Order on Financial Reports for Danish UCITS

Order on Financial Reports for Danish UCITS1)

Pursuant to Section 87, subsection 4, Section 95, and Section 190, subsection 6, of the Act on Investment Funds and the like, cf. Act No. 336 of 11 March 2022, as amended by Act No. 570 of 10 May 2022, the following is enacted:

Part I Scope

Chapter 1 Scope

Section 1. This Order applies to financial reports for Danish UCITS.

Subsection 2. Danish UCITS shall prepare and publish an annual report for each financial year, cf. Section 82 of the Act on Investment Funds and the like.

Subsection 3. Danish UCITS shall prepare and publish a half-yearly report, cf. Section 74.

Subsection 4. Annual and half-yearly reports shall be drawn up in Danish or English.

Section 2. The annual accounts shall contain a separate balance sheet, income statement, and notes, including a five-year summary, for each individual sub-fund. However, the statement of accounting policies may be drawn up as a joint statement for the sub-funds of a Danish UCITS, cf. Section 82, subsection 2, of the Act on Investment Funds and the like.

Subsection 2. If a sub-fund is divided into share classes, note disclosures, including the content of the five-year summary, shall be specified at the share class level, to the extent that the disclosures differ for the individual share classes.

Section 3. An accounts statement that a Danish UCITS or sub-fund prepares exclusively for its own use is not an annual report or a half-yearly report under this Order. If a Danish UCITS prepares an accounts statement that is not an annual report or a half-yearly report under this Order, it must not be designated as an annual report or half-yearly report, and it must appear in both form and content such that it cannot be confused with an annual report or half-yearly report submitted under this Order.

Section 4. The annual accounts shall be drawn up in Danish kroner or in euros. A sub-fund that issues shares in a currency other than Danish kroner or euros may draw up the annual report in this other currency, cf. Section 91 of the Act on Investment Funds and the like.

Subsection 2. If a sub-fund is divided into share classes and shares are issued in one or more share classes in a currency other than the currency in which the sub-fund's annual accounts are drawn up, the relevant note disclosures regarding these share classes, cf. Section 2, subsection 2, may be drawn up in this other currency. The exchange rate method used shall, if applicable, be disclosed in the notes.

Part II The Annual Report

Chapter 2 Classification and Presentation

General Provisions

Section 5. The balance sheet and income statement shall be presented in tabular form in accordance with Annex 2.

Subsection 2. The items in the tables in Annex 2 shall be listed separately and in the specified order. Provided that the structure of the presentation tables is maintained, a more detailed breakdown may be made if the amount in the new sub-item is material and if the nature or function of the sub-item differs from other sub-items. New items may be added if the amount for such items is material and if the nature or function of the new items differs from the other items.

Subsection 3. Items that only contain immaterial amounts may be aggregated with other items of the same nature or function.

Section 6. For each item in the balance sheet and income statement, the corresponding amounts for the preceding financial year shall be stated. If the items are not directly comparable with the preceding year's items, the latter shall be adjusted. However, the sub-fund may refrain from adjusting comparative figures if it is not practically possible. Lack of comparability or any adjustment made shall be stated and duly justified in the notes, cf. Section 37.

Subsection 2. Items in the balance sheet and income statement that do not contain any amount shall only be included if the preceding year's annual accounts contain such an item.

Subsection 3. Subsections 1 and 2 apply mutatis mutandis to note disclosures, unless otherwise stated in this Order.

The Balance Sheet

Section 7. Under asset item 1.1 "Deposits with custodian," receivables shall be included, and under liability item 4.3 "Liabilities to custodian," liabilities shall be included, except for balances relating to trade settlement, which the sub-fund has with the respective debtor custodian.

Section 8. Under asset item 5 "Derivative financial instruments," the value of derivative financial instruments with positive value shall be recorded. The value of derivative financial instruments with negative value shall be recorded under liability item 3 "Derivative financial instruments."

Section 9. Temporarily acquired properties shall be included under asset item 6.7 "Other assets." Any mortgage debt in these properties shall be included under liability item 4.5 "Mortgage debt."

Section 10. Under liability item 4.4 "Balances relating to trade settlement," liabilities relating to transactions with financial instruments that have been entered into but not yet settled shall be included.

Subsection 2. Receivables relating to unsettled transactions with financial instruments shall be recorded under asset item 6.4 "Balances relating to trade settlement."

The Income Statement

Section 11. Under income statement item 2 "Capital gains and losses," capital gains and losses as well as revaluations, both realized and unrealized, shall be recorded. The amount shall be distributed at a minimum among the asset types listed under sub-items 2.1-2.6. Under item 2.7 "Trading costs," all direct costs associated with trading financial instruments shall be recorded, except for trading costs covered by issuance and redemption proceeds.

Section 12. Under income statement item 3 "Other income" and income statement item 5 "Other expenses," income and expenses that do not fall under other items of the income statement shall be recorded, including income from lending securities and from various other sources. If the amounts under the items "Other income" or "Other expenses" are of significant importance, they shall be explained in a note.

Section 13. Under income statement item 6 "Tax," the calculated tax on the year's result, changes during the year in deferred tax assets and deferred tax liabilities, differences between the calculated expensed current tax for previous years and the actually paid or provided tax, and non-refundable tax on interest and dividends shall be recorded.

Subsection 2. Interest additions and deductions shall be recorded under income statement items 1.2 "Interest expenses" and 1.1 "Interest income," respectively.

Chapter 3 Recognition and Measurement

The Balance Sheet

General Provisions

Section 14. The balance sheet consists of recognized assets, recognized liabilities, including provided liabilities, and investors' equity, which constitutes the difference between these assets and other liabilities. Liabilities are understood as the sum of investors' equity and other recognized liabilities.

Section 15. An asset shall be recognized in the balance sheet when it is probable that future economic benefits will flow to the sub-fund, and the asset's value can be measured reliably.

Subsection 2. A liability shall be recognized in the balance sheet when it is probable that future economic benefits will flow away from the sub-fund, and the liability's value can be measured reliably.

Subsection 3. In recognizing and measuring assets and liabilities, information that emerges after the balance sheet date but before the accounts are prepared shall be taken into account if the information confirms or refutes conditions that existed at the latest on the balance sheet date.

Section 16. The fair value of an asset or liability is the quoted price in an active market for the relevant asset or liability.

Subsection 2. If no active market exists, fair value shall be measured using a suitable valuation method that incorporates all available data that market participants would be expected to consider in pricing, maximizing the use of relevant observable data and minimizing the use of unobservable data.

Section 17. Transactions carried out in a currency other than the sub-fund's functional currency shall be converted to the functional currency at the exchange rate on the transaction date.

Subsection 2. Monetary items in a currency other than the sub-fund's functional currency shall be converted to the functional currency at the rate at 16:00 GMT for the currency on the balance sheet date.

Subsection 3. Non-monetary items in a currency other than the sub-fund's functional currency shall be converted to the functional currency at the exchange rate on the transaction date if the item is recognized based on historical cost.

Subsection 4. Non-monetary items in a currency other than the sub-fund's functional currency shall be converted to the functional currency at the rate at 16:00 GMT on the balance sheet date if the item is recognized based on fair value.

Subsection 5. Exchange rate differences arising from the disposal or settlement of liabilities covered by subsections 2-4 or conversion according to subsections 1-4 shall be recognized in the income statement.

Subsection 6. If the presentation currency differs from the sub-fund's functional currency, conversion from the functional currency(ies) to the presentation currency shall follow the following rules:

1. Income statement items shall be converted at the exchange rate on the transaction date.
2. Balance sheet items shall be converted at the rate at 16:00 GMT on the balance sheet date.

Subsection 7. Exchange rate differences arising from conversion according to subsection 6 shall be recognized directly in investors' equity.

Tangible Fixed Assets

Section 18. For tangible fixed assets, including land and buildings, the provisions on recognition and measurement of tangible fixed assets in the Order on Financial Reports for Credit Institutions and Securities Dealers, etc., apply mutatis mutandis with the necessary adjustments.

Financial Instruments

Section 19. Financial assets and financial liabilities shall be recognized in the balance sheet when the sub-fund becomes subject to the contractual provisions of the financial instrument.

Section 20. A financial asset that has been sold or otherwise transferred to another party shall cease to be recognized in the balance sheet. A part of a financial asset shall cease to be recognized in the balance sheet if a uniquely defined portion of the asset has been sold or transferred.

Subsection 2. In the purchase or sale of financial assets under normal market conditions, the sub-fund shall recognize and cease recognition of the assets in the balance sheet on the trade date for all purchases and sales.

Subsection 3. Simultaneously with the recognition of the financial asset, cf. subsection 2, a liability corresponding to the agreed price shall be recognized. Similarly, upon the sale of a financial asset, an asset corresponding to the agreed price shall be recognized. This liability or asset shall cease to be recognized in the balance sheet on the settlement date.

Subsection 4. Notwithstanding subsection 1, a financial asset that is transferred in a manner implying that the sub-fund retains substantially all the risks and rewards (cash flows) associated with the asset shall be retained in the balance sheet. In such a transfer, a financial liability corresponding to the payment received in connection with the transfer shall be recognized.

Section 21. Financial liabilities cease to be recognized in the balance sheet when the liability expires, i.e., when the obligation stated in the contract is fulfilled, cancelled, or expires.

Section 22. Notwithstanding the prohibition against offsetting in Section 87, subsection 1, no. 8, of the Act on Investment Funds and the like, financial assets and liabilities shall be offset and presented with net amounts if:

1. the Danish UCITS has the right to offset against the counterparty, and
2. the Danish UCITS intends to settle the asset and the liability by offsetting or to realize the asset and settle the liability simultaneously.

Section 23. Financial instruments shall be measured at fair value both at the time of initial recognition and subsequently.

Subsection 2. Unlisted equity interests shall, however, if their fair value cannot be measured reliably, be measured at historical cost. The same applies to derivative financial instruments if their value is derived from such equity interests.

Leasing

Section 24. The lessee shall recognize a leased asset and a lease liability from the time the lessee obtains the right to use the asset. At initial recognition, the asset shall be measured at the present value of the lease liability including costs. Simultaneously, the present value of the agreed lease payments shall be recognized as a liability. In calculating the present value, the internal interest rate of the lease contract shall be used if it is possible to determine this. Otherwise, the lessee's marginal borrowing rate shall be used. The lessee may choose, but is not obliged, to recognize lease contracts regarding intangible assets. Assets leased under short-term contracts and leased assets with low value may be excluded.

Subsection 2. After initial recognition, financially leased assets shall be measured according to the principles in Section 18 based on the nature of the leased asset.

Provisions

Section 25. Provisions and other liabilities that are uncertain regarding size or timing of settlement shall be recognized as provisions when it is probable that the liability will result in a drain on the sub-fund's economic resources, and the liability can be measured reliably.

Subsection 2. Onerous contracts, which are contracts where the unavoidable costs associated with fulfilling the contractual obligations exceed the expected economic benefits, shall also be recognized as provisions.

Subsection 3. Provisions shall be measured at the best estimate of the costs necessary to fulfill the current obligation on the balance sheet date.

Subsection 4. If discounting is of significant importance to the size of a provision, it shall be measured at the present value of the costs expected to be necessary to fulfill the obligation.

Subsection 5. The discount rate used to measure the present value shall correspond to the current risk-free market rate adjusted to reflect the risks specifically associated with the liability. The discount rate must not reflect risks that are already adjusted for in the estimate of the costs necessary to fulfill the obligation, cf. subsection 3.

Section 26. Provisions shall be reviewed on each balance sheet date and adjusted so that they reflect the best current estimate. If it is no longer probable that fulfillment will result in a drain on the sub-fund's economic resources, the liability shall be reversed.

Subsection 2. A provision may only be used to cover the costs that justified the provision at initial recognition.

Section 27. Pension obligations to employees shall be recognized at the present value of the benefits that are expected to be paid based on the best possible estimate.

Subsection 2. Pension obligations shall be reviewed on each balance sheet date so that the amount recognized reflects the present value of the best current estimate. The change resulting from the remeasurement of the net liability size shall be recognized in the income statement.

Tax

Section 28. Current tax relating to the financial year and previous financial years shall, to the extent it has not been paid, be recognized as a liability. If the tax paid is greater than the current tax for the financial year and previous financial years, the difference shall be recognized as an asset. Receivables for interest and dividend tax from foreign tax authorities shall also be recognized in this item.

Subsection 2. The tax liability arising from a temporary difference between the accounting value and the tax value shall be recognized as deferred tax. If the temporary difference is negative and it is probable that it can be used to reduce future tax, a deferred tax asset shall be recognized.

The Income Statement

Section 29. The income statement consists of recognized income and expenses.

Section 30. All income shall be recognized in the income statement as it is earned, and all expenses shall be recognized as they are incurred. All revaluations, depreciation, impairments, and reversals of amounts previously recognized in the income statement shall be recognized in the income statement.

Subsection 2. The following shall be recognized directly in investors' equity:

1. Increases in the fair value of properties used by the sub-fund in its own operations, and reversals of such increases, cf. Section 19.
2. The effect of changes in recognition methods, measurement basis, or presentation currency, cf. Section 31, and the effect of correcting material errors in previous annual reports, cf. Section 33.

Change in Accounting Policies

Section 31. If the sub-fund changes methods for recognition, measurement basis, or presentation currency, all affected items, including comparative figures, note disclosures, and five-year summaries, shall, unless specific rules are established for the particular method change, be prepared as if the new practice had always been used.

Subsection 2. Subsection 1 does not apply to the extent that it is not practically possible to change items from previous financial years. In such cases, the opening balance shall be changed in accordance with the new method from the earliest possible time, and other items shall be restated consequentially.

Change in Accounting Estimates and Errors

Section 32. If amounts recognized for a previous financial year change due to a changed accounting estimate, the effect shall be recognized prospectively in a manner similar to the original estimate.

Section 33. If previous annual reports were materially affected by errors in their preparation, all affected items, including comparative figures, note disclosures, and five-year summaries, shall be prepared as if the error had not been committed.

Subsection 2. Subsection 1 does not apply to the extent that it is not practically possible to correct items from previous financial years. In such cases, the opening balance shall be changed from the earliest possible time, and other items shall be restated consequentially.

Chapter 4 Note Disclosures

General

Section 34. In addition to the disclosures required in this chapter, additional supplementary disclosures necessary to give a true and fair view shall be provided.

Section 35. Note disclosures shall, as far as possible, be presented in a systematic order. Disclosures linked to accounting items shall be given in the form of a note to the relevant accounting item. Unless otherwise stated in the individual provisions of this Order, it is the accounting values that shall be explained.

Subsection 2. The disclosures required under this chapter shall be contained in a separate part of the annual report for each individual sub-fund, which is clearly delimited and designated as "notes," cf. however Sections 36-38. If a disclosure requirement is fulfilled by including a reference under notes stating that the disclosures are given in the management report or in other parts of the annual report that do not form part of the annual accounts, the reference shall be precise and delimit the relevant disclosures from other disclosures not covered by the disclosure requirements under this chapter. The required disclosures are also subject to audit in such cases, cf. Section 92 of the Act on Investment Funds and the like.

Accounting Policies Applied

Section 36. A separate section in the annual accounts shall provide a description of all significant recognition methods and measurement bases used for the items in the balance sheet, income statement, and notes.

Subsection 2. For financial instruments, disclosures shall be given regarding the accounting practice used concerning recognition criteria and measurement bases.

Subsection 3. If the amount in an accounting item in the annual accounts has been derived from an allocation calculation, the calculation method shall be disclosed.

Subsection 4. In the event of changes in accounting practice, the following shall be disclosed:

1. the reason for the change,
2. the change made in accounting practice, including the nature of the change, and
3. the monetary effect of the change in accounting practice on items in the balance sheet and income statement for the current, previous, and future financial years, if possible.

Subsection 5. In the event of changes in accounting estimates that have an effect in the current or future financial years, the sub-fund shall disclose the nature and amount of the change made that has an effect in the current or future financial years. If it is not possible to estimate the monetary effect, the sub-fund shall disclose this.

Subsection 6. Regarding accounting errors, the nature of these shall be disclosed, as well as the monetary effect on and correction of items in the balance sheet and income statement.

Section 37. When comparative figures have been adjusted, cf. Section 6, subsection 1, the following shall be disclosed in the notes:

1. The nature of the adjustment.
2. The amount for each item that has been adjusted.
3. The reason for the adjustment.

Subsection 2. Lack of adjustment of comparative figures, cf. Section 6, subsection 1, shall be stated and justified.

Section 38. In the event of deviations in accordance with Section 87, subsection 3, of the Act on Investment Funds and the like, the requirement for note disclosures in Section 85, subsection 3, second sentence, of the Act on Investment Funds and the like applies.

Five-Year Disclosures

Section 39. Five-year summaries shall be provided for each individual sub-fund with main and key figures in accordance with Annex 4. For sub-funds with share classes, only relevant main and key figures shall be shown for the sub-fund. For the individual share class, main and key figures shall be shown in accordance with Annex 4 unless the figure is shown for the sub-fund.

Subsection 2. If the figures in the five-year summary are not comparable, the figures shall be adjusted as far as possible. Lack of comparability or any adjustment made shall be stated and duly justified.

Subsection 3. For sub-funds whose financial reporting does not cover 12 months, it shall be stated that the year's net result, the year's return in percentage, and the expense ratio are calculated and computed for a period shorter or longer than 12 months.

Subsection 4. The five-year summary or parts thereof may be omitted or cover a shorter period with the permission of the Danish Financial Supervisory Authority if, in special cases, comparable amounts cannot be prepared.

Tangible Fixed Assets

Section 40. For tangible fixed assets, including land and buildings, the disclosure requirements for tangible fixed assets in the Order on Financial Reports for Credit Institutions and Securities Dealers, etc., apply mutatis mutandis with the necessary adjustments.

Financial Instruments

Section 41. Stock-exchange listed financial instruments shall be specified in the notes with indication of name, published price, exchange rate, and price value for each individual ISIN code.

Subsection 2. The specification according to subsection 1 may be omitted if instead information is given about where the public has access upon request or in other ways to obtain this specification.

Subsection 3. Disclosures shall be given regarding the percentage distribution of financial instruments on:

1. stock-exchange listed financial instruments,
2. financial instruments listed on another regulated market,
3. newly issued financial instruments planned to be listed on a stock exchange or another regulated market, and
4. other financial instruments.

Subsection 4. Disclosures shall be given regarding...