Saab 2014 Annual Report Download - page 85

FINANCIAL INFORMATION – NOTES
Depreciation
Depreciation is booked on a straight-line basis based on the asset’s cost less esti-
mated residual value at the end of the period of use, over the asset’s estimated
period of use. Land is not depreciated. Component depreciation is applied, which
means that fixed assets consisting of various components or where significant
parts have different periods of use are depreciated as separate assets based on
their periods of use.
Estimated periods of use:
• Operating properties: 20–90 years
• Plant and machinery: 5–10 years
• Equipment, tools, installations and computers: 3–10 years
• Aircraft: 20–25 years
Each asset’s residual value and period of use are estimated annually. Periods of use
are unchanged compared with the previous year.
LEASE ASSETS
Lease assets mainly refer to the regional aircraft that were owned by legal entities
within Saab Aircraft Leasing. These aircraft were divested during the year, due to
which Saab’s leasing operations for this part of the portfolio ceased. For more infor-
mation, see note 18.
Leasing is classified in the consolidated accounts as either finance or operating
leasing. Finance leasing exists when the economic risks and benefits tied to owner-
ship are essentially transferred to the lessee; otherwise it is operating leasing.
BIOLOGICAL ASSETS
Biological assets in the form of forests are carried at fair value after deducting estimated
selling expenses. Fair value is based on the valuation of an independent appraiser.
INVESTMENT PROPERTIES
Investment properties are properties held to earn rental income, for capital appreci-
ation or a combination of both. Investment properties are carried in the statement
of financial position at fair value. Fair value has been determined by calculating net
rental income, which then serves as the basis of a valuation of fair value.
ASSETS HELD FOR SALE
When an asset is classified as held for sale, it means that its carrying amount will be
recovered primarily through a sale rather than through use. In order to classify a
fixed asset as an asset held for sale, the asset must be available for immediate sale
and it has to be highly likely that a sale will take place.
Immediately before classification as held for sale, the recognised value of the
assets is determined according to the Group’s accounting principles. Upon initial
classification as held for sale, assets are recognised at the lower of their carrying
amount and fair value less selling expenses.
Assets are not depreciated/amortised after they are classified as held for sale.
IMPAIRMENT
The carrying amount of fixed assets, with the exception of assets stated at fair
value, is tested on each closing day for any indication of impairment. If an indication
exists, the asset’s recoverable amount is calculated. A description of impairment
principles for available-for-sale financial assets is provided below.
For goodwill and other intangible fixed assets with an indeterminate period of use
and intangible fixed assets not yet ready for use, recoverable values are calculated
annually in the fourth quarter.
The recoverable amount of an asset is the higher of its fair value less selling expen-
ses and value in use. Value in use is measured by discounting future cash flows using
a discounting factor that takes into account the risk-free rate of interest plus supple-
mental interest corresponding to the risk associated with the specific asset.
If essentially independent cash flows cannot be isolated for individual assets, the
assets are grouped at the lowest levels where essentially independent cash flows
can be identified (cash-generating units). An impairment loss is recognised when
the carrying amount of an asset or cash-generating unit exceeds its recoverable
value. Impairment losses are charged against the income statement.
Impairment losses attributable to a cash-generating unit (pool of units) are mainly
allocated to goodwill, after which they are divided proportionately among other
assets in the unit (the pool of units).
Impairment of goodwill is not reversed. Impairment losses from other assets are
reversed if a change has occurred in the assumptions that served as the basis for
determining recoverable value. Impairment is reversed only to the extent the carrying
amount of the assets following the reversal does not exceed the carrying amount that
the asset would have had if the impairment had not been recognised, taking into
account the depreciation or amortisation that would have been recognised.
FINANCIAL ASSETS AND LIABILITIES AND
OTHER FINANCIAL INSTRUMENTS
Financial instruments recognised in the statement of financial position include, on
the asset side, liquid assets, accounts receivable, shares, loans receivable, bonds
receivable, derivatives and part of accrued income and other receivables. Liabilities
include trade accounts payable, loans payable, derivatives and certain accrued
expenses and other liabilities. Financial assets are recognised as of their settlement
date.
Financial instruments are initially recognised at cost, corresponding to the
instrument’s fair value plus transaction expenses for all financial instruments with
the exception of those in the category financial assets at fair value through profit or
loss. The instruments are subsequently recognised at fair value or amortised cost,
depending on how they have been classified as follows. The fair value of listed
financial assets and liabilities is determined using market prices. Saab also applies
various valuation methods to determine the fair value of financial assets and liabili-
ties traded on an inactive market or unlisted holdings. These valuation methods are
based on the valuation of similar instruments, discounted cash flows or accepted
valuation models such as Black-Scholes. Amortised cost is determined based on
the effective interest rate calculated on the acquisition date.
A financial asset or financial liability is recognised in the statement of financial
position when the company becomes party to the instrument’s contractual terms.
Accounts receivable are recognised in the statement of financial position when an
invoice has been sent. Liabilities are recognised when the counterparty has perfor-
med and there is a contractual obligation to pay, even if an invoice has not yet been
received. Accounts payable are recognised when an invoice is received.
A financial asset is removed from the statement of financial position when the rights
in the agreement are realised, expire or the company loses control over them. The
same applies to part of a financial asset. A financial liability is removed from the state-
ment of financial position when the obligation in the agreement has been discharged
or otherwise extinguished. The same applies to part of a financial liability.
On each reporting date, Saab evaluates whether there are objective indications
that a financial asset or pool of financial assets is in need of write-down . Financial
assets and liabilities are offset and recognised as a net amount in the statement of
financial position when there is a legal right to a set-off and when the intent is to
settle the items with a net amount or to realise the asset and settle the liability at the
same time. Exceptions are made for derivatives where derivatives with positive
values are recognised as assets and derivatives with negative values are recogni-
sed as liabilities.
Financial assets and liabilities are classified in one of
the following categories:
• Financial assets and liabilities at fair value through profit or loss:
Assets and liabilities in this category are carried at fair value with changes in value
recognised in profit or loss. This category consists of two subgroups: financial
assets and liabilities held for trading and other financial assets and liabilities that
the company initially chose to recognise at fair value through profit or loss. A
financial asset is classified as held for trading if it is acquired for the purpose of
selling in the near term. Derivatives are always recognised at fair value through
profit or loss, unless hedge accounting is applied.
• Held-to-maturity investments:
Financial assets in this category relate to non-derivative assets with predetermi-
ned or determinable payments and scheduled maturities that the company
intends and has the ability to hold to maturity. They are valued at amortised cost.
• Loans receivable and accounts receivable:
Loans receivable and accounts receivable are non-derivative financial assets with
fixed payments which are not listed on an active market. Receivables arise when
the company provides money, goods or services directly to the debtor without
the intent to trade its claim. The category also includes acquired receivables.
Assets in this category are recognised after acquisition at amortised cost.
Accounts receivable are recognised at the amount expected to be received
based on an individual valuation. Accounts receivable have a short maturity, due
to which they are recognised at their nominal amount without discounting.
Impairment losses on accounts receivable are recognised in operating expenses.
Saab has an accounts receivable sales programme with an independent party.
When a receivable is sold, the entire credit risk is transferred to the counterparty,
because of which the proceeds received are recognised as liquid assets. Other
receivables are receivables that arise when the company provides money without
the intent to trade its claim.
• Available-for-sale financial assets:
Available-for-sale financial assets are those assets that are available for sale or
are not classified in any of the other categories of financial assets. These assets
are measured at fair value. Changes in value are recognised directly in other
comprehensive income. When assets are sold the cumulative value changes are
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