LEGO-Group-Annual-Report-2017.pdf

Equity reserve for hedge accounting the reserve for

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Equity Reserve for hedge accounting The reserve for hedge accounting consists of the effective portion of gains and losses on hedging instruments designated as cash flow hedges. Reserve for currency translation The reserve for exchange adjustments consists of exchange rate differences that occur when translating the foreign subsidiaries´ financial statements from their functional currency into the LEGO Group’s presentation currency. On disposal of the net investment, the reserve for exchange adjustments of that foreign subsidiary is recognised in the income statement. Reduction of a net investment in a foreign operation which does not result in loss of control is not treated as a disposal. Dividend distribution Dividends are recognised as a liability in the period in which they are adopted at the Annual General Meeting. Liabilities Borrowings Borrowings are initially recognised at fair value, net of transaction expenses incurred. Borrowings are subsequent- ly measured at amortised cost. Any differences between the proceeds and the redemption value are recognised in the income statement over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the LEGO Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. Employee benefits Wages, salaries, social security contributions, paid annual leave and sick leave, bonuses and non-monetary employee benefits are accrued in the period in which the associated services are rendered by the employees of the LEGO Group. Where the LEGO Group provides long-term employee benefits, the costs are accumulated to match the rendering of the services by the employees concerned. Pension obligations Costs regarding defined contribution plans are recognised in the income statement in the periods in which the related employee services are delivered. Net obligations in respect of defined benefit pension plans are calculated separately for each plan by estimating the amount of future benefits that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets is deducted. Discount rates Note 1 (continued) 22 Notes The LEGO Group — Annual Report 2017
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are based on the market yield of high quality corporate bonds in the country concerned approximating to the terms of the LEGO Group’s pension obligations. The calculations are performed by a qualified actuary using the Projected Unit Credit Method. When the benefits of a plan are increased, the portion of the increased benefit relating to past service by employees is recognised as an expense in the income statement over the vesting period. To the extent that the benefits are vested, the expense is recognised in the income statement immediately.
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