Note 1

Information about the Group

HAVFISK is a company domiciled in Norway, with its head office in Ålesund. he 2015 consolidated financial statements include the parent company HAVFISK and its subsidiaries.

Basis for preparation and accounting standards not applied

Basis for measurement

These consolidated financial statements have been prepared on the basis of historical cost, with the following exceptions:

Functional currency and presentation currency

The consolidated financial statements are presented in NOK million. The Norwegian krone (NOK) is the functional currency of the parent company. Numbers and percentages may not always correspond to totals owing to amounts being rounded up or down.

Estimates and assessments

Preparation of annual financial statements in conformity with the IFRS includes assessments, estimates and assumptions that affect the application of the accounting principles applied, as well as the reported amounts for assets, liabilities, revenues and expenses. The actual amounts may deviate from estimated amounts. Estimates and underlying assumptions are reviewed and assessed on an on-going basis. Estimates and associated assumptions are based on historical experience and various other factors considered to be reasonable under the circumstances. Changes to accounting estimates are recognised in the period in which the estimates are revised and in any future periods that are affected.

(a) Intangible assets

In accordance with applicable accounting principles, the group tests annually to determine whether there is any need for impairment of intangible assets (licences). The estimated recoverable amount is determined on the basis of the present value of budgeted cash flows for the cash-generating unit. Such calculations require the use of estimates, and that these are consistent with the market valuation of the group. See note 11.

(b) Taxes

The group consists entirely of companies that pay tax in Norway. The tax rate for 2015 is 27%, but will be reduced to 25% with effect from 2016. This is the tax rate that is used for calculating future tax liabilities on the balance sheet. See note 8.

(c) Pension liabilities

The present value of pension liabilities depends on a number of factors determined on an actuarial basis using a number of assumptions. The assumptions used in determining net pension costs include a discount rate. Any changes in these assumptions will affect the calculated pension liabilities. The group determines the discount rate at the end of each year. This is the interest rate to be used to determine the present value of estimated future cash flows needed to fulfil the pension liabilities. In determining the discount rate, the group takes as its basis the interest rates on bonds with a high credit rating in the currency in which the benefits are payable and with terms to maturity that approximately equate to the pension liabilities. This and other key assumptions relating to pension liabilities are stated in Note 23.

(d) Financial instruments

The group is exposed to the following risks resulting from its use of financial instruments:

(e) Contingent liabilities

Provisions have been made to cover expected losses resulting from disputes in so far as negative outcomes are likely and reliable estimates can be made. However, the final outcome of these cases will always be subject to uncertainties and resulting liabilities may exceed recognised provisions. See note 27.

New and amended accounting standards

IFRS 13 Fair Value Measurement, the revised IAS 19 Employee Benefits and the revised IAS 1 IAS 1 Presentation of Financial Statements have been implemented with effect from 1 January 2013.

Accounting principles and interpretations issued but not applied

The new revenue recognition standard, IFRS 15, comes into force on 01 January 2018. Based on preliminary analysis, the new standard will not lead to any significant changes in the group’s revenue recognition principles, but may lead to a requirement for new note information.

Accounting principles

The accounting principles presented below have been applied consistently for all periods and companies presented in the consolidated financial statements. In the case of significant changes, comparative figures have been reclassified in accordance with this year's presentation. In addition, comparative figures for the income statement have been restated so that discontinued operations are presented as if they had been discontinued at the start of the comparative period.

Consolidated financial statements and consolidation principles

Subsidiaries

Subsidiaries are entities in which HAVFISK controls the company's operating and financial policies. Generally, the group owns, directly or indirectly, more than 50 per cent of the voting rights of such companies. Potential voting rights that may be exercised are considered when assessing whether an entity is controlled. Subsidiaries are recognised in the consolidated financial statements from the day control is achieved until control ceases. Wherever necessary, subsidiaries' principles for preparing financial statement are adjusted to ensure compatibility with the group's accounting principles.

Minority interest

Minority interests have been disclosed separately from liabilities and equity assigned to the owners of the parent company in the balance sheet, and are recorded as a separate item in the income statement. Takeovers of minority interests are recognised as transactions with owners in their capacity as owners, which means that no goodwill or gains or losses arise as a result of these transactions.

EBITDA

HAVFISK defines EBITDA as operating profit before depreciation, amortisation and non-recurring operating items.

Non-recurring operating items

Non-recurring operating items include writedowns of goodwill, significant write-downs and reversals of write-downs on property, plant and equipment, significant losses and gains on the sale of operating assets, restructuring costs and other material items not deemed to be of a regularly recurring nature. HAVFISK had no special operational items in 2014 or 2015.

Elimination of transactions during consolidation

Internal outstanding accounts and transactions within the group, as well as unrealised income and expenses from internal transactions, are eliminated in the consolidated financial statements. Unrealised gains from transactions with companies recognised using the equity method are eliminated against investment corresponding to the group's ownership share. Unrealised losses are eliminated in the same way, but only to the extent that no impairment has been demonstrated.

Foreign currency translations and transactions

Functional currency

Initial recording of items included in the financial statements of each group subsidiary is undertaken in its functional currency, i.e., the currency that best reflects the economic situation and environment relevant to that subsidiary. The consolidated financial statements are presented in Norwegian kroner (NOK), which is the functional currency of the parent company. All subsidiaries of HAVFISK present their accounts in Norwegian kroner.

Related party transactions

All transactions, agreements and business dealings with related parties are conducted under normal market terms.

Financial instruments

Non-derivative financial instruments

The group initially posts loans, receivables and contributions at the time of acquisition. All other financial assets (including assets allocated at fair value through profit and loss) are initially recognised at the time of the agreement, when the group becomes a party to the instrument's contractual terms. The group derecognises a financial asset when the contractual rights to the cash flow from the asset expire, or when the group transfers these contractual rights in a transaction where practically all risk and return on ownership of the financial asset are transferred. All rights and obligations created or retained in this type of transfer are accounted for separately as assets or liabilities. Financial assets and liabilities are offset if the group has a legal right to offset these amounts and intends either to settle them on a net basis or to realise the asset and settle the liability in one go. When amounts are offset, they are presented on a net basis in the balance sheet. The group has the following non-derivative financial assets: financial assets at fair value through profit and loss, loans and receivables and financial assets available for sale. The group has no financial assets held to maturity. Principles used in accounting for financial income and expenses are described in a separate paragraph.

Financial assets at fair value through profit and loss

A financial instrument is classified at fair value through profit and loss if it is designated as such at initial recognition or held for trading. Financial instruments are allocated at fair value through profit and loss if the asset is managed, and purchase and sale decisions related to it are made on the basis of fair value. After initial recognition, transaction costs attributable to the asset are recognised in the income statement when they are incurred. A financial instrument is valued at fair value, and any changes in value are recognised in the income statement.

Loans and receivables

Loans and receivables are financial assets involving fixed payments or payments that can be fixed and are not listed in an active market. Loans and receivables are initially recognised at fair value under directly derivative transaction costs. After this, loans and receivables are valued at amortised cost using the effective interest rate method, minus any losses in the event of impairment. Loans and receivables consist of customer receivables and other receivables. Cash amounts and bank payments, including payments on special terms due within the next three months, represent cash and cash equivalents.

Investments held to maturity

The group had no financial assets held to maturity as at the end of the year. Where the group has both the intention and ability to hold bonds to maturity, they are classified as held to maturity. Investments held to maturity are measured at their amortised cost using the effective interest method, minus any impairment losses

Financial assets available for sale

Financial assets available for sale are non-derivative financial assets classified as available for sale and which are not classified under any other category. The group's investments in equity instruments and certain debt instruments are classified as financial assets available for sale. After initial recognition, they are measured at fair value. Changes to the fair value are recognised in other income and expenses under comprehensive income and are presented as fair value reserve under equity. However, this does not apply to losses in the event of impairment (see separate section). Once an investment has been de-recognised, the accumulated gain or loss is transferred from other income and expenses to profit and loss.

Non-derivative financial liabilities

The group initially recognises bonded debt and unprioritised obligations at the time they are issued. All other financial obligations (including obligations allocated at fair value through profit and loss) are initially recognised on the contract date, when the group becomes a party to the contractual terms of the instrument. The group derecognises a financial obligation when the contractual terms have been fulfilled, cancelled or expired.

Financial derivatives, including hedge accounting

The group uses financial derivative instruments to hedge its exposure to interest rate and bunkering risks. Derivatives are initially recognised at fair value. Attributable transaction costs are recognised in the income statement as they are incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below. When hedging is established, the relationship between the hedging instrument(s) and the hedging object(s) is formally identified and documented. Documentation includes the company's goals and strategy for risk management in undertaking this hedging, and a description of how the company will evaluate its effectiveness. When entering into the hedge and on an ongoing basis for the periods for which the hedge is identified, the group assesses whether the hedging instrument is expected to be particularly effective in terms of achieving equalising changes in the fair value or cash flow from the
‎ relevant hedged objects. The actual effect of hedging is assessed on an on-going basis for the periods for which hedge accounting has been identified, up to a range of 80-125 per cent. When hedging cash flow for anticipated transactions, the anticipated transaction that is the hedge's contra entry must be highly probable, and have exposure to variations in cash flows that may eventually affect the result.

Cash flow hedges

Changes in the fair value of a derivative allocated as a hedging instrument in a cash flow hedge are recognised under other income and expenses and presented in the exchange rate hedging reserve as part of the equity. Amounts included in other income and expenses are transferred to the income statement for the period in which the hedged object affects the result. Upon transfer to the income statement, the same line in the comprehensive income is used for the hedged object and the hedging instrument. Ineffective hedging is recognised directly in the income statement. When a hedging instrument no longer meets the criteria for hedge accounting, expires, or is sold, terminated or exercised, or when it is no longer allocated for hedging, hedge accounting is terminated. Any cumulative gain or loss previously recognised under other income and expenses and presented in the hedging reserve remains there until the expected transaction affects the result. If the hedged object is a non-financial asset recognised in the balance sheet, the amount recognised under other income and expenses is transferred to the book value of the asset upon recognition. When hedging expected transactions that are no longer expected to occur, the amount recognised under other income and expenses is transferred to the income statement. In other cases, the amount recognised under other income and expenses is transferred to the income statement in the same period that the hedged item affects the result.

Fair value hedges

Changes in the fair value of derivative hedging instruments that have been allocated as fair value hedging are recognised in the income statement. The hedged object is also assessed at fair value with regard to the risk being hedged. Gains or losses that can be attributed to the hedged risk are recognised in the income statement and adjust the book value of the hedged object.

Economic hedges - derivatives not included in hedge accounting

These derivatives are valued at fair value and all changes in value are recognised in the income statement.

Share capital

Ordinary shares

Ordinary shares are classified as equity. Costs directly attributable to the issue of ordinary shares or share options are recognised as a deduction from equity, net of any tax effects.

Purchase of treasury shares

When share capital that was recognised as equity is repurchased, the compensation, including directly attributable costs, is recognised as a reduction in equity, net of any tax. Repurchased shares are classified as treasury shares and are presented separately as a deduction from total equity. When treasury shares are sold or reissued, the amount received is recognised as an increase in equity, and any resulting gain or loss on the transaction is transferred to/from retained earnings.

Vessels, property, plant and equipment

Recognition and measurement

The acquisition cost for a unit of property, plant and equipment is recognised as an asset if it is probable that future financial benefits associated with the asset will accrue to the enterprise, and that the acquisition cost for the asset can be reliably measured. Property, plant and equipment are valued at cost, minus cumulative depreciation and cumulative impairments. Cost includes expenses directly attributable to the purchase of the asset. Borrowing costs associated with loans to finance the construction of property, plant and equipment are capitalised over the period necessary to complete an asset and prepare it for its intended use. Other borrowing costs are expensed. When material parts of an item of property, plant and equipment have different useful lives, they are recognised as separate items. Gains or losses from the sale of property, plant and equipment are valued as the difference between the sale proceeds and book value. The resulting figure is included in the operating result before depreciation and amortisation. If the amount is material and is not deemed to be of a recurring nature, it is presented under non-recurring operating items. Assets that will be disposed of, which are classified as held for sale, are reported at the lower of the book value and the fair value less costs to sell.

Subsequent costs

The cost of replacing part of an item of property, plant and equipment is included in the book value of the item if it is probable that the future economic benefits in the part will accrue to the group and its cost can be measured reliably. The book value of the replaced part is derecognised. The costs of day-to-day maintenance of property, plant and equipment are recognised in the income statement as they are incurred.

Depreciation

Vessels, property, plant and equipment are depreciated on a straight line basis for each component over its estimated useful lifetime. Estimated useful lives for the current and comparative periods are as follows:

Intangible assets

Goodwill

As at 31/12/2015, HAVFISK has no goodwill on the balance sheet.

Other intangible assets – Fishing licences and other rights

Fishing licences and other rights acquired are stated in the balance sheet at cost minus any accumulated amortisation and impairment losses. Fishing rights consist of basic quotas with no time limit and structural quotas with a time limit of 20 or 25 years. The structural quotas have a predetermined useful lifetime and are depreciated over this period. Basic quotas have an indefinite useful lifetime and are not depreciated; they are however tested for loss of value annually.

Depreciation of licences

Fishing licences in the form of structural quotas are depreciated over the structural period. Basic quotas are not depreciated; see note 11. Estimated useful lives for the current and comparative periods are as follows:

Leases (as lessee)

HAVFISK has no lease agreements that are classified as financial lease agreements.

Impairment

Financial assets

Financial assets are reviewed at each balance sheet date to determine whether objective indications of impairment exist. A financial asset is regarded as subject to impairment if objective indications exist that one or more events have had a negative effect on estimated future cash flows for the asset, and this can be reliably measured.

Non-financial assets

The book value of non-financial assets other than inventories and deferred tax assets is reviewed at each balance sheet date to determine whether indications of impairment exist. If such indications exist, the asset's recoverable amount is estimated. For intangible assets that have indefinite useful lives or that are not yet available for use, annual testing for loss of value is performed.

Payments and benefits to employees

Payroll and pensions

Short term payments to employees, such as payroll, are valued on an undiscounted basis and recognised as costs as they are incurred.

Provisions

A provision is recognised when the group has a present legal or constructive obligation as a result of a past event, where it is probable that payments or the transfer of other assets will be required to settle the obligation and the obligation can be reliably measured. Provisions are determined as the present value of expected future cash flows, discounted using a market-based pre-tax discount rate. The interest rate applied reflects the time value of money and the risks specific to the liability.

Principles for revenue recognition

Revenue is recognised only if it is probable that future economic benefits will flow to HAVFISK, and that these benefits can be measured reliably. Revenue includes gross inflows of economic benefits that HAVFISK receives for its own account.

Sale of goods

Operating revenues for the sale of goods are included when the company has transferred the significant risks and benefits of ownership to the buyer, the income amount can be reliably measured, it is probably that the financial benefits connected with the transaction will fall to the company and the expenses that have accrued or will accrue in connection with the transaction can be reliably measured.

Leases (as lessor)

Lease agreements are classified as financial or operational in accordance with the agreement's real content at the time of entering into the contract. Lease agreements are classified as financial if all risks and benefits connected with ownership are substantially transferred to the landlord. Other lease agreements are classified as operational.

Expenses

Financial income and expenses

Financial income comprises interest income on financial investments (including financial assets classified as available for sale), dividend income, gains on the disposal of financial assets available for sale, changes in the fair value of financial assets at fair value through profit and loss, and gains on hedging instruments recognised in the income statement. Interest income is recognised using the effective interest rate method.

Tax expense

The tax expense comprises current and deferred tax. Income tax expense is recognised in the income statement with the exception of items recognised directly in equity, which are recognised in equity.

Dividends

Dividends are recorded in the financial statements in the period in which they are approved by the group's shareholders.

Earnings per share

Calculation of earnings per share is based on the result attributable to ordinary shares using the weighted average number of shares outstanding during the reporting period, after deduction of the average number of treasury shares held over the period.

Comparative figures

When necessary, comparative figures have been adjusted to conform with changes in presentation in the current year.

Segment reporting

IFRS 8 Operating Segments identifies segments based on the group's internal management and reporting structure. The company's top-level decision-maker, who is responsible for allocating resources to and assessing earnings in the operating segments, is defined as Group Management and the Board of Directors. Activities in the group were previously divided into five main areas: harvest, processing Norway, processing Denmark, processing France and eliminations. As a consequence of the decision to distribute Norway Seafoods to the shareholders in Aker Seafoods (now Havfisk) in 2011, four of the five segments were separated out from the group. After the distribution, HAVFISK only reports one segment, which is harvest.

Determination of fair value

Accounting principles and note information require fair value to be determined for both financial and non-financial assets and liabilities. Fair values are determined for measurement and/or disclosure purposes on the basis of the methods described below. When applicable, further information on the assumptions made in determining fair values is disclosed in the notes on the respective asset or liability.

Vessels, property, plant and equipment

In a business combination, property, plant and equipment are recognised at market value. The market value of property is the estimated selling price between two independent parties in an arm's-length transaction. The market value of non-current assets and of fixtures and fittings is based on market prices for similar items.

Intangible assets

The fair value of patents and trademarks acquired in a business combination is based on the estimated discounted royalty payments that would have been paid if the group had not had control of the patent or brand name. The fair value of other intangible assets is based on the discounted projected cash flow from usage or any sale of the assets.

Inventories

The fair value of inventories acquired in a business combination is determined on the basis of their estimated selling price in the ordinary course of business, less the costs of completion and sale, with the addition of a profit margin based on the effort required to complete and sell the inventories.

Investments in shares and bonds

Listed securities

The fair value of listed securities is defined as the listed price (most recent purchase price) on the balance sheet date for liquid investments.

Unlisted securities

Several valuation methods are used to measure the fair value of unlisted investments. When an arm's-length transaction has recently occurred for the relevant security, the value is based on the transaction price. If no arm's-length transaction has recently occurred, the company's value is inferred via a relative valuation of comparable listed companies, adjusted for individual properties such as differences in size and selection. Another method is to discount the estimated future cash flows to the current value using a market-based pre-tax discount rate. Valuation methods other than those described above are also used in cases where these better reflect the fair value of an unlisted investment.

Trade and other receivables

The fair value of accounts receivable and other receivables, other than construction work in progress, is estimated at the present value of future cash flows, discounted at the market rate of interest at the balance sheet date.

Derivatives

Forward exchange contracts are valued at fair value in relation to the observed forward rate for contracts with the equivalent term to maturity. The fair value of interest rate swaps is the present value of future cash flows based on observed market rates on the balance sheet date, including accrued interest. Fixed price contracts for bunker oil are measured at market price on the balance sheet date in relation to the price in the derivative, discounted from the maturity date of the derivative to the balance sheet date.

Non-derivative financial liabilities

Fair value is determined for disclosure purposes. Fair value for liquid, listed liabilities is based on market rates, while other liabilities are calculated in accordance with the present value of future cash flows for interest and deductions, discounted at the market rate at the balance sheet date. For convertible bonds, the conversion right and the loan are separated, and the market rate of interest applicable to similar liabilities with no conversion option is applied to the loan. For finance leases, the market rate of interest is based on similar leases.

Financial risk management

Asset management

The board aims to construct a strong capital base in order to retain the confidence of investors, creditors and the market, and to develop the business. The return on capital is monitored by the Board in the same way as assessment of dividends.