Veidekke

Earnings Release • Apr 25, 2018

Veidekke ASA: New revenue recognition standard takes effect - IFRS 15

Veidekke ASA: New revenue recognition standard takes effect - IFRS 15

The IFRS 15 revenue recognition standard took effect on 1 January 2018. The new

standard is relevant to Veidekke's recognition of revenue from residential

projects as well as change orders and supplementary work in construction

projects. The 2017 annual accounts have been restated in accordance with the new

standard.

Residential projects in property development operations

In the financial statement, Veidekke has, in accordance with the previous

standard IAS 11, recognised revenue from residential projects on the date of

contractual delivery to the purchaser (IFRIC 15). In accordance with the new

standard, revenue from residential projects in Sweden and Denmark will be

recognised on an ongoing basis in line with estimated final profit, stage of

completion and sales ratio, while the revenue recognition principles applicable

to residential projects in Norway remain unchanged. The different revenue

recognition approaches in the different countries are due to variations in

national legislation governing residential construction and sales.

Veidekke will contine to report revenue from residential projects on a

percentage-of-completion basis in its segment accounts. This is deemed to best

reflect the company's value creation in the property segment, and ensures

consistency with Veidekke's internal reporting. Veidekke's segment accounts for

residential projects will thus be unaffected by the new revenue recognition

standard. Going forward, any difference between the financial and segment

accounts will be due solely to the Norwegian property development operations.

Implementation of the new standard has added NOK 695 million to Veidekke's

equity as at 31 December 2017. The revised financial statements for 2017 show an

increase of NOK 198 million in the company's pre-tax profit compared to the

accounts issued under the previous standard.

Change orders and supplementary work in construction operations

Under the previous standard, revenue related to unresolved claims in

construction projects was recognised based on the likely outcome of the claim

against the customer. The new standard contains more stringent requirements

concerning recognition of such revenue: it may only be recognised when it is

deemed highly probable that it will not be reversed later. The new standard will

primarily affect revenue recognition in projects where the contract may result

in different interpretations of contractual scope and calculation of

compensation. Such situations will mainly arise in the civil engineering

segment.

Projects with material unresolved claims against customers as at year-end 2017

have been revalued in accordance with the new standard. The effect is a

reduction of NOK 323 million in Veidekke's equity as at 31 December 2017. The

revised pre-tax profit for 2017 is NOK 130 million lower than in the accounts

issued pursuant to the previous standard. The accounting of change orders and

supplementary work in construction projects is identical in the segment

reporting and in the financial statements, and both sets of accounts for 2017

have been restated.

Revised group and segment-level accounting figures for 2017 are appended.

For more information, contact:

Jørgen Michelet, SVP Finance, email: jorgen.michelet@veidekke.no, tel. +

47 917 43 856

Terje Larsen, CFO, email: terje.larsen@veidekke.no, tel. + 47 906 87 851

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Veidekke is one of Scandinavia's largest construction and property development

companies. The company undertakes all types of building construction and civil

engineering contracts, develops residential projects, maintains roads, and

produces asphalt and aggregates. The company is known for its involvement and

local knowledge. Its annual turnover is NOK 32 billion, and half of its 8,000

employees own shares in the company. Veidekke is listed on the Oslo Stock

Exchange and has always posted a profit since it was founded in 1936.

This information is subject to the disclosure requirements pursuant to section

5 -12 of the Norwegian Securities Trading Act.