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of the assets and assumptions of the future market conditions.
A significant part of the Group’s operations is in countries with
emerging markets. The political, regulatory and economical
situation in these countries may change rapidly and global financial
turmoil and recession may have a significant impact on these
countries. Recessionary effects and increased macroeconomic
risks may impact the estimates of future performance and /page 34/
telenor annual report 2011
notes to the financial statements / telenor group discount rates used in estimating recoverable amounts of assets.
Changes in circumstances and in management’s evaluations and
assumptions may give rise to impairment losses in the relevant
There are significant variations between different markets with
respect to growth, mobile penetration, ARPu, market share and
similar parameters, resulting in differences in EBITDA margins.
The future developments of EBITDA margins are important in the
Group’s impairment assessments, and the long-term estimates of
EBITDA margins are highly uncertain. In particular, this is the case for
emerging markets that are still not in a mature phase.
As a consequence of a court ruling that withdraws uninor’s licenses,
an impairment loss of NOK 4.1 billion was recognised in 2011.
The impairment loss was based on value in use calculations as of
31 December 2011 assuming continuing operations of uninor. There
are uncertainties about the form of the future operations, the cost of
new licenses and the estimated future cash flows, see also note 38.
This may affect future evaluations.
deferred tax assets, see also note 14
Deferred tax assets are recognised to the extent that it is probable
that the tax assets will be realised. Significant judgement is required
to determine the amount that can be recognised and depends
foremost on the expected timing, level of taxable profits as well
as tax planning strategies and the existence of taxable temporary
differences. The judgements relate primarily to tax losses carried
forward in some of the Group’s foreign operations. When an entity
has a history of recent losses the deferred tax asset arising from
unused tax losses is recognised only to the extent that there is
convincing evidence that sufficient future taxable profit will be
generated. Estimated future taxable profit is not considered as
convincing evidence unless the entity has demonstrated the ability
of generating significant taxable profit for this year or there are
certain other events providing sufficient evidence of future taxable
profit. uncertainty related to new transactions and events and the
interpretation of new tax rules may also affect these judgements.
Associated companies, see note 21
The Group has as of 31 December 2011 an ownership interest
of 31.7% in VimpelCom Ltd. (VimpelCom) and accounts for the
investment in VimpelCom in accordance with the equity method.
After the combination of VimpelCom and Kyivstar GSM in the second
quarter of 2010 and the combination of VimpelCom and Wind
Telecom in the second quarter of 2011, the carrying amount and
share of net income from VimpelCom was significantly increased.
Financial statements of VimpelCom as of the reporting date were not
available before the Board of Telenor ASA approved its unaudited interim consolidated financial statements for the fourth quarter
2011. VimpelCom is listed on the New York Stock Exchange and the
company is not able to provide financial information to one investor
without providing equivalent information to all other investors at
the same time. As a consequence, the share of net income from
VimpelCom, has from 2010 been recognised in the consolidated
financial statements of the Group with a one quarter lag. Thus,
share of net income from VimpelCom for 2010 included share of
net income for the period 1 January to 30 September 2010. For
2011, the share of net income from VimpelCom includes share
of net income for the period 1 October 2010 to 30 September
2011. Adjustments were made for the effects of publicly available
information on any significant transactions and events that occur
between the latest interim financial reporting from VimpelCom and
the date of the Group’s consolidated financial statements. This
required significant judgement.
In the second quarter of 2011, VimpelCom acquired Wind Telecom
for a consideration comprising cash, ordinary shares and preferred
shares. As a result of the transaction, the Group’s ownership share in
VimpelCom was diluted and a gain of NOK 1.6 billion was recognised.
The estimation of the gain was based upon assumptions that
required management to make judgements about fair value of the
Wind Telecom contribution.
Tax uncertainty, legal proceedings, claims and regulatory discussions, see also note 14 and 35
The Group is subject to various legal proceedings, disputes and
claims including regulatory discussions related to the Group’s
business, licenses, tax positions, investments etc., the outcomes of
which are subject to significant uncertainty. Management evaluates,
among other factors, the degree of probability of an unfavourable
outcome and the ability to make a reasonable estimate of
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