MINISTERIO DE SALUD

This new standard requires a management approach, –

under which segment information is presented on the same basis as that of internal reports provided to the chief operating decision maker. Operating segments are deter- mined based on the reports reviewed by the Board of Directors that are used to make strategic decisions and to allocate resources to the segments. With the adoption of IFRS 8, identifiable operating segments remain the same as those presented in the consolidated financial statements for the year ended 31 December 2008; how- ever, the related disclosures have been expanded and are presented in note 4. Comparatives for 2008 have been presented in conformity with the transitional requirements of the standard.

The Group further early-adopted the amendment to IFRS 8 whereby disclosure of segment assets are no longer re- quired in the case that this information is not presented to the chief operating decision maker.

The International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Com- mittee (IFRIC) have issued a number of new and amended standards and interpretations that are not yet effective for the financial period ended 31 December 2009. The impact of the following new and amended standards and interpre- tations has not yet been systematically analyzed. However, management has conducted a preliminary assessment:

IFRS 3 (revised) – Business combinations (effective from 1 July 2009)

The revised standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re- measured through the income statement. Transaction costs that the Group incurs in connection with a business com-

bination, such as legal fees, due diligence fees, and other professional and consulting fees, are expensed as incurred. The Group will apply IFRS 3 (revised) prospectively to all business combinations from 1 January 2010.

IAS 27 (revised) – Consolidated and separate financial statements (effective from 1 July 2009)

Under the revised standard, acquisitions of non-controlling interests are accounted for as transactions with equity hold- ers in their capacity as equity holders, and therefore, no goodwill is recognized as a result of such transactions. The Group will apply IAS 27 (revised) prospectively to transac- tions with non-controlling interest from 1 January 2010. Other standards and amendments to existing standards have been published and are mandatory for the Group’s accounting periods beginning on or after 1 January 2010, but the Group has not early-adopted them, nor is a signifi- cant impact on the Group’s accounting policies expected. 2.2. Basis of consolidation

Subsidiaries

Subsidiaries are companies controlled by Nobel Biocare Holding AG. Control exists when the Company has the power, directly or indirectly, to govern the financial and op- erating policies of a company so as to obtain benefits from its activities. Subsidiaries are included in the consolidated financial statements from the date the control effectively commences until the date control ceases.

According to the full consolidation method, all assets and liabilities as well as income and expenses of the subsidiaries are included in the consolidated financial statements. The share of minority shareholders in the net assets and results is presented separately as minority interests in the consoli- dated balance sheet and income statement, respectively.

Associates

Associates are companies where the Group is able to exer- cise significant influence, but not control, over the financial and operating policies.

The consolidated financial statements include the Group‘s share of the total recognized gains and losses of associates on an equity accounting basis, from the date significant influence commences until the date it ceases. When the

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Group’s share of losses exceeds the carrying amount of the associate, the carrying amount is reduced to zero and rec- ognition of further losses is discontinued except to the ex- tent that the Group has incurred obligations with respect to the associate.

Transactions eliminated on consolidation

Intragroup balances and transactions, as well as any unre- alized gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements.

2.3. Foreign currency

Foreign currency transactions

Transactions in foreign currencies are translated at the for- eign exchange rate at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the foreign exchange rate at the balance sheet date. Non- monetary assets and liabilities in foreign currencies that are stated at historical cost are translated at the foreign ex- change rate at the date of the transaction. Non-monetary assets and liabilities in foreign currencies that are stated at fair value are translated at the foreign exchange rate at the date the values were determined.

All foreign exchange differences arising on translation, in- cluding the result of hedging transactions related to opera- tions, are recognized in the income statement as foreign exchange gains or losses.

Financial statements of foreign operations

Assets and liabilities of foreign operations, including good- will and fair value adjustments arising on consolidation, are translated at the foreign exchange rates at the balance sheet date. Revenues and expenses of foreign operations are translated at rates approximating the foreign exchange rates at the dates of the transactions. Foreign exchange differ- ences arising on translation of foreign operations are rec- ognized directly in other comprehensive income and pre- sented in equity as a translation reserve.

If a loan is made to a foreign operation, and the loan in substance forms part of the Group‘s investment in the for- eign operation, translation differences arising on the loan are also recognized directly in other comprehensive income. On disposal of a foreign operation, cumulative translation

differences recognized in other comprehensive income are reclassified to the income statement as part of the gain or loss on disposal.

2.4. Segment reporting

Operating segments are determined based on internal re- porting provided to the chief operating decision maker. The chief operating decision maker is responsible for making strategic decisions and for allocating resources to the seg- ments. The Board of Directors has been identified as the chief operating decision maker of the Group.

2.5. Revenue

Revenue from the sale of goods is recognized in the income statement when the significant risks and rewards of owner- ship have been transferred to the buyer, which is usually on delivery to third parties. Revenue is reported net of sales taxes, discounts, rebates and return of goods.

2.6. Financial income and finance cost

Financial income comprises interest receivable on funds invested, foreign exchange gains and losses, dividends, gains on disposal of financial investments and positive changes in fair value of financial instruments held for trad- ing and derivatives that are recognized in the income state- ment. Interest income is recognized in the income state- ment as it accrues, using the effective interest method. Dividends are recognized in the income statement on the date the entity’s right to receive payments is established. Finance cost comprises interest payable on loans calcu- lated using the effective interest method, interest expenses derived from net present value calculations on the deferred purchase price related to the acquisition of Nobel Biocare Procera AB, losses on disposal of financial investments and negative changes in fair value of financial instruments held for trading and derivatives that are recognized in the income statement.

2.7. Income tax

Income tax on the profit or loss for the year comprises cur- rent and deferred tax. Income tax is recognized in the in- come statement except to the extent that it relates to items recognized directly in other comprehensive income or eq- uity, in which case it is recognized in other comprehensive income or equity, respectively.

Current tax is the expected tax payable on the taxable in- come for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to taxes payable with respect to previous years.

Deferred tax is recognized, based on the balance sheet li- ability method, on temporary differences between the car- rying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. No temporary differences are recognized on the initial recogni- tion of goodwill, on the initial recognition of assets or liabil- ities that affect neither the accounting nor taxable profit, or on differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax recognized is based on the expected manner of realization or settlement of the car- rying amount of assets and liabilities, using tax rates en- acted or substantially enacted at the balance sheet date. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

2.8. Property, plant and equipment

Property, plant and equipment are stated at cost less ac- cumulated depreciation and impairment losses. Where an item of property, plant and equipment comprises major com- ponents having different useful lives, the components are accounted for as separate items of property, plant and equipment.

Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of prop- erty, plant and equipment. Land is not depreciated. The estimated useful lives are as follows:

in years

Buildings & leasehold improvements 25

Machinery 5–8

Equipment 3–5

2.9. Intangible assets

Goodwill

All business combinations are accounted for by applying the purchase method. Goodwill arising on acquisition of a subsidiary or associate represents the excess of the cost of the acquisition over the fair value of the net identifiable assets acquired. With respect to associates, the carrying amount of goodwill is includ- ed in the carrying amount of the investment in the associate. Goodwill is stated at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units and is tested for impairment every year. The allocation is made to those cash- generating units or groups of cash-generating units that are expected to benefit from the business combination from which the goodwill arose.

Negative goodwill arising on acquisition is recognized direct- ly in the income statement.

Intangible assets acquired in business combinations

Intangible assets acquired in a business combination (includ- ing patents, licenses and in-process research and develop- ment) are recognized separately from goodwill if they are subject to contractual or legal rights or are separately transfer- able and their fair value can be reliably estimated.

Research and development

Expenditures on research and development activities include the cost of materials, direct labor and an appropriate proportion of overhead relating to research and development.

Expenditures on research activities are expensed as incurred. Expenditures on development activities are capitalized if the product or process is technically and commercially feasible, future economic benefits are probable, the costs can be mea- sured reliably, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. Capitalized development expenditure is stated at cost less accumulated amortization and impairment losses. Amor- tization is charged to the income statement on a straight-line basis over the estimated useful life of the development, nor- mally not exceeding five years, and starts when the developed assets are available for use. Capitalized development expen- ditures are tested for impairment every year.

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Patents and licenses

Patents and licenses (Intellectual Property Rights) acquired by the Group from third parties or in a business combination are stated at cost less accumulated amortization and impair- ment losses. Amortization is charged to the income state- ment on a straight-line basis over the estimated useful life, normally not exceeding five years.

Other intangible assets

Other intangible assets comprise expenditures for distribution networks, client base, brands and non-competition agree- ments acquired by the Group from third parties or in a busi- ness combination.

Other intangible assets are stated at cost less accumulated amortization and impairment losses. Amortization of other intangible assets is charged to the income statement on a straight-line basis over the estimated useful life, normally not exceeding five years.

Computer programs

Computer programs comprise expenditures for computer programs acquired by the Group from third parties or in a business combination.

Computer programs are stated at cost less accumulated amortization and impairment losses. Amortization of com- puter programs is charged to the income statement on a straight-line basis over the estimated useful life, normally not exceeding five years.

2.10. Impairment

The carrying amounts of the Group’s assets, other than inventories and deferred tax assets, are reviewed at each balance sheet date to determine whether there is any indi- cation of impairment. If any such indication exists, the as- set‘s recoverable amount is estimated. Goodwill, intangibles with indefinite useful life and capitalized development ex- penditures are tested for impairment every year.

An impairment loss is recognized in the income statement whenever the carrying amount of an asset or its cash-gen- erating unit exceeds its recoverable amount. The recover- able amount of an asset is the greater of the fair value less costs to sell and value in use.

An impairment loss is reversed if there is an indication that the impairment loss may no longer exist, and there has been a change in the estimates used to determine the recoverable amount. However, an impairment loss of goodwill is not reversed.

2.11. Leases

Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership of the leased asset are classified as finance leases. The Group has no material finance lease contracts.

Leases where the lessor effectively retains all the risks and rewards of ownership are classified as operating leases. Pay- ments made under operating leases (net of any incentives received from the lessor) are charged to the income state- ment on a straight-line basis over the period of the lease. 2.12. Inventories

Inventories are stated at the lower of cost and fair value less cost to sell. Cost to sell is the estimated selling price in the ordinary course of business, less estimated selling costs. The cost of inventories consisting of material, labor and production costs is calculated according to the first-in, first- out principle. The cost includes expenditures incurred in manufacturing or acquiring the inventories and bringing them to their existing location and condition. Production costs include an appropriate share of overhead based on normal operating capacity.

2.13. Loans, trade and other receivables

Loans, trade and other receivables are recognized initially at fair value and subsequently measured at amortized cost, less provision for impairment. A provision for impairment is recognized on an individual basis or on a portfolio basis where there is objective evidence that impairment losses have been incurred.

2.14. Non-current assets held for sale and discontinued operations

Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered prin- cipally through a sale transaction rather than from continu- ing use. The asset (or disposal group) must be available for immediate sale in its present condition, and the sale must be highly probable. On initial classification as held for sale,

non-current assets and disposal groups are recognized at the lower of carrying amount and fair value less costs to sell. Impairment losses on initial classification as held for sale are included in the income statement.

A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical area of operations, or is a subsidiary ac- quired exclusively with a view to resell. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier.

2.15. Derivative financial instruments and hedging activities

The Group uses derivative financial instruments to protect itself from fluctuations in currencies and variability in future cash flows. There are established policies and procedures for risk assessment and approval, reporting and monitoring of such instruments. They are not used for trading pur- poses.

Derivative financial instruments are initially recognized at fair value. Subsequent to initial recognition, derivative fi- nancial instruments also are stated at fair value. Any resul- tant gain or loss on revaluation of derivative financial instru- ments that do not qualify for hedge accounting is recognized immediately in the income statement within financial in- come and finance cost.

All derivatives with a positive fair value are included in “Fi- nancial investments” while all derivatives with a negative fair value are included in “Other liabilities”. The fair value of a derivative financial instrument is classified as a non-cur- rent asset or liability when the remaining maturity period is more than 12 months and as a current asset or liability when the remaining maturity period is 12 months or less.

Cash flow hedges

The Group applies hedge accounting for material future cash flows in all foreign currencies and for hedges of par- ticular risks associated with a recognized asset or liability. Where a derivative financial instrument is designated as a highly probable forecasted transaction, the effective por- tion of any gain or loss on the derivative financial instru- ment is recognized directly in the statement of compre-

hensive income and presented in the hedging reserve in equity. The gain or loss relating to the ineffective portion is recognized immediately in the income statement within financial income or finance cost.

The cumulative gain or loss is removed from equity and recognized in the income statement at the same time as the hedged transaction. The ineffective part of any gain or loss is recognized in the income statement immediately. When a hedging instrument is sold, terminated or exer- cised, but the hedged transaction still is expected to occur, the cumulative gain or loss at that point remains in equity and is recognized in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer probable, the cumulative unrealized gain or loss recognized in equity is recognized immediately in the in- come statement within financial income or finance cost.

Hedge of monetary assets and liabilities

Where a derivative financial instrument is used to eco- nomically hedge the foreign exchange exposure of a rec- ognized monetary asset or liability, hedge accounting is generally not applied. Any gain or loss on the hedging instrument is recognized as financial income or finance cost in the income statement. Related foreign exchange gains and losses are also recognized as financial income or finance cost as incurred.

2.16. Financial investments

Financial investments comprise fixed-term deposits with a term of more than 90 days from the date of acquisition,