Annual Report 2008 - Securitas

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Annual report
Notes and comments to the consolidated financial statements
IAS 39 (amendment) Financial instruments:
Recognition and measurement – Eligible hedged items
The amendment, effective from July 1, 2009, is still subject to approval
from EU. The amendment clarifies how the existing principles underlying
hedge accounting should be applied in two particular situations. It clarifies
when inflation can be identified as the hedged risk in a financial instrument
and how to account for the use of options as hedging instruments. The
Group will apply IAS 39 (amendment) from July 1, 2009.
IAS 39 (amendment) Financial instruments:
Recognition and measurement
The amendment is effective from January 1, 2009.
• This amendment clarifies that it is possible for there to be movements
into and out of the fair value through profit or loss category, where a
derivative commences or ceases to qualify as a hedging instrument in
cash flow or net investment hedge.
• The definition of financial asset or financial liability at fair value through
profit or loss as it relates to items that are held for trading is also
amended. This clarifies that a financial asset or liability that is part of a
portfolio of financial instruments managed together with evidence of
an actual recent pattern of short-term profit-taking is included in such
a portfolio on initial recognition.
• when re-measuring the carrying amount of a debt instrument on cessation
of fair value hedge accounting, the amendment clarifies that a revised
effective interest rate (calculated at the date fair value hedge accounting
ceases) are used.
• The amendment also includes some adjustments to IFrS 8 Operating
segments.
The Group will apply IAS 39 (amendment) from January 1, 2009. It is
expected to have no impact on the Group’s financial statements.
IFRIC 16 Hedges of a net investment in a foreign operation
The interpretation, effective from October 1, 2008, is still subject to approval
from EU. It clarifies the accounting treatment in respect of net investment
hedging. This includes the fact that net investment hedging relates to differences
in functional currency not presentation currency, and hedging instruments
may be held anywhere in the Group. The requirements of IAS 21 The
effects of changes in foreign exchange rates do apply to the hedged item.
The Group will apply IFrIc 16 from January 1, 2009. It is expected to have
no material impact on the Group’s financial statements.
IFRIC 18 Transfer of assets from customers
The interpretation applies to transfer of tangible non-current assets or cash
from customers received on or after July 1, 2009. The interpretation is still
subject to approval from EU. It is expected to have no impact on the Group’s
financial statements, since there are no such agreements with the Group’s
customers.
Other interpretations and amendments of existing standards
There are a number of minor amendments to IFRS 7 Financial instruments:
Disclosures, IAS 8 Accounting policies, changes in accounting estimates
and errors, IAS 10 Events after the reporting period, IAS 18 revenue and
IAS 34 Interim financial reporting, which are part of the IASB’s annual improvements
project published in May 2008 (not addressed above). These
amendments are unlikely to have an impact on the Group’s accounts and
have therefore not been analysed in detail.
Scope of the consolidated financial statements (IFRS 3)
The consolidated financial statements relate to the Parent Company Securitas
AB and all subsidiaries. Subsidiaries are all companies where the Group has
the right to govern the financial and operational policies in order to achieve
economic benefits, in a way that normally follows a shareholding of more
than one half of the voting rights.
Securitas Annual report 2008
Purchase method of accounting (IFRS 3)
The purchase method of accounting is used to account for the acquisitions
of subsidiaries and operations by the Group. The cost of an acquisition is
measured at the fair value of the assets given, equity instruments issued
and liabilities incurred or assumed at the date of exchange, plus costs directly
attributable to the acquisition. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date, irrespective of the extent
of any minority interest. The excess of the cost of acquisition over the fair
value of the Group’s share of the identifiable net assets acquired is recorded
as goodwill. If the cost of acquisition is less than the fair value of the net
assets of the subsidiary acquired, the difference is recognized directly in
the consolidated statement of income.
The consolidated financial statements include companies acquired with
effect from the date of the acquisition. Companies divested are excluded
with effect from the divestment date.
Pricing of deliveries among Group companies is based on normal business
principles. Inter-company transactions, balances and unrealized gains
between Group companies are eliminated. Unrealized losses are also eliminated
unless the transaction provides evidence of an impairment of the
asset transferred.
Minority interests (IFRS 3)
The Group has adopted the principle of treating transactions with minority
interests as transactions with parties outside the Group. Disposals of minority
interests result in gains and losses for the Group and are recognized via the
statement of income. Acquisitions of minority interests give rise to goodwill
that is determined as the difference between the purchase price paid and
the acquired share of the book value of the subsidiaries’ net assets.
Investments in associates (IAS 28)
The equity method is used to account for shareholdings that are neither
subsidiaries nor joint ventures, but where Securitas can exert a significant
influence, generally accompanying a shareholding of between 20 percent
and 50 percent of the voting rights. The cost of an acquisition is measured
at the fair value of the assets given, equity instruments issued and liabilities
incurred or assumed at the date of exchange, plus costs directly attributable
to the acquisition. Identifiable assets acquired and liabilities and contingent
liabilities assumed as a result of the acquisition are measured initially at their
fair values at the acquisition date. The excess of the cost of acquisition over
the fair value of the Group’s share of the identifiable net assets acquired is
attributed to goodwill. If the cost of acquisition is less than the fair value of
the net assets of the associated company acquired, the difference is recognized
directly in the consolidated statement of income.
The consolidated financial statements include associated companies
with effect from the date of the acquisition. Associated companies divested
are excluded with effect from the divestment date. Inter-company transactions,
balances and unrealized gains between the Group and its associated
companies are eliminated to the extent of the Group’s interest in the associate.
Unrealized losses are also eliminated unless the transaction provides
evidence of an impairment of the asset transferred.
Share in income of associated companies are recognized in the consolidated
statement of income depending on the purpose of the investment.
Associated companies that have been acquired to contribute to the operations
(operational) are included in operating income after amortization. Associated
companies that have been acquired as part of the financing of the Group
(financial investments) are included in income before taxes as a separate line
within the finance net. In both cases the share in income of associated companies
are net of tax. The classification of associated companies has been
applied as follows in 2008; the associated companies walsons Services Pvt
Ltd, which was acquired in 2007, and Facility Network A/S, which was formed
in 2007, have been classified as operational associates. The associated
company Securitas Employee convertible 2002 Holding S.A., has up until
its liquidation in 2007 been classified as a financial investment. In the consolidated
balance sheet, investments in associated companies are stated
at cost including the cost of the acquisition that is attributed to goodwill,
adjusted for dividends and the share of income after the acquisition date.