Electrolux 2006 Annual Report Download - page 78

notes, all amounts in SEKm unless otherwise stated
and maintenance are charged to the income statement during
the period in which they are incurred. Land is not depreciated as
it is considered to have an endless useful period, but otherwise
depreciation is calculated using the straight-line method and is
based on the following estimated useful lives:
Buildings and land improvements 10–40 years
Machinery and technical installations 3–15 years
Other equipment 3–10 years
The Parent Company reports additional fi scal depreciation, per-
mitted by Swedish tax law, as appropriations in the income state-
ment. In the balance sheet, these are included in untaxed
reserves. See Note 21 on page 92.
Impairment of non-current assets
At each balance sheet date, the Group assesses whether there is
any indication that any of the company’s non-current assets are
impaired. If any such indication exists, the company estimates
the recoverable amount of the asset. The recoverable amount is
the higher of an asset’s fair value less cost to sell and value in
use. An impairment loss is recognized by the amount of which
the carrying amount of an asset exceeds its recoverable amount.
The discount rates used refl ect the cost of capital and other
fi n a ncial parameters in the country or region where the asset is in
use. For the purposes of assessing impairment, assets are
grouped in cash-generating units, which are the smallest identifi -
able groups of assets that generate cash infl ows that are largely
independent of the cash infl ows from other assets or groups of
assets.
Classifi cation of fi nancial assets
The Group classifi es its fi n ancial assets in the following catego-
ries: fi nancial assets at fair value through profi t or loss; loans and
receivables; held-to-maturity investments; and available-for-sale
fi n a ncial assets. The classifi cation depends on the purpose for
which the investments were acquired. Management determines
the classifi cation of its investments at initial recognition.
Financial assets at fair value through profi t or loss
This category has two sub-categories: fi n ancial assets held for
trading, and those designated at fair value through profi t or loss
at inception. A fi n ancial asset is classifi ed in this category if
acquired principally for the purpose of selling in the short term or
if so designated by management. Derivatives are also catego-
rized as held for trading, presented under derivatives in the bal-
ance sheet, unless they are designated as hedges. Assets in this
category are classifi ed as current assets if they either are held for
trading or are expected to be realized within 12 months of the
balance sheet date.
Loans and receivables
Loans and receivables are non-derivative fi n ancial assets with
fi x e d or determinable payments that are not quoted in an active
market. They are included in current assets, except for maturities
greater than 12 months after the balance sheet date. These are
classifi ed as non-current assets. Loans and receivables are
included in trade and other receivables in the balance sheet.
Held-to-maturity investments
Held-to-maturity investments are non-derivative fi n ancial assets
with fi x ed or determinable payments and fi x ed maturities that
management has the positive intention and ability to hold to
maturity. During the year and last year, the Group did not hold
any investments in this category.
Available-for-sale fi n ancial assets
Available-for-sale fi n ancial assets are non-derivatives that are
either designated in this category or not classifi ed in any of the
other categories. They are included in non-current assets as
fi n a ncial assets unless management intends to dispose of the
investment within 12 months of the balance sheet date.
Recognition and measurement of fi nancial assets
Regular purchases and sales of investments, fi nancial assets, are
recognized on trade-date, the date on which the Group commits
to purchase or sell the asset. Investments are initially recognized
at fair value plus transaction costs for all fi n ancial assets not car-
ried at fair value through profi t or loss. Investments are derecog-
nized when the rights to receive cash fl ows from the investments
have expired or have been transferred and the Group has trans-
ferred substantially all risks and rewards of ownership. Available-
for-sale fi nancial assets and fi n ancial assets at fair value through
profi t or loss are subsequently carried at fair value. Loans, receiv-
ables, and held-to-maturity investments are carried at amortized
cost using the effective interest method. Realized and unrealized
gains and losses arising from changes in the fair value of the fi nan-
cial assets at fair value through profi t or loss category are included in
the income statement in the period in which they arise and reported
as operating result. Unrealized gains and losses arising from
changes in the fair value of fi nancial assets classifi ed as available-
for-sale are recognized in equity. When securities classifi ed as avail-
able-for-sale are sold or impaired, the accumulated fair value adjust-
ments are included in the income statement as gains and losses
from investment securities and reported as operating result.
The fair values of quoted investments are based on current bid
prices. If the market for a fi n ancial asset is not active, the Group
establishes fair value by using valuation techniques. These
include the use of recent arm’s length transactions, reference to
other instruments that are substantially the same, discounted
cash-fl ow analysis, and option-pricing models refi ned to refl ect
the issuer’s specifi c circumstances.
The Group assesses at each balance sheet date whether there
is objective evidence that a fi n ancial asset or a group of fi nancial
assets is impaired. If any such evidence exists for available-for-
sale fi n ancial assets, the cumulative loss is removed from equity
and recognized in the income statement. Impairment losses rec-
ognized in the income statement are not reversed through the
income statement.
Assets held for sale and discontinued operations
The Group classifi es a non-current asset or disposal group as
held for sale if its carrying amount will be recovered principally
through a sale. For classifi cation as held for sale the asset or dis-
posal group must be available for immediate sale in its present
condition and its sale must be highly probable.
A discontinued operation is a component of the Group’s busi-
ness that represents a separate major line of business or geo-
graphical area of operations or is a subsidiary acquired exclu-
sively with a view to resale.
Classifi cation as a discontinued operation occurs upon dis-
posal or when the operation meets the criteria to be classifi ed as
held for sale, if earlier. A disposal group that is to be abandoned
may also qualify.
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