Use of estimates in preparation of
the annual accounts
Preparing the annual accounts in accordance with IFRS as adopted by EU requires the management to use estimates and assumptions affecting the amounts reported in the accounts with notes. The management assumptions and valuations are based on past experience and on miscellaneous other factors assumed to be reasonable and appropriate. This applies in particular to pensions, share-based payments, deferred tax assets, impairment of fixed assets and the ships’ residual value. Future events can entail a change in these estimates. Estimates and the underlying assumptions are evaluated on an ongoing basis.
Changes in accounting estimates are entered in the period when the changes occur. If the changes also apply to future periods, the effect is distributed over the current and future periods and appears in the current note.
TANGIBLE FIXED ASSETS
The Group assess, at each reporting date, whether there are any indications that an asset may be impaired. Impairment is only made if carrying amount is higher than the asset’s recoverable amount. Value in use is calculated based on estimated future cash flows. Estimating future cash flows will always be subject to uncertainty. Any changes in the required rate of return and the assessment of counterparty risk will also affect the value.
Remaining useful life is estimated on the date of the presentation of accounts. The useful life of the assets and the method of depreciation are evaluated yearly. See note 7 for additional details.
The costs of defined benefit pension plans are calculated by an actuary. Actuarial estimates include assumptions concerning discount rate, required rate of return, future wage growth, mortality rate and future pension changes. Due to the time horizon of these schemes, the estimates are subject to great uncertainty. See note 17 for additional details.
The Group uses estimates to establish the actual value of share-based remuneration, the basis on which it is charged to costs. These estimates are mainly based on how volatile shares are expected to be, what the potential future yield might be, and what proportion of options are expected to be exercised. See note 16 for additional details.
DEFERRED TAX ASSET
The deferred tax asset is only recognised if it can be established as probable that the asset can be realised through a future tax deduction. The probability of this is estimated by the management and the estimate is subject to uncertainties relating to the underlying assumptions for calculating future tax results.
Deferred tax assets are not recognised. See note 12 for additional details.