ARCADIS NV is a public company organized under Dutch law. Its principal office is located at: Nieuwe Stationsstraat 10, 6811 KS, Arnhem, the Netherlands. Phone: +31-26-3778911. ARCADIS NV and its consolidated subsidiaries ("ARCADIS" or the "Company"), is an international provider of comprehensive knowledge-based consulting services in the areas of infrastructure, water, environment and buildings.
Compliance Statement
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union and in conformity
with the Dutch Civil Code, Book 2, Title 9.
The consolidated financial statements were authorized for issue
by the Executive Board and Supervisory Board on March 5,
2010. The financial statements as presented in this report are
subject to adoption by the General Meeting of Shareholders, to
be held on May 12, 2010.
Basis of measurement
The consolidated financial statements have been prepared on
historical cost basis, unless stated otherwise in the significant
accounting policies. Exceptions to the historical cost basis
include derivative financial instruments and share-based
payment arrangements, which are measured at fair value.
Functional and presentation currency
The consolidated financial statements are presented in euros,
which is the Company's reporting currency. All amounts shown
in the financial statements are in thousands of euros unless
otherwise stated.
Estimates and management judgements
The preparation of the consolidated financial statements
requires management to make judgements, estimates and
assumptions that affect the application of accounting policies
and the reported amounts of assets, liabilities, income and
expenses. The key accounting estimates and judgements in
preparing the consolidated financial statements are explained
in note 3. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimate is revised and in
any future periods affected.
Changes in accounting policies
As of January 1, 2009, revised IAS 1 Presentation of Financial
Statements became effective. As a result all non-owner changes
in equity are presented in the consolidated statement of
comprehensive income, whereas the consolidated statement
of changes in equity presents all owner changes in equity.
Comparative information has been adjusted. Since this only is
a change in presentations, there is no impact on earnings per
share.
Significant accounting policies
The accounting policies set out below have been applied
consistently to all periods presented in these consolidated
financial statements, and by all subsidiaries. Certain
comparative amounts have been reclassified to conform with
current's year presentation.
Basis of consolidation
The consolidated financial statements include the accounts of
ARCADIS NV and its subsidiaries. Subsidiaries are companies
over which ARCADIS NV has control. Control exists when the
Company has the power, directly or indirectly, to govern the
financial and operating policies of an entity so as to obtain
benefits from its activities. In assessing control, potential voting
rights that presently are exercisable or convertible are taken
into account. The financial statements of subsidiaries are
included in the consolidated financial statements from the date
that control commences until the date control ceases.
Jointly controlled entities are those entities over whose
activities the Company has joint control, established by
contractual agreement and requiring unanimous consent for
strategic, financial and operating decisions. The consolidated
financial statements include the Company's proportionate
share of the entities' assets, liabilities, revenue and expenses
with items of a similar nature on a line-by-line basis, from the
date that joint control commences until the date that joint
control ceases. The calculation is based on the ARCADIS'
accounting principles.
Associates are those entities in which ARCADIS has significant
influence, but no control over the financial and operating
policies. Significant influence is presumed to exist when
ARCADIS holds between 20 and 50 percent of the voting
power of the entity. The consolidated financial statements
include the Company's share of the income and expenses of
the associates, whereby calculation is based on ARCADIS'
accounting principles.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealized
gains and losses or income and expenses arising from intragroup
transactions are eliminated in preparing the consolidated
financial statements. Unrealized gains arising from transactions
with associates and jointly controlled entities are eliminated
against the investment to the extent of the Company's interest
in the investee. Unrealized losses are eliminated in the same
way as unrealized gains, but only to the extent that there is no
evidence of impairment.
Foreign currency
Foreign currency transactions
Transactions in foreign currencies are translated into the
functional currency of entities using the foreign exchange rate
at transaction date. The functional currency of the foreign
entities in general is the local currency. Assets and liabilities
denominated in foreign currencies are translated to the
functional currency of the entity using the exchange rates at
balance sheet date. Exchange rate differences are included in
the statement of income.
Foreign operations
The statements of income of foreign operations are translated
into euros using the foreign exchange rates at transaction date,
approximating average exchange rates. The assets and liabilities
of foreign operations, including goodwill and fair value
adjustments arising on acquisition, are translated to euros at
exchange rates at the reporting date.
Foreign currency differences are recognized directly in equity.
Since January 1, 2004, the Company's date of transition to
IFRSs, such differences have been recognized in the cumulative
translation reserve. When a foreign operation is disposed of, in
part or in full, the relevant amount in the cumulative
translation reserve is transferred to the statement of income.
Business combinations
The Company uses the purchase accounting method in
accounting for acquisitions. The cost of an acquisition is
measured as the fair value of the assets given, equity
instruments issued and liabilities incurred or assumed at the
date of exchange, plus costs directly attributable to the
acquisition. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are
initially measured at fair value at the acquisition date. The
excess of the cost of acquisition over the fair value of ARCADIS'
share of the identifiable net assets acquired is recorded as
goodwill. If the cost of acquisition is less than the fair value of
the net assets of the subsidiary acquired, the difference is
recognized directly in the statement of income.
Financial Instruments
Non-derivative financial instruments
Financial instruments include trade and other receivables, cash
and cash equivalents, loans and borrowings and trade and
other payables. These non-derivative financial instruments are
initially recognized at fair value. Subsequently, these are
measured at amortized cost, using the effective interest
method, less any impairment losses.
The company recognizes the following classes of nonderivative
financial assets: financial assets at fair value through
profit or loss and loans and receivables.
Financial assets at fair value through profit or loss
A financial asset is classified at fair value through profit or loss
if the purchase and sale decisions are based on fair value in
accordance with the Company's risk management and
investment strategy. The assets are measured at fair value, and
the changes in fair value are recognized in the statement of
income. Attributable transaction costs are recognized in the
statement of income as incurred.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable
payments, not quoted in an active market. These assets
are recognized initially at fair value plus any directly attributable
transaction costs. Subsequently these assets are measured
at amortized cost using the effective interest method, less any
impairment losses.
Financial liabilities
Debt securities issued and subordinated liabilities are
recognized on the date they are originated. All other financial
liabilities are recognized on the trade date at which the
Company becomes a party to the contractual provisions of the
instrument. Non-derivative financial liabilities include loans
and borrowings, bank overdrafts and trade and other payables.
Initially these liabilities are recognized at fair value plus directly
attributable transaction costs. Subsequently these financial
liabilities are measured at amortized cost using the effective
interest method.
Financial assets and liabilities are offset and the net amount
presented in the balance sheet only when the Company has a
legal right to offset the amounts and intends to settle on a net
basis or to realize the asset and settle the liability
simultaneously.
Derivative financial instruments
Derivative financial instruments include forward exchange rate
contracts and interest rate derivatives.
The Company only uses derivative financial instruments for
specific purposes in order to hedge the exposure to foreign
exchange and interest rate risks arising from operational,
financing and investment activities. In accordance with its
treasury policy, the Company does not hold or issue derivative
financial instruments for trading purposes.
All derivative financial instruments are recognized initially at
fair value. Attributable transaction costs are recognized in the
statement of income when incurred. Subsequently, derivatives
are measured at fair value, with the fair value changes
recognized in the statement of income, unless hedge
accounting is applied. The gain or loss on re-measurement to
fair value of the interest rate related derivatives is recognized in
the statement of income under financing expenses. The fair
value changes of forward exchange contracts are recognized in
operating income. The values of the derivatives are recognized
on the balance sheet as derivatives, which can be classified as
current or non-current, depending on the maturity of the
contracts.
In specific cases hedge accounting is applied for cash flow
hedges. In that case, the effective part of the fair value changes
is deferred in other comprehensive income and presented in
the hedging reserve in equity. The amount recognized in other
comprehensive income is released to the related specific lines
in the statement of income or balance sheet at the same time
as the hedged cash flows affect the statement of income. Any
ineffective portion of changes in the fair value of the derivatives
is included in the statement of income immediately.
At inception of the hedge, the relationship between the hedging
instrument and the hedged item is documented, and in case of
hedge-accounting the methods that will be used to asses the
effectiveness of the hedge. Both at the hedge inception and at
each reporting date, the Company makes an assessment
whether the derivatives used are highly effective in offsetting
changes in fair values or cash flows of hedged items. When a
derivative is not highly effective, hedge accounting is discontinued
prospectively. When a cash flow hedge relationship is
terminated, the fair value changes deferred in equity are released
to the statement of income only when the hedged transaction is
no longer expected to occur. Otherwise these will be released to
the statement of income at the same time as the hedged item.
Intangible assets
Goodwill
Goodwill arises on the acquisition of subsidiaries, associates
and joint ventures. All acquisitions are accounted for by
applying the purchase accounting method. Goodwill represents
the excess of the cost of the acquisition over the Company's
interest in the net fair value of the identifiable assets, liabilities
and contingent liabilities of the acquiree. When the excess is
negative (negative goodwill), it is recognized immediately in
the statement of income. Goodwill has an indefinite useful life
and is annually tested for impairment.
Goodwill is measured at cost less any accumulated impairment
losses. Goodwill in respect of equity accounted associates is
included in the carrying amount of the investment.
Goodwill is only recognized for acquisitions on or after January
1, 2003, since the Company elected as part of its transition to
IFRS to restate only those business combinations that occurred
on or after January 1, 2003.
Software
Software is measured at cost less accumulated amortization
and impairment losses. Software has a finite life and is
amortized on a straight-line basis over the estimated useful life,
which is 3 to 5 years.
Subsequent costs are recognized in the carrying amount of
software only when it increases the future economic benefits.
All other expenditures are recognized in the statement of
income as incurred.
Other intangible assets
Other intangible assets, mainly consisting of expected profits in
the backlog of the acquired companies at the moment of
acquisition, are measured at cost less accumulated amortization
and impairment losses.
Initially these other intangible assets are recognized at the fair
value at the moment of acquisition. Subsequently they are
amortized over the estimated useful life, which varies from 0.5
to 5 years. Amortization is recognized in the statement of
income on a straight-line basis over the estimated useful lives
of intangible assets. The amortization methods and useful lives,
as well as residual values, are reassessed annually.
Property, plant & equipment
Property, plant & equipment are measured at cost less accumulated
depreciation and impairment losses. Cost includes
expenditures that are directly attributable to the acquisition of
the asset.
Subsequent costs are recognized in the carrying amount of
property, plant & equipment if it is probable that future
economic benefits will be obtained. The costs of day-to-day
servicing of property, plant & equipment are expensed as
incurred.
Depreciation is recognized in the statement of income on a
straight-line basis over the estimated useful lives. The estimated
useful life of buildings ranges from 30 to 40 years, for
furniture and fixtures this varies from 3 to 8 years. Land is not
depreciated. Depreciation methods and useful lives, as well as
residual values, are reassessed annually.
When parts of an item of property, plant & equipment have
different useful lives, they are accounted for as separate items
(major components) of property, plant & equipment.
Gains and losses on the sale of an item of property, plant &
equipment are determined by comparing the proceeds from
disposal with the carrying amount of property, plant & equipment
and are recognized net within other income in the
statement of income.
Leased assets
Leases in which the Company assumes substantially all the
risks and rewards of ownership are classified as financial leases.
Upon initial recognition the leased asset is measured at an
amount equal to the lower of its fair value and the present
value of the minimum lease payments. Leased assets are
depreciated over the shorter of the lease term and their useful
life unless it is reasonably certain that the Company will obtain
ownership by the end of the lease term.
Other leases are operating leases, and such leased assets are
not recognized on the Company's balance sheet.
Investments in associates and jointly controlled entities
Associates are accounted for using the equity method from the
date that significant influence commences until the date that
significant influence ceases. Goodwill identified on the
acquisition of the associate is included in the carrying amount
of the investment.
The consolidated financial statements include ARCADIS' share
of the income and expenses of the associates, whereby the
calculation is based on the ARCADIS accounting principles.
When the share of losses exceeds the interest in an associate,
the carrying amount is reduced to zero, and recognition of
further losses is discontinued unless ARCADIS has an
obligation or has made payments on behalf of the company.
Jointly controlled companies are proportionally consolidated,
whereby the calculation is based on the ARCADIS accounting
principles.
Loans to associates and joint ventures are carried at amortized
cost less any impairment losses.
Other investments
Other investments include the investments in companies in
which ARCADIS has no significant influence. These are
measured at cost less impairment losses.
Deferred taxes
Deferred tax assets and liabilities are recognized on the balance
sheet, providing for temporary differences between the carrying
amount of the assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes.
Deferred tax is measured at the tax rates that are expected to be
applied to the temporary differences when they reverse, based
on enacted or substantially enacted tax rates and tax laws at
reporting date. Deferred tax assets for unused tax losses, tax
credits and deductible temporary differences are only
recognized when it is probable that there will be future taxable
profits against which to settle the temporary differences or
not-yet-compensated taxable losses. Deferred tax assets are
reviewed at each reporting date and are reduced to the extent
that it is no longer probable that the related tax benefit will be
realized. Deferred taxes are not discounted. Deferred taxes are
not recognized for the initial recognition of goodwill, the initial
recognition of assets or liabilities that affect neither accounting,
nor taxable profit, and the differences relating to investments in
subsidiaries to the extent that they will probably not reverse in
the foreseeable future.
Deferred tax assets and liabilities are offset if there is a legally
enforceable right to offset current tax liabilities and assets, and
they relate to income taxes levied by the same tax authority on
the same taxable entity, or on different tax entities, but they
intend to settle current tax liabilities and assets on a net basis
or their tax assets and liabilities will be realized simultaneously.
For share-based payments, the deferred tax is determined
based on the manner in which the award is expected to be
settled and in accordance with applicable tax legislation.
The information used in estimating the deductions available in
future periods is consistent with the information used to
determine the share-based payment expense. If the estimated
future tax deduction exceeds the amount of the related
cumulative share-based payment expense, the excess of the
associated income tax is recognized directly in equity.
Additional income taxes that arise from the distribution of
dividends are recognized at the same time that the liability to
pay the related dividend is recognized.
Inventories
Inventories are measured at the lower of cost and net realizable
value. Cost of inventories is based on the first in – first out
principle, and comprises all cost of purchase, cost of conversion
and other cost incurred in bringing the inventories to the
present location and condition. Net realizable value is the
estimated selling price in the ordinary course of business, less
the estimated cost of completion and selling expenses.
(Un)billed receivables
Unbilled receivables represent the gross unbilled amount
expected to be collected from customers for contract work
performed to date. Unbilled receivables are measured at cost
plus profit recognized to date less progress billings and a
provision for foreseeable losses. Cost includes all expenditures
related directly to specific projects and direct attributable
overhead incurred in the Company's contract activities based
on normal operating capacity. Billed receivables are measured
at amortized cost less any impairment losses. If payments
received from customers exceed the income recognized, the
difference is presented as deferred income (billings in excess of
cost) in the balance sheet.
Other receivables
Other receivables are measured at amortized cost less any
impairment losses.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call
deposits. For cash flow purposes bank overdrafts are included
in cash and cash equivalents.
Equity
Share capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of ordinary shares and share options are
recognized as a deduction of equity, net of any tax effects.
Priority shares and preference shares are classified as equity
since these are non-redeemable, or only redeemable at the
Company's option. Dividends on these shares are recognized
as distributions within equity upon approval by the Company's
shareholders.
Repurchase of shares
When share capital is repurchased in order to prevent dilution
as a result of the share option plan, the consideration paid,
including directly attributable costs net of any tax effects, is
deducted from equity.
Repurchased shares are classified as treasury shares and are
presented as a deduction from total equity. When treasury shares
are sold or reissued subsequently, the amount received is recognized
as an increase in equity, and the resulting surplus or deficit
on the transaction is transferred to / from retained earnings.
Dividends
Dividends are recognized as a liability in the period in which
they are declared.
Provisions
Provisions are recognized when there is a present obligation
(legal or constructive) as a result of a past event, a reliable
estimate can be made of the amount of the obligation, and it is
probable that an outflow of economic benefits will be required
to settle the obligation. Provisions are measured at net present
value, taking into account the timing of the cash outflows.
The discount rate reflects the current market assessments of
the time value of money and the risks specific to the liability.
Unwinding of the discount is recognized as a finance expense.
Employee benefits
Pensions
Most pension plans within ARCADIS qualify as a defined
contribution plan. The Company pays fixed contributions into a
separate entity and has no legal or constructive obligations to
pay further amounts. Obligations for contributions to defined
contribution plans are recognized as a cost in the statement of
income in the period during which services are rendered by
employees.
In some countries, minor plans exist that qualify as defined
benefit plans. For these minor defined benefit plans, a
provision is created, based on actuarial calculations. The net
obligation related to these defined benefit pension plans is
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. The estimated benefit
is discounted to determine its present value, and any
unrecognized past service costs and the fair value of any plan
assets are deducted. The discount rate is the yield at the
reporting date on bonds that have maturity dates
approximating the terms of the obligations. The calculation is
performed by a qualified actuary using the projected unit credit
method. When the calculation results in a benefit, the
recognized asset is limited to the net total of any unrecognized
past service costs and the present value of any future refunds
from the plan or reductions in future contributions to the plan.
When the benefits of a plan are improved, the portion of the
increased benefit relating to past service by employees is
recognized in the statement of income on a straight-line basis
over the average period until the benefits become vested. To the
extent that the benefits vest immediately, the expense is
recognized immediately in the statement of income.
Actuarial gains and losses are recognized to the extent that any
cumulative unrecognized actuarial gain or loss exceeds 10% of
the greater of the present value of the defined benefit
obligation and the fair value of plan assets. That portion is
recognized in the statement of income over the expected
average remaining working lives of the employees participating
in the plan.
Other long-term employee benefits
The Company's net obligation for long-term service benefits,
other than pension plans, is the amount of future benefit that
employees have earned in return for their service in the current
and prior periods. The obligation is calculated using the
projected unit credit method and is discounted to its present
value of any related assets that are deducted. Any actuarial
gains or losses are recognized in the statement of income in the
period in which they arise.
Share-based payment transactions
Within ARCADIS, equity-settled share-based compensation
plans exist. The grant date fair value of share-based payments
under the ARCADIS long-term incentive plan is recognized as
an employee expense, with a corresponding increase in equity,
over the period in which the employees become unconditionally
entitled to the options and shares. The amount recognized as an
expense is adjusted to reflect the actual number of share options
for which the related service and non-market performance
conditions are expected to be met, such that the amount
ultimately recognized as expense is based on the actual number
of awards meeting these conditions at vesting date.
The fair value of the granted options is determined using the
binomial model taking into account the effect of the
applications. The cost charged will be adjusted for the actual
number of share-based incentives that are forfeited. The
vesting and exercise of shares may be conditional on the
satisfaction of performance conditions or on continued
employment, or both, as set by the Supervisory Board.
Loans and borrowings
Interest-bearing debts are measured at amortized cost, in
which the difference between the proceeds and the final
repayment amount is charged to the statement of income over
the duration of the debts. The portion of long-term debt that
has to be repaid within one year after the balance sheet date is
presented as the current portion of long-term debt under
current liabilities.
Impairment
The carrying amounts of the assets of ARCADIS, other than
work in progress and deferred tax assets, are reviewed at each
reporting date to determine whether there is any indication of
impairment. If such indication exists, then the asset's
recoverable amount is estimated.
Receivables are first individually assessed for impairment, and
if they are found not to be impaired they are collectively
assessed for impairment. In the collective impairment testing
receivables with similar risk characteristics are grouped
together, and historical trends of the Company and
management judgement are used to assess an impairment.
For goodwill and assets that have an indefinite useful life, the
recoverable amount is estimated at each balance sheet date.
The recoverable amount is the greater of the fair value less cost
to sell and value in use. In assessing the value in use, estimated
future cash flows are discounted to present value using a
discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset.
An impairment loss is recognized whenever the carrying
amount of an asset or its cash-generating unit exceeds its
recoverable amount. Impairment losses are recognized in the
statement of income. Impairment losses recognized with
regard to cash-generating units are allocated first to reduce the
carrying amount of any goodwill allocated to cash-generating
units and then to reduce the carrying amount of the other
assets in the unit on a pro-rata basis.
An impairment loss of goodwill is not reversed. Regarding
other assets, an impairment loss can be reversed if there has
been a change in the estimates used to determine the
recoverable amount. An impairment loss is reversed only to the
extent that the asset's carrying amount does not exceed the
carrying amount that would have been determined, net of
depreciation or amortization, if no impairment loss had been
recognized.
Revenue
Services
Revenue from services rendered is recognized in the statement
of income in proportion to the percentage of completion of the
transaction at reporting date. The stage of completion for revenues
from services is determined as a percentage of the contract costs
incurred in relation to the total estimated contract costs (input
measure), and are only recognized to the extent of costs incurred
that are likely to be recoverable. An expected loss on a contract is
recognized immediately in the statement of income.
Construction contracts
Contract revenue includes the initial amount agreed in the
contract plus any variations in contract work, claims and
incentive payments to the extent that it is probable that they
will result in revenue and can be measured reliably. As soon as
the outcome of a construction contract can be estimated
reliably, contract revenue and expenses are recognized in the
statement of income in proportion to the percentage of
completion of the contract.
The percentage of completion is assessed by reference to
surveys of work performed. When the outcome of a
construction contract cannot be estimated reliably, contract
revenue is recognized only to the extent of contract costs
incurred that are likely to be recoverable. An expected loss on a
contract is recognized immediately in the statement of income.
The balances of the projects for which no confirmation of order
has been received at balance sheet date are recognized in the
statement of income.
Advance investments that can be identified separately,
measured reliably and are attributable to design, build, finance
and operate contracts are accounted for as contract costs only
when it is probable that the contract will be obtained. Advance
investments in the development of a contract that do not meet
these criteria are expensed. It is only considered probable that a
design, build, finance and operate contract will be obtained
upon receipt of a contract signed by the client.
Other revenues
Other revenues relate to activities which are not included
under construction contracts and services, for example sale of
licenses, and assets specifically related to project work.
These revenues are recognized once the significant risks and
rewards have been transferred to the buyer, recovery of the
consideration is probable and there is no continuing
management involvement with these items.
Carbon credits
The number of carbon credits produced is formally confirmed
by verification reports from external parties. Only after these
verification reports have been issued, the exact number of
carbon credits that can be delivered to other parties is known.
Revenue from the production of carbon credits is recognized at
the moment all risks and rewards have been transferred to the
buyer. Generally this is the case once the verification reports
have been issued and formal delivery by crediting the buyer's
account for carbon credits took place.
Materials, services of third parties and subcontractors
Under materials, services of third parties and subcontractors
project-related costs of materials and services charged by third
parties, including the costs of subcontractors, are recognized.
Sale of investments
When the sale of a subsidiary classified as a continued
operation, a jointly controlled entity or an associate leads to a
gain, this gain is recognized separately as part of other income.
A loss is recorded under other operational costs. In some
instances, the sale of associates is considered to be part of the
normal business strategy. This is specifically for associates
related to energy-projects within ARCADIS Logos. If this is the
case, the net capital gain is recognized as revenue.
Operational costs
All employee-related cost as well as non-project-related
out-of-pocket expenses, are recognized as operational cost as
incurred.
Net finance expense
The net finance expense comprises finance income, finance
expense and the fair value change of derivatives at fair value
through profit and loss. Finance income and finance expenses
are recognized in the statement of income as it accrues, using
the effective interest method.
Income from associates
ARCADIS' share in earnings from associates is recognized in
the statement of income. For investments at cost in which
ARCADIS does not have significant influence, only dividends
received are included in income.
Income taxes
Income taxes comprise both current and deferred tax. Income
tax is recognized in the statement of income except to the
extent that it relates to business combinations or to items
recognized directly in equity or other comprehensive income.
Current tax is the expected tax payable on the taxable income
for the year, using enacted or substantially enacted tax rates at
the reporting date, and any adjustments to tax payable related
to previous years.
Earnings per share
Basic earnings per share is calculated by dividing the profit or
loss attributable to the equity holders of the Company by the
weighted average number of shares outstanding during the
period, excluding the temporarily repurchased shares used to
cover option plans. Diluted earnings per share is calculated
using the weighted average number of shares and options
outstanding during the period as far as these have a potential
dilutive effect, e.g. as the exercise price of these options is lower
than the share price.
Cash flow statement
The cash flow statements have been prepared using the indirect
method. Cash flows in foreign currencies have been translated at
average exchange rates. Exchange rate differences on cash items
are shown separately in the cash flow statements. Receipts and
payments with respect to income tax are included in the cash
flow from operating activities. Interest payments and receipts are
included in cash flows from operating activities. The cost of
acquisition of subsidiaries, associates and joint ventures, and
other investments, insofar as it was paid for in cash, is included
in cash flows from investing activities. Acquisitions or divestments
of subsidiaries are presented net of cash balances acquired
or disposed of, respectively. Cash flows from derivatives are
recognized in the statement of cash flows in the same category
as those of the hedged item.
Segment reporting
The operating segment reporting follows the internal reporting
used by the chief decision-maker to manage the business,
assess the performance and to allocate the resources.
The Company is operated on a geographic basis and considers
those geographical areas with economic and operating
similarities to be separate primary operating segments.
The Company mainly operates in a local-to-local market;
therefore risks and rates of returns are reflected predominately
by the geographical market. Management reporting systems,
legal structures and consolidation are largely based on
geographic segments. The differentiation in the type of services
provided by the various group companies is limited. These
services extend in general to consulting, engineering and
project management services.
Performance is mainly measured based on EBITA (earnings
before interest, tax, and amortization of identifiable intangible
assets). Management believes this is the most relevant measure
in evaluating the operating results of the segments.
Inter-segment pricing is determined on an arm's length basis.
Segment results, assets and liabilities include items directly
attributable to a segment as well as those that can be allocated
on a reasonable basis.
Determination of fair values and management judgements
Property, plant & equipment
Measurement of property, plant & equipment involves the use
of estimates for determining the fair value of property, plant &
equipment acquired in a business combination. The fair value
of property, plant & equipment recognized as a result of a
business combination is based on market values. The market
value of property is the estimated amount for which a property
could be exchanged on the date of valuation between willing
parties in an arm's length transaction. The market value of
items of plant, equipment, fixtures and furniture is based on
the market prices for similar items.
Intangible assets
Measurement of intangible assets acquired in a business
combination involves the use of estimates for determining the
fair value at acquisition date. This mainly relates to the expected
profits in the backlog of the acquired companies at the moment
of acquisition. The fair value is based on discounted cash flows
expected to be received from these identifiable intangible assets.
Impairments of property, plant & equipment and
intangible assets
The determination of impairments of property, plant &
equipment and intangible assets involves the use of estimates.
The recoverable amount is determined by discounting the
estimated future cash flows to present value using a discount
rate that reflects the current market assessments
of the time value of money and the risks specific to the asset. The
identification of impairment indicators, as well as the estimation
of future cash flows and the determination of the fair value for
the assets requires management to make significant judgements,
specifically for the estimation of cash flows.
Revenue recognition
For construction contracts and part of the service contracts
revenue is recognized based upon percentage of completion. In
determining the percentage of completion estimates of project
management are used to assess the progress of the project and
the estimated outcome. The estimates influence the timing of
revenue recognition.
(Un)billed receivables
The fair value of (un)billed receivables is estimated as the
present value of future cash flows, discounted at the applicable
market rate of interest at the reporting date.
Derivative financial instruments
The fair value of interest rate swaps is the estimated amount
that the Company would receive or pay to terminate the swap
at the balance sheet date, taking into account current interest
rates and the current credit worthiness of the swap counterparties,
and is based on broker quotes. The fair value of forward
exchange contracts is based on the quoted market price at the
balance sheet date, being the present value of the quoted
forward price. Those quotes are tested for reasonableness by
discounting estimated future cash flows based on the term and
maturity of the contract, using market interest rates.
Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is
calculated based on the present value of future cash flows,
discounted at the company specific market rate of interest at
reporting date.
Share-based payment transactions
The fair value of share-based payment transactions is measured
using a binomial model. Measurement inputs include the share
price on measurement date, exercise price of the instrument,
the expected volatility, weighted average expected life of the
instrument and the risk-free interest rate.
Property, plant & equipment
Measurement of property, plant & equipment involves the use
of estimates for determining the fair value of property, plant &
equipment acquired in a business combination. The fair value
of property, plant & equipment recognized as a result of a
business combination is based on market values. The market
value of property is the estimated amount for which a property
could be exchanged on the date of valuation between willing
parties in an arm's length transaction. The market value of
items of plant, equipment, fixtures and furniture is based on
the market prices for similar items.
Intangible assets
Measurement of intangible assets acquired in a business
combination involves the use of estimates for determining the
fair value at acquisition date. This mainly relates to the expected
profits in the backlog of the acquired companies at the moment
of acquisition. The fair value is based on discounted cash flows
expected to be received from these identifiable intangible assets.
Impairments of property, plant & equipment and
intangible assets
The determination of impairments of property, plant &
equipment and intangible assets involves the use of estimates.
The recoverable amount is determined by discounting the
estimated future cash flows to present value using a discount
rate that reflects the current market assessments
of the time value of money and the risks specific to the asset. The
identification of impairment indicators, as well as the estimation
of future cash flows and the determination of the fair value for
the assets requires management to make significant judgements,
specifically for the estimation of cash flows.
Revenue recognition
For construction contracts and part of the service contracts
revenue is recognized based upon percentage of completion. In
determining the percentage of completion estimates of project
management are used to assess the progress of the project and
the estimated outcome. The estimates influence the timing of
revenue recognition.
(Un)billed receivables
The fair value of (un)billed receivables is estimated as the
present value of future cash flows, discounted at the applicable
market rate of interest at the reporting date.
Derivative financial instruments
The fair value of interest rate swaps is the estimated amount
that the Company would receive or pay to terminate the swap
at the balance sheet date, taking into account current interest
rates and the current credit worthiness of the swap counterparties,
and is based on broker quotes. The fair value of forward
exchange contracts is based on the quoted market price at the
balance sheet date, being the present value of the quoted
forward price. Those quotes are tested for reasonableness by
discounting estimated future cash flows based on the term and
maturity of the contract, using market interest rates.
Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is
calculated based on the present value of future cash flows,
discounted at the company specific market rate of interest at
reporting date.
Share-based payment transactions
The fair value of share-based payment transactions is measured
using a binomial model. Measurement inputs include the share
price on measurement date, exercise price of the instrument,
the expected volatility, weighted average expected life of the
instrument and the risk-free interest rate.
New standards and interpretations not yet
A number of new standards, amendments to standards and
interpretations are not yet effective for the year ended
December 31, 2009, and have not been applied in preparing
these consolidated financial statements. The Company assessed
that the following standard might be applicable and could have
an impact on the consolidated financial statements:
Revised IFRS 3 Business Combinations incorporates the
following changes that are likely to be relevant to the
Company:
? The definition of a business has been broadened, which will
probably result in more acquisitions being treated as a
business combination.
? Contingent consideration will be measured at fair value, with
subsequent changes recognized in the statement of income.
? Transaction costs, other than share and debt issue costs, will
be expensed as incurred.
? Any pre-existing interest in the acquiree will be measured at
fair value with the gain or loss recognized in the statement of
income.
Revised IFRS 3, which becomes mandatory for the Company's
2010 consolidated financial statements, will be applied
prospectively and therefore will have no impact on prior
periods included in the 2010 financial statements.
Amended IAS 27 Consolidated and Separate Financial Statements
(2008) requires accounting for changes in ownership interests
in a subsidiary, while maintaining control, to be recognized as
an equity transaction. When the Company loses control of a
subsidiary, any interest retained will be measured at fair value
with the gain or loss recognized in the statement of income.
The amendment is mandatory for the 2010 financial
statements, and is not expected to have a significant impact.
Eligible Hedged Items – Amendment to IAS 39 Financial
Instruments: Recognition and Measurement clarifies the existing
principles that determine whether specific risks or portion of
cash flows are eligible for designation in a hedging relationship.
This amendment, which becomes mandatory for the Group's
2010 consolidated financial statements is not expected to have
a significant impact on the consolidated financial statements.
In addition to the changes mentioned above, there are other
changes to existing standards that are not yet effective for the
year ended December 31, 2009, but these are not expected to
have a material impact on the consolidated financial
statements of ARCADIS.
show all
hide all