Saab 2011 Annual Report Download - page 88

Eliminated transactions
Intra-Group receivables and liabilities, revenue or expenses, and gains or
losses that arise from transactions between Group companies are eliminated
in their entirety in the preparation of the consolidated accounts.
Gains that arise from transactions with associated companies and joint
ventures are eliminated to an extent corresponding to the Group’s ownership
interest in the company. Losses are eliminated in the same way as gains, but
only to the extent there that is no impairment loss.
Foreign currency
Functional currencies are the currencies in each primary economic environ-
ment where units of the Group conduct their operations.
Transactions and assets and liabilities in foreign currency
Transactions in foreign currency are recognised in the functional currency at
the exchange rate on the transaction day. Monetary assets and liabilities are
translated to the functional currency on the closing day at the exchange rate
then in eect. Exchange rate dierences that arise through these translations
are recognised in prot and loss. Non-monetary assets and liabilities recog-
nised at fair value are translated to the functional currency at the rate in eect
at the time of valuation at fair value. Changes in exchange rates are then rec-
ognised in the same way as other changes in value of the asset or liability.
Translation of nancial reports of foreign operations to 
Assets and liabilities in operations with a functional currency other than 
are translated to  at the closing day exchange rate. Revenue and expenses
in foreign operations are translated to  at the average rate. Translation dif-
ferences that arise through currency translations are recognised directly in
other comprehensive income. e amount is recognised separately as a trans-
lation reserve in equity.
Revenue
Revenue is measured at the fair value of what is received or will be received
aer deducting sales tax, returns, discounts or other similar deductions.
Sales of goods
Revenue from the sale of goods is recognised in prot or loss when the signi-
cant risks and benets associated with ownership have transferred to the buyer,
when it is considered likely that payment will be received and the revenue and
related expenses can be calculated reliably.
Service assignments
Revenue from service assignments is recognised when the services are ren-
dered. Revenue from services rendered as part of xed-price contracts is rec-
ognised in accordance with the principles that apply to long-term customer
contracts; see below. Revenue is recognised only if it is likely that the eco-
nomic benets will accrue to the Group.
Long-term customer contracts
A large part of the Group’s operations comprises long-term customer con-
tracts. Long-term customer contracts relate to the development and manu-
facture of complex systems that stretch over several reporting periods. When
such contracts concern development and hardware that can be reliably calcu-
lated, revenue and expenditures attributable to the assignment are recognised
in the consolidated income statement in relation to the assignment’s stage of
completion, i.e., according to the percentage of completion method.
e stage of completion is based on a determination of the relationship
between expenditures incurred for services rendered as of the closing day
and estimated total expenditures. Of the estimated total revenue for an
assignment, the portion corresponding to the stage of completion is recog-
nised in each period. e stage of completion can also be determined in cer-
tain cases based on milestones or deliveries. With regard to orders that are
nanced to a signicant extent with advance payment from customers, the
eect on interest of advance nancing is recognised in gross income. e
interest amount that aected gross income is indicated in Note .
An anticipated loss is recognised in prot or loss as soon as it is identied.
Recognised subcontracting revenue for which the customer has not yet
been invoiced is recognised as a receivable from that customer. All projects in
progress from customers for whom invoiced amounts exceed project
expenses and reported prots are recognised as liabilities to those customers.
Operating expenses
e income statement is classied according to function as follows:
t Cost of goods sold comprises costs for material handling and manufac-
turing costs, including salary and material costs, purchased services,
premises, and the depreciation/amortisation and impairment of intan-
gible and tangible xed assets. Customer-nanced research and devel-
opment is recognised in cost of goods sold.
t Administrative expenses relate to expenses for the Board of Directors,
Group Management and sta functions.
t Marketing expenses comprise expenses for the in-house marketing and
sales organisation as well as external marketing and selling expenses.
t Research and development costs are recognised separately and com-
prise the cost of self-nanced new and continued product development
as well as amortisation of capitalised development costs; see below.
t Other operating revenue and expenses relate to secondary activities, ex-
change rate dierences on items of an operating nature, changes in the
value of derivatives of an operating nature and capital gains/losses on
the sale of tangible xed assets. Also included at the Group level are cap-
ital gains/losses on the sale of subsidiaries and associated companies.
Government grants
Government grants are recognised in the statement of nancial position as
prepaid or accrued income when there is reasonable certainty that the grant
will be received and that the Group will meet the conditions associated with
the grant. Grants are systematically recognised in the income statement in
the same way and over the same periods as the expenses for which the grants
are intended to compensate. Government grants related to assets are recog-
nised in the statement of nancial position as a reduction in the asset’s carry-
ing amount.
Financial revenue and expenses
Financial revenue and expenses consist of interest income on bank balances,
receivables and marketable securities, interest expenses on loans, dividends,
exchange rate dierences, unrealised and realised gains on nancial invest-
ments, amortisation of actuarial gains and losses on pensions, and derivatives
used in nancial operations.
Intangible fixed assets
Goodwill
Goodwill is distributed among cash-generating units and tested annually for
impairment in the fourth quarter. Goodwill arising through the acquisition of
associated companies is included in the carrying amount of the shares in the
associated company.
In acquisitions where the cost is less than, on the one hand, the net of the
cost of the Group company’s shares, the value of non-controlling interests in
the acquired company and the fair value of the previously owned interest and,
on the other, the carrying amount of the acquired assets and assumed liabilities
in the acquisition analysis, the dierence is recognised directly through prot
or loss.
Research and development
Expenditures for research undertaken in an eort to gain new scientic or
technological knowledge are expensed when incurred.
Expenditures for development, where the research results or other knowl-
edge is applied to new or improved products or processes, are recognised as
an asset in the statement of nancial position from the time when the prod-
uct or process in the future is expected to be technically and commercially
usable, the company has sucient resources to complete development and
subsequently use or sell the intangible asset, and the product or process is
likely to generate future economic benets. e carrying amount includes
expenditures for material, direct expenditures for salaries and, if applicable,
other expenditures that are considered directly attributable to the asset.
Other expenditures for development are recognised in prot for loss as an
expense when they arise. Development expenditures are recognised in the
statement of nancial position at cost less accumulated amortisation and any
FINANCIAL INFORMATION > NOTES
84 SAAB ANNUAL REPORT 2011