{"id":2108,"date":"2021-05-21T07:57:17","date_gmt":"2021-05-21T05:57:17","guid":{"rendered":"https:\/\/norfund.wpenginepowered.com\/annualreport-2020\/?page_id=2108"},"modified":"2025-08-25T13:05:57","modified_gmt":"2025-08-25T11:05:57","slug":"note-1","status":"publish","type":"page","link":"https:\/\/reports.norfund.no\/annualreport-2024\/annual-report\/notes\/note-1\/","title":{"rendered":"Note 1 – Accounting policies"},"content":{"rendered":"
\n\t\t\t\t\n\t\t\t\t\t

Note 1<\/h4>\n\t\t\t\t\t

Accounting policies<\/h3>\n\t\t\t\t<\/span>\n\t\t\t\t<\/span>\n\t\t\t<\/a>
  1. Accounting policies<\/a><\/li>\n
  2. Segment information<\/a><\/li>\n
  3. Exited investments<\/a><\/li>\n
  4. Realized losses and value changes<\/a><\/li>\n
  5. Personnel and pension costs<\/a><\/li>\n
  6. Fixed assets<\/a><\/li>\n
  7. Other operating expenses<\/a><\/li>\n
  8. Net financial items<\/a><\/li>\n
  9. Taxes<\/a><\/li>\n
  10. Equity<\/a><\/li>\n
  11. Other receivables<\/a><\/li>\n
  12. Investments<\/a><\/li>\n
  13. Liquidity placements<\/a><\/li>\n
  14. Bank deposits<\/a><\/li>\n
  15. Unused resources<\/a><\/li>\n
  16. Current liabilities and guarantees<\/a><\/li>\n
  17. Risk management and use of financial instruments<\/a><\/li>\n
  18. Events after balance-sheet date<\/a><\/li>\n<\/ol><\/div><\/div><\/div><\/div>\n\n\n

    This note describes accounting principles, fundamental estimates and discretionary assessments that apply to the financial statements as a whole. Other accounting principles, fundamental estimates and discretionary assessments are described in the respective tables and notes.<\/p>\n\n\n\n

    1.Basis for preparation<\/h2>\n\n\n\n

    In accordance with Section 25 of the Norfund Act, Norfund’s financial statements are presented in compliance with the Norwegian Accounting Act and Norwegian generally accepted accounting principles.<\/p>\n\n\n\n

    The investment portfolio is valued at the lower of cost of acquisition and fair value on balance sheet date. This is because the purpose with the investments is to dispose of all or part of each investment, normally after 3\u201310 years. Norfund has investments that are acquired solely for temporary ownership and held pending sale. For this reason, and pursuant to the first sentence, first paragraph, of Section 3-8 of the Accounting Act, consolidated accounts are not prepared. The provision states that subsidiaries acquired for temporary ownership and held pending sale shall be omitted from consolidation.<\/p>\n\n\n\n

    The income statement is presented in the manner that provides the most relevant information concerning financial earnings.<\/p>\n\n\n\n

    The financial statements are prepared with the closing of accounts as of 31 December. They are presented in Norwegian kroner and unless stated otherwise, rounded to the nearest thousand. Rounding differences may occur.<\/p>\n\n\n\n

    2. Changes in accounting principles, including new and amended standards and interpretations during the period<\/h2>\n\n\n\n

    The accounting principles employed are consistent with those employed in the previous financial year. No new or amended standards or interpretations that took effect for the financial year beginning 1 January 2024 have materially affected the financial statements.<\/p>\n\n\n\n

    Adopted standards, changes in existing standards and interpretations issued and taking effect from 2024 or later are expected to be immaterial or not relevant for financial reporting at the time of implementation.<\/p>\n\n\n\n

    3. Financial assets and liabilities – Recognition and exclusion – General<\/h2>\n\n\n\n

    Financial assets and liabilities are recognized on the balance sheet when Norfund becomes a party to the contractual terms of the instrument. Financial assets are excluded when the contractual rights to the cash flows expire, or when the financial assets and the majority of risk factors and of advantages associated with ownership of the assets are transferred. See notes 12 and 13 for investments in loans, equities, funds and liquidity placements.<\/p>\n\n\n\n

    Financial assets are excluded when they are terminated, i.e. when the obligations specified in the contracts have been fulfilled, cancelled or expired. Acquisition or disposal of a financial asset pursuant to a contract with settlement in line with normal market conditions is recorded at the time of making the agreement.”<\/p>\n\n\n\n

    4. Financial assets and liabilities – Classification and measurement – General<\/h2>\n\n\n\n

    Financial assets are classified on the basis of the business model underlying the management of the assets, and on the characteristics of the contractual cash flows.<\/p>\n\n\n\n

    Norfund’s investment portfolio is managed in accordance with the investment mandate laid down by the Foreign Office and investment strategies laid down by Norfund’s executive management. These mandates and strategies, including risk management strategies, mean that all financial assets are managed and followed up on the basis of fair value.<\/p>\n\n\n\n

    Norfund’s financial assets, in the form of equity investments and bonds, are measured as the lower of historical cost or fair value, in accordance with the provisions of the Norwegian Accounting Act. Other financial assets, in the form of loans, are carried at amortized cost. Amortized cost involves carrying balance sheet items according to originally agreed cash flows, adjusted for write-downs. Amortized cost will not always yield values that are consistent with the market\u2019s evaluation of the same financial instruments. This may be due to different perceptions of market conditions, risk factors and return requirements. “<\/p>\n\n\n\n

    5. Investment companies<\/h2>\n\n\n\n

    Investments through subsidiaries or associated companies are established exclusively as part of the management of Norfund’s mandates. A company is controlled when Norfund is exposed to, or has rights to, variable return on its loan to the company, and has the possibility of influencing this return through its power over the company.<\/p>\n\n\n\n

    Subsidiaries that are acquired solely for temporary ownership and held pending sale are omitted from consolidation; see the first sentence, first paragraph, of section 3-8 of the Accounting Act.<\/p>\n\n\n\n

    A discretionary assessment has been conducted of whether Norfund is to be regarded as an investment company in an accounting sense. This is not intended as an evaluation of Norfund’s legal position. The conclusion of an overall assessment is that Norfund fulfils the criteria in the definition. The assessment is based on the following factors:<\/p>\n\n\n\n

    a) Norfund receives funds from the Norwegian state, which is a related party and its sole owner, and delivers professional investment services in the form of management to the Norwegian state,
    b) Norfund is obligated by the Norwegian state to invest solely for the development of sustainable commercial activities in developing countries,
    c) Norfund measures and evaluates return on portfolio investment on the basis of fair value (although the lower value principle forms the basis for accounting treatment,
    d) Norfund does not have an explicit strategy that stipulates a specific date for exiting the individual investment, but investments are assessed continuously and acquisition and disposal evaluations carried out.<\/p>\n\n\n\n

    5.1 Equity investments in subsidiaries and other companies are treated as current assets.
    Norfund treats its equity investments in other companies as current assets. In other words, the equity method is not used, even though Norfund\u2019s holdings provide it with considerable influence. This is because the purpose with the investments is to dispose of all or part of each investment, normally after 3\u201310 years. According to generally accepted accounting practice, such investments are temporary by their very nature and should therefore be included under current assets.<\/p>\n\n\n\n

    6. Related parties<\/h2>\n\n\n\n

    Norfund is a separate legal entity which is wholly owned by the Norwegian state through the Foreign Office. See general information. All transactions take place on market terms.<\/p>\n\n\n\n

    For information on transactions with governing bodies and senior executives, see Note 5 Personnel and pension costs.<\/p>\n\n\n\n

    Norfund’s related parties also include companies in which Norfund has direct investments. Norfund has some transactions of an administrative nature with the following companies of this type: Norfinance AS, KNI India AS and KLP Norfund Investments AS. All transactions are according to separate agreements and pricing is based on the arm\u2019s length principle.<\/p>\n\n\n\n

    7. Estimates and uncertainty<\/h2>\n\n\n\n

    Determining estimates and probabilities entails using judgement based on experience and best estimate of future developments. Given Norfund’s investment strategy and geographical investment areas, there is a high degree of uncertainty associated with expectations regarding future developments. Specific areas that include extensive estimation and judgement are valuation of equity investments and loans, write-down on equity investments and provision for losses on loans to investment projects.<\/p>\n","protected":false},"excerpt":{"rendered":"

    This note describes accounting principles, fundamental estimates and discretionary assessments that apply to the financial statements as a whole. Other accounting principles, fundamental estimates and discretionary assessments are described in the respective tables and notes. 1.Basis for preparation In accordance with Section 25 of the Norfund Act, Norfund’s financial statements are presented in compliance with […]<\/p>\n","protected":false},"author":11,"featured_media":0,"parent":2101,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"norfund_header_layout":"hero","norfund_header_layout_image_id":0,"norfund_header_layout_image_focal_point_x":0,"norfund_header_layout_image_focal_point_y":0,"norfund_header_layout_suptitle":"","norfund_header_layout_subtitle":"","norfund_header_layout_title":"Notes","teft_cards_image_id":0,"teft_cards_image_focal_point_x":0,"teft_cards_image_focal_point_y":0,"teft_cards_title":"Notes","teft_cards_excerpt":""},"acf":[],"yoast_head":"\nNote 1 - Accounting policies | Annual Report 2024<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/reports.norfund.no\/annualreport-2024\/annual-report\/notes\/note-1\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Note 1 - Accounting policies | Annual Report 2024\" \/>\n<meta property=\"og:description\" content=\"This note describes accounting principles, fundamental estimates and discretionary assessments that apply to the financial statements as a whole. 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