Annual Report 2008 - Securitas

72
Annual report
Notes and comments to the consolidated financial statements
Provisions are allocated for estimated taxes on dividends from subsidiaries
to the Parent company in the following year.
Deferred income tax is provided on temporary differences arising on investments
in subsidiaries and associates, except where the timing of the reversal
of the temporary difference is controlled by the Group and it is probable
that the temporary difference will not be reversed in the foreseeable
future.
Non-current assets held for sale and discontinued
operations (IFRS 5)
The Group applies IFrS 5 Non-current assets held for sale and discontinued
operations, which sets out requirements for the classification, measurement
and presentation of non-current assets held for sale and discontinued operations.
According to IFRS 5 a non-current asset classified as held for sale or disposal
group shall be measured at the lower of its carrying amount and fair
value less cost to sell, if the carrying amount will be recovered through a
sales transaction rather than through its continuous use in the operations.
Measurement is carried out in two steps. First, all assets and liabilities are
measured in accordance with the relevant standard. For disposal groups a
second step also involves a re-measurement to the lower of the carrying
amount and the fair value less cost to sell. A re-measurement should be
carried out at each balance sheet date subsequent to the initial recognition.
No depreciation or amortization should be recognized for these assets from
the date of reclassification up until the disposal has been completed. As of
July 1, 2007 the Group recognized certain assets and liabilities as belonging
to a so-called disposal group. The disposal group related to the sale of the
operations of Loomis cash Management Ltd in the United Kingdom and
was de-recognized from the balance sheet upon completion of the sale of
the non-current assets and operations on November 24, 2007. The initial
recognition of the disposal group was in the interim report for the third
quarter 2007 and consequently no subsequent re-measurement took place
before the completion of the sale on November 24, 2007. The result from
the sale of the non-current assets and operations of Loomis cash Management
Ltd is included in Net income for the year, discontinued operations.
A discontinued operation is a component of a Group that represents a
major line of business or geographical area of operations. The net income
(after tax) relating to discontinued operations is included on a separate line,
net income for the year, discontinued operations. Notes relating to the
statement of income have consequently been adjusted to exclude discontinued
operations.
The extraordinary General Meetings in Securitas held on December 3,
2008 and September 25, 2006, resolved in accordance with the Board of
Directors’ proposal on a dividend to the effect that all shares in the whollyowned
subsidiaries Loomis AB, Securitas Direct AB and Niscayah Group AB
(former Securitas Systems AB) would be distributed to the shareholders.
The dividend date was December 9, 2008 for Loomis AB and September
29, 2006 for Securitas Direct AB and Niscayah Group AB. From these dates
Loomis AB, Securitas Direct AB and Niscayah Group AB are no longer part
of the Securitas Group. These operations, which in the Securitas Group previously
comprised the three primary segments Loomis, Direct and Securitas
Systems, consequently qualify as discontinued operations according to
IFrS 5 and are treated according to this standard. Further information on
the application of IFrS 5 regarding Loomis, Direct and Securitas Systems
is provided in Note 39.
Statement of cash flow (IAS 7)
The statement of cash flow has been prepared in accordance with the
indirect method. Liquid funds include cash and bank deposits and Shortterm
investments with a maximum duration of 90 days at the time of initial
recognition.
Securitas Annual report 2008
Goodwill and other acquisition related intangible assets
(IFRS 3, IAS 36 and IAS 38)
Goodwill represents the excess of the cost of an acquisition over the fair
value of the Group’s share of the identifiable net assets of the acquired subsidiary/operations
at the date of acquisition. Goodwill is tested annually for
impairment and carried at cost less accumulated impairment losses. Gains
and losses on the disposal of an entity include the carrying amount of goodwill
relating to the entity or operations sold.
Other acquisition related intangible assets arising from acquisitions can
include various types of intangible assets such as marketing-related, customer-related,
contract-related and technology-based. Other acquisition
related intangible assets have a definite useful life. These assets are recognized
at fair value on the date of acquisition and subsequently carried at cost
less accumulated amortization and any accumulated impairment losses.
Amortization is calculated using the linear method to allocate the cost of
assets over their estimated useful lives. Securitas’ acquisition related intangible
assets mainly relate to customer contract portfolios and the related
customer relationships. The valuation of the customer contract portfolios
and the related customer relationships is based on the Multiple Excess
Earnings Method (MEEM) which is a valuation model based on discounted
cash flows. The valuation is based on the churn rates and profitability of the
acquired portfolio at the time of the acquisition. In the model a specific charge
– a contributory asset charge – is applied as a cost or return requirement for
the assets supporting the intangible asset. Cash flows are discounted using
the weighted Average cost of capital (wAcc) adjusted for local interest
rate levels in the countries of acquisition. The useful life of customer contract
portfolios and the related customer relationships are based on the churn
rate of the acquired portfolio and are normally between 3 and 20 years corresponding
to a yearly amortization of between 5 percent and 33.3 percent.
A deferred tax liability is calculated at the local tax rate on the difference
between the book value and tax value of the intangible asset. The deferred
tax liability is reversed over the same period as the intangible asset is amortized,
which means that it neutralizes the impact of the amortization of the
intangible asset on the full tax rate percentage on the income after tax. The
initial recognition of this deferred tax liability increases the amount of goodwill.
Goodwill and other acquisition related intangible assets are allocated to
cash-generating units (cGU) at a level that is consistent with the level at
which Securitas monitors performance, that is per country in a business
segment. This allocation is also the basis for the yearly impairment testing.
The amortization of acquisition related intangible assets is shown on the
line Amortization and impairment of acquisition related intangible assets in
the statement of income.
Acquisition related restructuring costs
Acquisition related restructuring cost are costs relating to the restructuring
and/or integration of acquired operations into the Group. restructuring costs
are costs that are recognized based on the specific criteria for restructuring
provisions in IAS 37 (see further under Provisions below). restructuring
costs can cover several activities that are necessary to prepare acquired
operations for integration into the Group such as redundancy payments,
provisions for rented premises that will not be utilized or sublet below cost
or other non-cancellable leasing contracts that will not be utilized. Integration
costs normally cover activities that do not qualify to be recognized as provisions.
Such activities could be re-branding (changing logotypes on buildings,
vehicles, uniforms etc) but could also cover personnel costs for example
training, recruitment, relocation and travel, certain customer related costs
and other incremental costs to transform the acquired operation into the
acquirers format. classifying expenses as costs relating to integration of
acquired operations must also fulfil the criteria below:
• The cost would not have been incurred had the acquisition not take place.
• The cost relate to a project identified and controlled by management as
part of a integration programme set up at the time of acquisition or as a
direct consequence of an immediate post-acquisition review.