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Ingra d.d.
Standalone Financial Statements as at 31 December
2008 together with the Independent Auditors’ Report
Ingra d.d. 31 December 2008
CONTENT
Management’ Report 1 - 2
Responsibility for the financial statements
3
Independent Auditors' report
4-5
Financial statements:
Income statement for the period from 1 January to 31 December 2008 6 Balance sheet for the period from 1 January to 31 December 2008 7
Cash Flow Statement for the period from 1 January to 31 December 2008 8
Statement of changes in equity for the period from 1 January to 31 December 2008
9
Notes to the financial statements 10 - 54
Ingra d.d. 31 December 2008
1
Management' Report
INGRA is a company established in the year 1955, as an export association of industrial manufacturers from ex-
Yugoslavia, with the goal of organising their export activities and commercial development. In 50 years of its
existence, INGRA participated in over 700 investment projects in more than 30 countries worldwide; whose total
value exceeds USD 10 billion.
In cooperation with its members, INGRA was the first company from Central and East Europe to start operating
in Germany 35 years ago. During the eighties, INGRA participated in the construction of two hydroelectric
power plants in the USA. Adapting to market needs and changes of political, economic and legal system in
general, INGRA experienced numerous transformations in the course of its existence.
In the transformation proceedings of INGRA d.d., the Issuer’s share capital was estimated at DEM (German
Mark) 4,000,000.00. Pursuant to the Resolution of the General Meeting of 16 July 2004, by applying the fixed
exchange rate of German Mark and Euro (DEM 1.95583 for EUR 1), the Issuer’s share capital of DEM
4,000,000.00 was converted to equal the sum of EUR 2,045,167.5248, which amounts to equivalent value of
HRK 15,059,503.13 in accordance with the midpoint exchange rate for euro currency of the Croatian National
Bank, valid on the day of adopting the resolution at the General Meeting held on 1 June 2004.
Pursuant to the Resolution of the General Meeting of 16 July 2004, the share capital is increased from HRK
15,059,503.13, for the amount of HRK 44,940,496.87, to HRK 60,000,000.00, divided in 40 000 shares without
par value, fully paid from the Company’s own resources.
In accordance with the Companies’ Act, on 12 January 2006 INGRA’s ordinary shares were enlisted in the
Public Joint Stock Companies Listing of the Zagreb Stock Exchange (JSC market), where they are traded under
the symbol INGR-R-A. Until the mentioned date, trading of INGRA’s shares was limited to official market of
Varaždin Stock Exchange d.d.
Operative and financial review of the financial year
Within the scope of its various present business activities, INGRA has expanded its primary activity of exporting
investment projects for known clients to the marketing of self-funded investment projects. Capital construction
takes the form of “turnkey construction”, and includes construction works, energetic, industry, assembly,
shipbuilding, as well as tourism. Works are performed in cooperation with more than 40 companies.
Apart from the foreign markets, which today include Germany, Algiers, Libya, Middle East, Russia and Niger,
INGRA increasingly participates in large infrastructural projects in Croatia, such as road construction, residential
construction, construction of buildings such as public institutions (hospitals, hotels, embassies etc.) or mobile
networks infrastructure.
In its record year, INGRA rounded up investment cycle started in the year 2006 in the most significant part. in
the three-year-period involving the years 2006, 2007 and 2008, INGRA achieved total revenues above HRK 2.1
billion, while during the year 2008 invested in own investment projects and acquisitions more than HRK 300
million.
4
Independent Auditors’ report
To the Management Board and Shareholders of Ingra d. d.
We have audited the accompanying standalone financial statements of Ingra d.d. Zagreb (hereinafter: the
Company), which comprise the balance sheet as of 31 December 2008, and the income statement,
statements of changes in equity and cash flow for the year then ended, and a summary of significant
accounting policies and other explanatory notes as presented on pages 6 to 54. The standalone financial
statements of the Company as of the year ended 31 December 2007 were audited by another auditor who
issued qualified opinion on 28 May 2008.
Management’s Responsibility for the financial statem ents
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with International Financial Reporting Standards. This responsibility includes: designing,
implementing and maintaining internal control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or error; selecting and applying
appropriate accounting policies; and making accounting estimates that are reasonable in the
circumstances.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted
our audit in accordance with International Standards on Auditing. Those standards require that we comply
with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor's judgment, including the assessment
of the risks of material misstatement of the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair
presentation of the financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal
control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Basis for the Qualified Opinion
a) At the recognition of income and expenses related to construction for other investors, except for its
most significant project – Arena Zagreb, the Company has not complied with the requirements of
International Accounting Standard 11 Construction contracts ("IAS 11"), which include a
requirement for an assessment of contract revenue and expenses to be performed, and for these
to be recognised in profit or loss based on the stage of completion of the contract. IAS 11 also
requires full provision to be made immediately upon identification of any losses expected to arise
on long-term contracts currently in progress, irrespective of their stage of completion.
The Company also did not apply IAS 11 in prior years. Any resulting misstatement of the balance
sheet as at 31 December 2007 would have a consequential impact on the result in 2008.
Cash Flow Statement Ingra d.d. For the period 1 January to 31 December 2008
Notes are inegral part of Cash Flow Statement 8
2008 2007HRK '000 HRK '000
Cash flows from operating activitiesProfit/loss before tax 11,889 66,675 Adjustments:
Amortization 5,769 4,125 Negative goodwill (5,538) -
Gain on sale of long-term tangible assets (33) (657)
Interests expenses 18,193 5,300Interests income (4,815) (3,007)Share based payments 2,012 17,652
Gains/losses from the valuation of investments available for sale (64,786) 15,921
Increase/decrease of provisions (41,007) (4,049)
Impairment of loans given 140 400
Impairment of trade receivables and other receivables 15,208 2,773
(74,857) 38,458
Result from operating activities before changes in working capital (62,968) 105,133
Decrease/increase in current assetsDecrease (increase) in inventories (91,472) 52,333 Decrease (increase) in trade receivables (332,756) (269,320)Decrease (increase) in prepayments and accrued incomes (23,777) (3,548)
Increase (decrease) of current liabilitiesIncrease (decrease) of current liabilitiesIncrease (decrease) in trade payables 172,223 39,508 Increase (decrease) in accrued expenses 23,561 (4,837)
Net cash flow from operating activities before inte rests and taxes (315,189) (80,731)
Interests received 4,815 2,195 Interests paid (18,193) (2,286)
Net cash flow from operating activities (328,567) (80,822)
Novčani tijek iz investicijskih aktivnostiIncrease (decrease) of long-term intangible assets - - Increase (decrease) of long-term tangible assets 3,528 (152)Increase (decrease) of investment properties (20,467) (44,609)Increase (decrease) of long-term financial assets (69,594) (233,393)Increase (decrease) of short-term financial assets 154,097 52,063
Net cash flows from investing activities 67,564 (226,091)
Cash flow from financial activitiesReceipts from share issue, net - 343,000 Transactions with treasury shares (8,533) 1,133Receipts from share based payments - 726 Decrease (increase) in long-term financial liabilities 75,351 (6,411)increase (decrease) of deferred tax liability (4,216) 3,288Increase (decrease) in short term financial liabilities 128,754 5,058Dividends paid (10,000) (9,738)Payments to Supervisory Boad members and employees (1,510) (1,510)
Net cash flow from financial activities 179,846 335,546
Increase/decrease in cash (81,157) 28,633 Cash at the beginning of the period 87,155 58,522 Cash at the end of the period 5,998 87,155
Statement of changes in equity Ingra d.d. For the period 1 January to 31 December 2008
Notes are integral part of Statement of Changes in Equity 9
Reserves Unrealized loss/
Share Share Treasury Treasury shares Revaluation Legal an d retained gain from assets
capital premium shares reserves reserves reserves earning s available for sale
HRK'000 HRK'000 HRK'000 HRK'000 HRK'000 HRK'000 HRK'000 HR K'000 HRK'000
As at 1 January 2007 60,000 - (2,372) 6,000 45,695 3,000 49,445 - 161,768
Income for the year - - - - - - 66,675 - 66,675
Transfer from revaluation reserves to retained earnings
- - - - (943) - 943 - -
Net change of financial assets available for sale
- - - - - - - 15,921 15,921
Total recognized revenues and expenses in 2007
- - - - (943) - 67,618 15,921 82,596
Transfer to legal reserves - - - - - 1,000 (1,000) - -
Purchase of treasury shares - - (8,042) - - - - - (8,042)
Increase of share capital from retained earnings
20,000 - - - - - (20,000) - -
Rewards to supervisory board's members
- - - - - - (510) - (510)
Rewards to employees - - - - - - (1,000) - (1,000)
Share issue 20,000 323,000 (525) 525 - - - - 343,000
Sale of treasury shares - - 750 - - - 8,425 - 9,175
Dividends - - - - - - (9,738) - (9,738)
Share based payments - - 726 - - - 17,652 - 18,378
As at 31 December 2007 100,000 323,000 (9,463) 6,525 44,752 4,000 110,892 15,921 595,627
Income for the year - - - - - - 11,889 - 11,889
Transfer from revaluation reserves to retained earnings
- - - - (943) - 943 - -
Net change of financial assets available for sale
- - - - - - - (64,786) (64,786)
Total recognized revenues and expenses in 2008
- - - - (943) - 12,832 (64,786) (52,897)
Transfer from retained earnings to other reserves
- - 7,058 - - - (7,058) - -
Decrease of reserves from merger - - - - - (860) - (860)
Purchase of treasury shares - - (4,255) 1,475 - - (5,753) - (8,533)
Transfer to legal reserves - - - - 3,500 (3,500) - -
Increase of share capital from capital gains
200,000 (200,000) - - - - - - -
Rewards to supervisory board's members
- - - - - - (510) - (510)
Rewards to employees - - - - - - (1,000) - (1,000)
Dividends - - - - - - (10,000) - (10,000)
Share based payments - - - - - - 2,012 - 2,012
As at 31 December 2008 300,000 123,000 (6,660) 8,000 43,809 7,500 97,055 (48,865) 523,839
Total
Notes to the Financial statements Ingra d.d. For the year ended 31 December 2008
10
1. General data on the Company
Ingra d.d. (“the Company”) is a company registered and domiciled in Zagreb, Alexsandra Von
Humboldta 4/b, in the Republic of Croatia. The Company is registered with the Commercial Court in
Zagreb, year 2000.
As at 31 December 2007 the company had 140 employees, while as at 31 December 2008 the
Company had 166 employees.
Supervisory board
The members of Supervisory board during the 2008 were as follows:
� Mr. Danijel Režek, President
� Mr. Jakša Barbić, Vice president
� Mr. Josip Protega, Member
� Mr. Nadan Vidošević, Member
Management board
The members of board of directors during the 2008 were as follows:
� Mr. Igor Oppenheim, President
� Mis. Jasna Ludviger, Member
� Mr. Aleksandar Ivančić, Member
The owners structure as ad 31 December 2008 was as follows:
31 December 2008 31 December 2007
Number of
shares
Share % Number of
shares
Share %
Igor Oppenheim 762,750 10.17% 5,091 10.18%
Marijan Kostrenčić 737,550 9.83% 4,917 9.83%
Privredna banka Zagreb d.d. 486,985 6.49% 3,576 7.15%
Tehnika d.d. 451,800 6.02% 3,012 6.02%
AZ Obvezni mirovinski fond d.d. 435,682 5.81% 2,347 4.69%
Jasna Ludviger 368,850 4.92% 2,459 4.92%
Raiffeisen Obvezni mirovinski fond d.d. 355,200 4.74% 2,328 4.66%
PBZ Croatia Obvezni mirovinski fond d.d. 233,700 3.12% 1,450 2.90%
Elektroprojekt d.d. 207,450 2.77% 1,383 2.77%
Hidroelektra niskogradnja d.d. 171,300 2.28% 1,142 2.28%
Treasury shares 166,507 2.22% 940 1.88%
Other 3,122,226 41.63% 21,355 42.71%
TOTAL 7,500,000 100.00% 50,000 100.00%
Notes to the Financial statements Ingra d.d. For the year ended 31 December 2008
11
2. Summary of accounting policies
General
The financial statements have been prepared in accordance with the requirements of the
International Financial Reporting Standards (IFRS) issued by the International Accounting Standards
Committee (IASB). The financial statements for the year 2008 have been prepared using the
historical cost convention except for any financial assets and liabilities stated at fair value in
accordance with IAS 39 “Financial Instruments: Recognition and Measurement”. The accounting
policies have been consistently applied, except where disclosed otherwise. The financial statements
are prepared on a going concern basis.
The Company's consolidated financial statements and its subsidiaries that the Company has to
provide in accordance with IFRS and the Croatian law, will be issued as a separate document shortly
after the publication of these unconsolidated financial statements.
These financial statements were authorised for issue by the Management Board on 18 May 2009.
The financial statements are denominated in Croatian Kuna (HRK). At 31 December 2008, the
exchange rate for USD 1 and EUR 1 was HRK 5.16 and HRK 7.32, respectively (31 December 2007:
HRK 4.99 and HRK 7.33 respectively).
Estimates and judgements
In the preparation of financial statements the managements used certain judgements, estimations
and assumptions which affect reporting amounts of assets and liabilities, disclosure of contingent
items at the reporting date and income and expenses for the period then ended.
Estimates and associated assumptions are used, but not limited to, for: calculation and depreciation
period and residual values for property, plant and equipment and intangible assets, impairment,
value adjustments for inventory and doubtful receivables and provisions. More details on the
accounting policies for there estimates are presented in the other parts of this note as well in other
parts of notes to financial statements. Future events and their influence cannot be predicted with the
certainty. Therefore accounting estimates and underlying assumptions require judgement, and those
used in the preparation of the financial statements are subject to changes due to occurrence of new
events, gaining of additional experience, new information and changes in environment in which the
Company operates. Actual results may differ from these estimates.
The basic of Company's financial statements
The basic accounting policies used for the preparation of the financial statements are presented in
the following items:
Notes to the Financial statements Ingra d.d. For the year ended 31 December 2008
12
a) Property, plant and equipment
Items of property, plant and equipment, except for land, are measured at cost less accumulated
depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable
to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and
direct labour, any other costs directly attributable to bringing the asset to a working condition for its
intended use, and the costs of dismantling and removing the items and restoring the site on which they
are located.
Gains and losses on disposal of an item of property, plant and equipment are recognised net within
“other operating income” in profit or loss. When revaluated assets are sold, the amounts included in
the revaluation surplus reserve are transferred to retained earnings
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying
amount of the item if it is probable that the future economic benefits embodied within the part will flow to
the Company and its cost can be measured reliably. The costs of the day-to-day servicing of property,
plant and equipment are recognised in profit or loss as incurred.
Following initial recognition at cost, land is carried at a revaluated amount which is the fair value at the
date of the revaluation less any subsequent accumulated impairment losses.
Independent evaluation of land value is performed when carrying value significantly differ from fair
value.
Any revaluation surplus is credited to the revaluation reserve included in the equity unless, and limited
to the amount in which, it cancels the decrease in the value of the same asset which was previously
recognized as and expenses and then it is recognized as income.
If the carrying amount of the item decreased as a result of revaluation, this decrease should be
recognized as an expense. An annual transfer from the asset revaluation reserve is made to retained
earnings for the depreciation relating to the revaluation surplus. Related part of revaluation reserves
created from the earlier asset revaluation is transferred from revaluation reserves directly to retained
earnings, after asset derecognition.
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of
each part of an item of property, plant and equipment. Depreciation of an asset starts when the assets
are available for use. Land and assets in the course of construction are not depreciated. The estimated
useful lives are as follows:
Buildings 40 years
Plant and equipment 2-10 years
Vehicles, furniture and office equipment 4 years
Depreciation is calculated on the separate asset items until they are fully depreciated.
Following initial recognition at cost, buildings are carried at a revaluated amount which is the fair value
at the date of the revaluation less any subsequent accumulated depreciation on buildings and
accumulated impairment losses.
Notes to the Financial statements Ingra d.d. For the year ended 31 December 2008
13
Fair value is determined by reference to market-based evidence, which is the amount for which the
assets could be exchanged between a knowledgeable willing buyer and a knowledgeable willing seller
in an arm’s length transaction as at the valuation date.
Any revaluation surplus is credited to the asset revaluation reserve included in the equity section of the
balance sheet. If the carrying amount of the item increased as a result of revaluation, this increase
should be recognised as an income in the amount for which it cancels revaluation decrease of the
same asset, which was previously recognized as an expense.
If the carrying amount of the item decreased as a result of revaluation, this decrease should be
recognized as an expense. Revaluation decrease is recognised directly in the revaluation reserve
unless it exceeds the revaluation reserve of the same asset.
An annual transfer from the asset revaluation reserve is made to retained earnings for the depreciation
relating to the revaluation surplus. In addition, any accumulated depreciation at revaluation date is
eliminated against the gross carrying amount of the asset and the net amount is restated to the
revaluated amount of the asset.
Upon derecognition of an asset or disposal, any revaluation reserve relating to the particular asset is
transferred to retained earnings.
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Company reviews the carrying amount of its tangible and intangible
assets to determine whether there is any indication that those assets have suffered an impairment loss.
If any such indication exists, the recoverable amount of the asset is estimated in order to determine the
extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of the
individual asset, the Company estimated the recoverable amount of the cash-generating unit to which
the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate
assets are also allocated to individual cash-generating units, or otherwise they are allocated to the
smallest Company’s cash-generating units for which a reasonable and consistent allocation basis can
be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for
impairment annually, and when ever there is an indication that the asset may be impaired.
Recoverable amount is higher of fair value less costs to sell and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset
for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable
amount. An impairment loss is recognized immediately in profit or loss, unless the relevant asset is
carried at a revaluated amount, in which case the impairment loss is treated as a revaluation decrease.
b) Investment property
Investment property is property held either to earn rental income or for capital appreciation or both.
Investment property is initially measured at cost. After initial recognition, investment property is
measured at cost less accumulated depreciation and accumulated impairment losses.
Notes to the Financial statements Ingra d.d. For the year ended 31 December 2008
14
Cost includes purchase price and expenditure that is directly attributable to the acquisition of the asset.
Investment property in progress is classified as property, plant and equipment, except land which is
immediately recognised as investment property. Land is not amortised. After putting into use,
investment property will be depreciated over the useful economic life.
c) Investment in subsidiares
Subsidiaries are entities in which the Company has the power, directly or indirectly, to exercise control
over their operations. Control is achieved where the Company has the power to govern the financial
and operating policies of an entity so as to obtain benefit from its activities. Investments in subsidiaries
are stated at cost.
d) Investment in associates
Associates are those entities in which the Company has significant influence, but not control. Significant
influence is presumed to exist when the Company has influence over the financial and operating
policies of the associate, but does not have control or joint control on chosen policies. Associates are
initially recognised at cost.
e) Inventories
Inventories are stated at the lower of cost and net realisable value. Raw materials, spare parts and
small tools are stated at purchase price. The cost of materials is based on the weighted average
method. Small tools are written off as they are put into use.
Inventories of work in progress and trading goods are stated at the lower of cost, or net realisable
value. Cost includes expenditure incurred in acquiring the inventories and bringing them to their existing
condition and location.
f) Receivables
Receivables represent the right to collect determined amounts from customers or other debtors with
regard to the company's operations. Receivables are reported in the total amount and decreased by the
provisions for doubtful and bad debts. Bad debt provisions are made when collection of a part or a total
of this receivable is uncertain based on the Management’s estimation.
g) Cash and cash equivalents
Cash and cash equivalents consist of deposits, balances in banks and similar institutions and cash on
hand. This item includes cash immediately available and utilizable and is characterized by its absence
of collection risk and collection accessory charges.
h) Revenue recognition
Sales, which are reported net of returns, discounts and bonuses, as well as net of taxes directly
connected with the sale of products and services rendered, represent amounts invoiced to third parties.
Revenue is recognized at the time delivery has taken place and transfer of risks and rewards has been
completed.
Sale of goods
Revenue from the sale of goods is recognized when all the following conditions are satisfied:
Notes to the Financial statements Ingra d.d. For the year ended 31 December 2008
15
� The company has transferred to the buyer the significant risks and rewards of ownership of the
goods;
� The company retains neither continuing managerial involvement to the degree usually associated
with ownership nor effective control over the goods sold;
� The amount of revenue can be measured reliably;
� It is probable that the economic benefits associated with the transaction will flow to the entity; and
� The costs incurred in respect of the transaction can be measured reliably.
i) Use of estimates and judgements
The preparation of financial statements in conformity with IFRSs requires management to make
judgements, estimates and assumptions that affect the application of policies and reported amounts of
assets and liabilities, income and expenses.
The estimates and associated assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances, the results of which form the basis
of making the judgements about carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that
period or in the period of revision and future periods if the revision affects both current and future
periods.
Judgements made by management in the application of IFRS that have significant effect on the
amounts recognised in the financial statements and judgements which involve a risk of causing a
material adjustment within the next financial year are high, are also disclosed in Note 39.
j) Foreign currency translation
Assets and liabilities reported in foreign currencies are translated into Kuna’s by using Croatian
National Bank’s mid exchange rate as of the end of the year. Foreign exchange gains or losses are
included in the profit and loss statement as incurred.
k) Loans received
Interest-bearing bank loans and overdrafts are recorded on the basis of received amount decreased for
direct cost needed for their approval. Financial costs, including premium paid on the settlement or
withdrawals are recorded on accrual basis and added to the carrying value of the instrument, only for
the un-settled amount in period in which they occurred.
l) Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a
result of a past event, it is probable that the Company will be required to settle the obligation, and a
reliable estimate can be made of the amount of the obligation.
The amount recognized as a provision is the best estimated of the consideration required to settle the
present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding
Notes to the Financial statements Ingra d.d. For the year ended 31 December 2008
16
the obligation. Where a provision is measured using the cash flows estimated to settle the present
obligation, its carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered
from a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement
will be received and the amount of the receivable can be measured reliably.
m) Employee benefits
(i) Defined pension fund contributions
Obligations for defined contributions to pension funds are recognised as an expense in the income
statement when incurred.
(ii) Bonus plans
A liability for employee benefits is recognised in provisions based on the Company’s formal plan and
when past practice has created a valid expectation by the Management Board/key employees that they
will receive a bonus and the amount can be determined before the time of issuing the financial
statements.
Liabilities for bonus plans are expected to be settled within 12 months of the balance sheet date and
are measured at the amounts expected to be paid when they are settled.
(iii) Share based payment transactions
The Company operates a number of equity-settled, share-based compensation plans. The total amount
to be expensed over the vesting period and the amount that is credited to the share capital is
determined by reference to the fair value of the options granted. The fair value of the equity accounted
instruments is measured at the grant date. At each balance sheet date, the entity revises its estimates
of the number of options that are expected to vest.
n) Taxes
The Company provides for taxation liabilities in accordance with Croatian law. Corporate tax for the
year comprises current and deferred tax.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at
the balance sheet date.
Deferred tax reflects the net tax effect of the temporary differentials between the book values of the
assets and the liabilities for the purpose of the financial reporting and the values used for the purpose
of establishing profit tax. A deferred tax asset for the carry-forward of unused tax losses and unused tax
credits is recognized to the extent that it is probable that future taxable profit will be available against
which the unused tax losses and unused tax credits can be utilized. Deferred tax assets and liabilities
are calculated using the tax rate applicable to the taxable profit in the years in which these assets and
liabilities are expected to be collected or paid.
Current and deferred tax are recognized as an expense or income in profit or loss, except when they
relate to items credited or debited directly to equity, in which case the tax is also recognized directly in
equity.
Notes to the Financial statements Ingra d.d. For the year ended 31 December 2008
17
o) Earnings per share
The Company presents basic earnings per share data for its ordinary shares. Basic earnings per share
is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the
weighted average number of ordinary shares outstanding during the period.
p) Segment reporting
A segment is a distinguishable component of the Company that is engaged either in providing related
products or services (business segment), or in providing products or services within a particular
economic environment (geographical segment), which is subject to risks and rewards that are different
from those of other segments. The Company’s primary format for segment reporting is based on
geographical segments.
q) Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the
risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are initially recognised as assets of the Company at their fair value at
the inception of the lease or, if lower, at the present value of the minimum lease payments. The
corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.
Lease payments are apportioned between finance charges and reduction of the lease obligations so as
to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are
charged directly to profit or loss.
Operating lease payments are recognized as an expense on a straight-line basis over the lease term.
r) Finance income and expenses
Finance income and expenses comprises interest income on loans and borrowings using the effective
interest method, interest income on funds invested, dividend income, foreign currency losses and
gains, gains and losses from changes in the fair value of financial assets at fair value through profit or
loss.
Interest income is recognised as it accrues in profit or loss, using the effective interest method.
Dividend income is recognised on the date that the Company’s right to receive payment is established.
Finance expenses comprise interest expense on borrowings, foreign currency losses, changes in the
fair value of financial assets at fair value through profit or loss and impairment losses recognised on
financial assets. All borrowing costs are recognised in profit or loss using the effective interest method.
s) Dividends
Dividends are recognised in the statement of changes in equity and recorded as liabilities in the period
in which they are approved by the Company’s shareholders.
Notes to the Financial statements Ingra d.d. For the year ended 31 December 2008
18
t) Financial assets and financial liabilities
Financial assets
Investments are recognized and derecognized on trade date where the purchase or sale of an
investment is under a contract whose terms require delivery of the investment within the timeframe
established by the market concerned, and are initially measured at fair value, plus transaction costs,
except for those financial assets classified as at fair value through profit or loss, which are initially
measured at fair value.
Financial assets are classified into the following specified categories:
• “At fair value through profit or loss” (FVTPL)
Financial assets are classified as at FVTPL where the financial asset is either held for trading or it is
designated as at FVTPL. A financial asset is classified as held for trading if:
1. it has been acquired principally for the purpose of selling in the near future; or
2. it is a part of identified portfolio of financial instruments that the Company manages
together and has a recent actual pattern of short-term profit-taking; or
3. it is a derivative that is not designated and effective as a hedging instrument.
Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognized in profit or
loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest method less
any impairment, with revenue recognized on an effective yield basis.
• “Held-to-maturity”
Bills of exchange and debentures with fixed or determinable payments and fixed maturity dates that the
Company has the positive intent and ability to hold to maturity are classified as held-to-maturity
investments. Held-to-maturity investments are recorded at amortized cost using the effective interest
method less any impairment, with revenue recognized on an effective yield basis.
• “Available for sale” (AFS)
Unlisted shares and listed redeemable notes held by the Company that are traded in an active market
are classified as being AFS and are stated at fair value. Gains and losses arising from changes in fair
value are recognized directly in equity in the investments revaluation reserve with the exception of
impairment losses, interest calculated using the effective interest method and foreign exchange gains
and losses on monetary assets, which are recognized directly in profit or loss. Where the investment is
disposed of or is determined to be impaired, the cumulative gain or loss previously recognized in the
investment revaluation reserve is included in profit or loss for the period.
Dividends on AFS equity instruments are recognized in profit or loss when the Company’s right to
receive the dividends is established.
The fair value of AFS monetary assets denominated in a foreign currency is determined in that foreign
currency and translated at the spot rate at the balance sheet date. The change in fair value attributable
to translation differences that result from a change in amortised cost of the asset is recognized in profit
or loss, and other changes are recognized in equity.
Notes to the Financial statements Ingra d.d. For the year ended 31 December 2008
19
• “Loans and receivables”
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not
quoted in an active market are classified as loans and receivables. Loans and receivables are
measured at amortised cost using the effective interest method, less any impairment. Interest income is
recognized by applying the effective interest rate, except for short-term receivables when the
recognition of interest would be immaterial.
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance
sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or
more events that occurred after the initial recognition of the financial asset, the estimated future cash
flows or the investment have been impacted.
For unlisted shares classifies as AFS a significant or prolonged decline in the fair value of the security
below its cost is considered to be objective evidence of impairment.
For all other financial assets, including redeemable notes classifies as AFS and finance lease
receivables, objective evidence of impairment could include:
• Significant financial difficulty of the issuer or counterparty; or
• Default or delinquency in interest or principal payments; or
• It becoming probable that the borrower will enter bankruptcy or financial re-organisation.
For certain categories of financial asset, such as trade receivables, assets that are assessed not to be
impaired individually are subsequently assessed for impairment on a collective basis. Objective
evidence of impairment for a portfolio of receivables could include the Company’s past experience of
collecting payments, an increase in number of delayed payments in the portfolio past the average credit
period of 60 days, as well as observable changes in national or local economic conditions that correlate
with default on receivables.
For financial assets carried at amortised cost, the amount of the impairment is the difference between
the asset’s carrying amount and the present value of estimated future cash flow, discounted at the
financial asset’s original effective interest rate.
The carrying amount of the financial assets is reduced by the impairment loss directly for all financial
assets with the exception of trade receivables, where the carrying amount is reduced through the use of
an allowance account. When a trade receivable is considered uncollectible, it is written off against the
allowance account. Subsequent recoveries of amounts previously written off are credited against the
allowance account. Changes in the carrying amount of the allowance account are recognised in profit
or loss.
With the exception of AFS equity instruments, if in a subsequent period, the amount of the impairment
loss decreases and the decrease can be related objectively to an event occurring after the impairment
was recognised, the previously recognised impairment loss is reversed trough profit or loss to the
extent that the carrying amount of the investment at the date the impairment is reversed does not
exceed what the amortised cost would have been had the impairment not been recognised.
Notes to the Financial statements Ingra d.d. For the year ended 31 December 2008
20
In respect of AFS equity securities, impairment losses previously recognised through profit or loss are
not reversed trough profit or loss. Any increase in fair value subsequent to an impairment loss is
recognised directly in equity.
De-recognition of financial assets
The Company derecognises a financial asset only when the contractual rights to the cash flows from
the asset expire; or it transfers the financial asset and substantially all the risks and rewards of
ownership of the asset to another entity. If the Company neither transfers nor retains substantially all
the risks and rewards of ownership and continues to control the transferred asset, the Company
recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If
the Company retains substantially all the risks and reward ownership of a transferred financial asset,
the Company continues for recognise the financial asset and also recognises a collateralised borrowing
for the proceeds received.
Financial liabilities and equity instruments issued by the Company
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with
the substance of the contractual arrangement.
Equity instruments
An equity instruments is any contract that evidences a residual interest in the assets of an entity after
deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds
received, net of direct issue costs.
Compound instruments
The component parts of compound instruments issued by the Company are classified separately as
financial liabilities and equity in accordance with the substance of the contractual arrangement. At the
date of issue, the fair value of the liability component is estimated using the prevailing market interest
rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised cost
basis using the effective interest method until extinguished upon conversion or at the instrument’s
maturity date. The equity component is determined by deducting the amount of the liability component
from the fair value of the compound instrument as a whole. This is recognised and included in equity,
net of income tax effects, and is not subsequently remeasured.
Share capital
a. Ordinary shares
Incremental costs directly attributable to issue of ordinary shares are recognised as a deduction
from equity.
b. Repurchase of share capital
When share capital recognised as equity is repurchased, the amount of the consideration paid,
including directly attributable costs, is recognised as a deduction from equity. Repurchased shares
are classified as treasury shares and are presented as a deduction from total equity.
Notes to the Financial statements Ingra d.d. For the year ended 31 December 2008
21
Financial guarantee contract liabilities
Financial guarantee contract liabilities are measured initially at their fair values and are subsequently
measured at the higher of:
• the amount of the obligation under the contract, as determined in accordance with IAS 37
Provisions, Contingent Liabilities and Contingent Assets; and
• the amount initially recognised less, where appropriate, cumulative amortisation recognised in
accordance with the revenue recognition policies (dividend and interest revenue).
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTLP where the financial liability is either held for trading or it is
designated as at FVTPL.
A financial liability is classified as held for trading if:
• it has bees incurred principally for the purpose of repurchasing in the near future: or
• it is a part of an identified portfolio of financial instruments that the Company manages together
and has a recent actual pattern of short-term profit-taking; or
• it is derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon
initial recognition if:
• Such designation eliminates or significantly reduces a measurement or recognition
inconsistency that would otherwise arise; or
• The financial liability forms part of a group of financial assets or financial liabilities or both,
which is managed and its performance is evaluated on a fair value basis, in accordance with
the Company’s documented risk management or investment strategy, and information about
the grouping is provided internally on that basis; or
• It forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial
Instruments: Recognition and Measurement permits the entire combined contract (asset or
liability) to be designated as at FVTPL.
Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit
or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial
liability.
Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction
cost.
Other financial liabilities are subsequently measured at amortised cost using the effective interest
method, with interest expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of
allocating interest expense over the relevant period. The effective interest rate is the rate that exactly
discounts estimate future cash payments through the expected life of the financial liability, or, where
appropriate, a shorter period.
Notes to the Financial statements Ingra d.d. For the year ended 31 December 2008
22
De-recognition of financial liabilities
The Company derecognise financial liabilities when, and only when, the Company’s obligations are
discharged, cancelled or they expire
u) Contingent assets and liabilites
Contingent liabilities are not recognised in financial statements. They are published in notes only if cast
of economical benefits isn't possible.
Contingent assets isn't expressed in financial statement, already is expressed when the intakes of
economical benefits is possible.
v) Subsequent events
Post-year-end events that provide additional information about the Company’s position at the balance
sheet date (adjusting events) are reflected in the financial statements.
Post-year-end events that are not adjusting events are disclosed in the notes when material.
w) Comparatives
Comparative figures have been adjusted to conform to presentation in the current year, where
necessary.
x) Adoption of International Financial Reporting Sta ndards (IFRS) during the year
The Company has applied in the year 2008 the following amendments and interpretations issued which
are or have become effective during the year and presented, in accordance with the requirements,
comparative data. The application of the new standards had no effect on the capital as at 1 January
2008:
• IAS 39 (amendments) „Financial instruments: Recognition and measurement“ and IFRS 7
(amendments) „Financial instruments: Disclosure – Reclassification of Financial Assets“ (by
those amendments reclassification of financial assets made before 1 November 2008 is
permitted, with the earliest application starting from 1 July 2008)
The following three interpretations issued by International Financial Reporting Interpretations
Committee – IFRIC are effective for the current reporting period: IFRIC 11 “Group and Treasury
Transactions”, IFRIC 12 “Service concession Arrangements”, IFRIC 14 “The limit on a Defined Benefit
Asset, Minimum Funding Requirements and their Interaction“. Application of these interpretations has
not effected Company' accounting policies.
The Company reclassified part of its financial assets “At fair value through profit and loss” from that
position to the balance sheet position “Available for sale” financial assets. Reclassification effect
amounted to HRK 5,476 thousand (income before tax would be lower for that amount).
y) Standards and interpretations which are not appl ied yet
On the date of the Financial Statements' approval the following new and revised standards,
amendments and interpretations have been issued but were not effective yet for the financial year
ended 31 December 2008:
Notes to the Financial statements Ingra d.d. For the year ended 31 December 2008
23
New standard:
• IFRS 8 “Operating Segments” (effective for accounting periods beginning on or after 1 January
2009),
Amendments to standards:
• Improvements to IFRSs (effective for accounting periods beginning on or after 1 January 2009,
except for the amendment to IFRS 5 „Non-current Assets Held for Sale and Discontinued
Operations“ which is effective for annual periods beginning on or after 1 July 2009).
Improvements include 35 amendments which can be divided as follows:
• 1st part – amendments that result in accounting changes for presentation, recognition and
measurement purposes, and
• 2nd part – amendments that are terminology or editorial changes only, that have no or minimal
effect on accounting.
• IFRS 1 (amended) „First-time Adoption of IFRSs (effective for the accounting periods
beginning on or after 1 January 2009),
• IFRS 2 (amended) „Share-based Payment“, (effective for the accounting periods beginning on
or after 1 January 2009),
• IAS 27 (amended) „Consolidated and Separate Financial Statements“ (effective for the
accounting periods beginning on or after 1 January 2009)
• IAS 32 (amended) „Financial Instruments: Presentation – Puttable Financial Instruments and
Obligations Arising on Liquidation“ (effective for accounting periods beginning on or after 1
January 2009)
• IAS 39 (amended) „Financial Instruments: Recognition and Measurement – Eligible Hedged
Items“ (effective for accounting periods beginning on or after 1 July 2009)
Revised standards:
• IFRS 3 (revised) „Business Combinations“ (effective for accounting periods beginning on or
after 1 July 2009)
• IAS 1 (revised) „Presentation of Financial Statements“ (effective for accounting periods
beginning on or after 1 January 2009)
• IAS 23 (revised) “Borrowing Costs” (effective for the accounting periods beginning on or after 1
January 2009)
• IAS 27 (revised) „Consolidated and Separate Financial Statements“ (effective for the
accounting periods beginning on or after 1 July 2009)
Notes to the Financial statements Ingra d.d. For the year ended 31 December 2008
24
New interpretations:
� IFRIC 13 “Customer Loyalty Programmes” (effective for accounting periods beginning on or
after 1 July 2008),
� IFRIC 15 „Agreements for the Construction of Real Estate“ (effective for accounting periods
beginning on or after 1 January 2009)
� IFRIC 16 „Hedges of a Net Investment in a Foreign Operation“ (effective for accounting periods
beginning on or after 1 October 2009)
� IFRIC 17 „Distribution of Non-cash Assets to Owners“ (effective for accounting periods
beginning on or after 1 July 2009)
The Management anticipate that the application of the above mentioned standards and interpretations
will be applied in the Company' Financial Statements for the periods for which they become effective,
and that this application will have no material impact on the Company's Financial Statements in the
periods for which they are applied
3. Operating income
Segment reporting
Segment information is presented in respect of the Company’s geographical segments. The information
is based on the Company’s management and internal reporting structure.
Segment results include items directly attributable to a segment as well as those that can be allocated
on a reasonable basis.
Description 2008
2007
Croatia
000’HRK
Foreign
000’HRK
Total
000’HRK
Croatia
000’ HRK
Foreign
000’HRK
Total
000’HRK
Revenues 827,029 135,145 962,174 505,660 150,185 655,845
Total revenues 878,725 135,145 1,013,870 513,711 167,027 680,738
Profit/loss from operating activities
1,841 41,488 43,329 24,398 27,779 52,177
Net financial result/(expenses)
(26,496) 101 (26,395) 37,092 (318) 36,774
Profit before taxation 14,991 1,943 16,934 61,490 27,461 88,951
Income tax (4,913) (132) (5,045) (16,671) (5,605) (22,276)
Profit/loss for the year 10,078 1,811 11,889 44,819 21,856 66,675
Other data about segments
Depreciation (Note 14) 5,710 59 5,769 4,070 55
4,125
Notes to the Financial statements Ingra d.d. For the year ended 31 December 2008
25
Since the Company does not allocate assets and liabilities based on individual business segments, the
Management Board has not presented information on assets and liabilities based on geographical
segments.
4. Other operating income
2008
HRK’000
2007
HRK’000
Rental income 2,824 2,544
Excess of fair value of acquired assets over the consideration given (negative goodwill) 5,538 -
Income from contingent assets recognised - 14,956
Collection of previously impaired trade receivables - 590
Release of provision for court cases 41,007 4,581
Net gain on sale of property, plant and equipment 33 657
Other 2,294 1,565
51,696 24,893
Excess of the fair value of acquired assets over the consideration given (negative goodwill) in the
amount of HRK 5,538 thousand is the result of merger of the related company Carbonarius d.o.o. as at
29 December 2008.
Release of provision for court cases relates to release of provision in relation of court case with the
company Meñimurje d.d. Visokogradnja in bankruptcy. In accordance with the assessment of
Company’s lawyer the Company will not have losses in relation to this case and it is certain that the
case will be solved in Company’s favour.
5. Costs of materials and services
2008
HRK’000
2007
HRK’000
Costs of materials
Raw materials and materials 14,823 1,199
Energy 1,251 1,040
Small inventory 153 190
16,227 2,429
Costs of services
Subcontractors 911,749 374,279
Maintenance 1,522 1,232
Rental fee 2,672 2,265
Other services 7,533 5,272
923,476 383,048
939,703 385,477
Notes to the Financial statements Ingra d.d. For the year ended 31 December 2008
26
6. Personnel costs
2008
HRK’000
2007
HRK’000
Net salaries and wages 24,629 42,733
Taxes and contributions 21,558 21,019
46,187 63,752
The average number of employees in Company in 2008 was 143 (2007: 140)
Personnel expenses for the Company include HRK 7,110 thousand (2007: HRK 5,459 thousand) of
defined pension contributions paid into obligatory pension funds.
Contributions are calculated as a percentage of employees' gross salaries.
7. Depreciation
2008
HRK’000
2007
HRK’000 Depreciation of property, plant and equipment
- ordinary rates 4,590 2,946
- release of revaluation reserves 1,179 1,179
5,769 4,125
8. Other operating expenses
2008
HRK’000
2007
HRK’000
Non-production services 38,775 37,012
Remunerations 3,873 2,770
Entertainment costs 2,178 2,066
Insurance premiums 2,946 1,944
Other taxes 5,268 5,459
Bank services 5,731 2,818
Bad debt provisions 15,207 3,173
Severance payments and scholarships 665 935
Provisions for court cases - 531
Other taxes and contributions 814 499
Other expenses 5,947 9,344 81,404 66,551
Notes to the Financial statements Ingra d.d. For the year ended 31 December 2008
27
9. Financial incomes and expenses
2008
HRK’000
2007
HRK’000
Financial income
Interest income on investments not held at fair value through profit or loss 4,815 3,007
Net gain on disposal of available-for-sale financial assets released from equity 2,671 217
Foreign exchange gains 2,901 642 Net change in investments at fair value through profit or loss 1,458 4,725
Net profit on sale of financial asset trough profit or loss 12,959 33,483
Total financial income 24,804 42,074
Financial expenses
Interest expense 18,193 5,300
Foreign exchange losses 5,248 -
Realized losses on financial assets available for sale 15,399 -
Unrealised loss on financial asset trough profit or loss 8,199 -
Other financial expenses 4,160 -
Total financial expenses 51,199 5,300
Financial result (26,395) 36,774
10. Income tax
Recognized in the income statement
2008
HRK’000
2007
HRK’000
Current tax 5,045 22,968
Deferred tax - (692)
Income tax in the income statement 5,045 22,276
Notes to the Financial statements Ingra d.d. For the year ended 31 December 2008
28
Reconciliation of effective tax rate
A reconciliation of tax expense per the income statement and taxation at the statutory rate is detailed in
the table below:
2008.
HRK’000
2007.
HRK’000
Profit before taxation 16,934 88,951
Gain taxed abroad (4,236) -
Corrected gain 12,698 88,951
Tax calculated at the statutory rate of 20% (2007: 20%) 2,540 17,790
Expenses not allowable for income tax purposes 3,392 4,647
Tax on depreciation calculated on revaluated amount 236 236
Non-taxable income (1,079) (12)
Incentives (44) (36)
Income tax from previous periods - (349)
Income tax 5,045 22,276
Effective tax rate 39.72% 25.04%
Tax regulations in Croatia are subject to changes. There is also inconsistency in the application of tax
regulations and significant uncertainty in the area of tax laws interpretations of various taxes and
transactions which result in tax effects. Tax positions of the Company are subject to examination by
regulatory bodies and possible disputes, and accordingly the potential tax effect is uncertain in case the
tax authorities apply interpretations different from the Company’s interpretations.
In accordance with local regulations, Tax authorities can review the Company’s business books and
documentation and additional tax liabilities and potential penalties can be imposed to the Company.
Notes to the Financial statements Ingra d.d. For the year ended 31 December 2008
29
11. Long term intangible assets
Long term tangible assets as at 31 December 2008 completely relate to goodwill which is the result of
mergers of the following subsidiaries: Jabuka d.o.o., Pal vin d.o.o., Ingra-otok d.o.o., and Carbonarius
d.o.o. Merged subsidiaries were in 100% ownership of Ingra d.d. before the merger.
Total net assets of the above mentioned subsidiaries at the merger date (28 December 2008) are
presented in the following table:
Initial goodwill amounting to HRK 60,758 thousand has been adjusted for HRK 2,629 thousand which
represents the realised income for the sale of apartments in company Ingra-otok d.o.o. in the year 2008
in accordance with Partnership Agreement. Merger of the subsidiary Carbonarius d.o.o. resulted with
negative goodwill amounting to HRK 5,538 thousand.
Recognized value HRK’000
Non-current assets Intangible and tangible assets 6,495Financial assets -
6,495Current assets Inventories 184,141Trade receivables - Other receivables 573Current financial assets 40 Cash and cash equivalents 91
184,845Total assets 191,340
Minority interest - Non-current liabilities - Trade payables 208Short term loans - Other current liabilities 10,745
Total liabilities and minority interest 10,953
Fair value of assets 180,387Goodwill 60,758Cost of acquisition 234.650
Notes to the Financial statements Ingra d.d. For the year ended 31 December 2008
30
12. Property, plant and equipment
Description Land Buildings Plant and equipment
Vehicles and other
assets Total
HRK'000 HRK'000 HRK'000 HRK'000 HRK'000
Purchase value
As at 1 January 2007 12,060 105,142 4,687 7,438 129 ,327
Additions - - 1,562 1,815 3,377
Disposals - (2,713) (365) (1,559) (4,637)
As at 31 December 2007 12,060 102,429 5,884 7,694 12 8,067
Additions - - 1,088 949 2,037
Disposals - - (375) (235) (610) _______ _______ _______ _______ _______
As at 31 December 2008 12,060 102,429 6,597 8,408 129,494 _______ _______ _______ _______ _______
Accumulated depreciation
As at 1 January 2007 - 14,676 3,678 5,758 24,112
Additions - 2,561 891 673 4,125
Disposals - (170) (523) (1,375) (2,068)
As at 31 December 2007 - 17,067 4,046 5,056 26,169
Additions - 2,561 1,204 1,023 4,788
Disposals - - (369) (213) (582) _______ _______ _______ _______ _______
As at 31 December 2008 - 19,628 4,881 5,866 30,375 _______ _______ _______ _______ _______
Carrying value
As at 31 December 2007 12,060 85,362 1,838 2,638 101,898
As at 31 December 2008 12,060 82,801 1,716 2,542 99,119
Revaluation
Lands and buildings were revaluated for the first time during the September 2006 based on current
market value for current purpose. The valuation has made independent assessor.
Leased assets
Total area of the building is 4,700 m2 and it includes an area of 1,132 m2 that is rented to third parties.
Total book value of the building is HRK 85,363 thousand (2006: HRK 99,003 thousand). An asset under
lease has been rented under non-cancellable operating lease during the period of two to six years.
Subsequent renewals are negotiated with the lessee. No contingent rents are charged. Future minimal
payments according to non-cancellable operating lease in the whole amount for every upcoming period
is presented in Note 31.
Notes to the Financial statements Ingra d.d. For the year ended 31 December 2008
31
Total value of pledged assets as a security for loans amounted to HRK 166,229 thousand.
As at 31 December 2008 the Company uses completely depreciated assets with the purchase cost
amounting to HRK 7,161 thousand.
13. Investment property
Description Land Buildings Total
HRK'000 HRK'000 HRK'000
Purchase cost
As at 1 January 2007 - 9,312 9,312
Additions 10,082 34,527 44,609
Disposals - - -
As at 31 December 2007 10,082 43,839 53,921
Reclassification 5,127 (5,127) -
Additions 14,019 7,429 21,448
Disposals - - - _______ _______ _______
As at 31 December 2008 29,228 46,141 75,369 _______ _______ _______
Accumulated depreciation
As at 1 January 2007 - 776 776
Charge for the period - - -
Disposals - - -
As at 31 December 2007 - 776 776
Charge for the period - 981 981
Disposals - - - _______ _______ _______
As at 31 December 2008 - 1,757 1,757 _______ _______ _______
Carrying value
As at 31 December 2007 10,082 43,063 53,145
As at 31 December 2008 29,228 44,384 73,612
The fair value of the investment property does not significantly differ from the cost of acquisition.
Part of the building relating to office space sized 1,100 m2 and warehouse space sized 300 m2 is rented
to third parties. Remaining land and building is not rented to third parties.
Notes to the Financial statements Ingra d.d. For the year ended 31 December 2008
32
14. Investment in subsidiaries
31 December 2008 Ownership 31 December 2007 Ownership
HRK'000 % HRK'000 %
1. Ingra Mar d.o.o. 10 51% 10 51%
2. Ingra M.E. d.o.o. 20 100% 20 100%
3. Ingra Italija s.r.l., Italy 51 67% 51 67%
4. Bioadria d.o.o. 91 64% 91 64%
5. Ingra Bioren d.o.o. 12 60% 12 60%
6. Tiha nekretnine d.o.o. - - 1,879 100%
7. Ingra gradnja d.o.o. 20 100% 20 100%
8. Pal Vin d.o.o. - - 79,742 100%
9. Ingra Mont d.o.o. - - 15 75%
10. Posedarje Rivijera 160 100% 160 100%
11. Jabuka d.o.o. - - 67,385 100%
12. Ingra Energo d.o.o. 7 100% 7 100%
13. Mavrovo adg 54,213 79% - -
14. Južni Jadran Nautika
d.o.o.
255 51% 255 51%
15. Sarl Alžir 39 99% 39 99%
16. Mavrovo inženjering dooel 9,644 50% - -
17. Intel d.o.o. 12,463 100% 12,463 100%
18. Geotehnika Sudan d.o.o. 1,443 100% 1,443 100%
19. Opatija nekretnine d..o.o 190 51% 190 51%
20. Geotehnika d.o.o. 20 100% 20 100%
21. Lanište d.o.o. 93,967 100% 58,433 50%
22. Domovi dalmatinske
rivijere d.o.o.
13,214 100% 13,214 100%
23. Ingra otok d.o.o. - - 5,144 100%
24. P.B. Žitnjak d.o.o. - - 24,250 51%
25. Primani d.o.o. 2,200 51% 2,200 51%
26. Marina Slano d.o.o. 49 62% 49 62%
188,068 267,092
During 2008 the Company acquired two Macedonian construction companies: Mavrovo ADG (in April
2008) and Mavrovo Inženjering dooel (in June 2008). Request for bankruptcy procedure has been
initialized in March 2009 for the company Mavrovo ADG.
Notes to the Financial statements Ingra d.d. For the year ended 31 December 2008
33
15. Investment in associates
31 December
2008 Ownership 31 December 2007 Ownership
HRK'000 % HRK'000 %
Dubrovačke Lučice d.o.o. 45 49% 45 49%
Ingra Pro d.o.o. 8 40% 8 40%
Hotel Lapad d.d. 13,308 11% 13,052 19%
13,361 13,105
16. Other financial assets
31 December 2008
HRK’000
31 December 2007
HRK’000
Non-current
Investments in affiliates 10,860 10,860
Held to maturity investments 4,093 4,317
Financial assets at fair value through profit or loss - 363
Other non-current investments 2,056 1,056
17,009 16,596
Current
Available for sale financial assets 47,561 121,586
Deposits and guarantees 46 326
Financial assets at fair value through profit or loss 17,823 85,977
65,430 207,889
Investments in affiliates not publicly traded refer to investments in Lipik Glas d.o.o. (17.54%) and
Adriastar hotels and resorts d.o.o. (19.5%).
A financial asset available for sale refers to holdings in an investment fund.
Financial assets at fair value through profit and loss refer to holdings in cash funds. Financial assets at
fair value through profit and loss which were reclassified as at 1 July 2008 from this balance sheet
position to Available for sale financial assets amounted to HRK 7,798 thousand as at 31 December
2008. As stated in note 2x) reclassification effect amounted to HRK 5,476 thousand (income before tax
would be lower for that amount).
Notes to the Financial statements Ingra d.d. For the year ended 31 December 2008
34
17. Loans receivable
31 December 2008
HRK’000
31 December 2007
HRK’000
Long term loans
Loans given to related parties 59,908 74,498
Loans given to other companies 1,279 1,460
61,187 75,958
Current loans
Loans given to related parties 4,858 14,496
Loan impairment (1,729) (1,589)
Net loans given to related companies 3,129 12,907
Loans given to other companies 2,833 7,811
Short term loan impairment (2,651) (5,629)
182 2,182
3,311 15,089
Loans granted to related parties relate to short term and long term loans granted to subsidiaries.
Interest is fixed and amounts to 4 – 6% per annum.
The loans approved to third parties have a fixed interest rate of 4% to 8% per annum.
18. Non-current other receivables
Short-term receivables in amount HRK 4,666 thousand (2007: HRK 4,624 thousand) is related on
deposits for finance lease and Company's guarantees.
19. Inventories
31 December 2008
HRK’000
31 December 2007
HRK’000
Raw materials 20 19
Work in progress (own projects construction) 346,917 68,964
Trading goods (apartments built) 2,586 3,798
349,523 72,781
Notes to the financial statements Ingra d.d. For the year ended 31 December 2008
35
20. Trade and other receivables
31 December 2008
HRK’000
31 December 2007
HRK’000
Receivables from related parties
Trade receivables from related parties 466,230 171,901
Loans given to related parties 5,810 4,314
Receivables from key shareholders 2,195 6,192
474,235 182,407
Receivables from third parties
Trade receivables 128,718 124,269
Advances given 31,162 51,615
Receivable for VAT 19,222 10,553
Other receivables for taxes 22,530 243
Other receivables 17,107 5,726
218,739 192,406
692,974 374,813
21. Cash and cash equivalents
31 December 2008
HRK’000
31 December 2007
HRK’000
Cash at bank 39,692 96,174
Petty cash 104 1,335
Total cash at bank and petty cash 39,796 97,509
Granted overdraft on bank account (33,798) (10,354)
Cash in the cash flow statement 5,998 87,155
Cash in banks bear interest at a variable rate between 0.50% and 3% per annum.
Granted overdraft on bank account amounts to HRK 35,000 thousand and has variable interest rate
based on one month ZIBOR increased by 1.8% per annum. Interest rate range in 2007 was from 7.05%
to 10.47%.
22. Prepaid expenses and accrued income
31 December 2008
HRK’000
31 December 2007
HRK’000
Accrued income 27,184 6,098
Prepaid expenses 2,693 80
Interest and other receivables 114 36
29,991 6,214
Accrued income in the amount of HR 27,184 thousand mostly refer to accrued income from the
construction of Arena Zagreb performed in the year 2008.
Notes to the financial statements Ingra d.d. For the year ended 31 December 2008
36
23. Share capital and reserves
31 December 2008
HRK’000
31 December 2007
HRK’000
Share capital 300,000 100,000
By the Decision of the General Assembly held on 26 June 2007 share capital was increased by HRK 20
million from HRK 60 million to HRK 80 million. This was allocated to 40,000 shares without the nominal
value and was transferred from retained earnings. This decision was recorded in the court register of
the Commercial court in Zagreb on 27 June 2007. In accordance with the General Assembly decision of
the Company held on 26 June 2007 related to the share capital increase by issuing new shares, the
Company has increased share capital by issuing non-redeemable non transferable ordinary shares in
an initial public offering through cash payment.
Share capital was increased by HRK 20 million, from HRK 80 million to HRK 100 million through the
issue and payment of 10,000 non transferable ordinary shares, without nominal value. The price of the
initial public offer was HRK 35,000 per share and the Company collected the amount of HRK 350
million, paid into the separate Company’s bank account on 22 August 2007. Following the implemented
recapitalization and issuance of new shares, share capital of the Company amounted to HRK 100
million which was divided into 50,000 non transferable ordinary shares, without nominal value.
Increase of share capital resulted in the creation of a share premium in the amount of HRK 330,000
thousand. Fee charge in the amount of HRK 7,000 thousand incurred during the initial public offering
was recognised as a change in capital and reserves as a decrease in the share premium.
Increase in share capital was recorded into the court register of Commercial court in Zagreb on 7
September 2007
Furthermore, the Company increased the share capital by HRK 200,000 thousand in 2008 from share
premium account in accordance with the Decision made on General meeting held on 21 July 2008.
Also, in accordance with the Decision of the General Assembly the share split has been made in a way
that one ordinary share on the name INGR-R-A, without the nominal value, has been split to 150
shares without nominal amount. Total sum of ordinary shares on the name INGR-R-A after this
corporate action is 7,500,000 shares without nominal value.
Treasury shares
As at 31 December 2008 the Company held 166,507 own shares (31 December 2007: 940). Treasury
shares represent 2.22% of the share capital (2007: 1.88%). During 2008 the Company purchased
25,507 (2007: 230) own shares for the amount of HRK 4,255 thousand (2007: 230 thousand). The
shares have been fully paid.
Retained earnings contain HRK 6,660 thousand (2007: HRK 2,946 thousand ) which represent
reserves for treasury shares that together with the stated reserves for treasury shares cannot be
distributed to shareholders.
Notes to the financial statements Ingra d.d. For the year ended 31 December 2008
37
Revaluation reserves
A revaluation reserve as at 31 December 2008 in the amount of HRK 43,809 thousand arises from the
revaluation of land and buildings of the Company carried out in 2006.
The release of revaluation reserves to the income statement in the amount of HRK 943 thousand
(2007: HRK 943 thousand) represents the difference between depreciation based on the revaluated
carrying amount of property, plant and equipment and depreciation based on property, plant and
equipment’s original cost.
Legal reserves
A legal reserve has been created in accordance with Croatian law, which requires 5% of the profit for
the year to be transferred to this reserve until it reaches 5% of issued share capital. The legal reserve,
in the amount of up to 5% issued share capital, can be used for covering current and prior year losses.
Dividends
On 21 July 2008 the General Assembly approved a dividend in respect of 2007 of HRK 200 per share,
totalling HRK 10 000 thousand after adjustment for treasury shares (2007.: HRK 250 per share,
totalling HRK 10 000 thousand for year 2006.)
24. Basic earnings per share
2008
HRK’000
2007
HRK’000
Net profit for year attributable to ordinary shareholders 11,889
66,675
Average number of issued shares 7,333,650 6,256,500
Basic earnings per share (HRK) 1.62 10.66
The Company presents basic earnings per share data for its ordinary shares. Basic earning per share is
calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the
average number of ordinary shares outstanding during the period.
The average number of shares in 2007 has been divided with 150 to be comparable with the number of
shares in 2008.
Notes to the financial statements Ingra d.d. For the year ended 31 December 2008
38
25. Interest bearing loans and borrowings
31 December 2008
HRK’000
31 December 2007
HRK’000
Non-current interest bearing loans and
borrowings
Bank loans 80,611 5,489
Bonds issued 198,968 198,624
Finance lease liabilities 2 117
279,581 204,230
Current interest bearing and borrowings
Bank loans 177,106 86,101
Commercial bills 97,494 36,283
Finance lease liabilities 115 133
274,715 122,517
Total interest bearing loans and borrowings 554,296 326,747
Interest rates and repayments as at 31 December 2008 were as follows:
Notes to the financial statements Ingra d.d. For the year ended 31 December 2008
39
Total
000' kn
Less than
1 year
000' kn
1 – 2
years
000' kn
2 – 3
years
000' kn
More than
5 years
000' kn
Loans from banks
EUR 10,000 thousand, variable, 1m
EURIBOR + 2.85% 73,245 73,245 - - -
EUR 5.000 thousand, variable, 1m
LIBOR + 5.3% 36,622 36,622 - - -
CHF 4,900 thousand, variable, 1m
EURIBOR + 4.3% 23,783 23,783 - - -
HRK 145,000 thousand 77,780 - 77,780 - -
Granted overdraft on bank account (1m
ZIBOR + 1.8%) 33,798 33,798 - - -
HRK 7,000 thousand, variable, 9.5% 7,000 7,000 - - -
HRK 12,500 thousand, fixed, 6.5% 5,489 2,658 2,831 - -
Bonds
HRK 200,000 thousand, fixed 6.125% 198,968 - - 198,968 -
Finance lease
Fixed 8.25% 117 115 2 - -
Commercial bills 97,494 97,494 - - -
As at 31 December 2008 554,296 274,715 80,613 198,968 -
Secured loan from bank has variable interest rate based on EURIBOR. Average interest rate in 2008
was 6.704 %.( 2007: 6.723%).
The Company issued at 6 December 2006 bonds amounting to HRK 200,000 thousand, due for
payment on 6 December 2011, with the assistance of registered agents and brokers. The issue is
quoted at the ‘regular market’ of the Zagreb Stock Exchange. Interest rate for the mentioned scheme is
6.125% per year.
The Company has issued a fifth instalment of commercial bills in the amount of HRK 100,000 thousand,
as part of commercial bills issue program total worth HRK 250,000 thousand. Instalments are issued for
a period of 364 days and are due for payment on 20 August 2009. The issue is quoted at the ‘regular
Notes to the financial statements Ingra d.d. For the year ended 31 December 2008
40
market’ of the Zagreb Stock Exchange. Fourth instalment of commercial bills is issued at a discount of
6.43% while current weighted average discount rate on the entire program is 6.68%.
Insurances
Loans and borrowings are secured by a pledge over the Company’s stake in a related party Intel d.o.o.
Unused loan facilities
As at 31 December 2008 the Company had unused loans in the amount of HRK 67,212 thousand
(2007: HRK 24,646 thousand).
Finance lease liabilities
Finance lease liabilities are payable as follows:
Liability
2008
HRK’000
Principal
2008
HRK’000
Interests
2008
HRK’000
Liability
2007
HRK’000
Principal
2007
HRK’000
Interests
2007
HRK’000
Less than one year 119 115 4 151 133 18
Between one and five
years 4 2 2 123 117 6
123 117 6 274 250 24
26. Share based payments
31 December 2008
HRK’000
31 December 2007
HRK’000
Share based payments settled in equity instruments 2.012
17.652
The cost of share based payments made during 2008 in the amount of HRK 2,012 thousand (2007: HRK
16,597 thousand) is included as personnel expenses.
The Company established a plan for a share option programme to employees prior to retirement.
Options are settled in the Company's equity instruments. The Company incurred tax and contribution
expenses from the contract in the amount of HRK 487 thousand (2007: HRK 4,656 thousand).
Grant date /
Employees entitled
Number of
instruments Vesting conditions
Contractual
life of options
Options awarded to one employee on 7
August 2008 600
No conditions -
Options awarded to one employee on 10
September 2008 10,200
31 December 2008 3,300
Employed until 30
June 2009
31 December
2008
Total options 14,100
Notes to the financial statements Ingra d.d. For the year ended 31 December 2008
41
27. Trade and other payables
31 December 2008
HRK’000
31 December 2007
HRK’000
Payables to related parties
Trade payables 9,667 24,452
Liabilities to key shareholders 30 -
Advances received from related parties 14,021 14,019
Liability for capital increase in related party 1,650 1,830
25,368 40,301
Trade payables 322,396 139,728
Advances received 154,449 96,268
Liabilities to employees 1,127 2,521
Dividends payable 1,043 688
VAT payable 25,567 9,596
Income tax payable 10,745 15,172
Contributions and tax payables 35,927 16,984
551,254 280,957
576,622 321,258
28. Provisions
Provisions for court
cases
Provisions for court
cases
2008
HRK’000
2007
HRK’000
As at 1 January 47,888 51,938
Provisions made during the year - 531
Provisions released during the year (Note 4) (41,007) (4,581)
As at 31 December 6,881
47,888
Notes to the financial statements Ingra d.d. For the year ended 31 December 2008
42
29. Deferred tax liabilities
2008
000' HRK
Income
statement
profit/(loss)
recognised
000' HRK
2007
000'
HRK
Income
statement
profit/(loss)
recognised
000' HRK
Property, plant and equipment 10,952 236 11,188 236
Financial assets available for sale - - 3,980 43
Fair value of financial assets at fair
value through profit and loss - - - 413
Deferred tax liability 10,952 236 15,168 692
30. Accrued expenses and deferred income
Accrued expenses and deferred income in the amount of HRK 23,586 thousand mostly refer to accrued
costs of cooperants which were involved in construction of Arena Zagreb performed in the year 2008.
31. Commitments and contingencies
The following table indicates the contractual amounts of the Company's off balance sheet financial
instruments:
2008
HRK’000
2007
HRK’000
Guarantees
- in HRK 74,127 74,916
- in foreign currency 211,586 139,548
Foreign currency letters of credit 8,543 9,623
294,256 224,087
Commitments for operating lease payables (lessor):
The Company lease office and storage space under cancellable operating leases. The lease typically
runs for an unlimited number of years with a termination notice period. During the current year HRK
2,824 thousand (2007: HRK 265 thousand) was recognised as income in the income statement in
respect of cancellable operating lease.
Annual commitments under non-cancellable operating leases as follows:
2008
HRK’000
2007
HRK’000
Within one year 1,381 1,728
Between one and five years 2,491 2,523
More than five years - -
3,872 4,251
Notes to the financial statements Ingra d.d. For the year ended 31 December 2008
43
32. Related party transactions
Significant transactions with related parties were as follows:
Subsidiaries and key shareholders
31 December 2008
HRK’000
31 December 2007
HRK’000
Sales to related parties
Sales to related companies 722,683 135,146
Sales to key stakeholders 17,934 30,911
740,617 166,057 Purchase from related parties
Purchase from related companies 71,171 72,346
Purchases from key shareholders 72 -
71,243 72,346 Subsidiaries and key shareholders
Interest incomes from related companies 2,779 1,471
Interest expenses from related companies - 422
Receivables from related parties
Receivables from related companies 472,040 176,215
Receivables from key shareholders 2,195 6,192
474,235 182,407 Payables to related parties
Liabilities to key shareholders 30 -
Payables to related companies 9,668 24,452
Advances received from Management board 10,429 10,429
Advances received from Supervisory board 3,590 3,590
23,717 38,471 Loans granted
Ingra Mar d.o.o. - 2,275
Tiha nekretnine d.o.o. - 5,818
Ingra Mont d.o.o. - 2,876
Posedarje Rivijera d.o.o. 940 400
Jabuka d.o.o. - 46,327
Ingra Energo d.o.o. 6,048 10,151
Intel d.o.o. - 600
Opatija nekretnine d.o. 4,953 5,196
Lanište d.o.o. 37,846 12,224
Domovi dalmatinske rivijere d.o.o. 1,258 838
Mavrovo Inženjering, Skopje 11,063 -
Sarl Alžir 767 -
Marina Slano 10 -
Bioadria 152 -
Ingra otok d.o.o. - 700
Total given loans to related companies 63,037 87,405
Notes to the financial statements Ingra d.d. For the year ended 31 December 2008
44
Key personnel
Key management personnel comprise the Management and Supervisory Boards. Members of the
Management and Supervisory Board took part in the ownership structure as is stated in note 1.
During the year remuneration in the amount of HRK 6,777 thousand (2007: HRK 6,232 thousand) was
paid to the Management Board. The total remuneration to the Management Board was included in
personnel expenses.
During the year remuneration in the amount of HRK 1,631 thousand (2007: HRK 1,733 thousand) was
paid to the Supervisory Board.
33. Financial instruments
In its business operations Group is exposed to credit, interest and currency risk.
The Company does not use derivative financial instruments. The risk management policy regarding
risks linked to short-term and long-term financing of buyers, management of the funds, credits and
liabilities can be summarised as follows:
a) Capital risk management
The Company manages its capital to ensure that it will be able to continue as going concern while
maximising the return to shareholders through the optimalisation of the debt and equity balance.
The capital structure of the Company consists of debt, cash and cash equivalents and equity
attributable to shareholders of the Company, comprising issued capital, reserves and retained earnings.
The Company manages capital and for the purpose of proper capital structure, in accordance with the
economic conditions present on the market, decides if the retained earnings should be distributed to
shareholders, if the capital needs increase or decrease, etc. Goals, policies and processes have not
been changed during the period ending 31 December 2008 nor for the period ending 31 December
2007.
31 December 2008
HRK’000
31 December 2007
HRK’000
Financial liabilities 554,296 326,747
Trade payables, related parties and other payables 611,160 336,451
Provisions 6,881 47,888
Decrease for cash and cash equivalents (deposits) (39,796) (97,509)
Net debt 1,132,541 613,577
Equity 523,839 595,627
Equity and net debt 1,656,380 1,209,204
Gearing ratio 68.4% 51%
Notes to the financial statements Ingra d.d. For the year ended 31 December 2008
45
b) Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition,
the basis of measurement and the basis on which income and expenses are recognized, in respect of
each class of financial asset, financial liability and equity instrument are disclosed in note 2 to the
financial statements. Accounting policies for financial instruments are applied on the following Balance
Sheet items:
2008
Loans and
receivables
“Fair value
through
P&L”
Available
for sale
Held to
maturity
Total financial
assets
classified under
IAS 39
HRK'000 HRK'000 HRK'000 HRK'000 HRK'000
31 December 2008
Long-term financial
assets 67,909 - 10,860 4,093 82,862
Short-term financial
assets 3,311 17,823 47,561 46 68,741
Trade and other
receivables 692,974 - - - 692,974
Accrued income 29,991 - - - 29,991
Cash and cash
equivalents 39,796 - - - 39,796
Total 833,981 17,823 58,421 4,139 914,364
2007
Loans and receivables
“Fair value
through
P&L”
Available
for sale
Held to
maturity
Total financial
assets
classified
under IAS 39
HRK'000 HRK'000 HRK'000 HRK'000 HRK'000
31 December 2007
Long-term financial
assets 81,638 363 10,860 4,317 97,178
Short-term financial
assets 15,089 85,977 121,586 326 222,978
Trade and other
receivables 374,813 - - - 374,813
Accrued income 6,214 - - - 6,214
Cash and cash
equivalents 97,509 - - - 97,509
Total 570,639 86,340 132,446 4,643 800,282
Notes to the financial statements Ingra d.d. For the year ended 31 December 2008
46
All of the Company's liabilities have been classified as „Other financial liabilities“. The Company does
not have liabilities which are classified as „Liabilities at „Fair value through Profit and Loss“.
Fair value of financial instruments
The fair values of financial assets and financial liabilities are determined as follows:
• the fair value of financial assets and financial liabilities with standard terms and conditions
and traded on active liquid markets is determined with reference to quote market price;
• the fair value of other financial assets and financial liabilities (excluding derivative
instruments) is determined in accordance with generally accepted pricing models based on
discounted cash flow analysis using prices for observable current market transactions and
dealer quotes for similar instruments;
• the fair value of derivative instruments is calculate using quoted prices. Where such prices
are not available, use is made of discounted cash flow analysis using the applicable yield
curve for the duration of the instruments for non-optional derivatives, and option pricing
models for optional derivatives; and
• the fair value of financial guarantee contracts is determined using option pricing models
where the main assumptions are the probability of default by the specified counterparty
extrapolated from market-based credit information and the amount of loss, given the default.
The Company applied the following methods and assumptions for estimation of fair value of financial
instruments:
Receivables and deposits at banks
For assets which mature within 3 months, carrying value is similar to fair value due to shortness of
these instruments. For longer-term assets, contracted interest rates do not significantly defer from
current market interest rates, and due to that their fair value is similar to its carrying value.
Loan liabilities
Fair value of short term liabilities is similar to its carrying value due to shortness of these instruments.
For long term liabilities, contracted interest rates do not significantly defer from current market interest
rates, and due to that their fair value is similar to its carrying value.
Other financial instruments
Financial instruments of the Company which are not valuated at fair value are trade accounts
receivable, other receivables, trade accounts payable and other payables. Historic carrying value of
assets and liabilities, including the provisions, which are in accordance with the usual business
conditions, is similar to its fair value.
Receivables and deposits at banks
For assets which mature within 3 months, carrying value is similar to fair value due to shortness of
these instruments. For longer-term assets, contracted interest rates do not significantly defer from
current market interest rates, and due to that their fair value is similar to its carrying value.
Notes to the financial statements Ingra d.d. For the year ended 31 December 2008
47
Loan liabilities
Fair value of short term liabilities is similar to its carrying value due to shortness of these instruments.
For long term liabilities, contracted interest rates do not significantly defer from current market interest
rates, and due to that their fair value is similar to its carrying value.
Other financial instruments
Financial instruments of the Company which are not valuated at fair value are trade accounts
receivable, other receivables, trade accounts payable and other payables. Historic carrying value of
assets and liabilities, including the provisions, which are in accordance with the usual business
conditions, is similar to its fair value.
c) Financial risk management
The Company’s Management monitors and manages the financial risks relating to the operations of the
Company through internal risk reports provided to Ingra group which analyse exposures by degree and
magnitude of risks. These risks include market risk (including currency risk, fair value interest rate risk
and price risk), credit risk, liquidity risk and cash flow interest rate risk.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates
will affect the Company’s income or the value of its holdings of financial instruments. The objective of
market risk management is to manage and control market risk exposures within acceptable parameters,
while optimising the return.
The Company activities expose it primarily to the financial risks of changes in foreign currency
exchange rates and interest rates.
There has been no significant change to the Company’s exposure to market risks or the manner in
which it manages and measures the risk.
Foreign currency risk management
The Company is exposed to currency risk on sales, purchases and borrowings that are denominated in
a currency other than the respective functional currencies of the Company. The currencies in which
these transactions primarily are denominated are EUR and USD.
Exposure of the Company to the foreign currency risk is as follows:
Notes to the financial statements Ingra d.d. For the year ended 31 December 2008
48
2008
EUR
000' HRK
USD
000' HRK
Other
currencies
000' HRK
Total
foreign
currencies
000' HRK
HRK
000' HRK
Total
000' HRK
Trade receivables 11,351 - 4,906 16,257 578,691 594,948
Cash and cash
equivalents 21,076 103 3,550 24,729 15,067 39,796
Trade payables 23,137 4 94 23,235 308,828 332,063
Financial liabilities (109,867) - (23,783) (133,650) (420,646) (554,296)
(54,303) 107 (15,233) (69,429) 481,940 412,511
2007
EUR
000' HRK
USD
000' HRK
Other
currencies
000' HRK
Total
foreign
currencies
000' HRK
HRK
000' HRK
Total
000' HRK
Trade receivables 17,826 - 6,687 24,523 271,647 296,170
Cash and cash
equivalents 40,140 352 1,227 41,716 55,793 97,509
Trade payables 10,698 - 291 10,989 153,191 164,180
Financial liabilities (81,486) - - (81,486) (245,261) (326,747)
(26,655) 352 8,215 (4,255) 235,370 231,112
Sensitivity analysis
A 5% strengthening of the kuna against the following currencies at reporting date would have increased
/(decreased) profit before tax as follows:
2008
Effect on income
before taxes
HRK’000
2007
Effect on income
before taxes
HRK’000
EUR 56 802
USD - 124
DZD 41 447
This analysis assumes that all other variables, in particular interest rates, remain constant.
A 5% weakening of the kuna against the above currencies at reporting date would have had the equal but
opposite effect on the profit before tax, on the basis that all other variables remain constant.
It should be mentioned that with contracting works in Algeria (part relating to local currency DZD) contract
date is considered to be term contract with agreed exchange rates, so exchange differences arising
during the year are invoiced and recovered so it can be said that currency risk exposure is covered.
Notes to the financial statements Ingra d.d. For the year ended 31 December 2008
49
During the year, the Company has regulated possible currency risks by converting contracts to EUR
even in the traditionally USD countries.
b) Interest rate risk
The Company is exposed to interest rate risk as loans are agreed at floating rates while majority of the
assets bear no interest. The Company does not hedge exposure to interest rate risk.
The following table shows sensitivity of changes of interest rates relating to Company's loans as of 31
December 2008 (note 25), with the assumptions that all other variables are constant, on income before
taxes.
2008
Increase/decrease
in percentage
Effect on income
before taxes
HRK'000
HRK +1,5% (8.360)
HRK -1,5% 8.360
Credit risk
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in
financial loss to the Company. The Company has adopted a policy of only dealing with creditworthy
counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of
financial loss form defaults. The Company only transacts with entities with good credibility. The
Company uses other publicly available financial information and its own trading records to rate its major
customers. The Company’s exposure and the credit ratings of its counterparties are continuously
monitored and the aggregate value of transaction concluded is spread amongst approved
counterparties. The grand part of credit risk is based on trade receivables.
Trade and other receivables
The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each
customer. The demographics of the Company’s customer base, including the default risk of the industry
and country, in which customers operate, has less of an influence on credit risk. The Company has
established a credit policy under which each new customer is analysed individually for creditworthiness
before standard payment and delivery terms and conditions are offered. The Company establishes an
allowance for impairment that represents its estimate of incurred losses in respect of trade and other
receivables and investments.
Loan receivables
The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each
customer. As at 31 December 2008, the Company had loans receivables approved to related parties
including employees and third parties. The loans were approved with a fixed interest rate of 4% to 6%
per annum for related parties and fixed interest rate of 4% to 8% per annum for third parties. Loans
approved to related parties and third parties are secured.
Notes to the financial statements Ingra d.d. For the year ended 31 December 2008
50
The Company has been exposed to loans, interest rate and exchange rate risks as part of its ordinary
activities. The Company has not used derived insurance instruments in order to protect itself from these
risks.
The maximum exposure to credit risk for trade receivables and related party receivables at the
reporting date by regions was as follows:
2008
HRK’000
2007
HRK’000
Croatia 586,696 282,834
Foreign 16,257 24,523
602,953 307,357
Impairment losses
The ageing of trade receivables at the reporting date was as follows:
2008.
HRK’000
2007.
HRK’000
Not past due 148,545 158,277
Past due 0-90 days 121,291 130,705
Past due 91-180 days 165,045 14,506
Past due 181-360 days 168,072 3,105
More than one year - 764
602,953 307,357
The movement in the allowance for impairment in respect of trade receivables during the year was as
follows:
2008.
HRK’000
2007.
HRK’000
Balance as at 1 January 67,500 65,646
Impairment loss recognised 15,112 4,019
Collected in the period (225) (2,165)
Balance as at 31 December 82,387 67,500
The movement in the allowance for impairment in respect of current financial asset during the year was
as follows:
2008.
HRK’000
2007.
HRK’000
Balance as at 1 January 4,240 6,818
Impairment loss recognised 140 400
Balance as at 31 December 4,380 7,218
Notes to the financial statements Ingra d.d. For the year ended 31 December 2008
51
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due.
The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without
incurring unacceptable losses or risking damage to the Company’s reputation. The Company ensures
that it has sufficient cash on demand to meet expected operational expenses, including the servicing of
financial obligations.
The following are the contractual maturities of financial liabilities of the Company as at 31 December
2008:
Carrying
value
Contractual
cash flows
0 -12
months
1-2
years
2-5
years
More
then 5
years
31 December 2008 000' HRK 000' HRK 000' HRK 000' HRK 000' HRK 000' HRK
Secured bank loans 223,918 250,616 161,001 89,615 - -
Bonds 198,968 236,750 12,250 224,500 - -
Finance lease 117 123 119 4 - -
Commercial bills 97,494 100,000 100,000 - - -
Trade and other
payables 600,208 600,208 600,208 - - -
896,787 1,187,697 873,578 314,119 -
Carrying
value
Contractual
cash flows
0 -12
months
1-2
years
2-5
years
More
then 5
years
31 December 2007 000' HRK 000' HRK 000' HRK 000' HRK 000' HRK 000' HRK
Secured bank loans 73,251 73,872 73,872 - - -
Bank loans 7,985 9,045 3,015 3,015 3,015 -
Bonds 198,624 249,000 12,250 12,250 224,500 -
Finance lease 250 250 133 117 - -
Commercial bills 36,283 38,000 38,000 - - -
Trade and other
payables 296,515 296,515 296,515 - - -
612,908 666,682 423,785 15,382 227,515 -
Notes to the financial statements Ingra d.d. For the year ended 31 December 2008
52
34. Post-balance-sheet events
The subsidiary Intel d.o.o. has been disposed in April 2009 for HRK 12 million. Also, the Company
disposed in April 2009 the company Lipik Glas d.o.o. for EUR 800 thousand in which the Company had
17.54% of ownership.
Office for construction of City of Zagreb issued as at 7 April 2009 permanent usage permit for Arena
Zagreb. Before that, detailed testing of roof construction of Arena has been made which showed
positive results. Prior to that, the Company performed all necessary steps to remove all deficiencies
which caused the issuance of temporary usage permit in December 2008. Arena was built from June
2007 until December 2008, in form of public-private partnership, investor was INGRA in its entirety, and
public partner was City of Zagreb with the financial support of the Croatian Government.
Through its subsidiary Lanište d.o.o., for the next 28 years INGRA achieves right to annual rent
amounting to EUR 7.2 million plus EUR 300.000 (in counter value of kunas payable according to selling
rate of Zagrebačka bank) increased for VAT. Rent is subject to indexation in accordance with CPI
index. First quarterly rent was paid to the Company as at 22 April 2009.
Except for the above mentioned events, there were no other post-balance-sheet events which could
significantly affect Company’s financial statements as at 31 December 2008.
35. Consolidated financial statements
Ingra d.d. is the parent company of the Ingra Group and the consolidated financial statements of the
Ingra Group that are in accordance with IFRS, are not yet issued. Management board is preparing the
consolidated financial statements whose publishing is expected shortly after issuance of the
unconsolidated financial statements.
36. Contingent assets
The Company has a receivable in bonds in the amount of USD 17.4 million on pre-war contractual
basis with Hidrogradnja Sarajevo. Hidrogradnja Sarajevo was awarded, along with compensation for
war damages in Iraq, bonds at Jumbes bank Beograd in the amount of USD 26 million. The funds are
blocked at the moment due to a lawsuit between Hidrogradnja Sarajevo and subsequently established
Hidrogradnja Pale over legal ownership and rights to the funds mentioned. Due to the collection
uncertainty of the above noted receivable, the Company did not recognise it in their unconsolidated
financial statements.
37. Contingent liabilities
As at 31 December 2008 the Company is a defendant in various lawsuits which have been raised for
damage payments arising on the termination of a contract or ordinary course of business. The total
claims as at 31 December 2008 amount to HRK 69,504 thousand (2006: 73,455 thousand). As a result,
the Company provided for these cases in the amount of HRK 69,504 (31 December 2007: HRK 68,864
thousand).
Notes to the financial statements Ingra d.d. For the year ended 31 December 2008
53
Legal dispute between INGRA and Meñimurje Visokogradnja d.d. in bankruptcy relates to Construction
Contract for 2,870 apartments in Tripoli district – Libya. Dispute has been started in the year 1995 with
the request for payment amounting to USD 2,821,277 for performed construction work and amount of
USD 3,365,051 for the compensation for exported fixed assets and equipment. Since Meñimurje
Visokogradnja d.d. is in bankruptcy from the year 1999, the procedure was interrupted and continued in
the year 2003 under the jurisdiction of the Commercial Court in Varaždin. In this procedure, First
degree courts made ruling in favour of Meñimurje Visokogradnja, but after that the High Commercial
Court of the Republic of Croatia cancelled first ruling and sent back the procedure to First degree court.
Currently this procedure is in repeated first-degree procedure under the jurisdiction of the Commercial
court in Varaždin and the ruling has not been made yet. The Company’s Management beliefs that the
dispute will be solved in the Company’s favour.
In relation to mentioned requests and legal cases, the Company’s Management made estimation on the
basis of relevant facts and legal principles of the probability of negative result of these cases and
possibility of reliable estimation of losses. As the result of the estimation, further losses are not
assessed and therefore they are not recognised in the Income statement as a cost and as a provision
in the Balance sheet
38. Significant accounting estimates and judgements
Management has made the following judgements, apart from those involving estimations, which have
the most significant effect on the amounts recognised in the financial statements:
Provisions for contingencies
The Company recognises provisions as a result of claims initiated against the Company for which it is
likely that there will be an outflow of resources to settle the claims and the amounts can be reliably
estimated. A provision has not been created based on professional legal advice and management
considerations that it is unlikely that any further significant loss will arise from current claims against the
Company.
Trade receivables
The current value of trade and other receivables is estimated to be a reasonable estimation of their fair
value. Trade receivables have been estimated on each balance sheet date and are impaired according
to the estimate of the probability to collect the amount stated. Each customer is valuated separately
based on its status (i.e. customer is blocked and is cash only customer, legal procedure have been
commenced), the ageing of the amount due, stage of legal case and security of payment.
Income tax
Tax calculations are performed based on the Company’s interpretation of current tax laws and
regulations. These calculations which support the tax return may be subjected to review and approval
by the local tax authorities.
Notes to the financial statements Ingra d.d. For the year ended 31 December 2008
54
39. Fair value determination
A number of the Company’s accounting policies and disclosures require the determination of fair value,
for both financial and non-financial assets and liabilities. Fair values have been determined for
measurement and/or disclosure purposes based on the following methods. Where applicable, further
information about the assumptions made in determining fair values is disclosed in the notes specific to
that asset or liability.
Trade and other receivables/trade and other liabilities
Trade and other receivables, trade and other payables are stated at cost less impairment losses and
are approximately equal to their fair value, since these receivables and payables are current
receivables and payables.
Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is calculated based on the present value of
future principal and interest cash flows, discounted at the market rate of interest at the reporting date.
Investment in equity and debt securities
The fair value of financial assets at fair value through profit or loss, held-to-maturity investments and
available-for-sale financial assets is determined by reference to their quoted bid price at the reporting
date. The fair value of held-to-maturity investments is determined for disclosure purposes only.
Land and buildings
An estimation of the fair value of land and buildings of the Company was performed by an external,
independent and professionally qualified valuator during September 2006. Fair value is determined by
reference to market-based evidence, which is the estimated amount for which the assets could be
exchanged between a knowledgeable willing buyer and a knowledgeable willing seller in an arm’s
length transaction as at the valuation date after regular advertising where both sides acted with
knowledge, care and with no compulsion.