
       
- 42 239
- 42 239
Other short-term debt
       
- 49 842
- 49 842
Total 2013
     
5 241 213
2 377 235
9 211 724
16 830 172
               
NOK 1 000
     
Level 1
Level 2
Level 3
Total 2013
Assets
             
Investment property
       
1 981 853
1 981 853
Short-term receivables
       
15 434
15 434
Listed shares and bonds
   
3 476 584
 
 
3 476 584
Unlisted shares and bonds
     
6 448
8 744 368
8 750 816
Hedge funds
       
1 600 948
1 477 773
3 078 721
Interest investments
     
133 664
 
133 664
Liabilities
           
 
Other long-term debt
       
- 30 612
- 30 612
Other short-term debt
       
- 45 917
- 45 917
Total 2012
     
3 476 584
1 741 060
12 142 899
17 360 543
               
Reconciliation of movements in assets on level 3
NOK 1 000
Op.bal.1 Jan. 2013
Purchases/
share issues
Sales and proceeds from investments
Unrealised gain
and loss,
recognised in comprehensive income
Unrealised gain
and loss,
recognised in the result
Gain and loss recognised in the result
Closing bal. on 31 Dec. 2013
Investment property
1 981 853
641 408
- 814 807
 
- 11 141
31 604
1 828 917
Short-term receivables
15 434
   
- 514
- 5 155
1 945
11 710
Unlisted shares and bonds
8 744 368
235 239
-3 418 186
 
- 151 806
36 481
5 446 096
Hedge funds
1 477 773
503 208
- 643 837
 
388 679
291 259
2 017 082
Liabilities
- 76 529
   
- 1 470
- 13 001
- 1 081
- 92 081
Total
12 142 899
1 379 855
-4 876 830
- 1 984
207 576
360 208
9 211 724
               
NOK 1 000
Op.bal.1 Jan. 2012
Purchases/
share issues
Sales and proceeds from investments
Unrealised gain
and loss,
recognised in comprehensive income
Unrealised gain
and loss,
recognised in the result
Gain and loss recognised in the result
Closing bal. on 31 Dec. 2012
Investment property
1 514 927
130 554
- 6 963
 
343 335
 
1 981 853
Short-term receivables
18 300
   
- 2 104
 
- 762
15 434
Unlisted shares and bonds
6 696 942
186 454
- 410 758
 
2 383 646
- 111 916
8 744 368
Hedge funds
1 118 074
690 982
- 490 577
 
61 246
98 048
1 477 773
Liabilities
- 83 245
   
6 253
 
463
- 76 529
Total
9 264 998
1 007 990
- 908 298
4 149
2 788 227
- 14 167
12 142 899
               
The table below gives an overview over the most central assumptions used when measuring the fair value of Ferd's investments, allocated to level 3 in the hierarchy. We also show how sensitive the value of the investments is for changes in the assumptions.
               
NOK 1 000
Balance sheet value at 31 Dec 2013
Applied and
implicit EBITDA multiples
Value, if
the multiple is reduced by 10 %
Applied
discount rate
Value, if the
interest is increased by 1 percentage point
Estimated
discounts according to broker (interval)
Value if the
discount is increased by 10 percentage points
Investment property 1)
1 828 917
   
7,5% - 9,0%
1 666 917
   
Unlisted shares and bonds 2)
5 446 096
7,6 - 9,5
4 702 696
       
Hedge funds 3)
2 017 082
       
12 % - 76 %
1 783 380
               
1) Appr. 35% of Ferd Eiendom AS' portfolio constitutes rental property sensitive for changes in the discount interest rate.
2) Appr. 63 % of the investments are sensitive for a change in multiple. The other investments are valued by other methods.
3) Appr. 92 % of the hedge funds are sensitive for a change in discount. The other investments are valued by other methods.
NOTE 21
RISK MANAGEMENT - INVESTMENT ACTIVITIES
 
         
IMPAIRMENT RISK AND CAPITAL ALLOCATION
   
         
Ferd's allocation of capital shall be in line with the owner's risk tolerance. One measure of this risk tolerance is the size of the decline in value in kroner or percent that the owner accepts if any of the markets Ferd is exposed to should experience very heavy and quick downfalls. Ferd's total portfolio shall have maximum 35 per cent impairment risk, given certain assumptions. The impairment risk regulates how large part of equity that can be invested in assets with high risk for impairment. This is measured and followed up by stress tests. The loss risk is assessed as a possible total impairment expressed in kroner og as a percentage of equity. Due to Ferd's long-term approach, the owner can accept significant fluctuations in value-adjusted equity.
   
         
CATEGORIES OF FINANCIAL RISK
   
         
Liquidity risk
   
Ferd strongly emphasises liquidity and assumes that the return from financial investments shall contribute to cover current interest costs. Hence, it is important that Ferd's balance sheet is liquid, and that the possibility to realise assets corresponds well with the term of the debt. Ferd has determined that under normal market conditions, at least 4 billion kroner of the financial investments shall comprise assets that can be realised within a quarter of a year. This is primarily managed by investments in listed shares and hedge funds. Note 16 in the parent company's accounts has more information about Ferd's loan facilities, including an overview of due dates of the debt.
   
         
Foreign currency risk
   
Ferd has defined intervals for exposure in Norwegian kroner, euro, USD and Swedish kroner. As long as the exposure is within these intervals, Ferd is not making any currency adjustments. If Ferd's exposure exceeds these intervals, steps are taken to adjust the exposure to the established currency curve.
   
         
SENSITIVITY ANALYSE, IMPAIRMENT RISK IN INVESTMENT ACTIVITIES
   
         
The stress test is based on a classification of Ferd's equity in different asset classes, exposed for impairment as follows:
   
         
- The Norwegian stock market declines by 30 percent
   
- International stock markets decline by 20 percent
   
- Property declines by 10 percent
   
- The Norwegian krone appreciates by 10 percent
   
         
In order to refine the calculations, it is considered whether Ferd's investments will decline more or less than the market. As an example, it is assumed that private investments in a stress test scenario have an impairment loss of 1.5 - 2 times the market (30-60 per cent in Norway and 20-40 percent abroad).
   
         
NOK 1 000
2013
2012
   
Price risk: Norwegian shares decline by 30 percent
-4 500 000
-4 400 000
   
Price risk: International shares decline by 20 percent
-1 600 000
-1 100 000
   
Price risk: Property declines by 10 percent
- 200 000
- 200 000
   
Currency risk: The Norwegian krone appreciates 10 percent
- 1 100
- 600 000
   
Total impairment in value-adjusted equity
-7 400 000
-6 300 000
   
         
Impairment as a percentage of value-adjusted equity
31%
32%
   
         
Included in the basis for the value impairment risk for 2013 is Ferd Capital's acquisition of 24 percent of Interwell in January 2014.
   
NOTE 22
SHARE CAPITAL AND SHAREHOLDER INFORMATION
         
The share capital of the Company consists of 183.267.630 shares at a nominal value of NOK 1.-.
 
         
Owner structure
 
         
The shareholder as at 31 December 2013 was:
       
   
Number of shares
Stake
 
Ferd Holding AS
 
183 267 630
100,00%
 
Total number of shares
 
183 267 630
100,00%
 
         
Ferd AS is a subsidiary of Ferd Holding AS, being a subsidiary of Ferd JHA AS. Ferd shares offices with its parent companies in Lysaker, Bærum. The consolidated financial statements of Ferd JHA AS are available on www.ferd.no.
 
         
Shares indirectly owned by the CEO and board members in Ferd AS:
Position
 
Stake
 
Johan H. Andresen
Chair of the Board
 
15,21%
 
         
The children of Johan H. Andresen own appr. 85 percent of Ferd AS indirectly by ownership of shares in Ferd Holding AS.
 
 
 
NOTE 23
NON-CURRENT LIABILITIES
       
Long-term interest-bearing debt
     
NOK 1 000
Amount in currency 2013
Amount in NOK 2013
Amount in NOK 2012
NOK
1 617 918
1 617 918
2 273 899
USD
2 000
12 167
1 126 990
EUR
153 428
1 286 110
1 070 757
DKK
285 000
320 253
374 905
GBP
   
90 248
SEK
271 627
257 279
321 304
CHF
3 400
23 250
25 000
Carrying value of loan expenses
 
- 8 373
 
Carrying value at 31 December
 
3 508 604
5 283 103
       
Other long-term debt
 
301 204
350 309
Total non-current liabilities
 
3 809 808
5 633 412
       
Instalments determined in contracts
   
NOK 1 000
 
2013
 
2015
 
234 495
 
2016
 
345 674
 
2017
 
1 841 059
 
2018
 
1 396 953
 
Total
 
3 818 181
 
       
The first year's instalment of long-term debt is presented as part of the short-term interest-bearing debt.
NOTE 24
OTHER CURRENT LIABILITIES
       
NOK 1 000
2013
2012
 
Trade payables
1 074 147
755 698
 
Public duties etc.
218 230
229 784
 
Other short-term debt
1 172 188
1 043 002
 
Total
2 464 565
2 028 484
 
NOTE 25
SECURED BORROWINGS, GUARANTEES AND CONTINGENT LIABILITIES
 
             
Secured borrowings
           
NOK 1 000
2013
2012
       
Loan facilities
1 845 942
1 418 637
       
Factoring
8 383
19 872
       
Total
1 854 325
1 438 509
       
             
Loan facilities comprise various credit facilities in the Group, normally secured by receivables, inventories, tangible assets and investment property. Interest terms are floating interest rates.
       
             
Carrying amounts of pledged assets
           
NOK 1 000
2013
2012
       
Investment property
1 222 094
1 611 814
       
Other tangible assets
136 928
142 886
       
Inventories
497 486
213 678
       
Receivables
519 078
377 867
       
Total
2 375 586
2 346 245
       
             
Maximum exposure to the above assets
2 375 586
2 346 245
       
             
Guarantees and off-balance sheet liabilities
           
NOK 1 000
2013
2012
       
Committed capital to fund investments
903 209
993 986
       
Commitment to provide loans
 
3 283
       
Guarantees without security
923 476
665 210
       
Clauses on minimum purchases in agreements with suppliers
187 190
152 408
       
Other obligations 1)
108 369
82 044
       
Total
2 122 244
1 896 931
       
             
1) Other obligations mainly concern repurchase commitments on sales of machines and investment obligations relating to developing investment property and the building of manufacturing plants.
       
             
In 2012, Ferd AS was sued by Amorin in connection with Ferd's former engagement in TiMar (Portugal). Ferd agreed to a settlement involving an insignificant amount in 2013.
 
 
       
NOTE 26
RISK MANAGEMENT - OPERATIONS
   
           
Risk management relating to the investment activities of Ferd is described in note 21.
           
Currency risk
Contracted currency flows from operations are normally secured in their entirety, while projected cash flows are hedged to a certain extent. Interest payments related to the Group's foreign currency loans are mostly secured by corresponding cash flows from the Group's activities. Instruments such as currency forward contracts, currency swaps and options can be used to manage Ferd Group's currency exposure.
           
Outstanding foreign exchange forward contracts
         
   
Currency
NOK
NOK 1 000
Currency
Purchase
Sale
Purchase
Sale
 
CAD
 
- 14 000
 
- 83 825
 
CHF
1 000
 
8 383
 
 
EUR
21 000
- 130 000
176 033
-1 089 725
 
JPY
7 050 000
- 537 000
410 743
- 33 530
 
NOK
398 000
- 110 000
398 000
- 110 000
 
RUB
 
- 82 000
 
- 16 765
 
SEK
9 000
- 108 000
8 383
- 100 590
 
CZK
       
 
GBP
       
 
DKK
92 000
- 9 000
100 590
- 8 383
 
ILS
8 000
 
16 765
 
 
USD
43 000
 
259 858
 
Total
     
1 378 755
-1 442 818
           
Interest rate risk
The Group has short-term fixed interest rates on long-term funding in accordance with internal guidelines. This applies for loans in Norwegian kroner, as well as in foreign currency. The Group uses interest rate swaps to reduce interest rate exposure by switching from floating rates to fixed rates for a portion of the loans.
           
Outstanding interest rate swaps
         
NOK 1 000
Currency
Amount
Receives
Pays
Time remaining to maturity
 
DKK
100 000
6M CIBOR
Fast 2,97% - 4,15%
1,7 - 3,5 years
 
EUR
85 000
3M EURIBOR
Fast 0,81 - 2,88%
2,2 - 5,0 years
 
SEK
50 000
3M STIBOR
 
3,0 years
The table includes derivatives for hedging.
         
           
Credit risk
Credit risk is the risk that a counterparty will default on his/her contractual obligations resulting in a financial loss to the Group. Ferd has adopted a policy implying that the Group shall be exposed only to credit-worthy counterparties, and independent credit analyses are obtained for all counterparties when such analyses are available. If not, the Group uses other publicly available financial information and its own trade to assess creditworthiness.
 
NOTE 27
HEDGE ACCOUNTING - OPERATIONS
       
                 
The hedging reserve comprises the effective portion of the cumulative net change in fair value of cash flow hedges related to hedged transactions that have not yet taken place. Movements in the hedging reserve are described in the table below.
 
 
2013
2012
NOK 1 000
Interest rate swaps
Currency futures
Commodity swaps
Total
Interest rate swaps
Currency futures
Commodity swaps
Total
Opening balance
- 27 989
- 8 482
640
- 35 830
- 23 938
11 050
- 19 011
- 31 899
Gain/loss on cash flow hedges
54 115
- 10 546
- 4 679
38 890
11 394
59 593
- 56 202
13 315
Income/expense recognised in the income statement
- 25 922
- 7 855
593
- 33 185
- 16 379
- 83 635
80 390
- 19 624
Currency translation
- 162
- 3 673
- 743
- 4 579
       
Deferred tax (note 14)
- 7 770
5 555
1 192
- 1 023
935
4 510
- 4 537
2 378
Effect of cash flow hedging in comprehensive income
20 423
- 12 847
- 2 894
4 683
- 4 051
- 19 532
19 651
- 3 931
Closing balance
- 7 728
- 25 002
- 2 997
- 35 726
- 27 989
- 8 482
640
- 35 830
Negative amounts represent a liability and a reduction in equity.
                 
Gain/loss transferred from other income and expenses in the income statement of the period is included in the following items in the income statement:
 
NOK 1 000
     
2013
2012
     
Revenue
       
- 727
     
Commodity costs
     
9 060
8 486
     
Other operating expenses
     
- 1 179
375
     
Net finance result
     
25 304
11 490
     
Total
     
33 185
19 624
     
Negative amounts represent income.
NOTE 28
LIQUIDITY RISK
     
           
Liquidity risk - operations
Liquidity risk concerning operations relates primarily to the risk that Elopak, Telecomputing, Mestergruppen, Servi and Swix will not be able to service their financial obligations as they fall due. This risk is managed by maintaining adequate cash reserves and overdraft opportunities in banking and credit facilities, as well as continuously monitoring future and actual cash flows.
           
The following tables provide an overview of the Group's contractual maturities of financial liabilities. The tables are compiled based on the earliest date the Group may be required to pay.
           
31 December 2013
         
NOK 1 000
 
Less than 1 year
1-3 years
3-5 years
Total
Finance institutions
 
525 844
324 049
3 192 937
4 042 830
Accounts payable
 
1 074 147
   
1 074 147
Related parties
   
 
 
 
Other non-current liabilities
   
256 120
45 084
301 204
Other current liabilities
 
935 883
   
935 883
Total 1)
 
2 535 874
580 169
3 238 021
6 354 064
           
31 -December 2012
         
NOK 1 000
 
Less than 1 year
1-3 years
3-5 years
Total
Finance institutions
 
362 440
2 840 370
2 442 733
5 645 543
Accounts payable
 
755 698
   
755 698
Related parties
   
11 498
32 731
44 229
Other non-current liabilities
   
164 550
141 530
306 080
Other current liabilities
 
1 106 157
   
1 106 157
Total 1)
 
2 224 295
3 016 418
2 616 994
7 857 707
1) The table does not include lease obligations, guarantees and off-balance sheet liabilities, cf. notes 25 and 29 respectively.
           
The table below shows the anticipated receipts and payments on derivatives:
 
31 December 2013
         
NOK 1 000
 
Less than 1 year
1-3 years
More than
3 years
Total
Net settlement
       
 
- Interest rate swaps
 
1 915
5 750
18 022
25 687
- Currency futures
 
- 35 969
- 19 892
- 3 437
- 59 298
- Commodity derivatives
 
 
   
 
Total
 
- 34 054
- 14 142
14 585
- 33 611
           
31 December 2012
         
NOK 1 000
 
Less than 1 year
1-3 years
More than
3 years
Total
Net settlement
       
 
- Interest rate swaps
 
51 446
   
51 446
- Currency futures
 
10 252
   
10 252
- Commodity derivatives
 
- 600
   
- 600
Total
 
61 098
 
 
61 098
           
Credit facilities
The table below shows a summary of used and unused credit facilities at 31 December:
           
 
2013
 
2012
 
Used
Unused
 
Used
Unused
Overdraft
         
-Secured
122 925
256 587
 
47 078
314 940
-Unsecured
163 744
526 438
 
54 982
440 696
Credit facilities
         
-Secured
2 300 529
7 716 123
 
1 604 440
1 567 090
- Unsecured
         
Factoring
         
- Secured
514 191
268 634
 
4 311
15 561
-Unsecured
 
 
 
391 113
416 599
Total secured
2 937 645
8 241 344
 
1 655 829
1 897 591
Total unsecured
163 744
526 438
 
446 095
857 295
NOTE 29
OPERATING AND FINANCE LEASES
       
The Group as lessor, operating leases
       
The Group leases fixtures and equipment under operating leases. Essentially, equipment is rented out to Elopak's customers who use them in their own production.
       
Specification of income on operating leases
 
2013
2012
Total variable leases recognised as income
 
101 495
90 229
Minimum leases (including fixed leases) recognised as income
 
3 933
 
Total variable leases recognised as income
 
105 428
90 229
       
At the balance sheet date, the Group has contracted the following future minimum leases:
 
2013
2012
Totally due next year
 
80 291
70 128
Totally due in 2-5 years
 
225 228
175 879
Totally due after 5 years
 
41 095
28 075
Total
 
346 614
274 082
The amounts have not been discounted.
       
The Group as lessor, finance leases
       
Specification of income from finance leases
 
2013
2012
Total variable leases recognised as income
 
6 019
 
Finance income from finance leasing contracts
   
1 476
Total
 
6 019
1 476
       
Gross investment compared to the present value of outstanding minimum leases
 
2013
2012
Gros receivables on leasing contracts
 
27 528
17 714
Finance income not yet earned
 
- 3 303
- 2 969
Net investment from finance leases (present value)
 
24 225
14 745
       
The Group as lessee, operating leases
       
Specification of expenses on operating leases
 
2013
2012
Total variable leases recognised as expenses
 
153 379
184 846
Minimum leases (including fixed leases) recognised as expense
 
151 328
47 979
Subleases recognised as cost reductions
 
- 934
- 899
Total leasing costs
 
303 773
231 926
       
Due for payment
 
2013
2012
Total costs next year
 
280 803
238 682
Total costs 2-5 years
 
887 725
736 636
Total costs after 5 years
 
426 201
478 246
Total
 
1 594 729
1 453 564
The amounts have not been discounted.
       
Distribution of the same leasing obligation on leasing objects
 
2013
2012
Buildings and land
 
1 308 512
751 031
Machines and installations
 
193 384
16 839
Fixtures, vehicles and equipment
 
92 833
685 694
Total leasing obligations related to operating lease commitments
 
1 594 729
1 453 564
       
The Group as lessee, finance leasing
       
Specification of leasing costs
 
2013
2012
Total variable leases recognised as expenses
 
8 922
7 263
Total leasing costs
 
8 922
7 263
       
Future minimum leases and corresponding present values, by due dates:
Minimum rent
Calculated interest
Present value
Total due in one year
6 410
305
6 105
Total due in year 2-5
4 471
266
4 205
Total due after 5 years
 
 
 
Total leasing obligations related to finance leasing
10 881
571
10 310
       
Net carrying value of leased assets, by asset class
 
2013
2012
Buildings and land
     
Machines and installations
   
3 362
Fixtures, vehicles and equipment
 
15 447
19 470
Total carrying value of leased assets
 
15 447
22 832
The fixed assets are also included in note 9.
NOTE 30
RELATED PARTIES
     
Associated companies and joint ventures
 
Transactions with associated companies and joint ventures are accounted for in note 12.
 
     
The Board and executives
 
The board members' rights and obligations are stated in the Articles of Association and Norwegian law. The Group has no significant contracts in which a board member has a substantial interest. Ownership in Ferd AS by board members is stated in note 22, and information on fees to board members and executives in note 6.
 
 
NOTE 31
EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE
 
             
Through the wholly-owned subsidiary FC Well Invest AS, Ferd increased its ownership in Interwell AS from 34 % to 58 % in January 2014. Interwell will be fully consolidated in Ferd's consolidated financial statements starting on 1 January 2014. The compensation for the transaction constituted MNOK 496.
         
             
In 2013, Interwell had a turnover of MNOK 762 and an EBITDA of MNOK 265.
         

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