The accounting policies set out below have been applied consistently to all periods accounted for in these consolidated financial statements and by all entities included in the consolidation.
Consolidation principles Capital interests
Grontmij directly or indirectly holds interests in other companies: subsidiaries, joint ventures and associates. With regard to subsidiaries, Grontmij has the power, directly or indirectly, to govern the financial and operational policies. In assessing the level of control, account is taken of the potential voting rights which may be exercised or converted. A joint venture is a co-operation agreement whereby the Group and one or more other parties undertake an economic activity in the form of an enterprise in respect of which they exercise joint control only. An associate is an entity in which the Group has significant influence on the financial and operating policies but not control, nor in respect of which control is exercised jointly: the other parties involved have the power, to jointly exercise control.
Scope of consolidation
The consolidation includes the financial data of Grontmij and its subsidiaries. The financial statements of subsidiaries are included in the consolidated financial statements as from the date on which they come under Grontmij’s control to the date on which control Grontmij’s is relinquished. Joint ventures and associates are not consolidated.
Method of consolidation
The financial statements of the subsidiaries are consolidated based on the integral method, whereby third party interests are accounted for separately.
Intra-group balances, intra-group transactions and any unrealised profits from intra-group transactions within the group are eliminated in the consolidation. Unrealised profits from transactions with associates and joint ventures are eliminated, to the extent of the Group’s interest in the entity concerned.
Unrealised losses are eliminated in the same way as unrealised profits, but only to the extent that there is no evidence of impairment.
Foreign currencies Foreign currency transactions
Transactions in foreign currencies are translates to the functional currencies at exchange rates at the dates of the transactions. The Group uses periodically fixed average exchange rates that approximate the exchange rates prevailing at the transaction dates adequately.
Monetary assets and liabilities
Monetary assets and liabilities denominated in foreign currency are translated at the exhange rate prevailing on the balance sheet date. The exchange differences arising are recognised in profit or loss.
Non-monetary assets and liabilities
Non-monetary assets and liabilities denominated in foreign currency which are stated at the historical cost price are translated at the exchange rate prevailing at the date of transaction. Non-monetary assets and liabilities in foreign currency recognised at their fair value are translated at the exchange rates that were applicable at the date on which the value was determined.
Operations of entities having a functional currency other then the euro
Assets and liabilities of such entities including fair value adjustments on consolidation are translated at the exchange rate prevailing at the balance sheet date. Income and expenses of such entities are translated at the exchange rate, prevailing at the date of translation. The Group uses periodically fixed average exchange rates which approximate the exchange rates on transaction dates effectively.
Financial instruments
Non-derivative financial instruments
Non-derivative financial instruments comprise loans and receivables, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value: non-derivative financial instruments not at fair value through profit or loss are recognised initially at fair value plus any directly attributable transaction costs.
Subsequent to initial recognition, loans and other non-derivative financial instruments are measured on the reporting date at amortised cost, which is detemined by use of the effective interest method. Derivative financial instruments
Where considered necessary, the Group uses derivative financial instruments to hedge its foreign currency and interest rate risk exposures.
Embedded derivates are separated from the host contract and accounted for separately if the economic characteristics and rules of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss.
Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss when incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.
Cash flow hedges
When a derivative financial instrument is designated as a cash flow hedge, the effective part of any gain or loss on the derivative financial instrument is recognised directly in equity. The ineffective part of any gain or loss is recognised immediately in the income statement. The associated cumulative gain or loss is removed from equity and recognised in the income statement in the same period or periods during which the hedged transaction affects the income statement.
When a derivative financial instrument or hedge relationship no longer meets the criteria for hedge accounting, expires or is sold, but the hedged transaction still is expected to occur, the cumulative unrealised gain or loss remains in equity. The cumulative gain or loss will be recognised in the income statement in accordance with the above policy when the transaction occurs.
If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss will be immediately recognised in the income statement.
Share capital
Grontmij’s share capital as at 31 December 2007 comprises common shares only, at a nominal value of € 0.25 per share. The share capital is classified as equity.
Impairment General
The carrying amount of the assets, with the exception of deferred tax assets, is reviewed on every balance sheet date to determine whether there is an indication that it is impaired. If such an indication is established, the fair value of the asset is estimated.
For goodwill and intangible assets that have indefinite lives or that are not yet available for use, the recovarable amount is estimated at each reporting date, irrespective of indications that they are impaired.
The recoverable amount of assets represents the greater of the recoverable amount less sale costs and the value in use. In determining the value in use, the present value of the estimated future cash flows is calculated on the basis of a discount factor before tax which reflects the current market estimates of the time value of money and the specific risk to the asset. An impairment loss is recognised once the carrying amount of an asset or a cash generating unit to which the asset pertains exceeds the recoverable amount. Impairment losses are recognised in the income statement.
Any cumulative loss in respect of an available-for-sale financial asset recognised previously in equity is transferred to profit or loss.
Reversal of impairment losses
Where applicable, assets are assessed for evidence that impairment losses recognised in previous years have lessened or do no longer exist. An impairment loss is in that case reversed only as far as the carrying amount of the asset on the reporting date does not exceed the carrying amount that would have been determined in the case no impairment loss was ever recognised
Impairment losses in respect of goodwill are never reversed. Intangible assets
Research and development
Expenditure in respect of research activities for the purpose of obtaining new knowledge of a scientific or technological nature is recognised in the income statement as an expense as incurred.
Expenditure in respect of development activities is capitalised and subsequently, at reporting date, measured at cost less accumulated amortisation and impairment losses.
The development costs are, however, capitalised only when it is likely that the future economic benefits from the asset will accrue to Grontmij and if the costs can be reliably determined.
Expenditure capitalised in such case comprise direct labour and indirect costs which are directly allocatable, as well as direct cost of material and third party expenses. Finance expenses related to the development are recognised in the income statement as an expense as incurred.
Trade names
Trade names concern the expected value of established brand names of acquired businesses at the date of the acquisition and are measured at cost, being the fair value at acquisition date, less accumulated amortisation and impairment losses. The fair value is based on the achieved positive recognition and standing for a good quality of work expressed at an appropriate arm’s length royalty rate, taking into account the brand specific sales and the economic lifetime of the brand name at the date of the acquisition. The determination of the fair value is based on reasonable assumptions and estimations of the economic situation during the lifetime of the asset. Customer relations
Customer relations concern the expected value of the sales attributable to customer relationships of acquired
Notes to the consolidated financial statements
Order backlogs
Order backlogs concern the remaining expected value of orders of acquired businesses at the date of
the acquisition, and are measured at cost, being the fair value at acquisition date, less accumulated amortisation and impairment losses. The fair value is based on the future economic benefits associated with the order backlog that are due to the Group. The determination of the fair value is based on reasonable assumptions and estimations of the economic situation during the lifetime of the asset.
Other intangible assets
The other intangible assets are stated at cost, less accumulated amortisation and impairment losses. Subsequent expenditure
Expenditure for intangible assets after initial recognition is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including internally generated goodwill and trade names, are recognised in the income statement as incurred.
Amortisation
Amortisation of intangible assets is recognised in the income statement on a straight-line basis over the estimated useful lives of the intangible assets. The estimated useful lives in years are as follows:
o development costs 3
o software 3-5
o other 3-5
The estimated useful life of trade names, customer relations and order backlogs is determined individually upon each acquisition and are dependent on expectations upon first time recognition.
Goodwill
Goodwill concerns the difference between the consideration for a business combination and the net fair value of acquired identifiable assets, liabilities and contingent liabilities.
Goodwill is stated at cost less accumulated impairment losses. An impairment loss is recognised when the recoverable amount of the cash generating unit of the asset to which the goodwill pertains is lower than the carrying amount. Negative goodwill arising on an acquisition is recognised in the income statement directly.
Property, plant and equipment General
Property, plant and equipment are measured at cost, less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset.
Property, plant and equipment which on or before 1 January 2004 were measured at fair value are measured on assumed cost, the revaluated value as per the date of the valuation concerned.
Property, plant and equipment under construction are stated at cost until construction is complete, at which time it is reclassified as land and buildings or plant and equipment or other property, plant and equipment. At the moment that the obligation arises in regard to the aftercare liabilities for landfill sites, a provision is recognised for the present value of the total amount of the future liability. At the moment that the obligation arises, an amount equal to the amount of the liability is capitalised as part of the cost of the asset.
Gains and losses on disposal of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount and are recognised as part of other operating income in profit or loss. Subsequent expenditure
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the concerning part will flow to the Group and its cost can be measured reliably. The carrying amount 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 incurred.
Financial leases
Leases in terms on which the Group assumes substantially all the risks and rewards of ownership are classified as financial leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses.
Depreciation
Land is not depreciated. The depreciation of landfill sites is systematically recorded in line with waste units disposed.
Depreciation of other property, plant and equipment is recognised in the income statement on a straight-line basis over the estimated useful lives.
The estimated useful lives in years are as follows:
o buildings 30-50
o plant and equipment 3-10
o other 3-15
In case an item of property, plant and equipment consists of parts with an inequal useful life, these are depreciated separately.
Equity accounted investees
The Group participates in co-operation with other parties in enterprises on a regular basis in order to share project related risks and in order to join knowledge and financing capabilities
This happens both through joint ventures (where control is excercised on a jointly basis only) and through associates (where the Group has significant influence on the financial and operating policies but not control, while the other parties involved have the power to jointly excercise control). All joint ventures and associates are measured based on the ‘equity’ method.
Joint ventures are recognised as such as from the date on which the Group excercises joint-control to the date on which joint-control is relinquished. From the moment the Group’s share in a joint venture is valued at nil as a result of accumulated losses, further losses are taken into account only when the Group is commited under a legal or constructive obligation to pay off the losses.
Investments in associates are recognised as such as from the date on which the Group has significant influence to the date on which such influence is relinquished. From the moment the Group’s share in an associate is valued at nil as a result of accumulated losses, further losses are taken into account only when the Group is committed under a legal or constructive obligation to pay off the losses.
Amounts due from and due to customers for contract work
Amounts due from customers from contract work concern amounts to be invoiced in respect of agreements negotiated for the construction of an asset. These are stated at cost plus profit recognised on the basis of the stage of completion to that date, less progress billings and, to the extent necessary, less a provision for foreseeable losses. The stage of completion is determined on the basis of the technical completeness of a project.
A credit balance is recognised as a liability towards the principal and taken up as a liability item in the balance sheet.
Income and expenditure are thus accounted for proportional to the stage of completion of a project at the balance sheet date.
Costs consist of direct costs and the directly attributable indirect costs. Project costs are capitalised from the moment the contract has been secured. Project costs incurred in the period prior to securing the contract are recognised directly as period expenses.
Amounts due from and due to customers for rendering services
Amounts due from costumers for rendering services relate to amounts to be invoiced in respect of agreements which do not concern the construction of an asset. Revenues from rendering services based on fixed-price contracts are recognised in profit or loss pro rata of the services rendered on the reporting date in proportion to the total of the contracted services. Revenues from rendering services based on cost plus contracts are recognised in profit or loss pro rata of the time spent and based on the contractual hourly rates. These are stated at cost plus the profit recorded to that date, less progress billings and, to the extent necessary, less a provision for foreseeable losses. Income and expenditure are accounted for proportional to the stage of completion of a project at the balance sheet date.
A credit balance is recognised as a liability towards the principal and taken up as a liability item in the balance sheet.
The costs consist of direct costs and the directly attributable indirect costs. Project costs are capitalised from the moment the contract has been secured. Project costs incurred in the period prior to securing the contract are recognised directly as period expenses.
Employee benefits Pension schemes
Grontmij has granted pension rights in the form of defined contribution plans and defined benefit plans. Defined contribution plans
A defined contribution plan is a plan relating to employee benefits after retirement for which the Group pays fixed contributions to the entity that administers the concerning plan, and for which no legal or constructive obligation exists to pay any further contributions.
Obligations for contributions to defined contribution pension plans are recognised as personnel expenses in profit or loss when they are due.
Defined benefit plans
Defined benefit plans concern all plans relating to employee benefits after retirement, other than defined contribution plans. The Group’s net obligation in respect of defined benefit pension plans is calculated seperately for each plan. The calculations are performed by qualified actuaries in accordance with the ‘projected unit credit’ method. For this calculation the amount of future benefits that employees have earned in return for their services in the current and prior periods are estimated. These benefits are discounted to determine their present value, and any unrecognised past service costs and the fair value of the plan assets are deducted. The discount rate used is the yield on the balance sheet date for quality corporate bonds whose maturity is approaching the terms of the Group’s liabilities. The fair value of the plans assets are subsequently deducted.