82
83
Annual Financial Statements
ods that exceed twelve months from the Balance Sheet date, then they must be
discounted based on the yields of investment grade corporate or government
bonds.
In the case of an offer that is made to encourage voluntary redundancy, the valu-
ation of benefits for employment termination must be based on the number of
employees that are expected to accept the offer.
In case of an employment termination where there is inability to assess the num-
ber of employees to use such benefits, a disclosure for a contingent liability is
made but no accounting treatment is followed.
3.19 Grants
The Group recognizes Government Grants that cumulatively satisfy the following
criteria:
a) There is reasonable certainty that the company has complied or will comply to
the conditions of the grant and
b) it is probable that the amount of the grant will be received.
Government Grants are booked at fair value and are systematically recognized
as revenues according to the principle of matching the grants with the corre-
sponding costs that they are subsidizing.
Government Grants that relate to assets are included in long-term liabilities as
deferred income and are recognized systematically and rationally as revenues
over the useful life of the fixed asset.
3.20 Provisions
Provisions are recognized when the Group has present obligations (legal or
constructive) as a result of past events, their settlement through an outflow of
resources is probable and the exact amount of the obligation can be reliably
estimated. Provisions are reviewed during the date when each balance sheet is
compiled so that they may reflect the present value of the outflow that is expected
to be required for the settlement of the obligation. Contingent liabilities are not
recognized in the financial statements but are disclosed, except if the probability
that there will be an outflow of resources that embody economic benefits is very
small. Contingent claims are not recognized in the financial statements but are
disclosed provided that the inflow of economic benefits is probable.
3.21 Recognition of income and expenses
Income:
Income includes the fair value of goods and services sold, net of Value
Added Tax, discounts and returns. Intercompany revenue within the Group is
eliminated completely. The recognition of revenue is done as follows:
-
Construction Projects Contracts:
The income from the execution of con-
struction contracts is accounted for in the period the project is constructed,
based on its completion stage.
-
Sale of goods
: Sales of goods are recognized when the Group transfers goods
to customers, the goods are accepted by them and the collection of the resulting
claim is reasonably assured.
-
Provision of services
: Income from the provision of services is accounted
for in the period during which the services are rendered, based on the stage of
completion of the service in relation to the total services to be rendered.
- Income from assigned rights for use of tangible assets (Compensative
benefits):
The fair value of the assigned rights is recognized as deferred income
and are amortized through the income statement according to the completion of
the contracts for which these rights have been assigned.
-
Income Interest
: Interest income is recognized on a time proportion basis
using the effective interest rate. When there is impairment of assets, their book
value is reduced to their recoverable amount which is the present value of the
expected future cash flows discounted using the initial real interest rate. Interest
is then booked using the same interest rate calculated on the impaired (new
book) value.
-
Dividends
: Dividends are accounted for as rev-
enue when the right to receive payment is estab-
lished.
Expenses:
Expenses are recognized in the results
on an accrued basis. The payments made for op-
erating leases are transferred to the results as an
expense, during the time the lease is used. Interest
expenses are recognized on an accrued basis.
3.22 Leases
Group company as Lessee:
Leases of fixed as-
sets with which all the risks and benefits related with
ownership of an asset are transferred to the Group,
regardless of whether the title of ownership of the
asset is eventually transferred or not, are finance
leases.
These leases are capitalized at the inception of the
lease at the lower of the fair value of the asset and
the present value of the minimum lease payments.
Each lease payment is apportioned between the re-
duction of the liability and the finance charge so that
a fixed interest rate on the remaining financial liability
is achieved. The relevant liabilities from leases, net
of financial expenses, are reported as liabilities. The
part of the financial expense that relates to finance
leases is recognized in the income statement during
the term of the lease. Fixed assets acquired through
finance leases are depreciated over the shorter of
their useful life and the lease term.
Lease agreements where the lessor transfers the
right of use of an asset for an agreed period of time,
without transferring, however, the risks and rewards
of ownership of the fixed asset are classified as op-
erating leases. Payments made with respect to op-
erating leases (net of any incentives offered by the
lessor) are recognised in the income statement pro-
portionately throughout the term of the lease.
Group Company as lessor:
When fixed assets are
leased through financial leasing, the present value
of the lease is recognized as a receivable. The dif-
ference between the gross amount of the receivable
and its present value is registered as a deferred fi-
nancial income. The income from the lease is recog-
nized in the period’s results during the lease using
the net investment method, which represents a con-
stant periodic return.
Fixed assets that are leased through operating
leases are included in the balance sheet’s tangible
assets. They are depreciated during their expected
useful life on a basis consistent with similar self-
owned tangible assets. The income from the lease
(net of possible incentives given to the lessees) is
recognized using the constant method during the
period of the lease.
3.23 Construction contracts
Construction contracts refer to the construction of
assets or a group of affiliated assets specifically for
customers according to the terms provided for in the
relevant contracts and whose execution usually lasts
for a period of over one fiscal year.
The expenses that refer to the contract are recognized when occur.
In the case where the result of one construction contract may not by
reliably valuated, and especially in the case where the project is at a
premature state, then:
•
The income must be recognized only to the extent that the contrac-
tual cost may be recovered, and
•
The contractual cost must be recognized in the expenses of the
period in which it was undertaken.
Thus, for such contracts income is recognized in order for the profit
from the specific project to equal zero.
When the result of a construction contract can be valuated reliably, the
contract’s income and expenses are recognized during the contract’s
duration, respectively as income and expense.
The Group uses the “percentage of completion” method to define the
appropriate income and expense amount that will be recognized in a
specific period.
The completion stage is measured based on the contractual cost that
has been realized up to the balance sheet date compared to the total
estimated construction cost of each project.
When it is likely for the total contract cost to exceed the total income,
then the expected loss is directly recognized in the period’s results as
an expense.
For the calculation of the cost realized until the end of the period,
any expenses related to future activities regarding the contract are ex-
cluded and appear as a project under construction. The total cost that
was realized and the profit/loss that was recognized for each contract
is compared with the progressive invoices until the end of the period.
When the realized expenses plus the net profit (less the losses) that
have been recognized, exceed the progressive invoices, the differ-
ence appears as a receivable from construction contract customers
in the account “Customers and other receivables”. When the progres-
sive invoices exceed the realized expenses plus the net profit (less the
losses) that have been recognized, the balance appears as a liability
towards construction contract customers in the account “Suppliers
and other liabilities”.
3.24 Dividend distribution
The distribution of dividends to the shareholders of the parent com-
pany is recognized as a liability in the consolidated financial state-
ments at the date on which the distribution is approved by the General
Meeting of the shareholders.
3.25 Proforma figure “Operating Earnings before Fi-
nancial & Investment results, Tax, Depreciation &
Amortization” (Group EBITDA)
Pro forma figures (EBITDA, EBITDA margin, free cash flow, net debt)
are not governed by the International Financial Reporting Standards
(IFRS). Thus, these figures are calculated and presented by the Group
in a way that provides a more fair view of the financial performance
of its Business Sectors. The Group defines “Group EBITDA” as the
Operating Earnings before any interest income and expenses, invest-
ment results, depreciation, amortization and before the effects of any
special factors. “Group EBITDA” is an important indicator used by
Mytilineos Group to manage the Group’s operating activities and to
measure the performance of the individual segments.
The special factors that affect the Group’s net profit
/ (losses) and EBITDA are the following:
•
The Group’s share in the EBITDA of associates
when these are active in one of its reported Busi-
ness Segments.
•
The Group’s share on the profit from the con-
struction of fixed assets on account of subsidiaries
and associates when these are active in one of its
reported Business Segments.
It is noted that the Group financial statements, pre-
pared according to IAS 1 and IAS 28, include:
The Group’s profit realized in connection with the
construction of fixed assets on account of subsidi-
aries and associates, when these are active in one
of its reported Business Segments. Such profits are
deducted from the Group’s equity and fixed assets
and released in the Group accounts over the same
period as depreciation is charged. Consequently,
for the calculation of EBITDA (operational results
before depreciation), the Group does not eliminate
the profit from the construction of fixed assets as its
recovery through their use will effect only the profit
after depreciation.
The Group states that the calculation of “Group
EBITDA” may differ from the calculation method
used by other companies/groups. However, “Group
EBITDA” is calculated with consistency in each fi-
nancial reporting period and any other financial
analysis presented by the Group. Specifically finan-
cial results contain interest income/expense, while
investment results contain gains/loss of financial
assets at fair value through profit and loss, share of
results in associates companies and gains/losses
from the disposal of financial assets (such as sub-
sidiaries and associates).
Finally, the proforma figure “Group EBITDA”
should not be confused with the figure “Earnings
before income tax, financial results, depreciation
and amortization” calculated for the purposes of
6/448/11.10.2007 resolution of the Hellenic Capital
Committee, according to Circular No. 34, as the pur-
pose of the latter is not to define proforma figures
like EBITDA despite the familiar terminology used.
3.26 CO
2
emission Liability
CO
2
emissions are recognized according to the net
liability approach through which, the Group recog-
nizes liabilities from CO
2
emissions when the actual
emissions exceed the distributed emission rights
from E.U. The liability is measured at fair value to the
extent that the Group has the obligation of covering
the deficit through the market. Emission rights ac-
quired over the required quantities for covering the
deficit are recognized as intangible assets at cost.
3.27 Hedging Accounting
The Group uses Derivative financial instruments
such as Commodity Futures and Currency Forwards
in order to mitigate the risk related to its business
activities along with the risk related to the funding of
such activities.
