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The International Accounting Standards Board (IASB) has approved a number of changes to the existing International Financial Accounting Standards (IFRSs) and adopted several new IFRSs, which became effective as of January 1, 2008. The RWE Group is applying the following IFRSs in the reporting period for the first time:
“Reclassification of Financial Assets (Amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures)” allows entities under specific conditions to measure certain non derivative financial assets, which were previously accounted for at fair value, at amortized cost. Additionally, more extensive disclosure on the reclassification of financial assets in the notes to consolidated financial statements is also required. The new regulations became applicable for the first time effective July 1, 2008. The RWE Group’s consolidated financial statements were not influenced by this.
IFRIC 11 “IFRS 2 - Group and Treasury Share Transactions” provides guidance on how to apply IFRS 2 to share-based payments, involving a company’s own equity instruments or equity instruments of a company from the same group. The first-time application of IFRIC 11 had no impact on the RWE Group’s consolidated financial statements.
IFRIC 14 “IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction“ addresses detailed issues related to the accounting treatment of pension plans. The first-time application of IFRIC 14 had no impact on the RWE Group’s consolidated financial statements.
Additionally, RWE has made the following voluntarily changes to accounting policies:
Application of IAS 19.93A: To increase the transparency of reporting, the RWE Group started fully recognizing actuarial gains and losses from defined benefit pension plans and similar obligations in the period in which they occur as of January 1, 2008, in accordance with IAS 19.93A. This method replaces the ‘corridor method.’ With the ‘corridor method’, actuarial gains and losses were recognized as profit or loss over the anticipated average remaining working lives of the qualified employees, to the extent that they exceeded 10 % of the greater of the benefit obligation or the fair value of the plan assets. The new method pursuant to IAS 19.93A calls for immediate recognition of all actuarial gains and losses. They are reported as a component of other comprehensive income outside profit or loss, in the statement of recognized income and expenses. After having been reported as part of other comprehensive income for the first time, they are immediately assigned to retained earnings; consequently, they remain outside profit or loss in subsequent periods as well.
Pursuant to IFRS, the comparable figures for 2007 were to be adjusted in line with the new method. This retroactive adjustment increased provisions for pensions and similar obligations as of January 1, 2008 by €69 million (January 1, 2007: €257 million). Moreover, as of January 1, 2008, the surplus of plan assets over benefit obligations reported under non-current other receivables and other assets declined by €266 million (January 1, 2007: €413 million). Due to this change, as of January 1, 2008, assets held for sale increased by €9 million and liabilities held for sale by €22 million. Taking into account the €46 million in deferred tax assets recognized outside profit or loss (January 1, 2007: €96 million), and the €43 million decrease in deferred tax liabilities (January 1, 2007: €123 million), equity declined by a total of €259 million as of January 1, 2008 (January 1, 2007: €451 million). Due to the discontinuation of the amortization of actuarial gains and losses recognized with an effect on income, staff costs for fiscal 2007 decreased by €13 million, and income taxes increased by €5 million. As a result of this transition, income in fiscal 2007 increased by €8 million.
