Annual Financial Report for the period from 1st of January to the 31st of December 2012
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3.8.2 Assumptions and estimations
The presentation of the value of specific assets and liabilities in the financial statements requires the use of
estimations that are based on assumptions relating to the values and conditions not known with certainty
during the compilation date of the financial statements. The Group continuously evaluates the estimations it
makes based on historical data, the research of specialized consultants, the trends and methods considered
appropriate for the estimation of specific conditions as well as estimations regarding how the assumptions
made may change in the future.
Assumptions and estimations are required for the presentation of:
• Possible reductions in goodwill
• Provisions for future payable income tax and deferred taxes.
• The fair value of derivatives and other financial instruments
• Provisions amounts
• Contingent receivables and liabilities
• Possible reductions in Goodwill
The Group test goodwill for impairment annually and whenever events or circumstances make it more likely
than not that an impairment may have occurred, such as a significant adverse change in the business climate
or a decision to sell or dispose of a reporting unit. Determining whether an impairment has occurred requires
valuation of the respective reporting unit, which we estimate using a discounted cash flow method. When avail-
able and as appropriate, we use comparative market multiples to corroborate discounted cash flow results. In
applying this methodology, we rely on a number of factors, including actual operating results, future business
plans, economic projections and market data.
If this analysis indicates goodwill s impaired, measuring the impairment requires a fair value estimate of each
identified tangible and intangible asset. In this case we supplement the cash flow approach discussed above
with independent appraisals, as appropriate.
We test other identified intangible assets with defined useful lives and subject to amortization by comparing the
carrying amount to the sum of undiscounted cash flows expected to be generated by the asset. We test intangi-
ble assets with indefinite lives annually for impairment using a fair value method such as discounted cash flows.
The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting
policy stated in Note 6. The recoverable amounts of cash-generating units have been determined based on
value-in-use calculations.
• Budget of construction contracts
The treatment for income and expenses of a construction contract, depends on whether the final result of the
contract can be reliably estimated. When the result of a construction contract can be estimated reliably then all
income and expenses related to the contract are recognized as such during the time period of the contract. The
Group uses the percentage of completion method to determine the appropriate amount of income and expense
to be recognized in each period. The percentage of completion is calculated as the contracted cost realized
over the total budgeted cost of construction for each project.
• Income Tax
Group and company is subject to income taxes in numerous jurisdictions. Significant estimates are required
in determining the provision for income taxes. There are many transactions and calculations for which the ul-
