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financial statements 2011
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the objectives of the Group’s risk management and the
hedging strategy applied. When initiating the hedge
and thereafter when publishing all financial statements,
the Group Management documented and assessed the
effectiveness of the hedging relationships by examining
the ability of the hedging instrument to nullify changes
in the fair value of the hedged item or changes in
cash flows. The gains and losses originating from the
hedging of a net investment in a foreign operation and
accumulated in the translation differences in sharehold-
ers’ equity are recognized in the income statement
when the net investment is relinquished completely or
partially.
In spite of the fact that certain hedging relation-
ships fulfill the requirements for effective hedging set
by the Group’s risk management, hedge accounting
is not applied to them. Changes in their fair value are
recognized in financial income or expenses in accord-
ance with the method of recognition followed in the
Group.
Operating Profit
IAS 1 Presentation of Financial Statements does not
define the concept of operating profit. The Edita
Group defines operating profit as the net sum arrived
at by adding other operating income to net revenue,
deducting the costs of materials and services (adjusted
for changes in inventories of finished and unfinished
goods), employee benefit expenses, personnel ex-
penses depreciation, impairment and other operating
expenses, and taking account of the share of profit/
loss from associates. All income statement items other
than the above-mentioned are disclosed in the lines
below operating profit.
Exchange rate differences and changes in the fair
values of derivatives are included in operating profit,
provided that they arise from items related to business
operations. Otherwise, they are recognized in financial
items.
Accounting Policies Requiring
the Management’s Judgment, and
Key Uncertainties Associated with
Estimates
In order to draw up the financial statements in compli-
ance with the ifrs, the Group management must make
estimates and assumptions concerning the future,
the outcome of which may differ from that of earlier
estimates and assumptions. It is also necessary to
employ judgment in applying the accounting policies.
The estimates are based on the management’s best
assessments on the balance sheet date. Any changes
made to the estimates and assumptions are entered
in the financial statements for the year during which
the changes are made, and in all subsequent years.
Estimates have been used in drawing up the financial
statements, for example in the calculations for impair-
ment testing, allocation of acquisition costs and when
defining the life of tangible and intangible assets. The
management must also employ judgment in assessing
receivables and product development capitalization,
tax risks, the calculation of pension liabilities and
utilization of deferred tax assets against future taxable
income.
Application of New and
Amended IFRS Standards and
Interpretations
The International Accounting Standards Board (iasb)
has announced the following new or amended stand-
ards and interpretations, which the Group has not
yet adopted. The Group will apply each standard and
interpretation from the effective date. However, if this
date is not the first day of the financial year, it will apply
the standard and interpretation from the beginning of
the following financial year.
– Amendment to ifrs 7
Financial Instruments: Disclo-
sures
(effective for financial periods beginning on
or after July 1, 2011). This amendment will promote
transparency in the reporting of transfer transac-
tions and improve users’ understanding of the risk
exposures relating to transfers of financial assets
and the effect of those risks on an entity’s financial
position, particularly those involving securitisation
of financial assets. The amendment has not yet
been approved for application in the eu.
– Amendment to ifrs 1
First-time Adoption of Inter-
national Financial Reporting Standards
(effective for
financial periods beginning on or after July 1, 2011).
Two changes were made to this standard. The first
replaces references to the fixed date of 1 January
2004 with “the date of transition to ifrss”, thus
eliminating the need for entities adopting ifrss for
the first time to restate derecognition transactions
that occurred before the date of transition to ifrss.
The second amendment provides guidance on
how an entity should presume the presentation of
financial statements in accordance with ifrss after a
period during which the entity was unable to com-
ply with ifrss because its functional currency was
subject to severe hyperinflation. The amendment
has not yet been approved for application in the eu.
– Amendment to ias 12
Income Taxes
(effective for
financial periods beginning on or after January 1,
2012). Previously, ias 12 required an entity to assess