1. Investments: converting accounts from LOCOM to fair value basis Orkla a.s., one of Norway’s…

 

1. Investments: converting accounts from LOCOM to fair value basis

Orkla a.s., one of Norway’s largest listed companies, has three main areas of activity: branded consumer goods, chemicals and financial investments. Its portfolio of investments, with a book value of NOK 11,400 million, represents over 20% of the group’s end-2001 assets. The company classifies the portfolio investments as a current asset and accounts for them at the lower of portfolio cost or market. However, it provides market value information in the notes to the accounts. Set out below are key data from its 2001 accounts. Amounts are in NOK million.

 

 

* These comprise gains and losses on disposal of investments and asset write-downs.

 

 

Required

What is the profit before tax Orkla would have reported in the three years 1999–2001 if it had accounted for its securities portfolio at fair value? What do the fair value-based profit numbers reveal about the performance of its financial investments division in these years?