ANNUAL REPORT 2021
LUNDBECK
ANNUAL REPORT 2021
E CONTENTS
CONSOLIDATED FINANCIAL STATEMENTS
NOTE 25
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25 SIGNIFICANT ACCOUNTING POLICIES
The Group has consistently applied the following accounting policies to all periods presented in these
consolidated financial statements, unless otherwise mentioned (see note 1.7 New standards and
amendments issued but not yet effective).
Basis of consolidation
The consolidated financial statements comprise the Parent company H. Lundbeck A/S and entities controlled
by the Parent company.
Translation of foreign currency
On initial recognition, transactions denominated in foreign currencies are translated at standard rates which
approximate the exchange rates at the transaction date. Exchange differences arising between the exchange
rates at the transaction date and the exchange rates at the date of payment are recognized in profit or loss
under financial income or financial expenses.
Receivables, payables and other monetary items denominated in foreign currencies that have not been
settled at the balance sheet date are translated at the exchange rates at the balance sheet date. The
differences between the exchange rates at the balance sheet date and the rates at the time of recognition or
settlement are recognized in profit or loss under financial income or financial expenses.
On recognition of foreign subsidiaries having a functional currency different from that used by the Parent
company, items in the profit or loss are translated at monthly average exchange rates, and non-monetary
and monetary balance sheet items are translated at the exchange rates at the balance sheet date. Exchange
differences arising when translating the profit or loss and the balance sheet of foreign subsidiaries are
recognized in other comprehensive income.
Exchange gains/losses on translation of receivables from and payables to subsidiaries that are considered
part of the Parent company's overall net investment in subsidiaries are recognized in other comprehensive
income.
Exchange gains/losses on that part of the bank debt in foreign currency which is used for hedging of the net
investments in subsidiaries and which provides an effective hedging of the exchange gains/losses of the net
investments are recognized in other comprehensive income
Statement of cash flows
The consolidated statement of cash flows is presented in accordance with the indirect method and shows
the composition of cash flows, divided into operating, investing and financing activities, and cash and bank
balances at the beginning and end of the year.
Cash comprises cash and bank balances.
Cash flows denominated in foreign currencies, including cash flows in foreign subsidiaries, are translated at
the average exchange rates for the year as they approximate the actual exchange rates at the date of
payment. Cash and bank balances at year-end are translated at the exchange rates at the balance sheet
date, and the effect of exchange gains/losses on cash and bank balances is shown as a separate line item
in the statement of cash flows.
Financial instruments
Forward exchange contracts and other derivatives are initially recognized in the balance sheet at fair value
on the contract date and subsequently remeasured at fair value at the balance sheet date. The fair value of
derivatives is determined by applying recognized measurement techniques, whereby assumptions are based
on the market conditions prevailing at the balance sheet date. Positive and negative fair values are included
in other receivables and other payables, respectively.
Changes in the fair value of derivatives classified as hedging instruments and meeting the criteria for hedge
accounting are recognized in other comprehensive income. On recognition of hedged items, income and
expenses relating to such hedging transactions are transferred from other comprehensive income and
recognized in the same line item as the hedged item.
Changes in the fair value of derivatives not qualifying for hedge accounting are recognized in the statement
of profit or loss under financial income or financial expenses as they arise.
Securities, equity investments recognized in other financial assets, derivatives and contingent consideration
measured at fair value are classified according to the fair value hierarchy as belonging to levels 1-3
depending on the valuation method applied.View entire presentation