Saab 2014 Annual Report Download - page 82

FINANCIAL INFORMATION – NOTES
NOTE 1 ACCOUNTING PRINCIPLES
OPERATIONS
Saab AB is a Swedish limited company with its registered address in Linköping.
The company’s Series B shares are listed on Nasdaq Stockholm’s large cap list.
The operations of Saab AB with its subsidiaries, joint ventures and associated
companies (jointly referred to as Saab or the Group) were divided into six business
areas in 2014: Aeronautics, Dynamics, Electronic Defence Systems, Security and
Defence Solutions, Support and Services, and Co mbitech. The operations in each
business area are described in note 4.
As of 1 January 2015, Saab’s operations are divided into six business areas:
Aeronautics, Dynamics, Electronic Defence Systems, Security and Defence Solu-
tions, Support and Services, and Industrial Products and Services. The new busi-
ness area Industrial Products and Services includes the independent consultancy
firm Combitech, the business units Aerostructures (previously in business area
Aeronautics) and Avionics Systems (previously in business area Electronic Defence
Systems), Saab Ventures and a development project, previously included in Saab
Corporate.
Saab has a strong position in Sweden and the large part of its sales are genera-
ted in Europe, in addition to which Saab has a local presence in South Africa, Aus-
tralia, the US and other selected countries.
On 16 February 2015, the Board of Directors and the President approved this
annual report and consolidated accounts for publication, and they will be presen-
ted to the Annual General Meeting on 15 April 2015 for adoption.
CONFORMITY TO STANDARDS AND LAWS
The consolidated accounts have been prepared in accordance with the Internatio-
nal Financial Reporting Standards (IFRS) issued by the International Accounting
Standards Board (IASB) and the interpretations of the International Financial
Reporting Interpretations Committee (IFRIC) as approved by the EU. The consoli-
dated accounts have also been prepared in accordance with the Swedish Financial
Reporting Board’s recommendation RFR 1 Supplementary Accounting Rules for
Groups, which contains certain additional disclosure requirements for Swedish
consolidated accounts prepared in accordance with IFRS.
The annual report for Saab AB has been prepared according to the Annual
Accounts Act, the Swedish Financial Reporting Board’s recommendation RFR 2
Reporting by Legal Entities and the pronouncements of the Swedish Financial
Reporting Board. Differences between the accounting principles applied by
SaabAB and the Group are the result of limitations on opportunities to apply IFRS
by the Parent Company owing to the Annual Accounts Act, the Act on Safeguar-
ding Pension Commitments and in certain cases current tax rules. Significant diffe-
rences are described below under “Significant differences between the Group’s
and the Parent Company’s accounting principles.”
ASSUMPTIONS IN THE PREPARATION OF THE FINANCIAL REPORTS
The Parent Company’s functional currency is Swedish kronor (SEK), which is also
the reporting currency for the Parent Company and for the Group. The financial
reports are presented in SEK. All amounts, unless indicated otherwise, are roun-
ded off to the nearest million.
Assets and liabilities are carried at historical cost, with the exception of certain
financial assets and liabilities, investment properties and biological assets, which
are carried at fair value or amortised cost. Derivatives are carried at fair value.
Non-current assets and disposal groups held for sale are carried at the lower of
their carrying amount and fair value less selling expenses at the time they were
classified as held for sale.
The preparation of the financial reports in accordance with IFRS requires the
Board of Directors and Management to make estimates and assumptions that
affect the application of the accounting principles and the carrying amounts of
assets, liabilities, revenue and expenses. Estimates and assumptions are based on
historical experience and knowledge of the industry that Saab operates in, and
under current circumstances seem reasonable. The result of these estimates and
assumptions is then used to determine the carrying amounts of assets and liabili-
ties that otherwise are not clearly indicated by other sources. Actual outcomes may
deviate from these estimates and assumptions.
Estimates and assumptions are reviewed regularly, and the effect of changed
estimates is recognised in profit or loss.
Estimates made by the Board of Directors and Management in applying the
accounting principles in compliance with IFRS that may have a significant impact
on the financial reports as well as estimates that may necessitate significant adjust-
ments in financial reports in subsequent years are described in more detail in
note2.
The accounting principles described below for the Group have been applied
consistently for all periods presented in the Group’s financial reports, unless
otherwise indicated below.
APPLICATION OF NEW AND REVISED ACCOUNTING RULES
IASB and IFRIC have issued and the EU has adopted the following new and revi-
sed standards, which apply as of the fiscal year 2014:
• IFRS 10 Consolidated Financial Statements, additional guidance for situations
where control is difficult to assess.
• IFRS 11 Joint Arrangements, focusing on rights and obligations rather than an
arrangement’s legal structure. There are two types of joint arrangements: joint
operations and joint ventures. Joint operations are recognised based on the
holder’s share of assets, liabilities, revenue and expenses. Joint ventures are
recognised according to the equity method. The proportional method is no
longer permitted.
• IFRS 12 Disclosure of Interests in Other Entities, comprising disclosure require-
ments for subsidiaries, joint arrangements, associated companies and unconso-
lidated structured entities.
• IAS 28 (amended 2011) Investments in Associates and Joint Ventures, contain-
ing requirements on the recognition of joint ventures and associated companies
according to the equity method.
• Amendments to IAS 32 Financial Instruments: Presentation, IAS 36 Impairment
of Assets, and IAS 39 Financial Instruments: Recognition and Measurement will,
for Saabs part, only lead to minor changes to disclosures.
The effects of amendments to IFRS 11 are reported in the annual report for 2013
and in note 22 in this annual report. Other new and amended standards and inter-
pretations have not had a material effect on the Group’s financial reports for 2014.
NEW AND AMENDED STANDARDS AND INTERPRETATIONS
THAT HAVE NOT YET ENTERED INTO FORCE
IASB has issued the following new and amended standards that have not
yet entered into force:
Standards
Will apply to financial
years beginning:
IFRS 9 Financial Instruments 1 January 2018 (not adopted by EU)
IFRS 15 Revenue from Contracts
with Customers 1 January 2017 (not adopted by EU)
IFRS 15 Revenue from Contracts with Customers governs the recognition of reve-
nue. The principles that IFRS 15 are based on give users of financial statements
more useful information on the company’s revenue. The expanded disclosure obli-
gation means that information must be provided on the nature, timing and uncerta-
inty of revenue and cash flows arising from contracts with customers. According to
IFRS 15, revenue is recognised when customers obtain control over purchased
goods or services and are able to use and obtain benefits from the goods or servi-
ces. IFRS 15 replaces IAS 18 Revenue and IAS 11 Construction Contracts. Saab
has not yet evaluated the effects of the introduction of the standard.
OPERATING SEGMENTS
Segment information is presented based on management’s view, and operating
segments are identified based on internal reporting to the company’s chief opera-
ting decision maker. Saab has identified the Chief Executive Officer as its chief
operating decision maker, while the internal reports used by the CEO to oversee
operations and make decisions on allocating resources serve as the basis of the
information presented. The segments are monitored at the operating income level.
The accounting principles for reportable segments conform to the principles
applied by the Group as a whole.
The Group had six reportable segments in the year:
• Aeronautics
• Dynamics
• Electronic Defence Systems
• Security and Defence Solutions
• Support and Services
• Combitech
Complementing the six segments is Corporate, which comprises Group staffs and
departments as well as other non-core operations.
Sales of goods and services between segments are made on market terms.
A detailed description of the segments, together with the factors used to identify
segments, can be found in note 4 and on pages 42–48.
78 – SAAB ANNUAL REPORT 2014