IAS 23 'Borrowing costs'

Capitalisation Of Borrowing Costs

This report examines the extent to which companies follow disclosure requirements when capitalising interest costs.

Vestas Wind Systems A/S Period End 31 December 2010

Submitted by Alisdair on Wed, 2011-03-30 06:49

Change in revenue recognition policy significantly reduces prior year profit and equity
Danish wind turbine manufacturer Vestas Wind Systems changes its policies to delay the timing of recognising revenue from supply-and-installation projects and to record warranty provisions at an earlier time and the resultant restatements of prior year comparatives reduce pre-tax profit by 75% and equity by 24%.

Restructuring costs reduce profit by 40%
Danish wind turbine manufacturer Vestas Wind Systems records €158 million costs on a restructuring, mainly relating to impairments and staff costs, and reports them as a separate line item titled “one-off costs”.

Associated British Foods plc Period End 18 September 2010

Gain on change in pension inflation index treated as change of assumption
UK food producer Associated British Foods recognises in other comprehensive income £28 million gain on moving from Retail Prices Index (RPI) to Consumer Price Index (CPI) for pension inflation on deferred benefits which almost halves the net deficit in its UK pension scheme.

Severn Trent plc Period End 31 March 2010

Submitted by Company Reporting on Fri, 2010-08-13 10:44

Several prior year errors corrected
UK utility company Severn Trent corrects prior year errors in its calculation of fair values of its borrowings and disclosure of movements in equity.

BT Group plc Period End 31 March 2010

Third party concerns revealed, as pensions deficit drives company into negative equity
UK telecoms company BT’s pensions deficit before deferred tax has increased to £7.9 billion in the year, as the company publishes additional detail on the calculation of liabilities and notes the “substantial” concerns of the Pensions Regulator as it moves into a £2.6 billion net liabilities position.

Non-executives included in key management personnel in correction of error
UK telecoms company BT restates its accounts to include its Chairman and non-executive directors in its disclosures on key management personnel, increasing comparative salaries and short-term benefits of these personnel by £1.6 million, or 23.5%, to £8.4 million.

voestalpine AG Period End 31 March 2010

Disclosure of contingent liability linked to factoring indicates previous compliance failure
Austrian steel manufacturer voestalpine discloses a contingent liability arising from risks retained in relation to trade receivables sold through factoring arrangements which indicates prior year compliance failure.

Casino, Guichard-Perrachon SA Period End 31 December 2009

Recognition of gain on dividend in specie increases profit by 20.2%
French retailer Casino, Guichard-Perrachon distributes shares in a subsidiary without losing control and recognises a €139 million gain in the income statement that increases pre-tax profit by 20.2%, noting that impending revisions to IFRS will not permit the current treatment.

Gap emerges in IFRS over accounting treatment of new French tax regime
French retailer Casino, Guichard-Perrachon discloses that it intends to account for elements of a new tax based on value added under IAS 12 “Income taxes” with effects on the income statement and deferred tax, as guidance by the French Accounting Standards Authority permits varying treatments.

Swedbank AB Period End 31 December 2009

Large restatement of liquidity disclosures lacks explanation
Swedish bank Swedbank changes the maturities of SEK1.3 trillion comparative loans to the public, leading to a more than fourfold increase in comparative financial assets with maturities over ten years, but offers no explanation whilst misleadingly describing the carrying amounts of financial liabilities as “undiscounted cash flows”.

Holmen AB Period End 31 December 2009

Liquidity disclosures significantly at odds with IFRS
Swedish paper manufacturer Holmen discloses explicitly that it includes only carrying amounts and not undiscounted cash flows in its maturity analysis of SEK5.8 billion financial liabilities, in a presentation that differs from that of other companies and conflicts with IFRS.

Wärtsilä Corporation Period End 31 December 2009

Submitted by Company Reporting on Wed, 2010-03-03 00:00

Significant restructuring disclosed outside financial statements
Finnish engineering company Wärtsilä discloses a significant reduction of capacity, that it expects to lead to €140 million non-recurring costs equal to 25% of current year profit but, contrary to IFRS requirements, locates the principal disclosure outside the financial statements and notes.

State of order book included in segmental disclosures
Finnish engineering company Wärtsilä discloses information by three business areas, including significant declines of up to 83% in new orders, whilst drawing attention to limitations of the information.

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