Tratamiento de fisuras y revoques

Parts of property, plant and equipment that have different useful lives are accounted for as separate items of property, plant and equipment. Cost of major maintenance activities are capitalized as a separate component of property, plant and equipment, and depreciated over the estimated useful life. Maintenance costs which cannot be separately defined as a component of property, plant and equipment are expensed in the period in which they occur.

Leases

Lease contracts whereby the company has substantially all the risks and rewards of ownership are classified as finance leases. At inception these are recognized in the balance sheet at the lower of the assets’ fair value and the present value of the minimum lease payments. Subsequently, these are amortized on a straight-line basis over the shorter of the lease term or the useful life of the asset. If the carrying value exceeds the recoverable amount of the assets an impairment charge is recognized.

Operational leases are not capitalized. Costs related to these contracts are expensed as incurred, which is normally on a straight-line bases over the term of the lease.

Asset retirement obligations

The company has identified conditional asset retirement obligations at a number of its facilities that are mainly related to plant decommissioning. The company recognizes these conditional asset retirement obligations in the periods in which sufficient information becomes available to reasonably estimate their fair values.

Intangible assets

Intangible assets with a finite life, such as licenses, know-how, brand names, customer relationships, and intellectual property rights, are capitalized at historic cost and amortized on a straight- line basis over the estimated useful life, which in the majority of cases ranges from 10 to 40 years.

Development costs are capitalized if costs can be measured reliably, the product or process is technically and commercially feasible and sufficient future economic benefits will be generated, and the company has sufficient resources to complete the development. Capitalized development costs are amortized on a straight-line basis over the estimated useful life, which in the majority of cases is 5 years. If there is an indication that an intangible asset may be impaired the recoverable amount of the asset is estimated; see Impairments. If the carrying value exceeds the recoverable amount an impairment charge is recognized in the statement of income.

Intangible assets with an indefinite life, which presently only include purchased goodwill, are not amortized, but tested for impairment annually. In cases where the carrying value of the intangibles exceeds the recoverable amount an impairment charge is recognized in the statement of income. Goodwill is determined

as the difference between the fair value of the consideration paid for a business combination and the fair value of the acquired identifiable assets, liabilities and recognized contingent liabilities. Goodwill related to an investment in associates is included in the carrying value of that investment.

Business combinations

In accounting for the acquisition of subsidiaries the purchase accounting method is used. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued, and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured at fair value at the acquisition date. The excess of the cost of acquisition over the fair value of Akzo Nobel’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the statement of income.

The assets and liabilities from business combinations arising from transfers of interests in entities that are under the control of the company are accounted for at the carrying amounts recognized previously.

If written put options on minority shares are acquired as part of a business combination, these are accounted for under IFRS 3 as if the additional interests were already acquired from the initial date of acquisition. This results in the recognition of a liability instead of a minority share, and an increase of goodwill for the fair value of the written put option.

Associated companies and joint ventures

Investments over which Akzo Nobel has significant influence but no control over the financial and operational policies, are classified as associated companies and are accounted for using the equity method from the date that significant influence commences until the date that significant influence ceases. The consolidated financial statements include the company’s share of the income and expenses of the equity-accounted investments, whereby calculation is based as much as possible on the Akzo Nobel principles of valuation. When the share of losses exceeds the interest in the company, the carrying amount is reduced to nil and recognition of further losses is discontinued, unless Akzo Nobel has incurred legal or constructive obligations on behalf of the company.

Summary of significant accounting policies

Financial statements

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Jointly controlled companies are equity accounted for under associated companies and joint ventures. Joint control is established by contractual agreement and requires unanimous consent for strategic, financial, and operational decisions.

Unrealized gains arising from transactions with equity accounted associates and joint ventures are eliminated to the extent of Akzo Nobel’s interest in the company and are eliminated against the investment. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

Loans to associates and joint ventures are carried at amortized cost, less impairment losses.

Other financial noncurrent assets Held to maturity investments

Other financial noncurrent assets are classified as held to maturity if the company has the positive intent and ability to hold these assets to maturity. These assets are measured at amortized costs using the effective interest method, less any impairment losses.

Other financial noncurrent assets available for sale

Other financial noncurrent assets classified as available for sale are measured at fair value, and changes in the fair value, other than impairment losses and foreign exchange gains and losses, are recognized directly in equity. Upon derecognition, the cumulative gain or loss in equity is transferred to the statement of income.

Inventories

Inventories are measured at the lower of cost or net realizable value. Costs of inventories comprise all costs of purchase, costs of conversion, and other costs incurred in bringing the inventories to the present location and condition. The costs of conversion of inventories include direct labor and fixed and variable production overheads, and takes into account the stage of completion. The costs of inventories is determined using the weighted average cost formula. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

Receivables

Trade and other receivables are measured at amortized cost, using the effective interest method, less impairment losses. Long-term receivables are discounted to their net present value.

Cash and cash equivalents

Cash and cash equivalents include all cash balances and short-term highly liquid investments that are directly convertible into cash.

Assets and liabilities classified as held for sale

Assets and liabilities are classified as held for sale if it is highly probable that the carrying value will be recovered through a sale transaction rather than through continuing use. When reclassifying

assets as held for sale, the assets are recognized at the lower of the carrying value or fair value less selling costs. Assets held for sale are not depreciated but tested for impairment. Impairment losses on assets and liabilities held for sale are recognized in the statement of income.

Shareholders’ equity

The consideration paid for repurchased shares, including directly attributable cost, is deducted from equity.

Dividends are recognized as a liability in the period in which they are declared.

Provisions

Provisions are recognized when a present legal or constructive obligation as a result of a past event exists, and it is probable that an outflow of economic benefits is required to settle the

obligation. Provisions are measured at net present value, taking the timing of cash outflows into account. The expected future cash outflows are discounted at appropriate pretax interest rates, reflecting current market assessments of the time value of money and, if applicable, the risks specific to the liability. The increase of provisions as a result of the passage of time is recognized in the statement of income under financing income and expenses.

Provisions for restructuring are recognized when a detailed and formal restructuring plan has been approved, and the restructuring has either commenced or has been announced publicly. Future operating costs are not provided for.

Pensions and other postretirement benefits Defined contribution plans

Obligations for contributions to defined contribution plans are recognized in the statement of income as incurred.

Defined benefit plans

Most of the company’s defined benefit pension plans are funded with plan assets that have been segregated in a trust or

foundation. For plans which are not separately funded, the company recognizes a provision. Valuations of both funded and unfunded plans are carried out by independent actuaries based on the projected unit credit method. Pension costs primarily represent the increase in the actuarial present value of the obligation for projected pension benefits based on employee service during the year and the interest on this obligation in respect of employee service in previous years, net of the expected return on plan assets. The discount rate used in determining the present value of the obligations is the yield at reporting date of risk-free credit-rated bonds that have maturity dates approximating the terms of the company’s obligations.

Summary of significant accounting policies