The financial statements for Norfund consist of the following:

  • Income statement
  • Balance sheet
  • Cash flow statement
  • Notes

The financial statements, which are prepared by the Board of Directors and the executive management of Norfund, must be read in conjunction with the Board of Directors’ report and the auditor’s report.

Basic principles – assessment and classification

The financial statements are presented in compliance with the Norwegian Accounting Act and Norwegian generally accepted accounting principles in effect at 31 December 2021. The financial statements provide a true and fair view of assets and liabilities, financial standing and profit.

The financial statements have been prepared on the basis of fundamental principles governing historical cost accounting, comparability, the going concern assumption, congruence and prudence. Transactions are recorded at their value at the time of the transaction. Revenue is recognised when it accrues and expenses are matched with the related revenue. A more detailed account of the accounting policies is provided below. When actual figures are not available at the time the accounts are closed, generally accepted accounting principles require management to make the best possible estimate for use in the income statement and the balance sheet. Actual results could differ from these estimates.

Current assets/liabilities are recorded at the lower/higher of historical cost and fair value. The definition of fair value is estimated future sales price reduced by expected sales costs. Other assets are classified as non-current assets. Non-current assets are carried in the accounts at historical cost, with deductions for depreciation. In a portfolio such as Norfund’s, with a large share of of both listed and unlisted equities in markets of variable liquidity, there will always be substantial uncertainty associated with valuation. Investments are valued on the basis of available information, in accordance with the IPEV guidelines. If the estimated market value of an investment is lower than the historical cost, the investment will be subject to write-down.

Some exceptions are made to the general valuation rules, and these are commented upon in relevant notes. When applying the accounting policies and disclosure of transactions and other items, the “substance over form” rule is applied. Contingent losses that are probable and quantifiable are expensed. The segmentation is based on Norfund’s internal management and reporting requirements as well as on risk and earnings. Figures are presented for geographical markets, since the geographical distribution of activities is of material importance to the users of the financial statements.

The most important accounting principles used by Norfund are described below.

Principles for revenue recognition

Operating income includes dividends, gain on sale of shares/ownership interests in other companies, interest on loans made to other companies, directors’ fees and other project income.

Gains on sales of shares/ownership interests in other companies are recognised in the year in which the sale takes place. Changes in the value of funds are calculated for the individual fund as they arise. Receipts are recorded either as dividend or as reflow of capital and deducted from the book value.

Interest is recorded as and when it is estimated to be earned.

When loans to development projects are classified as problem loans, interest is taken to income on the basis of the written-down value or, if an evaluation indicates that interest cannot be expected, interest is not recorded. In the event of known losses, recorded interest is reversed.

Financial income and expenses

Interest on Norfund’s liquidity reserve in Norges Bank and other banks is recorded as financial income.

Project development expenses

Development expenses are entered on the balance sheet when it is probable that they will lead to future investments and a positive return on the investment. Determining such probabilities entails using judgement based on experience and best estimate of future developments. In view of Norfund’s investment strategy and geographical investment areas, there is uncertainty associated with expectations of future developments. In an early phase of project development, some costs will be expensed as they accrue.

Equity investments

Norfund treats its investments in other companies as current assets. In other words, the equity method is not used, even though Norfund’s shareholdings provide it with considerable influence. This is because the aim of the institution’s investments is for all or part of each investment to be exited, normally after 3-10 years. This is in accordance with Norfund’s objects and with the provisions of the Norwegian Accounting Act and generally accepted accounting practice. According to generally accepted accounting practice, such investments are temporary by their very nature and should therefore be included under current assets.

Pursuant to Norfund’s Statute 12, Norfund’s injection of capital into a portfolio company shall not exceed 35 per cent of the company’s total equity. Norfund’s share of the equity may be higher in special cases, but nonetheless such that the Fund’s total equity holding does not exceed 49 per cent of the portfolio company’s total equity.

Equity investments in companies are valued at the lower of historical cost or market value on the basis of a concrete evaluation of each investment. Individual investments are written down where this is seen to be required, according to the lowest value principle, to the lower of historical cost or assumed fair value. Norfund conducts individual valuations of all its investments. Because of the nature and volume of the investment portfolio, the management calculates estimates, makes discretionary assessments and makes assumptions that affect the book values of investments. Estimates of fair value are calculated continuously and are based on historical experience, known information and other factors that are regarded as probable and relevant on balance sheet date.

No group write-downs are made for either the company’s equity investments or its loan investments. See also the section below relating to the treatment of currency items.

When investments are exited wholly or in part, the gain/loss is calculated on the basis of the original cost in NOK. This means that realisations are a function of changes in exchange rates and the change in the value of the investment expressed in foreign currency.

By “committed investments” is meant an external future commitment for a specified amount.

Norfund often utilises various instruments – such as options, conversion options and so forth – in investment agreements in order to reduce risk. These are taken into account when valuing the individual investment.


Norfund manages two types of loans:

  • loans relating to Norfund’s investments and disbursed by Norfund (project loans)
  • loans to enterprises in developing countries that have been taken over from NORAD (loan portfolio).

Project loans are treated as current assets.

Loans are carried at amortised cost in accordance with the straight-line allocation method.

In accordance with Norfund’s strategy, the loan portfolio taken over from NORAD is classified as a current asset and carried in the accounts at historical cost, which is NOK 0. Receipts from the loan scheme are therefore treated on a cash basis and recorded as income.

When estimating write-down of loans, both the current and the anticipated future financial position of the client in question are considered. Key considerations when assessing whether the client will be able to repay the loan are for example the general market situation, company-specific factors, the risk of bankruptcy and associated collateral.

Individual assessments are made, and any write-down of the individual loans. Group write-downs are not made for the company’s loan portfolio.

There will be uncertainty associated with the valuation of the loan portfolio and associated collateral.


In some cases, Norfund issues guarantees in connection with investments. Accounting provisions are made when the likelihood of the guarantee being invoked is 50% or higher. On the balance sheet, the guarantee provision is entered under other current liabilities.

Known losses

Losses as a result of insolvency, the winding-up of a company and the like, and losses on the sale of shares are recorded as known losses.

Currency items

Monetary items are carried at the exchange rate prevailing on 31 December. Unrealised foreign exchange gains/losses on loans are included in the operating result. Unrealised gains/losses on other monetary items are recorded as financial income/expenses respectively. The assessment of changes in the value of investments (see above) also includes assessing changes caused by exchange rate movements.

In 2021 Norfund hedged its bond portfolio against USD. The portfolio consists of securities denominated in both EUR and GDP as well as USD. Futures contracts are used as a hedging instrument, with daily settlements that are not recorded on the balance sheet, but entered on the income statement as they mature.

Bank deposits and other short-term investments

Liquid assets consist of bank deposits without any kind of binding.

Other current investments consist of instruments (time deposits, loans and bonds) with a longer or shorter binding period intended for temporary investment of surplus liquidity waiting to be invested within Norfund’s mandate. Interest income from these is recorded as other financial income.

Current receivables/Accounts receivable

Current receivables, including accounts receivable, are recorded at their estimated value and adjusted for irrecoverable items.

Fixed assets

Tangible fixed assets are recorded at historical cost reduced by commercial depreciation based on the estimated economic life of the asset in question.


Rent paid under leases that are not recorded on the balance sheet is treated as an operating cost and allocated systematically over the whole term of the lease.


Norfund’s capital is divided into primary, reserve and surplus capital. This breakdown is made on the basis of the framework conditions for Norfund’s activities, which specify that the Ministry of Foreign Affairs must be notified if the institution’s losses are so great that its primary capital is affected. Any net profit is added to surplus capital, while any net losses are deducted from the surplus capital or from reserve capital if the former fund is insufficient to cover the net loss.

Government grants

Norfund receives government grants that are treated in accordance with Norwegian Accounting Standard (NRS) 4. In Norfund’s view, net recording of government grants received by the institution provides the best picture of the accounts.

Two parties are related if one party can influence the other’s decisions. Relations with related parties are regarded as normal in business.

Norfund’s related parties are mainly companies in which Norfund has invested, and which it buys services from or sells services to. Norfund’s investments are presented in a separate note in the accounts.

The company has direct transactions with a limited number of companies in its investment portfolio. There are some transactions of an administrative nature with companies we have a stake in, including Norfinance AS and KLP Norfund Investments AS. All transactions are according to separate agreements and pricing based on the arm’s length principle.

Deferred tax and tax expense

Norfund is exempt from tax pursuant to a separate section in the Taxation Act. In certain countries, Norfund is obliged to pay withholding tax on interest and dividends.

Cash flow statement

The cash flow statement is compiled using the indirect method.

Pension liabilities and costs

Norfund has pension plans known as defined benefit plans which entitle employees in Norway to defined future benefits. Pension liabilities are calculated on a straight-line earnings basis, taking into account assumptions regarding the number of years of employment, discount rate, future return on plan assets, future changes in pay, pensions and National Insurance benefits, and actuarial assumptions regarding mortality, voluntary retirement etc. The chosen principle is the IAS 19R option of NRS 6, with unamortised actuarial losses over equity.

Plan assets are stated at fair market value. Net pension liability comprises gross pension liability less the fair value of plan assets. Net pension liabilities from underfunded pension plans are included on the balance sheet as a provision, while net plan assets in overfunded schemes are included as long-term interest-free receivables if it is likely that the overfunding can be utilised. Employer’s social security contribution is made on the basis of net plan assets.

The effect of changes in pension plans with retroactive effect not conditional on future earnings is defined as an actuarial gain or loss and charged directly to the company’s equity.

Net pension costs, which consist of gross pension costs less estimated return on plan assets, are classified as an ordinary operating cost and presented as part of the payroll expenses item. All actuarial gains or losses are charged directly to the company’s equity. Employer’s social security contribution is calculated on contributions paid to the pension plans.

In 2018 the company closed its defined benefit plan and introduced defined contribution plans for new employees. At the end of year, the company therefore had two different pension plans. In addition, the company has defined contribution plans for employees at regional offices outside Norway.

Estimates and uncertainties

Determining estimates and probabilities entails using judgement based on experience and best estimate of future developments. Given Norfund’s investment strategy and geographical investment areas, there is a high degree of uncertainty associated with expectations regarding future developments. Specific areas that include an extensive amount of estimation and judgement are net asset value / valuation of equity investments, write-down of equity investments including currency adjustment and provision for losses on loans to investment projects.