Saab 2014 Annual Report Download - page 83

FINANCIAL INFORMATION – NOTES
As of 1 January 2015, Saab’s operations are divided into the following six business
areas: Aeronautics, Dynamics, Electronic Defence Systems, Security and Defence
Solutions, Support and Services, and Industrial Products and Services, which will
also be reported as operating segments. See note 50 for more information.
CLASSIFICATION OF ASSETS AND LIABILITIES
Current assets and current liabilities generally consist of amounts that can be reco-
vered or paid within twelve months of the closing day. Other assets and liabilities
are recognised as fixed assets or long-term liabilities.
CONSOLIDATION PRINCIPLES
Group companies
Group companies are companies in which Saab AB has a decisive influence through
a direct or indirect shareholding amounting to more than 50 per cent of the votes,
other than in exceptional circumstances where it can be clearly demonstrated that
such ownership does not constitute a decisive influence. Decisive influence also
exists when the parent owns not more than half of the voting power of an entity but
otherwise has a decisive influence over more than half the voting rights or the power
to govern the company’s financial and operating policies under a statute or agree-
ment. When determining whether a decisive influence exists, potential voting shares
that can be exercised or converted without delay are taken into account.
Subsidiaries and acquired operations (business combinations) are recognised
according to the purchase accounting method. This means that a business combi-
nation is treated as a transaction whereby the Group indirectly acquires the
business’s assets and takes over its liabilities and contingent liabilities. The Group’s
cost is determined through an acquisition analysis with regard to the acquisition of
operating entities. Cost is comprised of the sum of the fair value of what of is paid in
cash on the acquisition date through the assumption of liabilities or shares issued.
Contingent consideration is included in cost and recognised at its fair value on the
acquisition date. The subsequent effects of revaluations of contingent consideration
are recognised in profit or loss. Acquired identifiable assets and assumed liabilities
are initially recognised at their acquisition-date fair value. The exceptions to this prin-
ciple are acquired tax assets/liabilities, employee benefits, share-based payment and
assets held for sale, which are valued in accordance with the principles described in
the sections below for each item. Exceptions are also made for indemnification
assets and repurchased rights. Indemnification assets are valued according to the
same principle as the indemnified item. Repurchased rights are valued based on the
remaining contractual period regardless of whether other market players might con-
sider opportunities for contract extensions in connection with valuations.
Recognised goodwill consists of the difference between, on the one hand, the
cost of Group company’s interests, the value of non-controlling interests in the acqui-
red 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 ana-
lysis. Goodwill is recognised according to the section on intangible fixed assets. Non-
controlling interests are recognised on the acquisition date either at fair value or their
proportionate share of the carrying amount of the acquired company’s identified
assets and liabilities. Acquisitions of non-controlling interests are recognised as
transactions affecting the owners’ equity.
The financial reports of Group companies are included in the consolidated
accounts from the point in time when a decisive influence arises (acquisition date)
until this influence ceases. When decisive influence over the Group company ceases
but the Group retains an interest in the company, the remaining shares are initially
recognised at fair value. The gain or loss that arises is recognised in profit or loss.
Associated companies and joint ventures
Associated companies are companies over which the Group has a significant, but
not decisive, influence over operating and financial controls, usually through a share-
holding of between 20 and 50 per cent of the votes. Joint ventures are companies in
which the Group, through a cooperative agreement with one of more parties, shares
a decisive influence over operating and financial controls. As of the date that signifi-
cant influence in an associated company and shared decisive influence in a joint ven-
ture arises, the shares in the associated company or joint venture are recognised
according to the equity method in the consolidated accounts. The equity method is
applied as of the date when significant or shared decisive influence ceases.
The equity method means that the carrying amount of the shares in associated
companies and joint ventures corresponds to the Group’s share of the associated
companies’ and joint ventures’ equity based on an application of the Group’s
accounting principles as well as Group goodwill and any remaining Group surplus
or deficit values. “Share in income of associated companies and joint ventures” in
the income statement comprises the Group’s share of the net income after tax and
the non-controlling interests in associated companies and joint ventures adjusted
for any depreciation, impairment loss or dissolution of acquired surplus and deficit
values determined in the same way as for operating acquisitions. Dividends recei-
ved from associated companies and joint ventures reduce the carrying amount of
the investment.
If the Group’s share of the accumulated deficit in an associated company or joint
venture exceeds the carrying amount of the shares in the Group, the value of the
shares is reduced to nil. Losses are also offset against long-term uncollateralised
financial balances that in their economic significance represent part of the owner-
company’s net investment in the associated company or joint venture. Subsequent
losses are not recognised as a liability in the consolidated accounts as long as the
Group has not issued any guarantees to cover losses arising in the associated
company or joint venture.
When significant influence over the associated company or shared decisive influ-
ence over the joint venture ceases but the Group retains an interest in the com-
pany, the remaining shares are initially recognised at fair value. The gain or loss that
arises is recognised in profit or loss.
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 environment
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 effect.
Exchange rate differences that arise through these translations are recognised in
profit and loss. Non-monetary assets and liabilities recognised at fair value are
translated to the functional currency at the rate in effect at the time of valuation at
fair value. Changes in exchange rates are then recognised in the same way as
other changes in value of the asset or liability.
Translation of financial reports of foreign operations to SEK
Assets and liabilities in operations with a functional currency other than SEK are
translated to SEK at the closing day exchange rate. Revenue and expenses in foreign
operations are translated to SEK at the average rate. Translation differences that
arise through currency translations are recognised directly in other comprehensive
income. The amount is recognised separately as a translation reserve in equity.
REVENUE
Revenue is measured at the fair value of what is received or will be received after
deducting sales tax, returns, discounts or other similar deductions. In Saab, reve-
nue is referred to as sales in the financial reporting.
Sales of goods
Revenue from the sale of goods is recognised in profit or loss when the significant
risks and benefits 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 rendered.
Revenue from services rendered as part of fixed-price contracts is recognised in
accordance with the principles that apply to long-term customer contracts; see
below. Revenue is recognised only if it is likely that the economic benefits will
accrue to the Group.
Long-term customer contracts
A large part of the Group’s operations comprises long-term customer contracts.
Long-term customer contracts relate to the development and manufacture of com-
plex systems that stretch over several reporting periods. When such contracts
concern development and hardware that can be reliably calculated, 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., accor-
ding to the percentage of completion method.
The stage of completion is based on a determination of the relationship between
expenditures incurred for services rendered as of the closing day and estimated
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