Electrolux 2010 Annual Report Download - page 131

greater than 12 months after the balance-sheet date. These are
classified as non-current assets. Loans and receivables comprise
trade and other receivables and cash and cash equivalents in the
balance sheet.
Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets
with fixed or determinable payments and fixed maturities that
management has the positive intention and ability to hold to matu-
rity. During 2010 and 2009, the Group did not hold any invest-
ments in this category.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are
either designated in this category or not classified in any of the
other categories. They are included in non-current assets as
financial assets unless management intends to dispose of the
investment within 12 months of the balance-sheet date.
Recognition and measurement of financial assets
Regular purchases and sales of financial assets are recognized on
trade-date, the date on which the Group commits to purchase or
sell the asset. Financial assets are initially recognized at fair value
plus transaction costs except for those carried at fair value
through profit or loss. Financial assets are derecognized when the
rights to receive cash flows from the asset have expired or have
been transferred and the Group has transferred substantially all
risks and rewards of ownership. Financial assets at fair value
through profit or loss and available-for-sale financial assets are
subsequently carried at fair value. Loans, receivables, 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 financial assets
at fair value through profit or loss category are included in the income
statement in the period in which they arise. Unrealized gains and
losses arising from changes in the fair value of financial assets
classified as available-for-sale are recognized in other comprehen-
sive income. When securities classified as available-for-sale are sold
or impaired, the accumulated fair-value adjustments are included in
income for the period as gains and losses from investment securi-
ties and reported as operating result.
The fair values of quoted investments are based on current bid
prices. If the market for a financial 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-flow
analysis, and option-pricing models refined to reflect the issuer’s
specific circumstances.
The Group assesses at each balance-sheet date whether there is
objective evidence that a financial asset or a group of financial assets
is impaired. If any such evidence exists for available-for-sale financial
assets, the cumulative loss is recognized in the income for the period.
Impairment losses recognized in the income statement are not
reversed through the income statement.
Leasing
A finance lease is a lease that transfers substantially all the risks and
rewards incidental to ownership of an asset. Title may or may not
eventually be transferred. An operating lease is a lease other than a
finance lease. Assets under finance leases in which the Group is a
lessee are recognized in the balance sheet and the future leasing
payments are recognized as a borrowing. Expenses for the period
correspond to depreciation of the leased asset and interest cost for
the borrowing. The Group’s activities as a lessor are not significant.
The Group generally owns its production facilities. The Group
rents some warehouse and office premises under leasing agree-
ments and has also leasing contracts for certain office equipment.
Most leasing agreements in the Group are operational leases and
the costs are recognized directly in the income statement in the
corresponding period. Finance leases are capitalized at the incep-
tion of the lease at the lower of the fair value of the leased property
or the present value of the minimum lease payments.
Leased assets are depreciated over their useful lives. If there is
no reasonable certainty that the lessee will obtain ownership by
the end of the lease term, the assets are fully depreciated over the
shorter of the lease term or remaining useful life.
Inventories
Inventories and work in progress are valued at the lower of cost,
at normal capacity utlization, and net realizable value. Net realiz-
able value is defined as the estimated selling price in the ordinary
course of business less the estimated costs of completion and the
estimated costs necessary to make the sale at market value. The
cost of finished goods and work in progress comprises develop-
ment costs, raw materials, direct labor, tooling costs, other direct
costs and related production overheads. The cost of inventories is
assigned by using the weighted average cost formula. The cost of
inventories are recognized as expense and included in cost of
goods sold. Provisions for obsolescence are included in the value
for inventory.
Trade receivables
Trade receivables are recognized initially at fair value and subse-
quently measured at amortized cost using the effective interest
method, less provision for impairment. A provision for impairment
of trade receivables is established when there is objective evi-
dence that the Group will not be able to collect all amounts due
according to the original terms of receivables. The amount of the
provision is the difference between the asset’s carrying amount
and the present value of estimated future cash flows, discounted
at the effective interest rate. The change in amount of the provi-
sion is recognized in the income statement in selling expenses.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, bank depos-
its and other short-term highly liquid investments with a maturity
of 3 months or less.
Provisions
Provisions are recognized when the Group has a present obliga-
tion as a result of a past event, and it is probable that an outflow
of resources will be required to settle the obligation, and a reliable
estimate can be made of the amount of the obligation. The amount
recognized, as a provision is the best estimate of the expenditure
required to settle the present obligation at the balance-sheet date.
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