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Som godkendt på selskabets
generalforsamling dem 19. april
2013.
Som dirigent:
Erhvervsstyrelsen
23 apr. 2013
arlsberg
Carlsberg Breweries A/S
CVR No. 25 50 83 43
Annual Report for 2012
(13th financial year)
1304236EogSN10234
Contents
Management Review …M(.(|.W|M.GW..u.….sssscerererre tet ELLLER EL ELLE REN TELE SELE ENE E ELL TERN E LET L EL HEEL E TEE E RETTE EL EILER ELSE ERR rkrrre 3
Carlsberg Breweries Group financial statements …...............ssssscserrrrreeesrtee nr nt er L ERE LER ELERS NELL ES Lk ERR rr rer 16
Income statement ..ssssssene usenet kt EL E LL NE KNEE REELLE KER E KLEE E PERLE NERE LEE ELERS RELSE KLEE ELLE REEL ennes 17
Statement of comprehensive income …....ssesssseserrererekkk sket kk ERE EE ELLE RER E LET E LEE NEE TEL EN NERE EDER E ER LER n regere rer 18
Statement of financial position ….....................ssssssneeeneverner ren krrrn nt nk skr r nn ret kreere n eres 19
Statement of changes in equity ……..u..ssssenssssreeersrttt sett ERNE NEP RENE LEVIS E ET ELSE E REE ETT LEE E NES REESE SEER RR En nen er 21
Statement of cash flows... ssssneeseerrerserrrer seeren nr nere rer en rr rs 22
Notes…G…GdGwuvxssceserreerererret ennen ss ELLEN E NERE ESME LE ER ENE ELERS TEE SEER LE ERNE Ree esse s KERNE LEE E NE r EEN r teen snarere stnne 23
Financial statements, Parent Company Carlsberg Breweries A/S M1(1(1|W|.[W..u.ssssssseneneree nen sener nr eres nr rn nrrnnee 113
Company information …..............sssssseserse serene stk ett tt EA ALE ER ELLLER TELTE EET LESTER ET EPE ELEV ELLE PEER LENET REEL REEL s Er 147
Management statement ……......….….u.sssesssreessskeesrste tere ets erne rtr rr rr rr res 150
The independent auditors' report.…......W.…...sssssnseeeeeeerer renere rn ennen teen teske treer en rese eres renere rn renerne 151
Carlsberg Breweries Group
Management Review
Five-year summary
DKK million 2008
Sales volumes, gross (million hl)
Beer 126.8 137.0 136.5 139.8 140.9
Other beverages 22.3 22.2 22.5 22.2 22.0
Sales volumes, pro rata (million hl)
Beer 109,3 116.0 114.2 118.7 120.4
Other beverages 19.8 19.8 19.3 19.2 19.1
Income statement
Net revenue 59,944 59,382 60,054 63,561 67,201
Operating profit before special items 7,604 9,460 10,246 9,877 9,909
Special items, net -1,641 -262 -249 605 -1,812
Financial items, net -3,455 -2,980 -2,137 -1,908 -1,735
Profit before tax 2,508 6,218 7,860 8,574 6,362
Corporation tax 383 -1,561 -1,847 -2,156 -1,529
Consolidated profit 2,891 4,657 6,013 6,418 4,833
Attributable to:
Non-controlling interests 572 565 609 543 638
Shareholders in Carlsberg Breweries A/S 2,319 4,092 5,404 5,875 4,195
Statement of financial position
Total assets 129,668 121,886 132,148 136,195 141,948
Invested capital 106,740 97,354. 104,873 105,992 109,096
Interest-bearing debt, net 45,771 36,122 32,847 30,780 31,639
Equity, shareholders in Carlsberg Breweries A/S 41,367 42,613 52,544 55,572 59,529
Statement of cash flows
Cash flow from operating activities 8,037 13,420 11,225 9,789 10,138
Cash flow from investing activities -57,427 -2,409 -6,242 4,876 -5 888
Free cash flow -49,390 11,011 4,983 4,913 4,250
Financial ratios
Operating margin % 12.7 15.9 17.1 15,5 14.7
Return on average invested capital (ROIC) % > 89 9.3 9.8 9,4 9.0
Equity ratio % 31.9 35.0 39,8 40.8 41.9
Debt/equity ratio (financial gearing) xX 0.97 0.76 0.57 0.50 0.50
Interest cover X 2.20 3.17 4.80 5.18 5.71
Stock market ratios”
Earnings per share (EPS) DKK 4,629 8,168 10,786 11,727 8,373
Cash flow from operating activities per share (CFPS) DKK 16,042 26,786 22,405 19,539 20,236
Free cash flow per share (FCFPS) DKK -98,583 21,978 9,946 9,806 8,483
Dividend per share (proposed) DKK - - - - 1,827.0
Pay-out ratio % - - - - 22
Employees
Full-time employees (average) 45,364 45,364 41,278 42,552 41,614
= Stock market ratios for 2008 are adjusted for bonus factor from rights issue in June 2008 in accordance with IAS 33. Number of shares
(period-end) is not adjusted.
Financial ratios are calculated in accordance with the Danish Society of Financial Analysts' guidelines "Recommendations and Financial
Ratios 2010”,
1304236EogSN10235
ACTIVITIES OF THE GROUP
The Carlsberg Breweries Group is one of the leading brewery groups in the world, with a large portfolio of
beer and other beverage brands. Carlsberg Breweries" activities are focused on the markets where the
Group has the expertise and the right products to secure a leading position. Due to the variation of the
markets, the contribution to growth, earnings and development within the Group differs, both at present and
in the longer-term projections.
The parent company's main activities are investments in national and international breweries as well as
license and export business.
BUSINESS DEVELOPMENT
A key part of the Group's strategy is to drive both our international premium brands — Carlsberg, Tuborg,
Kronenbourg 1664, Grimbergen and Somersby — and our strong local power brands. We will continue the
development, enhancement and deployment of our sales and marketing tools across our markets and
ensure that best practices are embedded across all relevant markets.
The repositioning of the Carlsberg brand, initiated in 2011, continued to be strongly supported in 2012. An
important event was the EURO 2012 sponsorship, which was successfully activated and an important driver
of the 8% volume growth of the Carlsberg brand in its premium markets. The brand grew across all three
regions.
An important initiative behind Tuborg was the rejuvenation of the brand in early 2012 in selected markets,
including a new campaign with a new tagline, new visual identity and new communication. The brand grew
6% for the year. Major commercial activities were the introduction of Tuborg in China in the spring and the
launch of the new 3G Tuborg bottle in Russia and India. All initiatives yielded very good results.
Kronenbourg 1664 grew its volume both in France and outside France. We continued to introduce the brand
in new markets and saw particularly good results in Russia, Denmark, Canada and in several Asian markets.
The wheat beer Kronenbourg Blanc contributed significantly to overall brand development.
Our cider brand, Somersby, almost doubled its volumes and became the fastest growing global top 10 cider
brand in 2012 (source: Canadean). The strong growth was driven by both category growth and a significant
geographical expansion throughout the Group. The Somersby portfolio was extended with Somersby Double
Press, a premium, naturally refreshing dry cider. Somersby was launched in 15 new markets in 2012 and is
now available in 35 markets worldwide.
Grimbergen, our super-premium Belgian abbey ale, was launched in nine new markets across Europe and
Asia. This, coupled with the introduction of a new proprietary Grimbergen bottle, livery, an impactful
marketing activation programme and strong performance in the French market, resulted in solid double-digit
volume growth for the Grimbergen brand.
As a result of the strong performance of our international premium portfolio as well as our local power brands,
in 2012 the Group once again grew market share across a substantial part of its business, including very
solid market share performance in Western Europe (approximately +40bp). In Eastern Europe, our market
share developed favourably throughout the year and continued the positive trend seen since Q4 2011. In
Asia, we continued to increase our market share across most markets.
During the year, we invested alongside the United Nations Industrial Development Organization (UNIDO) in
an initiative to improve the environment in Russia; through the International Centre for Alcohol Policy (ICAP)
we pledged a 5-year commitment to strengthen our efforts to reduce the misuse of alcohol; and we
continued to make good progress in lowering our energy and water consumption and CO2 emissions.
2012 results
For 2012, overall market growth was mixed across our three regions. Impacted by a challenging macro and
consumer environment and bad weather during the summer, the Western European market declined overall
by around 3% (excluding the strong-performing Polish market). The Russian beer market was flat for the
year. The Asian markets continued to grow.
Group organic beer volumes were flat. Volume development in Q1 and Q4 was impacted by destocking in
Russia in Q1, stocking in France in Q4 and less stocking in Russia in Q4 than in 2011. Adjusted for this
disruption, organic beer volume growth would have been +1%. Reported beer volumes grew by 1%. The
acquisition impact related to Asia. The pro rata volume for other beverages was flat.
Net revenue grew by 6% to DKK 67,201m as a result of 3% organic growth (total beverage volume of -1%
and positive price/mix of 4%), +2% from currencies and a net acquisition impact of +1%.
Cost of sales per hl for the year grew organically by 4% in line with expectations. Gross profit per hl grew
organically by 3% as the positive price/mix and production efficiencies more than offset the higher input
costs. Due to the higher input costs across all regions, gross profit margin decreased by 30bp to 49.7%
Operating expenses grew organically by 4% for the year, largely in line with the organic growth in net
revenue, The increase was driven by several factors, including higher logistics costs in Eastern Europe,
increased trade marketing investments in Russia and growth in Asia.
Consequently, Group operating profit was flat at DKK 9,909M with a 4% organic decline and reported
operating margin declined to 14.7%. The positive currency impact was mainly due to the weakness of the
DKK versus Eastern European and Asian currencies. The acquisition impact was due to the 2011
acquisitions in Laos and Vietnam. Adjusted for the stocking/destocking disruptions in Russia and France and
the suspended production in Uzbekistan, organic operating profit would have declined by an estimated 1-2%.
Reported net profit declined to DKK 4,195m (2011: DKK 5,875m).
Cash flow
Average trade working capital to net revenue was reduced to 1.0% at the end of 2012 versus 1.9% at the
end of 2011.
Free operating cash flow was DKK 5,070m, down 3% from 2011. Free cash flow declined to DKK 4,250m
(DKK 4,913m in 2011), driven by slightly higher capital expenditures and financial investments.
The Group invested significant resources in structural changes such as the buyout of minority shareholders
in Russia and the Balkans. The net interest-bearing debt is at DKK 31.6bn, an increase of DKK 0.9m from
2011.
The Group took advantage of the attractive market for corporate bonds and issued three bonds during 2012.
In July, the Group placed a 7-year EUR 500m bond with a coupon of 2.625%. The principal amount of this
issue was increased in November to EUR 750m, together with the issue of a 10-year EUR 750m bond with a
coupon of 2.625%.
Structural changes
During 2012, the Group took several important steps to further focus and strengthen the company's growth
profile.
In Q1, the Group increased its ownership in several businesses in the Balkan area and now has 100%
ownership of the subsidiaries in Serbia, Croatia and Bulgaria.
In 2012 the Group initiated and completed the buyout of the remaining minority shareholders in Baltika
Breweries. Following a successfully executed voluntary offer and compulsory purchase, the Group
announced on 29 November that the transaction was complete and that it had obtained 100% ownership of
Baltika Breweries at a total purchase price of DKK 4.3bn.
1204236EogSN10236
On 14 November, the Group announced the signing of an agreement to acquire a further shareholding of
approximately 19% in Chongqing Jianiang Brewery Co. Ltd., taking the total shareholding close to 50%. Our
partner in this joint venture is Chongqing Brewery Co. Ltd.
The supply chain integration and business standardisation project
2013 will be a year in which the Group will start Implementing one of its largest and most important projects
in recent years. The roll-out of the supply chain integration and business standardisation project in Western
Europe will start with our Swedish subsidiary going live with the system in the spring, followed later by
Norway and the UK.
The project will be a key enabler for the transformation of our Western European operating model, with all
procurement, production, planning and logistics across the region being centrally managed, supported by
standardised processes and data, and full transparency. The purpose is to improve capabilities, customer
service and efficiency, increase speed and optimise asset utilisation. This project will yield significant long-
term benefits when fully implemented in Western Europe, but will also require significant resources and
entail substantial implementation costs.
For 2013, 2014 and 2015, additional costs related to this project are expected to be approximately DKK 300-
400m, DKK 400-500m and DKK 500m respectively.
FINANCIAL REVIEW
Income statement
The Group generated total net revenue of DKK 67,201m, an increase of 6% compared with 2011. Gross
profit was DKK 33,370m (DKK 31,773m in 2011), and the gross profit margin declined by 30bp to 49.7% due
to higher input costs.
Sales and distribution expenses increased by DKK 1,162m to DKK 19,645m, primarily due to higher sales
and marketing investments in Eastern Europe and Asia and higher logistics costs, mainly in Eastern Europe.
Administrative expenses amounted to DKK 4,174m (DKK 3,944m in 2011) and other operating income, net
was DKK 246m (DKK 357m in 2011). The Group's share of profit after tax in associates was DKK 112m
(DKK 174m in 2011).
Group operating profit before special items was DKK 9,909m (DKK 9,877m in 2011). Strong growth in Asia
and Northern & Western Europe was not enough to offset the decline in Eastern Europe.
Net special items (pre-tax) amounted to DKK -1,812m against DKK 605m in 2011. The main items impacting
special items were the impairment of Vena Brewery, production and sales equipment in Russia (DKK -589m),
impairment and restructuring of our business in Uzbekistan (DKK -290m), restructuring in Norway (DKK -
262m) and restructuring of the Nordic Getrånke joint venture in Germany (DKK -118m). Generally, special
items include costs in connection with the restructuring measures implemented across the Group.
Net financial costs declined to DKK -1,735m against DKK -1,908m in 2011. Net interest costs were DKK -
1,529m (2011: DKK 1,707m) due to lower average funding costs coming from lower short-term interest rates
and the maturity of a GBP 250m bond in December 2011. Other net financial items decreased to DKK -206m
(2011: DKK -201m), primarily due to currency and fair value adjustments.
Tax totalled DKK -1,529m against DKK -2,156m in 2011. The reported tax rate was 24.0% versus 25.2% in
2011 impacted by non-taxed gains within special items.
Non-controlling interests were DKK -638m, an increase of DKK -95m versus 2011 (DKK -543m) due to the
increased shareholding in Lao Brewery in 2011, since when the company has been fully consolidated (51%
ownership) versus previous proportional consolidation. This more than offset lower non-controlling interests
from Baltika Breweries following the buyout of minority shareholders during the year.
Carlsberg's share of net profit was DKK 4,195m versus DKK 5,875m in 2011.
Statement of financial position
At 31 December 2012, Carlsberg had total assets of DKK 141.9%bn against DKK 136.2bn at 31 December
2011.
Assets
Intangible assets increased to DKK 80.0bn against DKK 77.8bn at 31 December 2011, driven by currency
impact from Russia.
Property, plant and equipment increased to DKK 31.0bn against DKK 30.8bn at 31 December 2011, mainly
due to investments being on a par with depreciation, an exchange rate difference of DKK 0.7bn and
impairment of DKK -0.9bn, mainly related to activities in Russia and Norway.
Financial assets increased to DKK 9.1bn against DKK 7.6bn at 31 December 2011. The increase was largely
related to investments in the 48.58% shareholding in Chongqing Jianiang Brewery Co. Ltd. In China and the
25% shareholding in the consortium developing the Copenhagen brewery site.
Current assets increased to DKK 21.7bn against DKK 19.6bn at 31 December 2011. The increase was
primarily related to cash.
Liabilities
Total equity increased to DKK 62.9bn versus DKK 61.3bn at 31 December 2011. DKK 59.5bn can be
attributed to shareholders in Carlsberg Breweries A/S and DKK 3.4bn to non-controlling interests.
The increase in equity of DKK 1.6bn was mainly due to profit for the period of DKK 4.8bn and foreign
exchange gains of DKK 1.9bn, actuarial losses to DKK -0.7bn and acquisition of non-controlling interests to
DKK -4.6bn, mainly related to the acquisition of minority shares in Baltika Breweries.
Liabilities increased to DKK 79.0bn against DKK 74.7bn at 31 December 2011. The increase was in both
current and non-current liabilities.
Non-current liabilities increased to DKK 51.6bn (DKK 48.2bn at 31 December 2011), principally due to higher
borrowings related to increased financial investments in associated entities and non-controlling interests.
Current liabilities increased to DKK 27.4bn (DKK 26.5bn at 31 December 2011) due to a DKK 1.9%bn bond
that matures February 2013 and thus became a current liability, and an increase in trade payables of DKK
0.8bn as a result of our continued focus on reducing average trade working capital.
Cash flow
Operating profit before depreciation and amortisation was DKK 13,917m (DKK 13,643m in 2011).
The change in trade working capital was DKK 865m (DKK 361m in 2011). Average trade working capital to
net revenue was 1.0% at the end of 2012 versus 1.9% at the end of 2011.
Paid net interest etc. amounted to DKK -1,873m (DKK -2,049m in 2011).
Cash flow from operating activities was DKK 10,138m against DKK 9,789m in 2011. The 4% increase was
driven by improved trade working capital.
Cash flow from investing activities was DKK -5,888m against DKK -4,876m in 2011. Total operational
investments of DKK -5.1bn were above 2011 (DKK -4.6bn in 2011) and primarily included sales investments
and capacity expansion in Asia. Total financial investments of DKK -798m (DKK -314m in 2011) were mainly
related to the acquisition of associates, including the establishment of the Chongqing Jianiang Brewery Co.
Ltd. joint venture and the subsequent acquisition of an additional 18.58% shareholding.
Free cash flow was DKK 4,250m against DKK 4,913m for 2011.
1304236EogSN10237
Financing
At 31 December 2012, gross interest-bearing debt amounted to DKK 39.8bn and net interest-bearing debt
amounted to DKK 31.6bn. The difference of DKK 8.2bn was other interest-bearing assets, including DKK
5.8bn in cash and cash equivalents. Net interest-bearing debt was impacted by DKK 4.9bn from acquisition
of non-controlling interests, mainly related to the increased shareholding in Baltika Breweries.
Of the gross interest-bearing debt, 92% (DKK 36.5bn) was long term, i.e, with maturity after more than one
year. The net interest-bearing debt consisted primarily of facilities in EUR and approximately 86% was at
fixed interest (fixed-interest period exceeding one year).
The Group issued three bonds during 2012. In July, the Group placed a 7-year EUR 500m bond with a
coupon of 2.625%. The principal amount of this issue was increased to EUR 750m in November together
with the issue of a 10-year EUR 750m bond with a coupon of 2.625%.
INCENTIVE PROGRAMMES
In 2012, a total of 131,500 share options were granted to members of the Executive Board of the Carlsberg
Group.
In addition, a total of 202,955 performance share units (PSUs) have been granted to other management
personnel as part of the long-term incentive programme. The number of PSUs in this programme is
preliminary, as the final number will be determined on the basis of a per-unit value calculated as an average
of the share price on the first five trading days after publication of the present Company announcement.
The share options were granted to a total of two employees with an exercise price of DKK 444,60 (2011:
61,200 share options to three employees with an exercise price of DKK 566.78). The PSUs were granted to
a total of 319 employees with an exercise price of DKK 0 (2011: no grant).
Long-term incentive awards for the Executive Board for 2013 will be determined following the Annual
General Meeting.
RISK MANAGEMENT
At Carlsberg we consider effective risk management an integral part of our business operations as it reduces
uncertainty, helps the group achieve its strategic ambition and facilitates value creation for all stakeholders.
Carlsberg's comprehensive approach to risk management involves the identification, assessment,
prioritisation and economic management of risks that might prevent the Group from achieving its strategic
ambition. The Risk Management Policy sets out the requirements for the risk management process in the
Group.
Risk management framework
Carlsberg's risk management framework is a systematic process of risk identification, analysis and
evaluation, providing a comprehensive overview of strategic risks and enabling the Group to mitigate and
monitor the most significant risks.
Our risk management approach is top-down and covers all major entities across regions, markets and
functions. The framework is based at the strategic level to ensure that the risks related to carrying out the
Group's strategy — both short-term and long-term — are identified and that relevant preventive actions are
taken.
Risk management governance structure
Ultimately, the Supervisory Board is responsible for risk management. The Supervisory Board has appointed
the Audit Committee to act on behalf of the Supervisory Board. The Audit Committee monitors the overall
strategic risk exposure and the individual risk factors associated with the Group's activities. Monitoring is
mainly performed in connection with the quarterly reporting process. The Audit Committee adopts guidelines
for key areas of risk, monitors developments and sees that plans are in place for the management of
individual risk factors, including commercial and financial risks.
The Executive Committee (ExCom) is responsible for reviewing the overall risk exposure associated with the
Group's activities. Strategic risks are assessed according to a two-dimensional heat map rating system that
estimates the impact of the risk on net revenue or brand/image and the likelihood of the risk materialising.
Based on this assessment, ExCom updates the existing heat map to reflect changes in perceived risks to the
business, and a number of high-risk issues for the coming year are identified. In addition, any risks in relation
to the Group strategy for the subsequent three-year period are identified and appropriate actions are agreed
upon.
In accordance with the Risk Management Policy, ExCom identifies owners of short-term and long-term risks
who are responsible for mitigating the risks through a programme of risk-reducing activities.
Local entities and Group functions are responsible for the identification, evaluation, qualification, recording
and reporting of the management of strategic risks at local level. Local-level risk assessment follows the
same principles as Group- level risk assessment and is based upon the heat map described above. The
local risk review is carried out regularly, and, following the review, local risk owners are appointed and given
responsibility for mitigating the risks through a programme of risk-reducing activities.
A formal procedure is in place for on-going identification, assessment and reporting during the year of any
new or emerging risks that are determined to have a material impact upon the business.
Group Internal Audit is responsible for facilitating and following up on risk-reducing activities/action plans for
the most significant risks in the Group.
The financial risks, including foreign exchange, interest rate, and credit and liquidity risks, are described in
the notes to the consolidated financial statements.
Risk assessment 2013
In October 2012, ExCom carried out the annual risk management workshop to evaluate the adequacy of the
existing heat map. The review resulted in a revision of the identified high risks, and a revised set of high risks
for 2013-2017 were defined. Local risk management workshops and heat mapping were carried out during
the third quarter of 2012.
The correlation between the high risks identified at Group level and at local level was significant, which
indicates that the strategy and associated risks at local and regional level are aligned with the overall Group
strategy.
Among the risks identified, the change agenda related to the supply chain integration, legal restrictions in
Eastern Europe and increased promotional pressure from retail customers were classifi ed as high risks for
2013. These three risks are presented on the opposite page. The other strategic high risks identifi ed
included declining beer markets and the image of beer in Europe, increasing excise taxes, tightened
regulation and lack of top-line growth. The Group closely monitors and undertakes risk-reducing activities in
order to minimise the likelihood and potential impact of strategic high risks.
Economic downturn. The uncertain global environment and an economic downturn impacting consumer
sentiment were considered a high risk at the end of 2011.
A number of risk-reducing activities were initiated to mitigate the impact of an economic downturn. These
included a revision of the regional structure of the Group, which led to the Northern and Western Europe
entities being combined into one managed region to allow more focused allocation of resources, the
development and deployment of various tools to extract maximum return on investments, acceleration
of working capital initiatives, and on-going cost reduction initiatives.
1304236EogSN10238
The mitigation initiatives alongside other Group projects, such as the supply chain integration and the focus
on investment opportunities in growth markets outside Europe, mean that "economic downturn” is no longer
dealt with as a high risk for the Group.
Russian consumer sentiment and Russian dependency. Russia is the Group's largest market,
accounting for approximately 30% of beer volumes and 40% of operating profit. All other markets account for
less than 10% of Group operating profit. Group earnings are therefore highly exposed to the performance of
the Russian business.
For 2012, the dependency on Russia and the Russian consumer sentiment was viewed as a high risk. To
counter the risk, a number of changes were undertaken during 2011 and early 2012, including the roll-out of
a number of Group tools, a sharpened focus on public affairs, structural changes, the appointment of a new
CEO and other management changes, particularly within sales. In addition, the planning for 2012 was based
on detailed analyses and modelling of anticipated developments in consumer sentiment, inflation and other
macroeconomic indicators, pricing, changes in regulation etc. to allow a fast response if assumptions did not
materialise.
The many changes implemented in our Russian business have yielded satisfying results and,
notwithstanding the fact that the dependency on Russia remains high and, consequently, a strategic risk, it is
not as such deemed a high risk for 2013.
Ability to increase prices. Lack of ability to raise prices was identified as a high risk for 2012 as a large
number of our input costs increased and we therefore had to increase our sales prices accordingly.
Risk-mitigating activities included sophisticated value management tools to increase net sales/hl. Value
management levers embrace price, customer investment, promotions, value engineering and product mix.
Systems were established to allow ExCom to regularly monitor net sales/hl and deviation from budgets and
estimates. In addition, the Group invested in key account capability building.
The measures and actions taken to mitigate the risk of being able to increase prices were considered
adequate, and the risk is not considered a high risk for 2013.
CORPORATE SOCIAL RESPONSIBILITY
Integrating CSR into our business functions is necessary to Maintain our licence to operate, address risks,
and create commercial and efficiency opportunities. Across the Carlsberg Group, we make decisions that
have a positive impact on our business and the communities in which we operate and we are committed to
conducting our operations in a socially and environmentally responsible way.
In 2012, we further developed our CSR strategy and priorities and will consequently increase our efforts with
sustainable packaging and responsible drinking. Furthermore, we will continue our efforts to reduce
consumption of water and energy to maintain our position — according to the most recent data available — as
the world's most efficient global brewer from this perspective.
10
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2010 and 2011 restated due to changes in methodology. 2 For 2012, Carlsberg purchased renewable power documented by Guarantees of Origin certifi
cates to offset CO2 emissions. 3 Target revised in 2012 from 7.5 to 7.1 kg CO2 /hl.
CSR reporting and management
We publish an annual CSR report on eight different areas: environment, health & safety, community
engagement, labour & human rights, responsible sourcing, business ethics, responsible drinking and
marketing communication. The CSR report serves as our Communication on Progress to the United Nations
Global Compact, and further enables us to live up to our legal responsibility on CSR disclosure stated in
$99a of the Danish Financial Statements Act. As in previous years, a selected set of indicators used to track
our performance with respect to environment, health and safety has been independently assured by the
KPMG Climate Change & Sustainability team. Progress towards our targets on energy, CO2, water and last-
time accidents in production is shown on page 23 in the Carlsberg Report 2012. The fuli 2012 CSR report,
including the KPMG assurance statement and GRI G3 table, is available online at
http://www.carlsberggroup.com/investor/downloadcentre/Documents/CSR%20Reports/Carlsbergq%20Group
%20CSR%20Report%202012. pdf.
Reducing environmental impact
Carlsberg is proud to be the most efficient global brewer in terms of energy, CO2 and water, according to the
most recent data available. We reached our ambitious 2013 target for CO2 emissions per hl in production
already in 2012 and have therefore set a new target for 2013. The reductions are driven by focused efforts at
our production sites as well as offsetting emissions through the purchase of renewable power documented
by Guarantees of Origin certificates in Western Europe. Water efficiency continues to be an important area
for Carlsberg. Reducing water consumption in and around our breweries is of particular importance in parts
of the world where water resources are under pressure.
A sustainable packaging strategy
Packaging represents both a risk and an opportunity for Carlsberg. Constituting approx. 45% of the Group's
total CO2 emissions, packaging holds great potential in terms of reducing our environmental impact. An
increased focus on reducing the environmental impact of packaging is expected to bring about many benefits
both for Carlsberg and the communities where we operate.
Packaging affects nearly all steps in the value chain — from procurement to point-of-sale activities. In 2012,
we developed a new strategy for sustainable packaging. A baseline for primary packaging weight and CO2
11
1304236EogSN10239
emissions was established and reduction potentials were estimated. In 2013, we will implement a number of
projects and initiatives to reduce the environmental impact of our packaging. Read more about our
sustainable packaging efforts on page 38 in the Carlsberg Report 2012.
Promoting responsible drinking
While the vast majority of consumers enjoy beer in moderation as part of a healthy lifestyle, we recognise
that a minority of consumers may have a harmful drinking pattern leading to unwanted health and social
effects. As a responsible brewer, we are committed to fighting the harmful consumption of beer and
promoting responsible drinking.
THE AUDIT COMMITTEE
In 2012, the Audit Committee consisted of three members of the Supervisory Board. Jess Søderberg
(Chairman) and Richard Burrows were members of the Committee for the entire year. Povl Krogsgaard-
Larsen was a member of the Committee until he retired from the Supervisory Board in March 2012, after
which Flemming Besenbacher became a member of the Committee.
The Audit Committee is appointed for one year at a time. For 2013, Jess Søderberg, Richard Burrows,
Donna Cordner and Flemming Besenbacher have been appointed to the Committee. Jess Søderberg,
Richard Burrows and Donna Cordner all qualify as being independent of the Company and all possess the
relevant financial expertise.
The Audit Committee works according to Terms of Reference, which are reviewed and approved annually by
the Supervisory Board, and a detailed annual meeting plan approved by the Supervisory Board prior to the
beginning of each financial year. The Supervisory Board approved the current Terms of Reference and the
Audit Committee meeting plan for 2012 at its meeting in December 2011. The Terms of Reference are
available on the Company's website.
In 2012, the Audit Committee held five meetings. All members participated in three of the meetings. At two
meetings, one member was absent. In accordance with its Terms of Reference and annual meeting plan, the
Audit Committee has primarily carried out the following work:
a) Monitored the financial reporting process. The presentations to the Audit Committee and the Audit
Committee's discussions had special focus on management judgemenis, estimates, and changes in
accounting policies and procedures and the clarity of disclosures. In addition, they focused on compliance
with accounting standards and stock exchange and other legal requirements related to the financial reporting.
The Audit Committee also discussed the assumptions behind the Company's full-year profit expectations
before all releases of financial statements.
b) Monitored the effectiveness of the internal control and risk management systems. This work included
regular updates from Group Finance with regard to Carlsberg's financial control framework. The Audit
Committee reviewed the company's relevant Group-wide policies in relation to internal control and risk
management systems and the financial reporting process and received reports and presentations from
Group Finance about the effectiveness of these systems as well as the scope, plans and status for controls
throughout the year. The Audit Committee also reviewed quarterly reports from Group Internal Audit on risk
management, including the risk management process at Carlsberg and the status of risks identified in the
strategic risk map and heat map.
c) Monitored the internal audit function. The work included a review and approval of internal audit plans, a
review of the internal audit function and competences and an evaluation of the independence of Group
Internal Audit. The Audit Committee was presented with several of the tools used by Group Internal Audit in
its work and a benchmarking report comparing Carlsberg's internal audit function with other internal audit
functions worldwide.
d) Monitored the external audit of financial reporting and the independence of the external audit. The work
included discussions regarding audit planning and scope, terms of engagement, audit fees and a review at
each meeting of the external auditors' work and findings.
12
In accordance with the Terms of Reference, four of the Audit Committee meetings were held prior to the
approval and announcement of the external financial reporting.
In addition, and in accordance with the Terms of Reference, all minutes and material were made available to
the Supervisory Board, internal and external auditors and the Executive Board. The Audit Committee
Chairman also reported at each Supervisory Board meeting on the key findings and conclusions from the
previous Audit Committee meeting.
At each Audit Committee meeting, the Audit Committee examines relevant issues with the external auditors
and the head of Group Internal Audit, and the Committee invites other relevant function heads from the
Carlsberg organisation depending on the topics being discussed at the meeting. The heads of Group
Finance and Group Accounting are usually invited to participate in the Audit Committee meetings. In 2012,
the Audit Committee held regular meetings with the external auditors and Group Internal Audit as well as
with other relevant internal function heads without the presence of the Executive Board of the Company.
INTERNAL CONTROLS OF FINANCIAL REPORTING
Overall control environment
The Supervisory Board and the Executive Board have overall responsibility for the Group's control
environment. The Audit Committee appointed by the Supervisory Board is responsible for monitoring the
internal control and risk management systems related to the financial reporting process on an on-going basis.
The Company has a number of policies and procedures in key areas of financial reporting, including the
Finance Manual, the Controller Manual, the Chart of Authority, the Risk Management Policy, the Treasury
Policy, the Information Security Policy and the Business Ethics Policy. The policies and procedures apply to
all subsidiaries, and similar requirements are set out in collaboration with the partners of the joint ventures.
The internal control and risk management systems are designed to mitigate rather than eliminate the risks
identified in the financial reporting process. Internal controls related to the financial reporting process are
established to mitigate, detect and correct material misstatements in the consolidated financial statements.
The monitoring of risk and internal controls in relation to the financial reporting process are anchored by the
reporting of the maturity level of the control environment using Carlsberg's financial control framework.
Risk assessment
The risk assessment process related to the risk in relation to the financial reporting process is assessed
annually and approved by the Audit Committee.
The risk related to each accounting process and account in the consolidated financial statements is
assessed based on quantitative and qualitative factors. The associated financial reporting risks are identified
based on the evaluation of the impact of the risks materialising and the likelihood of the risks materialising.
The identified areas are divided into accounts with high, medium or low risk. High-risk areas are accounts
that include significant accounting estimates, including goodwill and special items, and the sales and
purchase process. Carlsberg's financial control framework reporting covers relevant Group companies and
functions to the level where high-risk accounts are covered at least 80% and medium-risk accounts at least
60%. Low-risk accounts are not covered.
Control activities
1304236EogSN10240
The Group has implemented a formalised financial reporting process for the strategy process, budget
process, quarterly estimates and monthly reporting on actual performance. The accounting information
reported by all Group companies is reviewed both by controllers with regional or functional in-depth
knowledge of the individual companies/functions and by technical accounting specialists. In addition,
significant Group companies have controllers with extensive commercial and/or accounting knowledge and
insight.
13
Based on the risk assessment, the Group has established minimum requirements for the conducting and
documentation of IT and manual control activities to Mmitigate identified significant financial reporting risks.
Carlsberg's financial control framework covers 132 controls relating to 23 accounting processes and areas.
The relevant Group companies and functions must ensure that Carlsberg's financial control framework is
implemented in their business and that individual controls are designed to cover the predefined specific risk.
The local management is responsible for ensuring that the internal control activities are performed and
documented, and is required to report the compliance quarterly to the Group's finance organisation.
The entities in the Group are dependent on IT systems. Any weaknesses in the system controls or IT
environment are compensated for by manual controls in order to mitigate any significant risk relating to the
financial reporting. This includes the implementation of compensating controls during the implementation of
the supply chain integration and business standardisation project given that an increased number of people
will have access to systems. Sweden will be the first country to implement the project in the spring of 2013.
Information and communication
The Group has established information and communication systems to ensure that accounting and internal
control compliance are established, including a finance manual, a controller manual and internal control
requirements.
Besides this, the Group has implemented a formalised reporting process for reporting monthly, quarterly,
budget and estimate figures from all countries and functions.
Monitoring
The Audit Committee's monitoring covers both the internal control environment and business risk. The
monitoring of the internal control environment is covered by Carlsberg's financial control framework. The
business risk is assessed and reviewed at multiple levels in the Group, such as periodic review of control
documentation, controller visits and audits performed by Group Internal Audit. Additionally, business risks
are discussed and monitored at business review meetings between the Executive Committee, regional
management and local management, at which potential financial impacts are identified.
The Audit Committee's Terms of Reference outline its roles and responsibilities concerning supervision and
monitoring of the internal control and risk management systems related to financial reporting. The monitoring
is performed on the basis of periodical reporting from the finance organisation, internal and external audit.
2013 EARNINGS EXPECTATIONS
For 2013, the Group expects beer market dynamics for all three regions to be similar to 2012.
2013 volumes are expected to be impacted by destocking in France and Russia in Q1 and stock building in
Russia in Q4 ahead of the RUB 3 excise tax increase in January 2014.
Reported cost of sales per hl is expected to be flat with limited variation between the three regions. in
organic terms, cost of sales per hl is expected to grow by low single-digit percentages.
The Group will continue to drive a focused commercial agenda, balancing volume and value share. For 2013,
we expect sales and marketing investments to revenue at the level of last year.
Costs associated with roll-out of the integrated supply chain and business standardisation project in Western
Europe will impact Group profits in 2013 by approximately DKK 300-400m.
Average all-in cost of debt will decline by some 50-75bp due to the maturity of a GBP 200m bond in
February 2013 and the bond issues during 2012.
The tax rate is expected to be 24-25%.
Capital expenditures are expected to remain at the level of 2012.
The outlook is based on an average EUR/RUB exchange rate of 42 (a EUR/RUB change of
+/- 1 impacts Group operating profit by slightly less than +/- DKK 100m).
Based on the above, for 2013 the Group expects:
. Operating profit before special items of around DKK 10bn.
+ Adjusted net profit to increase by a mid-single-digit percentage.
COMPANY ANNOUNCEMENTS
Date Event
27.02.2012 Carlsberg Group looks to strengthen and diversify Supervisory Board
with three new appointments
06.03.2012 Clarification as to Carlsberg's statement of intention to delist Baltika as
soon as possible
23.03.2012 Carlsberg Breweries Annual Report 2011
04.04.2012 Delisting of Baltika Breweries
15.05.2012 Voluntary offer to minority shareholders in Baltika Breweries submitted
to Russian authorities
31.05.2012 Voluntary offer to minority shareholders of Baltika Breweries
26.06.2012 Carlsberg issues 7-year EUR Notes
17.07.2012 MICEX approves delisting of Baltika Breweries
21.08.2012 Ownership of Baltika Breweries increased to 96.77%
17.09.2012 Compulsory purchase of outstanding shares in Baltika Breweries initiated
08.11.2012 Successful placement of two notes
14.11.2012 Carlsberg Group increases its ownership in Chinese joint venture
29.11.2012 Fuil ownership of Baltika Breweries
DISCLAIMER
This Annual Report contains forward-looking statements, including statements about the Group's sales, revenues, earnings, spending,
margins, cash flow, inventory, products, actions, plans, strategies, objectives and guidance with respect to the Group's future operating
results. Forward looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results,
performance or achievements, and may contain the words "believe, anticipate, expect, estimate, intend, plan, project, will be, will
continue, will result, could, may, might", or any variations of such words or other words with similar meanings. Any such statements are
subject to risks and uncertainties that could cause the Group's actual results to differ materially from the results discussed in such
forward-looking statements. Prospective information is based on management's then current expectations of forecasts. Such
information is subject to the risk that such expectations or forecasts, or the assumptions underlying such expectations or forecasts, may
change. The Group assumes no obligation to update any such forwardlooking statements to reflect actual results, changes in
assumptions or changes in other factors affecting such forward-looking statements. Some important risk factors that could cause the
Group's actual results to differ materially from those expressed in its forward-looking statements include, but are not limited to:
economic and political uncertainty (including interest rates and exchange rates), financial and regulatory developments, demand for the
Group's products, increasing industry consolidation, competition from other breweries, the availability and pricing of raw materials and
packaging materials, cost of energy, production- and distribution related issues, information technology failures, breach or unexpected
termination of contracts, price reductions resulting from market-driven price reductions, market acceptance of new products, changes
in consumer preferences, launches of rival products, stipulation of market value in the opening balance sheet of acquired entities,
litigation, environmental issues and other unforeseen factors. New risk factors can arise, and it may not be possible for management to
predict all such risk factors, nor to assess the impact of all such risk factors on the Group's business or the extent to which any
individual risk factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking
statement. Accordingly, forward-looking statements should not be relied on as a prediction of actual results.
15
1304236EogSN10241
Carlsberg Breweries Group
Consolidated financial statements 2012
Income statement
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the consolidated financial statements
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Significant accounting estimates and judgements
Segment information
Cost of sales
Sales and distribution expenses
Fees to auditors appointed at the Annual General Meeting
Other operating income and expenses
Special items
Financial income and financial expenses
Corporation tax
Non-controlling interests
Earnings per share
Staff costs and remuneration of the Supervisory Board and the Executive Board
Share-based payment
Intangible assets
Impairment test
Property, plant and equipment
Associates
Securities
Receivables
Inventories
Cash and cash equivalents
Assets held for sale and associated liabilities
Share capital
Borrowings
Retirement benefit obligations and similar obligations
Deferred tax assets and deferred tax liabilities
Provisions
Other liabilities etc.
Cash flows
Acquisition and disposal of entities
Acquisition and disposal of non-controlling interests
Specification of invested capital
Specification of net interest-bearing debt
Investments in proportionally consolidated entities
Financial risks
Financial instruments
Related party disclosures
Contingent liabilities and other commitments
Operating lease liabilities
Events after the reporting period
Parent company
Accounting policies
Group companies
Carlsberg Breweries Group
Income statement
DKK million Note 2012 2011
Revenue 93,100 86,555
Excise duties on beer and soft drinks etc. -25,899 -22,994
Net revenue 67,201 63,561
Cost of sales 3 -33,831 -31,788
Gross profit 33,370 31,773
Sales and distribution expenses 4 -19,645 -18,483
Administrative expenses 5 -4,174 -3,944
Other operating income 6 538 575
Other operating expenses 6 -292 -218
Share of profit after tax, associates 17 112 174
Operating profit before special items 9,909 9,877
Special items, net 7 -1,812 605
Financial income 8 918 634
Financial expenses 8 -2,653 -2,542
Profit before tax . 6,362 8,574
Corporation tax 9 -1,529 -2,156
Consolidated profit 4,833 6,418
Attributable to:
Non-controlling interests 10 638 543
Shareholders in Carlsberg Breweries A/S 4,195 5,875
DKK Note 2012 2011
Earnings per share 11
Basic earnings per share 8,373 11,727
Diluted earnings per share 8,373 11,727
17
1304236EogSN10242
Carlsberg Breweries Group
Statement of comprehensive income
DKK million Note . 2012 2011
Profit for the year 4,833 6,418
Other comprehensive income:
Foreign exchange adjustments of foreign entities 8 1,904 -1,839
Value adjustments of hedging instruments 8, 35, 36 111 -52
Retirement benefit obligations 25 -739 -1,081
Share of other comprehensive income in associates 17 4 3
Effect of hyperinflation 8 75 175
Other -2 -12
Corporation tax 9 87 321
Other comprehensive income 1,440 -2,485
Total comprehensive income 6,273 3,933
Attributable to:
Non-controlling interests 582 639
Shareholders in Carlsberg Breweries A/S 5,691 3,294
Foreign exchange adjustments arise on the translation of the financial statements of foreign entities with a
functional currency other than the Group's presentation currency, foreign exchange adjustments of assets
and liabilities which constitute part of the Group's net investment in a foreign entity and foreign exchange
adjustments of hedging transactions related to the Group's net investment in a foreign entity.
Value adjustments of hedging instruments comprise changes in the fair value of hedging transactions that
qualify for recognition as cash flow hedges and for which the hedged transaction has not yet been realised
and hedging transactions related to the Group's net investment in foreign entities.
Carlsberg Breweries Group
Statement of financial position
Assets
DKK million Note 31 Dec 2012 31 Dec 2011
Non-current assets:
Intangible assets 14, 15 80,010 77,834
Property, plant and equipment 15, 16 31,034 30,890
Investments in associates 17 5,768 5,007
Securities 18 112 106
Receivables 19 2,075 1,649
Deferred tax assets 26 1,192 871
Retirement benefit plan assets 25 4 5
Total non-current assets 120,195 116,362
Current assets:
Inventories 20 4,541 4,350
Trade receivables 19 7,872 7,870
Tax receivables 60 129
Other receivables 19 2,631 3,250
Prepayments 853 867
Securities 18 21 24
Cash and cash equivalents 21 5,748 3,108
Total current assets 21,726 19,598
Assets held for sale 22 27 235
Total assets 141,948 136,195
1304236EogSN10243
Carlsberg Breweries Group
Statement of financial position
Equity and liabilities
DKK million Note 31. Dec 2012 31. Dec 2011
Equity:
Share capital 23 501 501
Reserves -6,368 -8,632
Retained earnings 65,396 63,703
Equity, shareholders in Carlsberg Breweries A/S 59,529 55,572
Non-controlling interests 3,389 5,763
Total equity 62,918 61,335
Non-current liabilities:
Borrowings 24 36,479 34,137
Retirement benefit obligations and similar obligations 25 3,917 3,218
Deferred tax liabilities 26 8,930 8,870
Provisions 27 1,097 965
Other liabilities 28 1,201 1,087
Total non-current liabilities 51,624 48,277
Current liabilities:
Borrowings 24 3,352 2,591
Trade payables 11,906 11,039
Deposits on returnable packaging 1,381 1,291
Provisions 27 574 503
Corporation tax 551 533
Other liabilities, etc. 28 9,624 10,570
Total current liabilities 27,388 26,527
Liabilities associated with assets held for sale 22 18 56
Total liabilities 79,030 74,860
Total equity and liabilities 141,948 136,195
Carlsberg Breweries Group
Statement of changes in equity
2012
Shareholders in Carlsberg Breweries A/S
Equity,
shareholders
Available- in Carlsberg Non-
Share Currency Hedging for-sale- Total — Retained Breweries controlling Total
DKK million Sapital translation reserves investments reserves eamings — — SwS Interests equity
Equity at 1 January 2012 501 -7,622 -1,134 124 -8,632 63,703 55,572 5,763 61,335
Profit for the period - - - - - 4,195 4,195 638 4,833
Other comprehensive income:
Foreign exchange adjustments of foreign entities - 1,952 - - 1,952 - 1,952 -48 1,904
Value adjustments of hedging instruments - -216 327 - 111 - 111 - 111
Retirement benefit obligations - - - - - -727 -727 -12 -739
Share of other comprehensive income in associates - - - - - 4 4 - 4
Effect of hyperinflation - 71 - - 71 - 71 4 75
Other - - - - - -2 -2 - -2
Corporation tax - 56 7å - 130 -43 87 - 87
Other comprehensive income - 1,863 401 - 2,264 -768 1,496 -56 1,440
Total comprehensive income for the year - 1,863 401 - 2,264 3,427 5,691 582 6,273
Refund to parent company for exercise of share options - - - - - -33 -33 - -33
Change in expected future refunds for exercise of share options - - - - - 148 148 - 148
Share-based payment - - - . - - 48 48 - 48
Dividends paid to shareholders - - - - - - - "282 -282
Acquisition of non-controlling interests - - - - - 1,897 -1,897 -2 674 -4,571
Total changes in equity - 1,863 401 - 2,264 1,693 3,957 -2,374 1,583
Equity at 31 December 2012 501 -5,759 -733 124 6,368 65,396 59,529 3,389 62,918
2011
Shareholders in Carlsberg Breweries A/S
Equity,
shareholders
Available- in Carlsberg Non-
Share Currency Hedging for-sale- Total Retained Breweries controlling Total
DKK million Sapital translation reserves investments reserves eamings — — SwS, imterests equity,
Equity at 1 January 2011 501 -5,943 -1,099 124 -6,918 58,961 52,544 5,381 57,925
Profit for the period - - - - - 5,875 5,875 543 6,418
Other comprehensive income:
Foreign exchange adjustments of foreign entities - -1,941 - - -1,941 - -1,941 102 -1,839
Value adjustments of securities - -20 -32 - -52 -52 - -52
Retirement benefit obligations - - - - - -1,067 -1,067 -14 -1,081
Share of other comprehensive income in associates - - - - - 3 3 - 3
Effect of hyperinflation - 168 - - 166 - 166 9 175
Other - - - - - -11 -11 -1 -12
Corporation tax - 116 -3 - 113 208 321 - 321
Other comprehensive income - -1,679 -35 - -1,714 -867 -2,581 96 -2,485
Total comprehensive income for the year - -1,679 -35 - -1,714 5,008 3,294 639 3,933
Refund to parent company for exercise of share options - - - - - -39 -39 - -39
Change in expected future refunds for exercise of share options - - - - - -78 -78 - -78
Share-based payment - - - - - -5 -5 - -5
Share buy-back - - - - - - - -417 417
Dividends paid to shareholders - - - - ” - - -121 -121
Acquisition of non-controlling interests - - - - - -176 -176 -1,353 -1,529
Effect of hyperinflation - - - - - 32 32 2 34
Acquisition of entities - z - - - z - 1,632 1,832
Total changes in equity - -1,679 -35 - -1,714 4,742 3,028 382 3,410
Equity at 31 December 2011 501 "7,622 -1,134 124 -8,632 63,703 55,572 5,763 61,335
The proposed dividend of DKK 1,827 per share, in total DKK 915m (2011: DKK 0.00 per share, in total DKK Om), is included in retained earnings at 31 December
2012, No dividends are paid out in 2012 for 2011 (paid out in 2011 for 2010: No dividend). Dividends paid out to shareholders of Carlsberg Breweries A/S do not impact taxable income in
Carlsberg Breweries A/S.
Currency translation comprises accumulated foreign exchange adjustments arising on the translation of the financial statements of foreign entities with a functional currency other than the
Group's presentation currency, foreign exchange adjustments of assets and liabilities which constitute part of the Group's net investment in a foreign entity and foreign exchange
adjustments of hedging transactions related to the Group's net investment in foreign entities.
21
1304236EogSN10244
Carlsberg Breweries Group
Statement of cash flows
DKK million Note 2012 2011
Operating profit before special items 9,909 9,877
Adjustment for depreciation and amortisation 3,980 3,762
Adjustment for impairment losses" 28 4
Operating profit before depreciation, amortisation and impairment losses 13,917 13,643
Adjustment for other non-cash items 29 323 382
Change in trade working capital 29 865 361
Change in other working Capital 29 -505 -466
Restructuring costs paid -324 -441
Interest etc. received 378 209
interest etc. paid -2,251 -2,258
Corporation tax paid -2 265 -1,641
Cash fiow from operating activities 10,138 9,789
Acquisition of property, plant and equipment and intangible assets -5,061 -4,320
Disposal of property, plant and equipment and intangibie assets 440 276
Change in trade loans 29 447 -518
Total operational investments -5,068 -4,562
Free operating cash flow 5,070 5,227
Acquisition and disposal of entities, net 30 -27 -260
Acquisitions of associates -825 -75
Disposals of associates 3 15
Acquisition of financial assets -38 -9
Disposal of financial assets 21 7
Change in financial receivables 29 -28 -46
Dividends received 96 54
Total financial investments -798 "314
Disposal of other property, plant and equipment -22 -
Total other activities? -22 -
Cash flow from investing activities -5,888 -4,876
Free cash flow 4,250 4,913
Non-controlling interests 29 -5,198 -1,876
External financing 29 3,263 -2 781
Cash flow from financing activities -1,935 -4,657
Net cash flow 2,315 256
Cash and cash equivalents at 1 January? 2,798 2,546
Foreign exchange adjustment of cash and cash equivalents -65 -4
Cash and cash equivalents at 31 December? 21 5,048 2,798
1 Impairment losses excluding those reported in special items.
2 Other activities cover real estate and assets under construction, separate from beverage activities.
3 Cash and cash equivalents less bank overdrafts.
22
Carlsberg Breweries Group
Note
1 Significant accounting estimates and judgements
In preparing the Carlsberg Breweries Group's consolidated financial statements, management makes
various accounting estimates, judgements and assumptions which form the basis of presentation,
recognition and measurement of the Group's assets and liabilities. The most significant accounting estimates
and judgements are performed in relation to the accounting treatment of:
+ Business combinations
+ |Impairment testing
+ Useful lives and residual values for intangible assets with finite useful life and property, plant and
equipment
+ Restructurings
+ Deferred tax assets
+ Receivables
+ Retirement benefit obligations and similar obligations
+ Provisions and contingencies
The Group's accounting policies are described in detail in note 41 to the consolidated financial statements.
Estimation uncertainty
Determining the carrying amount of some assets and liabilities requires judgements, estimates and
assumptions concerning future events.
The judgements, estimates and assumptions made are based on historical experience and other factors
which management assesses to be reliable, but which, by their very nature, are associated with uncertainty
and unpredictability. These assumptions may prove incomplete or incorrect, and unexpected events or
circumstances May arise.
The slow recovery of most European economies continues causes a challenging consumer environment.
The consumption in some markets, including Denmark, France and Russia, has been significantly impacted
by excise duty increases in recent years and this will also be the case for 2013. The impact on business
development and the 2012 financials is described in the Management review, especially the sections
describing the segment developments.
Estimates in the consolidated financial statements for 2012 have been prepared taking the recovery in the
economic and financial markets into consideration, but still ensuring that one-off effects, which are not
expected to exist in the long term, do not affect estimation and determination of factors, including discount
rates and expectations of the future.
The assessment of the value of assets, including breweries, brands and goodwill, should be viewed with the
long-term perspective of the investment in mind.
The Group is also subject to risks and uncertainties which may lead to actual results differing from these
estimates, both positively and negatively. Specific risks for the Group are discussed in the relevant sections
of the Management review and in the notes.
Assumptions about the future and estimation of uncertainty at the end of the reporting period are described
in the notes when a significant risk of changes could result in material adjustments to the carrying amount of
assets or liabilities within the next financial year.
Business combinations
23
1304236EogSN10245
Purchase price allocation. For acquisitions of new entities, the assets, liabilities and contingent liabilities of
the acquiree are recognised using the acquisition method. The most significant assets acquired generally
comprise goodwill, trademarks, non-current assets, receivables and inventories. No active market exists for
the majority of the acquired assets and liabilities, in particular in respect of acquired intangible assets.
Accordingly, management makes estimates of the fair value of acquired assets, liabilities and contingent
liabilities. Depending on the nature of the item, the determined fair value of an item may be associated with
uncertainty and possibly adjusted subsequently.
The unallocated purchase price (positive amount) is recognised in the statement of financial position as
goodwill, which is allocated to the Group's cash-generating units. Management makes estimates of the
acquired cash-generating units, the cash-generating units that already existed in the Group and the
allocation of goodwill. The allocation of goodwill is based on the expected future cash flows for each activity.
In each business combination, management decides whether or not to recognise goodwill related to non-
controlling interests. If such goodwill is recognised, it is estimated based on the fair value of the non-
controlling interests less the non-controlling interests' share of the fair value of acquired assets, liabilities and
contingent liabilities. The fair value of the non-controlling interests is estimated based on the net present
value of expected future cash flows from the entity, the cost of newly acquired shareholdings in the entity
excluding a control premium paid, and other fair value models as applicable for the transaction.
In a step acquisition, the Group gains control of an entity in which the Group already holds a shareholding
immediately before the step acquisition. In 2011 the Group gained control of Lao Brewery, Laos, and Hue
Brewery, Vietnam, through step acquisitions. The purchase price allocation of these transactions was
completed during 2012.
Management estimates the total fair value of the shareholding in the entity held immediately after the
completion of the step acquisition. The estimated total fair value is accounted for as the cost of the total
shareholding in the entity. The shareholding held immediately before the step acquisition is re-measured at
fair value at the acquisition date. The resulting gain or loss is recognised in the income statement under
special items. The fair value of the shareholding held immediately before the step acquisition is calculated as
the estimated total fair value less the fair value of consideration paid for the shareholdings acquired in the
step acquisition and the fair value of non-controlling interests.
The total fair value is based on various valuation methods, including the net present value of expected future
cash flows from the entity, the cost of newly acquired shareholdings in the entity including a control premium
paid and other fair value models as applicable for the transaction, e.g. multiples.
The net present value of expected future cash flows (value in use) is based on budgets and business plans
for the next three years and projections for subsequent years as well as management's expectations for the
future development following the gain of control of the business. Key parameters are revenue growth,
operating margin, future capital expenditure and growth expectations beyond the next three years. Budgets
and business plans for the next three years are based on concrete commercial initiatives. Projections
beyond the next three years are based on general expectations and risks. As the risk on cash flows is not
included in the expected cash flows for newly acquired entities, the expected future cash flows are
discounted using a WACC rate, cf. the description below.
Management believes that the purchase price accounted for in the consolidated financial statements reflects
the best estimate of the total fair value of the business and the fair value of the non-controlling interests, and
hence the allocation of goodwill to controlling and non-controlling interests.
Trademarks. The value of the trademarks acquired and their expected useful lives are assessed based on
the trademarks” market position, expected long-term developments in the relevant markets and the
trademarks' profitability. The estimated value of acquired trademarks includes all future cash flows
associated with the trademarks, including the value of customer relations etc. related to the trademarks. For
most entities acquired there is a close relationship between trademarks and sales. The consumers' demand
for beer and other beverages drives sales, and therefore the value of the brand is closely linked to consumer
demands, while there is no separate value attached to customers (shops, bars etc.) as their choice of
products is driven by consumer demand.
When the value of a well-established trademark is expected to be maintained for an indefinite period in the
relevant markets, and these markets are expected to be profitable for a long period, the useful life of tne
trademark is determined to be indefinite. In the opinion of management, there is usually only a minimal risk
of the current situation in the markets reducing the useful life of trademarks, primarily due to the respective
market share in each market and the current and planned marketing efforts, which are helping to maintain
and increase the value of these trademarks.
For each trademark or group of trademarks, measurement is based on the relief from royalty method under
which the value is calculated based on expected future cash flows for the trademarks on the basis of key
assumptions about expected useful life, royalty rate and growth rate and a theoretically calculated tax effect.
A post-tax discount rate is used which reflects the risk-free interest rate with the addition of a risk premium
associated with the particular trademark.
The estimates of the expected useful life of each trademark are based on its relative local, regional and
global market strength. This assessment will also influence the estimate of the expected future royalty rate
that may be obtained for each trademark in a royalty agreement entered into with a third party on market
terms for each of the markets.
Customer agreements and portfolios. In business combinations, the value of acquired customer
agreements and customer portfolios is assessed based on the local market and trading conditions. The
relationship between trademarks and customers is carefully considered so that trademarks and customer
agreements are not both recognised on the basis of the same underlying cash flows. Usually there is a
particularly close relationship between trademark and sales, and no separate value for customer relations
will be recognised in these cases, as these relations are closely associated with the value of the acquired
trademarks.
Fair value of property, plant and equipment. In business combinations, the fair value of land and buildings,
standard production and office equipment is based, as far as possible, on the fair value of assets of similar
type and condition that may be bought and sold in the open market.
Property, plant and equipment for which there is no reliable evidence in the market of the fair value (in
particular breweries, including production equipment) are valued using the depreciated replacement cost
method. This method is based on the replacement cost of a similar asset with similar functionality and
capacity. The calculated replacement cost for each asset is then reduced to reflect functional and physical
obsolescence.
The expected synergies and the user-specific intentions for the expected use of assets are not included in
the determination of the fair value.
Impairment testing
Goodwill. In performing the annual impairment test of goodwill, an assessment is made as to whether the
individual units of the entity (cash-generating units) to which goodwill is allocated will be able to generate
sufficient positive net cash flows in the future to support the value of goodwill and other net assets of the
entity.
The cash-generating units are determined based on the Group structure, linkage of the cash flows between
entities and the individual entities' integration in regions or sub-regions. The structure and cash-generating
units are reassessed each year.
The estimates of future free cash flows (value in use) are based on budgets and business plans for the next
three years and projections for subsequent years. Key parameters are revenue growth, operating margin,
future capital expenditure and growth expectations beyond the next three years. Budgets and business plans
for the next three years are based on concrete commercial initiatives. Projections beyond the next three
years are based on general expectations and risks.
The cash flows used incorporate the effect of relevant future risks. Accordingly these risks are not
incorporated in the discount rates used. Potential upsides and downsides identified during the budget
25
1304236EogSN10246
process and in the daily business are reflected in scenarios for possible future cash flows for each individual
cash-generating unit. The scenarios reflect, among other things, factors such as assumptions on market,
price and input cost developments. Budgets and business plans do not incorporate the effect of future
restructurings and non-contracted capacity increases.
Pre-tax discount rates which reflect the risk-free borrowing interest rate in each particular geographical area
for the cash-generating units are used to calculate recoverable amounts.
Trademarks. Management performs an annual impairment test of trademarks with an indefinite life and an
assessment of whether the current market situation in the relevant market has reduced the value of
trademarks with a finite useful life. Management also assesses trademarks for changes in their useful lives.
When there is an indication of a reduction in the value or useful life, the trademark is tested for impairment
and is written down if necessary or the amortisation period is reassessed and if necessary, adjusted in line
with the trademark's changed useful life. The impairment test of trademarks is based on the same approach
used to determine the fair value at the acquisition date in business combinations.
Estimates of future earnings from trademarks are made using the same approach used to measure
trademarks in business combinations, cf. above. Assessment of indications of impairment of trademarks with
indefinite useful lives is based on the Group's total royalty income for each trademark.
The impairment test of trademarks resulted in an impairment loss of DKK 11m in 2012 (2011: DKK 450m)
related to a trademark having difficult market conditions and poor performance.
The useful life of trademarks is assessed yearly, especially in relation to trademarks which have been
impaired.
The discount rate is an after-tax WACC calculated country by country based on long-term expectations for
each trademark.
For a description of impairment testing for intangible assets, see note 15.
Property, plant and equipment. Property, plant and equipment are impairment-tested when there are
indications of impairment. Management performs an annual assessment of the assets' future application, e.g.
in relation to changes in production structure, restructurings or closing of breweries. The impairment test is
based on budgeted and estimated cash flows from the cash-generating unit. The assessment is based on
the lowest cash-generating unit affected by the changes that indicate impairment. The pre-tax discount rate
reflects the risk-free interest rate with the addition of a risk premium associated with the particular asset.
For a description of impairment testing for property, plant and equipment, see note 15.
Associates. Management performs an impairment test of investments in associates when there are
indications of impairment, e.g. due to loss-making activities or major changes in the business environment.
The impairment test is based on budgeted and estimated cash flows from the associate and related assets
which form an integrated cash-generating unit. The pre-tax discount rate reflects the risk-free interest rate
with the addition of a risk premium associated with the particular investments.
Discount and growth rates applied for 2012. The risk-free interest rates used in impairment tests
performed at year-end 2012 were based on observed market data. For countries where long-term risk-free
interest rates are not observable or valid due to specific national or macroeconomic changes affecting the
country, the interest rate is estimated based on observations from other markets and/or long-term
expectations expressed by major international credit institutions.
The risk premium for the risk-free interest rate (spread) was fixed at market price or slightly lower than the
current market level, which is comparable to the market level. The total interest rate, including spread,
thereby reflected the long-term interest rate applicable to the Group's investments in the individual markets.
For each country the applied growth rates for projections and discount rates were compared to ensure a
reasonable link between the two (real interest rate).
26
Useful lives and residual values for intangible assets with finite useful life and property, plant and
equipment. Intangible assets with finite useful life and property, plant and equipment are measured at cost
less accumulated amortisation, depreciation and impairment losses. Amortisation and depreciation are
recognised on a straight-line basis over the expected useful lives, taking into account any residual value. The
expected useful lives and residual values are determined based on past experience and expectations of the
future use of the assets. Reassessment of the expected future use is as a minimum made in connection with
an evaluation of changes in production structure, restructuring and brewery closures. The expected future
use and residual values may not be realised, which will require reassessment of useful lives and residual
values and recognition of impairment losses or losses on disposal of non-current assets. The amortisation
and depreciation periods used are described in the accounting policies in note 41 and the value of non-
current assets is specified in notes 14 and 16.
For operating equipment in the on-trade, a physical inspection of assets is carried out and the continuing use
evaluated in order to assess any indications of impairment.
Restructurings. In connection with restructurings, management reassesses useful lives and residual values
for non-current assets used in the entity undergoing restructuring. The extent and amount of onerous
contracts as well as employee and other obligations arising in connection with the restructuring are also
estimated.
Deferred tax assets. The Group recognises deferred tax assets, including the expected tax value of tax loss
carryforwards if management assesses that these tax assets can be offset against positive taxable income in
the foreseeable future. This judgement is made annually and based on budgets and business plans for the
coming years, including planned commercial initiatives.
Receivables. Receivables are measured at amortised cost less impairment.
Write-downs are made for bad debt losses due to inability to pay. If the ability to pay deteriorates in the
future, further write-downs may be necessary. Management performs analyses on the basis of customers'
expected ability to pay, historical information on payment patterns, doubtful debts, customer concentrations,
customers' creditworthiness, including the impact of the economic downturn on the markets in general as
well as on the individual customer, collateral received and the financial situation in the Group's sales
channels.
With regard to loans to the on-trade, the individual Group companies manage and control these loans as well
as standard trade credits in accordance with Group guidelines.
Derecognition of groups of receivables, e.g. in business combinations or other structured transactions, is
based on management's judgement of contractual terms and other factors related to the transaction.
Write-downs made are expected to be sufficient to cover losses. The financial uncertainty associated with
write-downs for bad debt losses is usually considered to be limited. As a result of the international economic
crisis, the risk of bad debt losses has increased. This has been taken into consideration in the assessment of
impairment at the end of the reporting period and in the general management and monitoring of usual trade
credits and loans to the on-trade.
Retirement benefit obligations and similar obligations. When calculating the value of the Group's defined
benefit plans, a number of significant actuarial assumptions are made, including discount rates, expected
return on plan assets, expected growth in wages and salaries, mortality and retirement benefits. The range
and weighted average for these assumptions are disclosed in note 25.
The value of the Group's defined benefit plans is based on valuations from external actuaries.
Provisions and contingencies. Management assesses provisions, contingent assets and contingent
liabilities and the likely outcome of pending or probable lawsuits etc. on an ongoing basis. The outcome
depends on future events, which are by nature uncertain. In assessing the likely outcome of lawsuits and tax
disputes etc., management bases its assessment on external legal assistance and established precedents.
27
1304236EogSN10247
In connection with large restructurings, management assesses the timing of costs to be incurred, which
influences the classification as current or non-current liabilities respectively. Provision for losses on onerous
procurement contracts is based on agreed terms with the supplier and expected fulfilment of the contract
based on the current estimate of volumes and use of raw materials. Warranty provisions are based on the
substance of the agreements entered into, including the guarantees issued covering customers in the on-
trade. Provisions are disclosed in note 27 and contingent liabilities in note 38.
Assessment in applied accounting policies
In applying the Group's accounting policies, management makes judgements which may significantly
influence the amounts recognised in the consolidated financial statements. Such judgements are performed
in relation to the accounting treatment of:
+ Business combinations
+ Financial instruments
- Revenue
+ Loans to the on-trade
- Special items
+ Inventories
+ Deposit liabilities
+ Leases and service contracts
Business combinations. When accounting for business combinations, new cooperation agreements and
changes in shareholder agreements, judgement is made concerning the classification of the acquired entity
as a subsidiary, joint venture or associate. This judgement is made on the basis of the agreements entered
into on the acquisition of ownership interests or voting rights in the entity and on the basis of shareholder
agreements etc. stipulating the actual level of influence over the entity.
This classification is significant as the recognition of proportionally consolidated joint ventures impacts the
financial statements differently from full consolidation of subsidiaries or recognition of associates using the
equity method. The amendment to IFRS preventing the use of proportional consolidation will have an impact
on the consolidated financial statements as of 1 January 2014 which is not material to the Group. Key figures
for proportionally consolidated entities are disclosed in note 34.
Financial instruments. When entering into financial instruments, management assesses whether the
instrument is an effective hedge of recognised assets and liabilities, expected future cash flows or financial
investments. The effectiveness of recognised hedge instruments is assessed at least quarterly. Any
ineffectiveness is recognised in the income statement.
Revenue recognition. Revenue from the sale of finished goods and goods for resale is recognised when
the risk has been transferred to the buyer. Revenue is measured excluding discounts, VAT and duties
(including excise duties on beer and soft drinks).
Management assesses the local rules on the imposition of duties for the purpose of classification either as
sales-related duties, which are deducted from revenue, or as part of cost of sales. Customer discounts are
recognised in the same period as the sales to which they relate. Customer discounts are deducted from
revenue.
Customer discounts based on accumulated sales volumes over a period of time are calculated on the basis
of expected total sales based on experience from previous sales, sales up to that date and other current
information about trading with the customer. These calculations are performed by management in
cooperation with sales managers.
Loans to the on-trade. Under certain circumstances the Group grants loans to on-trade customers in some
markets. The agreements are typically complex and cover several aspects of the relationship between the
parties. Management assesses the recognition and classification of income and expenses for each of these
agreements, including the allocation of revenue from the loan between income, customer discounts and
other operating income. Management also assesses whether developments of importance to the on-trade
could indicate impairment of on-trade loans in a market in general. Such developments also include changes
in local legislation, which may have an adverse effect on the earnings in the industry as a whole and where
the effect cannot be allocated to individual loans.
Special items. The use of special items entails management judgement in the separation from other items
in the income statement, cf. the accounting policies. Special items constitute items of income and expenses
which cannot be attributed directly to the Group's ordinary operating activities but concern fundamental
structural or process-related changes in the Group and any associated gains or losses on disposal.
Management carefully considers such changes in order to ensure the correct distinction between the
Group's operating activities and restructuring of the Group carried out to enhance the Group's future
earnings potential.
Special items also include other significant non-recurring items, such as impairment of goodwill and
trademarks, gains and losses on the disposal of activities, revaluation of shareholdings in an entity held
immediately before a step acquisition of that entity and transaction cost in a business combination.
Inventories. The cost of finished goods and work in progress comprises the cost of raw materials,
consumables, direct labour and indirect production overheads. Indirect production overheads comprise
indirect supplies, wages and salaries as well as maintenance and depreciation of the machinery, plant and
equipment used for production and costs of plant administration and management. Entities in the Group
which use standard costs in the measurement of inventories review these costs at least once a year, The
standard cost is also revised if it deviates by more than 5% from the actual cost of the individual product.
Indirect production overheads are calculated on the basis of relevant assumptions as to capacity utilisation,
production time and other factors pertaining to the individual product.
The net realisable value of inventories is calculated as the selling price less costs of completion and costs
necessary to make the sale and is determined taking into account marketability, obsolescence and
developments in expected selling price. The calculation of net realisable value is mainly relevant to packing
materials, packaging and spare parts. Net realisable value is normally not calculated for beer and soft drinks
because their limited shelf-life means that slow-moving goods must be scrapped instead. Following the
economic downturn, the individual entities in the Group have paid special attention to inventory turnover and
the remaining shelf-life when determining net realisable value and scrapping.
Deposit liabilities. In a number of countries, the local entities have a legal or constructive obligation to buy
back returnable packaging from the market. When invoicing customers, a deposit is added to the sales price
and the entity recognises a deposit liability. The deposit is paid out on return of bottles. The deposit liability
provided for is estimated based on movements during the year in recognised deposit liabilities and on
historical information about return rates and loss of bottles in the market.
Leases and service contracts. The Group has entered into a number of leases and service contracts.
When entering into these agreements, management considers the substance of the service being rendered
in order to classify the agreement as either a lease or a service contract. In making this judgement, particular
importance is attached to whether fulfilment of the agreement depends on the use of specific assets. The
Group's leases and significant service contracts are disclosed in notes 38 and 39.
For leases an assessment is made as to whether the lease is a finance lease or an operating lease. The
Group has mainly entered into operating leases for standardised assets with a short duration relative to the
life of the assets and accordingly the leases are classified as operating leases.
29
1304236EogSN10248
Carlsberg Breweries Group
Note
2
Segment information
The Group's activities are segmented on the basis of geographical regions in accordance with the management reporting structure for
2012.
For segment reporting purposes, the Chief Operating Decision Maker is the Executive Committee. The Executive Committee manages
and makes business decisions based on geographical segments. Segments are managed and decisions are made based on business
performance measured as operating profit before special items. Decisions on intra-Group sale of trademarks
and activities, financing and tax planning are made based on information for the Group as a whole and therefore not segmented. The
"Not allocated” segment relates mainly to headquarters functions which consist of management fees, royalty charges, central
marketing, sponsorships, receivables etc. and of eliminations. Intra-segment revenue is based on arm's length prices.
The non-beverage activities are managed separately and therefore also shown separately. The segmentation reflects the structure
used for interna! reporting and monitoring of the strategic and financial targets of the Group.
A segment's operating profit/loss before special items includes revenue, operating costs and share of profit/loss in associates to the
extent that they can be allocated directly to the individual segment. Income and expenses related to Group functions have not been
allocated and, as is the case with eliminations and non-brewing activities, are not included in the operating profit/loss before special
items of the segments.
Non-current segment assets comprise intangible assets and property, plant and equipment used directly in the operating activities of
the segment. Current segment assets are allocated to the segments to the extent that they can be allocated directly to the individual
segment, including inventories, trade receivables, other receivables and prepayments. Allocated goodwill and trademarks by segment
are specified in note 15.
2012
Carlsberg
Western Eastern Not — Breweries
DKK million Europe Europe Asia allocated Group, total
Income statement:
Net revenue 37,672 20,222 9,114 193 67,201
Intra-segment revenue 55 14 - 69 -
Total net revenue 37,727 20,236 9,114 124 67,201
Share of profit after tax, associates 4 4 104 - 112
Operating profit before special items 5,121 4,302 1,685 -1,199 9,909
Special items, net -1,812
Financia] items, net -1,735
Profit before tax 6,362
Corporation tax -1,529
Consolidated profit 4,833
Operating margin 13.6% 21.3% 18.5% 14.7%
Not allocated net revenue, DKK 124m, consists of DKK 7,641m net revenue from other companies and activities and DKK 7,517m
from eliminations of sales between these other companies and the segments.
Not allocated operating profit before special items, DKK -1,199m, consists of DKK -1,217m from other companies and activities and
DKK 18m from eliminations.
Other segment items:
Total assets 52,061 77,698 21,818 -9,629 141,948
Assets held for sale 27 - - - 27
Invested capital, cf. note 32 28,002 67,194 17,075 -3,175 109,096
Acquisition of property, plant and equipment and intangible
assets 2,114 1,233 1,339 374 5,060
Depreciation and amortisation 1,835 1,582 508 55 3,980
Impairment losses 316 679 - - 995
Not allocated total assets, DKK -9,629m, comprise entities that are not business segments and eliminations of investments in
subsidiaries, receivables, loans etc.
30
Carlsberg Breweries Group
Note
2
Segment information
2011
Carlsberg
Western Eastern Not — Breweries
DKK Million Europe Europe Asia allocated Group, total
Income statement:
Net revenue 36,840 19,702 6,838 181 63,561
Intra-segment revenue 39 17 - -56 -
Total net revenue 36,879 19,719 6,838 125 63,561
Share of profit after tax, associates 42 5 127 - 174
Operating profit before special items 5,419 4,286 1,286 -1,114 9,877
Special items, net 605
Financial items, net -1,908
Profit before tax 8,574
Corporation tax -2 156
Consolidated profit 6,418
Operating margin 14.7% 21.7% 18.8% 15.5%
Not allocated net revenue, DKK 125m, consists of DKK 6,433m net revenue from other companies and activities and DKK 6,308m
from eliminations of sales between these other companies and the segments.
Not allocated operating profit before special items, DKK -1,114m, consists of DKK -1,169m from other companies and activities and
DKK 58m from eliminations.
Other segment items:
Total assets 52,113
Assets held for sale 235
Invested capital, cf. note 32 27,754
Acquisition of property, plant and equipment and intangible
assets 1,946
Depreciation and amortisation 1,884
Impairment losses 379
76,703
65,285
1,153
1,467
750
20,388
15,631
889
356
-13,009 136,195
- 235
-2,678 105,992
332 4,320
55 3,762
250 1,379
Not allocated total assets, DKK -13,009m, comprise entities that are not business segments and eliminations of investments in
subsidiaries, receivables, loans etc.
Information on geographical allocation of net revenue and non-current assets
Net revenue
Non-current assets
2012 2011 2012 2011
Denmark (Carlsberg Breweries A/S's domicile) 4,572 4,722 2,053 2,086
Russia 16,520 16,070 62,397 60,945
Other countries 46,109 42,769 53,987 51,628
Total 67,201 63,561 118,437 114,659
The geographical allocation is made on the basis of the selling countries" domicile and comprises countries each accounting for more
than 10% of the Group's consolidated net revenue as well as that of the domicile country.
Non-current assets comprise non-current assets other than financial instruments, deferred tax assets and retirement benefit plan assets.
A
Information about major customers
The Carlsberg Breweries Group does not have customers that account for more than 10% of the Group's net revenue.
31
1304236EogSN10249
Carlsberg Breweries Group
Note
3 Cost of sales
DKK million 2012 2011
Cost of materials 19,566 18,699
Direct staff costs 1,375 1,270
Machinery costs 902 839
Depreciation, amortisation and impairment losses 2,815 2,671
Indirect production overheads 3,682 3,432
Purchased finished goods and other costs 5,491 4,877
Total 33,831 31,788
Of which is staff costs, cf. note 12 2830 2,652
4 Sales and distribution expenses
DKK million 2012 2011
Marketing expenses 7,009 6,554
Sales expenses 5,277 4,937
Distribution expenses 7,359 6,992
Total 19,645 18,483
Of which is staff costs, cf. note 12 5,068 5,872
5 Fees to auditors appointed at the Annual General Meeting
DKK million 2012 2011
KPMG:
Statutory audit 24 26
Assurance engagements - -
Tax advisory 3 4
Other services 14 3
Assurance engagements include fees for assurances in relation to opinions to third parties, including fee for assurances in
relation to bond issue. Tax advisory services mainly relate to fees for assistance on Group restructuring projects and general tax
consultancy.
Other services include fee for advice and services in relation to acquisition and disposal of entities, which includes accounting
and tax advice and due diligence.
32
Carlsberg Breweries Group
Note
Other operating income and expenses
DKK million 2012 2011
Other operating income:
Gains on disposal of property, plant and equipment and intangible assets 157 123
Interest and amortisation of on-trade loans 91 102
Rental income, real estate 42 73
Income from grants and subsidies 28 33
Other 220 244
Total 538 575
Other operating expenses:
Loss on disposal of property, plant and equipment and intangible assets within beverage activities -45 -56
Losses and write-downs on on-trade loans -55 -1
Real estate costs -»45 -43
Expenses relating to research centres -44 -53
Other -103 -65
Total -292 -218
Of which is staff costs, cf. note 12 -3 -14
33
1304236EogSN10250
Carlsberg Breweries Group
Note
7 Special items
DKK million 2012 2011
Special items, income:
Gain on disposal of entities and adjustment to gain in prior year 107 64
Revaluation gain on step acquisition of entities - 1,300
Other restructuring income etc., other entities - 40
Gain on disposal of subsidiaries z 866
Income total 107 2,270
Special items, cost:
Impairment of trademarks - -450
Impairment and restructuring of Carlsberg Uzbekistan -290 -300
Impairment of Nordic Getrånke GmbH, Germany -118 -260
Impairment of the business standardisation project - -250
Impairment of Vena Brewery, production and sales equipment in
connection with restructuring. Baltika Breweries, Russia -589 -
Impairment of other non-current assets -93 -31
Restructuring of Carlsberg Sverige (2011: Impairment of non-current
assets in connection with change of production structure) -76 -47
Restructuring of Ringnes AS, Norway -262 -
Termination benefits and impairment of non-current assets in connection with restructuring
at Carlsberg Deutschland -37 -94
Impairment and restructuring in relation to optimisation of packaging standardisation in Western Europe - -36
Termination benefits in connection with restructuring in central headquarter functions -10 -70
Restructuring of Leeds Brewery, Carisberg UK -4 -57
Termination benefits in connection with restructuring of sales force,
logistic and administration, Carlsberg UK - -16
Termination benefits and impairment of non-current assets in connection with new administration structure
at Brasseries Kronenbourg, France -76 -32
Termination benefit etc., Carlsberg Italia -16 -10
Termination benefits etc, in connection with Operational Excellence Programmes -86 -57
Loss on sale of Sorex, France - -86
Provision for onerous malt contracts, including reversal of unused provision from previous year - 150
Costs in relation to acquisition of Hue Brewery Itd., Vietnam - -14
Loss on disposal of subsidiary -176 -
Other restructuring costs etc., other entities 86 -5
Cost total -1,919 -1,665
Special items, net -1,812 605
If special items had been recognised in operating profit before special items, they would have been
included in the following items:
Cost of sales -1,366 -857
Sales and distribution expenses -83 -5
Administrative expenses -67 -372
Other operating income - 2,270
Other operating expenses -176 -86
Share of profit after tax in associates -120 -254
-1,812 696
JImpairment of goodwill - -91
Special items, net -1,812 605
Special items include significant income and costs of a special nature in terms of the Group's revenue-generating operating activities, such as the
cost of extensive structuring of processes and fundamental structural adjustments, as well as any gains or losses arising from disposals in this
connection which have a material effect over a given period. This item also includes significant non-recurring items, including impairment of goodwill
and trademarks and gains and losses on the disposal of activities.
Special items also include gains on revaluation of shareholdings in associates prior to a step acquisition of the entities.
Special items, income, amounted to DKK 107m (2011: DKK 2,270m) and relate to adjustment of gains and losses on disposal of entities in prior
years.
Speciat items, costs, amounted to DKK -1,919m (2011: DKK -1,665m).
The impairment and restructuring of Carlsberg Uzbekistan, DKK 290m, Nordic Getrånke GmbH, DKK 118m, and Vena Brewery, production and
sales equipment in Russia DKK 589m, are related to non-current assets in the entities due to difficult market conditions, poor performance and profit
outlook.
34
Carlsberg Breweries Group
Note
8 Financial income and financial expenses
Financial items recognised in the income statement
DKK million 2012 2011
Financial income:
Interest income 361 201
Dividends from securities 4 10
Fair value adjustments of financial instruments, net, cf. note 36 191 11
Foreign exchange gains, net - 54
Realised gains on disposal of associates and securities 16 -
Expected return on plan assets, defined benefit plans 323 327
Other financial income 23 31
Total 918 634
Interest income relates to interest from cash and cash equivalents measured at amortised cost.
Financial expenses:
Interest expenses -1,890 -1,908
Foreign exchange losses, net -172 -
Realised losses on disposal of securities -22 -1
Impairment of financial assets -2 -5
Interest cost on obligations, defined benefit plans -380 -376
Effect of hyperinflation -9 -59
Other financial expenses -178 -193
Total -2,653 -2,542
Financial items, net, recognised in the income statement -1,735 -1,908
Interest expenses primarily relate to interest on borrowings measured at amortised cost.
Interest, losses and write-downs on trade loans, which are measured at amortised cost, are included as revenue and cost in
other operating income and expenses (cf. note 6), as such loans are seen as a prepaid discount to the customer.
Financial items recognised in other comprehensive income
DKK million 2012 2011
rd
Foreign exchange adjustments of foreign entities: Q
Foreign currency translation of foreign entities 1,904 -1,837 OQ
Recycling to income statement of cumulative translation differences related to >=
foreign operations acquired in step acquisitions/disposed of during the year - -2 Ul
Effect of hyperinflation 75 175 øm
Total 1,979 1,664 og
Value adjustments of hedging instruments: øm
Change in fair value of effective portion of cash flow hedges -295 -453 9
Change in fair value of cash flow hedges transferred to the income statement 622 421 O
Change in fair value of net investment hedges -216 -20 ”
Total 111 -52 rl
Financial items, net, recognised in other comprehensive income 2,090 -1,716
Financial items, net, recognised in statement of comprehensive income 355 -3,624
Of net change in fair value of cash flow hedges transferred to the income statement DKK 266m (2011: DKK 99m) is included in
cost of sales and DKK 356m (2011; DKK 322m) is included in financial items.
35
Carlsberg Breweries Group
Note
Corporation tax
2012 2011
Other Other
Total compre- compre- Total compre- compre-
hensive hensive Income hensive hensive Income
income income statement income income statement
Tax for the year can be specified as follows:
Current tax 1,742 -189 1,553 1,913 -9 1,904
Change in deferred tax during the year -183 193 10 -6 211 205
Change in deferred tax from change in tax rate 27 - 27 -15 - -15
Adjustments to tax for previous years -144 83 61 -57 119 62
Total 1,442 87 1,529 1,835 321 2,156
2012 2011
Reconciliation of the effective tax rate for the year: % DKK million % DKK million
Nominal weighted tax rate for Carlsberg Breweries Group 20.5% 1,302 22.7% 1,944
Change in tax rate 0.4% 27 -0.2% -15
Adjustments to tax for previous years -0.9% -61 0,7% 62
Non-capitalised tax assets, net movements -1.9% -119 3.0% 264
Non-taxable income -0.4% -26 -0.7% -64
Non-deductible expenses 3.4% 216 2.3% 194
Tax incentives etc. -1.7% -109 -1.4% -121
Special items/tax in associates 0.7% 43 -1.8% -156
Withholding taxes 4.1% 269 1.0% 86
Other -0.2% -13 -0.4% -38
Effective tax rate for the year 24.0% 1,529 25.2% 2,156
Nominal weighted tax rate for the Group is calculated as domestic tax rates applicable to profits in the entities as a proportion of each entity's share
of the Group's profit before tax.
Tax recognised in other comprehensive income:
2012 2011
Tax Recognised Tax
Recognised (expense) item before (expense)
DKK million item before tax benefit Net of tax tax benefit Net of tax
Foreign exchange adjustments 1,904 - 1,904 -1,839 - -1,839
Hedging instruments 111 133 244 -52 113 61
Retirement benefit obligations -739 130 -609 -1,081 205 -876
Share of other comprehensive income in associates 4 - 4 3 - 3
Effect of hyperinflation 75 - 75 175 - 175
Other -2 -176 -178 -12 3 -9
Total 1,353 87 1,440 -2,806 321 -2,485
An interest ceiling reduces the tax deduction for value adjustments of hedging instruments recognised in other comprehensive income.
DKK million 2012 2011
The change in deferred tax recognised in the income statement can be broken down as follows:
Tax losses 32 93
Deferred tax from change in tax rate 27 -15
Intangible ts and property, plant and equipment etc. -22 112
Change in deferred tax recognised in the income statement 37 190
Adjustment to tax for previous years DKK 83m (2011: DKK 119m) is included in the tax income/expense for hedging instruments.
36
Carlsberg Breweries Group
Note
10
11
Non-controlling interests
DKK million
Non-controlling interests” share of profit for the year relates to the following:
Baltika Breweries 158 294
Carlsberg Malaysia Group 169 146
Asia, other 291 90
Other regions 20 13
Total 638 543
The non-controlling interests' share of Baltika Breweries has decreased compared to 2011 following the Carlsberg Group obtained 100%
ownership of the entity in the fall of 2012.
The increase in Asia mainly relates to the full consolidation of Lao Brewery Co. Ltd. from the fall 2011.
Earnings per share
2012 2011
DKK
Basic earnings per share of DKK 1.000 (EPS) 8,373 11,727
1,000 shares
Average number of shares 501 501
DKK million
Consolidated profit 4,833 6,418
Non-controlling interests -638 -543
Profit attributable to shareholders in Carlsberg Breweries A/S 4,195 5,875
37
1304236EogSN10252
Carlsberg Breweries Group
Notes
12
Staff costs and remuneration of the Supervisory Board and the Executive Board
DKK million 2012 2011
Salaries and other remuneration 7,926 8,860
Severance pay 351 192
Social security costs 1,240 1,220
Retirement benefit costs - defined contribution plans 192 190
Retirement benefit costs - defined benefit plans 113 73
Share-based payment 48 -5
Other employee benefits 305 218
Total 10,175 10,748
Staff costs are included in the following items in the income statement:
Cost of sales 2,830 2,652
Sales and distribution expenses 5,068 5,872
Administrative expenses 1,975 2,037
Other operating expenses 3 14
Special items (restructuring) 298 173
Total 10,175 10,748
The Group had an average of 41,614 (2011: 42,552) full-time employees during the year.
Remuneration of Executive Board and Key management personnel:
DKK million
2012 2011 2010 2012 2011
Jørgen Buhl Jørn P. Jørgen Buh! Jørn P. Jørgen Buhl Jørn P.
Rasmussen Jensen Rasmussen Jensen Rasmussen Jensen, ,… Key management personnel
Fixed salary 10.5 9.1 10.5 9.1 10.5 9.1 50.5 52.1
Cash bonus 6.3 55 - - 6.3 5.5 21.3 22.1
Non-monetary benefits 0.3 0.3 0.3 0.3 0.3 0.2 5,5 3.4
Share-based payment 57 54 4.0 4.0 3.5 35 11.2 4.2
Total 22.8 20.3 14.8 13.4 20.6 18.3 88.5 81.8
Executive Boards share optlons
Number DKK million
Grant 1 Jan. 31 Dec. For exercise
year Exercise year 2012 Granted Exercised 2012 31 Dec. Fair value
Jørgen Buhl Rasmussen:
2007 2010-2015 12,388 - - 12,388 12,388 1
2008 2011-2016 44,776 - - 44,776 44,776 6
2009 2012-2017 30,000 - - 30,000 30,000 11
2010 2013-2018 15,000 - - 15,000 - 3
2011 2014-2019 30,000 - - 30,000 - 4
2012 2015-2020 69,500 - 69,500 - 14
Total 132,164 69,500 - 201,664 87,164 39
Jørn P. Jensen:
2004 2007-2012 13,008 - -13,008 - -
2005 2008-2013 12,388 - - 12,388 12,388 4
2006 2009-2014 12,388 - - 12,388 12,388 3
2007 2010-2015 12,388 - - 12,388 12,388 1
2008 2011-2016 44,776 - - 44,776 44,776 6
2009 2012-2017 30,000 - - 30,000 30,000 11
2010 2013-2018 15,000 - - 15,000 - 3
2011 2014-2019 30,000 - - 30,000 - 4
2012 2015-2020 62,000 - 62,000 - 12
Total 169,948 62,000 -13,008 218,940 111,940 44
Executive Board total 302,112 131,500 -13,008 420,604 199,104 83
Remuneration of the Executive Board and key management personnel is based on a fixed salary, cash bonus payments and non-monetary benefits such as company car, telephone
etc. Furthermore, share option programmes and incentive schemes have been established for the Executive Board and other management personnel as defined in note 13. These
programmes and schemes cover a number of years.
Employment contracts for members of the Executive Board contain terms and conditions that are considered common to executive board members in Danish listed companies,
including terms of notice and non-competition cClauses.
Key management personnel comprise Senior Vice Presidents and Vice Presidents heading regions and Group business functions and CEOs in significant Group entities. The key
management personnel are, together with the Executive Board, responsible for the planning, directing and controlling of the activities of the Group.
In respect of other benefits and bonus schemes, the remuneration of CEOs in foreign subsidiaries is based on local terms and conditions.
The Supervisory Board of Carlsberg Breweries A/S received remuneration of DKK Om (2011:.DKK Om). The Supervisory Board is not included in share option
programmes, retirement benefit plans and other schemes,
38
Carlsberg Breweries Group
Notes
13
Share-based payment
The Carlsberg Breweries Group has set up share option programmes to attract, retain and motivate the Group's Executive Board and other levels of management personnel and to align their
Interests with those of the shareholders. Key management personnel comprise Senior Vice Presidents and Vice Presidents heading regions and Group business functions and CEOs in the
most significant Group entities. Other management personnel comprise Vice Presidents and other key employees as well as the management of significant subsidiaries, No share option
programme has been set up for Carlsberg Breweries A/S's Supervisory Board.
Since 2001 the Group has issued share options yearly as part of its remuneration packages. In 2011 the Group introduced a new long-term incentive programme. The value of the remuneration
received under the long-t: i ive pr is asap p! ge of the employee's yearly salary. The new long-term programme can be settled in performance
share units (PSUs).
A participant In the long-term incentive programme will receive a number of PSUs, each giving the right to receive one B share in Carlsberg A/S. The exact number of PSUs granted is
determined after the publication of the Annual Report for the year in which the PSUs are granted.
The general terms and conditions for the two programmes:
Share option programme Long-term incentive p Nnme
Vesting conditions 3 years of service 3 years of service and Group's: financial
performance for the grant year
Earliest time of exercise 3 years from grant date -
Latest time of exercise 8 years from grant date Shares are transferred to the recipient
immediately after PSUs have vested
Time of valuation of option Immediately after publication of the Annual Immediately after publication of the Annual
Report for the Group for the prior reporting — Report for the Group for the grant year
period
Upon resignation, a proportion of the options may be exercised within one to three months unless special severance terms are agreed. Special terms and conditions apply In the case of
retirement, iliness, death or changes in Carlsberg A/S's capital resources. Each share option entitles ihe holder to purchase one class B share in Carlsberg A/S. The options may only be settled
in shares (equity-settled scheme).
Share option programme
In 2012, a total of 131,500 (2011: 61,200) share options were granted to 2 (2011: 3) employees. The fair value at grant date of these options was a total of DKK 19m (2011: DKK 11m). The falr
value is recognised in the income statement over the vesting period of three years, In 2012, DKK 5m (2011: DKK 3m) was recognised in respect of share options granted in the year. The total
cost of share-based payment was DKK 17m (2011: DKK 22m) in respect of options granted in the period 2009-2012 (2011: 2008-2011). The cost of share-based payment is included in staff
costs. At 31 December 2012, an amount of DKK 19m (2011: DKK 17m) has not been recognised in respect of current share option programmes.
The average share price at the exercise date for share options was DKK 494 (2011: DKK 571). At 31 December 2012, the exercise price for outstanding share options was in the range of DKK
203.50 to DKK 566,78 (2011: DKK 203.50 ta DKK 566.78). The average remaining contractual life was 3,8 years (2011: 4.2 years).
Refunds etc. between Carlsberg A/S, Carlsberg Breweries A/S and subsidiaries in the Carlsberg Breweries Group are recognised directly in equity and total DKK -33m (2011: DKK -39m).
Change in expected future refunds based on the fair value of share options at year end are recognised directly in equity by. DKK 148m (2011: DKK -78m).
Share option programme Number Exercise price
Key Other Fixed,
Executive management == management Resigned weighted
board personnel personnel employees Total average
Share opti ing at 31 D 2010 255,120 164,174 600,455 270,391 1,290,140 372.40
Granted 60,000 1,200 - - 61,200 566,78
Forfeited/expired - -3,342 -13,530 - -16,872 360.03
Exercised -13,008 -21,387 -102,873 -55,439 -192,707 347,85
Transferred - -34,752 -35,029 69,781 - 388,75
Share opti: ding at 31 D 2011 302,112 105,893 449,023 284,733 1,141,761 387.16
Granted 131,500 - - - 131,500 444,60
Forfeited/expired - - »4,707 - -4,707 270.91
Exercised -13,008 -11,191 -71,545 -70,786 -166,530 259,52
Transferred - -17,946 -23,162 41,108 - 412.95
Share options outstanding at 31 December 2012 420,604 76,756 349,609 255,055 1,102,024 413.92
Exercisable at 31 December 2011 152,112 79,220 255,081 232,789 719,202 277.90
Exercised options as % of share capital of Carlsberg A/S 0.01% 0.01% 0.07% 0,04% 0,13%
Exercisable at 31 December 2012 199,104 68,369 193,902 329,859 791,235 396.49
Exercised options as % of share capital of Carlsberg A/S 0,01% 0.01% 0.05% 0.05% 0.12%
Assumptions 2012 2011
Expected life
Expiring Exercise — Expected Risk-free Expected of options, Fair value at Options Options
Grant date date Programme price volatility interestrate dividend yleld years grant date [: OL i
Share option programme:
01.03.2004 01.03.2012 Grant 2004 216,65 29% 3.5% 1.8% 5,5 81.51 - 21,463
01.03.2005 01.03.2013 Grant 2005 232.71 27% 3.1% 1.7% 5,5 74.27 39,881 62,934
01.03.2006 01.03.2014 Grant 2006 306.89 19% 3.3% 1.3% 5,5 89.37 87,812 107,116
01.03.2007 01.03.2015 Grant 2007 472.11 19% 3,9% 1.0% 5,5 136.67 148,161 157,143
01.03.2008 01.03.2016 Grant 2008 457.82 22% 3,6% 1.1% 5,5 141.72 157,281 169,501
01.06.2008 01.06.2016 Special grant 531.80 23% 4,3% 0.9% 5,5 181.08 161,044 161,044
01.09.2008 01.09.2016 Special grant 448,18 27% 4.3% 1.3% 5,5 128.83 40,000 40,000
01.03.2009 01.03.2017 Grant 2009 203.50 52% 3.0% 1.7% 5,5 88.41 157,056 238,407
01.03.2010 01.03.2018 Grant 2010 417.34 30% 3.1% 0.8% 8,0 154,23 118,089 122,952
01.03.2011 01.03.2019 Grant 2011 566.78 25% 2,9% 0.9% 8,0 180.50 61,200 61,200
01.03.2012 01.03.2020 Grant 2012 444.60 34% 0.9% 1.2% 8.0 146.67 131,500
o ding share options under the share opti: prog: 1,102,024 1,141,761
39
1304236EogSN10253
Carlsberg Breweries Group
Notes
13
Share-based payment
Long-term incentive programme
The granted number of PSUs included in the specification below is the estimated number of PSUs that would be granted when applying the assumptions available at 31 December of the
reporting year. When the actual value per PSU is determined after the publication of the Annual Report for Carlsberg A/S in February of the next year, the number of granted PSUs will be
adjusted.
In 2012 202,955 (2011: 0) PSUs were granted under the long-term incentive programme. In 2012 PSUs were granted to 319 employees. The fair value at the grant date of the PSUs granted in
2012 was a total of DKK 112m. The fair value is recognised in the income statement over the vesting period of three years, In 2012, DKK 37m was recognised in respect of PSUs granted in the
year. The cost/(income) of share-based payment is included in staff costs. At 31 December 2012, an amount of DKK 75m has not been recognised in respect of PSUs granted under the long
term incentive programme.
Number Exercise price
Key Other Fixed,
E: ti: at it Resit weighted
board personnel personnel employees Total average
Performance share units outstanding at 31 December 2011 - - - ” - -
Granted - 28,455 174,500 - 202,955 0.00
Transferred - -3,860 5,670 9,530 - 0.00
Performance share units ng at 31 Di ber 2012 - 24,595 168,830 9,530 202,955 0.00
ptions 2012 2011
p life Fair value at
Expiring Exercise Expected Risk-free Expected of options, measurement Options Options
Grant date date P price volatility — interestrate dividend yield years date outstanding ing
Long-term incentive programme:
01.01.2012 01.01.2015 LTi 2012-2014 (preliminary) None 284% 0,3% 1.2% 3.2 542.22 202,955 -
Outstanding performance share units under the long-term incentive programme 202,955 -
There are no exercisable PSUs in the fong-term incentive programme as at 31 December 2012.
General information
The fair value of granted share options and PSUs is estimated using the Black-Scholes call option pricing model based on the exercise price. The fair value at 31 December 2012 was DKK
275m (2011: DKK 131m), which is DKK 144m higher than at year-end 2011.
The assumptions underlying the calculation of the grant date fair value for share options outstanding at year-end are stated above. The stated exercise prices and number of outstanding share
options are adjusted for the bonus element in connection with the share rights issues in 2004 and 2008.
The calculation of the number of PSUs where no value has been determined at year-end is based on the assumptions available at year-end (preliminary). The final number of PSUs will be
adjusted to reflect the assumptions available after the publication of the Annual Report for Carlsberg A/S in February of the next year.
The share price and exercise price for share options and value of PSUs are calculated as the average price of Carlsberg A/S's class B shares on NASDAQ OMX Copenhagen during the first
five trading days after the publication of Carlsberg A/S's Annual Report following the granting of the options or PSUs (for PSUs in the following year). The preliminary share price and value for
PSUSs granted under the long-term incentive programme is the last available price before 31 December of the reporting year.
The expected volatility for share options granted prior to 2010 was based on the historical volatility in the price of Carisberg A/S's class B shares over the previous two years. For share options
and PSUs granted or measured after 1 January 2010, the volatility is based on presently observed data on Bloomberg's Options Valuation Function.
The risk-free interest rate is the interest rate on Danish government bonds of the relevant maturity, while the dividend yield is calculated as DKK 5.50 per share (2011: DKK 5.0 per share)
divided by the share price.
The expected life of share options granted prior to 2010 was based on exercise in the middle of the exercise period. For share options or measured after 1 January 2010 the expected life was
based on exercise at the end of the exercise period.
Carlsberg Breweries Group
Note
14
Intangible assets
2012
Other
intangible Under
DKK million Goodwill Trademarks assets = development Total
Cost:
Cost at 1 January 2012 44,895 32,941 2,383 797 81,016
Acquisition of ownership interest in proportionally consolidated entities 17 - - - 17
Additions/(-) adjustments to prior period -23 2 141 329 449
Disposals - - -132 - -132
Transfers - - 51 -34 17
Transfer to/from assets held for sale - - - -1 -1
Effect of hyperinflation 43 7 - - 50
Foreign exchange adjustments etc. 872 1,093 -22 - 1,943
Cost at 31 December 2012 45,804 34,043 2,421 1,091 83,359
Amortisation and impairment losses:
Amortisation and impairment losses at 1 January 2012 105 1,070 2,007 - 3,182
Disposals - - -130 - -130
Amortisation - 25 214 - 239
Impairment losses - 11 28 - 39
Foreign exchange adjustments etc. -9 10 18 - 19
Amortisation and impairment losses at 31 December 2012 96 1,116 2,137 - 3,349
Carrying amount at 31 December 2012 45,708 32,927 284 1,091 80,010
DKK million 2012 2011
Amortisation and impairment losses for the year are included in:
Cost of sales 49 66
Sales and distribution expenses 47 56
Administrative expenses 169 141
Special items 13 791
Total 278 1,054
41
1304236EogSN10254
Carlsberg Breweries Group
Note
14
Intangible assets
2011
Other
intangible Under
DKK million Goodwill Trademarks assets development Total
Cost:
Cost at 1 January 2011 42,584 33,413 2,078 613 78,688
Step acquisition of entities 2,712 237 1 - 2,950
Revaluation of previously recognised assets acquired in step acquisition - 237 - - 237
Acquisition of ownership interest in proportionally consolidated entities 101 - - - 101
Additions 122 - 197 247 566
Disposal of entities 6 - -3 - -9
Disposals - - -21 - -21
Transfers - -1 99 -62 36
Transfer to/from assets held for sale - - -2 - -2
Effect of hyperinflation 115 23 - - 138
Foreign exchange adjustments etc. -733 -968 34 -1 -1,668
Cost at 31 December 2011 44,895 32,941 2,383 797 81,016
Amortisation and impairment losses:
Amortisation and impairment losses at 1 January 2011 13 569 1,542 - 2,124
Disposals - - -19 - -19
Amortisation - 43 220 - 263
Impairment losses 91 450 250 - 791
Transfers - -1 32 - 31
Transfer to/from assets held for sale - - -2 - -2
Foreign exchange adjustments etc. 1 9 -16 - -6
Amortisation and impairment losses at 31 December 2011 . 105 1,070 2,007 - 3,182
Carrying amount at 31 December 2011 44,790 31,871 376 797 77,834
Additions to goodwill during the year can be specified as follows:
DKK million 2012 2011
Step acquisition of entities - 2,712
Acquisition of ownership interest in proportionally consolidated entities 17 101
Recognition and revaluation of put options related to acquisitions prior to 2010 -27 122
Adjustment to acquisition of entities in prior period 4 -
Total -6 2,935
Additions to goodwill is furter described in note 30 and 31.
The carrying amount of trademarks which have an indefinite useful life and therefore are not amortised was DKK 35,395m (2011: DKK 34,294m) at 31
December 2012, equivalent to 99% (2011: 98%) of the capitalised trademarks. Management assesses that the value of these trademarks can be maintained
for an indefinite period, as these are well-established trademarks in the markets concerned and these markets are expected to be profitable in the longer
ierm. In the opinion of management, there is only a minimal risk of the current situation in the markets reducing the useful life of these trademarks, primarily
due to the respective market share in each market and the current and planned marketing efforts, which are helping to maintain and increase the value of
these trademarks.
Goodwill is determined as the difference between purchase price and the fair value of acquired assets, liabilities and contingent liabilities in each business
combination. Goodwill is allocated to the individual cash-generating units based on an allocation of the purchase price less the fair value of acquired assets,
liabilities and contingent liabilities in each entity. It is management's assessment that the allocation is based on documented estimates, taking into
consideration the uncertainties inherent in determining the cash flows of the acquired cash-generating units.
The carrying amount of other intangible assets at 31 December 2012 included capitalised software costs of DKK 44m (2011: DKK 86m) and beer delivery
rights of DKK 79m (2011: .DKK 81m).
Research and development costs of DKK 96m (2011: DKK 119m) have been recognised in the income statement.
Carlsberg Breweries Group
Note
15 Impairment test
Goodwill and trademarks with an indefinite useful life
General assumptions. The Carlsberg Breweries Group annually performs impairment tests of goodwill and
trademarks with an indefinite useful life, Intangible assets with a finite useful life and property, plant and
equipment are tested if indications of impairment exist. The Carlsberg Breweries Group has performed
impairment tests of the carrying amounts based on the budget and target plans approved by the Supervisory
Board and the Executive Board in December 2012,
Goodwill and trademarks related to Baltika Breweries (Russia), Brasseries Kronenbourg (France) or more of
the total carrying amount of goodwill and trademarks with an indefinite useful life at 31 December 2012. No
other goodwill and trademarks comprise 10% or More of the total carrying amount of goodwill and
trademarks with indefinite useful life at 31 December 2012.
Goodwill
The impairment test of goodwill is performed for Northern Europe, Western Europe and Eastern Europe,
while entities in Asia are tested at sub-regional levels. Entities that are less integrated in regions or sub-
regions are tested at individual entity level. The cash-generating units are based on the management
structure and reflect the smallest identifiable group of assets that are largely independent of cash inflows
from other cash-generating units. The management of the Group is centralised and driven through the
regional managements, which are responsible for performance, investments and growth initiatives in their
respective regions. ,
The management structure and responsibilities support and promote optimisations across countries focusing
on the Group or region as a whole and not just on the specific country. Changes in procurement and
sourcing between countries increase intra-group trade/transactions, which will also have an increasing
impact on the allocation of profits.
For the Group's cash-generating units, the carrying amount of goodwill at 31 December was as follows:
DKK million 2012 % 2011 %
Western Europe:
Northern Europe 4.413 10% 4.360 10%
Western Europe excl. Unicer-Bebidas de Portugal 10.281 22% 10.259 23%
Unicer-Bebidas de Portugal 536 1% 534 1%
Eastern Europe:
Eastern Europe 24.573 54% 23.683 53%
Asia:
Greater China and Malaysia 1.777 4% 1.771 4%
Indochina 3.526 8% 3.567 8%
India 247 0% 243 0%
Nepal 355 1% 373 1%
Total 45.708 100% 44.790 100%
The impairment test of goodwill for each cash-generating unit is based on the discounted value of expected
future free cash flows (value in use), based on budgets and target plans for the next three years and
projections for subsequent years (the terminal period). Key parameters include assumptions about revenue
43
1304236EogSN10255
growth, operating margin, future capital expenditure and growth expectations beyond the next three years.
Budgets and target plans do not incorporate the effect of future restructurings and non-contracted capacity
increases.
Budgets and target plans for the next three years are based on concrete commercial initiatives, and the risks
associated with the key parameters are assessed and incorporated in expected future free cash flows. The
impairment test is based on scenarios for possible future cash flows. Potential upsides and downsides
identified during the budget process and in the daily business are reflected in the future cash flow scenarios
for each individual cash-generating unit. The scenarios reflect, among other things, different assumptions
about combinations of market, price and input cost developments. Projections for the terminal period are
based on general expectations and risks, taking into account the general growth expectations for the brewing
industry in the relevant segments. The growth rates applied are not expected to exceed the average long-
term growth rate for the Group's individual geographical segments. The average growth rates for the terminal
period are presented in the table on the following page.
In calculating the recoverable amounts, the Group uses pre-tax discount rates that reflect the risk-free
borrowing rate in each particular geographical segment.
The impairment test of cash-generating units is based on a comparison of the recoverable amount,
corresponding to the discounted value of the expected future free cash flow, with the carrying amount of the
individual cash-generating unit. The carrying amount comprises goodwill and other net assets.
Trademarks
The carrying amount of the Group's trademarks with an indefinite useful life at 31 December was as follows:
Trademarks with an indefinite useful life
DKK million 2012 % 2011 %
Western Europe 3,411 11% 3,396 11%
Eastern Europe 28,479 88% 27,410 88%
Asia 505 1% 488 1%
Total 32,395 100% 31,294 100%
Trademarks are allocated to the segment that owns the individual trademark. Royalty income generated by
the trademark is based on the Group's total income and earned globally, i.e. the income is also earned
outside the segment that owns the trademark.
Trademarks are impairment-tested individually at Group level. The impairment test is performed using the
relief from royalty method and is based on expected future free cash flows from the Group's calculated
royalty income generated by the individual trademark for the next 20 years and projections for subsequent
years. Key assumptions include revenue, royalty rate, expected useful life, growth rate and a theoretically
calculated tax effect. A post-tax discount rate is used which reflects the risk-free interest rate with the
addition of a risk premium associated with the individual trademark.
The royalty rate is based on the actual market position of the individual trademark in the global, regional and
local markets. If external licence agreements for the individual trademark already exist, the market terms of
such agreements are considered when assessing the royalty rate which the trademark is expected to
generate in a transaction with independent parties.
For each individual trademark a 20-year curve is projected reflecting the expected future growth in revenue
per year. Depending on the expectations for the individual trademark, the growth in individual years is either
above, equal to or below the current inflation level in the countries where the individual trademark is sold.
The curve for each individual trademark is determined with reference to its market position, the overall
condition of the markets where the trademark is marketed, as well as regional and national macroeconomic
trends etc. For some trademarks, national, regional and international potential has been linked to the value
of the trademark, and investments in terms of product development and marketing strategy are expected to
be made. For these trademarks the expected growth is generally higher than for comparable trademarks,
especially at the beginning of the 20-year period. The growth rates determined for the terminal period are in
line with the expected rate of inflation.
The tax rate is the expected future tax rate in each country, based on current legislation. The impairment test
at year-end 2012 incorporates tax rates of 15-34%.
The impairment test of trademarks is based on a comparison of the recoverable amount, corresponding to
the discounted value of the expected future free cash flow, with the carrying amount of the individual
trademark. This corresponds to the approach used for determining the fair value of the trademark at the
acquisition date.
Significant assumptions for goodwill and trademarks
The main growth in the terminal period and discount rates applied in the impairment tests can be
summarised as follows:
Significant assumptions
Growth in the Discount rates
terminal period (risk-free interest rate)
2012 2011 2012 2011
Goodwill:
Northern Europe 1.5% 1.5% 2.3% 2.8%
Western Europe excl. Unicer-Bebidas de Portugal 1.5% 1.5% 2.6% 2.6%
Unicer-Bebidas de Portugal 1.5% 1.5% 1.6% 2.4%
Eastern Europe 2.5% 2.5% 7.0% 8.5%
Asia 2.5 - 3.5% 2,5 - 3.5% 3,5 -12,1% 3.4%-12,7%
Growth in the Discount rates
terminal period (WACC)
2012 2011 2012 2011
Trademarks:
Wester Europe 2.0 - 3.0% 2.0% 4.5 - 7.0% 5.0 - 9.0%
Eastern Europe 2.0 - 5.0% 2.0 - 5.0% 8.5 - 18.9% — 10.2 - 18.8%
Asia 2.0 - 2.5% 2.0% 6.5 - 12.9% 6.0%
Growth rates are determined for each individual cash-generating unit and trademark. The growth rates
applied for the terminal period are in line with the expected rate of inflation.
For the impairment testing of goodwill, the Group uses a pre-tax risk-free interest rate.
For the impairment testing of trademarks the Group uses a post-tax discount rate for each country. In
determining the discount rate, a risk premium on the risk-free interest rate (spread) is fixed at a level that
reflects management's expectations of the spread for future borrowings.
The risk-free interest rate is based on observable long-term interest rates for the individual countries. For
countries where long-term risk-free interest rates are not observable or valid due to specific national or
macroeconomic changes affecting the country, the interest rate is estimated based on observations from
other markets and/or long-term expectations expressed by major international credit institutions.
45
1304236EogSN10256
The WACC rates in Asia vary within a wide range with the lowest rate for China and developed countries,
whereas the subcontinent, a.o. India and Nepal, has the highest WACC rates in the region.
For each region, sub-region or individually tested entity, the applied growth rates for projections and discount
rates are compared to ensure a reasonable link between the two (real interest rate).
Western Europe is generally characterised by stable volumes and by growth markets in the central and
eastern parts of the region. The entire region continues to experience strong competition, requiring ongoing
optimisation of cost structures and use of capital. A slight increase in revenue is expected in the next three
years, while the ongoing restructuring initiatives already implemented in key countries and under
implementation in other countries, the initiative to establish a fully integrated supply chain across all markets
and the roll-out of the business standardisation project (BSP) are expected to contribute to productivity
improvements and cost savings. Some countries will continue to be characterised by a high level of
investment as a result of changes to the production structure.
Eastern Europe showed fluctuations between quarters, but overall the beer markets were flat. In addition,
Russia saw some transitional disruption following the closures ahead of the sales restrictions coming into
effect on 1 January 2013. Other markets in the region faced a worsening of macroeconomic conditions. In
the longer run increases in revenue are expected in the region.
Asia is a growth area, with significant growth in China in particular. Increases in revenue in the emerging
markets are expected, while more stable earnings are expected in the more mature markets.
Sensitivity test
Sensitivity tests have been performed to determine the lowest growth rates and/or highest discount rates that
can occur in the cash-generating units and for trademarks with indefinite useful life without resulting in any
impairment loss.
Goodwill Sensitivity tests show that for the cash-generating unit with the lowest margin between recoverable
amount and carrying amount, the growth rate in the terminal period can decline by around 3.7 percentage
points (2011: 0.4 percentage points). Alternatively, the discount rate can increase by around 3.2 percentage
points (2011: 0.4 percentage points) without resulting in any impairment losses.
Trademarks Sensitivity tests show that for trademarks with an indefinite useful life, the growth rate in the
terminal period can decline by around 0.6 percentage points (2011: 0.8 percentage points) without resulting
in any additional impairment losses. Alternatively, the discount rate can increase by around 0.3 percentage
points (2011: 0.3 percentage points) without resulting in any additional impairment losses.
In 2012 several of the WACCs in - Western Europe are impacted by relatively low interest rates due to the
current economic climate and associated outlooks. The lower WACC is mainly driven by lower observed risk-
free interest rates. In addition to the impairment test and to ensure that a potential impairment in not
overlooked, an additional impairment sensitivity calculation has been prepared. This sensitivity calculation
has tested the impact of a higher interest rate, reflecting a reasonable assumption of a higher risk-free
interest level. This additional sensitivity test did not identify impairment needs.
As recently impaired trademarks will have less ability to absorb changes in the risk-free interest rate or a
decline in growth, these trademarks are sensitivity-tested separately. For the recently impaired trademark
(indefinite useful life) with the lowest margin between recoverable amount and carrying amount, the growth
rate in the terminal period can decline by around 0.1 percentage points without resulting in any additional
impairment losses. Alternatively, the discount rate can increase by around 0.1 percentage points without
resulting in any additional impairment losses.
Property, plant and equipment
Property, plant and equipment are impairment-tested if there are indications of impairment, e.g. when
restructuring programmes are considered. Each individual impairment test is based on the lowest cash-
generating unit affected by the changes that indicate impairment. The impairment test is based on budgeted
46
and estimated cash flows from the cash-generating unit. The pre-tax discount rate reflects the risk-free
interest rate with the addition of a risk premium associated with the particular asset.
Impairment losses
Based on the impairment tests performed, the following impairment losses have been recognised in respect
of goodwill, trademarks and other non-current assets: '
DKK million 2012 2011
Goodwilj
Impairment of Carlsberg Uzbekistan - 91
Trademarks:
Trademarks with finite useful life - 198
Trademarks with indefinite useful life 11 252
Other intangible assets:
Impairment of the business standardisation project - 250
Impairment of Carlsberg Uzbekistan 2 -
Other 26 -
Property, plant and equipment:
Impairment of Carlsberg Uzbekistan 78 209
Impairment of Vena Brewery, production and sales equipment, Russia 589 -
Impairment of Aldaris Brewery, Latvia 93 -
Impairment of plant, machinery and equipment, Ringnes, Norway 76 -
Impairment of prodution lines in Western Europe 54 83
Other 2 36
Investments in associates:
Impairment of Nordic Getrånke, Germany 64 260
Total 995 1,379
The impairment losses on Carlsberg Uzbekistan, DKK 91m (2011: DKK 300m), Nordic Getrånke, Germany,
DKK 64m (2011: DKK 260m), and Vena Brewery, production and sales equipment, Russia DKK 589m, relate
to intangible assets and property, plant and equipment and are a consequence of difficult market conditions
and poor performance. The trademark Sarbast has been fully impaired as part of the DKK 91m impairment in
Uzbekistan.
In 2011 the impairment losses on trademarks (indefinite and finite useful life) related to Nevskoye, Russia,
and Slavutich, Ukraine. These trademarks suffered from the economic crisis and were not expected to fully
recover. For Slavutich this has furthermore led to a change in the brand strategy. The trademarks were
written down to the lower recoverable amount.
Other impairments of property, plant and equipment are a consequence of restructuring and process
optimisations, especially in Northern & Western Europe and Eastern Europe.
The impairment losses of DKK 967m (2011: DKK 1,375m) are recognised under special items in the income
statement, while DKK 28m (2011: DKK 4m) has been included in cost of sales. The impairment losses are
included in the relevant segments, cf. note 2.
Based on the impairment tests performed, there were no indications of further impairment of goodwill and
trademarks at 31 December 2012.
47
1304236EogSN10257
Carlsberg Breweries Group
Note
16
Property, plant and equipment
2012
Fixtures and
fittings, other
Land and Plant and plant and Under
DKK million buildings machinery equipment == construction Total
Cost:
Cost at 1 January 2012 17,015 27,925 11,788 1,248 57,976
Increase in ownership interest in proportionally consolidated entities 8 28 10 5 51
Additions 318 1,228 1,520 1,465 4,531
Disposals -88 -752 -1,247 -4 -2,091
Transfers 104 410 358 -887 -15
Transfer to/from assets held for sale -1 - -1 - -2
Effect of hyperinflation 8 18 10 - 36
Foreign exchange adjustments etc. 265 363 4 -38 586
Cost at 31 December 2012 17,629 29,220 12,434 1,789 61,072
Depreciation and impairment losses:
Depreciation and impairment losses at 1 January 2012 4,851 14,469 7,766 - 27,086
Disposals -34 -709 -1,238 - -1,981
Depreciation 538 1,764 1,439 - 3,741
Impairment losses 289 522 81 - 892
Transfers 4 4 -8 - -
Transfer to/from assets held for sale - - -1 - -1
Effect of hyperinflation 1 7 4 - 12
Foreign exchange adjustments etc. 61 188 40 - 289
Depreciation and impairment losses at 31 December 2012 5,710 16,245 8,083 - 30,038
Carrying amount at 31 December 2012 11,919 12,975 4,351 1,789 31,034
Assets held under finance leases:
Cost 7 92 11 - 110
Depreciation and impairment losses -7 -55 -2 - -64
Carrying amount at 31 December 2012 - 37 9 - 46
Carrying amount of assets pledged as security for loans 107 338 3 28 476
DKK million 2012 2011
Depreciation and impairment losses are included in:
Cost of sales 2,766 2,605
Sales and distribution expenses 820 737
Administrative expenses 157 161
Special items 890 324
Total 4,633 3,827
Carlsberg Breweries Group
Note
16
Property, plant and equipment
2011
Fixtures and
fittings, other
Land and Plant and plant and Under
DKK million buildings machinery equipment | construction Total
Cost:
Cost at 1 January 2011 17,626 27,227 10,736 1,123 56,712
Step acquisition of entities -287 145 63 64 -15
Revaluation of previously recognised assets acquired in step acquisition -1 -41 - - -42
Increase in ownership interest in proportionally consolidated entities 30 91 2 12 135
Additions 278 1,256 1,350 1,032 3,916
Disposal of entities -52 -2 -8 -2 -64
Disposals -218 -496 -563 -12 -1,289
Transfers 69 465 277 -929 -118
Transfer to/from assets held for sale -284 -473 -11 - -768
Effect of hyperinflation 23 52 21 1 97
Foreign exchange adjustments etc. -169 -299 -79 -41 588
Cost at 31 December 2011 17,015 27,925 11,788 1,248 57,976
Depreciation and impairment losses:
Depreciation and impairment losses at 1 January 2011 4,869 13,556 7,000 - 25,425
Disposals of entities -293 -1 -5 - -299
Disposals -102 -412 -518 - -1,032
Depreciation 527 1,692 1,280 - 3,499
Impairment losses - 275 53 - 328
Transfers -49 -69 -11 - -129
Transfer to/from assets held for sale -107 -538 -11 - -656
Effect of hyperinflation 3 15 8 26
Foreign exchange adjustments etc. 3 -49 -30 - -76
Depreciation and impairment losses at 31 December 2011 4,851 14,469 7,766 " 27,086
Carrying amount at 31 December 2011 12,164 13,456 4,022 1,248 30,890
Assets held under finance leases:
Cost 7 95 12 - 114
Depreciation and impairment losses -5 -52 -3 - -60
Carrying amount at 31 December 2011 2 43 9 - 54
Carrying amount of assets pledged as security for loans 659 257 4 78 998
Fixtures and fittings, other plant and equipment include rolling equipment such as cars and trucks, draught beer equipment, coolers, returnable
packaging and office equipment.
Leased assets with a carmying amount of DKK 46m (2011: DKK 54m) have been pledged as security for lease liabilities totalling DKK 38m (2011: DKK
53m).
49
1304236EogSN10258
Carlsberg Breweries Group
Note
17 Associates
DKK million 2012 2011
Cost:
Cost at 1 January 5,012 4,742
Acquisition of entities 775 26
Additions 51 50
Disposals -3 -1
Foreign exchange adjustments etc. -12 195
Cost at 31 December 5,823 5,012
Value adjustments:
Value adjustments at 1 January -5 93
Dividends -95 -42
Impairment losses 64 -260
Share of profit after tax 112 174
Share of other comprehensive income 4 3
Reversal of impairment 3 -
Foreign exchange adjustments etc. -10 27
Value adjustments at 31 December -55 -5
Carrying amount at 31 D: ber 5,768 5,007
The acquisition of the shareholding in Chongqing Jianiang Brewery Co. Ltd. consists of contributed cash at the formation of the entity and a subsequent acquisition of
18.58% of the shares in the entity. Chongqing Jianiang Brewery Co. Ltd. is a subsidiary of Chongqing Brewery Co. Ltd. and an associate of the Carlsberg Group,
2012
Carlsberg Breweries Group share
Profit after Ownership Profit after
DKK million Revenue tax Assets Liabilities interest tax Equity
Key figures for associates:
Chongqing Group 2,866 57 15,630 2,567 29.7% 17 4,201
Tibet Lhasa Brewery Co. Ltd. 426 81 680 48 33% 27 209
Lanzhou Huanghe Jianjiang Brewery Company 337 23 501 109 30% 7 118
Hanoi Beer Company 1,639 210 4,360 827 17% 37 601
The Lion Brewery Ceylon 560 56 433 324 25% 14 27
Other associates, Asia (3 entities) 245 15 338 82 30-33% 5 84
International Breweries BV 560 -45 723 652 23% -11 16
Nuuk Imeq A/S 207 26 266 119 31.9% 8 47
Nordic Getrånke GmbH 2,246 -18 715 715 50% -9 -
Other 1,581 51 1,924 1,511 20-50% 17 465
Lo d2 5,768
50
Carlsberg Breweries Group
Note
17 Associates
Carlsberg Breweries Group share
Profit after Ownership Profit after
| DKK million Revenue tax ÅAssets Liabilities interest tax Equity
Key figures for associates:
Chongqing Brewery Co, Ltd. 2,434 232 13,535 1,929 29.7% 61 3,447
| Tibet Lhasa Brewery Co. Ltd. 390 82 642 27 33% 25 203
| Lanzhou Huanghe Jianjiang Brewery Company 268 11 456 86 30% 3 111
| Hanoi Beer Company 1,466 249 3,728 310 17% 41 581
| The Lion Brewery Ceylon 379 20 283 187 25% 5 24
Other associates, Asia (3 entities) 211 -4 283 70 30-33% -2 80
International Breweries BV 680 -46 113 7 16% -7 17
| Nuuk Imeq A/S 147 22 211 70 31.9% 7 45
| Nordic Getrånke GmbH 2,437 59 1,098 953 50.0% 30 127
Other 856 70 2,792 2,195 20-50% 11 372
174 5,007
DKK million 2012 2011
Fair value of investments in listed associates:
Chongqing Brewery Co. itd., Chongqing, China 2,006 3,726
The Lion Brewery Ceylon, Biyagama, Sri Lanka 235 189
Total 2,241 3,915
For associates in which the Group holds an ownership interest of less than 20%, the Group participates in the management of the company and is therefore
exercising significant influence.
The Group also has minor investments in associates in which the Group is unable to exercise significant influence. As a result these investments are classified as
securities,
51
1304236EogSN10259
Carlsberg Breweries Group
Note
18 Securities
DKK million 2012 2011
Securities are classified in the statement of financial position as follows:
Non-current assets 112 106
Current assets 21 24
Total 133 130
Types of security:
Listed shares 1 23
Unlisted shares 132 107
Total 133 130
Securities classified as current assets are those expected to be sold within one year after the end of the reporting period.
Shares in unlisted entities comprise a number of small holdings. Most of these shares are not recognised at fair value as the
fair value cannot be calculated on a reliable basis. Instead the assets are recognised at cost.
Carlsberg Breweries Group
Note
19
Receivables
DKK million 2012 2011
Receivables are included in the statement of financial position as follows:
Trade receivables 7,872 7,870
Other receivables 2,631 3,250
Total current receivables 10,503 11,120
Non-current receivables 2,075 1,649
Total 12,578 12,769
Trade receivables comprise invoiced goods and services as well as short-term loans to customers in the on-trade.
Other receivables comprise VAT receivables, loans to partners and associates, interest receivables and other financial receivables.
Non-current receivables consist mainly of on-trade loans. Non-current receivables fall due more than one year from the end of the
reporting period, with DKK 142m (2011: DKK 145m) falling due more than five years from the end of the reporting period.
DKK million 2012 2011
Receivabtes by origin: .
Receivables from the sale of goods and services 7,117 7,115
On-trade loans 2,022 2,066
Loans to associates 137 123
Loans to partners 226 230
Fair value of hedging instruments 584 499
Other receivables 1,813 1,267
Intercompany receivables 679 1,469
Total ' 12,578 12,769
Hedging instruments are measured at fair value. All other receivables are measured at amortised cost.
On-trade loans are usually repaid through discounts during the continuing sales relationship with the individual customer, which is reflected
in the repayment scheme and the discounting of the loans. There are therefore no significant overdue on-trade loans.
2012 2011
% %
Average effective interest rates:
Loans to associates 4.4 2.9
On-trade loans 4.9 5,8
53
1304236EogSN10260
Carisberg Breweries Group
Note
20
21
Inventories
DKK million 2012 2011
Raw materials and consumables 2,332 2,316
Work in progress 304 303
Finished goods 1,905 1,731
Total 4,541 4,350
Production costs of inventories sold amount to DKK 33,532m (2011: DKK 31,367m).
Raw materials, packaging and spare parts are measured at the lower of net realisable value and cost. Write-downs of
inventories to net realisable value amount to DKK 8m (2011: DKK 47m) and are included in cost of sales.
Obsolete beer and soft drinks and raw materials are generally scrapped due to limited shelf-life and are fully written down. The
cost of scrapped goods is included in production costs.
Cash and cash equivalents
DKK million 2012 2011
Cash at bank and in hand 5,748 3,108
Total 5,748 3,108
In the statement of cash flows, bank overdrafts are offset against cash and cash
equivalents as follows:
Cash and cash equivalents 5,748 3,108
Bank overdrafts -700 -310
Cash and cash eqguivalents, net 5,048 2,798
Of which pledged as security
Short-term bank deposits amounted to DKK 3,579m (2011: DKK 1,506m). The average interest rate on these deposits was
6.6% (2011: 6.4%).
Proportionally consolidated entities' share of cash and cash equivalents is specified in note 34.
54
Carlsberg Breweries Group
Note
22
Assets held for sale and associated liabilities
DKK million
Assets held for sale comprise the following individual assets::
Property, plant and equipment 27 227
Other non-current assets - 7
Current assets - 1
Total 27 235
Liabilities associated with assets held for sale:
Deferred tax liabilities 5 -
Other provisions 13 56
Total 18 56
Assets that are reclassified as held for sale are measured at the lower of the carrying amount and fair value at the
reclassification date. Any impairment losses in relation to such assets are recognised as impairment of assets before the
reclassification. Accordingly, neither depreciation nor impairment losses have been recognised in the income statement relating
to assets classified as held for sale. Consequently, the selling price is as a minimum expected to be equal to the carrying
amount of assets held for sale.
Assets held for sale primarily comprised land and property, mainly in Western Europe, which are disposed of as part of the
Group's strategy to optimise production and logistics and reduce the amount of capital tied up. Identification of and negotiations
with buyers have begun, and sales agreements have been entered into or are expected to be entered into in 2013.
Assets (properties) which no longer qualified for recognition as assets held for sale were transferred to property, plant and
equipment in 2012 as a result of ongoing sales negotiations not proceeding as expected. This involved an amount of DKK 1m
(2011: DKK 9m) and affected the income statement by a total of DKK Om (2011: 5m) in depreciation.
Gains or losses of the disposal of assets held for sale are recognised in the income statement under other operating income.
The gains recognised as income in all material respects relate to disposal of land, depots and properties and total DKK Om
(2011: DKK om).
55
1304236EogSN10261
Carlsberg Breweries Group
Note
23 Share capital
Total share capital
Nominal
Shares of value, DKK
DKK 1.000 "000
1 January 2011 501 501,000
No change in 2011 - -
31 December 2011 501 501,000
No change in 2012 - -
31 December 2012 501 501,000
The share capital amounts to DKK 501m divided into shares in denominations of DKK 1,000 and multiples thereof.
None of the shares confer any special rights. The share capital is fully owned by Carlsberg A/S, Copenhagen, Denmark.
56
Carlsberg Breweries Group
Note
24 Borrowings
DKK million 2012 2011
Non-current borrowings:
Issued bonds 29,021 19,478
Mortgages 1,248 1,248
Bank borrowings 5,722 13,071
Financial lease liabilities 35 38
Other non-current borrowings 453 302
Total 36,479 34,137
Current borrowings:
Issued bonds 1,826 -
Current portion of other non-current borrowings 283 159
Bank borrowings 1,179 1,386
Financial lease liabilities 4 14
Borrowings from Group Companies - 699
Other current borrowings 60 333
Total 3,352 2,591
Total non-current and current borrowings 39,831 36,728
Fair value 41,330 37,492
Borrowings are measured at amortised cost. The Group has designated a fixed-interest rate GBP 300m bond issue as the hedged item in the fair value
hedge with the designated risk being movements in a benchmark interest rate (floating interest rate). The carrying amount of this borrowing is therefore
adjusted for movements in the fair value due to movements in the benchmark rate. The carrying amount of this borrowing was DKK 2,999m in 2012.
57
1304236EogSN10262
Carlsberg Breweries Group
Note
24
Borrowings
(Continued)
Time to maturity for non-current borrowings
DKK million 2012
1-2 years 2-3 years 3-4 years 4-5 years > 5 years Total
Issued bonds 7,443 - 2,999 7,402 11,177 29,021
Mortgages - - - - 1,248 1,248
Bank borrowings 400 5,263 56 3 - 5,722
Financial lease liabilities 4 4 4 4 19 35
Other non-current borrowings 204 150 56 30 13 453
Total 8,051 5,417 3,115 7,439 12,457 36,479
DKK million 2011
1-2 years 2-3 years 3-4 years 4-5 years > 5 years Total
Issued bonds 1,780 7,406 - 2,927 7,365 19,478
Mortgages - - - - 1,248 1,248
Bank borrowings 792 426 11,753 100 - 13,071
Financial lease liabilities 4 4 4 4 22 38
Other non-current borrowings 73 190 9 4 27 303
Total 2,649 8,026 11,766 3,035 8,662 34,138
58
Carlsberg Breweries Group
Note
24 Borrowings
(Continued)
Interest rate risk at 31 December
2012
Average
effective Carrying Interest
DKK million Interest rate interest rate Fixed for amount . rate risk
Issued bonds:
GBP 200m maturing 26 February 2013 Fixed 7.01% 0-1 year 1,826 Fair value
EUR 1,000m maturing 28 May 2014 Fixed 6.22% 1-2 years 7,443 Fair value
GBP 300m maturing 28 November 2016 Fixed 7.41% 3-4 years 2,999 Fair value
EUR 1,000m maturing 13 October 2017 Fixed 3,55% 4-5 years 7,402 Fair value
EUR 750m maturing 03 Juli 2019 Fixed 2.49% >5 years 5,629 Fair value
EUR 750m maturing 15 November 2022 Fixed 2.71% >5 years 5,548 Fair value
Total issued bonds 4.43% 30,847
Mortgages:
Floating rate Floating 1.51% 0-1 year 1,248 Cash flow
Total mortgages 1.51% 1,248
Bank borrowings:
Fixed rate Fixed 0-3 years 6,901 Fair value
Total bank borrowings 6,901
EUR 750m maturing 3 July 2019 consists of two bonds of EUR 250m and EUR 500m. The EUR 500m bond was issued in July 2012, while the EUR 250m
was issued in November 2012.
All interest rates stated in the table includes margin,
Å cross-currency swap (GBP 300m) has been used to change the interest from fixed to floating 6-month EURIBOR +4.01%. The bond and the swap are
designated as a fair value hedge relationship, meaning that the carrying amount of the bond is the fair value.
The floating-rate mortgage was repriced in December 2012 at a rate of 0.86% (excl. margin) commencing in January 2013 and will be repriced again in July
2013. The time to maturity is more than five years. The floating-rate mortgage is repriced semi-annually with reference to 6-month CIBOR.
The main part of the bank borrowings presented as having a fixed rate was originally a floating rate but has been swapped to a fixed rate of 5.24%, The
borowing itself have a variable interest rate which have been swapped to fixed. The maturity of these interest rate swaps is between 6 month and 214
years.
Net financial Interest rate"
interest-bearing
DKK million debt" Floating Fixed Floating % — Fixed % (2.9)
EUR 29,855 748 29,107 3% 97% LO
DKK -680 -680 - 100% - N
PLN 1,504 1,504 - 100% - CD
USD 1,180 1,180 - 100% - rd
CHF 1,892 1,892 - 100% - a
RUB -3,049 -3,049 - 100% - Om
Other 3,381 3,314 67 98% 2% O
Total 34,083 4,909 29,174 14% 86% g
LO
” After swaps and currency derivatives, ”" Before currency derivatives. Q
AU
O
m
rl
59
Carlsberg Breweries Group
Note
24
Borrowings
(Continued)
2011
Average
effective Carrying Interest
DKK million Interestrate interest rate Fixed for amount. rate risk
Issued bonds:
GBP 200m maturing 26 February 2013 Fixed 7.01% 1-2 year 1,780 Fair value
EUR 1,000m maturing 28 May 2014 Fixed 6.22% 2-3 year 7,406 Fair value
GBP 300m maturing 28 November 2016 Fixed 7.41% 4-5 years 2,927 Fair value
EUR 1,000m maturing 13 October 2017 Fixed 3.55% >5 years 7,365 Fair value
Total issued bonds 5.46% 19,478
Mortgages:
Floating rate Floating 1.73% 0-1 year 1,248 Cash flow
Total mortgages 1.73% 1,248
Bank borrowings:
Floating rate Floating 0-1 year 3,931 Cash flow
Fixed rate Fixed 1—4 years 10,526 Fair value
Total bank borrowings
All interest rates stated in the table are including margin.
14,457
A cross-currency swap (GBP 300m) has been used to change the interest from fixed to floating 6-month EURIBOR +4.01%. The bond and the swap are
designated as a fair value hedge relationship, meaning that the carrying amount of the bond is the fair value.
In December 2011 a GBP 250m bond matured and was repaid.
The floating-rate mortgage was repriced in December 2011 at a rate of 1.28% (excl. margin) commencing in January 2012 and was repriced again in July
2012. The time to maturity is more than five years. The floating-rate mortgage is repriced semi-annually with reference to 6-month CIBOR.
Carlsberg has repaid two mortgages (a total of DKK 525m) with a time to maturity of more than five years, which were originally at floating rates but were
swapped to fixed rates.
The main part of the bank borrowings presented as having a fixed rate was originally at floating rate but has been swapped to a fixed rate of 5.36%.
Net financial
interest-bearing
DKK million debt"
EUR 30,415
DKK -2,450
PLN 710
USD 1,601
CHF 2,469
RUB -1,249
Other 2,124
Total 33,620
= After swaps and currency derivatives.
60
Interest rate""
Floating Fixed Floating % Fixed %
4,924 25,491 16% 84%
-2,450 - 100% -
707 3 100% -
1,588 13 99% 1%
2,469 - 100% -
-1,249 - 100% -
283 1,841 -11% 111%
6,272 27,348 19% 81%
” Before currency derivatives.
Carlsberg Breweries Group
Note
24
Borrowings
(Continued)
Currency profile of borrowings before and after derivative financial instruments
2012
Next repricing (of principal before currency swaps)
Effect of
DKK million Original principal swap After swap 2013 2014 2015 2016 2017 2018-
CHF 52 1,853 1,905 52 - - - - -
DKK 1,243 -1,895 -652 1,243 - - - - -
EUR 30,237 290 30,527 1,130 7,499 2,988 4 7,406 11,210
GBP 5,240 4,521 719 . 5,240 - - - - -
NOK 143 229 372 143 - - - - -
PLN 86 1,425 1,811 86 - - - - -
RUB 9 -634 -625 9 - - - - -
SEK 132 70 202 132 - - - - -
SGD 1 -342 -341 1 - - - - -
USD 2,173 34 2,207 2,173 - - - - -
Other 515 3,491 4,006 448 4 4 56 3 -
Total 39,831 - 39,831 10,657 7,503 2,992 60 7,409 11,210
Cf. also note 35, Financial risks.
2011
Currency profile of borrowings before and after derivative financial instruments Next repricing (of principal before currency swaps)
Effect of
DKK million Original principa! swap After swap 2012 2013 2014 2015 2016 2017-
CHF 29 2,441 2,470 29 - - - - -
DKK 1,976 4,422 -2,446 1,979 - - - - -
EUR 27,543 3,425 30,968 2,052 7,608 7,474 2,986 9 7,414
GBP 4,693 -4,489 204 2,913 1,780 - - - -
NOK -53 632 579 -53 - - - - -
PLN 58 658 716 54 1 2 - - -
RUB 9 -1,098 -1,089 9 - - - - -
SEK 81 -313 -232 81 - - - - -
SGD 24 -424 -400 24 - - - - -
USD 1,773 592 2,365 1,760 13 - - - -
Other 596 2,998 3,594 533 9 - 27 25 -
Total 36,729 - 36,729 9,381 9,411 7,476 3,013 34 7,414
61
1304236EogSN10264
Carlsberg Breweries Group
Note
25 Retirement benefit obligations and similar obligations
A number of the Group's employees are covered by retirement benefit plans. The nature of the retirement benefit plans varies
depending on labour market conditions, legal requirements, tax legislation and economic conditions in the individual countries.
Benefits are generally based on wages and salaries and length of employment. Retirement benefit obligations cover both
present and future retirees” entitiement to retirement benefits.
Approximately 63% (2011: 73%) of the Group's retirement benefit costs relate to defined contribution plans, which limit the
Group's obligation to the contributions paid. The retirement benefit plans are funded by payments from the Group's companies
and employees to funds that are independent of the Group.
The other plans are defined benefit plans. A retirement benefit obligation is recognised in the statement of financial position
based on an actuarial calculation of the present value at the end of the reporting period less the plan assets. For defined benefit
plans, the Group assumes the risk associated with future developments in interest rates, inflation, mortality and disability etc.
The retirement benefit plans in among other countries Switzerland, Norway, the United Kingdom and Hong Kong have assets
placed in independent pension funds.
A number of plans are unfunded, primarily in Germany, Sweden and Italy.
For these plans the retirement benefit obligations amount to approximately 14% (2011: 14%) of the total gross liability.
The defined benefit plans typically guarantee the employees covered a retirement benefit based on the final salary at
retirement.
DKK million 2012 2011
Defined benefit plans are recognised in the statement of financial position
as follows:
Retirement benefit obligations and similar obligations 3,917 3,218
Plan assets -4 -5
Net obligations 3,913 3,213
Specification of net obligations:
Present value of funded plans 9,983 8,893
Fair value of plan assets -7,648 -7,099
Net obligation for funded plans 2,335 1,794
Present value of unfunded plans 1,567 1,401
Payment in transit 11 18
Net obligations recognised 3,913 3,213
Specification of total obligations:
Present value of funded plans 9,983 8,893
Present value of unfunded plans 1,567 1,401
Total obligations 11,550 10,294
62
Carlsberg Breweries Group
Note
25 Retirement benefit obligations and similar obligations
DKK million
Changes in obligations:
Total obligations at 1 January
Current service cost
Interest cost
Actuarial gains (-) and losses (+)
Benefits paid
Curtailments and settlements
Employee contributions to pension scheme
Transfer from other provisions
Disposal of entities
Foreign exchange adjustments etc.
Total obligations at 31 December
Changes in plan assets:
Fair value of assets at 1 January
Expected return
Actuarial gains (-) and losses (+)
Contributions to plans
Benefits paid
Foreign exchange adjustments etc.
Fair value of assets at 31 December
The Group expects to contribute DKK 23m (2011: DKK 23m) to the plan assets in 2013.
Actual return on plan assets:
Expected return
Actuarial gains (+) and losses (-)
Actual return
Breakdown of plan assets:
2012 2011
DKK million % DKK million %
Shares 2,490 33% 2,172 31%
Bonds and other securities 3,460 45% 3,251 45%
Real estate 1,170 15% 1,346 19%
Cash and cash equivalents 528 7% 330 5%
Total 7,648 100% 7,099 100%
Plan assets do not include shares in or properties used by Group companies.
Actuarial assumptions. The actuarial assumptions underlying the calculations and valuations vary from country to country due
to local economic conditions and labour market conditions.
1304236EogSN10265
Calculation of the expected return on plan assets is based on a low-risk investment in bonds in the relevant countries. The rate
of return is increased if the plan assets comprise shares and properties, which despite the increased risks are expected to
provide a higher rate of return than bonds.
63
Carlsberg Breweries Group
Note
25
Retirement benefit obligations and similar obligations
2012 2011
Weighted Weighted
Assumptions applied: Range average Range average
Discount rate 1.0 - 16.5% 3.0% 1.0 - 5.3% 3.6%
Expected return on plan assets 2.2 - 8.5 % 4.1% 0.4 - 5.4% 4.4%
Future salary increases 2.0 - 16.0 % 2.8% 2.0 - 8.0% 2.9%
Future retirement benefit increases 1.0 - 3.4 % 1.6% 1.0 - 3.8% 2.0%
DKK million 2012 2011
Recognised in income statement:
Current service cost 115 176
Expected return on plan assets -323 -327
Interest cost on obligations 380 376
Curtailments and settlements -1 -103
Total recognised in income statement 171 122
The cost is recognised in the income statement as follows:
Cost of sales 23 9
Sales and distribution expenses 64 42
Administrative expenses 26 25
Special items (restructuring) - -3
Total staff costs, cf. note 12 113 73
Financial income -323 -327
Financial expenses 381 376
Total 171 122
Recognised in other comprehensive income:
Recognised at 1 January -2,503 -1,410
Actuarial gains/losses -739 -1,081
Foreign exchange adjustment of foreign entities -62 -12
Recognised in other comprehensive income during the period -801 -1,093
Recognised at 31 December -3,304 -2,503
Of which accumulated actuarial gains/losses -3,329 -2,590
2012 2011 2010 2009 2008
DKK million
Five-year overview
Obligations 11,550 10,294 9,294 7,948 7,009
Plan assets -7,848 -7,099 -6,905 -5,823 -5,245
Deficit 3,903 3,195 2,389 2,125 1,764
Experience adjustments to obligations 231 82 108 -34 -492
Experience adjustments to plan assets -881 -506 -815 -544 100
Carlsberg Breweries Group
Note
26 Deferred tax assets and deferred tax liabilities
DKK million
Deferred tax at 1 January, net
Adjustments to previous years
Entities acquired in a step acquisition
Revaluation of previously recognised deferred tax acquired in a step acquisition - 43
Disposal of entities - 11
Recognised in other comprehensive income -193 -211
Recognised in income statement 10 205
Change in tax rate 27 -15
Effect of hyperinflation - 16
Foreign exchange adjustments -71 -65
7,742 7,999
Of which is transferred to Assets held før sale -4 -
Deferred tax at 31 December, net 7,738 7,999
Specified as follows:
Deferred tax liabilities 8,930 8,870
Deferred tax assets -1,192 -871
Deferred tax at 31 December, net 7,738 7,999
Specification of deferred tax assets and liabilities at 31 December:
DKK million 2012 2011 2012 2011
Deferred tax assets Deferred tax liabilities
Intangible assets 502 549 7,107 6,959
Property, plant and equipment 403 241 2,528 2,676
Current assets 109 84 52 45
Provisions and retirement benefit obligations 840 690 261 359
Fair value adjustments 20 120 150 212
Tax losses etc. 1,573 1,495 1,091 926
Total before set-off 3,447 3,179 11,189 11,178
Set-off -2,255 -2,308 -2,255 -2,308
Transferred to assets held for sale 0 - 4 2
Deferred tax assets and liabilities at 31 December 1,192 871 8,930 8,870
Expected to be used as follows:
Within 12 months after the end of the reporting period 219 150 507 277
More than 12 months after the end of the reporting period 973 721 8,423 8,593
Total 1,192 871 8,930 8,870
Deferred tax assets and liabilities are offset in the consolidated statement of financial position if the Group has a legally enforceable right to set off
current tax liabilities, and the deferred tax assets and liabilities relate to the same legal tax entity/consolidation.
Of the total deferred tax assets recognised, DKK 705m (2011: DKK 836m) relate to tax loss carryforwards, the utilisation of which depends on future
positive taxable income exceeding the realised deferred tax liabilities.
Tax assets of DKK 1,248m (2011: DKK 1,435m) were not recognised. These relate primarily to tax losses which are not expected to be utilised in the
foreseeable future. Tax losses that will not expire amount to DKK 1,000m (2011: DKK 1,138m).
Deferred tax on temporary differences relating to investments in subsidiaries, joint ventures and associates amounts to DKK Om (2011: DKK om).
Deferred tax of DKK 160m (2011: DKK Om) has been recognised in respect of earnings in the Eastern Europe region which are intended for distribution
in the short term, as tax of 5% is payable on distributions, For other subsidiaries where distributable reserves are planned to be distributed, any
distribution of earnings will not trigger a significant tax liability based on current tax legislation.
1304236EogSN10266
65
Carlsberg Breweries Group
Note
27 Provisions
Restructuring provisions totalling DKK 575m relate primarily to restructurings of Ringnes AS, Carlsberg Sverige, Carlsberg Deutschland,
Feldschlåsschen, Carlsberg Italia and Brasseries Kronenbourg. In 2011 the restructuring provisions totalling DKK 336m primarily related to
restructurings of Carlsberg Deutschland, Carlsberg UK, Carlsberg Italia, Brasseries Kronenbourg and Carlsberg IT. The restructuring provisions
are calculated on the basis of detailed plans announced to the parties concerned and relate mainly to termination benefits to employees made
redundant.
The Group has made provision for certain contracts which are deemed to be onerous. Onerous contracts totalfing DKK 112m primarily relate to
raw materials in Western Europe. The provision for onerous contracts in 2011 was also primarily related to raw materials.
Other provisions totalling DKK 984m (2011: DKK 1,020m) relate primarily to profit sharing in France, employee obligations other than retirement
benefits, and ongoing disputes, lawsuits etc.
DKK million 2012
Onerous
Restructurings contracts Other Total
Provisions at 1 January 2012 336 112 1,020 1,468
Additional provisions recognised 414 - 199 613
Used during the year -156 - -231 -387
Reversal of unused provisions -24 - -135 -159
Transfers 2 - 130 132
Discounting 13 - 48 61
Foreign exchange adjustments etc. -10 - -47 -57
Provisions at 31 December 2012 575 112 984 1,671
Provisions are recognised in the statement of financial position as follows:
Non-current provisions 304 5 788 1,097
Current provisions 271 107 196 574
Total 575 112 984 1,671
DKK million 2011
Onerous
Restructurings contracts Other Total
Provisions at 1 January 2011 409 315 1,253 1,977
Step acquisition of entities - - 13 13
Additional provisions recognised 164 - 73 237
Disposal of entities - - -6 -6
Used during the year -216 -6 -275 -497
Reversal of unused provisions -13 -197 -98 -308
Transfers -9 - 67 58
Discounting 10 - 55 65
Foreign exchange adjustments etc. -9 - -62 -71
Provisions at 31 December 2011 336 112 1,020 1,468
Provisions are recognised in the statement of financial position as follows:
Non-current provisions 121 5 839 965
Current provisions 215 107 181 503 |)
Total 336 112 1,020 1,468
DKK 871m (2011: DKK 862m) of total non-current provisions falls due within five years from the end of the reporting period.
66
Carlsberg Breweries Group
Note
28
Other liabilities etc.
DKK million 2012 2011
Other liabilities are recognised in the statement of financial position as follows:
Non-current liabilities 1,201 1,087
Current liabilities 9,624 10,570
Total 10,825 11,657
Other liabilities by origin:
Excise duties and VAT payable 3,690 3,512
Staff costs payable 1,590 1,555
Interest payable 812 731
Fair value of hedging instruments 606 1,197
Liabilities related to the acquisition of entities 1,129 1,459
Amounts owed to associates 2 1
Deferred income 1,139 1,117
Other 1,857 2,085
Total 10,825 11,657
67
1304236EogSN10267
Carlsberg Breweries Group
Note
29
Cash flows
DKK million 2012 2011
Adjustment for other non-cash items:
Share of profit after tax, associates -112 -174
Gains on disposal of property, plant and equipment and intangible assets, net -112 -67
Amortisation of on-trade loans etc. 547 623
Total 323 382
Change in trade working capital:
Inventories -202 -206
Receivables 206 -1,236
Trade payables and other liabilities 861 1,803
Total 865 361
Change in other working capital:
Other receivables -164 117
Other payables -36 240
Retirement benefit obligations and other liabilities related to operating activities before special items -294 -687
Adjusted for unrealised foreign exchange gains/losses -11 -136
Total "505 -466
Change in on-trade loans:
Loans provided -1,089 -1,052
Repayments 642 534
Total -447 -518
Change in financial receivables:
Loans and other receivables -65 -83
Other financial receivables - -17
Repayments 37 54
Total -28 -46
Non-controlling interests:
Acquisition of non-controlling interests -4,916 -1,338
Dividends to non-controlling interests -282 -121
Share buy-back - -417
Total -5,198 -1,876
External financing:
Proceeds from issue of bonds 11,160 -
Repayment of bonds including cross-currency swap - -2,965
Debt institutions, long term -7,187 1,418
Debt institutions, short term -848 533
Intercompany loans, long term 42 -
Intercompany loans, short term 144 -1,476
Loans from associates -65 -30
Finance lease liabilities -14 -12
Other financing liabilities 31 -249
Total 3,263 -2,781
68
2011
Previous Previously held Acquired Total
method of ownership ownership Carlsberg Acquisition Main
DKK million consolidation interest interest interest date activity Cost
Acquired entity:
Lao Brewery Co. Ltd. Proportionate 50.00% 1.00% 51.00% 30 Aug. 2011 Brewery 33
Hue Brewery Ltd. Proportionate 50.00% 50.00% 100.00% 23 Nov. 2011 Brewery 485
Total 518
Acquired share of net assets recognised at fair value Revaluation of Total recognised
Lao Brewery Hue Brewery previously recognised net assets
DKK million Co. Ltd. Ltd. Total net assets at fair value from acquisition
Intangible assets 130 108 238 237 475
Property, plant and equipment 251 91 342 -42 300
Inventories 24 14 38 -3 35
Loans and receivables, current 20 3 23 - 23
Cash and cash equivalents 125 66 191 - 191
Provisions -13 - -13 - -13
Deferred tax assets and liabilities, net -31 -29 -60 -43 -103
Borrowings -18 -17 -35 - -35
Trade payables and other payables -52 -81 -133 - -133
Net assets 436 155 591 149 740
Lao Brewery
DKK million Co. itd, Hue Brewery Ltd. Total
Fair value of consideration transferred for acquired ownership interest 33 485 518
Fair value of previously held ownership interest 1,665 451 2,116
Fair value of non-controlling ownership interest 1,832 - 1,632
Fair value of entities acquired in stages, total 3,330 936 4,266
Carrying amount of identified assets and liabilities recognised before step acquisition 368 74 442
Revaluation of identified assets and liabilities recognised before step acquisition 68 81 149
Fair value of acquired identified assets, liabilities and contingent |iabilities 436 155 591
Falr value of identified assets, liabllities and contingent liabilities 872 310 1,182
Total goodwill 2,458 626 3,084
Goodwill recognised before a step acquisition 344 28 372
Change in total recognised goodwill 2,114 598 2,712
Goodwill is attributable to:
Shareholders in Carlsberg A/S 1,253 626 1,879
Non-controlling interests 1,205 - 1,205
Total goodwill 2,458 626 3,084
Gain on revaluation of previously held ownership interest in entities acquired in a step acqulsition:
Carrying amount of previously held ownership interest -712 -102 -814
Fair value of previously held ownership interest 1,665 451 2,116
Recycling of cumutative exchange differences 44 -46 -2
Total 997 303 1,300
Elements of cash consideration paid:
Cash - 485 485
Cash and cash equivalents, acquired -125 -66 -191
Total cash consideration paid -125 419 294
Capital injection in kind 33 - 33
Total consideration transferred -92 419 327
Acquired cash only comprised the additional consolidated share in the step acquisition due to the change from proportional to full consolidation equalling the difference between the
previous ownership interest and 100%.
Contingent consideration
in 2012 Carlsberg revalued contingent considerations for the previous acquisition of shareholdings in Gorkha Brewery, Nepal, South Asian Breweries Pte, Ltd., Singapore and
Olivaria, Belarus. The revaluations are based on updated information since the initial recognition of the liabilities including new budgets and sales forecasts, discount rates etc. The
total revaluation recognised in 2012 is DKK 17m (2011: DKK 349m).
69
1304236EogSN10268
Carlsberg Breweries Group
Note
30
Acquisition and disposal of entities
The Group has not completed any acquisitions of entities during 2012.
Acquisition of entities
In 2012, the purchase price of part of the activities in S&N (acquired in 2008) has been adjusted by DKK 4m as a result of allocation of debt according to agreement. The
adjustment was recognised as goodwill. The purchase price is expected to be further adjusted depending on the final allocation of debt according to agreement.
Acquisition of proportionally consolidated entities
In Q2 2012, Carisberg acquired 6% of the shares in the jointly controlled entity South Asian Breweries Pte. Ltd., which is recagnised by proportional consolidation. The purchase
price allocation of the fair value of identified assets, liabilities and contingent liabilities in the acquisition has not yet been completed. The fair value of identified assets, liabilities and
contingent liabilities less the cost of the acquisition, (DKK 23m), is recognised as goodwill (DKK 17m). Accounting for the acquisition will be completed within the 12-month period
required by IFRS 3.
During 2011, Carlsberg acquired 22.5% in Q2 and an additional 4% in Q4 of the shares in the jointly controlled entity South Asian Breweries Pte. Ltd., which is recognised by
proportional consolidation due to terms in the shareholder agreement with the partner. The purchase price allocation of the fair value of identified assets, liabilities and contingent
liabilities in both acquisitions has been completed. The fair value of identified assets, liabilities and contingent liabilities less the cost of the acquisitions, DKK 101m in total, was
recognised as goodwill.
Step acquisition of entities
In 2011, Carlsberg gained control of Lao Brewery Co. Ltd. in Laos and Hue Brewery Ltd. in Vietnam, Previously both entities were proportionally consolidated.
Revaluation of previously recognised net assets at fair value includes revaluation at fair value of net assets that were proportionally consolidated prior to the step acquisition of the
entity.
In Q3 2011, Carlsberg acquired an additional 1% of the shareholding in the joint venture Lao Brewery Co. Ltd. in a disproportionate capital increase where Carlsberg contributed
assets in kind, thus gaining control of the entity in a step acquisition. The fair value of the consideration injected amounted to DKK 33m. The shareholdings held immediately before
obtaining control was recognised at fair value with the revaluation adjustment, DKK 997m, recognised in special items. The purchase price allocation of the fair value of identified
assets, liabilities and contingent liabilities has been completed, which has not resulted in any changes to the recognised amounts.
This step acquisition was a natural step for Carlsberg and in line with the strategy of obtaining full control of key operating activities. The calculation of goodwill represents staff
competences as well as expectations of positive growth. Goodwill related to the non-controlling interests' share of Lao Brewery Co. Ltd. was recognised as part of goodwill.
In Q4 2011, Carlsberg acquired additional 50% of the shareholding in the joint venture Hue Brewery Ltd. and thereby gained control through a step acquisition. The shareholdings
held immediately before obtaining control was recognised at fair value with the revaluation adjustment, DKK 303m, recognised in special items. The purchase price allocation of the
fair value of identified assets, liabilities and contingent liabilities has been completed, which has not resulted in any changes to the recognised amounts.
This step acquisition was a natural step for Carlsberg and in line with the strategy of obtaining full contro! of key operating activities. The calculation of goodwill represents staff
competences as well as expectations of positive growth.
The acquired entities contributed positively to operating profit before special items for 2011 by approximately DKK 61m and to the profit for the year by approximately DKK 29m. The
net profit for the year, had the acquisitions been completed at 1 January 2011, was estimated at DKK 5,966m.
The fair value of the non-controlling ownership interest was estimated based on the net present value of expected future cash flows from the entity, the cost of newly acquired
shareholdings in the entity, excluding control premium, and other fair value models as applicable for the transaction. The key assumptions applied for the Lao Brewery Co. Ltd.
transaction were an after-tax WWACC of 11.4% and a terminal growth rate of 2.5%.
Acquired net assets of entities acquired in a step acquisition included receivables from customers at a fair value of DKK 11m. None of the acquired receivables from customers
were considered irrecoverable at the time of acquisition.
Goodwill recognised regarding transactions completed in 2011 was not deductible for tax purposes.
Carlsberg Breweries Group
Note
30 Acquisition and disposal of entities
Disposal of entities
No entities were disposed of in 2012.
In Q1 2011, Carlsberg disposed of the subsidiary Dresden Brauerei, Germany, at a sales price of DKK 126m.
The entity had a carrying amount of DKK 116m, resulting in a gain of DKK 10m, which was recognised in
special items. Prior to the sale, an impairment loss of DKK 128m had been recognised in 2010 on the brewery
assets, corresponding to the difference between the carrying amount and the expected sales price.
In Q2 2011, Carlsberg disposed of the subsidiary Sorex Holding SAS, a logistical company in France, at a
sales price of DKK 134m. The entity had a carrying amount of DKK 220m, including goodwill of DKK 6m,
resulting in a loss of DKK 86m, which was recognised in special items.
DKK million 2012 2011
Net assets disposed of - 336
Gains/losses recognised under special items - -76
Cash consideration received - 260
Cash and cash equivalents disposed of - -51
Cash inflow, net - 209
DKK million 2012 2011
Acquisition and disposal of entities, net:
Step acquisitions, cash outflow - -294
Acquisitions of proportionally consolidated entities, cash outflow -23 -175
Payment regarding acquisition in prior period -4 -
Disposals, cash inflow - 209
Net "27 -260
71
1304236EogSN10269
Carlsberg Breweries Group
Note
31
Acquisition and disposal of non-controlling interests
2012
DKK million Increase in ownership
psc UAB Svyturys- Carlsberg — The Bottling
Baltika Carlsberg Utenos South East and Brewing Other
Entity Breweries! Ukraine Alus? JSC Aldaris? Europe? Group Ltd. entities”
Country Russia Ukraine Lithuania Latvia Malawi
Paid -4,296 -15 20 -27 -393 -35 -170 -4,916
Change in provision for put option - - - 26 393 - -46 373
Proportionate share of equity acquired 2,650 1 3 - - 21 =1 2,674
Difference recognised directly in equity -1,646 -14 -2 1 - -=14 -220 -1,897
Difference recognised in goodwill - - 25 - 2 - 3 28
Effects of changes in Carlsberg's ownership interest on the equity attributable to Carlsberg:
1 January 2012 31,065 1,839 954 232 881 - 1,603 36,574
Effect of acquisition 2,650 1 3 - - 21 -1 2,674
Comprehensive income 3,749 272 57 -109 11 - 169 4,149
Dividends, capital injections etc. 400 -155 i 1 -26 -21 -106 94
31 December 2012 37,864 1,957 1,015 124 866 - 1,665 43,491
2011
DKK million Increase in ownershig
Carlsberg Carlsberg Carlsberg pJsc UAB Svyturys-
Baltika Serbia Croatia Bulgaria Carlsberg Utenos Other
Entity Breweries? d.0.07 d.0.0.7 aD! Ukraine Alus? entities?
Country Russia Serbia Croatia Bulgaria Ukraine Lithuania
Paid -866 - - - -59 -373 -40 -1,338
Change in provision for put option - -194 -92 -107 - 482 -402 -313
Proportionate share of equity acquired/disposed 1,127 80 56 48 39 -21 24 1,353
Difference recognised directly in equity 261 - - - -20 - 417 -176
Difference recognised in goodwill - -114 36 59 a 88 -1 -122
Effects of changes in Carlsberg's ownership interest on the equity attributable to Carlsberg:
1 January 2011 30,590 285 232 180 1,551 1,126 1,609 35,573
Effect of acquisition/disposal 1,127 80 56 48 39 -21 24 1,353
Comprehensive income 1,649 25 9 -6 366 54 -168 1,929
Dividends, share buy-back, capital injections etc. -2,301 -1 -22 -5 -117 -205 -29 -2,680
31 December 2011 31,065 389 275 217 1,839 954 1,436 36,175
1) In June 2012 Baltika Breweries completed a cancellation of 7,954,071 treasury shares acquired in the share buy-back in 2011. After the cancellation, Carlsberg completed a voluntary offer to the
non-controlling interests in Baltika Breweries in August 2012, followed by a compulsory purchase of all outstanding shares completed in November 2012. In total Carisberg increased the shareholding
by 13,058,025 shares in the two transactions, leaving Carisberg as the sole shareholder of Baltika Breweries.
2) Adjustment to the acquisition price for non-controlling interests acquired in 2011 is due to dividens received for 2011 (see item 8). In addition the Group acquired a small portion of non-controlling
interests in 2012.
3) In January 2012 Carlsberg completed the voluntary offer to the non-controlling interests in JSC Aldaris (Latvia) that was initiated in December 2011 .
4) In January 2012 Carlsberg settled the acquisition of non-controlling interests in Carlsberg Serbia d.0.0., Carisberg Croatia d.0.0. and Carlsberg Bulgaria AD negotiated in 2011 (see item 7).
5) Comprises transactions with shareholdings in OJSC Olivaria Brewery (Belarus), Carisberg South Asia Pte. Ltd. (Singapore), Carlsberg Kazakhstan, Lao Brewery Co. Ltd. (Laos) and Carlsberg
Distributers Taiwan Ltd.
6) In addition to acquiring non-controfling interests, Carlsberg transferred title of some of its ownership interests in Baltika Breweries as part of an arrangement to provide financing for Carisberg's
operating activities. In accordance with IFRS, the ownership interest was not derecognised in the consolidated financial statements.
7) Non-controlling interests of Carlsberg Serbia d.0.0., Carlsberg Croatia d.0.0. and Carlsberg Bulgaria AD negotiated sale of their shareholdings to Carlsberg.
8) Non-controlling interests of UAB Svyturys-Utenos Alus (Lithuania) exercised put options held against the Group. Carlsberg also derecognised a put liability related to a smaller shareholding.
9) Comprises transactions with shareholdings in OJSC Olivaria Brewery (Belarus), Carlsberg South Asia Pte. Ltd. (Singapore), Carlsberg Kazakhstan, JSC Aldaris (Latvia), Lao Soft Drinks Co. Ltd.
and Parag Breweries Limited (India).
72
Carlsberg Breweries Group
Note
32
Specification of invested capital
DKK million 2012 2011
Invested capital is calculated as follows:
Total assets 141,948 136,195
Less:
Deferred tax assets -1,192 -871
Loans to associates (current) -126 -105
Loans to Group companies (current) -634 -1,451
Interest income receivable, fair value of hedging instruments and financial receivables -612 -528
Securities (current and non-current) -133 -130
Cash and cash equivalents -5,748 -3,108
Assets held for sale -27 -235
Assets included 133,476 129,767
Trade payables -11,906 -11,039
Deposits on retumable packaging -1,381 -1,291
Provisions, excluding restructuring -1,096 -1,132
Corporation tax -551 -533
Deferred income -1,139 -1,117
Finance lease liabilities, included in borowings -39 -52
Other liabilities, excluding deferred income, interest payable and fair value of hedging instruments 8,268 8,611
Liabilities offset -24,380 -23,775
Invested capital 109,096 105,992
73
1304236EogSN10270
Carlsberg Breweries Group
Note
33
Specification of net interest-bearing debt
DKK million 2012 2011
Net interest-bearing debt is calculated as follows:
Non-current borrowings 36,479 34,137
Current borrowings 3,352 2,591
Gross interest-bearing debt 39,831 36,728
Cash and cash equivalents -5,748 -3,108
Loans to associates, interest-bearing portion -110 -97
Loans to partners -226 -230
On-trade loans -2,022 -2,066
Non-interest-bearing portion 1,015 1,033
Other receivables -1,813 -1,267
Non-interest-bearing portion 1,346 1,238
Receivables from group companies, interest-bearing portion -634 -1,451
Net interest-bearing debt 31,639 30,780
Changes in net interest-bearing debt:
Net interest-bearing debt at 1 January 30,780 32,847
Cash flow from operating activities -10,138 -9,789
Cash flow from investing activities, exc! acquisition of entities, net 5,861 5,136
Cash flow from acquisition of entities, net 27 -260
Share buy-back - 417
Dividends to shareholders and non-controlling interests 282 121
Acquisition of non-controlling interests 4,916 1,338
Acquired net interest-bearing debt from acquisition/disposal of entities -9 53
Change in interest-bearing lending 18 18
Settlement of financial instruments in relation to loan agreements - 805
Effect of currency translation 326 289
Other -424 -195
Total change 859 -2,067
Net interest-bearing debt at 31 December 31,639 30,780
74
Carlsberg Breweries Group
Note
34
Investments in proportionally consolidated entities
The amounts shown below represent the Group's share of the assets and liabilities, revenue and profit of proportionally
consolidated entities as shown in the overview of Group companies. These amounts are recognised in the consolidated
statement of financial position, including goodwill, and in the income statement.
DKK million 2012 2011
Revenue 2,709 2,744
Total costs -2 428 -2,336
Operating profit before special items ” 281 408
Consolidated profit 131 228
Non-current assets 3,086 2,560
Current assets 929 896
Assets held for sale, net 9 10
Non-current liabilities -672 -448
Current liabilities -1,762 -1,465
Net t: 1,590 1,553
Free cash flow -360 -227
Net cash flow -100 -139
Cash and cash equivalents, year-end 52 149
Contingent liabilities in joint ventures 150 132
75
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Carlsberg Breweries Group
Note
35. Financial risks
The Group's activities create exposure to a variety of financial risks. These risks include market risk (foreign
exchange risk, interest rate risk and raw material risk), credit risk and liquidity risk.
The Group's financial risks are managed by Group Treasury in accordance with the Financial Risk
Management Policy approved by the Supervisory Board and are an integrated part of the overall risk
management process in Carlsberg. The risk management framework is described in the Management review.
As the Group did not identify any additional financial risk exposures in 2012, the risk management activities
were unchanged compared to 2011.
Capital structure
Management regularly assesses whether the Group's capital structure is in the interests of the Group and its
shareholders. The overall objective is to ensure a continued development and strengthening of the Group's
capital structure which supports long-term profitable growth and a solid increase in key earnings and
statement of financial position ratios.
This includes the assessment of and decision on the split of financing between share capital and loans,
which is a long-term strategic decision to be made in connection with major acquisitions and similar
transactions.
As an element of strategic capital structure decisions, management assesses the risk of changes in the
Group's investment grade rating. In 2006 the Carlsberg Breweries Group was awarded investment-grade
ratings by Moody's Investor Service and Fitch Ratings. In February 2011 these ratings were upgraded one
notch each by both rating agencies. The current rating is Baa2 from Moody's and BBB from Fitch, both with
a stable outlook.
Other operational decisions relate to the issue of bonds, and the entering into and changing of bank loan
agreements. To facilitate these decisions and manage the operational capital structure, management
assesses committed credit facilities, expected future cash flows and the net debt ratio.
At 31 December 2012, the Carlsberg Breweries Group had net interest-bearing debt totalling DKK 31,639m
(2011: DKK 30,780m). The credit resources available and the access to unused committed credit facilities
are considered reasonable in the light of the Group's current needs in terms of financial flexibility.
Comitted non-current credit facilities at 31 December
DKK million 2012 2011
1-2 years 8 050 3.430
2-3 years 14 313 8.026
3-4 years 9 083 13.129
4-5 years 7.439 8.985
>5 years 12.457 8.638
Total 51.342 42.208
Current borowings 3 352 2.591
Non-current borrowings 36.479 34.137
Total
Market risk
Market risk is the risk of changes in market prices, such as foreign exchange rates and interest rates, that
will affect the Group's net result and/or equity.
To minimise the exposure to these risks, the Group enters into a variety of financial instruments and
generally seeks to apply hedge accounting to Minimise volatility in profit and loss.
Foreign exchange risk
A significant part of the Group's activities and investments take place outside Denmark and in currencies
other than DKK. Foreign exchange risk is therefore a principal financial risk for the Group and, as such,
exchange rate fluctuations can have a significant impact on the income statement and the statement of
financial position.
The Group is exposed to foreign exchange risks on revenue and purchases, as the predominant part of
revenue and purchases originates from foreign entities and is translated into the Group's functional currency,
DKK. The Group is primarily exposed to RUB and secondarily to the currencies stated in the table below.
There is also some exposure to a number of Asian currencies, which in total represent approximately 15% of
the Group's operating profit. The exposure to fluctuations in EUR/DKK is considered insignificant due to
Denmark's fixed exchange rate policy towards EUR. Despite turmoil in the Eurozone for the past 2-3 years,
the DKK has moved in a narrow band against the EUR. Carlsberg monitors and will continue to monitor the
risks related to the EUR.
Furthermore, the Group has a foreign exchange risk on cash flow from operations in countries where there is
no natural hedge relationship between cash flow from operations and loans.
Revenue exposure to currencies is illustrated below:
Net revenue by currency a5 a percentage Net revenue by currency as a percentage
of total net revenue 2012 of total net revenue 2011
EM EUR 26% M EUR 26%
RUB 21% RUB 23%
EJ DKK 10% ELDKK 11%
MI GBP 2% M GEP rr
[ CHF 5% EJ CHF 5%
ml NOK 4% MI NOK 4%
mM SEK 49% HM SEK 4%
E1 PLN 4% EJ PLN 3%
HM CNY 3% HM CNY 3%
ME UAH 3% mM UAH 3%
[3 Other 13% [I Other 11%
The Group has chosen not to hedge the exposure arising from translation of revenue or earnings in foreign
currencies, but does in certain cases hedge specific cash flows such as dividends to be received in foreign
currencies. Net investment hedges (described in the section "/nvestment in and financing of local entities”)
do to some extent provide an economic hedge of the exposure arising from translation of revenue or
earnings in foreign currencies.
The Group is exposed to transaction risks on purchases and sales in currencies other than the functional
currency of the local entities. It is therefore Group policy to hedge future cash flows in currencies other than
the functional currency of the entities for a one-year period. This policy applies to Western Europe, excluding
some of the Baltic and Balkan States. Hedging is carried out when plans for the following year are being
prepared, effectively hedging the entities' operating profit in local currency. Since a major part of the
purchases in foreign currency are in EUR, this will not constitute a risk at Group level. However, at Group
77
1304236EogSN10272
level these hedges are effectively an economic hedge of (parts of) the net revenue in the relevant currency,
and are accounted for as cash flow hedges at Group level.
Impact from Eastern Europe. The foreign exchange risk in the entities in Eastern Europe is managed
differently from Carlsberg's operations in the main parts of the rest of the Group. The reason is the excessive
cost of hedging these currencies over a longer period of time.
With regard to transaction risk, it is a long-standing principle in Baltika Breweries to reduce the financial risk
measured in RUB by balancing expenses in the foreign currencies USD and EUR. This procedure reduces
the transaction risk. However, appreciation and depreciation of RUB have affected and will continue to affect
operating profit measured in both DKK and RUB.
Investment in and financing of local entities. The Group is exposed to foreign exchange risk on
borrowings denominated in a currency other than the functional currency of the individual Group entity.
The main principle for funding of subsidiaries is that loans and borrowings should be in local currency or
hedged to local currency to avoid foreign exchange risk. However, in some Group entities debt is
denominated in a currency other than the local entity's functional currency without the foreign exchange risk
being hedged. This applies primarily to a few entities in Eastern Europe and is based on an assessment of
the alternative cost of financing the entity in the local currency. For the countries concerned, the interest rate
level in the local currency, and thus the additional cost of financing in local currency, is so high that it justifies
a foreign exchange risk. In some countries financing in local currency is not available at all.
The tables in the sensitivity analysis below show the impact from a 10% adverse development in exchange
rates for the relevant currencies at 31 December.
At 31 December 2012, 87% of the Group's net financial debt was in EUR (2011: 90%), cf. note 24.
The Group holds a number of investments in foreign subsidiaries where the translation of net assets to DKK
is exposed to foreign exchange risks. The Group uses net investment hedges to hedge part of this foreign
exchange exposure by taking up borrowings denominated in the relevant currencies or by entering into
forward exchange contracts. This applies to net investments in CHF, CNY, GBP, MYR, NOK, PLN, RUB and
SEK. The basis for hedging is reviewed annually, and the two parameters, risk reduction and cost, are
balanced. The effect of net investment hedges on the income statement and other comprehensive income is
summarised in note 36.
The most significant net risk relates to foreign exchange adjustment of net assets in RUB, which has only
been hedged to a minor extent.
Applied exchange rates. The DKK exchange rates applied for the most significant currencies when
preparing the consolidated financial statements are presented below. The average exchange rate for the
year was calculated using the monthly exchange rates weighted according to the phasing of the Group's net
revenue throughout the year.
Closing Rate Average Rate
DKK 2012 2011 2012 2011
Swiss Franc (CHF) 6.1758 6.1157 6.1777 6 0678
Chinese Yuan (CNY) 0.9079 0.9112 0.9204 0 8260
Euro (EUR) 7.4604 7.4342 7.4431 7.4514
Pound Sterling (GBP) 9,1320 8.9000 9.1931 86019
Malaysian Ringgit (MYR) 1.8486 1.8108 1.8735 1.7545
Norwegian Krone (NOK) 1.0167 0.9588 0.9973 0 9562
Polish Zioty (PLN) 1.8281 1.6676 1.7791 1 8245
Russian Rouble (RUB) 0.1855 0.1784 0.1863 0.1827
Swedish Krone (SEK) 0.8714 0.8342 0.8565 0 8248
Ukrainian Hryvnia (UAH) 0.7080 0.7219 0.7315 0 6679
78
Impact on financial statements and sensitivity analysis
Impact on operating profit. Developments in exchange rates between DKK and the functional currencies of
foreign entities had a positive impact compared to 2011 on the Group's operating profit measured in DKK.
Operating profit was improved as a result of an increase in the average rates for NOK/DKK (4%), GBP/DKK
(7%), MYR/DKK (7%), SEK/DKK (4%), RUB/DKK (2%) and UAH/DKK (10%).
Impact on financial items, net. |n 2012, the Group had net gains on foreign exchange and fair value
adjustments of financial instruments of DKK 7m (2011: DKK -10m).
Impact on statement of financial position. Fluctuations in foreign exchange rates will also affect the level
of debt as funding is obtained in a number of currencies. In 2012, net interest-bearing debt increased by
DKK 327m (2011: DKK 289m) due to movements in foreign exchange rates. The primary impact derives
from net debt in GBP and EUR; the GBP/DKK rate appreciated from 8.9 at the end of 2011 to 9.13 at the
end of 2012, and EUR/DKK appreciated from 7.4342 at the end of 2011 to 7.4604 at the end of 2012.
Impact on other comprehensive income. For 2012, the total gain on net investments, loans granted to
subsidiaries as an addition to the net investment and net investment hedges amounted to DKK 1,686m
(2011: DKK -1,956m). Gains were primarily incurred in RUB, as the RUB/DKK rate appreciated by 4% from
the end of 2011 to the end of 2012.
Sensitivity analysis. An adverse development in the exchange rates would, all other things being equal,
have the following impact on the consolidated profit and loss for 2012. The hypothetical impact ignores the
fact that the subsidiaries' initial recognition of revenue, cost and debt would be similarly exposed to the
changes in the exchange rates. The calculation is made on the basis of balance sheet items at 31 December.
2012
EUR EUR Gross Net Effect on
DKK million recievable EUR payable EUR loans cash exposure Derivative exposure % change P/L
EUR/RUB 7 -100 - 1 -92 - -92 10.00% -9
EUR/LTL 11 -26 - 14 -1 - -1. 10.00% -
EUR/RSD 24 69 - 98 53 - 53. 10.00% 5
EUR/KZT - Kes] - - 8 - -8. 10,00% -1
EUR/UAH 4 46 - 72 30 - 30 10.00% 3
EUR/UZS - -14 -223 9 -228 - -228 10.00% -23
EUR/CNY - 2 - - -2 - 2 10.00% -
Total -28
USD USD Gross Net Effect on
DKK million recievable USD payable USD loans cash exposure Derivative exposure % change P/L
USDUAH 1 -49 - 329 281 281 10.00% 28
Total 28
2011
EUR EUR Gross Net Effect on
DKK million recievable EUR payable EUR loans cash ” exposure Derivative exposure % change P/L
EUR/RUB 2 -143 - 100 41 - 41 10.00% 4
EUR/LTL 2 -14 - 1 -11 - -11 10,00% -1
EUR/RSD 19 35 - 23 7 - 7. 10.00% 1
EUR:/KZT - 3 - - -3 - -3. 10.00%
EUR/UAH 1 -29 - 22 5 - -& 10.00% -
EUR/UZS - -14 -246 10 -250 - -250 10.00% -25
EUR/CNY - 4 - - 4 - 4 10.00%
Total -29
USD USD Gross Net Effect on
DKK million recievable USD payable USD loans cash exposure Derivative exposure % change P/L
USDUAH - -39 -102 25 -115 - 7115 10.00% -12
Total -12
79
1304236EogSN10273
Other comprehensive income is affected by changes in the fair value of currency derivatives designated as
cash flow hedges of future purchases and sales. If the currency rates of the currencies hedged had been 5%
higher on 31 December, other comprehensive income would have been DKK 170m lower (2011: DKK 139m
lower).
Interest rate risk
The most significant interest rate risk in the Group relates to borrowings. As the Group's net debt is primarily
in EUR and DKK, interest rate exposure relates to the development in the interest rates in these two
currencies.
Interest rate risks are mainly managed using interest rate swaps and fixed-rate bonds.
The interest rate risk is measured by the duration of the net borrowings. The target is to have a duration
between one and five years.
A breakdown of the net financial debt, including the exposure to interest rate risk, financial instruments used
to manage foreign exchange and interest rate risks, is provided in note 24.
Sensitivity analysis. At the reporting date, 86% of the net borrowings consisted of fixed-rate loans with
rates fixed for more than one year (2011: 85%). It is estimated that an interest rate increase of 1 percentage
point would lead to an increase in annual interest expenses of DKK 49m (2011: DKK 63m). The calculation
assumes a parallel shift in the relevant yield curves and 100% effective hedging of changes in the yield curve.
At 31 December 2012, the duration of the borrowings was 3.9 years (2011: 2.3 years) and in value terms
amounted to DKK 1,326m (2011: DKK 775m). The duration has increased compared to 2011 due to the
issuance of a total of EUR 1.5bn of fixed-rate bonds during 2012. The maturity of the bonds issued in 2012 is
evenly split between EUR 750m maturing in 2019 and EUR 750m maturing in 2022. If the market interest
rate had been 1 percentage point higher (lower) at the reporting date, it would have led to a financial gain
(loss) of DKK 1,326m (2011: DKK 775m). However, since only interest rate swaps and not fixed-rate
borrowings are recognised at fair value, marked-to-market, only the duration contained in financial
instruments will impact on comprehensive income or the income statement. It is estimated that DKK 72m
(2011: DKK 164m) of the duration is contained in interest rate derivatives designated as cash flow hedges,
meaning that the impact from changes in interest rates will be recognised in other comprehensive income,
provided that the hedges are efficient and that there are no ineffective portion(s). If the market interest rates
had been 1 percentage point higher (lower) at 31 December 2012, shareholders' equity would have been
DKK 72m (2011: DKK 164m) higher (lower). The remaining duration is included in borrowings with fixed
interest — primarily the issued bonds described in note 24, which are carried at amortised cost.
The sensitivity analysis is based on the financial instruments recognised at the reporting date. The sensitivity
analysis assumes a parallel shift in interest rates and that all other variables, in particular foreign exchange
rates and interest rate differentials between the different currencies, remain constant. The analysis was
performed on the same basis as for 2011.
The recognised impact from interest rate derivatives is disclosed in note 36.
Raw material risk. Raw material risks are associated in particular with purchasing of cans (aluminium), malt
(barley) and energy. Management of raw material risks and foreign exchange risks is coordinated centrally.
The aim of the risk management process is to ensure stable and predictable raw material prices in the long
term, and to avoid capital and liquidity being tied up unnecessarily.
As the underlying markets for the specified categories of raw materials vary, so does the way in which they
are hedged against price increases. The most common form of hedging is fixed-price agreements in local
currencies with suppliers.
80
To hedge the implicit risk of rising aluminium prices associated with the purchase of cans, the Group's
purchase price in the majority of purchase agreements is variable and based on the global market price of
aluminium (London Metal Exchange, LME). The Group is thus able to hedge the underlying aluminium price
risk. For 2013, the majority of the aluminium price risk has been hedged for Western and Eastern Europe,
and for 2014 the risk has been partially hedged. The total volume of aluminium purchased via financial
instruments was approximately 97,300 tonnes at the end of 2012 (2011: 88,600 tonnes). Based on this
volume, and assuming 100% efficiency, a 10% increase (decrease) in aluminium prices would impact equity
positively (negatively) by DKK 106m (2011: DKK 94m). Fair values are specified in note 36.
It is Group policy to secure delivery of malt and hops for the coming budget year, and the main part of the
exposure for 2013 was thus hedged through fixed-price purchase agreements for the majority of the Group
in 2012. The percentage which is hedged or price-fixed is higher for Western Europe than for Eastern
Europe.
Credit risk
Credit risk is the risk of a counterparty failing to meet its contractual obligations and so inflicting a loss on the
Group. The Group is exposed to credit risk on financial assets such as trade and other receivables, on-trade
loans, cash balances (including fixed deposits and cash and cash equivalents), investments and derivative
financial instruments with a positive fair value.
Trade receivables, on-trade loans and other receivables. Credit risk related to trade receivables arises
when the Group makes sales for which no cash payments are received when goods are delivered.
Exposures on trade receivables are managed locally in the operating entities and credit limits set as deemed
appropriate for the customer taking into account the current market conditions.
The Group does not generally renegotiate the terms of trade receivables with the individual customer and
trade receivables are not changed to on-trade loans. However, if a negotiation takes place, the outstanding
balance is included in the sensitivity analysis based on the original payment terms. No significant trade
receivables or on-trade loans were renegotiated during 2012 and 2011.
Under certain circumstances the Group grants loans to the on-trade. On-trade loans are concentrated in
France, UK, Germany, Switzerland and Sweden, and spread across a large number of customers/debtors.
The operating entities monitor and control these loans in accordance with central guidelines. On-trade loans
are usually repaid through discounts during the continuing sales relationship with the individual customer,
which is reflected in the repayment scheme and the discounting of the loans. There are therefore no
significant overdue on-trade loans. It is estimated that the provisions made are sufficient to cover expected
losses.
Significant adverse developments in the on-trade market may increase the credit risk for groups of
customers in a country/market. Such developments include changes in local legislation, which may have an
adverse effect on the earnings in the industry in general and are taken into consideration in the assessment
of impairment losses.
lt is Group policy to reduce the credit risk through prepayments or cash payments on delivery, especially for
certain categories of customers in each country. The local entities assess the credit risk and whether it is
appropriate and cost-effective to hedge the credit risk by way of credit or bank guarantees, credit insurance,
conditional sale etc. Such security is taken into account when assessing the necessary impairment losses.
Security is primarily received from on-trade customers.
The credit risk on on-trade loans is usually reduced through collateral and pledges of on-trade movables
(equipment in bars, cafés etc.). The fair value of the pledged on-trade movables cannot be estimated reliably
but is assessed to be insignificant as the movables are used. Movables received through pledges usually
need major repair before they can be used again.
Other financial assets. Credit risk related to cash and cash equivalents, investments and financial
instruments arises due to uncertainty as to whether the counterparty will be able to meet its contractual
obligations as they fall due. The Group has established a credit policy under which financial transactions
81
1304236EogSN10274
may be entered into only with financial institutions with a high credit rating. The credit exposure on financial
institutions is effectively managed by Group Treasury.
The credit risk on other loans is reduced through pledge of shares in one of the Group's subsidiaries that are
held by the borrower.
The Group primarily enters into financial instruments and transactions with the Group's relationship banks,
i.e. banks extending loans to the Group. In most cases, the Group will be in a net debt position with its
relationship banks.
Furthermore, Group Treasury monitors the Group's gross credit exposure to banks, and operates with
individual limits on banks based on rating, level of government support and access to netting of assets and
liabilities. During 2012 the Group has recognised a loss on bank balances due to the counterparty's inability
to pay, and therefore management expects the counterparty to fail to meet its obligations. Before 2012 the
Group had not incurred any losses on bank balances or derivative financial instruments.
Exposure to credit risk. The carrying amount of financial assets represents the maximum credit exposure.
The carrying amount of financial assets, DKK 17,708m (2011: DKK 15,874m), is summarised below.
2012
Net Past due
carrying Of which neither between 30 Past due
amount at impaired nor past due Past due less and 90 more than
DKK million 31 Dec at the reporting date than 30 days days 90 days
Receivable from sale of goods and services 7,117 6,316 298 154 349
On-trade loans 2,022 1,930 5 8 79
Loans to associates 137 137 - - -
Loans to partners 226 226 - - -
Fair value of hedging instruments 584 584 - - -
Other receivable 1,862 1,712 22 23 105
Cash and cash equivalent 5 760 5 760 - - -
2011
Net Past due
carrying Of which neither between 30 Past due
amount at impaired nor past due Past due less and 90 more than
DKK million 31 Dec at the reporting date than 30 days days 90 days
Receivable from sale of goods and services 7,115 6,529 216 154 216
On-trade loans 2,066 1,923 12 10 121
Loans to associates 123 123 - - -
Loans to partners 230 230 - - -
Intercompany receivables 1,465 1,466 - - -
Fair value of hedging instruments 499 499 - - -
Other receivables 1,267 1,023 32 35 177
Cash and cash equivalent 3,108 3,108 - - -
Impairment losses are based on an individual review for impairment in connection with customer insolvency,
anticipated insolvency and past due amounts and on mathematically computed impairment losses based on
classification of debtors, maturity and historical information.
No significant impairment losses were incurred in respect of individual trade receivables or on-trade loans in
2012 and 2011. The impairment losses at 31 December 2012 relate to several minor customers that have —
in different ways — indicated that they do not expect to be able to pay their outstanding balances, mainly due
to adverse economic developments. The Group believes that the unimpaired amounts that are past due by
more than 30 days are still collectable, based on historic payment behaviour and extensive analysis of the
underlying customers' credit ratings.
Impairment losses on other receivables relate to a foreign bank that is not expected to meet its obligations
and to receivables from Nordic Getrånke GmbH. The impairment losses on these items are recognised in
special items.
82
The development in impairment losses in respect of receivables was as follows:
2012
Trade Other
DKK million receivables On-trade foans receivable Total
Impairment at 1 January -715 -232 - -947
Impairment loss recognised -129 -80 -163 -372
Realised impairment losses 135 59 - 194
Reversed impairments 16 25 - 41
Disposals 5 -5 -
Impairment at 31 December 688 -233 -163 =1,084
2011
Trade Other
DKK million receivables On-trade loans receivable Total
Impairment at 1 January 675 -265 - -940
Impairment loss recognised -151 -25 - -176
Realised impairment losses 61 33 - 94
Reversed impairments 21 25 - 46
Disposals 30 - - 30
Impairment at 31 December -714 -232 - -946
Liquidity risk
Liquidity risk results from the Group's potential inability to meet the obligations associated with its financial
liabilities, e.g. settlement of its financial debt, paying its suppliers and settling finance lease obligations. The
Group's liquidity is managed by Group Treasury. The approach is to ensure effective liquidity management,
which primarily involves obtaining sufficient committed credit facilities to ensure adequate financial resources,
and to some extent tapping a diversity of funding sources. At 31 December 2012, the Group had unutilised
non-current committed credit facilities of DKK 14,863m (2011: DKK 8,071m).
In addition to efficient working capital management and credit management, the Group mitigates liquidity risk
by arranging borrowing facilities with highly rated financial institutions.
83
1304236EogSN10275
Distribution of gross financial debt 2012, DKK 39,831 Distribution of gross financial debt 2011, DKK 36,728
mM Non-current bank
dl |
Non-current bank borrowing 36%
borrowing 14%
E Issued bonds 73% B Issued bonds 54%
6
& Non-current
Q Non-current mortgages mortgages 4%
3%
Current bank
E Current bank borrowing 4%
borrowing 3%
ao Other current and
i Other current and non- non-current
current borrowings 7% borrowings 2%
The Group uses cash pools in its day-to-day liquidity management for most of the entities in Northern &
Western Europe, as well as intra-Group loans between Group Treasury and subsidiaries. As a result of
withholding tax and local legislation, the majority-owned entities in Eastern Europe have their own credit
facilities and borrowings from banks. This is also the case for the joint venture in Portugal (Unicer-Bebidas).
Carlsberg applies the formula below in the monitoring of credit resources available:
2012 2011
Total non-current commited loans and credit facilities 51.342 42.208
Total current and non-currents borrowings -39.831 -36.728
Unused committed non-current credit facilities 11.511 5.480
Cash and cash equivalents 5.748 3.108
Credit resources available 17.259 8.588
The unused non-current committed credit facilities of DKK 11,511m (2011: DKK 5,480m) stated in the
formula are net of non-current and current borrowings and therefore DKK 3,352m (2011: DKK 2,591m) (the
current borrowing) lower than the actual unutilised part of non-current committed credit facilities of DKK
14,863m (2011: DKK 8,071m).
A few insignificant non-current committed credit facilities include financial covenants with reference to the
ratio between net debt and EBITDA. Management monitors this ratio, and at 31 December 2012 there was
sufficient headroom below the ratio.
The following table lists the contractual maturities of financial liabilities, including estimated interest
payments and excluding the impact of netting agreements, and thus summarises the liquidity risk.
The risk implied from the values shown in the maturity table below reflects the one-sided scenario of cash
outflows only. Trade payables and other financial liabilities mainly originate from the financing of assets in
the ongoing operations such as property, plant and equipment and investments in working capital, e.g.
inventories and trade receivables.
84
2012
Maturity >1
Contractual Maturity year <5 Maturity Carrying
DKK million cash flows < 1 year years > 5 years amount
Derivative financial instruments:
Derivative financial instruments, payables 646 383 263 - 606
Non-derivative financial Instruments
Financial debt, gross ' 39,711 3,352 23,889 12,470 39,831
Interest expense 5,273 1,289 3,034 950 N/A
Trade payables and other liabilities 13,287 13,287 - - 13,287
Liabilities related to the acquisition of entities 1,129 1 129 999 1,129
Financial liabilities associated with assets held for sale 18 18 - - 18
Non-derivate financial instruments 59,418 17,947 27,052 14,419 -
Financial liabilities 60,064 18,330 27,315 14,419 -
2011
Maturity >1
Contractual Maturity year <5 Maturity Carmying
DKK million cash flows < 1 year years > $ years amount
Derivative financial systems
Derivative financial instruments, payables 1,158 535 623 - 1,197
Non-derivative financial instruments
Financial debt, gross 36,635 2,591 25,313 8,731 36,728
Interest expense 4,350 1,321 2,811 218 N/A
Trade payables and other liabilities 12,290 12,290 - - 12,290
Liabilities retated to the acquisition of entities 1,136 418 24 694 1,136
Financial liabilities associated with assets held for sale 56 56 - - 56
Non-derivate fi ial instruments 54,467 16,676 28,148 9,643 -
Financial abilities 55,625 17,211 28,771 9,643 -
All items are stated at their nominal amounts. Derivative financial instruments are presented gross.
Derivative financial instruments are in general traded with the Group's relationship banks. The nominal
amount/contractual cash flow of the financial debt is DKK 121m lower (2011: DKK 94m higher) than the
carrying amount. The difference between the nominal amount and the carrying amount comprises
differences between these amounts at initial recognition, which are treated as cost that is capitalised and
amortised over the duration of the borrowings, and differences between nominal amounts and fair values of
bonds. The interest expense is the contractual cash flows expected on the financial gross debt at 31
December 2012. For the part of bank borrowing and mortgages that has been swapped, the expected
interest expense (before swaps but including margin) has been included. The expected net cash flow from
the swaps related to the borrowings is included in the contractual cash flow for the derivative financial
instrument. It should be noted that the cash flow regarding the interest expenses is estimated cash flow
based on the notional amount of the above-mentioned borrowings and forward interest rates at year-end
2012 and 2011. Interest on the debt existing at year-end 2012 and 2011, for which no contractual obligation
(current borrowing and part of the amount drawn on cash pools) exists, has been included for a two-year
period.
Accounting classification and fair values. The accounting classification and fair values can be specified
as follows:
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2012 2011
Carying Canying
DKK million Note amount Fair Value Amount Fair Value
Securities 18 133 133 130 130
Available for sale instruments 133 158 130 130
Fair value hedges 36 499 499 443 443
Cash flow hedges 36 46 48 43 43
Net investment hedges 36 39 39 13 13
Derivative financial instruments 584 584 499 499
Receivables from the sale of goods and services 19 7,117 7,117 7,115 7,115
On-trade loans 19 2,022 2,022 2,066 2,066
Other receivables 19 1,813 1,813 1,267 1,267
Loans to partners 19 226 226 230 230
Loans to associates 19 137 137 123 123
Cash and cash equivalents 21 5,748 5,748 3,108 3,108
Loans and receivables 17,063 17,063 13,909 13,909
Fair value hedges 36 62 -62 -165 -165
Cash flow hedges 36 -495 -495 -792 -792
Net investment hedges 36 -49 49 -240 -240
Derivative financial instruments -606 -606 1,197 -1,197
Issued bonds 24 29,021 30,520 19,478 20,157
Mortages 24 1,248 1,248 1,248 1,248
Bank borrowings 24 6,901 6,901 14,440 14,440
Financial lease obligations 24 39 39 52 52
Other borrowings 24 7% 796 812 812
Trade payables 11,908 11,906 10,999 10,999
Financial liabilities measured at amortised cost 49,911 51,410 47,029 47,708
Fair value hierarchy. Carlsberg has no financial instruments measured at fair value on the basis of level 1
input (quoted prices) or level 3 input (non-observable data).
Securities. Shares in unlisted entities comprise a number of small holdings. These unlisted entities are not
recognised at fair value if the fair value cannot be calculated on a reliable basis. Instead such unlisted
securities are recognised at cost.
Derivative financial instruments — level 2 input. The fair value of all derivatives, and in most cases non-
derivative financial instruments, is determined based on observable market data using generally accepted
methods. Internally calculated values are used, and these are compared to external market quotes on a
quarterly basis.
The fair value of all derivatives (whether designated as fair value or economic hedges, cash flow hedges or
net investment hedges) is calculated internally by: a) estimating the notional future cash flows using
observable market data such as yield curves and the aluminium forward curve; b) discounting the estimated
and fixed cash flow to present value; and c) converting the amounts in foreign currency into the functional
currency at the end-of-period foreign exchange rate.
Loans and other receivables. The carrying amount of trade receivables and other receivables
approximates the fair value.
On-trade loans. On-trade loans are recognised at amortised cost. Based on discounted cash flows using
the interest rates at the end of the reporting period, these loans have a fair value of DKK 2,022m (2011: DKK
2,066m).
Other financial liabilities. Other financial liabilities, including issued bonds, mortgages, bank borrowings,
finance lease obligations, trade payables and other liabilities, are measured at amortised cost. The only
exception is a GBP 300mM bond which is measured at fair value based on movements in a benchmark
interest rate.
86
Carlsberg Breweries Group
Note
36
Financial instruments
Fair value hedges and financial derivatives not designated as hedging instruments (economic hedges)
2012 2011
Fair value Fair value
adjustment adjustment
recognised recognised
in income in income
DKK million statement Fair value statement Fair value
Exchange rate instruments 221 438 8 284
Other instruments -5 -1 -7 6
Ineffective portion of hedge -26 - 10 -
Total 190 437 11 278
Value adjustments of fair value hedges and financial derivatives not designated as hedging instruments in the financial year are recognised in the income statement. The
adjustments are included in financial income and financial expenses (cf. note 8). In 2012, financial income amounted to DKK 190m (2011: DKK 11m).
The ineffective portion of hedge in 2012 relates to the reclassification of the ineffective portion of interest rate instruments (DKK -37m) designated as cash flow hedges
where the hedged item is no longer likely to occur, and reversals of prior years' ineffective portions of interest rate hedges (DKK 11m). For 2011, the ineffective portion
related to the reclassification of fair value adjustments of interest rate instruments (DKK -83m) and of exchange rate instruments (DKK -2m) designated as cash flow
hedges where the hedged item was no longer likely to occur, and of reversal of prior years ineffective portion of interest rate hedges (DKK 12m). The total ineffective
portion for 2012 was a loss of DKK 26m (2011: gain of DKK 10m).
The fair value of the entire derivative classified as a cash flow hedge is presented in the cash flow hedge section, Other instruments are primarily aluminium hedges, which
were not classified as cash flow hedges.
The value of fair value hedges recognised at 31 December amounted to DKK 437m (2011: DKK 278m).
Cash flow hedges
Cash flow hedges are primarily used on interest rate swaps where the hedged item is the underlying (floating rate) borrowing, and on aluminium hedges where the hedged
item is aluminium cans that are used in a number of Group entities in Western Europe and Eastern Europe.
Main financial instruments - overview
Instrument Maturity Purpose
EUR 1,000m interest rate swap 2013 Swap of borrowing with 1 -month EURIBOR to fixed
EUR 400m interest rate swap 2015 Swap of borrowing with 1 -month EURIBOR to fixed
Aluminium 2013-2014 Fixing of aluminium risk related to purchase of cans
The two EUR interest rate swaps were entered into during 2008 following the acquisition of part of the activities in S&N and the subsequent increase in debt.
87
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Carlsberg Breweries Group
Note
36 Financial instruments
Cash flow hedges
2012 2011
Fair value Fair value
adjustment adjustment
recognised in recognised in
other compre- other compre-
hensive Expected hensive Expected
DKK million income Fair value recognition income Fair value recognition
Interest rate instruments 244 -452 2013-2015 156 -669 2012-2015
Exchange rate instruments 24 46 2013 65 22 2012
Other instruments 59 -43 2013-2014 -253 -102 2012-2013
Total 327 -449 -32 -749
Fair value adjustments on cash flow hedges in the financial year are recognised in other comprehensive income and amounted to DKK 327m (2011: DKK -32m).
The fair value of cash flow hedges recognised at 31 December amounted to DKK -449m (2011: DKK -749m). This includes the ineffective portion reclassified to the
income statement, but does not include the value of cash flow hedges closed and not yet transferred to the income statement.
The impact on other comprehensive income from exchange rate instruments relates to hedges of Group entities' purchases and sales in currencies other than their
functional currencies. The impact on other comprehensive income from other instruments relates to hedges of Group entities' exposure to changes in aluminium prices.
Hedging of net investments in foreign subsidiaries
Changes in the fair value of financial instruments (both derivatives and debt instruments) used to hedge the foreign exchange risk associated with investments in foreign
currency are recognised in other comprehensive income.
Where the fair value adjustments do not exceed the value adjustments of the investment, the adjustments of the financial instruments are recognised in other
comprehensive income; otherwise the fair value adjustments are recognised in the income statement.
In addition, loans classified as additions to net investments have been granted to subsidiaries. Foreign exchange adjustments of these loans are recognised in other
comprehensive income in the same line as the gains / losses on the hedges of net investments.
Hedging of net inv
2012 2011
Fair value Fair value
adjustment adjustment
recognised recognised
in other in other
compre- compre-
hensive hensive
DKK million income Fair value income Fair value
Exchange rate instruments -216 -10 -20 -227
Total -216 -10 -20 -227
Carlsberg Breweries Group
Note
36 Financial instruments
Fair value adjustments of net investment hedges and loans classified as additions to net investments in the financial year are recognised in other comprehensive income
and amounted to DKK -216m (2011: DKK -20m). For 2012 there has been an ineffective portion of DKK 1m (2011: DKK Om) which has been reclassified from other
comprehensive income to the income statement.
The fair value of derivatives used as net investment hedges recognised at 31 December 2012 amounted to DKK -10m (2011: DKK -227m).
2012 2011
Total
Addition to adjustment
Hedging of net Total Hedging of Addition to to other
investment, investment, adjustment to investment, net compre-
amount in amount in other compre- Income amount in investment, hensive Income
local local hensive statement local amount in income statement
Million currency currency income (DKK) (DKK) currency local currency (DKK) (DKK)
SEK 4,560 - -167 - -4,194 - -35 -
NOK -750 3,182 125 - -750 3,182 2 -
CHF -380 - -20 - -460 - -36 -
GBP -70 87 3 1 -70 86 -1 -
MYR —458 - -37 - -450 - -12 -
EUR - 698 18 - - 645 -13 -
RUB -13,572 - -105 - -5,910 - 5 -
PLN -300 - -70 - -300 - 31 -
CNY -1,250 - -5 - -1,250 - -68 -
HKD - 3,946 -34 - - 2,874 55 -
USD -141 - 76 - 184 - 52 -
Total -216 1 -20 -
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Carlsberg Breweries Group
Note
37
Related party disclosures
Related parties exercising control. Carlsberg A/S, Ny Carlsberg Vej 100, DK,1799 Copenhagen V, Denmark, holds all the shares in
Carlsberg Breweries A/S. During the year, the Group had balances with the parent company. The balances were subject to arm's length terms
and prices. No transactions were carried out with Carlsberg A/S during the year.
Related parties exercising significant influence. During the year the Carlsberg Breweries Group was not involved in any transactions with
major shareholders, members of the Supervisory Board, members of the Executive Board, key management personnel, or companies outside
the Carlsberg Breweries Group in which these parties have significant influence,
The income statement and the statement of financial position include the following transactions:
Proportionally consolidated
Associates entities
DKK million 2012 2011 2012 2011
Revenue 286 377 13 12
Cost of sales -381 -322 - -1
Loans 300 123 727 161
Receivables 131 233 26 14
Borrowings -96 -107 - -
Trade payables and other liabilities etc. -22 -72 -4 -3
90
Carlsberg Breweries Group
Note
38
Contingent liabilities and other commitments
The Group has issued guarantees for loans etc. raised by joint ventures (non-consolidated share of loan) of DKK 83m (2011:
DKK 87m) and for loans etc. raised by third parties (non-consolidated entities) of DKK 659m (2011: DKK 762m).
Carlsberg Breweries A/S is jointly registered for Danish VAT and excise duties with Carlsberg A/S, Carlsberg Danmark A/S and
various other minor Danish subsidiaries and is jointly and severally liable for payment of VAT and excise duties.
The Group is party to certain lawsuits, disputes etc. of various scopes. It is management's opinion that, apart from what is
recognised in the statement of financial position or disclosed in the consolidated financial statements, the outcome of these
lawsuits, disputes etc. will not have a material negative effect on the Group's financial position.
Certain guarantees etc. are issued in connection with disposal of entities and activities etc. Other than as recognised in the
statement of financial position or disclosed in the consolidated financial statements, these guarantees etc. will not have a
material effect on the Group's financial position.
Contractual commitments. The Group has entered into service contracts of various lengths in respect of sales, logistics and
IT, Costs related to the contracts are recognised as the services are received.
Capital commitments
DKK million 2012 2011
Capital commitments which at the end of the period are agreed to be made at a later
date and therefore not recognised in the consolidated financial statements:
Intangible assets 1 -
Property, plant and equipment and construction contracts 401 763
Total 402 763
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Carlsberg Breweries Group
Note
40
39
Operating lease liabilities
2012
Fixtures and
fittings, other
Land and Plant and plant and
DKK million buildings machinery equipment Total
Future lease payments:
Within one year 161 32 322 515
Between one and five years 335 117 642 1,094
After more than five years 233 18 99 350
Total 729 167 1,063 1,959
2011
Fixtures and
fittings, other
Land and Plant and plant and
DKK million buildings machinery equipment Total
Future lease payments:
Within one year 205 10 354 569
Between one and five years 332 54 640 1,026
After more than five years 236 - 91 327
Total 773 64 1,085 1,922
DKK million 2012 2011
Operating lease expenses recognised in the income statement 522 564
Expected future income under non-cancellable subleases (matures within 10 years) 58 57
The Group has entered into operating leases which relate primarily to properties, IT equipment and transport
equipment (cars, trucks and forklifts). These leases contain no special purchase rights etc.
Events after the reporting period
Apart from the events recognised or disclosed in the consolidated financial statements, no events have occurred
after the reporting period of importance to the consolidated financial statements.
In January 2013 Carlsberg and its partner in Nordic Getrånke GmbH agreed to cease the cooperation
and split the entities between them. Hence Carlsberg acquired entities from Nordic Getrånke GmbH that
will be fully consolidated and integrated in the German business in 2013. The transaction had no
significant impact on the income statement or financial position.
92
Carlsberg Breweries Group
Note
41 Accounting policies
The 2012 consolidated financial statements of the Carlsberg Breweries Group have been prepared in
accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and Danish
disclosure requirements for listed companies, cf. the statutory order pursuant to the Danish Financial
Statements Act.
The consolidated financial statements are presented in Danish kroner (DKK million), which is the Parent
Company's functional currency.
In addition, the consolidated financial statements have been prepared in compliance with IFRS issued by the
IASB.
The consolidated financial statements have been prepared on the historical cost basis except for the
following assets and liabilities, which are measured at fair value: derivative financial instruments, financial
instruments in the trading portfolio and financial instruments classified as available-for-sale.
Non-current assets and disposal groups classified as held for sale are measured at the lower of the carrying
amount before the changed classification and fair value less costs to sell.
The accounting policies set out below have been used consistently in respect of the financial year and the
comparative figures.
The comparative figures have been changed to reflect the effect of the purchase price allocation of the fair
value of identified assets, liabilities and contingent liabilities in business combinations in accordance with
IFRS 3.
New IFRS and Interpretations
Implementation of new and amended IFRSSs and Interpretations. With effect from 1 January 2012, the
following amended IFRS was implemented:
«+ Amendment to IAS 12 "Income Taxes — Deferred Tax: Recovery of Underlying Assets”. The
amendments provides further guidance on deferred tax on investment properties and is therefore not
relevant to the Group.
The implementation of the amended IFRS has not changed the principles applied to recognition and
measurement for 2012 from those used in prior years. The accounting policies used in the preparation of the
consolidated financial statements are consistent with those of last year.
New and amended IFRSSs and Interpretations not yet adopted by or applicable within the EU
In addition, the following new or amended IFRSSs and Interpretations of relevance to the Carlsberg Breweries
Group have been issued and adopted by the EU but are not applicable for 2012:
«+ IFRS 10 "Consolidated Financial Statements”. The standard changes the definition of control over an
entity following which de facto control will result in full consolidation of the entity and potential voting
rights could require full consolidation. The standard is effective for financial years beginning on or after 1
January 2013.
«+ IFRS 11 "Joint Arrangements”. The standard supersedes IAS 31 "Interests in Joint Ventures” and
eliminates the possibility of proportionate consolidation of joint ventures. The standard distinguishes
between joint ventures (recognised according to the equity method) and joint arrangements
(proportionate consolidation). The standard changes the Group's recognition and measurement of joint
ventures. The standard is effective for financial years beginning on or after 1 January 2013 according to
the standard but not applicable within the EU until 1 January 2014.
1304236EogSN10280
93
+ IFRS 12 "Disclosure of Interests in Other Entities”. The standard defines disclosure requirements for
consolidated entities, and for joint ventures and associates recognised according to the equity method.
The standard is effective for financial years beginning on or after 1 January 2013 according to the
standard but is not applicable within the EU until 1 January 2014.
+ |FRS 13 "Fair Value Measurement”. The standard supersedes the definitions of fair value in the
individual IFRSs and requires further disclosure of fair value estimates. The standard does not change
recognition and measurement for the Group. The standard is effective for financial years beginning on or
after 1 January 2013.
e€ Amendments to IAS 27 "Separate Financial Statements”. The standard contains requirements for the
accounting treatment of and disclosures for investments in subsidiaries, joint ventures and associates in
parent company financial statements. The standard does not change recognition and measurement for
the Parent Company. The standard is effective for financial years beginning on or after 1 January 2013
according to the standard but not applicable within the EU until 1 January 2014.
« Amendments to IAS 28 "Investments in Associates and Joint Ventures”. The standard prescribes the
accounting treatment of investments in joint ventures and associates according to the equity method.
The standard does not change recognition and measurement for the Group. The standard is effective for
financial years beginning on or after 1 January 2013 according to the standard but is not applicable
within the EU until 1 January 2014.
.&«… Amendments to IAS 19 "Employee Benefits”, The standard changes the valuation of assets and is not
expected to have a material impact on the Group. The standard is effective for financial years beginning
on or after 1 January 2013.
« Amendment to IlAS 1 "Other Comprehensive Income" (issued 16 June 2011). The standard changes the
presentation of other comprehensive income. The standard is effective for financial years beginning on
or after 1 July 2012.
.& Amendment to IFRS 7 "Disclosures — Offsetting Financial Assets and Financial Liabilities". The standard
is effective for financial years beginning on or after 1 January 2013.
.« Amendment to lAS 32 "Offsetting Financial Assets and Financial Liabilities. The standard is effective for
financial years beginning on or after 1 January 2014.
«+ IFRIC 20 "Stripping Costs in the Production Phase of a Surface Mine”. The Interpretation is not relevant
to the Group.
« Improvements to IFRSSs issued in June 2011.
Implementation of IFRS 10, IFRS 11 and the amendment to IAS 28 will change the Group's accounting
policies from proportionate consolidation of joint ventures to accounting for these according to the equity
method. The change in the consolidation method will be assessed for each individual shareholding taking the
changed guidance on assessment of control into consideration. The changes are not expected to have any
material effect on the Group's profit.
Furthermore, the following new or amended IFRSs and Interpretations of relevance to the Carlsberg
Breweries Group have been issued but not yet adopted by the EU but are not applicable for 2012:
.« |FRS 9 "Financial Instruments”, most recently revised in November 2010. As further changes to the
standard are being drafted and planned, the impact of the final standard on the consolidated financial
statements cannot yet be estimated. The standard is effective for financial years beginning on or after 1
January 2015.
. Improvements to IFRSs 2009-2011 (issued 17 May 2012), effective for financial years beginning on or
after 1 January 2013.
« Transition Guidance (amendmenits to IFRS 10, IFRS 11 and IFRS 12) (issued 28 June 2012), effective
for financial years beginning on or after 1 January 2013.
. Investment Entities (amendments to IFRS 10, IFRS 12 and IAS 27) (issued 31 October 2012), effective
for financial years beginning on or after 1 January 2014.
The new and amended Standards and Interpretations are not mandatory for the financial reporting for 2012.
The Carlsberg Breweries Group expects to adopt the Standards and Interpretations when they become
mandatory.
Consolidated financial statements
The consolidated financial statements comprise the Parent Company, Carlsberg A/S, and subsidiaries in
which Carlsberg A/S has control, i.e. the power to govern the financial and operating policies. Control is
obtained when Carlsberg A/S directly or indirectly owns or controls more than 50% of the voting rights in the
subsidiary or has control in some other way.
Entities over which the Group exercises a significant influence, but which it does not control, are considered
associates. Significant influence is generally obtained by direct or indirect ownership or control of more than
20% of the voting rights but less than 50%.
When assessing whether Carlsberg A/S exercises control or significant influence, potential voting rights
exercisable at the end of the reporting period are taken into account.
Entities which by agreement are managed jointly with one or more other parties (joint ventures) are
consolidated proportionally, and the individual accounting entries are recognised in proportion to the
ownership interest.
A Group chart is included in note 42,
The consolidated financial statements have been prepared as a consolidation of the financial statements of
the Parent Company, subsidiaries and proportionally consolidated entities prepared according to the Group
accounting policies. On consolidation, intra-Group income and expenses, shareholdings, intra-Group
balances and dividends, and realised and unrealised gains on intra-Group transactions are eliminated.
Unrealised gains on transactions with associates and proportionally consolidated entities are eliminated in
proportion to the Group's ownership share of the entity. Unrealised losses are eliminated in the same way as
unrealised gains to the extent that impairment has not taken place.
Investments in subsidiaries and proportionally consolidated entities are set off against the proportionate
share of the subsidiaries' fair value of identifiable net assets, including recognised contingent liabilities, at the
acquisition date.
The accounting items of subsidiaries are included in full in the consolidated financial statements. Non-
controlling interests' share of the profit/loss for the year and of the equity of subsidiaries is included in the
Group's profit/loss and equity respectively, but is disclosed separately.
Business combinations. Entities acquired or formed during the year are recognised in the consolidated
financial statements from the date of acquisition or formation. Entities which are disposed of or wound up are
recognised in the consolidated income statement until the date of disposal or winding-up. The comparative
figures are not restated for entities acquired, disposed of or wound up. Discontinued operations are
presented separately, cf. below.
For acquisitions of new subsidiaries, joint ventures and associates, the acquisition method is used. The
acquired entities' identifiable assets, liabilities and contingent liabilities are measured at fair value at the
acquisition date. Identifiable intangible assets are recognised if they are separable or arise from a
contractual right. Deferred tax on revaluations is recognised.
The acquisition date is the date when the Carlsberg Breweries Group effectively obtains control of the
acquired subsidiary, enters the management of the joint venture or obtains significant influence over the
associate.
For business combinations made on 1 January 2004 or later, any excess of the cost over the fair value of the
identifiable assets, liabilities and contingent liabilities acquired (goodwill) is recognised as goodwill under
intangible assets. Goodwill is not amortised but is tested annually for impairment. The first impairment test is
performed before the end of the acquisition year. Upon acquisition, goodwill is allocated to the cash-
generating units, which subsequently form the basis for the impairment test.
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1304236EogSN10281
The cost of a business combination comprises the fair value of the consideration agreed upon. When a
business combination agreement provides for an adjustment to the cost of the combination contingent on
future events, the fair value of that adjustment is included in the cost of the combination.
Goodwill and fair value adjustments in connection with the acquisition of a foreign entity with a functional
currency other than the presentation currency used in the Carlsberg Breweries Group are treated as assets
and liabilities belonging to the foreign entity and translated into the foreign entity's functional currency at the
exchange rate at the transaction date.
Negative differences (negative goodwill) are recognised in the income statement at the acquisition date.
If uncertainties regarding measurement of acquired identifiable assets, liabilities and contingent liabilities
exist at the acquisition date, initial recognition will take place on the basis of preliminary fair values. If
identifiable assets, liabilities and contingent liabilities are subsequently determined to have a different fair
value at the acquisition date from that first assumed, goodwill is adjusted up until 12 months after the
acquisition. The effect of the adjustments is recognised in the opening balance of equity and the comparative
figures are restated accordingly.
Changes in estimates of contingent purchase considerations, except in cases of material error, are
recognised in the income statement under special items. Changes in estimates of contingent purchase
considerations in business combinations completed before 31 December 2009 are recognised as an
adjustment to goodwill.
Step acquisitions. In a business combination achieved in stages (step acquisition), the shareholding held
immediately before the step acquisition is remeasured at fair value at the acquisition date. The resulting gain
or loss is recognised in the income statement under special items. The total fair value of the shareholding
held immediately after the step acquisition is estimated and recognised as the cost of the total shareholding
in the entity.
Non-controlling interests in a business combination. in each business combination, management
decides whether or not to recognise goodwill related to non-controlling interests. If such goodwill is
recognised, it is estimated based on the fair value of the non-controlling interests less the non-controlling
interests' share of the fair value of acquired assets, liabilities and contingent liabilities.
Business combinations prior to 1 January 2004. For business combinations made prior to 1 January
2004, the accounting classification is maintained according to the former accounting policies, except that
trademarks are now presented in a separate line in the statement of financial position. Accordingly, goodwill
is recognised on the basis of the cost recognised in accordance with the former policies (the Danish
Financial Statements Act and Danish Accounting Standards) less amortisation and impairment losses up
until 31 December 2003. Goodwill is not amortised after 1 January 2004. The accounting treatment of
business combinations prior to 1 January 2004 was not changed in connection with the opening balance at 1
January 2004.
Disposal. Gains or losses on the disposal or winding-up of subsidiaries, joint ventures and associates are
stated as the difference between the sales amount and the carrying amount of net assets, including goodwill
at the date of disposal or winding-up, foreign exchange adjustments recognised in other comprehensive
income and costs to sell or winding-up expenses. Gains or losses on disposal or winding-up of subsidiaries
are recognised in the income statement under special items, whereas gains or losses on disposal or
winding-up of associates are recognised as financial income or financial expenses.
On disposal of entities acquired prior to 1 January 2002 where goodwill was written off in equity in
accordance with the former accounting policies and where, in accordance with the exemption in IFRS 1,
goodwill is not recognised in the statement of financial position, the goodwill written off is recognised at a
carrying amount of DKK 0 in determining any gains and losses on the disposal of the entity.
Partial disposal of investments with loss of control. When the Group loses control of a subsidiary
through a partial disposal of its shareholding or voting rights, the retained shareholding in the entity is
classified as an associate or a security depending on the level of control after the disposal. The shareholding
in the associate or security held immediately after the partial disposal is remeasured at fair value at the date
of disposal. The fair value is measured as the cost of the shareholding in the associate or security. The
resulting gain or loss is recognised in the income statement under special items.
Acquisition and disposal of non-controlling interests. On acquisition of non-controlling interests (i.e.
subsequent to the Carlsberg Breweries Group obtaining control), acquired net assets are not remeasured at
fair value.
On acquisition of non-controlling interests, the difference between the cost and the non-controlling interests'
share of total carrying amount including goodwill is transferred from the non-controlling interests' share of
equity to equity attributable to shareholders in Carlsberg A/S. The amount deducted cannot exceed the non-
controlling interests' share of equity immediately before the transaction.
On disposal of shareholdings to non-controlling interests, the difference between the sales price and the
share of total carrying amount including goodwill acquired by the non-controlling interests is transferred from
equity attributable to shareholders in Carlsberg A/S to the non-controlling interests' share of equity.
Fair value adjustment of put options written on non-controlling interests on or after 1 January 2010 is
recognised directly in the statement of changes in equity. Fair value adjustment of put options written before
31 December 2009 is recognised in goodwill.
Foreign currency translation. For each of the reporting entities in the Group, a functional currency is
determined. The functional currency is the primary currency used for the reporting entity's operations.
Transactions denominated in currencies other than the functional currency are considered transactions
denominated in foreign currencies.
On initial recognition, transactions denominated in foreign currencies are translated to the functional
currency at the exchange rates at the transaction date. Foreign exchange differences arising between the
exchange rates at the transaction date and at the date of payment are recognised in the income statement
as financial income or financial expenses.
Receivables, payables and other monetary items denominated in foreign currencies are translated at the
exchange rates at the end of the reporting period. The difference between the exchange rates at the end of
the reporting period and at the date at which the receivable or payable arose or the exchange rate in the
latest consolidated financial statements is recognised in the income statement as financial income or
financial expenses.
On recognition in the consolidated financial statements of entities with a functional currency other than the
presentation currency of Carlsberg A/S (DKK), the income statement and statement of cash flows are
translated at the exchange rates at the transaction date and the statement of financial position items are
translated at the exchange rates at the end of the reporting period. An average exchange rate for the month
is used as the exchange rate at the transaction date to the extent that this does not significantly deviate from
the exchange rate at the transaction date. Foreign exchange differences arising on translation of the opening
balance of equity of foreign entities at the exchange rates at the end of the reporting period and on
translation of the income statement from the exchange rates at the transaction date to the exchange rates at
the end of the reporting period are recognised in other comprehensive income and attributed to a separate
translation reserve in equity.
Foreign exchange adjustment of balances with foreign entities which are considered part of the investment in
the entity is recognised in the consolidated financial statements in other comprehensive income if the
balance is denominated in the functional currency of the Parent Company or the foreign entity.
Correspondingly, foreign exchange gains and losses on the part of loans and derivative financial instruments
which is designated as hedges of investments in foreign entities with a functional currency other than that of
Carlsberg A/S and which effectively hedge against corresponding foreign exchange gains and losses on the
97
1304236EogSN10282
investment in the entity are also recognised in other comprehensive income and attributed to a separate
translation reserve in equity.
On recognition in the consolidated financial statements of associates with a functional currency other than
the presentation currency of Carlsberg A/S, the shåre of profit/loss and other comprehensive income for the
year is translated at average exchange rates and the share of equity, including goodwill, is translated at the
exchange rates at the end of the reporting period. Foreign exchange differences arising on the translation of
the share of the opening balance of equity of foreign associates at the exchange rates at the end of the
reporting period, and on translation of the share of profit/loss and other comprehensive income for the year
from average exchange rates to the exchange rates at the end of the reporting period, are recognised in
other comprehensive income and attributed to a separate translation reserve in equity.
On complete or partial disposal of a foreign entity or on repayment of balances which constitute part of the
net investment in the foreign entity, the share of the cumulative amount of the exchange differences
recognised in other comprehensive income relating to that foreign entity is recognised in
the income statement when the gain or loss on disposal is recognised.
Prior to translation of the financial statements of foreign entities in countries with hyperinflation, the financial
statements are inflation-adjusted for changes in purchasing power in the local currency. Inflation adjustment
is based on relevant price indexes at the end of the reporting period.
Hyperinflation. The financial statements of foreign entities whose functional currency is the currency of a
hyperinflationary market are stated in terms of the measuring unit current at the end of the reporting period
using a general price index. Non-monetary assets are restated to the current purchasing power at the
reporting date from the value on the date when they were first recognised in the financial statements (or the
value on 1 January 2004 when the Group adopted IFRS). The gain/loss is recognised in other
comprehensive income. Gain/loss on the net monetary position is recognised as financial income or
expenses in the income statement. Income statement items are restated from the value on the transaction
date to the value on the reporting date except for items related to non-monetary assets, such as depreciation
and amortisation and consumption of inventories etc. Deferred tax is adjusted accordingly. The comparative
figures for the Group are not restated in terms of the measuring unit current at the end of the reporting period.
Derivative financial instruments. Derivative financial instruments are initially recognised in the statement
of financial position at fair value on the trade date and subsequently measured at fair value. Attributable
transaction costs are recognised in the income statement.
The fair values of derivative financial instruments are included in other receivables and other payables, and
positive and negative values are offset only when the Group has the right and the intention to settle several
financial instruments net. Fair values of derivative financial instruments are computed on the basis of current
market data and generally accepted valuation methods.
Changes in the fair value of derivative financial instruments designated as and qualifying for recognition as a
fair value hedge of recognised assets and liabilities are recognised in the income statement, together with
changes in the value of the hedged asset or liability with respect to the hedged portion. Except for foreign
currency hedges, hedging of future cash flows according to a firm agreement is treated as a fair value hedge
of a recognised asset or liability.
Changes in the portion of the fair value of derivative financial instruments which are designated and qualify
as a cash flow hedge and which effectively hedge changes in the value of the hedged item are recognised in
other comprehensive income and attributed to a separate reserve in equity. When the hedged transaction
results in gains or losses, amounts previously recognised in other comprehensive income are transferred to
the same item as the hedged item when the hedged risk impacts the income statement. When the hedged
item is a non-financial asset, the amount recognised in other comprehensive income is transferred to the
carrying amount of the asset when the non-financial asset is recognised.
Derivatives designated as and qualifying for recognition as a cash flow hedge of financial investments are
recognised in other comprehensive income. On complete or partial disposal of the financial investment, the
portion of the hedging instrument that is recognised in other comprehensive income and relates to that
financial investment is recognised in the income statement when the gain or loss on disposal is recognised.
For derivative financial instruments that do not qualify for hedge accounting, changes in fair value are
recognised in the income statement as financial income or financial expenses.
Changes in the fair value of derivative financial instruments used to hedge net investments in foreign
subsidiaries, joint ventures or associates and which effectively hedge currency fluctuations in these entities
are recognised in the consolidated financial statements in other comprehensive income and attributed to a
separate translation reserve in equity.
Embedded derivatives are recognised separately from the host contract and measured at fair value if their
economic characteristics and risks are not closely related to those of the host contract, as a separate
instrument with the same terms would meet the definition of a derivative, and the entire combined instrument
is not measured at fair value through profit and loss. Separated embedded derivatives are subsequently
measured at fair value.
Income statement
Revenue. Revenue from the sale of finished goods and goods for resale is recognised in the income
statement provided that transfer of all significant risks and rewards to the buyer has taken place and that the
income can be reliably measured and is expected to be received.
Royalty and licence fees are recognised when earned according to the terms of the licence agreements.
Revenue is measured excl. VAT and duties, including excise duties on beer and soft drinks, and discounts.
Cost of sales. Cost of sales comprises costs incurred in generating the revenue for the year and
development costs. Such costs include direct and indirect costs for raw materials and consumables, wages
and salaries, rent and leases, and depreciation of production plant and returnable packaging.
Sales and distribution expenses. Costs incurred in distributing goods sold during the year and in
conducting sales campaigns etc. during the year are recognised as sales and distribution expenses. Also
included are costs relating to sales staff, sponsorships, advertising and in-store display expenses, as well as
depreciation and impairment of sales equipment.
Administrative expenses. Administrative expenses comprise expenses incurred during the year for
management and administration, including expenses for administrative staff, office premises and office
expenses, and depreciation and write-downs for bad debt losses.
Other operating income and expenses. Other operating income and expenses comprise items secondary
to the principal activities of the entities, including income and expenses relating to rental properties, hotels,
and gains and losses on the disposal of intangible assets and property, plant and equipment. Gains and
losses on the disposal of intangible assets and property, plant and equipment are determined as the sales
price less selling costs and the carrying amount at the disposal date. Also included in this item are the
effective interest rate on on-trade loans calculated on the basis of amortised cost, expenses relating to the
research activities in France.
Government grants. Government grants relate to grants and funding for R&D activities, investment grants
etc.
Grants for R&D activities which are recognised directly in the income statement are recognised as other
operating income.
Grants for the acquisition of assets and development projects are recognised in the statement of financial
position as deferred income and transferred to other operating income in the income statement as the assets
for which the grants were awarded are amortised.
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Operating profit before special items. Operating profit before special items is an important financial ratio
for year-over-year comparison and for comparison of companies in the brewing industry.
Special items. Special items include significant income and costs of a special nature in terms of the
Group's revenue-generating operating activities, such as the cost of extensive structuring of processes and
fundamental structural adjustments, as well as any gains or losses arising from disposals in this connection
which have a material effect over a given period. This item also includes significant non-recurring items,
including impairment of goodwill (including goodwill in joint ventures and associates) and trademarks, and
gains and losses on the disposal of activities, revaluation of the shareholding in an entity held immediately
before a step acquisition of that entity and transaction costs in a business combination.
These items are shown separately in order to give a more true and fair view of the Group's operating profit.
Profits/losses from investments in associates. The proportionate share of the results of associates after
tax is recognised in the consolidated income statement after elimination of the proportionate share of
unrealised intra-Group profits/losses.
Financial income and expenses. Financial income and expenses comprise interest income and expenses,
gains and losses on securities and impairment of securities, payables and transactions denominated in
foreign currencies, amortisation of financial assets (other than loans to customers in the on-trade, which are
included in other operating income) and liabilities, including defined benefit retirement benefit plans,
surcharges and refunds under the on-account tax scheme etc. Realised and unrealised gains and losses
on derivative financial instruments which are not designated as hedging arrangements and the ineffective
portion of those designated as hedging arrangements are also included.
Borrowing costs on specific or general borrowings which are directly attributable to the development or
construction of a qualifying asset are included in the cost of that asset.
Tax on profit/loss for the year. Tax for the year comprises current tax and changes in deferred tax for the
year, including changes as a result of a change in the tax rate. The tax expense relating to the profit/loss for
the year is recognised in the income statement, and the tax expense relating to other comprehensive income
is recognised in other comprehensive income. Carlsberg A/S is subject to the Danish rules on mandatory
joint taxation of the Carlsberg Breweries Group's Danish companies. Danish subsidiaries are included in the
joint
taxation from the date when they are included in the consolidated financial statements and up to the date
when they are excluded from the consolidation.
Carlsberg A/S is the administrative company under the joint taxation scheme and accordingly pays all
income taxes to the tax authorities.
The jointly taxed Danish companies are taxed under the on-account tax scheme.
On payment of joint taxation contributions, the current Danish corporation tax is allocated between the
Danish jointly taxed companies in proportion to their taxable income. Companies with tax losses receive joint
taxation contributions from other companies that have used the tax losses to reduce their own taxable profit
(full absorption).
If the Carlsberg Breweries Group obtains a tax deduction on computation of the taxable income in Denmark
or in foreign jurisdictions as a result of share-based payment programmes, the tax effect of the programmes
is
recognised in tax on the profit/loss for the year. However, if the total tax deduction exceeds the total tax
expense, the tax benefit for the excess deduction is recognised in other comprehensive income.
100
Statement of financial position
Intangible assets
Goodwill. Goodwill is initially recognised in the statement of financial position at cost as described under
Business combinations. Subsequently, goodwill is measured at cost less accumulated impairment losses.
Goodwill is not amortised.
The carrying amount of goodwill is allocated to the Group's cash-generating units at the acquisition date.
Identification of cash-generating units is based on the management structure and internal financial control.
Other intangible assets. Trademarks and customer agreements/portfolios acquired in connection with
business combinations are recognised at cost and amortised over their expected useful life. Trademarks with
an indefinite useful life are not amortised but impairment-tested at least annually.
Research costs are recognised in the income statement as they are incurred. Development costs are
recognised as intangible assets if the costs are expected to generate future economic benefits.
Costs for development and implementation of substantial IT systems are capitalised and amortised over their
estimated useful life. Cost comprises the purchase price and any costs directly attributable to the acquisition
and installation until the date when the asset is available for use. The cost of self-constructed assets
comprises direct and indirect costs of software, licences, components, subcontractors, wages and salaries,
and capitalised borrowing costs on specific or general borrowing attributable to the construction of the asset.
CO? emission rights are measured at cost at the date of allocation (i.e. normally DKK 0), while acquired
rights are measured at cost. Acquired rights are amortised over the production period during which they are
expected to be utilised. A liability is recognised (at fair value) only if actual emissions of CO” exceed
allocated levels based on the holding of rights.
Other intangible assets are measured at cost less accumulated amortisation and impairment losses.
Amortisation is carried out systematically over the expected useful lives of the assets. The expected useful
lives are as follows:
Trademarks with finite useful life
Useful life, normally maximum 20 years
Software etc.
Normally 3-5 years. Group-wide systems developed as an integrated part of a major business development
programme: 5-7 years
Delivery rights
Depending on contract; if no contract term has been agreed, normally not exceeding 5 years
Customer agreements/relationships
Depending on contract with the customer. When no contract exists, normally not exceeding 20 years
The useful life is reassessed annually. When changing the amortisation period due to a change in the useful
life, the effect on the amortisation is recognised prospectively as a change in accounting estimates.
Amortisation is recognised in the income statement under cost of sales, sales and distribution costs, and
administrative expenses to the extent that amortisation is not included in the cost of self-constructed assets.
Impairment losses of a non-recurring nature are recognised in the income statement under special items.
Tangible assets
Property, plant and equipment. Land and buildings, plant and machinery, fixtures and fittings, and other
property, plant and equipment are measured at cost less accumulated depreciation and impairment losses.
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Cost comprises the purchase price and any costs directly attributable to the acquisition until the date when
the asset is available for use. The cost of self-constructed assets comprises direct and indirect costs of
materials, components, subsuppliers, wages and salaries, and capitalised borrowing costs on specific or
general borrowing attributable to the construction of the asset. The present value of estimated liabilities
related to dismantling and removing the asset and restoring the site on which the asset is located is
added to the cost of self-constructed assets if the liabilities are provided for. Where individual components of
an item of property, plant and equipment have different useful lives, they are accounted for as separate
items and are depreciated separately.
The cost of assets held under finance leases is stated at the lower of fair value of the assets and the present
value of the future minimum lease payments. For the calculation of the net present value, the interest rate
implicit in the lease or an approximation thereof is used as the discount rate. .
Subsequent costs, e.g. in connection with replacement of components of property, plant and equipment, are
recognised in the carrying amount of the asset if it is probable that the costs will result in future economic
benefits for the Group. The replaced components are derecognised in the statement of financial position and
recognised as an expense in the income statement. Costs incurred for ordinary repairs and maintenance are
recognised in the income statement as incurred.
Property, plant and equipment, including assets held under finance leases, are depreciated on a straight-line
basis over the expected useful lives of the assets. The expected useful lives are as follows:
Buildings 20-40 years
Technical installations 15 years
Brewery equipment 15 years
Filling and bottling equipment 8-15 years
Technical installations in warehouses 8 years
On-trade and distribution equipment 5 years
Fixtures and fittings, other plant and equipment 5-8 years
Returnable packaging 3-10 years
Hardware 3-5 years
Land is not depreciated.
The basis of depreciation is calculated on the basis of the cost less the residual value and impairment losses.
The residual value is determined at the acquisition date and reassessed annually. If the residual value
exceeds the carrying amount, depreciation is discontinued.
When changing the depreciation period or the residual value, the effect on the depreciation is recognised
prospectively as a change in accounting estimates.
Depreciation and Minor impairment losses are recognised in the income statement under cost of sales, sales
and distribution costs, and administrative expenses to the extent that depreciation is not included in the cost
of self-constructed assets.
Significant impairment losses of a non-recurring nature are recognised in the income statement under
special items.
Investments in associates. Investments in associates are recognised according to the equity method and
measured at the proportionate share of the entities' net asset values calculated in accordance with the
Group's accounting policies, minus or plus the proportionate share of unrealised intra-Group profits and
Losses, and plus the carrying amount of goodwill.
Investments in associates with negative net asset values are measured at DKK 0. If the Group has a legal or
constructive obligation to cover a deficit in the associate, the deficit is recognised under provisions.
Any amounts owed by associates are written down to the extent that the amount owed is deemed
irrecoverable.
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On acquisition of investments in associates, the acquisition method is used, cf. the description under
Business combinations.
Inventories. Inventories are measured at the lower of weighted average cost and net realisable value.
Goods for resale and raw materials and consumables are measured at cost, comprising purchase price and
delivery costs.
Finished goods and work in progress are measured at cost, comprising the cost of raw materials,
consumables, direct wages and salaries, and indirect production overheads. Indirect production overheads
comprise indirect materials and wages and salaries, and maintenance and depreciation of production
machinery, buildings and equipment, and production administration and management.
The net realisable value of inventories is calculated as the sales amount less costs of completion and costs
necessary to make the sale, and is determined taking into account marketability, obsolescence and
development in expected sales price.
Receivables. Receivables are measured at amortised cost less impairment losses. Receivables are written
down for bad debt losses on the basis of customers' anticipated ability to pay and expectations of any
changes to this ability, taking into account historical payment patterns, terms of payment, customer segment,
creditworthiness and prevailing market conditions in the individual markets.
Objective indication of impairment is assessed for a portfolio of receivables when no objective indication of
individual impairment losses exists. The portfolios are based on on-trade and off-trade customers, and on-
trade receivables and on-trade loans. The objective indications used for portfolios are based on historical
experiences and actual market developments.
Impairment losses are calculated as the difference between carrying amount and net realisable value,
including the expected net realisable value of any collateral provided.
Regarding loans to the on-trade, any difference between present value and the nominal amount at the loan
date is treated as a prepaid discount to the customer, which is recognised in the income statement in
accordance with the terms of the agreement. The market interest rate is used as the discount rate,
corresponding to the money market rate based on the maturity of the loan with the addition of a risk premium.
The effective interest rate on these loans is recognised in other operating income. The amortisation of the
difference between the discount rate and the effective interest rate is included as a discount in revenue.
Prepayments. Prepayments comprise costs incurred concerning subsequent financial years, including in
particular sponsorship and marketing costs. Prepayments are measured at cost.
Securities. Shares not classified as investments in subsidiaries or associates and bonds are classified as
securities available-for-sale. Such securities are recognised at the trade date. Upon initial recognition,
securities are measured at fair value plus any directly attributable transaction costs and are subsequently
measured at fair value corresponding to the market price of quoted securities and, for unquoted securities,
an estimated fair value computed on the basis of market data and generally accepted valuation methods.
Unrealised value adjustments are recognised in other comprehensive income except for impairment losses
and foreign exchange adjustments of bonds denominated in foreign currencies, which are recognised in the
income statement as financial income or financial expenses. On realisation, the accumulated value
adjustment recognised in other comprehensive income is transferred to the income statement.
Securities available-for-sale are classified as current and non-current on the basis of management's selling
plans. The Group has no securities classified as a trading portfolio.
Impairment of assets. Goodwill and trademarks with indefinite useful life are subject to an annual
impairment test, initially before the end of the acquisition year.
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The carrying amount of goodwill is tested for impairment, together with the other non-current assets in the
cash-generating unit to which goodwill is allocated, and written down to the recoverable amount through the
income statement if the carrying amount is higher. The recoverable amount is generally calculated as the
present value of expected future net cash flows (value in use) from the entity or activity (cash-generating unit)
to which the goodwill is allocated. Impairment of goodwill is recognised under special items in the income
statement.
The carrying amount of trademarks with indefinite useful life is subject to an impairment test and written
down to the recoverable amount through the income statement if the carrying amount is higher. The
recoverable amount is generally calculated as the present value of expected future net cash flows from the
trademark in the form of royalties (the relief from royalty method). Impairment of trademarks is recognised
under special items in the income statement.
The carrying amount of other non-current assets is subject to an annual test for indications of impairment.
When there is an indication that assets may be impaired, the recoverable amount of the asset is determined.
The impairment test is performed for the individual asset or in combination with related assets which form an
integrated cash-generating unit. The recoverable amount is the higher of an asset's fair value less expected
costs to sell and its value in use. Value in use is the present value of the future cash flows expected to be
derived from an asset or the cash-generating unit to which the asset belongs.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds the
recoverable amount of the asset or the cash-generating unit. Minor impairment losses are recognised in the
income statement under cost of sales, sales and distribution costs, administrative expenses and other
operating costs. Significant impairment losses and impairment losses arising on extensive structuring of
processes and fundamental structural adjustments are recognised under special items.
Impairment of goodwill is not reversed. Impairment of other assets is reversed only to the extent of changes
in the assumptions and estimates underlying the impairment calculation. Impairment is only reversed to the
extent that the asset's new carrying amount does not exceed the carrying amount of the asset after
amortisation had the asset not been impaired.
Deferred tax assets are subject to annual impairment tests and are recognised only to the extent that it is
probable that the assets will be utilised.
Equity
Translation reserve. The translation reserve in the consolidated financial statements comprises foreign
exchange adjustments arising on translation of financial statements of foreign entities from their functional
currencies into the presentation currency used by Carlsberg A/S (DKK), balances considered to be part of
the total net investment in foreign entities, and financial instruments used to hedge net investments in foreign
entities.
On full or partial realisation of the net investment, the foreign exchange adjustments are recognised in the
income statement in the same item as the gain/loss.
The translation reserve was recognised at zero at 1 January 2004 in accordance with IFRS 1.
Fair value adjustments. Fair value adjustments comprise changes in the fair value of hedging transactions
that qualify for recognition as cash flow hedges and where the hedged transaction has not yet been realised.
Fair value adjustments also comprise a reserve for securities available-for-sale.
Proposed dividends. Proposed dividends are recognised as a liability at the date when they are adopted at
the Annual General Meeting (declaration date). The dividend recommended by the Supervisory Board and
therefore expected to be paid for the year is disclosed in connection with the statement of changes in equity.
Interim dividends are recognised as a financial liability at the date when the decision to pay interim dividends
is made.
104
Treasury shares. Cost of acquisition, consideration received and dividends received from treasury shares
are recognised directly as retained earnings in equity. Capital reductions from the cancellation of treasury
shares are deducted from the share capital at an amount corresponding to the nominal value of the shares.
Proceeds from the sale of treasury shares in connection with the exercise of share options are recognised
directly in equity.
Share-based payment. The value of services received in exchange for granted options is measured at the
fair value of the options granted.
The share option programme for the Executive Board and other management personnel in the Group is an
equity-settled scheme. The share options are measured at fair value at the grant date and recognised in the
income statement under staff costs over the vesting period.
Other key employees in the Group who participate in the long-term incentive programme choose between
settlement in share options and a cash bonus. The share options are measured at fair value at the grant date
and recognised in the income statement under staff costs over the vesting period. The value of the long-term
incentive programme is calculated as a percentage of the employee's yearly salary. If the employee chooses
to receive share options under the long-term incentive programme, the number of share options is
determined based on the employee's salary and the fair value of a share option.
On initial recognition of the share options, an estimate is made of the number of options expected to vest, cf.
the service condition for each programme. That estimate is subsequently revised for changes in the number
of options expected to vest. Accordingly, recognition is based on the number of options that ultimately vested.
The fair value of granted share options is estimated using the Black-Scholes call option pricing model, taking
into account the terms and conditions upon which the options were granted.
Employee benefits. Wages and salaries, social security contributions, paid leave and sick leave, bonuses
and other employee benefits are recognised in the financial year in which the employee renders the related
service. This includes the payment to other management personnel in the Group who participate in the long-
term incentive programme and choose cash settlement. The cost is provided for over the vesting period of
the programme and according to the service conditions and included in staff costs and provisions.
Retirement benefit obligations and similar obligations. The Group has entered into retirement benefit
schemes and similar arrangements with the majority of the Group's employees.
Contributions to defined contribution plans are recognised in the income statement in the period to which
they relate and any contributions outstanding are recognised in the statement of financial position as other
payables.
For all defined benefit plans an annual actuarial calculation is made of the present value of future benefits
under the defined benefit plan. The present value is determined on the basis of assumptions about the future
development in variables such as salary levels, interest rates, inflation and mortality. The present value is
determined only for benefits earned by employees from their employment with the Group. The actuarial
present value less the fair value of any plan assets is recognised in the statement of financial position
under retirement benefit obligations.
Pension costs for the year are recognised in the income statement based on actuarial estimates and
financial expectations at the beginning of the year. Any difference between the expected development in
pension plan assets and liabilities and realised amounts determined at year-end constitutes actuarial gains
or losses and is recognised in other comprehensive income.
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lf changes in benefits relating to services rendered by employees in previous years result in changes in the
actuarial present value, the changes are recognised as historical costs. Historical costs are recognised
immediately, provided employees have already earned the changed benefits. If employees have not earned
the benefits, the historical costs are recognised in the income statement over the period in which the
105
changed benefits are earned by the employees. If a retirement benefit plan constitutes a net asset, the asset
is only recognised if it offsets future refunds from the plan or will lead to reduced future payments to the plan.
Interest on retirement benefit obligations and the expected return on plan assets are recognised under
financial income or financial expenses.
Realised gains and losses on the adjustment of retirement benefit obligations as a result of large-scale
termination of jobs in connection with restructuring are recognised in the income statement under special
items.
Realised gains and losses on the curtailment or settlement of retirement benefit plans are recognised in the
income statement.
Corporation tax and deferred tax. Current tax payable and receivable is recognised in the statement of
financial position as tax computed on the taxable income for the year, adjusted for tax on the taxable income
of prior years and for tax paid on account.
Deferred tax on all temporary differences between the carrying amount and the tax base of assets and
liabilities is measured using the balance sheet liability method. However, deferred tax is not recognised on
temporary differences relating to goodwill which is not deductible for tax purposes or on office premises and
other items where temporary differences, apart from business combinations, arise at the acquisition date
without affecting either profit/loss for the year or taxable income. Where alternative tax rules can be applied
to determine the tax base, deferred tax is measured based on management's planned use of the asset or
settlement of the liability.
lf specific dividend plans exist for subsidiaries, joint ventures and associates in countries levying withholding
tax on distributions, deferred tax is recognised on expected dividend payments.
Deferred tax assets, including the tax base of tax loss carryforwards, are recognised under other non-current
assets at the expected value of their utilisation, either as a set-off against tax on future income or as a set-off
against deferred tax liabilities in the same legal tax entity and jurisdiction.
Deferred tax assets and tax liabilities are offset if the entity has a legally enforceable right to offset current
tax liabilities and tax assets or intends either to settle current tax liabilities and tax assets on a net basis or to
realise the assets and settle the liabilities simultaneously.
Adjustment is made to deferred tax resulting from elimination of unrealised intra-Group profits and losses.
Deferred tax is measured according to the tax rules and at the tax rates applicable in the respective
countries at the end of the reporting period when the deferred tax is expected to crystallise as current tax.
The change in deferred tax as a result of changes in tax rates is recognised in the income statement.
Changes to deferred tax recognised in other comprehensive income are, however, recognised in other
comprehensive income.
Provisions. Provisions, including warranty provisions, are recognised when, as a result of events arising
before or at the end of the reporting period, the Group has a legal or a constructive obligation and it is
probable that there may be an outflow of resources embodying economic benefits to settle the obligation.
Other provisions are discounted if the effect is material to the measurement of the liability. The Carlsberg
Breweries Group's average borrowing rate is used as the discount rate.
Restructuring costs are recognised under liabilities when a detailed, formal restructuring plan has been
announced to the persons affected no later than at the end of the reporting period. On acquisition of entities,
restructuring provisions in the acquiree are only included in the opening balance when the acquiree has a
restructuring liability at the acquisition date.
A provision for onerous contracts is recognised when the benefits expected to be derived by the Group from
a contract are lower than the unavoidable costs of meeting its obligations under the contract.
106
When the Group has a legal obligation to dismantle or remove an asset or restore the site on which the asset
is located, a provision is recognised corresponding to the present value of expected future costs.
Financial liabilities, Amounts owed to credit institutions, bonds etc. are recognised at the date of borrowing
at fair value less transaction costs. In subsequent periods, the financial liabilities are measured at amortised
cost using the effective interest method. Accordingly, the difference between the fair value less transaction
costs and the nominal value is recognised in the income statement under financial expenses over the term of
the loan.
Financial liabilities also include the capitalised residual obligation on finance leases, which is measured at
amortised cost.
Other liabilities are measured at amortised cost.
Deposits on returnable packaging. The refund obligation in respect of deposits on returnable packaging is
stated on the basis of deposit price as well as an estimate of the number of bottles, kegs, cans and crates in
circulation, and expected return rate.
Leases. For accounting purposes, lease obligations are divided into finance and operating leases.
Leases are classified as finance leases if they transfer substantially all the risks and rewards incident to
ownership to the lessee. All other leases are classified as operating leases.
The accounting treatment of assets held under finance leases and lease obligations is described under
Property, plant and equipment and Financial liabilities respectively.
Operating lease payments are recognised in the income statement on a straight-line basis over the lease
term.
Deferred income. Deferred income comprises payments received concerning income in subsequent years
and is measured at cost.
Assets held for sale. Assets held for sale comprise non-current assets and disposal groups held for sale.
Disposal groups are defined as a group of assets to be disposed of, by sale or otherwise, together as a
group in a single transaction and those liabilities directly associated with the assets that will be transferred in
the transaction.
Assets are classified as held for sale if management has decided to sell the asset or disposal group and
taken the necessary steps to carry out the sale such that the carrying amount will be recovered principally
through a sale within 12 months in accordance with a formal plan rather than through continuing use.
Assets or disposal groups held for sale are measured at the lower of carrying amount or fair value less costs
to sell. Assets are not depreciated or amortised from the date when they are reclassified as held for sale.
Impairment losses on initial recognition as held for sale and gains and losses on subsequent remeasurement
at the lower of carrying amount and fair value less costs to sell are recognised in the income statement in the
items to which they relate. Gains and losses are disclosed in the notes.
Assets and liabilities are recognised separately in the statement of financial position and main items are
specified in the notes. Comparative figures are not restated.
1304236EogSN10287
If a sale is not completed as expected, the asset or disposal group is reclassified to the items in the
statement of financial position from which the asset or disposal group was originally separated. This
reclassification is made at the carrying amount less any depreciation charges that would have been
recognised if the asset had not been classified as held for sale.
107
Presentation of discontinued operations. Discontinued operations comprise activities and cash flows that
can be clearly distinguished from the other business areas and have either been disposed of or are held for
sale. The sale is expected to be carried out within 12 months in accordance with a formal plan.
Discontinued operations also include entities which are classified as held for sale in connection with an
acquisition.
Discontinued operations are presented in a separate line in the income statement and as assets and
liabilities held for sale in the statement of financial position, and main items are specified in the notes.
Comparative figures are restated.
Statement of cash flows
The statement of cash flows shows the cash flows from operating, investing and financing activities for the
year, the year's changes in cash and cash equivalents as well as cash and cash equivalents at the beginning
and end of the year.
Cash flow from operating activities. Cash flows from operating activities are calculated using the indirect
method as the operating profit before special items adjusted for non-cash operating items, changes in
working capital, restructuring costs paid, interest received and paid, and income tax paid.
Cash flow from investing activities. Cash flows from investing activities comprise payments in connection
with acquisitions and disposals of entities and activities, and of intangible assets, property, plant and
equipment and other non-current assets, as well as acquisition and disposal of securities not recognised as
cash and cash equivalents.
The cash flow effect of acquisitions and disposals of entities is shown separately in cash flows from investing
activities. Cash flows from acquisitions of entities are recognised in the statement of cash flows from the
acquisition date. Cash flows from disposals of entities are recognised up until the disposal date.
Acquisitions of assets by means of finance leases are treated as non-cash transactions.
Cash flow from financing activities. Cash flows from financing activities c