2. NORMATIVA ESPECÍFICA
1.4. La responsabilidad patrimonial de la administración
The financial statements for Yara International ASA have been prepared in accor dance with the rules of the Norwegian Accounting Act and generally accepted accounting practice in Norway (NGAAP). Financial statement preparation requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses as well as disclosures of con tingencies. Actual results may differ from estimates.
Yara International ASA was established on 10 November 2003, for the purpose of acting as the transferee company in the demerger of Hydro Agri from Norsk Hydro. Until the completion of the de-merger, there were no subsidiaries or operational activity in Yara International ASA.
For information about risk management in Yara International ASA see note 26 to the consolidated financial statements.
Yara International ASA provides financing to most of the subsidiary companies in Nor way as well as abroad. The information given in note 23 to the consolidated financial statements on payments on long-term debt also applies to Yara International ASA. The accompanying notes are an integral part of the financial statements. FOREIGN CURRENCY TRANSACTIONS
Realized and unrealized gains and losses on transactions, assets and liabilities denominated in a currency other than the functional currency of Yara International ASA that do not qualify for hedge accounting treatment, are included in net income. REVENUE
Sale of goods
Revenue from sale products including products sold in international commodi ties markets is recognized when the products are delivered to the customer, assuming the risk and rewards have been transferred to the customer. Yara’s rebate arrangements include fixed-rate rebates or variable rate rebates increasing with increasing volumes. For variable rate rebates, the estimated rebate is accrued at each revenue transaction, and the accrual is adjusted at the end of each “rebate period”, which typically is the end of a fertilizer season.
Dividends and group contribution
Dividends and group contribution from subsidiaries are recognized in the income statement when the subsidiary has proposed these.
Interest income
Interest income is recognized in the income statement as it is accrued, based on the effective interest method.
INCOME TAXES
Deferred income tax expense is calculated using the liability method in accor dance with Norsk RegnskapsStandard (“NRS”) regarding Income Taxes (“Resul tatskatt”). Under this standard, deferred tax assets and liabilities are measured based on the differences between the carrying values of assets and liabilities for financial reporting and their tax basis, which is considered temporary in nature. Deferred income tax expense represents the change in deferred tax asset and liability balances during the year except for deferred tax related to items charged directly to equity. Changes resulting from amendments and revisions in tax laws and tax rates are recognized when the new tax laws or rates are enacted. INTANGIBLE ASSETS
Intangible assets acquired individually or as a group are recorded at fair value when acquired. Intangible assets with finite useful lives are amortized on a straight-line basis over their benefit period.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at historical cost less accumulated depreciation. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recover able. Depreciation is determined using the straight-line method.
SUBSIDIARIES AND ASSOCIATED COMPANIES
Shares in subsidiaries and associated companies are in Yara International ASA’s financial statements presented according to the cost method. Group relief received is included in dividends from subsidiaries. Yara reviews subsidiaries and associated companies for impairment if indications of loss in value are identified. Impairment indications may include operating losses, or adverse market condi tions. Fair value of the investment is estimated based on valuation model tech niques. If it is considered probable that the fair value is below Yara’s carrying value, the investment is written down as impaired.
INVENTORIES
Inventories are valued at the lower of cost, using the “first-in, first-out method” (“FIFO”), and net realizable value. Cost includes direct materials, direct labor, other direct cost, and the appropriate portion of production overhead or the price to purchase inventory.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash, bank deposits and all other monetary instruments with a maturity of less than three months at the date of purchase. LEASED ASSETS
Leases that provide Yara with substantially all the rights and obligations of own ership are accounted for as finance leases. Such leases are valued at the present value of minimum lease payments or fair value if this is lower, and recorded as assets under property, plant and equipment. The liability is included in long-term debt. The assets are subsequently depreciated and the related liabilities are reduced by the amount of the lease payments less the effective interest expense. Other leases are accounted for as operating leases with lease payments recog nized as an expense over the lease term.
FINANCIAL ASSETS AND LIABILITIES
Financial assets are initially recognized in the balance sheet at fair value (cost) and subsequently at the lower of cost or fair value. Financial liabilities are initially recognized in the balance sheet at fair value (cost) and subsequently at cost. FORWARD CURRENCY CONTRACTS
Forward currency contracts are initially recognized in the balance sheet at fair value and are subsequently recognized at fair value with
changes in fair value recognized in the income statement. INTEREST RATE AND FOREIGN CURRENCY SWAPS
Interest income and expense relating to swaps that are not designated as hedge instruments are netted and recognized as income or expense over the life of the contract. Foreign currency swaps are translated into Norwegian kroner at applica ble exchange rates at the balance sheet date with the resulting unrealized exchange gain or loss recorded in interest expense and foreign exchange gain/(loss). SHARE-BASED PAYMENTS
The Company’s cash-settled share based incentive program Share Incentive Rights (SIRs) is recognized as an expense at fair value. Fair value is initially mea sured at grant date and spread over the period during which the employees become unconditionally entitled to the payments. The fair value of the SIRs is measured based on the Black Scholes Merton option pricing model, taking into account the terms and conditions upon which the instruments were granted. The liability is remeasured at each balance sheet date and at settlement date. Any changes in fair value are recognized in the income statement.
The Company also gives employees the possibility to purchase share in Yara at a reduced price. The cost of this is recognized when the employee exercises this possibility.
EMPLOYEE RETIREMENT PLANS
Pension costs are calculated in accordance with the NRS no. 6A. Prior service costs are amortized on a straight-line basis over the average remaining service period of active participants. Actuarial gains and losses are recognized directly in equity.
Employee retirement plans
and other similar obligations
Yara International ASA is a part of the Yara Group pension plans in Norway. With effect from 1 July 2006 Yara implemented a new pension plan in Norway. The company changed from defined benefit plans to defined contribution plans. In the defined contribution plans Yara International ASA makes agreed contri butions when employees have rendered service entitling them to the contribu tions. Yara International ASA has no legal or constructive obligations to pay fur ther contributions. This new plan applies to the future pension earnings of existing employees below 55 in 2006 and all new employees. Employees aged 55 and above in 2006 remained in the existing defined benefit plans. All employees below 55 in 2006 received a paid-up policy of previous earned rights. Employees below age 55 in 2006, who were departement managers and above, remained members of a defined benefit early retirement plan.RECONCILIATION OF LIABILITIES TO BALANCE SHEET
NOK million
Pension liabilities defined benefit plans
At 31 December 2008, the number of active participants in the defined benefit plan was 71 and the number of retirees was 71. In addition the net liability in Yara International ASA consists of 345 existing and previous employees who have earned paid-up policies in Yara Pensjonskasse. There was an increase in number of employees who have earned paid-up policies in 2008 as the paid-up policies from the former daughtercompany Yara Industrial AS was transferred to Yara International ASA. Yara Industrial AS was sold to Praxair Inc. late in 2007. The benefits from the defined benefit plan are generally based on years of service and final salary levels.
Yara International ASA are obliged to, and do fulfil the requirements in act relating to mandatory occupational pension scheme (”Lov om obligatorisk tjenestepensjon”).
2008
(482) Termination benefits and other
(555) (41) (596)
(55)
Total net employee benefits recognized in balance sheet (537)
PENSION COST
NOK million 2008 2007
Defined benefit plans (41)
(14) (14) (68)
(48)
Defined contribution plans (13)
Termination benefits and other (25)
Total pension cost (86)
DEFINED BENEFIT PLANS Specification of recognized liability
NOK million 2007
Present value of unfunded obligations (469)
Present value of wholly or partly funded obligations (451)
Total present value of obligations (920)
Fair value of plan assets 497
Social security on defined benefit obligations (60)
Total recognized liability for defined benefit plans (482)
2008 (530) (548) (1,078) 597 (75) (555) 2007
(32) (46) 36
1 (41)
Current service cost (31)
Interest on obligation (39)
Expected return on plan assets 29
Social security cost (6)
Total expense recognized in income statement (48)
THE EXPENSE IS RECOGNIZED IN THE FOLLOWING LINE ITEMS IN THE INCOME STATEMENT
NOK million 2008 2007
(31) (10) (41)
Payroll and related costs (37)
Financial income (expense), net (11)
Total expense recognized in income statement (48)
MOVEMENT IN THE LIABILITY FOR DEFINED BENEFIT OBLIGATIONS
NOK million 2008 2007 (920) (32) (46) (32) (66) 18 (1,078)
Liability for defined benefit obligations at 1 January (850)
Current service cost (31)
Interest cost on obligation (39)
Actuarial gains / (losses) on obligation (11)
Obligation transferred on disposal of subsidiary -
Benefits paid (11)
Liability for defined benefit obligations at 31 December (920)
MOVEMENT IN FAIR VALUE OF PLAN ASSETS
NOK million 2008 2007 497 36 (116) 113 74 (7) 597
Fair value of plan assets at 1 January 443
Expected return on plan assets 29
Actuarial gains / (losses) on plan assets 13
Employer contributions 18
Plan assets transferred on disposal of subsidiary -
Benefits paid (6)
Fair value of plan assets at 31 December 497
The actual return on plan assets in 2008 was a negative NOK 80 million (2007: Positive NOK 42 million).
MOVEMENT IN ACTUARIAL (GAINS) / LOSSES RECOGNIZED DIRECTLY IN EQUITY
NOK million 2007
Cumulative amount recognized directly in equity pre tax at 1 January 41
Recognized during the period -2
2008 39 169 208 (58) 150
Cumulative amount recognized directly in equity pre tax at 31 December 39
Deferred tax related to actuarial (gains) / losses recognized directly in equity (11)
Equity instruments 176 35%
Debt instruments 304 61%
Property 10 2%
Bank deposits 6 1%
Total plan assets 497 100%
163 27%
397 66%
9 2%
28 5%
597 100%
Yara Pensjonskasse (Yara Pensionfund) does not hold any financial instruments issued by Yara Group companies. Contributions expected to be paid to the defined benefit plans for 2009 are NOK 41.4 million.
PRINCIPAL WEIGHTED AVERAGE ACTUARIAL ASSUMPTIONS AT 31 DECEMBER
Discount rate 4.6%
Expected rate of return on plan assets 6.4%
Expected rate of salary increases 4.1%
Future rate of pension increases 2.6%
Since there is no deep market in high quality corporate bonds in Norway, the tables. The actuary has used the K2005 mortality table,. The weighted average discount rate used is a weighted average of the yields at the balance sheet date of long-term rate of return on plan assets is 6.1 percent. The expected long-term Norwegian government bonds. If the bonds have different maturities than the rate of return is based on the portfolio as a whole and not on the sum of the obligations, the discount rate is adjusted. The weighted average discount rate returns on individual asset categories. The return is based exclusively on histori applied at 31 December 2008 was 3.9 percent. Normal assumptions for demo- cal returns, without adjustments. The expected rate of return on plan assets as graphical and retirement factors have been used by the actuary when calculating seen in the income statement for 2008 was 6.4 percent.
the obligation. Future mortality are based on published statistics and mortality
HISTORICAL INFORMATION
NOK million 2008 2007 2006 2005 2004
Present value of the defined benefit obligation (1,078) 597 (481)
(37) (116)
(920) (850) (774) (722)
Fair value of plan assets 497 443 393 346
Deficit in the plan 2) (423) (407) (381) (377)
Experience adjustments arising on plan liabilities 1) 30 (4) -
Experience adjustments arising on plan assets 1) 13 3 -