Saab 2012 Annual Report Download - page 80

tives in the statement of nancial position. Gains and losses on a derivative
arising due to a change in fair value are recognised in prot or loss if the
derivative is classied among nancial assets and liabilities at fair value
through prot or loss.
In hedge accounting, derivatives are classied as fair value hedges or cash
ow hedges. e recognition of these hedging transactions is described below.
Cash ow hedges
Certain forward exchange contracts and currency swaps (hedge instruments)
entered into to hedge future receipts and disbursements against currency
risks are accounted for according to the rules for cash ow hedging. Deriva-
tives that protect future receipts and disbursements are recognised in the
statement of nancial position at fair value. Changes in value are recognised
in other comprehensive income and separately recognised in the hedge
reserve in equity until the hedged cash ow meets the operating prot or loss,
at which point the cumulative changes in value of the hedging instrument are
transferred to prot or loss to meet and match the eects on earnings of the
hedged transaction.
Interest rate exposure from future variable-rate liabilities is hedged with
interest rate swaps. In its reporting, Saab applies cash ow hedging, which
means that the change in value of the interest rate swap is recognised in other
comprehensive income and separately recognised in the hedge reserve in
equity. e change in value is recognised in nancial revenue and expenses
when transferred to prot or loss.
When the hedged future cash ow refers to a transaction that will be capi-
talised in the statement of nancial position, the net gain or loss on cash ow
hedges in equity is dissolved when the hedged item is recognised in the state-
ment of nancial position. If the hedged item is a non-nancial asset or a non-
nancial liability, the reversal from the net gain or loss on cash ow hedges in
equity is included in the original cost of the asset or liability. If the hedged item
is a nancial asset or nancial liability, the net gain or loss on cash ow hedges
in equity is gradually reversed through prot or loss at the same rate that the
hedged item aects earnings.
When a hedging instrument expires, is sold or is exercised, or the com-
pany revokes the designation as a hedging relationship before the hedged
transaction occurs and the projected transaction is still expected to occur, the
recognised cumulative gain or loss remains in the net gain or loss on cash
ow hedges in equity and is recognised in the same way as above when the
transaction occurs.
If the hedged transaction is no longer expected to occur, the hedging
instrument’s cumulative gains and losses are immediately recognised in prot
or loss in accordance with principles described above for derivatives.
Fair value hedges
Certain forward exchange contracts and currency swaps (hedge instruments)
entered into to hedge future receipts and disbursements for currency and
interest rate risk are accounted for according to the rules for fair value hedg-
ing. ese hedges are recognised at fair value in the statement of nancial
position with regard both to the derivative itself and the future receipt or dis-
bursement (hedge item) for the risk being hedged. e change in fair value of
the derivative is recognised in the prot and loss together with the change in
value of the hedged item.
Hedge of currency exposure in assets and liabilities
Currency exposure from an asset or liability is hedged with forward exchange
contracts. No hedge accounting is applied, due to which both the hedged
item and hedging instrument are recognised with respect to currency risk at
fair value with changes in value through prot or loss. Changes in the value of
operations-related receivables and liabilities are recognised in operating
income, while changes in the value of nancial receivables and liabilities are
recognised in nancial revenue and expenses.
Inventories
Inventories are valued at the lower of cost and net realisable value. Net realis-
able value is the estimated selling price in continuing operations aer deduct-
ing estimated expenses for completion and expenses incurred in selling.
Cost is calculated by applying the rst-in rst-out method () and
includes expenses to acquire inventory assets and bring them to their present
location and condition. For nished and seminished goods, cost consists of
direct manufacturing expenses and a reasonable share of indirect manufac-
turing expenses as well as expenses to customise products for individual cus-
tomers. Calculations take into account normal capacity utilisation.
Dividends
e dividend proposed by the Board of Directors reduces earnings available
for distribution and is recognised as a liability when the Annual General
Meeting has approved the dividend.
Employee benefits
e Group has two types of pension plans: dened-contribution and dened-
benet pension plans.
Dened-contribution plans
In dened-contribution plans, pensions are based on the premiums paid.
Obligations with regard to dened-contribution plans are expensed in the
income statement.
Dened-benet plans
In dened-benet plans, pensions are based on a percentage of the recipient’s
salary. Saab has around ten dierent types of dened-benet plans. e pre-
dominant plan is the  plan, which accounts for approximately  per cent
of the total obligation. e second largest plan refers to the state-funded
retirement pension and vested pensions in Aärsverket  when it was
incorporated on  January .
e Group’s net obligation for dened-benet plans is calculated sepa-
rately for each plan by estimating the future compensation that employees
have earned through employment in present and previous periods. is com-
pensation is discounted to present value. Saab has secured main part of the
obligation through provisions to a pension fund, and the fair value of the
fund’s assets is oset against the provision for the pension obligation at pre-
sent value in the statement of nancial position. e discount rate to calculate
the commitment at present value has been determined based on the interest
rate on the closing day for a rst-class mortgage bond with a maturity corre-
sponding to the pension obligation. e calculation is made by a qualied
actuary using the projected unit credit method.
When the compensation terms in a plan improve, the portion of the
increased compensation attributable to the employees’ services in previous
periods is expensed through the income statement on a straight-line basis
over the average period until the compensation is fully vested. If the compen-
sation is fully vested, an expense is recognised directly through prot or loss.
e obligation is estimated on the closing day, and if the calculated
amount deviates from the estimated commitment an actuarial gain or loss
arises. All actuarial gains and losses as of  January , the date of transi-
tion to , are recognised in equity and other items in the statement of
nancial position. For actuarial gains and losses that arise from the calcula-
tion of the Group’s obligation for dierent plans aer  January , the so-
called corridor method is applied. is means that the portion of the cumula-
tive actuarial gains and losses exceeding  per cent of the higher of the
commitments’ present value and the fair value of assets under management is
recognised over the expected average remaining period of employment of the
employees covered by the plan. Actuarial gains and losses otherwise are not
taken into account.
If pension obligations are lower than assets under management and actu-
arial losses, this amount is recognised as an asset.
When there is a dierence in how the pension cost is determined for a
legal entity and the Group, a liability or receivable for the special employer’s
contribution arises based on this dierence.
Severance
A provision is recognised in connection with termination of personnel only if
the company is obligated to terminate an employment before the customary
time, e.g. when compensation is paid in connection with a voluntary termi-
nation oer. In cases where the company terminates personnel, a detailed
plan is draed containing at the minimum the workplaces, positions and
approximate number of individuals aected as well as compensation for each
personnel category or position and a schedule for the plan’s implementation.
FINANCIAL INFORMATION > NOTES
76 SAAB ANNUAL REPORT 2012