Saab 2014 Annual Report Download - page 87

FINANCIAL INFORMATION – NOTES
When the compensation terms in a plan improve, the portion of the increased
compensation attributable to the employees’ services in previous periods is
expensed through the income statement.
The obligation is estimated on the closing day, and if the calculated amount devi-
ates from the estimated commitment an actuarial gain or loss arises. All actuarial
gains and losses as of 1 January 2013, the date of transition to revised IAS 19, are
recognised in equity and other items in the statement of financial position. Actuarial
gains and losses after 1 January 2012 are recognised directly in other comprehen-
sive income. The same interest rate is used to calculate financial income of assets
under management as in discounting pension liabilities.
If pension obligations are lower than assets under management, this amount is
recognised as an asset.
When there is a difference in how the pension cost is determined for a legal entity
and the Group, a liability or receivable for the special employer’s contribution arises
based on this difference.
Severance
A provision is recognised in connection with termination of personnel only if the
company is obligated to terminate an employment before the customary time, e.g.,
when compensation is paid in connection with a voluntary termination offer. In
cases where the company terminates personnel, a detailed plan is drafted contain-
ing at the minimum the workplaces, positions and approximate number of individu-
als affected as well as compensation for each personnel category or position and a
schedule for the plan’s implementation.
Share-based payment
Share-based payment refers solely to remuneration to employees, including senior
executives. Share-based payment settled with the company’s shares or other
equity instruments is comprised of the difference between the fair value at the time
these plans were issued and the consideration received. This remuneration is
recognised as staff costs during the vesting period. To the extent the vesting condi-
tions in the plan are tied to market factors (such as the price of the company’s sha-
res), they are taken into consideration in determining the fair value of the plan.
Other conditions (such as earnings per share) affect staff costs during the vesting
period by changing the number of shares or share-related instruments that are
expected to be paid.
Share matching plan for employees
Saab has a Global Share Matching Plan where all permanent employees are entit-
led to participate. The payroll expenses for matching shares in the plan are recogni-
sed during the vesting period based on the fair value of the shares. The employees
pay a price for the share that corresponds to the share price on the investment
date. Three years after the investment date, employees are allotted as many shares
as they purchased three years earlier provided that they are still employees of the
Saab Group and that the shares have not been sold. In certain countries, social
security expenses are paid on the value of the employee’s benefit when matching
takes place. During the vesting period, provisions are allocated for these estimated
social security expenses. Share repurchases to fulfil the commitments of Saab’s
share matching plans are recognised in equity.
In addition, a plan was introduced for senior executives entitling them to
2–5matching shares depending on the category the employee belongs to. As of
the 2011 Plan this was changed to 1-4 matching shares. In addition to the require-
ment that the employee remain employed by Saab after three years, there is also a
requirement that earnings per share grow in the range of 5 to 15 per cent on aver-
age per year during the three-year period. In April 2014 at the Annual General Mee-
ting the decision was made to modify the Performance Share Plan in order to
increase interest in the plan. See also note 37.
PROVISIONS
A provision is recognised in the statement of financial position when the Group has
a legal or informal obligation owing to an event that has occurred and it is likely that
an outflow of economic resources will be required to settle the obligation and a reli-
able estimate of the amount can be made. Where it is important when in time pay-
ment will be made, provisions are estimated by discounting projected cash flow at
a pre-tax interest rate that reflects current market estimates of the time value of
money and, where appropriate, the risks associated with the liability.
Restructuring
A provision for restructuring is recognised when a detailed, formal restructuring
plan has been established and the restructuring has either begun or been publicly
announced. No provision is made for future operating losses.
Onerous contracts
A provision for an onerous contract is recognised when anticipated benefits are
less than the unavoidable costs to fulfil the obligations as set out in the contract.
Guarantees
A provision for guarantees is normally recognised when the underlying products or
services are sold if a reliable calculation of the provision can be made. The provi-
sion is based on historical data on guarantees for the products or similar products
and an overall appraisal of possible outcomes in relation to the likelihood associa-
ted with these outcomes.
Soil remediation
In accordance with the Group’s publicly announced environmental policy and app-
licable legal requirements, periodic estimates are made of Saab’s obligations to
restore contaminated soil. Anticipated future payments are discounted to present
value and recognised as an operating expense and a provision.
CONTINGENT LIABILITIES
A contingent liability exists if there is a possible commitment stemming from events
whose occurrence is dependent on one or more uncertain future events and there
is a commitment that is not recognised as a liability or provision because it is unli-
kely that an outflow of resources will be required or the size of the obligation cannot
be estimated with sufficient reliability. Information is provided as long as the likeli-
hood of an outflow of resources is not extremely small.
TAXES
Income taxes consist of current tax and deferred tax. Income taxes are recognised
in profit or loss unless the underlying transaction is recognised in other comprehen-
sive income, whereby the related tax effect is also recognised in other comprehen-
sive income.
Current tax is the tax paid or received for the current year, applying the tax rates
that have been set or essentially set as of the closing day to taxable income and
adjusting for current tax attributable to previous periods.
Deferred tax is calculated according to the balance sheet method based on tem-
porary differences that constitute the difference between the carrying amount of
assets and liabilities and their value for tax purposes. Deductible temporary diffe-
rences are not taken into account in the initial reporting of assets and liabilities in a
transaction other than a business combination and which, at the time of the trans-
action, do not affect either the recognised or taxable result. Moreover, temporary
differences are not taken into account if they are attributable to shares in subsidia-
ries and associated companies that are not expected to be reversed within the
foreseeable future. The valuation of deferred tax is based on how the carrying
amounts of assets or liabilities are expected to be realised or settled. Deferred tax
is calculated by applying the tax rates and tax rules that have been set or essenti-
ally are set as of the closing day.
Deferred tax assets from deductible temporary differences and tax loss carry for-
wards are only recognised to the extent it is likely that they will be utilised. The value
of deferred tax assets is reduced when it is no longer considered likely that they
can be utilised. Deferred tax assets are set off against deferred tax liabilities when
the receivable and liability refer to the same tax authority.
SAAB ANNUAL REPORT 2014 – 83