Background
Financial statement

Notes to the consolidated financial statement 2015/2016

 
General

Relationship with parent company and principal activities
The Company, having its legal address in Joure at Edisonweg 5 with Dutch Chamber of Commerce number 807807928, is a private limited liability company under Dutch law, with 100% of its shares held by the Association HZPC (Vereniging HZPC).

The Company is a holding company; the group is primarily involved in selling seed potatoes and related products and services.

The associated growers deliver the seed potatoes they have grown to the company and receive a payment for this. The Company sells the delivered seed potatoes grown by them and receives a commission. In the Netherlands seed potatoes are grown by a pool-mechanism. Outside the Netherlands separate agreements have been made with growers.

Financial reporting period
These financial statements have been prepared for a reporting period of one year. The financial year of the company runs from 1 July up to and including 30 June of the next year.

Applied standards
The financial statements have been prepared in accordance with Title 9, Book 2 of the Netherlands Civil Code. The applied accounting policies are based on the historical cost convention.

Application of Section 402, Book 2 of the Netherlands Civil Code
The financial information of the company is included in the consolidated financial statements. For this reason, in accordance with Section 402, Book 2 of the Netherlands Civil Code, the company profit and loss account exclusively states the share of the result of participating interests after tax and the general result after tax.

Continuity
These financial statements have been prepared on the supposition of continuity.

 

Principles for the valuation of assets and liabilities and the general determination of the result

General determination of the result
Unless stated otherwise, assets and liabilities are shown at nominal value. 

In order to effect a better link with the category model, reclassifications have occurred on the wages and salaries and other operating expenses. The other investments have also been reclassified.

An asset is disclosed in the balance sheet when it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the cost of the asset can be measured reliably. A liability is recorded in the balance sheet if it is probable that the processing of it will be linked to an outflow of resources which contain economic benefits and the total amount can be reliably established.

Income is recognised in the profit and loss account when an increase in future economic potential related to an increase in an asset or a decrease of a liability has arisen, the size of which can be measured reliably. Expenses are recognised when a decrease in the economic potential related to a decrease in an asset or an increase of a liability has arisen, the size of which can be measured with sufficient reliability.

If a transaction results in a transfer of all or virtually all future economic benefits and when all or virtually all risks relating to assets or liabilities transfer to a third party, the asset or liability is no longer included in the balance sheet. Assets and liabilities are not included in the balance sheet if economic benefits are not probable and/or cannot be measured with sufficient reliability.

Revenues and expenses are allocated to the period to which they relate. Revenues are recognized when the company has transferred the significant risks and rewards of ownership of the seed potatoes and ware potatoes to the buyer.

Licences are considered as income when third parties have exercised the right of use of the company’s assets.

The financial statements are presented in euros, the company’s functional currency. All financial information in euros is rounded up to the nearest thousand unless otherwise indicated.

Use of estimates
The preparation of the financial statements requires the management to form opinions and to make estimates and assumptions that influence the application of principles and the reported values of assets and liabilities and of income and expenditure. Actual results may differ from these estimates. The estimates and the underlying assumptions are constantly assessed. Revisions of estimates are recognised in the period in which the estimate is revised and in future periods for which the revision has consequences.

The accounting policy on trade receivables is in the opinion of management the most critical for the purpose of presenting the financial position and it requires estimates and assumptions related to the customer credit risk which is dependent on the buyer of the seed, the geographical region and economic circumstances.

Consolidation principles
The consolidated financial statements include the financial data of the company, its group companies and other companies over which the company 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. Group companies are participating interests in which the company has a direct or indirect controlling interest.

In assessing whether a controlling interest exists, financial instruments are involved which include potential voting rights and which can be exercised directly.

The items in the consolidated financial statement are drawn up in accordance with uniform principles for valuation and determination of the result for the group.

Newly acquired participating interests are involved in the consolidation from the point in time at which a controlling interest can be exercised. Participating interests which have been disposed of are included in the consolidation up to the point in time when this interest ended. Joint ventures are not consolidated but valued at net asset value.

In preparing the consolidated financial statements, inter company payables, receivables and transactions are eliminated together with the profits made within the group. If transactions occur with a non-consolidated participating interest, which does not qualify as a group company and which is valued in accordance with the equity method, the profit or loss which emanates from this transfer is processed pro rata on the basis of the relative interest that third parties have (proportional determination of results). A loss which emanates from the transfer of current assets or a particular reduction in value of fixed assets is processed completely.

The Group companies are consolidated in full with minority interest presented within Group equity separate from shareholders’ equity. If losses to be assigned to the minority interest of third parties exceed the minority interest in the shareholders’ equity of the consolidated company, the difference and any additional losses are charged completely to the majority shareholder. The share of third parties in the result is placed separately as the final item in the consolidated profit and loss account set against the group result.

Purchases
On 19 February 2016 Participatie Maatschappij Buitenland B.V. signed a letter of intent for the purchase of the remaining 58.7% of the shares of HZPC Sadokas Oy so that it will hold 100% of the shares from that date. The purchase was processed in accordance with the purchase accounting method.

On 11 April 2016 the company used an asset and liability transaction to effect the acquisition of the varieties and breeding material for fries, crisps and table/export markets and associated grower and customer relationships of KWS Potato B.V. by Stet Holland B.V. From 27 June 2016 Stet Holland B.V. has had the control which enabled the purchase to be processed in accordance with the purchase accounting method from that date.

A total of 7.3 million euros was paid for the acquisitions in the financial year 2015/2016 at the moment of acquisition. 

The goodwill is recorded as an investment in the statement of changes to intangible fixed assets. 

This is determined as follows:

(in EUR x 1 million)

Purchase price 7.3
Minus: real value of assets and liabilities 5.7
 
Goodwill 1.6

Participations
HZPC Holland B.V. in Joure, is the parent company of a group with the following participations:

Participating interests (direct and indirect) as of 30 June 2016

Participatie Maatschappij Buitenland B.V. in Joure, the Netherlands with its participations:

Consolidated: Interest:
Stet Holland B.V., te Emmeloord, the Netherlands with its participations: 100%
     Stet Potato UK Ltd. 100%
     Stet France SARL 100%
Bonna Terra B.V., in Emmeloord, the Netherlands 100%
ZOS B.V. in Leeuwarden, the Netherlands with its participation: 100%
     ZOS WEHE B.V., in Wehe-den Hoorn, the Netherlands 100%
Participatie Maatschappij Buitenland B.V. in Joure, the Netherlands with its participations: 100%
     Huchette Cap Gris Nez SAS, in La Chapelle d’Armentieres, France
     with its participation:
100%
 
          Fleur de Lys - Huchette SARL, in La Chapelle d’Armentieres, France 100%
     Patatas HZPC España S.L., in Torrent, Spain 100%
     HZPC Portugal Lda, in Mira, Portugal 100%
     HZPC Americas Corp., in Charlottetown, Canada 100%
     HZPC UK Ltd., in Crowle Scunthorpe, United Kingdom 100%
     HZPC Deutschland GmbH, in Eydelstedt, Germany 100%
     HZPC Polska Sp. z o.o., in Poznan, Poland 100%
     HZPC América Latina, in Buenos Aires S.A., Argentina 80%
     HZPC Kantaperuna Oy, in Tyrnävä, Finland 100%
     HZPC Sverige AB, in Lidkoping, Sweden 100%
     HZPC China Ltd, in Hong Kong, China with its participation: 100%
          Beijing HZPC Agricultural consultancy Co. Ltd., Beijing China 100%
      HZPC Ltd, in Hongkong, China 100%
      Solentum B.V., in Joure, the Netherlands 100%
      HZPC Sadokas Oy, in Tyrnävä, Finland with its participation: 100%
          ZAO HZPC Sadokas in Sint Petersburg, Russia 100%
IPR B.V. in Joure, the Netherlands  
   
Not consolidated:  
D.S.S. Opslag B.V., in Dronten, the Netherlands 50%
Semillas SZ S.A., in Santiago, Chile 20%
La Flor Limitada S.A., in Santiago, Chile 20%
El Mainten Limitada S.A., in Santiago, Chile 20%
Mahindra HZPC Ltd., in Chandigarh, India 40%
Fries4all B.V., in Joure, the Netherlands 33%
N.V. Breeders Trust, in Brussels, Belgium 15%

Principles for the conversion of foreign currency

Transactions in foreign currencies
Transactions denominated in foreign currency are converted into the relevant functional currency of the group companies at the exchange rate applying on the transaction date. Monetary assets and liabilities denominated in foreign currency are converted into the functional currency on the balance sheet date at the exchange rate applying on that date. The fluctuations in currency exchange rates which occur during the conversion and processing are recorded in the period in which they occur with the exception of the fluctuations in exchange rates on monetary items which form part of the net investment in a foreign operation. Non-monetary assets and liabilities in foreign currencies that are stated at historical cost are converted into euros at the applicable exchange rates applying on the transaction date. Fluctuations which occur in the foreign currency rates during conversion are recorded as expenditure in the profit and loss account.

Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are converted into euros at exchange rates applying on the balance sheet date. Income and expenses of foreign operations are converted into euros at the exchange rate applying on the transaction date.

Conversion gains and losses are processed in the reserve for conversion differences. If a foreign operation is fully or partially sold, the respective amount is transferred from the reserve for conversion differences to the profit and loss account.

Developments in most important foreign exchange currencies
The development of the foreign exchange rate of the most important currencies:

  rate average rate
EUR 1 to foreign currency 30-06-16 rate 30-06-15
Canadian dollar 1.438 1.472 1.393
British pound 0.835 0.749 0.714
Polish zloty 4.372 4.296 4.195
American dollar 1.110 1.110 1.123
South African rand 16.357 16.103 13.737

Financial instruments
Financial instruments include investments in shares, trade and other receivables, cash items, loans and other financing commitments, derivative financial instruments, trade payables and other amounts payable. These financial statements contain the following financial instruments: financial instruments held for trading (financial assets and liabilities), loans and receivables (both purchased and issued), equity instruments, other financial liabilities and derivatives. Financial instruments also include derivative financial instruments embedded in contracts. These derivatives are not separated from the basic contract and they are therefore processed in accordance with the basic contract. Following initial recording, derivative financial instruments are valued at cost price or lower market value.

Financial instruments are initially processed at fair value, including discount or premium and directly attributable transaction costs. However, if financial instruments are subsequently measured at fair value with value changes processed in the profit and loss account, then directly attributable transaction costs are processed directly in the profit and loss account.

The fair value of a financial instrument is the amount for which an asset could be traded or a liability could be settled between two well-informed parties that are independent of each other and willing to enter into a transaction. The fair value of unlisted financial instruments is determined by discounting the expected cash flows at a discount rate equal to the prevailing risk-free market interest rate for the remaining term, plus credit and liquidity spreads. Given the nature and the short-term character of the ‘financial instruments’, the book value does not differ significantly from the fair value.

After initial recording, financial instruments are valued in the manner described below.

Financial instruments held for trading
If the company has acquired financial instruments or has entered into them with the aim of selling the instrument in the short term, these form part of the trading portfolio and following initial recording these are valued against fair value with processing of value changes in the profit and loss account.

Loans granted and other receivables
Loans granted and other receivables are valued against the amortised cost price following initial recording on the basis of the effective interest rate method reduced less impairment losses.

Current liabilities and other financial obligations
Current liabilities and other financial obligations are carried at amortised cost on the basis of the effective interest method following initial recording.

Impairment of financial assets
A financial asset that is not stated at (1) fair value with value changes reflected in the profit and loss account, or at (2) amortised cost or lower market value, is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is regarded as being impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recording of the asset, with negative impact on the expected future cash flows of that asset, which can be estimated reliably.

Objective evidence that financial assets are impaired includes default or non-payment by a debtor, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, indications that a debtor or issuer is approaching bankruptcy, or the disappearance of an active market for a security.

An impairment loss in respect of a financial asset stated at amortised cost is calculated as the difference between the book value and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recorded in the profit and loss account. Interest on a particular asset subject to impairment will continue to be accounted for via addition of interest from the asset with the original effective interest of the asset.

When, in a subsequent period, the amount of an impairment loss decreases, and the decrease can be related objectively to an event occurring after the impairment was recognised, the decrease in impairment loss is reversed through profit or loss (up to the amount of the original cost).

Intangible fixed assets
The intangible fixed assets are valued against acquisition price or production price with reductions applied due to cumulative depreciations and impairment losses. The outlays following initial processing of an intangible fixed asset which has been purchased or produced are added to the acquisition or production price if it is probable that the outlays will lead to an increase in the future economic benefits and the outlays and the allocation to the asset can be reliably established. If the conditions cannot be met, the outlays are accounted for as costs in the profit and loss account.

Goodwill
Goodwill represents the excess of the cost of the acquisition over the company’s interest in the net realizable value of the assets acquired and the ‘conditional’ liabilities assumed at the transfer date, less cumulative amortization and impairment losses.

Goodwill paid upon the acquisition of foreign group companies and subsidiaries is converted at the exchange rates on the date of the transaction. The capitalized goodwill is amortized on a linear basis over an estimated useful life of five years.

Software
Software is stated at cost less accumulated amortisation and impairment losses. The capitalised amount is amortised on a linear basis during the three-year term period. 
 
Development costs
Development costs are capitalised to the extent that they relate to projects deemed commercially achievable. The development of an intangible fixed asset is considered commercially viable if:
  • the completion of the asset is technically feasible;
  • the Company has the intention of completing the asset and then of using or selling it;
  • the Company has the ability to use or sell the asset; ;
  • it is probable that the asset will generate future economic benefits, and the costs during the development phase can be determined reliably;
  • the Company has adequate technical, financial or other resources available to complete the development and to use or to sell the intangible fixed asset.

Development costs are stated at production cost, less accumulated amortisation and impairment losses.

The Company has not capitalised development costs as the criteria for capitalisation have not been met. The costs for development and other costs for research have been fully charged to the result in the period in which they are incurred.

Concessions, licences and intellectual property
The intellectual property rights are valued by means of the amount of the realised costs with reductions applied due to cumulative depreciations and impairment losses if applicable. The annual depreciations amount to a fixed percentage of the realised costs. The economic lifespan of seven years and the depreciation method are re-assessed at the end of each financial year.
 
Tangible fixed assets
Company land and buildings, plant and equipment and other fixed operating assets are stated at cost, less accumulated depreciation and impairment losses.

The cost consists of the price of acquisition or manufacture, plus other costs that are necessary to get the assets to their location and condition for their intended use. The cost of self-constructed assets includes the cost of materials and consumables and other costs that can be directly allocated to the construction.

Investment government grants are deducted from the cost price of the assets to which the government grants relate.

Depreciation is calculated as a percentage of the purchase value in accordance with the linear method on the basis of the economic lifespan while taking residual value into account. Land is not depreciated.

Depreciation starts at the moment that an asset is available for the intended use and it ends at the time of putting out of use or disposal.

• Company buildings: 4% - 20%
• Plant and equipment: 10% - 33 1/3%
• Other fixed operating assets: 10% - 33 1/3%

Maintenance expenditures are only capitalised when the maintenance leads to extension of the useful life of the asset. Assets that are taken out of service are stated at the lower of book value or lower realizable value.

 

Financial fixed assets
Participating interests where significant influence is exercised over the business and financial policy are valued according to the equity method on the basis of net asset value. If valuation on the basis of the net asset value cannot take place as the information necessary for this cannot be obtained, the participation is valued according to the visible shareholders’ equity.

Participating interests where the company exercises control along with other participants, such as in joint ventures, are valued in the same way.

The net asset value is calculated on the basis of the Company’s accounting policies. If the participating legal entity transfers an asset or a liability to a participation which is valued according to the equity method, the profit or loss emanating from this transfer is processed pro rata on the basis of the relative interest that third parties have in the participations (proportional determination of results). A loss which emanates from the transfer of current assets or a particular reduction in value of fixed assets is processed completely. Results on transactions involving transfer of assets and liabilities between the Company and its participating interests and mutually between participating interests are eliminated to the extent that these cannot be regarded as having been realised.

Participations with a negative net asset value are valued at zero and a share in the profit of the participation in later years in only processed if and to the extent that the cumulative share which has not been processed is entered in the loss. If the Company fully or partially guarantees the debts of the relevant participating interest, or it has the constructive obligation to enable the participating interest to pay its debts (for its share therein), then a provision is recognised accordingly to the amount of the estimated payments by the company on behalf of the participating interest. This provision is recognised primarily to the debit of the receivables on the respective participating interest and for the remainder is presented under provisions.

Participations in which no meaningful control is exercised are valued on the basis of the acquisition price or lower recoverable value. If the situation involves a firm intention to sell, valuation occurs against the possible lower expected sale value. If a legal entity transfers an asset or a liability to a participation which is valued at the acquisition price or current value, the profit or loss emanating from this transfer is processed in the consolidated profit and loss account fully and directly unless the profit on the transfer is not realised in essence.

The loans to non-consolidated participations are initially valued on the basis of the fair value, with directly imputable transaction costs added. These receivables are valued at amortised cost using the effective interest method, less impairment losses.

The accounting policies for other financial fixed assets are included under the heading ‘Financial instruments’.

Dividends from participations which are valued on the basis of the acquisition price are accounted for in the period in which they are declared as income from participations. Any profit or loss is recognised under financial income or expenses.

Impairment
For tangible and intangible fixed assets an assessment is made as of each balance sheet date as to whether there are indications that these assets are subject to impairment. If there are such indications, then the recoverable value of the asset is estimated. The recoverable value is the higher of the value in use and the net realizable value. If it is not possible to determine the recoverable value of an individual asset, then the recoverable value of the cash flow generating unit to which the asset belongs is estimated.

If the carrying value of an asset (or a cash flow generating unit) is higher than the recoverable value, an impairment loss is recorded for the difference between the carrying value and the recoverable value. In case of an impairment loss of a cash flow generating unit, the loss is first allocated to goodwill that has been allocated to the cash flow generating unit. Any remaining loss is allocated to the other assets of the unit in proportion to their carrying values.

In addition an assessment is made on each balance sheet date whether there is any indication that an impairment loss that was recorded in previous years has decreased. If there is such indication, then the recoverable value of the related asset (or cash flow generating unit) is estimated.

Reversal of an impairment loss that was recorded in the past only takes place in case of a change in the estimates used to determine the recoverable value since the recording of the last impairment loss. In such case, the carrying value of the asset (or cash flow generating unit) is increased up to the amount of the estimated recoverable value, but not higher than the carrying value that would have applied (after depreciation) if no impairment loss had been recorded in prior years for the asset (or cash flow generating unit).

An impairment loss for goodwill is not reversed in a subsequent period, unless the previous impairment loss was caused by an extraordinary specific external event that is not expected to recur and if there are successive external events that undo the effect of the earlier event.

Losses are recorded in the profit and loss account. Interest on an asset subject to impairment will continue to be accounted for via addition of interest from the asset with the original effective interest of the asset.

Disposal of fixed assets
Fixed assets available for sale are stated at the lower of their carrying amount and net realisable value.
 
Inventories
Inventories are valued at cost or lower realisable value. The cost price is made up of the acquisition price or production price with the addition of other costs connected with keeping the inventories at their present level and in their present condition. The realisable value is based on the most reliable estimate of the amount that the inventories are expected to yield.

Raw materials and consumables are carried at the lower of cost, determined in accordance with the first-in, first-out (FIFO) principle, and market value.

The inventory of finished product and mini-tubers which have been grown by the Company itself, is stated at cost directly attributable to production. The main part of this is personnel expenses.

The valuation of inventories includes possible impairments that arise on the balance sheet date.

Receivables and securities
The accounting policies applied for the valuation of trade and other receivables and securities are described under the heading ‘Financial instruments’.

Cash and cash equivalents
Cash and cash equivalents are valued on the basis of nominal value. If cash and cash equivalents are not freely available, this is taken into account during the valuation.

Cash and cash equivalents in foreign currency are converted into the functional currency on the balance sheet date at the exchange rate applying on that date. Reference is made to the pricing principles for foreign currency.

Shareholders’ equity
Financial instruments that are designated as equity instruments by virtue of the economic reality are presented under shareholders’ equity. Payments to holders of these instruments are deducted from the shareholders’ equity as part of the profit distribution. Financial instruments that are designated as a financial liability by virtue of the economic reality are presented under liabilities Interest, dividends, income and expenditure with respect to these financial instruments are recognised in the profit and loss account as financial income or expense.

 
 

 

 

Provisions

General
A provision is recognized if the following applies:

  • the Company has a legal or constructive obligation, arising from a past event;
  • the amount can be estimated reliably; and
  • it is probable that an outflow of resources will be required to settle the obligation.

If all or part of the payments that are necessary to settle a provision are likely to be fully or partially compensated by a third party upon settlement of the provision, then the compensation amount is presented separately as an asset.

Provisions are stated at the present value of the expenditures that are expected to be required to settle the liabilities and losses.

Pension provision and long service
A provision for pension and for long service is included for the obligations based on pension administration regulations or similar commitments by the Company. The long-service provision is the provision for future long-service awards. The provision is recognised for the present value of the future long-service awards, which is calculated on the basis of the commitments made, the likelihood of the staff concerned remaining with the Company, and their age. See also the accounting principles wages and salaries and note 11 to the consolidated balance sheet.

Current liabilities
The valuation of current liabilities is explained under the heading ‘Financial instruments’.

 

Revenue recognition

Sales of seed potatoes and ware potatoes
Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates.

Revenue from the sale of potatoes is processed in the profit and loss account when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the payment due is probable, the associated costs and possible return of the potatoes can be estimated reliably, and there is no continuing involvement with the potatoes.

The transfer of risks and benefits varies according to the conditions of the relevant sales contract.

Rendering of services
Revenue from the rendering of services is recorded in the net turnover at the fair value of the consideration received or receivable following deduction of concessions and reductions. These revenues are recorded in the profit and loss account when the revenue amount can be determined in a reliable manner, collection of the related compensation to be received is probable, the extent to which the services have been performed on the balance sheet date can be determined reliably, and the costs already incurred and (possibly) yet to be incurred to complete the service can be determined reliably.

Licences
Licences are paid when third parties have exercised the right of the Company’s assets like varieties developed by the company. If the group acts on behalf of varieties developed by third parties, the net turnover is included after the deduction of the payments to these third parties as the Company does not bear the customer credit risk on these licences. Turnover is accounted for if the scope of the payment to be received can be estimated reliably and the collection of it is probable.
 
Government grants
Government grants are initially recorded in the balance sheet as deferred income when there is reasonable assurance that they will be received and there will be full compliance with the conditions associated with the grant. Grants which provide compensation for expenses incurred are recorded as income in the profit and loss account on a systematic basis in the same period in which the expenses are incurred. Grants for compensation of the costs of an asset are deducted from the cost price of the asset and therefore systematically recorded in the profit and loss account for the period that the asset is in use.
 
Costs of outsourced work and other external costs
This concerns costs that are directly attributable to net turnover such as cost of trade goods, services, transport, loading and packaging. The costs for development and other costs for research are fully charged to the result in the period in which they are incurred.
 
Share in result of participating interests
The share in the result of participating interests consists of the share of the group in the results of these participating interests, determined on the basis of the accounting principles of the group. Gains or losses on transactions involving the transfer of assets and liabilities between the company and its non-consolidated participating interests or between non-consolidated participating interests themselves have not been processed to the extent that they cannot be regarded as realised.

The results of participating interests acquired or sold during the financial year are stated in the group result from the date of acquisition or until the date of sale respectively.

Personnel expenses
The rewards of the personnel as an expense are recognised in the profit and loss account in the period in which the services are provided and, to the extent not already paid, recognised as a liability on the balance sheet. If the amounts already paid exceed the compensation payable, the excess is recorded as a current asset to the extent that this will be reimbursed by the staff or be set-off against future payments by the Company.

An expected compensation due to profit sharing and bonus payments is accounted for if the obligation to pay that fee has arisen on or before the balance sheet date and a reliable estimate of the liabilities can be made.

For rewards with building rights, profit sharing and bonuses of the projected costs are taken into account during the service. A liability is recorded on the balance sheet date. The recognised liability relates to the best estimate of the amounts required to settle the liability by the balance sheet date. The best estimate is based on contractual agreements with employees (collective bargaining agreements and individual employment contracts). Additions to and releases of liabilities are charged or credited to the profit and loss account.

Dutch pension scheme
The pension commitments are placed with a pension insurer. The pension scheme is of such a nature that the actuarial risks are covered by the pension insurer. In the financial statement, the owed premiums are included as costs in the profit and loss account; they are included as a liability on the balance sheet to the extent that the premiums due for the period have not been paid. The main principle is that the pension charge to be recognised for the reporting period should be equal to the pension contributions payable to the pension fund over the period. In so far as the payable contributions have not yet been paid as at balance sheet date, a liability is recognised. If the contributions already paid exceed the payable contributions as at balance sheet date, a receivable is recorded to account for any repayment by the fund or settlement with contributions payable in future.

Foreign pension plans
Pension plans that are comparable in design and functioning to the Dutch pension system, having a strict segregation of the responsibilities of the parties involved and risk sharing between the said parties (company, fund and members) are recognised and measured in accordance with Dutch pension regulations (see previous section).

For foreign pension plans that are not comparable in design and functioning to the Dutch pension system, a best estimate is made of the commitment as at balance sheet date. This commitment should then be stated on the basis of an actuarial valuation principle generally accepted in the Netherlands.

Leasing
The Company may enter into financial and operating leases. A lease contract where the risks and rewards associated with ownership of the leased property are transferred substantially or completely to the lessee, is referred to as a financial lease. All other lease contracts are classified as operational leases. In classifying leases, the economic reality of the transaction is decisive rather than its legal form.
If the Company acts as lessee in an operating lease, then the leased property is not capitalised. Lease payments regarding operating leases are charged to the profit and loss account on a linear basis over the lease period. The Company has only operational lease agreements.

Interest income and charges
Interest income is recognised in the profit and loss account on an accrual basis, using the effective interest rate method. Interest charges and similar charges are accounted for in the period to which they refer.

Corporate income tax
Corporate income tax comprises the current and deferred corporate income tax payable and deductible for the reporting period. Corporate income tax is recognized in the profit and loss account except to the extent that it relates to items recognized directly to equity, in which case it is recognized in equity.

Current tax comprises the expected tax payable or receivable on the taxable profit or loss for the financial year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to the tax payable in respect of previous years.

If the carrying values of assets and liabilities for financial reporting purposes differ from their values for tax purposes, this results in temporary differences.

A provision for deferred tax liabilities is recognized for taxable temporary differences.

For deductible temporary differences, unused loss carry forwards and unused tax credits, a deferred tax asset is recognized, but only in so far as it is probable that taxable profits will be available in the future for offset or compensation. Deferred tax assets are reviewed on each reporting date and reduced to the extent that it is no longer probable that the related tax benefit will be realized.

For taxable temporary differences related to group companies, foreign branches, associates and interests in joint ventures, a deferred tax asset is recognized unless the Company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

For deductible temporary differences regarding group companies, foreign branches, associates and interests in joint ventures, a deferred tax asset is only recognized in so far as it is probable that the temporary difference will reverse in the foreseeable future and that taxable profit will be available to offset the temporary difference. 
 
Deferred tax assets and liabilities are stated at nominal value. 
 
Cash flow statement
The cash flow statement is prepared using the indirect method. Cash flows in foreign currencies are converted into euros using the weighted average exchange rates on the dates of the transactions.