Electrolux 2012 Annual Report Download - page 40

annual report 2012 notes all amounts in SEKm unless otherwise stated
defined benefit liability by approximately SEK 4,800m and reduced
retained earnings by approximately SEK 4,100m. The modified
net interest calculation and the removal of the amortization of the
actuarial losses would have decreased the income for the period
by approximately SEK 235m. The standard will be applied as of
Q1, 2013, with full retrospective application.
IFRS 10 Consolidated Financial Standards, IFRS 11 Joint
Arrangements and IFRS 12 Disclosure of Interests in Other
En tities. IFRS 10 provides a single consolidation model that
identifies control as the basis for consolidation in all types of
entities.
IFRS 10 replaces IAS 27 Consolidated and Separate Financial
Statements and SIC-12 Consolidation – Special Purpose Entities.
IFRS 11 Joint Arrangements establishes principles for the finan-
cial reporting by parties to joint arrangement.
IFRS 11 supersedes IAS 31 Interests in Joint Ventures and SIC-
13 – Jointly Controlled Entities – Non-monetary Contributions by
Venturers.
IFRS 12 combines, enhances and replaces the disclosure
requirements for subsidiaries, joints arrangements, associates
and unconsolidated structured entities. The new standards will
have no immediate impact on Electrolux financial result or position
but may influence the accounting for consolidation purposes in
the future. The standards are effective from January, 2014 in the
European Union.
IFRS 9 Financial Instruments1). This standard addresses the clas-
sification and measurement of financial instruments and is likely to
affect the Group’s accounting for its financial assets and liabilities.
The Group is yet to assess IFRS 9’s full impact. The effective date
was originally for annual periods beginning on or after January 1,
2013. In 2011, IASB amended IFRS 9 and postponed the manda-
tory effective date to January 1, 2015, with early application
allowed.
New interpretations of accounting standards
The International Financial Reporting Interpretation Committee
(IFRIC) has not issued any new interpretations that are applicable
to Electrolux.
1) This amendment or replacement has not been adopted by the EU at the
writing date.
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
financial statements in conformity with IFRS. Actual results may
differ from these estimates under different assumptions or condi-
tions. Below Electrolux has summarized 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
Non-current assets, including goodwill, are evaluated for impair-
ment yearly or whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recover-
able. An impaired asset is written down to its recoverable amount
based on the best information available. Different methods have
been used for this evaluation, depending on the availability of
information. When available, market value has been used and
impairment charges have been recorded when this information
indicated that the carrying amount of an asset was not recover-
able. In the majority of cases, however, market value has not been
available, and the fair value has been estimated by using the dis-
counted cash-flow method based on expected future results. Dif-
ferences in the estimation of expected future results and the dis-
count rates used could have resulted in different asset valuations.
Property, plant and equipment are depreciated on a straight-
line basis over their estimated useful lives. Useful lives for prop-
erty, plant and equipment are estimated between 10 and 40 years
for buildings and land improvements and between 3 and 15 years
for machinery, technical installations and other equipment. The
carrying amount for property, plant and equipment at year-end
2012 amounted to SEK16,693m. The carrying amount for good-
will at year-end 2012 amounted to SEK 5,541m. Management
regularly reassesses the useful life of all significant assets. Man-
agement believes that any reasonably possible change in the key
assumptions on which the asset’s recoverable amounts are
based would not cause their carrying amounts to exceed their
recoverable amounts.
Deferred taxes
In the preparation of the financial statements, Electrolux estimates
the income taxes in each of the taxing jurisdictions in which the
Group operates as well as any deferred taxes based on tempo-
rary differences. Deferred tax assets relating mainly to tax loss
carry-forwards, energy tax-credits and temporary differences are
recognized in those cases when future taxable income is expected
to permit the recovery of those tax assets. Changes in assump-
tions in the projection of future taxable income as well as changes
in tax rates could result in significant differences in the valuation of
deferred taxes. As of December 31, 2012, Electrolux had a net
amount of SEK 2,159m recognized as deferred tax assets in
excess of deferred tax liabilities. As of December 31, 2012, the
Group had tax loss carry-forwards and other deductible tempo-
rary differences of SEK 8,455m, which have not been included in
computation of deferred tax assets.
Current taxes
Electrolux provisions for uncertain outcome of tax audits and tax
litigations are based on management’s best estimates and
recorded in the balance sheet. These estimates might differ from
the actual outcome and the timing of the potential effect on
Electrolux cash flow is normally not possible to predict.
In recent years, tax authorities have been focusing on transfer
pri cing. Transfer-pricing matters are normally very complex, include
high amounts and it might take several years to reach a conclusion.
Cont. Note 1
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