Arla Foods Consolidated Annual Report 2021
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Arla Foods Consolidated Annual Report 2021 / Consolidated Financial Statements / Notes
Other areas
5.7 GENERAL ACCOUNTING POLICIES
Contents
III
Basis for preparation
The consolidated financial statements included in
this annual report are prepared in accordance with
International Financial Reporting Standards (IFRS),
as adopted by the EU, and additional disclosure
requirements in the Danish Financial Statements
Act for large companies in class C. Arla is not an
EU public interest entity as the group has no debt
instruments traded on a regulated EU market place.
The consolidated financial statements were authorised
for issue by the company's Board of Directors on
9 February 2022 and presented for approval by the
Board of Representatives on 23 February 2022.
The functional currency of the parent company is DKK.
The presentation currency of the parent company and
of the group is EUR.
These financial statements are prepared in million EUR
with roundings.
Consolidated financial statements
The consolidated financial statements are prepared
as a compilation of the parent company's and the
individual subsidiaries' financial statements, in line with
the group's accounting policies. Revenue, costs, assets
and liabilities, along with items included in the equity
of subsidiaries, are aggregated and presented on a line-
by-line basis. Intra-group shareholdings, balances and
transactions as well as unrealised income and expenses
arising from intra-group transactions are eliminated.
The consolidated financial statements comprise Arla
Foods amba (parent company) and the subsidiaries in
which the parent company directly or indirectly holds
more than 50 per cent of the voting rights, or otherwise
maintains control to obtain benefits from its activities.
Entities in which the group exercises joint control
through a contractual arrangement are considered to
be joint ventures. Entities in which the group exercises a
significant but not a controlling influence, are considered
associates. A significant influence is typically obtained
by holding or having at the group's disposal, directly or
indirectly, more than 20 per cent, but less than 50 per
cent, of the voting rights in an entity.
Unrealised gains arising from transactions with joint
ventures and associates, i.e. profits from sales to joint
ventures or associates and whereby the customer pays
with funds partly owned by the group, are eliminated
against the carrying amount of the investment in
proportion to the group's interest in the company.
Unrealised losses are eliminated in the same manner,
but only to the extent that there is no evidence of
impairment.
The consolidated financial statements are prepared on
a historical cost basis, except for certain items with
alternative measurement bases, which are identified
in these accounting policies. Some reclassifications
have been carried out compared to previously. These,
however, have no impact on the net profit or loss or
the equity.
Translation of transactions and
monetary items in foreign currencies
For each reporting entity in the group, a functional
currency is determined, being the currency used in
the primary economic environment where the entity
operates. Where a reporting entity has transactions in
a foreign currency, it will record the transaction in its
functional currency using the transaction date rate.
Monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency
using the exchange rate applicable at the reporting
date. Exchange rate differences are recognised in the
income statement under financial items. Non-monetary
items, for example property, plant and equipment,
which are measured based on historical cost in a foreign
currency, are translated into the functional currency
upon initial recognition.
Translation of foreign operations
The assets and liabilities of consolidated entities,
including the share of net assets and goodwill of joint
ventures and associates with a functional currency
other than EUR, are translated into EUR using the
year-end exchange rate. The revenue, costs and share
of the net profit or loss for the year are translated
into EUR using the average monthly exchange rate
if this does not differ materially from the transaction
date rate. Exchange rate differences are recognised in
other comprehensive income and accumulated in the
translation reserve.
On partial divestment of associates and joint ventures,
the relevant proportional amount of the cumulative
foreign currency translation adjustment reserve is
transferred to the net profit or loss for the year, along
with any gains or losses related to the divestment. Any
repayment of outstanding balances considered part
of the net investment is not in itself considered to be a
partial divestment of the subsidiary.
Adoption of new or amended IFRS
The group has implemented all new standards and
interpretations effective in the EU from 2021.
Future implementations
The IASB has issued a number of new or amended
and revised accounting standards and interpretations
which are not yet applicable. Arla will adopt these new
standards when they become mandatory. No material
impact is expected from that.View entire presentation