YAŞAR HOLDİNG A.Ş. CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2011 TOGETHER WITH INDEPENDENT AUDITOR S REPORT

Transcription

1 CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2011 TOGETHER WITH INDEPENDENT AUDITOR S REPORT

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4 INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2011 CONTENTS Page CONSOLIDATED BALANCE SHEETS CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME... 3 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY... 4 CONSOLIDATED STATEMENTS OF CASH FLOWS... 5 FINANCIAL STATEMENTS NOTE 1 GENERAL INFORMATION NOTE 2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS NOTE 3 CONSOLIDATION NOTE 4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NOTE 5 FINANCIAL RISK MANAGEMENT NOTE 6 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS NOTE 7 SEGMENT INFORMATION NOTE 8 FINANCIAL INSTRUMENTS BY CATEGORY NOTE 9 CASH AND CASH EQUIVALENTS NOTE 10 TRADE RECEIVABLES NOTE 11 TRANSACTIONS AND BALANCES WITH RELATED PARTIES NOTE 12 BIOLOGICAL ASSETS NOTE 13 INVENTORIES NOTE 14 OTHER CURRENT / NON-CURRENT ASSETS NOTE 15 AVAILABLE-FOR-SALE INVESTMENTS AND FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS NOTE 16 INVESTMENT IN ASSOCIATE NOTE 17 PROPERTY, PLANT AND EQUIPMENT AND INVESTMENT PROPERTY NOTE 18 INTANGIBLE ASSETS NOTE 19 BORROWINGS NOTE 20 DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES NOTE 21 OTHER FINANCIAL LIABILITIES NOTE 22 TRADE PAYABLES NOTE 23 OTHER CURRENT LIABILITIES NOTE 24 TAXATION ON INCOME NOTE 25 PROVISION FOR EMPLOYMENT TERMINATION BENEFITS NOTE 26 OTHER NON-CURRENT LIABILITIES NOTE 27 SHARE CAPITAL NOTE 28 (LOSS)/ EARNINGS PER SHARE NOTE 29 STATUTORY RETAINED EARNINGS AND LEGAL RESERVES NOTE 30 CHANGES IN WORKING CAPITAL NOTE 31 SELLING AND MARKETING COSTS NOTE 32 GENERAL ADMINISTRATIVE EXPENSES NOTE 33 EXPENSES BY NATURE NOTE 34 OTHER OPERATING INCOME AND EXPENSE NOTE 35 FINANCE INCOME AND EXPENSE NOTE 36 FOREIGN CURRENCY POSITION NOTE 37 COMMITMENTS AND CONTINGENT ASSETS AND LIABILITIES

5 CONSOLIDATED BALANCE SHEETS AT 31 DECEMBER ASSETS Notes Current assets: Cash and cash equivalents 9 64,341 62,008 Trade receivables , ,190 Due from related parties 11 20,359 34,621 Biological assets 12 34,373 29,566 Inventories , ,258 Derivative financial instruments 20 3,555 - Other current assets 14-a 67,682 69,379 Total current assets 848, ,022 Non-current assets: Trade receivables 10 16,440 10,878 Due from related parties 11 97,826 60,955 Biological assets 12 16,983 16,776 Derivative financial instruments 20 16,020 2,503 Available-for-sale investments 15-a 2,430 2,528 Financial assets at fair value through profit or loss 15-b 2,934 3,086 Investment in associate 16 11,519 18,622 Property, plant and equipment 17-a 1,090, ,117 Investment property 17-b 152, ,297 Intangible assets 18 2,377 2,110 Deferred income tax assets 24 9,018 9,251 Other non-current assets 14-b 8,076 6,780 Total non-current assets 1,426,543 1,141,903 TOTAL ASSETS 2,275,492 1,887,925 These consolidated financial statements at 31 December 2011 and for the year then ended were authorized for issue by the Yaşar Holding A.Ş. Management on 9 April The accompanying notes on pages 6 to 80 are an integral part of these consolidated financial statements. 1

6 CONSOLIDATED BALANCE SHEETS AT 31 DECEMBER LIABILITIES AND EQUITY 2 Notes Current liabilities: Borrowings , ,960 Derivative financial instruments 20 4,122 1,239 Other financial liabilities 21 1,706 14,374 Trade payables , ,832 Due to related parties 11 11,169 7,830 Current income tax liabilities 24 5,265 5,943 Provision for employment termination benefits Other current liabilities , ,914 Total current liabilities 704, ,122 Non-current liabilities: Borrowings , ,205 Trade payables 22 5,575 7,975 Derivative financial instruments 20 12,365 - Deferred income tax liabilities 24 92,749 67,307 Provision for employment termination benefits 25 33,226 30,473 Other non-current liabilities 26 2,267 1,704 Total non-current liabilities 925, ,664 Total liabilities 1,630,484 1,311,786 Equity: Equity attributable to equity holders of the Group Share capital , ,158 Adjustment to share capital , ,822 Total paid-in capital , ,980 Treasury shares 27 (39,767) (39,624) Contribution from shareholders 3 5,323 5,323 Revaluation reserve , ,514 Cash flow hedge reserves Currency translation reserve 2-c 2,681 1,265 Accumulated losses (554,588) (463,428) 272, ,030 Non-controlling interest 372, ,109 Total equity 645, ,139 TOTAL LIABILITIES AND EQUITY 2,275,492 1,887,925 The accompanying notes on pages 6 to 80 are an integral part of these consolidated financial statements.

7 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED AT 31 DECEMBER Notes Revenue 7 2,254,923 2,028,047 Cost of sales (1,657,830) (1,485,181) Gross profit 597, ,866 Selling and marketing costs 31 (317,505) (266,478) General administrative expenses 32 (109,591) (101,755) Research and development costs (17,305) (13,494) Share of loss of associate 16 (7,103) (1,387) Other operating income 34 26,014 46,939 Other operating expense 34 (39,777) (32,287) Operating profit 131, ,404 Finance income , ,534 Finance expense 35 (328,754) (171,690) (Loss)/Profit before taxation on income (80,569) 114,248 Taxation 24 (13,941) (28,347) (Loss)/Profit for the year (94,510) 85,901 Other comprehensive income: Revaluation of property, plant and equipment ,712 9,530 Cash flow hedge 20 (1,432) - Currency translation differences 2-c 2,255 (1,335) Other comprehensive income for the year, net of tax 190,535 8,195 Total comprehensive income for the year 96,025 94,096 (Loss)/Profit attributable to: (94,510) 85,901 Equity holders of the Group (105,118) 52,914 Non-controlling interest 10,608 32,987 Total comprehensive income attributable to: 96,025 94,096 Equity holders of the Group 24,657 57,897 Non-controlling interest 71,368 36,199 Basic and diluted earnings per share for (loss)/ profit attributable to the equity holders of the parent company during the year 28 (0.35) 0.18 The accompanying notes on pages 6 to 80 are an integral part of these consolidated financial statements. 3

8 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED AT 31 DECEMBER 2011 AND 2010 Attributable to equity holders of the Group Cash flow Contribution Revaluation hedge Currency Non- Share Adjustment Treasury from reserve reserve translation Accumulated controlling Total capital to share capital shares shareholders (Note 17) (Note 20) reserve losses interest equity Balances at 31 December , ,822 (39,624) 5, ,318-2,360 (534,022) 328, ,468 Dividend relating to 2009 (Note 11.ii-f) (32,665) (32,665) Increase in share capital by cash injection ,240 3,240 Decrease of shareholding in subsidiaries (1,771) - - 2,569 (798) - Sales of property, plant and equipment-net (5,377) - - 5, Total consolidated comprehensive income ,078 - (1,095) 52,914 36,199 94,096 Depreciation transfer -net (9,734) - - 9, Balances at 31 December , ,822 (39,624) 5, ,514-1,265 (463,428) 334, ,139 Dividend relating to 2010 (Note 11.ii-f) (32,538) (32,538) Increase in share capital by cash injection ,382 5,382 Increase of shareholding in subsidiaries and share capital due to legal merge (Note 1.i) 4,555 (1,225) (143) ,802 (5,944) - Sales of property, plant and equipment-net (617) Total consolidated comprehensive income , ,416 (105,118) 71,368 96,025 Depreciation transfer -net (11,539) , Balances at 31 December , ,597 (39,767) 5, , ,681 (554,588) 372, ,008 The accompanying notes on pages 6 to 80 are an integral part of these consolidated financial statements. 4

9 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED AT 31 DECEMBER Notes Cash flows from operating activities: (Loss)/ Profit before taxation on income (80,569) 114,248 Adjustments to reconcile (loss)/profit to net cash generated from operating activities: Depreciation 17.a 53,666 53,324 Amortisation Interest expense 35 71,424 56,007 Interest expense from swap transactions 35 4,854 14,123 Net foreign exchange loss on borrowings including swap transactions 119,138 1,260 Interest income (12,216) (10,612) (Gain) / loss from sales of property, plant and equipment and investment property- net 34 (1,173) 6,605 Impairment of property, plant and equipment and intangible assets 34 3, Reversal of impairment loss on property, plant and equipment 34 (2,068) - Obsolence of inventory 34 1, Fair value loss on financial assets Provision for litigations 34 4,334 - Reversal of provision for litigations 34 (2,080) (127) Loss from share of results of investment in associate 16 7,103 1,387 Fair value gain on investment property 34 (11,044) (33,907) Fair value loss on derivative financial - instrument held for trading 34 6,064 - Discount from early redemption of borrowings - net - (8,474) (Gain)/ loss arising from changes in fair value less estimated point-of-sale costs of biological assets 12 (8,063) 4,001 Provision for employment termination benefits 32 8,147 9,684 Bad debt expense 34 1,821 3,073 Unutilised provision for doubtful trade receivables 34 (1,786) (3,776) 163, ,561 Changes in working capital 30 (78,372) (51,747) Net cash generated from operating activities 85, ,814 Cash flows from investing activities: Purchases of property, plant and equipment, intangible and biological assets (60,111) (57,292) Participation to capital increases by non-controlling interest 5,382 3,240 Interest received 12,266 10,648 Proceeds from sales of property, plant and equipment, intangibles and investment property 8,389 10,538 Capital increase in available-for-sale investments 15 - (297) Impairment of available-for-sale investments Increase in non-trade receivables from related parties (4,042) (8,145) Net cash used in from investing activities (38,018) (41,308) Cash flows from financing activities: Repayment of borrowings (227,621) (364,657) Proceeds from borrowings 286, ,190 Dividends paid to non-controlling interest 11-ii.f (32,538) (32,665) Interest paid (74,667) (73,117) Changes in currency translation reserve 2,356 (1,095) Net cash used in financing activities (46,272) (85,344) Net increase in cash and cash equivalents ,162 Change in blocked cash and cash equivalents (856) Foreign exchange gain/ (loss) on cash and cash equivalents 1,470 (136) Cash and cash equivalents, at start of year 59,596 30,426 Cash and cash equivalents, at end of year 9 62,869 59,596 The accompanying notes on pages 6 to 80 are an integral part of these consolidated financial statements. 5

10 NOTE 1 GENERAL INFORMATION Yaşar Holding A.Ş., the parent company, was established on 1 November 1968 as a holding company to coordinate the activities of, and liaise between, companies in different fields of activities, including mainly food and beverage, coatings, tissue and tourism. Yaşar Holding A.Ş. is registered in İzmir, Western Turkey. Yaşar Family is the ultimate controlling party of Yaşar Holding A.Ş. (Note 27). Yaşar Holding A.Ş. is not a listed company. The address of the registered head office of Yaşar Holding A.Ş. is as follows: Şehit Fethi Bey Caddesi No: 120 Alsancak, İzmir Turkey The products of Yaşar Group carry the countrywide well-known food and beverage business brand name Pınar and the coating business brand names DYO and Dewilux. Yaşar Holding A.Ş. has the following subsidiaries (the Subsidiaries ), investment in associate and Special Purpose Entity ( the SPE ) consolidated in these consolidated financial statements at 31 December 2011 (together referred as the Group or Yaşar Holding ). The nature of the businesses of the investment in associate and the Subsidiaries including the SPE, for the purpose of these consolidated financial statements, their respective business segments are as follows: i) Fully consolidated subsidiaries: Nature of business Business segment 1. Pınar Entegre Et ve Un Sanayi A.Ş. ( Pınar Et ) Meat processing Food and beverage 2. Pınar Süt Mamülleri Sanayii A.Ş. ( Pınar Süt ) Dairy products Food and beverage 3. Çamlı Yem, Besicilik San. ve Tic. A.Ş. ( Çamlı ) Agricultural products Food and beverage and farming 4. Pınar Su Sanayi ve Ticaret A.Ş. ( Pınar Su ) Drinking water Food and beverage 5. Yaşar Birleşik Pazarlama Dağıtım Turizm ve Ticaret A.Ş. ( YBP ) Marketing and distribution Food and beverage 6. Pınar Foods GmbH - incorporated in Germany Marketing and distribution Food and beverage 7. Pınar Anadolu Gıda Sanayi ve Ticaret A.Ş. Meat processing ( Pınar Anadolu ) (*) and dairy products Food and beverage 8. DYO Boya Fabrikaları Sanayi ve Ticaret A.Ş. ( DYO Boya ) Coatings Coatings 9. DYO Matbaa Mürekkepleri San. ve Tic. A.Ş. ( DYO Matbaa ) (**) Coatings and printing ink Coatings 10.Bornova Matbaa Mürekkepleri San. ve Tic. A.Ş. ( Bornova Matbaa ) Coatings and printing ink Coatings 11. ZAO Kemipex Joint Stock Co. ( Kemipex ) - incorporated in Russian Federation Marketing and distribution Coatings 12. Yaşar Dış Ticaret A.Ş. ( Yaşar Dış Ticaret ) Foreign trade Food and beverage/ Coatings/ Tissue/ Other 13. Yadex Export-Import und Spedition GmbH ( Yadex ) - incorporated in Germany Foreign trade Food and beverage/ Coatings/ Tissue/ Other 6

11 NOTE 1 - GENERAL INFORMATION (Continued) Nature of business Business segment 14. Viking Kağıt ve Selüloz A.Ş. ( Viking ) Paper products Tissue 15. AltınYunus Çeşme Turistik Tesisleri A.Ş. ( AltınYunus ) Tourism - Hotel management Other 16. Desa Enerji Elektrik Üretimi A.Ş. ( Desa Enerji ) Energy generation Other 17. DYO Balkan SRL- incorporated in Romania Coatings and printing ink Coatings 18. HDF FZCO- incorporated in United Arab Emirates ( UAE ) Foreign Trade Food and beverage (*) The operations of Pınar Anadolu were discontinued with effect from 31 January 2011 and on 28 November 2011 Pınar Anadolu have legally merged under YBP based on the decision taken in Extraordinary General Assembly of YBP. Since volume of the operations and total assets of Pınar Anadolu were immaterial for the consolidated financial statements, on the ground of materiality, the requirements of IFRS 5 Non- current assets held for sales and Discontinued Operations were not applied. (**) Based on the decision taken in the Board of Directors meeting of Yaşar Holding held on 25 July 2011, Yaşar Holding and DYO Matbaa have legally merged under Yaşar Holding on 27 September 2011 and its business segment was designated as other thereafter. ii) Fully consolidated the SPE: Nature of Business business segment Troy Capital S.A.- incorporated in Luxembourg (*) Investment Other (*) Troy Capital S.A. was established in 2006 and included in the scope of consolidation as a the SPE, since then according to interpretation number 12 by Standing Interpretations Committee ( SIC 12 ), because the Group had the authority and power to control the financial and operational policies of this company for its own benefit, even though the Group had no voting rights related to its shares in this company. Based on the decision dated 29 December 2011, the operation of Troy Capital S.A. was ceased and legal procedures for its dissolution was initiated once the debt securities issued by Troy Capital S.A. were fully redeemed in 2011 and deconsolidated since then, as it is no longer qualified as the SPE in accordance with the requirements in SIC 12. The dissolution was also confirmed by the regulatory body in Luxemburg (see Note 19.b). As the total net asset of Troy Capital S.A. is nil, there was no effect of such deconsolidation on the consolidated equity movement. iii) Investment in associate: Nature of business Business segment DYO Boya Vernik ve Reçine Fabrikaları A.Ş. ( DYO A.Ş. ) Investment Coatings All Subsidiaries (including the SPE) and the investment in associate are registered in Turkey, except for Pınar Foods GmbH and Yadex which are registered in Germany; Kemipex registered in Russian Federation, DYO Balkan registered in Romania, HDF FZCO registered in UAE and Troy Capital S.A. registered in Luxembourg. 7

12 NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS The consolidated financial statements of Yaşar Holding have been prepared in accordance with International Financial Reporting Standards ( IFRS ). The policies set out in Notes 3 and 4 have been consistently applied to the years presented, unless otherwise stated. The consolidated financial statements have been prepared under the historical cost convention as modified by the revaluation of land, buildings and land improvements, machinery and equipment, investment properties, biological assets, available-for-sale financial assets, financial assets at fair value through profit or loss and derivative financial instruments, which are measured at fair value. Yaşar Holding A.Ş., its Subsidiaries and investment in associate registered in Turkey maintain their books of account and prepare their statutory financial statements ( Statutory Financial Statements ) in Turkish Lira ( TL ) in accordance with the Turkish Commercial Code, tax legislation, the Uniform Chart of Accounts issued by the Ministry of Finance and the financial reporting standards accepted by the Capital Market Board ( CMB ) where applicable for the subsidiaries listed on Istanbul Stock Exchange ( ISE ). Consolidated Subsidiaries (including the SPE) registered in countries other than Turkey, keep their accounting records in accordance with the applicable standards and laws and regulations in those countries. These consolidated financial statements are based on the statutory records of Yaşar Holding A.Ş. and its Subsidiaries (including the SPE), with adjustments and reclassifications including the application of consistent accounting policies for the purpose of fair presentation in accordance with IFRS. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 6. a) New and amended standards and interpretations adopted by the Group: There are no IFRSs amendments or IFRIC interpretations that are effective for the first time for the financial year beginning on 1 January 2011 that would be expected to have a material impact on the Group. b) New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2011 and not early adopted. - IFRS 9, Financial instruments, addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in November 2009 and October It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured as at fair value and those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. The Group is yet to assess IFRS 9 s full impact and intends to adopt IFRS 9 no later than the accounting period beginning on or after 1 January

13 NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) - Amendments to IFRS 7, Financial instruments: Disclosures on derecognition, effective for periods on or after 1 July 2011, this amendment will promote transparency in the reporting of transfer transactions and improve users understanding of the risk exposures relating to transfers of financial assets and the effect of those risks on an entity s financial position, particularly those involving securitisation of financial assets. The Group is yet to assess the full impact of the amendment. - IFRS 10, Consolidated financial statements builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. The Group is yet to assess IFRS 10 s full impact and intends to adopt IFRS 10 no later than the accounting period beginning on or after 1 January IFRS 12, Disclosures of interests in other entities includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. The Group is yet to assess IFRS 12 s full impact and intends to adopt IFRS 12 no later than the accounting period beginning on or after 1 January IFRS 13, Fair value measurement, aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRS. The Group is yet to assess IFRS13 s full impact and intends to adopt IFRS 13 no later than the accounting period beginning on or after 1 January Amendment to IAS 12, Income taxes, effective for periods after 1 January IAS 12, Income taxes, currently requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. It can be difficult and subjective to assess whether recovery will be through use or through sale when the asset is measured using the fair value model in IAS 40, Investment property. This amendment therefore introduces an exception to the existing principle for the measurement of deferred tax assets or liabilities arising on investment property measured at fair value. As a result of the amendments, SIC 21, Income taxes - recovery of revalued non-depreciable assets, will no longer apply to investment properties carried at fair value. The amendments also incorporate into IAS 12 the remaining guidance previously contained in SIC 21, which is withdrawn. The Group is yet to assess the amendment s full impact. - Amendment to IAS 1, Financial statement presentation regarding other comprehensive income, 1 July 2012, The main change resulting from these amendments is a requirement for entities to group items presented in other comprehensive income ( OCI ) on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The amendments do not address which items are presented in OCI. - IAS 27 (revised 2011), Separate financial statements,, effective for periods after 1 January 2013, includes the provisions on separate financial statements that are left after the control provisions of IAS 27 have been included in the new IFRS 10. The Group is yet to assess the amendment s full impact. - IAS 28 (revised 2011), Associates and joint ventures, 1 January 2013, includes the requirements for joint ventures, as well as associates, to be equity accounted following the issue of IFRS 11. The Group is yet to assess the amendment s full impact. There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group. The Group is yet to assess the amendment s full impact. 9

14 NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) c) Foreign currency translation i) Functional and presentation currency Items included in the financial statements of each of the Group s entities are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ). The consolidated financial statements are presented in TL which is the parent Company s functional and the Group s presentation currency. ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated statement of comprehensive income, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges. Changes in the fair value of monetary assets denominated in foreign currency classified as available-for-sale are analysed between translation differences resulting from changes in the amortised cost of the assets, and other changes in the carrying amount of the assets. Translation differences are recognised in profit or loss, and other changes in carrying amount are recognised in equity. Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as equities classified as available-for-sale are included in the equity. All foreign exchange gains and losses are presented in the consolidated statement of comprehensive income within finance income and expense. iii) Translation of financial statements of foreign subsidiaries Financial statements of consolidated subsidiaries (including the SPE) operating in foreign countries are prepared according to the legislation of the country in which they are registered and adjusted to the IFRS to reflect the proper presentation and content. The assets and liabilities of foreign subsidiaries are translated into TL from the foreign exchange rate at the date of that balance sheet date. The income and expenses of foreign subsidiaries are translated into TL at the average foreign exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions). All resulting exchange differences are recognised in currency translation differences in other comprehensive income. d) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that takes strategic decisions. Management has determined the operating segments based on the reports reviewed by the Board of Directors that are used to take strategic decisions. 10

15 NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) The chief operating decision maker mainly considers the operations from business perspective. A business segment is a group of assets and operations engaged in providing products or services that are subject to risk and return that are different from those of other business segments. Accordingly, the Group is organised mainly in Turkey into the following four main business segments: - Food and Beverage segment: Sale of meat, dairy, poultry and bottled drinking water products and animal husbandry, fish farming, production of animal nutrition and production; - Coatings segment: Production and sale of a variety of paint and paint chemicals; - Tissue segment: Production and sale of sanitary paper products; - Other operations segment The Board of Directors assess the performance of the operating segments based on a specific measure. This measurement basis excludes the effects of other operating income and expenses, provision expense for employment termination benefits and financial income and expenses from profit/ (loss) before taxation on income. Finance income and expenses, excluding items charged from/ to the related parties of the Group, are not allocated to segments, as this type of activity is driven by the central treasury function, which manages the cash position of the Group. The amounts provided to the Board of Directors with respect to the total assets are measured in a manner consistent with that of the consolidated financial statements. Segment assets consist primarily of property, plant and equipment, investment properties, intangible assets, inventories, receivables, investments in associate, financial assets and operating cash. They exclude deferred income tax assets. Segment liabilities comprise operating liabilities. They exclude items such as borrowings, other financial liabilities, derivative financial instruments, current and deferred income tax liabilities. Capital expenditure comprises additions to property, plant and equipment, investment properties (Note 17), certain biological assets (Note 12) and intangible assets (Note 18). Other operations of the Group mainly comprise foreign trade, hotel management and energy and they do not meet the quantitative thresholds required by IFRS 8 as individual reportable segments. NOTE 3 - CONSOLIDATION The consolidated financial statements include the accounts of the parent company, Yaşar Holding A.Ş., its Subsidiaries (including the SPE) and investment in associate on the basis set out in sections (a) to (c) below. The financial statements of the companies included in the scope of consolidation have been prepared as of the date of the consolidated financial statements and have been prepared in accordance with IFRS applying uniform accounting policies and presentation. a) Subsidiaries are companies (including the SPE) over which the Group has power to control the financial and operating policies for the benefit of the Group, generally accompanying a shareholding of more than one half of the voting rights relating to shares in the company as a result of shares owned directly and indirectly by itself or company whereby the Group exercises control over the voting of the shares held by itself. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. 11

16 NOTE 3 - CONSOLIDATION (Continued) The Group also assesses existence of control where it does not have more than 50% of the voting power but is able to govern the financial and operating policies by virtue of de-facto control. Defacto control may arise in circumstances where the size of the group s voting rights relative to the size and dispersion of holdings of other shareholders give the group the power to govern the financial and operating policies, etc. The Group recognises any non-controlling interest in the acquiree on an acquisition- byacquisition basis, either at fair value or at the non-controlling interest s proportionate share of the recognised amounts of acquiree s identifiable net assets. Acquisition-related costs are expensed as incurred. The subsidiaries are fully consolidated from the date on which control is transferred to the Group and de-consolidated from the date that control ceases. When the Group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an investment in associate or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to the profit or loss. Inter-company transactions, balances, income and expenses on transactions between Group companies are eliminated. Profits and losses resulting from inter-company transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Changes in ownership interests in subsidiaries without change of control Transactions with non-controlling interests that do not result in gain/ (loss) of control are accounted for as equity transactions that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on purchases from/ disposals to non-controlling interests are also recorded in equity. Transactions under common control A business combination is the bringing together of separate entities or businesses into one reporting entity. Business combinations are accounted for using the purchase method in the scope of IFRS 3, Business Combinations. However, if the parties involved for the transaction are the entities under common control, the provisions stated in IFRS 3 are not applicable for the transaction, and accordingly goodwill or negative goodwill are not to be accounted for. The positive difference between the consideration given and the aggregate book value of the assets and liabilities (as of the date of the transaction) is accounted as an adjustment to equity as Contribution from shareholders. 12

17 NOTE 3 - CONSOLIDATION (Continued) The table below sets out all Subsidiaries and the SPE included in the scopes of consolidation at 31 December 2011and 2010 and shows the related controlling interests at 31 December 2011 and 2010: Total direct and indirect control by Yaşar Holding A.Ş. Subsidiaries: and its Subsidiaries (%) Pınar Et Pınar Süt DYO Matbaa (*) Bornova Matbaa Viking YBP (*) Yaşar Dış Ticaret Çamlı Altınyunus Pınar Su DYO Boya Desa Enerji Pınar Foods GmbH Pınar Anadolu (*) Yadex Kemipex DYO Balkan SRL HDF FZCO SPE: Troy Capital SA (*) - - (*) Please see Note 1. 13

18 NOTE 3 - CONSOLIDATION (Continued) b) Companies controlled by Yaşar Holding A.Ş. and Yaşar Family members, who are shareholders of Yaşar Holding A.Ş., have interests in the share capital of certain Subsidiaries, investment in associate and the SPE. In the consolidated financial statements, their shares in net assets are treated as non-controlling interest and are included in the Group's equity in the consolidated balance sheet and profits and losses attributable to non-controlling interest in the consolidated statement of comprehensive income. c) Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The Group s share of its associate s post-acquisition profits or losses is recognised in the consolidated statement of comprehensive income statement, and its share of post-acquisition movements in reserves are recognised in the respective reserves (Note 16). The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate. Unrealised gains on transactions between the Group and its associate are eliminated to the extent of the Group s interest in the associate. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount adjacent to share of profit/ (loss) of an associate in the income statement. If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. Dilution gains and losses arising in investment in associate are recognised in the consolidated statement of comprehensive income. Ownership interest % Investment in associate: in 2011 and 2010 DYO A.Ş. (Notes 1 and 16)

19 NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of Subsidiaries (including the SPE and investment in associate) are prepared as of the same reporting date, which is 31 December. The significant accounting policies, other than Group accounting, which is described in Note 3, followed in the preparation of the consolidated financial statements are summarised below: a) Related parties For the purpose of the consolidated financial statements, shareholders having control, joint control or significant influence over the Group, Yaşar Family members who are the ultimate parent of the Group, fellow subsidiaries and key management personnel, together with companies controlled, jointly controlled or significantly influenced by them are considered as and referred to as related parties (Note 11). b) Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand accounts, deposits held at call with banks other short term highly liquid investments and loans originated by the Group by providing money directly to a bank under reverse repurchase agreements with a predetermined sale price at fixed future dates of less than 3 months. Cash and cash equivalents, except for loans originated by the Group that are stated at amortised cost, are stated at their fair values (Note 9). c) Financial assets The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, available-for-sale and held-to-maturity (Note 15). The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. i. Classification - Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months; otherwise, they are classified as non-current. - Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Group s loans and receivables comprise trade receivables, due from related parties and cash and cash equivalents in the balance sheet. 15

20 NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) When the loan is originated by the Group by providing money directly to a bank, the loan is secured by Turkish government bonds and treasury bills, acquired under reverse repurchase agreements with banks with a predetermined sale price at fixed future dates and are stated at amortised cost. The accrued interest represents the apportionment to the current period of the difference between future sale prices and the amount provided by the Group. Such originated loans where original maturity at the time the money is directly transferred to the bank is less than three months, are considered and classified as cash equivalents for the purposes of cash flow statements (Note 9). - Held-to-maturity financial assets Non-derivative financial assets with fixed or determinable payments and fixed maturity that the management has the positive intention and ability to hold to maturity are classified as held-tomaturity. There is no held-to-maturity financial asset at 31 December 2011 and Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period. ii. Recognition and measurement Regular purchases and sales of financial assets are recognised on the trade-date -the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the consolidated income statement. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method. Gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss category are presented in the consolidated statement of comprehensive income within other income / (expense) in the period in which they arise. Dividend income from financial assets at fair value through profit or loss and available-for sale equity instruments is recognised in the consolidated statement of income as part of other income when the Group s right to receive payments is established. Changes in the fair value of monetary and non-monetary securities classified as available for sale are recognised in other comprehensive income. When securities classified as available for sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the income statement as gains and losses from investment securities. Interest on available-for-sale securities calculated using the effective interest method is recognised in the income statement as part of other income. 16

21 NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) d) Impairment of financial assets - Assets carried at amortised cost The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The criteria that the Group uses to determine that there is objective evidence of an impairment loss include: - Significant financial difficulty of the issuer or obligor; - A breach of contract, such as a default or delinquency in interest or principal payments; - The Group, for economic or legal reasons relating to the borrower s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider; - It becomes probable that the borrower will enter bankruptcy or other financial reorganisation; - Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including: (i) (ii) Adverse changes in the payment status of borrowers in the portfolio; and National or local economic conditions that correlate with defaults on the assets in the portfolio. The Group first assesses whether objective evidence of impairment exists. For loans and receivables category, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated statement of comprehensive income. 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 (such as an improvement in the debtor s credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated statement of comprehensive income. - Assets classified as available for sale The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity investments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss is removed from equity and recognised in the consolidated statement of comprehensive income. Impairment losses recognised in the consolidated income statement on equity instruments are not reversed through the consolidated statement of comprehensive income. 17

22 NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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, impairment losses recognised in the consolidated comprehensive income statement, on equity instruments are not reversed through the consolidated statement of comprehensive income. e) Derivative financial instruments and hedging activities i. Recognition Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. Fair values of derivatives are carried as assets when positive and as liabilities when negative. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so the nature of the item being hedged. The Group designates certain derivatives as either fair value hedge or cash flow hedge. The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values and cash flows of hedged items. ii. Measurement - Fair value hedge The Group s derivate financial instruments designated as fair value hedge, consist of foreign currency swap transactions. The Group applies fair value hedge accounting with regard to the hedged portion of its EUR denominated borrowings (Notes 19 and 20). Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the consolidated statement of income, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The gain or loss relating to the effective portion of the hedging instrument is recognised in the consolidated statement of income within finance income/ (expense). The gain or loss relating to the ineffective portion is recognised in the consolidated statement of income within other income/ (expense). If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedge item for which the effective interest method is used, is amortised to consolidated statement of income over the period to maturity. Based on the assessments performed by the Group management, the derivatives designated and qualified as fair value hedge are considered to be effective at 31 December 2011 and Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the consolidated statement of income. Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss (for example, when the forecast sale that is hedged takes place or portion related to the accrued interest). When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised, in the consolidated statement of income. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the consolidated statement of income. Based on the assessments performed by the Group management, the derivatives designated and qualified as cash flow hedges are considered to be effective at 31 December 2011 and