Electrolux 2012 Annual Report Download - page 35

Related party transactions
All transactions with related parties are carried out on an arm’s-
length basis.
Foreign currency translations
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions.
Monetary assets and liabilities denominated in foreign currency
are valued at year-end exchange rates and the exchange-rate
differences are included in income for the period, except when
deferred in other comprehensive income for the effective part of
qualifying net investment hedges.
The consolidated financial statements are presented in Swedish
krona (SEK), which is the Parent Company’s functional and
presentation currency.
The balance sheets of foreign subsidiaries have been translated
into SEK at year-end rates. The income statements have been
translated at the average rates for the year. Translation differences
thus arising have been included in other comprehensive income.
When the Group uses foreign exchange derivative contracts
and loans in foreign currencies in hedging certain net investments
in foreign operations, the effective portion of the exchange-rate
differences related to these contracts and loans are charged to
other comprehensive income.
When a foreign operation is partially disposed of or sold,
exchange-rate differences that were recorded in other compre-
hensive income are transferred to income for the period as part of
the gain or loss on sales.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the foreign
entity and translated at the closing rate.
Segment reporting
The Group has six reportable segments. The segments are identi-
fied from the Group’s two main business areas, Consumer
Durables and Professional Products. Consumer Durables is
divided into five operating segments, which are all identified as
separate reportable segments. In Professional Products, there are
two operating segments that are aggregated into one reportable
segment in accordance with the aggregation criteria. The seg-
ments are regularly reviewed by the President and CEO, the
Group’s chief operating decision maker.
The segments are responsible for the operating results and the
net assets used in their businesses, whereas financial net and
taxes as well as net borrowings and equity are not reported per
segment. The operating results and net assets of the segments
are consolidated using the same principles as for the total Group.
The segments consist of separate legal units as well as divisions
in multi-segment legal units where some allocations of costs and
net assets are made. Operating costs not included in the seg-
ments are shown under Group common costs, which mainly are
costs for Group functions.
Sales between segments are made on market conditions with
arm’s-length principles.
Revenue recognition
Sales are recorded net of value-added tax, specific sales taxes,
returns, and trade discounts. Revenues arise from sales of fin-
ished products and services. Sales are recognized when the sig-
nificant risks and rewards connected with ownership of the goods
have been transferred to the buyer and the Group retains neither
a continuing right to dispose of the goods, nor effective control of
those goods and when the amount of revenue can be measured
reliably. This means that sales are recorded when goods have
been put at the disposal of the customers in accordance with
agreed terms of delivery. Revenues from services are recorded
when the service, such as installation or repair of products, has
been performed. Revenues from sale of extended warranty are
recognized on a linear basis over the contract period.
Items affecting comparability
This item includes events and transactions with significant effects,
which are relevant for understanding the financial performance
when comparing income for the current period with previous
periods, including:
• Capital gains and losses from divestments of product groups
or major units
• Close-down or significant down-sizing of major units or activities
• Restructuring initiatives with a set of activities aimed at reshap-
ing a major structure or process
• Significant impairment
• Other major non-recurring costs or income
Borrowing costs
Borrowing costs that are directly attributable to the acquisition,
construction or production of qualifying assets are capitalized as
a part of the cost of those assets. Other borrowing costs are rec-
ognized in the financial net as an expense in the period in which
they are incurred.
Taxes
Deferred income tax is provided in full, using the liability method,
on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated
financial statements. However, the deferred income tax is not
accounted for if it arises from initial recognition of an asset or
liability in a transaction other than a business combination that at
the time of the transaction affects neither accounting nor taxable
profit or loss. Deferred taxes are calculated using enacted or
substantially enacted tax rates by the balance sheet date. Taxes
incurred by the Electrolux Group are affected by appropriations
and other taxable or tax-related transactions in the individual
Group companies. They are also affected by utilization of tax
losses carried forward referring to previous years or to acquired
companies. Deferred tax assets on tax losses and temporary
differences are recognized to the extent it is probable that they
will be utilized in future periods. Deferred tax assets and deferred
tax liabilities are shown net when they refer to the same taxation
authority and when a company or a group of companies, through
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