annual report 2020 - Flipbook - Side 30
INDUSTRIENS PENSIONSFORSIKRING A/S ANNUAL REPORT 2020
NOTES
Note 1 - Accounting policies
General
This annual report has been prepared in
accordance with the regulations of the Financial
Business Act, as well as the Executive Order
from the Danish Financial Supervisory Authority
on Financial Reports for Insurance Companies
and Multi-Employer Occupational Pension
Funds (Executive Order on the Presentation of
Financial Statements).
The Executive Order has been amended with
effect for 2020 to include a requirement to
recognise leased assets and associated leasing
commitments, also in connection with operating
leases. Industriens Pension has only limited
operating leases. Leased assets and leasing
commitments amounting to approx. DKK 15 mill.
have thus been recognised from 1 January
2020. This change has not had any effect on
equity brought forward for 2020. Moreover, the
change has not had a significant effect on the
profit for the year. Leased assets have been
recognised under property, plant and
equipment in the same item as similar assets
held (see notes 8 and 9), while leasing
commitments have been recognised under
other debt.
Apart from this, the accounting policies applied
are unchanged compared with 2019.
All amounts in the financial statements are
presented in whole million DKK. Each figure is
rounded separately, which means that there
may be small differences between the totals
stated and the total of the underlying figures.
Pursuant to section 134(1) of the Executive Order
on Presentation of Financial Statements, no
consolidated financial statements have been
prepared for the company. The company and its
subsidiaries, see note 10 of these financial
statements, together with the affiliate
Industriens Pension Service A/S, are included in
the consolidated financial statements of
IndustriPension Holding A/S (CVR no. 15 89 32
30).
Accounting estimates and assessments
Preparation of the annual report requires that
management make a number of estimates and
assessments regarding future conditions which
could significantly influence the accounting
treatment of assets and liabilities, and thus the
result in the current and coming years. The most
significant estimates and assessments concern
calculation of provisions for insurance contracts,
fair value of unlisted financial instruments and
fair value of the owner-occupied property.
Financial Statements. This means that the size of
provisions is also affected by the current
interest-rate level determining the discount rate.
Provisions with these uncertainties constitute
less than 5% of total provisions.
Fair value of financial investment assets
There are no significant estimates connected
with the valuation of financial instruments with
listed prices on an active market (level 1), or
where valuations are based on accepted
valuation models with observable market data
(level 2).
Provisions for insurance and investment
contracts
In relation to financial instruments where there is
only limited observable market data on which to
base valuation (level 3), valuation will be affected
by estimates. This applies in particular to
holdings in group undertakings and associated
undertakings with investments in investment
properties and wind turbines, to unlisted equity
investments in funds with private equity, real
estate and infrastructure, to unlisted investment
units, to unlisted bonds, and to the owneroccupied property.
The calculation of provisions for insurance
contracts (excl. the market-rate scheme) is
based on actuarial calculations, and applies
assumptions on e.g. mortality and disability
rates. Assumptions on mortality are based on
benchmarks from the Danish Financial
Supervisory Authority, and like other
assumptions, they are set as a best estimate
based on experience with previously held
portfolios of insurance contracts. The provisions
are calculated as the present value of the future
benefits discounted by the yield curve defined
in the Executive Order on Presentation of
Valuation of investment properties and wind
turbines in group undertakings and associated
undertakings is based on the present value of
expected cash flows during a planning period of
10 years for investment properties and up to 25
years for wind turbines. For investment
properties, the method (discounted cash flow
(DCF)) is defined in an annex to the Executive
Order on the Presentation of Financial
Statements. The most significant estimates
concern determination of the discount rate,
which is composed of an individual rate of return
and the expected inflation rate, as well as certain
elements of the budgeted cash flows, in
particular budgeted rental income which
depends on the level of the rent and vacant
periods etc., expenses for maintenance and
renovation as well as a so-called terminal value
when the planning period expires. The
determination of the individual rate of return is
based on statistics on actual real estate
transactions involving similar properties and
takes into consideration the location of the
property, its age, use and state of maintenance,
etc. As a supplement to this valuation, a
valuation from an external estate agent is
obtained
every
year
concerning
the
assumptions applied (primarily individual rates
of return), and the fair value is calculated every
three years.
The extensive planning period of up to 25 years
for wind turbine investments naturally adds to
the uncertainty concerning future cash flows and
consequently also concerning the current fair
value of the wind turbines. Again, the most
significant estimates relate to the discount rate
and to specific elements which have a major
impact on budgeted cash flows, in particular
electricity production, which is based on wind
forecasts, idle days with no generation of
electricity, electricity price developments, costs
of maintenance of the wind turbines and costs of
dismantling the wind turbines at the end of their
useful lives. The discount rate is calculated
according to the cost of capital method, which
combines a risk-free interest rate with the
addition of an illiquidity premium and the
expected inflation rate. The DCF model is
maintained by external experts, and, as a
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