Electrolux 2005 Annual Report Download - page 52

48 Electrolux Annual Report 2005
Notes to the financial statements
Amounts in SEKm, unless otherwise stated
Contents
Note Page
1 Accounting and valuation principles 48
2 Financial risk management 55
3 Segment information 57
4 Net sales and operating income 59
5 Other operating income 59
6 Other operating expenses 59
7 Items affecting comparability 59
8 Leasing 59
9 Financial income and expenses 60
10 Taxes 60
11 Intangible assets 61
12 Property, plant and equipment 62
13 Financial assets 63
14 Inventories 63
15 Other current assets 63
16 Trade receivables 63
17 Financial instruments 63
18 Other reserves 67
19 Assets pledged for
liabilities to credit institutions 67
20 Share capital and number of shares 67
21 Untaxed reserves, Parent Company 67
22 Employees and employee benefits 68
23 Other provisions 72
24 Other liabilities 72
25 Contingent liabilities 72
26 Acquired and divested operations 73
27 Remuneration to the Board of Directors,
the President and other members of
Group Management 73
28 Fees to auditors 75
29 Shares and participations 76
30 US GAAP information 77
31 Transition to IFRS 81
32 Definitions 83
Proposed distribution of earnings 84
Auditors’ report 85
Note 1 Accounting and valuation principles
Basis of preparation
The consolidated financial statements are prepared in accordance
with International Financial Reporting Standards (IFRS) as adopted by
the European Union. Some additional information is disclosed based
on the standard RR 30 from the Swedish Financial Accounting Stan-
dards Council. As required by IAS 1, Electrolux companies apply uni-
form accounting rules, irrespective of national legislation, as defined
in the Electrolux Accounting Manual, which is fully compliant with
IFRS. The policies set out below have been consistently applied to all
years presented except for those relating to the classification and
measurement of financial instruments. The Group has made use of
the exemption available under IFRS 1 to only apply IAS 32 and IAS 39
from January 1, 2005. The policies applied to financial instruments for
2004 and 2005 are disclosed separately below.
The Parent Company’s financial statements are prepared in accor-
dance with the Swedish Annual Accounts Act and the standard
RR 32 from the Swedish Financial Accounting Standards Council.
Principles applied for consolidation
The purchase method of accounting is used to account for the acqui-
sition of subsidiaries by the Group, whereby the assets and liabilities
in a subsidiary on the date of acquisition are recognized and mea-
sured to determine the acquisition value to the Group.
If the cost of the business combination exceeds the fair value of
the identifiable assets, liabilities and contingent liabilities, the differ-
ence is recognized as goodwill. If the fair value of the acquired net
assets exceeds the cost of the business combination, the acquirer
must reassess the identification and measurement of the acquired
assets. Any excess remaining after that reassessment must be recog-
nized immediately in profit or loss. The consolidated income for the
Group includes the income statements for the Parent Company and
its direct and indirect owned subsidiaries after
• elimination of intra-group transactions, balances and unrealized
intra-group profits
• depreciation and amortization of acquired surplus values.
Definition of Group companies
The consolidated financial statements include AB Electrolux and all
companies in which the Parent Company has the power to govern the
financial and operating policies, generally accompanying a sharehold-
ing of more than 50% of the voting rights referring to all shares and
participations.
The following applies to acquisitions and divestments during the
year:
• Companies acquired during the year have been included in the
consolidated income statement as of the date when Electrolux
gains control.
• Companies divested during the year have been included in the
consolidated income statement up to and including the date when
Electrolux loses control.
At year-end 2005, the Group comprised 355 (358) operating units,
and 281 (276) companies.
Associated companies
Associates are all companies over which the Group has significant
influence but not control, generally accompanying a shareholding of