Accounting Policies

Basis of Presentation

The consolidated financial statements of Glaston Group are prepared in accordance with International Financial Reporting Standards (IFRS), including International Accounting Standards (IAS) and Interpretations issued by the International Financial Reporting Interpretations Committee (SIC and IFRIC). International Financial Reporting Standards are standards and their interpretations adopted in accordance with the procedure laid down in regulation (EC) No 1606/2002 of the European Parliament and of the Council. The Notes to the Financial Statements are also in accordance with the Finnish Accounting Act and Ordinance and the Finnish Companies’ Act.

The consolidated financial statements include the financial statements of Glaston Corporation and its subsidiaries. The functional and reporting currency of the parent is euro, which is also the reporting currency of the consolidated financial statements. Functional currencies of subsidiaries are determined by the primary economic environment in which they operate.

The financial year of Glaston Group as well as of the parent and subsidiaries is the calendar year ending 31 December.

The financial statements have been prepared under the historical cost convention except as disclosed in the accounting policies below.

The figures in Glaston’s consolidated financial statements are mainly presented in EUR thousands. Due to rounding differences the figures presented in tables do not necessarily add up to the totals of the tables.

New Accounting Standards

Glaston has applied the following new or revised or amended standards and interpretations from 1 January 2010:

• IFRS 3 (revised) Business Combinations
• Amendments to IAS 27 Consolidated and Separate Financial Statements
• IFRS 2 Share-based Payments - group cash-settled Share-based Payment Transactions

In addition, Glaston applies the annual Improvements to IFRSs issued in April 2009.
Applying IFRS 8 did not have any material effect on the financial information of Glaston.

In accordance with the revised IFRS 3 standard all acquisition-related costs arising from the business combinations made after 1 January 2010 are recognized in profit or loss and not capitalized as a part of the purchase consideration, as previously has been done. In addition, all consideration transferred in the business combination is measured at the acquisition date fair value, and liabilities classified as contingent consideration are subsequently measured at fair value with any resulting gain or loss recognized in profit or loss. For each business combination it is possible to choose, whether the non-controlling interest will be measured at fair value or as the non-controlling interest’s proportionate share of the acquiree’s net assets. This choice affects the goodwill arising from the business combination.

In accordance with the revised IAS 27 standard, the effects of the transactions made with non-controlling interests are recognized in equity, if there is no change in control. These transactions do not result in goodwill or gains or losses. If the control is lost, the possible remaining ownership share is measured at fair value and the resulting gain or loss is recognized in profit or loss. Also, in accordance with the revised standard, total comprehensive income is attributed also to non-controlling interest even if this will result in the non-controlling interest having a deficit balance.

The change of IAS 36 Impairment of Assets included in the annual improvements of IFRSs changed the allocation of goodwill in Glaston. Previously goodwill was allocated to reportable segments aggregated from operating segments. According to the change in the standard, the unit to which the goodwill can be allocated cannot be larger than an operating segment before it is aggregated to be a part of a reportable segment.

Other new or amended standards or interpretations applicable from 1 January, 2010 are not material for Glaston Group.

Glaston will apply the following new or revised or amended standards and interpretations from 1 January, 2011:

• IAS 24 (revised) Related Party Disclosures
• Amendments to IAS 32 Financial Instruments: Presentation – Classification of Rights Issues
• Amendment to IFRIC 14 IAS 19 Prepayments of a Minimum Funding Requirement
• IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments

IAS 24 (revised) Related Party Disclosures standard shall be applied for annual periods beginning on or after 1 January, 2011. The application is retrospective.

Amendments to IAS 32 Financial Instruments: Presentation – Classification of Rights Issues shall be applied for annual periods beginning on or after 1 February, 2010.

Amendment to IFRIC 14 IAS 19 Prepayments of a Minimum Funding Requirement shall be applied for annual periods beginning on or after 1 January, 2011. The application is retrospective.

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments shall be applied for annual periods beginning on or after 1 July, 2010.

In addition, Glaston will apply the annual Improvements to IFRSs issued in May 2010. These will affect mainly the disclosure information in Glaston’s consolidated financial statements. These improvements shall be mainly applied for annual periods beginning on or after 1 January, 2011.

The change of IFRS 3 Business Combinations included in the annual improvements of IFRSs changes the measurement of non-controlling interest. For each business combination it is possible to choose, whether the non-controlling interest will be measured at fair value or as the non-controlling interest’s proportionate share of the acquiree’s net assets. This choice affects the goodwill arising from the business combination. In accordance with the improvement, the choice is possible only for the non-controlling interests in the acquiree that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation. All other components of non-controlling interests, such as options, are measured at their acquisition-date fair value.

Other new or amended standards or interpretations applicable from 1 January, 2011 are not material for Glaston Group.

Glaston will apply the following new or revised or amended standards and interpretations from 1 January, 2012, if EU has approved them:

- Amendment to IFRS 7 Financial Instruments: Disclosures – Transfers of Financial Assets

The amendment shall be applied for annual periods beginning on or after 1 July, 2011. The amendment increases the disclosure requirements of transfers and derecognition of financial assets. The amendment does not have material effect on Glaston’s consolidated financial statements.

Glaston will apply the following new or revised or amended standards and interpretations from 1 January, 2013, if EU has approved them:

• IFRS 9 Financial Instruments, Part 1
• Amendment to IFRS 9 Financial Instruments – Additions to Accounting for Financial Liabilities

The standards shall be applied for annual periods beginning on or after 1 July, 2013. IFRS 9 shall be applied retrospectively.

In accordance with the new IFRS 9 standard, financial assets, which are debt instruments, are measured after initial measurement at either amortized cost or fair value on the basis of the entity’s business model for managing the financial assets and the contractual cash flows characteristics of the financial asset. Financial assets, which are equity instruments, are measured at fair value after initial measurement. Fair value changes of equity instruments are recognized in other comprehensive income, if the entity has elected to present the changes at fair value through other comprehensive income.

Financial liabilities are subsequently measured at amortized cost or at fair value through profit or loss. If the entity recognizes the liability at fair value through profit or loss, the fair value changes arising from changes in the liability’s credit risk are recognized in other comprehensive income and they will not be reclassified to profit or loss.

The new IFRS 9 standard is estimated to not to have any material effect of Glaston’s financial statements.