Electrolux 2006 Annual Report Download - page 81

notes, all amounts in SEKm unless otherwise stated
Amendment to IAS 39 The Fair Value Option which permits,
under certain conditions, an entity to designate certain instru-
ments upon initial recognition as at fair value through profi t or
loss. The implementation of this option has not had any effect on
the consolidated fi g ures.
Amendment to IAS 39 Financial guarantee contracts. This
amendment defi nes fi nancial guarantee contracts and states that
fi n a ncial guarantee contracts issued are under the scope of IAS
39 and shall be initially recognized at fair-value and subsequently
measured at the higher of (a) the amount determined in accord-
ance with IAS 37 and (b) the amount initially recognized less,
when appropriate, cumulative amortization recognized in accord-
ance with IAS 18. This amendment has been applied as from
January 1, 2006.
IFRIC 4 Determining whether an Arrangement contains a Lease.
It requires an assessment of whether (a) fulfi llment of the arrange-
ment is dependent on the use of a specifi c asset or assets, and
(b) the arrangement conveys a right to use the asset. IFRIC 4 is
effective from January 1, 2006. IFRIC 4 has not had any effect on
the consolidated fi g ures.
IFRIC 6 Liabilities arising from Participating in a Specifi c Market-
Waste Electrical and Electronic Equipment. IFRIC 6 has been
applied as from 2005.
New Accounting principles applicable for
Electrolux as from 2007
The IASB has issued a number of new standards and interpreta-
tions as well as amendments to standards and interpretations
that are applicable for Electrolux as from January 1, 2007. While
the Group has not yet evaluated the complete effect of the imple-
mentation of the new and amended standards and interpreta-
tions, it does not expect them to have any material impact on the
Group’s fi n ancial position.
IFRS 7 Financial Instruments: Disclosures. This standard super-
sedes IAS 30 Disclosures in the Financial Statements of Banks
and Similar Financial Institutions, and states principles for pre-
senting fi n ancial assets and liabilities that complement those
included in IAS 32, Financial Instruments: Presentation and IAS
39, Financial Instruments: Recognition and Measurement. IFRS 7
is effective for annual periods beginning on or after January 1,
2007.
Amendment to IAS 1 Capital Disclosures requires that an
entity shall disclose information that enables users of its fi nancial
statement to evaluate the entity’s objectives, policies, and proc-
esses for managing capital. This amendment is effective for
annual periods beginning on or after January 1, 2007.
IFRIC 7 Applying the Restatement Approach under IAS 29,
Financial Reporting in Hyperinfl ationary Economies, which pro-
vides guidance on how to apply the requirements of IAS 29 in a
reporting period in which an entity identifi es the existence of
hyperinfl a tion in the economy of its functional currency, when
that economy was not hyperinfl ationary in the prior period. This
Interpretation is effective for annual periods beginning on or after
March 1, 2006.
IFRIC 8 Scope of IFRS 2 which states that the entity shall meas-
ure unidentifi able goods or services received as consideration for
equity instruments of the entity as the difference between the fair
value of the share-based payment and the fair value of any identi-
fi a b le goods or services received. This interpretation is effective
for annual periods beginning on or after May 1, 2006.
IFRIC 9 Reassessment of Embedded Derivatives which states
that an entity shall asses whether an embedded derivative is
required to be separated from the host contract and accounted for
as a derivative when the entity fi rst becomes a party to the con-
tract and that subsequent reassessment is prohibited unless there
is a change in the terms of the contract that signifi cantly moves the
cash fl o ws that otherwise would be required under the contract, in
which case reassessment is required. This interpretation is effec-
tive for annual periods beginning on or after June 1, 2006.
IFRIC 10 Interim fi nancial reporting and Impairment. This Inter-
pretation states that an entity shall not reverse an impairment
loss recognized in a previous interim period in respect of goodwill
or an investment in either an equity instrument or a fi n ancial
asset carried at cost. This interpretation is effective for annual
periods beginning on or after November 1, 2006.
Critical accounting policies and key sources
of estimation uncertainty
Use of estimates
Management of the Group has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
the disclosure of contingent assets and liabilities to prepare these
fi n a ncial statements in conformity with generally accepted account-
ing principles. Actual results could differ from these estimates.
The discussion and analysis of our results of operations and
fi n a ncial condition are based on our consolidated fi nancial state-
ments, which have been prepared in accordance with Interna-
tional Financial Reporting Standards (IFRS), as adopted by the
EU. The preparation of these fi n ancial statements requires man-
agement to apply certain accounting methods and policies that
may be based on diffi cult, complex or subjective judgments by
management or on estimates based on experience and assump-
tions determined to be reasonable and realistic based on the
related circumstances. The application of these estimates and
assumptions affects the reported amounts of assets and liabili-
ties and the disclosure of contingent assets and liabilities at the
balance sheet date and the reported amounts of net sales and
expenses during the reporting period. Actual results may differ
from these estimates under different assumptions or conditions.
Electrolux has summarized below the accounting policies that
require more subjective judgment of the management in making
assumptions or estimates regarding the effects of matters that
are inherently uncertain.
Asset impairment
All non-current assets, including goodwill, are evaluated for
impairment yearly or whenever events or changes in circum-
stances indicate that, the carrying amount of an asset may not be
recoverable. An impaired asset is written down to its recoverable
amount based on the best information available. Different meth-
ods have been used for this evaluation, depending on the availa-
bility of information. When available, market value has been used
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