Saab 2014 Annual Report Download - page 84

FINANCIAL INFORMATION – NOTES
total expenditures. Of the estimated total revenue for an assignment, the portion
corresponding to the stage of completion is recognised in each period. The stage
of completion can also be determined in certain cases based on milestones or deli-
veries. With regard to orders that are financed to a significant extent with advance
payment from customers, the effect on interest of advance financing is recognised
in gross income. The interest amount that affected gross income is indicated in
note 13.
An anticipated loss is recognised in profit or loss as soon as it is identified.
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 repor-
ted profits are recognised as liabilities to those customers.
OPERATING EXPENSES
The income statement is classified according to function as follows:
• Cost of goods sold comprises costs for material handling and manufacturing
costs, including salary and material costs, purchased services, premises, and
the depreciation/amortisation and write-down of intangible and tangible fixed
assets other than self-financed capitalised development cost (see below). Custo-
mer-financed research and development is recognised in cost of goods sold.
• Administrative expenses relate to expenses for the Board of Directors, Group
Management and staff functions as well as expenses attributable to business
area and business unit managements.
• Marketing expenses comprise expenses for the in-house marketing and sales
organisation as well as external marketing and selling expenses.
• Research and development costs are recognised separately and comprise the
cost of self-financed new and continued product development as well as amorti-
sation of capitalised development costs; see below.
• Other operating revenue and expenses relate to secondary activities, exchange
rate differences on items of an operating nature, changes in the value of derivati-
ves of an operating nature and capital gains/losses on the sale of tangible fixed
assets. Also included at the Group level are capital gains/losses on the sale of
subsidiaries and associated companies.
Government grants
Government grants are recognised in the statement of financial 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 recognised in the statement of financial
position as a reduction in the asset’s carrying 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 differences, unrealised and realised gains on financial investments
and derivatives used in financial operations as well as financial revenue and expen-
ses related to pensions.
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 difference is recognised directly through profit or loss.
Research and development
Expenditures for research undertaken in an effort to gain new scientific or technolo-
gical knowledge are expensed when incurred.
Expenditures for development, where the research results or other knowledge is
applied to new or improved products or processes, are recognised as an asset in
the statement of financial position from the time when the product or process in the
future is expected to be technically and commercially usable, the company has suf-
ficient resources to complete development and subsequently use or sell the intan-
gible asset, and the product or process is likely to generate future economic bene-
fits. The carrying amount includes expenditures for material, direct expenditures for
salaries and, if applicable, other expenditures that are considered directly attributa-
ble to the asset. Other expenditures for development are recognised in profit or loss
as an expense when they arise. Development expenditures are recognised in the
statement of financial position at cost less accumulated amortisation and any
impairment losses. Customer-financed research and development is recognised in
cost of goods sold rather than capitalised.
Other intangible fixed assets
Other acquired intangible fixed assets, which include acquired assets such as tra-
demarks and customer relations, are recognised at cost less accumulated amorti-
sation and any impairment losses.
Amortisation
Amortisation is recognised in profit or loss over the intangible fixed assets’ estima-
ted periods of use, provided such periods can be determined. Intangible fixed
assets, excluding goodwill and other intangible fixed assets with indeterminate
periods of use, are amortised from the day they are available for use. Estimated
periods of use and amortisation methods are as follows:
• Patents, trademarks, customer relations and other technical rights: 5-10 years
on a straight line basis.
• Capitalised development costs: Self-financed capitalised development costs are
amortised based on estimated production volume, but over a maximum period
of 5 years. Production volume is set using future sales projections according to a
business plan based on identified business opportunities. Acquired development
costs are amortised on a straight line basis over a maximum of 10 years.
• Goodwill: In the Parent Company, goodwill is amortised over a maximum 20
years. Goodwill is not amortised in the Group.
Periods of use are tested annually and unfinished development work is tested for
impairment at least once a year regardless of any indications of diminished value.
TANGIBLE FIXED ASSETS
Tangible fixed assets are recognised as an asset in the statement of financial posi-
tion if it is likely that the future economic benefits will accrue to the Group and the
cost of the asset can be reliably estimated.
Tangible fixed assets are recognised at cost after deducting accumulated depre-
ciation and any write-down . Cost includes the purchase price and costs directly
attributable to putting the asset into place and condition to be utilised in accor-
dance with the purpose of the purchase. Examples of directly attributable expendit-
ures included in cost are delivery and handling, installation, title and consulting ser-
vices.
The cost of fixed assets produced by Saab includes expenditures for material,
expenditures for employee benefits and, where applicable, other production costs
considered directly attributable to the fixed asset.
The cost of tangible fixed assets includes estimated costs for disassembly and
removal of the assets as well as restoration of the location or area where these
assets are found.
The carrying amount of a tangible fixed asset is excluded from the statement of
financial position when the asset is sold or disposed of or when no future economic
benefits are expected from its use. The gain or loss that arises on the sale or dispo-
sal is comprised of the difference between the sales price and the asset’s carrying
amount less direct selling expenses. Such gains and losses are recognised as other
operating income/expenses.
Incremental expenditures
Incremental expenditures are added to cost only if it is likely that the future econo-
mic benefits tied to the incremental expenditures will accrue to the Group and the
expenditures can be reliably estimated. All other incremental expenditures are
recognised as costs in the period they arise.
The determining factor whether an incremental expenditure is added to cost is
whether it relates to the replacement of identifiable components, or parts thereof. If
so, the cost is capitalised. Even in cases where a new component is created, the
expenditure is added to cost. Any undepreciated carrying amount of replaced com-
ponents, or parts of components, is disposed of and expensed in connection with
the replacement. Repairs are expensed as incurred.
Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or pro-
duction of an asset and takes a substantial period of time to prepare for its intended
use or sale is capitalised as part of the asset’s cost when it is likely that they will lead
to future economic benefits for the Group and the expenditures can be measured
reliably. Other borrowing costs are expensed in the period in which they arise.
80 – SAAB ANNUAL REPORT 2014