Electrolux 1998 Annual Report Download - page 42

Notes to the financial statements
40
Electrolux Annual Report 1998
specific sales taxes, returns and trade
discounts. In most cases, sales of projects
are not reported as operating income until
the project has been fully invoiced. In
certain exceptional cases referring to
particularly large projects extending over
several accounting years, revenue is
recognized while the project is in
progress, on condition that revenue can be
computed for the part of the project that
has been completed and that this
contributes to more accurate timing of
Group income and expense.
Costs of research and development
These costs are reported on a current
basis and are included in “Cost of goods
sold” in the consolidated income
statement.
Depreciation on tangible fixed assets
Depreciation according to plan is based
on the original acquisition value of the
asset prior to write-offs against invest-
ment reserves or their equivalents. The
depreciation period is based on the
estimated useful life of the asset. Depre-
ciation according to plan is distributed
by function, according to the way the
asset is used.
In certain cases, assets in individual
companies have been revalued at the
estimated acquisition cost to the Group
in connection with preparation of the
consolidated balance sheet. Depreci-
ation according to plan on these assets
is based on the adjusted value.
The parent company reports the
difference between book depreciation
and depreciation according to plan in
the income statement under “Allocations.”
The corresponding item in the balance
sheet is reported as “Accumulated
depreciation in excess of plan” under
“Untaxed reserves.” Accumulated
depreciation in excess of plan on real
estate has been written down against
the residual value of previous write-ups.
Depreciation in excess of plan includes
utilization of investment funds, etc. See
Note 17.
Other operating income and expense
These items include profits and losses
arising from sale of fixed assets and
divestment of operations, as well as
the share of income in associated
companies. Other operating expense
also includes depreciation of goodwill.
See Notes 3 and 4.
Items affecting comparability
This item includes only events and
transactions with effects on income that
are of significance when income for the
period is compared with that for other
periods.
Taxes
Taxes incurred by the Electrolux Group
are affected by allocations and other
fiscally motivated arrangements in
individual Group companies. They are
also affected by utilization of tax-loss
carry-forwards referring to previous
years or to acquired companies. This
applies to both Swedish and foreign
Group companies. Tax-loss carry-
forwards are recognized only if it is
probable that they will be utilized.
A comparison of the Group’s nominal
and actual tax rates is given in Note 8.
Receivables and liabilities in
foreign currency
Financial receivables and liabilities in
foreign currencies are reported in
accordance with Recommendation no.7
of the Swedish National Accounting
Standards Board. This means that such
receivables and liabilities are valued at
year-end rates. In the parent company,
unrealized exchange gains on long-term
loans are returned to the income
statement under “Allocations” and are
reported in the balance sheet under
“Untaxed reserves.”
Financial receivables and liabilities
for which forward contracts have been
arranged are reported at the spot rates
prevailing on the date of the contract.
The premium is amortized on a current
basis and reported as interest.
Loans and forward contracts
intended as hedges for equity in foreign
subsidiaries are reported in the parent
company at the rate prevailing on the
date when the loan or contract arose.
With regard to forward contracts
intended as hedges for the cross-border
flow of goods and services, accounts
receivable and accounts payable are
valued at contract rates.
Inventories
Inventories are valued at the lower of
acquisition cost and market value.
Acquisition cost is computed according
to the first-in, first-out method (FIFO).
Appropriate provisions have been made
for obsolescence.
Financial fixed assets
Shares and participations in major
associated companies are valued
according to the equity method. Other
financial fixed assets are reported at
acquisition value.
US GAAP
Information in conformity with US
GAAP (US Generally Accepted
Accounting Principles) is given in Note
25 and in the separate 20-F Form which
is submitted annually to the SEC
(Securities and Exchange Commission)
in the United States.
Note 2. NET GROUP SALES Net sales Operating income
AND OPERATING INCOME (SEKm) 1998 1997 1998 1997
Net sales and operating income, by business area
Household Appliances 84,581 81,419 4,065 2,943
Professional Appliances 11,574 11,413 723 340
Outdoor Products 19,295 18,087 1,788 1,680
Other 2,074 2,081 –76 67
Common Group costs –––436 –480
Items affecting comparability ––964 –1,896
Total 117,524 113,000 7,028 2,654
Group Parent company
Note 3.OTHER OPERATING INCOME (SEKm) 1998 1997 1998 1997
Gain on sale of:
Tangible fixed assets 117 95 2–
Operations and shares 24 54 124 45
Total 141 149 126 45