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fsa:FixturesFittingsToolsAndEquipmentMember 30903021 2022-01-01 2022-12-31 fsa:InvestmentsInGroupEnterprisesMember 30903021 2021-01-01 2021-12-31 fsa:InvestmentsInGroupEnterprisesMember 30903021 2022-01-01 2022-12-31 relatedEntityIdentifier_asso_list_3 fsa:SubsidiaryMember 30903021 2022-01-01 2022-12-31 relatedEntityIdentifier_asso_list_4 fsa:SubsidiaryMember 30903021 2022-01-01 2022-12-31 fsa:DepositsLongtermInvestmentsAndReceivablesMember cmn:ConsolidatedMember 30903021 2022-01-01 2022-12-31 fsa:DepositsLongtermInvestmentsAndReceivablesMember iso4217:DKK pure Årsrapport 33771231 PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab Strandvejen 44 2900 Hellerup 2022-01-01 2021-01-01 2022-12-31 2021-12-31 30903021 EAST.DK ApS Siriusvej 17 7430 Ikast PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab 33771231 Platanvej 4 7400 Herning Denmark 96 60 25 00 herning@pwc.dk 2023-05-25 Poul Jacob Skovgaard Regnskabsklasse C, mellemstor virksomhed Revisionspåtegning The Executive Board and Board of Directors have today considered and adopted the Consolidated Financial Statements and Parent Company Financial Statements of EAST.DK ApS for the financial year 1 January - 31 December 2022. The Annual Report is prepared in accordance with the Danish Financial Statements Act. In our opinion the Financial Statements and the Consolidated Financial Statements give a true and fair view of the financial position at 31 December 2022 of the Company and the Group and of the results of the Company and Group operations and of consolidated cash flows for 2022. In our opinion, Management's Review includes a true and fair account of the matters addressed in the Review. We recommend that the Consolidated Financial Statements and Parent Company Financial Statements be adopted at the Annual General Meeting. 2023-05-25 Ikast Poul Jacob Skovgaard Executive officer Poul Jacob Skovgaard Jesper Lund Timmermann To the shareholders of EAST.DK ApS Opinion In our opinion, the Consolidated Financial Statements and the Parent Company Financial Statements give a true and fair view of the financial position of the Group and the Parent Company at 31 December 2022 and of the results of the Group’s and the Parent Company’s operations and of consolidated cash flows for the financial year 1 January - 31 December 2022 in accordance with the Danish Financial Statements Act. We have audited the Consolidated Financial Statements and the Parent Company Financial Statements of EAST.DK ApS for the financial year 1 January - 31 December 2022, which comprise income statement, balance sheet, statement of changes in equity and notes, including a summary of significant accounting policies, for both the Group and the Parent Company, as well as consolidated statement of cash flows (”the Financial Statements”). Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) and the additional requirements applicable in Denmark. Our responsibilities under those standards and requirements are further described in the ”Auditor’s responsibilities for the audit of the Financial Statements” section of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (IESBA Code) and the additional ethical requirements applicable in Denmark, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Management is responsible for the preparation of consolidated financial statements and parent company financial statements that give a true and fair view in accordance with the Danish Financial Statements Act, and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the Financial Statements, Management is responsible for assessing the Group´s and the Parent Company´s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting in preparing the Financial Statements unless Management either intends to liquidate the Group or the Parent Company or to cease operations, or has no realistic alternative but to do so. Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements. As part of an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit 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 Group´s and the Parent Company´s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. Conclude on the appropriateness of Management’s use of the going concern basis of accounting in preparing the Financial Statements and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group´s and the Parent Company´s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and the Parent Company to cease to continue as a going concern. Evaluate the overall presentation, structure and contents of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that gives a true and fair view. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the Consolidated Financial Statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Management is responsible for Management’s Review. Our opinion on the Financial Statements does not cover Management’s Review, and we do not express any form of assurance conclusion thereon. In connection with our audit of the Financial Statements, our responsibility is to read Management’s Review and, in doing so, consider whether Management’s Review is materially inconsistent with the Financial Statements or our knowledge obtained during the audit, or otherwise appears to be materially misstated. Moreover, it is our responsibility to consider whether Management’s Review provides the information required under the Danish Financial Statements Act. Based on the work we have performed, in our view, Management’s Review is in accordance with the Consolidated Financial Statements and the Parent Company Financial Statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act. We did not identify any material misstatement in Management’s Review. Herning 2023-05-25 PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab Jacob F Christiansen State Authorised Public Accountant mne18628 Mads Hornbæk State Authorised Public Accountant mne33762 67105000 54858000 46764000 -80000 -300000 -250000 41266000 31045000 24853000 59958000 50456000 37855000 78827000 64292000 58973000 17384000 30418000 28787000 -14000 60000 25000 -24937000 -24377000 -27691000 17 16 18 46.5 28.0 76.1 78.5 64.2 72.9 40.0 74.7 70.3 83.4 Key activities As in previous years, the main activity has consisted of importing and trading in textile goods. Development in the year The income statement of the Group for 2022 shows a profit of TDKK 30,340, and at 31 December 2022 the balance sheet of the Group shows positive equity of TDKK 42,816. The result for the year is considered satisfactory but is negatively affected by higher freight costs and unfavorable exchange rates. During the year the two subsidiaries EAST.EU ApS and EAST.Nordic ApS have been merged with EAST.dk ApS using the pooling-of-interests method. Foreign exchange risks Due to activities abroad the result, cash flows and equity are affected by exchange rate and interest rate developments for a number of currencies. It is EAST's policy to hedge commercial currency risks. Hedging is primarily via forward exchange contracts to hedge expected purchases within the next 12 months. There are not speculative currency dispositions. Interest rate risks As the interest-bearing net debt does not constitute a significant amount, moderate changes in the interest rate level will not have any significant, direct effect on earnings. Therefore, no interest dispositions are entered into to hedge interest rate risks. Targets and expectations for the year ahead For the coming year, a profit before tax, based on current market conditions, is expected to be DKK 30 - 40 million. External environment EAST is environmentally conscious and works continuously to reduce the environmental impact of the company's operations. The Management is aware of measures that can protect the environment and are therefore having ESG high on the agenda, as EAST wants to work with responsible and more sustainable business operations. 89913000 57940000 58773000 34760000 47777000 28664000 16178000 10546000 670000 241000 187000 9000 462000 2227000 0 2189000 41004000 26808000 42408000 22016000 0 229000 -2214000 1931000 616000 6000 616000 0 1657000 1236000 1217000 1015000 39963000 25807000 39593000 22932000 9623000 5736000 9253000 4619000 30340000 20071000 30340000 18313000 26000000 0 26000000 0 0 0 -1710000 -10125000 0 1758000 0 0 4340000 18313000 6050000 28438000 972000 953000 741000 918000 972000 953000 741000 918000 611000 323000 0 2000 432000 549000 0 0 1043000 872000 0 2000 1696000 1947000 0 0 19090000 36574000 23355000 19862000 6407000 9550000 0 0 42313000 70537000 31876000 47546000 9935000 14646000 0 1456000 89920000 142011000 78760000 100328000 92103000 143987000 79669000 115713000 0 0 0 14314000 168000 151000 168000 151000 168000 151000 168000 14465000 2183000 1976000 909000 15385000 27193000 48071000 23355000 19862000 0 0 20628000 26374000 1242000 309000 185000 0 542000 0 542000 1811000 176000 203000 627000 202000 54208000 85695000 53858000 77389000 8519000 8245000 1547000 3077000 179000 179000 179000 179000 0 1282000 0 1092000 573000 106000 0 0 0 0 0 404000 0 0 2109000 0 950000 1546000 950000 988000 950000 1546000 3059000 1392000 23955000 58264000 24540000 54561000 68000 1956000 0 0 1565000 304000 2176000 7607000 390000 2391000 0 2391000 179000 179000 179000 179000 42064000 38810000 42637000 39106000 42816000 40377000 42816000 40377000 10836000 27250000 934000 3088000 11523000 11899000 6144000 6297000 48337000 102064000 33794000 73944000 48337000 102064000 33794000 73944000 92103000 143987000 79669000 115713000 179000 1282000 106000 38810000 179000 0 1092000 39105000 0 1001000 190000 -1191000 0 0 467000 0 0 417000 0 318000 0 0 417000 319000 0 0 0 -26000000 0 0 0 -26000000 0 467000 0 0 0 -1699000 0 -1646000 0 0 -1699000 -1646000 0 0 0 242000 0 242000 0 0 0 0 0 30340000 0 -1710000 0 32050000 179000 0 573000 42064000 179000 0 0 42637000 30340000 20071000 11334000 6987000 31957000 -24530000 73631000 2528000 616000 6000 1657000 1121000 72590000 1413000 12362000 6915000 60228000 -5502000 241000 964000 650000 345000 33000 0 18000 0 0 -1135000 -906000 -174000 34309000 -52301000 -1261000 -304000 0 18300000 26000000 41250000 0 -18300000 -59048000 11355000 274000 5679000 8245000 2566000 8519000 8245000 8519000 8245000 0 0 No events materially affecting the assessment of the Annual Report have occurred after the balance sheet date. 41844000 24739000 15159000 9373000 1049000 1223000 916000 1087000 4884000 2702000 103000 86000 47777000 28664000 16178000 10546000 221 116 12 11 214000 11000 185000 0 456000 230000 2000 9000 606000 0 606000 0 10000 6000 10000 0 0 0 0 73000 1657000 1236000 1217000 942000 1657000 1236000 1217000 1015000 9819000 6465000 9160000 4580000 -196000 -729000 93000 39000 9623000 5736000 9253000 4619000 1027000 918000 -11000 241000 8000 1257000 926000 74000 0 -3000 214000 185000 285000 185000 972000 741000 2063000 1219000 759000 -28000 -22000 447000 203000 -17000 2482000 1202000 940000 1740000 1217000 210000 -11000 -16000 142000 2000 314000 -17000 1871000 1202000 508000 611000 0 432000 19928000 350000 -18491000 0 0 19578000 1437000 19928000 -5614000 9828000 3572000 0 467000 106000 -1628000 4858000 0 -3850000 0 190000 -585000 -3157000 242000 -13589000 -3546000 -5614000 2109000 0 Guangzhou Trendseuro Garment Co Ltd Guangzhou, China 100 East.EU GmbH Düsseldorf, Germany 100 150000 150000 34000 34000 -16000 -16000 168000 168000 Prepayments consist of prepaid expenses concerning rent, insurance premiums, subscriptions and interest. Deferred tax asset at 1 January 309,000 -2,000 Net effect from merger and acquisition 0 0 Amounts recognised in the income statement for the year 196,000 729,000 Amounts recognised in equity for the year 737,000 -418,000 Deferred tax asset at 31 December 1,242,000 309,000 Deferred tax asset at 1 January -404,000 -2,000 Net effect from merger and acquisition -53 0 Amounts recognised in the income statement for the year -93,000 -39,000 Amounts recognised in equity for the year 735,000 -363,000 Deferred tax asset at 31 December 185,000 -404,000 The recognised tax asset comprises tax regarding intercompany profit on inventories expected to be utilised within the next year. The Company provides warranties of on some of its products and is therefore obliged to repair or replace goods which are not satisfactory. Based on previous experience in respect of the level of repairs and returns, other provisions of TDKK 950 (2021: TDKK 558) have been recognised for expected warranty claims. Other provisions 950 1546 950 1546 0 0 Derivative financial instruments contracts in the form of forward exchange contracts have been concluded. At the balance sheet date, the fair value of derivative financial instruments amounts to: Assets 0 1,699 Liabilities 1,646 0 Forward exchange contracts have been concluded to hedge future buy of goods in CNY. At the balance sheet date, the fair value of the forward exchange contracts amounts to TDKK 1,646. The forward exchange contracts have a term of 1-12 months. -616000 -6000 1657000 1236000 670000 250000 0 -229000 9623000 5736000 21327000 -9919000 33526000 -38156000 -596000 1546000 -18955000 20102000 -3345000 1897000 Charges and security Corporate mortgage totaling TDKK 20,000. which provides a mortgage on inventories, receivables from sales and services, as well as tangible fixed assets to a total carrying amount of 55,979,000 68,327,000 55,979,000 68,327,000 Rental and lease obligations Lease obligations under operating leases. Total future lease payments: Within 1 year 386,000 466,000 289,000 294,000 Between 1 and 5 years 130,000 428,000 127,000 343,000 516,000 894,000 416,000 637,000 Rent obligations, non-cancellation period 3-24 months. (2021: 3-36 months.) 5,334,000 7,860,000 1,062,000 1,542,000 Other contingent liabilities The group companies are jointly and severally liable for tax on the jointly taxed incomes etc of the Group. The total amount of corporation tax payable is disclosed in the Annual Report of East Holding ApS, which is the management company of the joint taxation purposes. Moreover, the group companies are jointly and severally liable for Danish withholding taxes by way of dividend tax, tax on royalty payments and tax on unearned income. Any subsequent adjustments of corporation taxes and withholding taxes may increase the Company's liability. Transactions The Company has chosen only to disclose transactions which have not been made on an arm's length basis in accordance with section 98(c)(7) of the Danish Financial Statements Act. Apart from the above, there have been no transactions with the Supervisory Board, the Executive Board, senior officers, significant shareholders, group enterprises or other related parties, except for intercompany transactions and normal management remuneration. The Company is included in the Group Annual Report of the Parent Company of the largest and smallest group: Name Place of registered office EAST Holding ApS Ikast, Denmark The Annual Report of EAST.DK ApS for 2022 has been prepared in accordance with the provisions of the Danish Financial Statements Act applying to medium-sized enterprises of reporting class C. The accounting policies applied remain unchanged from last year. The Consolidated Financial Statements and the Parent Company Financial Statements for 2022 are presented in TDKK. 1 Revenues are recognised in the income statement as earned. Furthermore, value adjustments of financial assets and liabilities measured at fair value or amortised cost are recognised. Moreover, all expenses incurred to achieve the earnings for the year are recognised in the income statement, including depreciation, amortisation, impairment losses and provisions as well as reversals due to changed accounting estimates of amounts that have previously been recognised in the income statement. Assets are recognised in the balance sheet when it is probable that future economic benefits attributable to the asset will flow to the Company, and the value of the asset can be measured reliably. Liabilities are recognised in the balance sheet when it is probable that future economic benefits will flow out of the Company, and the value of the liability can be measured reliably. Assets and liabilities are initially measured at cost. Subsequently, assets and liabilities are measured as described for each item below. Basis of consolidation The Consolidated Financial Statements comprise the Parent Company, EAST.DK ApS, and subsidiaries in which the Parent Company directly or indirectly holds more than 50% of the votes or in which the Parent Company, through share ownership or otherwise, exercises control. Enterprises in which the Group holds between 20% and 50% of the votes and exercises significant influence but not control are classified as associates. On consolidation, items of a uniform nature are combined. Elimination is made of intercompany income and expenses, shareholdings, dividends and accounts as well as of realised and unrealised profits and losses on transactions between the consolidated enterprises. The Parent Company's investments in the consolidated subsidiaries are set off against the Parent Company's share of the net asset value of subsidiaries stated at the time of consolidation. Business combinations Business acquisitions carried through on or after 1 July 2018 Acquisitions of subsidiaries are accounted for using the purchase method under which the identifiable assets and liabilities of the entity acquired are measured at fair value at the time of acquisition. Acquired contingent liabilities are recognised at fair value in the Consolidated Financial Statements to the extent that the value can be measured reliably. The time of acquisition is the time when the Group obtains control of the entity acquired. The cost of the entity acquired is the fair value of the consideration agreed, including consideration contingent on future events. Transaction costs directly attributable to the acquisition of subsidiaries are recognised in the income statement as incurred. Positive differences between the cost of the entity acquired and identifiable assets and liabilities are recognised as goodwill in intangible assets in the balance sheet and are amortised in the income statement on a straight-line basis over their estimated useful lives. Where the differences are negative, they are recognised immediately in the income statement. Where the purchase price allocation is not final, positive and negative differences from acquired subsidiaries due to changes to the recognition and measurement of identifiable net assets may be adjusted for up to 12 months after the time of acquisition. These adjustments are also reflected in the value of goodwill or negative goodwill, including in amortisation already made. Where cost includes contingent consideration, this is measured at fair value at the time of acquisition. Contingent consideration is subsequently measured at fair value. Any value adjustments are recognised in the income statement. In respect of step acquisitions, any previously held investments in the entity acquired are remeasured at fair value at the time of acquisition. The difference between the carrying amount of the investment previously held and the fair value is recognised in the income statement. Pooling of interests Intragroup business combinations are accounted for under the pooling-of-interests method. Under this method, the two enterprises are combined at carrying amounts, and no differences are identified. Any consideration which exceeds the carrying amount of the acquired enterprise is recognised directly in equity. The pooling-of-interests method is applied at the date of acquisition, and comparative figures have not been restated.EAST.dk ApS was merged with EAST.EU ApS and EAST.Nordic ApS during the financial year. The book value method was used, and comparative figures have not been restated. Leases in terms of which the Group assumes substantially all the risks and rewards of ownership (finance leases) are recognised in the balance sheet at the lower of the fair value of the leased asset and the net present value of the lease payments computed by applying the interest rate implicit in the lease or an alternative borrowing rate as the discount rate. Assets acquired under finance leases are depreciated and written down for impairment under the same policy as determined for the other fixed assets of the Group. The remaining lease obligation is capitalised and recognised in the balance sheet under debt, and the interest element on the lease payments is charged over the lease term to the income statement. All other leases are considered operating leases. Payments made under operating leases are recognised in the income statement on a straight-line basis over the lease term. Danish kroner is used as the presentation currency. All other currencies are regarded as foreign currencies.If currency positions are considered to hedge future cash flows, value adjustments are recognized directly in equity. Transactions in foreign currencies are translated at the exchange rates at the dates of transaction. Exchange differences arising due to differences between the transaction date rates and the rates at the dates of payment are recognised in financial income and expenses in the income statement. Where foreign exchange transactions are considered hedging of future cash flows, the value adjustments are recognised directly in equity. Receivables, payables and other monetary items in foreign currencies that have not been settled at the balance sheet date are translated at the exchange rates at the balance sheet date. Any differences between the exchange rates at the balance sheet date and the rates at the time when the receivable or the debt arose are recognised in financial income and expenses in the income statement. Fixed assets acquired in foreign currencies are measured at the transaction date rates. Derivative financial instruments are initially recognised in the balance sheet at cost and are subsequently remeasured at their fair values. Positive and negative fair values of derivative financial instruments are classified as ”Other receivables” and ”Other payables”, respectively. Changes in the fair values of derivative financial instruments are recognised in the income statement unless the derivative financial instrument is designated and qualify as hedge accounting, see below. Changes in the fair values of financial instruments that are designated and qualify as fair value hedges of a recognised asset or a recognised liability are recognised in the income statement as are any changes in the fair value of the hedged asset or the hedged liability related to the hedged risk. Changes in the fair values of derivative financial instruments that are designated and qualify as hedges of expected future transactions are recognised in the fair value reserve under equity as regards the effective portion of the hedge. The ineffective portion is recognised in the income statement. If the hedged transaction results in an asset or a liability, the amount deferred in equity is transferred from equity and recognised in the cost of the asset or the liability, respectively. If the hedged transaction results in an income or an expense, the amount deferred in equity is transferred from equity to the income statement in the period in which the hedged transaction is recognised. The amount is recognised in the same item as the hedged transaction. Changes in the fair values of financial instruments that are designated and qualify as hedges of net investments in independent foreign subsidiaries or associates are recognised directly in equity as regards the effective portion of the hedge, whereas the ineffective portion is recognised in the income statement. Revenue from the sale of goods is recognised when the risks and rewards relating to the goods sold have been transferred to the purchaser, the revenue can be measured reliably and it is probable that the economic benefits relating to the sale will flow to the Group. Revenue is measured at the consideration received and is recognised exclusive of VAT and net of discounts relating to sales. Expenses for raw materials and consumables comprise the raw materials and consumables consumed to achieve the consolidated revenue for the year. Other external expenses comprise expenses for premises, sales as well as office expenses, etc. With reference to section 32 of the Danish Financial Statements Act, gross profit/loss is calculated as a summary of revenue, other operating income, expenses for raw materials and consumables and other external expenses. Staff expenses comprise wages and salaries as well as payroll expenses. Amortisation, depreciation and impairment losses comprise amortisation, depreciation and impairment of intangible assets and property, plant and equipment. Other operating income and other operating expenses comprise items of a secondary nature to the main activities of the Group, including gains and losses on the sale of intangible assets and property, plant and equipment. The item “Income from investments in subsidiaries” in the income statement includes the proportionate share of the profit for the year. Financial income and expenses are recognised in the income statement at the amounts relating to the financial year. Tax for the year consists of current tax for the year and deferred tax for the year. The tax attributable to the profit for year is recognised in the income statement, whereas the tax attributable to equity transactions is recognised directly in equity. Any changes in deferred tax due to changes to tax rates are recognised in the income statement. The Company is jointly taxed with wholly owned Danish and foreign subsidiaries.. The tax effect of the joint taxation with the subsidiaries is allocated to Danish enterprises showing profits or losses in proportion to their taxable incomes (full allocation with credit for tax losses). Rights are measured at cost less accumulated amortisation and less any accumulated impairment losses or at a lower value in use. Rights are amortised over the period of the agreements, which is 3-5 years. Property, plant and equipment are measured at cost less accumulated depreciation and less any accumulated impairment losses. Cost comprises the cost of acquisition and expenses directly related to the acquisition up until the time when the asset is ready for use. Interest expenses on loans contracted directly for financing the construction of property, plant and equipment are recognised in cost over the construction period. Depreciation based on cost reduced by any residual value is calculated on a straight-line basis over the expected useful lives of the assets, which are: Other fixtures and fittings, tools and equipment 3-5 years Leasehold improvements The fixed assets’ residual values are determined at nil. 3-5 years Depreciation period and residual value are reassessed annually. The carrying amounts of intangible assets and property, plant and equipment and investments are reviewed on an annual basis to determine whether there is any indication of impairment other than that expressed by amortisation and depreciation. If so, the asset is written down to its lower recoverable amount. Investments in subsidiaries are recognised and measured under the equity method. The item “Investments in subsidiaries” in the balance sheet include the proportionate ownership share of the net asset value of the enterprises calculated on the basis of the fair values of identifiable net assets at the time of acquisition with deduction or addition of unrealised intercompany profits or losses and with addition of the remaining value of any increases in value and goodwill calculated at the time of acquisition of the enterprises. The total net revaluation of investments in subsidiaries is transferred upon distribution of profit to “Reserve for net revaluation under the equity method“ under equity. The reserve is reduced by dividend distributed to the Parent Company and adjusted for other equity movements in the subsidiaries. Subsidiaries with a negative net asset value are recognised at DKK 0. Any legal or constructive obligation of the Parent Company to cover the negative balance of the enterprise is recognised in provisions. fixed asset investments consist of deposits. Inventories are measured at the lower of cost under the FIFO method and net realisable value. The net realisable value of inventories is calculated at the amount expected to be generated by sale of the inventories in the process of normal operations with deduction of selling expenses and costs of completion. The net realisable value is determined allowing for marketability, obsolescence and development in expected selling price. The cost of goods for resale equals landed cost. The cost of finished goods and work in progress comprises the cost of raw materials, consumables and direct labour with addition of indirect production costs. Indirect production costs comprise the cost of indirect materials and labour as well as maintenance and depreciation of the machinery, factory buildings and equipment used in the manufacturing process as well as costs of factory administration and management. Receivables are measured in the balance sheet at the lower of amortised cost and net realisable value, which corresponds to nominal value less provisions for bad debts. Prepayments comprise prepaid expenses concerning rent, insurance premiums, subscriptions and interest. Dividend distribution proposed by Management for the year is disclosed as a separate Dividend item. Provisions are recognised when - in consequence of an event occurred before or on the balance sheet date - the Group has a legal or constructive obligation and it is probable that economic benefits must be given up to settle the obligation. Other provisions include warranty obligations in respect of repair work within the warranty period of 1-2 years. Provisions are measured and recognised based on experience with guarantee work. Deferred income tax is measured using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes on the basis of the intended use of the asset and settlement of the liability, respectively. Deferred tax assets, including the tax base of tax loss carry-forwards, are measured at the value at which the asset is expected to be realised, either by elimination in tax on future earnings or by set-off against deferred tax liabilities within the same legal tax entity. Deferred tax is measured on the basis of the tax rules and tax rates that will be effective under the legislation at the balance sheet date when the deferred tax is expected to crystallise as current tax. Any changes in deferred tax due to changes to tax rates are recognised in the income statement or in equity if the deferred tax relates to items recognised in equity. Current tax liabilities and receivables are recognised in the balance sheet as the expected taxable income for the year adjusted for tax on taxable incomes for prior years and tax paid on account. Extra payments and repayment under the on-account taxation scheme are recognised in the income statement in financial income and expenses. Debts are measured at amortised cost, substantially corresponding to nominal value. The cash flow statement shows the Group’s cash flows for the year broken down by operating, investing and financing activities, changes for the year in cash and cash equivalents as well as the Group’s cash and cash equivalents at the beginning and end of the year. Cash flows from operating activities are calculated as the net profit/loss for the year adjusted for changes in working capital and non-cash operating items such as depreciation, amortisation and impairment losses, and provisions. Working capital comprises current assets less short-term debt excluding items included in cash and cash equivalents. Cash flows from investing activities comprise cash flows from acquisitions and disposals of intangible assets, property, plant and equipment as well as fixed asset investments. Cash flows from financing activities comprise cash flows from the raising and repayment of long-term debt as well as payments to and from shareholders. Cash and cash equivalents comprise ”Cash at bank and in hand”. The cash flow statement cannot be immediately derived from the published financial records. Solvency ratio Equity at year end x 100 / Total assets at year end Return on equity Net profit for the year x 100 / Average equity