Electrolux 2012 Annual Report Download - page 41

Trade receivables
Receivables are reported net of allowances for doubtful receiv-
ables. The net value reflects the amounts that are expected to be
collected, based on circumstances known at the balance-sheet
date. Changes in circumstances such as higher than expected
defaults or changes in the financial situation of a significant cus-
tomer could lead to significantly different valuations. At year-end
2012, trade receivables, net of provisions for doubtful accounts,
amounted to SEK 18,288m. The total provision for doubtful
accounts at year-end 2012 was SEK 674m.
Post-employment benefits
Electrolux sponsors defined benefit pension plans for some of its
employees in certain countries. The pension calculations are
based on assumptions about expected return on assets, discount
rates, mortality rates and future salary increases. Changes in
assumptions affect directly the defined benefit obligation, service
cost, interest cost and expected return on assets components of
the expense. Gains and losses which result when actual returns
on assets differ from expected returns, and when actuarial liabili-
ties are adjusted due to experienced changes in assumptions, are
subject to amort ization over the expected average remaining
working life of the employees using the corridor approach.
Expected return on assets used in 2012 was 6.4% in average
based on historical results. The discount rate used to estimate
liabilities at the end of 2011 and the calculation of expenses during
2012 was 4.1% in average.
Restructuring
Restructuring charges include required write-downs of assets
and other non-cash items, as well as estimated costs for person-
nel reductions and other direct costs related to the termination of
the activity. The charges are calculated based on detailed plans
for activities that are expected to improve the Group’s cost struc-
ture and productivity. In general, the outcome of similar historical
events in previous plans are used as a guideline to minimize these
uncertainties. The total provision for restructuring at year-end
2012 was SEK 2,041m.
Warranties
As is customary in the industry in which Electrolux operates, many
of the products sold are covered by an original warranty, which is
included in the price and which extends for a predetermined
period of time. Provisions for this original warranty are estimated
based on historical data regarding service rates, cost of repairs,
etc. Additional provisions are created to cover goodwill warranty
and extended warranty. While changes in these assumptions
would result in different valuations, such changes are unlikely to
have a material impact on the Group’s results or financial situ-
ation. As of December 31, 2012, Electrolux had a provision for
warranty commitments amounting to SEK 1,359m. Revenues
from extended warranty are recognized on a linear basis over the
contract period unless there is evidence that some other method
better represents the stage of completion.
Disputes
Electrolux is involved in disputes in the ordinary course of busi-
ness. The disputes concern, among other things, product liability,
alleged defects in delivery of goods and services, patent rights
and other rights and other issues on rights and obligations in con-
nection with Electrolux operations. Such disputes may prove
costly and time consuming and may disrupt normal operations. In
addition, the outcome of complicated disputes is difficult to fore-
see. It cannot be ruled out that a disadvantageous outcome of a
dispute may prove to have a material adverse effect on the
Group’s earnings and financial position.
Parent Company accounting principles
The Parent Company has prepared its Annual Report in
compliance with Swedish Annual Accounts Act (1995:1554)
and recommendation RFR 2, Accounting for Legal Entities of
the Swedish Financial Reporting Board. RFR 2 prescribes that
the Parent Company in the Annual Report of a legal entity shall
apply all International Financial Reporting Standards and
interpreta tions approved by the EU as far as this is possible
within the framework of the Annual Accounts Act, and taking
into account the connection between reporting and taxation.
The recommendation states which exceptions from IFRS and
additions shall be made. The Parent Company applies IAS 39,
Financial Instruments.
Subsidiaries
Holdings in subsidiaries are recognized in the Parent Company
financial statements according to the cost method of accounting.
The value of subsidiaries are tested for impairment when there is
an indication of a decline in the value.
Anticipated dividends
Dividends from subsidiaries are recognized in the income state-
ment after decision by the annual general meeting in respective
subsidiary. Anticipated dividends from subsidiaries are recog-
nized in cases where the Parent Company has exclusive rights to
decide on the size of the dividend and the Parent Company has
made a decision on the size of the dividend before the Parent
Company has published its financial reports.
Taxes
The Parent Company’s financial statements recognize untaxed
reserves including deferred tax. The consolidated financial state-
ments, however, reclassify untaxed reserves to deferred tax liabil-
ity and equity.
Group contribution
Group contributions provided or received by the Parent Com-
pany, and its current tax effects are recognized as financial
items in the income statement. Shareholder contributions pro-
vided by the Parent Company are recognized in shares and
participations and as such they are subject to impairment tests
as indicated above.
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