Saab 2015 Annual Report Download - page 77

FINANCIAL INFORMATION – FINANCIAL STATEMENTS
until this influence ceases. When decisive influence over the Group company ceases
but the Group retains an interest in the company, the remaining shares are initially
recognised at fair value. The gain or loss that arises is recognised in profit or loss.
Associated companies and joint ventures
Associated companies are companies over which the Group has a significant, but
not decisive, influence over. Joint ventures are companies in which the Group,
through a cooperative agreement with one of more parties, shares a decisive influ-
ence over. Associated company and joint venture are recognised according to the
equity method in the consolidated accounts. See note 21 for further information.
Eliminated transactions
Intra-Group receivables and liabilities, revenue or expenses, and gains or losses
that arise from transactions between Group companies are eliminated in their
entirety in the preparation of the consolidated accounts.
Gains that arise from transactions with associated companies and joint ventures
are eliminated to an extent corresponding to the Group’s ownership interest in the
company. Losses are eliminated in the same way as gains, but only to the extent
there that is no impairment loss.
FOREIGN CURRENCY
Functional currencies are the currencies in each primary economic environment
where units of the Group conduct their operations.
Transactions and assets and liabilities in foreign currency
Transactions in foreign currency are recognised in the functional currency at the
exchange rate on the transaction day. Monetary assets and liabilities are translated
to the functional currency on the closing day at the exchange rate then in effect.
Exchange rate differences that arise through these translations are recognised in
profit and loss. Non-monetary assets and liabilities recognised at fair value are
translated to the functional currency at the rate in effect at the time of valuation at
fair value. Changes in exchange rates are then recognised in the same way as
other changes in value of the asset or liability.
Translation of financial reports of foreign operations to SEK
Assets and liabilities in operations with a functional currency other than SEK are
translated to SEK at the closing day exchange rate. Revenue and expenses in foreign
operations are translated to SEK at the average rate. Translation differences that
arise through currency translations are recognised directly in other comprehensive
income. The amount is recognised separately as a translation reserve in equity.
SIGNIFICANT DIFFERENCES BETWEEN THE GROUP’S AND
THE PARENT COMPANY’S ACCOUNTING PRINCIPLES
The Parent Company follows the same accounting principles as the Group
with the following exceptions.
Business combinations
Transaction costs are included in the cost of business combinations.
Associated companies and joint ventures
Shares in associated companies and joint ventures are recognised by the Parent
Company according to the acquisition cost method. Revenue includes dividends
received.
Intangible fixed assets
All development costs are recognised in profit or loss.
Tangible fixed assets
Tangible fixed assets are recognised after revaluation, if necessary.
Investment properties
Investment properties are recognised according to acquisition cost method.
Financial assets and liabilities and other financial instruments
The Parent Company carries financial fixed assets at cost less write-down and
financial current assets according to the lowest value principle. If the reason for
write-down has ceased, it is reversed. The Parent Company does not apply the
rules for setting off financial assets and liabilities.
Derivatives and hedge accounting
Derivatives that are not used for hedging are carried by the Parent Company accor-
ding to the lowest value principle based on net value of different portfolios. For deri-
vatives used for hedging, recognition is determined by the hedged item. This
means that the derivative is treated as an off balance sheet item as long as the hed-
ged item is recognised at cost or is not included on the balance sheet. Receivables
and liabilities in foreign currency hedged with forward contracts are valued at the
forward rate.
Employee benefits
The Parent Company complies with the provisions of the Law on Safeguarding of
Pension Commitments and the regulations of the Swedish Financial Supervisory
Authority, since this is a condition for tax deductibility.
Untaxed reserves
The amounts allocated to untaxed reserves constitute taxable temporary differen-
ces. Due to the connection between reporting and taxation, the deferred tax liability
is recognised in the Parent Company as part of untaxed reserves.
Group contributions and shareholders’ contributions
Shareholders’ contributions are recognised directly in the equity of the recipient
and capitalised in the shares and participating interests of the contributor, to the
extent write-down is not required. Group contributions received are recognised
through profit or loss in financial income and expenses. Group contributions paid
are capitalised in the shares and participating interests of the parent, to the extent
write-down is not required.
NOTE 2 ASSUMPTIONS IN THE APPLICATION
OF THE ACCOUNTING PRINCIPLES
The Board of Directors and Group Management together have identified the follo-
wing areas where estimates and assumptions in the application of the accounting
principles may have a significant impact on the accounting of the Group’s results of
operations and financial position and may result in significant adjustments in sub-
sequent financial reports. Developments in these areas are monitored continuously
by Group Management and the Board of Directors’ audit committee.
UNCERTAINTIES IN ESTIMATES AND ASSUMPTIONS
Long-term customer contracts
A majority of all long-term customer contracts contain significant development
aspects, which are associated with risks. Before a contract is signed with a custo-
mer on delivery of a product, solution or service, a thorough analysis is always
made of the prerequisites and risks of the delivery through a project management
process established within Saab. In the execution stage, continuous reviews are
made of the work in the project according to the same process. An important
aspect is to identify risks and assess them and the measures that are taken to miti-
gate the risks with the help of a risk assessment method.
The Group applies the percentage of completion method to recognise revenue
from long-term customer contracts. An estimation of total costs including an estima-
tion of technical and commercial risks is critical in revenue recognition. Changed esti-
mations may affect revenue recognition, recognition of project loss provisions and
inventories. Payments are made upon achievement of milestones in projects, making
delivery according to project plan and milestones important for the cash flow. See
note 5 for more information regarding long-term customer contracts.
Recovery of value of development costs
The Group has invested significant amounts in research and development. The repor-
ted amounts in the statement of financial position are primarily due to development
projects relating to radar and sensors, electronic warfare systems, Air Traffic Manage-
ment, and airborne surveillance systems. Capitalised development costs amount to
MSEK1,157 (952). The recognition of development expenditures as an asset on the
statement of financial position requires an assumption that the product is expected to
be technically and commercially usable in the future and that future economic benefits
are likely. Capitalised development costs are amortised over the estimated production
volume or period of use, up to a maximum of 5 years, with the exception of acquired
development costs, where the maximum period of use is 10 years. Projected produc-
tion volumes and periods of use may later be reassessed, which could necessitate
impairment. See note 17 for further information.
Note 1, cont.
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