Saab 2010 Annual Report Download - page 113

NOTE 40
ACCRUED EXPENSES AND DEFERRED INCOME
Group Parent Company
MSEK 31-12-2010 31-12-2009 31-12-2010 31-12-2009
Accrued expenses
Vacation pay liability 807 847 607 634
Accrued project costs 782 989 451 548
Social security expenses 475 447 357 337
Expected invoices 382 468 296 354
Personnel liabilities 239 211 186 163
Accrued leasing costs 135 174 - -
Cost of customer commit-
ments in regional aircraft 108 142 108 142
Claims reserve 67 75 4 1
Accrued interest 37 119 56 119
Royalties and commissions 28 23 16 13
Early retirement and
redundancies 7 107 - 103
Other 228 133 111 34
Total accrued expenses 3,295 3,735 2,192 2,448
Deferred income
Advance invoicing 3,883 3,064 3,437 2,513
Prepaid insurance
compensation1) 486 565 - -
Capitalised project interest 27 43 27 43
Capitalised changes in
value related to forward
contract rollovers - 232 598 618
Other 60 29 51 63
Total deferred income 4,456 3,933 4,113 3,237
Total 7,751 7,668 6,305 5,685
1) Insurance consideration from insurance companies for aircraft leasing operations.
Saab does not consider there to be a signicant dierence between book and
fair value.
NOTE 41
FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
Saab’s nancial assets and liabilities and contractual obligations give rise to
nancial risks. ese risks are managed to a large extent with various nan-
cial instruments.
Financial risk management
e Board of Directors of Saab has approved a Group Treasury Policy, which
provides an overall description of the management of nancial risks and
treasury operations. e goal is to identify and actively manage nancial risks
in order to reduce the negative impact on the Group’s results, competitive
strength and nancial exibility.
e nancial risks are dened as follows:
• Foreign currency risk
• Interest rate risk
• Liquidity and nancing risk
• Commodity risk
• Credit and counterparty risk
Saab uses derivatives primarily to:
• Convert anticipated commercial cash ows in foreign currency to 
• Convert borrowings in , or surpluses in , to the currencies in
which assets are denominated (primarily relates to aircra that Saab
owns in its leasing eet)
• Convert the xed interest periods in leases to coincide with leasing reve-
nue and the desired xed interest rates for nancing of other assets and
liabilities
Responsibility for managing the Group’s nancial risks and developing meth-
ods and principles to manage nancial risks is centralised in Group Treasury.
e operating business areas have directives and processes that describe how
nancial risks are managed. Furthermore, Group Management has issued
detailed directives and guidelines for Group Treasury’s operations.
Management of insurance is centralised in the Group’s insurance com-
pany, Lansen Försäkrings , where external transactions are handled as
well. Customer nance, guaranty and nance issues are also managed by
Group Treasury.
e Group’s internal bank, Saab Treasury, is responsible for the Group’s
cash management, nancing, management of interest rate and currency risks
and also electricity risks. Saab has an agreement with an external party to
manage the Group’s electricity risks through discretionary management.
Other commodity risk is managed primarily through contractual clauses.
To a limited extent the Group Treasury Policy allows proprietary trading
in currency and money market instruments. e main purpose of this trad-
ing is to gain access to qualitative market information and maintain a high
level of market expertise. Saab Treasury has a risk mandate expressed as VaR
(Value at Risk) of   (), which is divided between trading and man-
agement of economic risks, expressed primarily in the Tender to Contract
portfolio. During the year,   was allocated to the trading portfolio and
  to the Tender to Contract portfolio.VaR is a probability-based
method based on historical price uctuations and correlations and is consid-
ered a standard in the nancial industry. e method provides a measure of
the probability of the maximum loss over a specic number of days. Saab uses
three days and a -per cent probability. e Treasury Risk Analysis unit
reports each portfolio’s risk dened according to established risk measures to
Group Management on a daily basis.
Financial instruments
Financial assets in the Group mainly comprise accounts receivable, accrued
income, interest-bearing receivables, liquid assets, xed income investments
and derivatives with positive market values. Saab’s nancial liabilities mainly
comprise interest-bearing liabilities, accounts payable, accrued expenses and
derivatives with negative market values. e following tables show a sub-
divided statement of nancial position categorised and classied according
to  . A more detailed description of the categories can be found in note ,
Accounting principles.
FINANCIAL INFORMATION > NOTES
110 SAAB ANNUAL REPORT 2010