Electrolux 2012 Annual Report Download - page 39

transaction that is hedged results in the recognition of a non-
financial asset, for example inventory or a liability, the gains and
losses previously reported in other comprehensive income are
included in the initial measurement of the cost of the asset
or liability.
When a hedging instrument expires or is sold, or when a hedge
no longer meets the criteria for hedge accounting, any cumulative
gain or loss previously reported in other comprehensive income is
recognized when the forecast transaction is ultimately recognized
in the income statement. When a forecast transaction is no longer
to occur, the cumulative gain or loss that was reported in other
comprehensive income is immediately transferred to the income
statement within financial items or as cost of goods sold depend-
ing on the purpose of the transaction.
Net investment hedge
Hedges of net investments in foreign operations are accounted
for similarly to cash flow hedges. Any gain or loss on the hedging
instrument relating to the effective portion of the hedge is recog-
nized in other comprehensive income; the gain or loss relating to
the ineffective portion is recognized immediately in the income
statement as financial items.
Gains and losses previously reported in other comprehensive
income are included in income for the period when the foreign
operation is disposed of, or when a partial disposal occurs.
Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge account-
ing. Changes in the fair value of any derivative instruments that do
not qualify for hedge accounting are recognized immediately in
the income statement as financial items or cost of goods sold
depending on the purpose of the transaction.
Share-based compensation
For Electrolux, the share-based compensation programs are
classified as equity-settled transactions, and the cost of the
granted instrument’s fair value at grant date is recognized over
the vesting period which is 2.5 years. At each balance-sheet date,
the Group revises the estimates to the number of shares that are
expected to vest. Electrolux recognizes the impact of the revision
to original estimates, if any, in the income statement, with a cor-
responding adjustment to equity.
In addition, the Group provides for employer contributions
expected to be paid in connection with the share-based
compensation programs. The costs are charged to the income
statement over the vesting period. The provision is periodically
revalued based on the fair value of the instruments at each
closing date.
Government grants
Government grants relate to financial grants from governments,
public authorities, and similar local, national, or international bod-
ies. These are recognized at fair value when there is a reasonable
assurance that the Group will comply with the conditions
attached to them, and that the grants will be received. Govern-
ment grants are included in the balance sheet as deferred income
and recognized as income matching the associated costs the
grant is intended to compensate.
New or amended accounting standards in 2012
IFRS 7 Financial Instruments: Disclosures – Transfers of Financial
Assets (Amendment). The change will provide users with more
information about an entity’s exposure to the risks of transferred
financial assets, particularly those that involve securitisation of
financial assets. The standard has not had any impact on
Electrolux financial results or position. The standard was effective
for periods after July 1, 2011.
New or amended accounting standards after 2012
The following new standards and amendments to standards have
been issued. No significant impact on the financial result or posi-
tion is expected upon their eventual application with the exception
for IAS 19, which is described below.
IAS 1 Financial Statement Presentation: Presentation of Items of
Other Comprehensive Income (Amendments). The amendments
prescribe how to group items presented in OCI on the basis of
whether they are potentially reclassifiable to profit or loss subse-
quently. The standard will not have any impact on Electrolux finan-
cial results or position and will be applied as of Q1, 2013.
IAS 19 Employee Benefits (Amendments). IAS 19 prescribes the
accounting and disclosure by employers for employee benefits.
The amended standard requires an entity to regularly determine
the present value of defined benefit obligations and the fair value
of plan assets and to recognize the net of those values in the
financial statements as a net defined benefit liability. The
amended standard removes the option to use the corridor
approach (see page 36 for a description) presently used by
Electrolux. The standard also requires an entity to apply the dis-
count rate on the net defined benefit liability (asset) in order to
calculate the net interest expense (income). The standard
thereby removes the use of an expected return on the plan
assets. All changes in the net defined benefit liability (asset) will
be recognized as they occur, as follows: (i) service cost and net
interest in profit or loss; and (ii) remeasurement in other compre-
hensive income.
The standard will have the following preliminary impact on the
presentation of Electrolux financial results and position: All his-
torical actuarial gains or losses will be included in the measure-
ment of the net defined benefit liability. This will initially increase
the liabilities of Electrolux and reduce the equity (after deduction
for deferred tax). Future changes in the net defined benefit liability
from changes in, e.g., discount rate and mortality rate will be pre-
sented in other comprehensive income. Electrolux will classify the
defined benefit liability as a financial liability and present the net
interest on the net liability in the financial net. The removal of the
expected return will worsen the net interest with the difference
between the expected return and the discount rate applied on the
plan assets. For 2012, the changes would have increased the net
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