Arla Foods Annual Report 2020
Management Review
Our Strategy
Our Brands and Commercial Segments Our Responsibility Our Governance
Our Performance Review Our Consolidated Financial Statements
Our Consolidated Environmental, Social and Governance Data
Other areas
5.6 GENERAL ACCOUNTING POLICIES
Consolidated financial statements
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 require-
ments in the Danish Financial Statement Act for class C
large companies. 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 10 February 2021 and presented
for approval by the Board of Representatives on 25
February 2021.
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.
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 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 as 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 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 transacts 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 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 results for the year are translated into EUR using
the average monthly exchange rate if this does not
differ materially from the transaction date rate. Foreign
currency differences are recognised in other compre-
hensive 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 results for the year, along with any
gains or losses related to the divestment. Any
repayment of outstanding balance 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 implemented all new standards and
interpretations effective in the EU from 2020. IASB
issued a number of new or amended and revised
accounting standards and interpretations that have
not yet come into effect. Arla will adopt these new
standards when they become mandatory. No material
impact is expected from that.
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