Annual Report 2008 - Securitas

Joint ventures (IAS 31)
The proportional method is applied to joint ventures in which there is a
shared controlling interest. According to this method, all statement of income
and balance sheet items are stated in the consolidated statement of income,
the consolidated statement of cash flow and the consolidated balance sheet
in proportion to ownership. The proportional method of consolidation is
used with effect from the date when a shared controlling interest is achieved
and up until a shared controlling interest ceases to exist.
Translation of foreign subsidiaries (IAS 21)
The functional currency of each Group company is determined by the primary
economic environment in which the company operates, that is the
currency in which the company primarily generates and expends cash. The
functional currency of the Parent company and the presentation currency
of the Group, that is the currency in which the financial statements are
presented, is the Swedish krona (SEK).
The financial statements of each foreign subsidiary are translated according
to the following method: Each month’s statement of income is translated
using the exchange rate prevailing on the last day of the month, which
means that income for each month is not affected by foreign exchange fluctuations
during subsequent periods. Balance sheets are translated using
exchange rates prevailing at each balance sheet date. Translation differences
arising in the conversion of balance sheets are posted directly to equity
and thus do not affect income for the year. The translation difference arising
because statements of income are translated using average rates, while
balance sheets are translated using exchange rates prevailing at each balance
sheet date, is posted directly to equity. where loans have been raised
to reduce the Group’s foreign exchange/translation exposure in foreign net
assets, and qualify for the hedge accounting criteria, exchange rate differences
on such loans are recognized together with the exchange rate differences
arising from the translation of foreign net assets in the translation
reserve in equity. when a foreign operation or part thereof is sold, such
exchange differences are recognized in the statement of income as part of
the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and translated
at the closing rate.
Transactions and balance sheet items in foreign currency
(IAS 21)
Transactions in foreign currency are translated into the functional currency in
accordance with the exchange rates prevailing at the date of the transaction.
Exchange differences on monetary items are recognized in the statement of
income when they arise, with the exception of net investment hedges recognized
via translation reserve in equity (see above under the section Translation
of foreign subsidiaries). Exchange differences from operating items are
recognized as either production expenses or selling and administrative
expenses, while exchange differences from financial items are recognized
as financial income or financial expense.
When preparing the financial statements of individual companies, foreign
currency denominated receivables and liabilities are translated to the functional
currency of the individual company using the exchange rates prevailing
at each balance sheet date.
Revenue recognition (IAS 11 and IAS 18)
The Group’s revenue is generated from various types of security services as
well as from some remaining revenue arising from the sale of alarm products.
Revenue from services is recognized in the period in which it is earned.
Alarm installations are recognized in revenue as they are completed, in
accordance with the percentage of completion method. According to this
method, revenue, expenses, and thus, income are recognized in the period
in which the work was undertaken. The determination of the percentage of
alarm installations that can be recognized as revenue is based on the time
spent in relation to the total estimated time.
Trademark fees from the former subsidiary Securitas Direct AB, relating
to the use of the Securitas trademark, are recognized on an accrual basis in
accordance with the substance of the agreement, and are based on the
sales recognized by Securitas Direct AB. Trademark fees from the former
subsidiary Niscayah Group AB (former Securitas Systems AB) have been
recognized up until November 2008, based on the sales recognized by
Niscayah Group AB.
Interest income and borrowing costs are recognized in the statement of
income in the period to which they are attributable.
Segment reporting (IAS 14)
The Group’s operations are divided into three primary segments (Security
Services North America, Security Services Europe and Mobile and Monitoring)
that provide the operational structure for governance, monitoring and
reporting. The previous primary segment Loomis is included in the Securitas
Group up to December 8, 2008 and reported as Discontinued operations.
Other includes general administrative expenses, expenses for head offices
and other central expenses that according to IAS 14 should be excluded
from the segments as relating to the Group as a whole. The Group’s joint
venture Securitas Direct S.A. (Switzerland) as well as the guarding operations
in Latin America and Asia are also included in Other. Moreover, the
assets and liabilities of each segment include only those items that have
been utilized or arisen in ongoing operations. Non-operational balance
sheet items, primarily current tax, deferred tax, and provisions for taxes, are
accounted for under the Other heading in the table capital employed and
financing in Note 9. In the table Assets and liabilities in the same note, these
items are accounted for as Unallocated non-interest bearing assets and
Unallocated non-interest bearing liabilities. For further information regarding
the segments operations, refer to Note 9. The secondary segments are the
geographical areas in which the Group is active: Nordic region, Europe
excluding Nordic region, North America and the operations outside these
regions included in the rest of world. The geographical breakdown represents
various levels of market development in terms of wages, employee turnover,
product mix, market growth and profitability. The total sales for each geographical
segment are based on the location of the sales. The location of
the sales corresponds in all material aspects to the location of the customers.
Accounting for government grants and disclosure
of government assistance (IAS 20)
Securitas like other employers is eligible for a variety of grants relating to
employees. These grants relate to training, incentives for hiring new staff,
reduction of working hours, etc. All grants are accounted for in the statement
of income as a cost reduction in the same period as the related underlying
cost.
Taxes (IAS 12)
Annual report
Notes and comments to the consolidated financial statements
Deferred income tax is provided in full, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and
their carrying amounts in the consolidated financial statements. However, if
the deferred income tax arises from initial recognition of an asset or liability
in a transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit or loss, it is not
accounted for. Deferred income tax is determined using tax rates (and laws)
that have been enacted or substantially enacted by the balance sheet date
and are expected to apply when the related deferred income tax asset is realized
or the deferred income tax liability is settled.
A deferred tax asset is recognized when it is probable that sufficient taxable
income will arise that the deferred tax asset can be offset against. Deferred
tax assets are valued as of the balance sheet date, and any potential
previously unvalued deferred tax asset is recognized when it is expected to
be usable, or correspondingly, reduced when it is expected to be wholly or
partly unusable against future taxable income.
current and deferred taxes are posted directly to shareholders’ equity if
the relevant underlying transaction or event is posted directly to shareholders’
equity in the period, or previous period if it pertains to an adjustment of an
opening balance of retained earnings as the result of a change in accounting
principle, or if it relates to exchange rate differences in the translation of the
balance sheets of foreign subsidiaries that are posted to shareholders’ equity.
Securitas Annual report 2008
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