Electrolux 2013 Annual Report Download - page 110

Notes
Note 1 Accounting and valuation principles
Basis of preparation
The consolidated financial statements are prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the
European Union. The consolidated financial statements have been pre-
pared under the historical cost convention, as modified by revaluation of
available-for-sale financial assets and financial assets and liabilities
(including derivative instruments) at fair value through profit or loss. Some
additional information is disclosed based on the standard RFR 1 from the
Swedish Financial Reporting Board and the Swedish Annual Accounts
Act. As required by IAS 1, Electrolux companies apply uniform account-
ing rules, irrespective of national legislation, as defined in the Electrolux
Accounting Manual, which is fully compliant with IFRS. The policies set
out below have been consistently applied to all years presented with the
exception for new accounting standards where the application follows
the rules in each particular standard. For information on new standards,
see the section on new or amended accounting standards on page 111.
The Parent Company applies the same accounting principles as the
Group, except in the cases specified below in the section entitled Parent
Company accounting principles.
The financial statements were authorized for issue by the Board of
Directors on January 30, 2014. The balance sheets and income state-
ments are subject to approval by the Annual General Meeting of share-
holders on March 26, 2014.
Principles applied for consolidation
The acquisition method of accounting is used to account for the acquisi-
tion of subsidiaries by the Group, whereby the assets and liabilities and
contingent liabilities assumed in a subsidiary on the date of acquisition
are recognized and measured to determine the acquisition value to the
Group.
The cost of an acquisition is measured as the fair value of the assets
given, equity instruments issued and liabilities incurred or assumed at
the date of exchange. The consideration transferred includes the fair
value of any asset or liability resulting from a contingent consideration
arrangement. Costs directly attributable to the acquisition effort are
expensed as incurred. On an acquisition-by-acquisition basis, the Group
recognizes any non-controlling interest in the acquiree either at fair value
or at the non-controlling interest’s proportionate share of the acquiree’s
net assets.
The excess of the consideration transferred, the amount of any
non-controlling interest in the acquiree and the acquisition-date fair value
of any previous equity interest in the acquiree over the fair value of the
identifiable net assets acquired is recorded as goodwill. If the fair value of
the acquired net assets exceeds the cost of the business combination,
the acquirer must reassess the identification and measurement of the
acquired assets. Any excess remaining after that reassessment must be
recognized immediately in profit or loss.
The consolidated financial statements for the Group include the finan-
cial statements for the Parent Company and the direct and indirect-
owned subsidiaries after:
• elimination of intra-group transactions, balances and unrealized intra-
group profits and
• depreciation and amortization of acquired surplus values.
Definition of Group companies
The consolidated financial statements include AB Electrolux and all com-
panies in which the Parent Company has the power to govern the finan-
cial and operating policies, generally accompany ing a shareholding of
more than 50% of the voting rights referring to all shares and participa-
tions. When the Group ceases to have control or significant influence,
any retained interest in the entity is remeasured to its fair value, with the
change in carrying amount recognized in profit or loss.
The following applies to acquisitions and divestments:
• Companies acquired are included in the consolidated income state-
ment as of the date when Electrolux gains control.
• Companies divested are included in the consolidated income state-
ment up to and including the date when Electrolux loses control.
At year-end 2013, the Group comprised 222 (224) operating units, and
156 (157) companies.
Associated companies
Associates are all companies over which the Group has significant influ-
ence but not control, generally accompanying a shareholding of between
20 and 50% of the voting rights. Investments in associated companies
have been reported according to the equity method. This means that the
Group’s share of income after taxes in an associated company is
reported as part of the Group’s income. The Group’s share of its associ-
ates’ post-acquisition movements in other comprehensive income is rec-
ognized in other comprehensive income. Investment in an associated
company is reported initially at cost, increased, or decreased to recog-
nize the Group’s share of the profit or loss of the associated company
after the date of acquisition. When the Group’s share of losses in an
associate equals or exceeds its interest in the associate, the Group does
not recognize further losses, unless it has incurred obligations or made
payments on behalf of the associate. Gains or losses on transactions
with associated companies, if any, have been recognized to the extent of
unrelated investors’ interests in the associate.
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 val-
ued at year-end exchange rates and the exchange-rate differences are
included in income for the period, except when deferred in other compre-
hensive 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 cur-
rency.
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 opera-
tions, 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 comprehensive 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 for-
eign 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 identified
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 aggre-
gated into one reportable segment in accordance with the aggregation
criteria. The segments 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 items 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 sep-
arate 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 segments 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.
notes
108 ANNUAL REPORT 2013
All amounts in SEKm unless otherwise stated