DNO Revises Profits from NOIL Sale
As previously reported DNO International ASA will show a substantial positive P&L effect from the integration agreement between Det norske oljeselskap ASA and NOIL Energy ASA. in the fourth quarter of 2007
Based on further assessment of the application of IFRS, the accounting effects of the Integration Agreement have been revised. The profit from DNO's sale of shares in NOIL Energy ASA in exchange for shares in Det norske oljeselskap ASA is estimated to be NOK 870 million, and will be recorded in the Group accounts for the fourth quarter 2007. The difference from the initial estimated gain of approximately NOK 1.1 billion is mainly caused by the adjustment for the minority share of booked equity in NOIL and the elimination of the remaining indirect ownership in NOIL through the investment in Det norske oljeselskap ASA (formerly Pertra ASA). The adjustment has no cash effect, and is only a P&L effect caused by revised application of technical accounting requirements under IFRS. The book value of DNO's investment in Det norske oljeselskap ASA will as a consequence be approximately NOK 1,3 billion at the time of the transaction.
The investment in Det norske oljeselskap ASA is classified as an investment in an associated company (ownership between 20 and 50%). Investment in an associated company is accounted for using the equity method. Under the equity method, the investment is initially recognised at cost and the carrying amount is increased or decreased to recognise the investor's share of the profit or loss in the associated company after the date of acquisition. The investment will not be adjusted for any increase in the share price of Det norske oljeselskap ASA above the initial cost price, the investment is however assessed for impairment at each balance sheet date. An impairment loss can be reversed in a subsequent period if the impairment situation no longer exists.
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