Annual Report 2008 - Securitas

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Annual report
Notes and comments to the consolidated financial statements
Financial assets or financial liabilities at fair value through profit or loss
Financial assets at fair value through profit or loss have two sub-categories:
financial assets held for trading, and those designated at fair value through
profit or loss at inception. A financial asset is classified in this category if
acquired principally for the purpose of selling in the short-term or if so
designated by management. Fair value derivative assets are also categorized
as held for trading unless they qualify for hedge accounting. Assets in
this category are classified as current assets if they are either held for trading
or are expected to be realized within 12 months of the balance sheet date.
Financial liabilities at fair value are trading securities with negative fair value;
normally derivative liabilities unless they qualify for hedge accounting.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. They arise
when the Group provides money, goods or services directly to a debtor with
no intention of trading the receivable. They are included in current assets,
except for maturities later than 12 months after the balance sheet date.
Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed
or determinable payments and fixed maturities that the Group’s management
has the positive intention and ability to hold to maturity.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated
in this category or not classified in any of the other categories. They
are included in non-current assets unless management intends to dispose
of the investment within 12 months of the balance sheet date.
Financial liabilities designated as hedged item in a fair value hedge
Financial liabilities designated for as hedged item in a fair value hedge are
qualifying for hedge accounting. The hedging instrument is normally a derivative
included in the category derivatives designated for hedging. Financial
liabilities designated as hedged item in a fair value hedge are included in
non-current liabilities except for maturities later than 12 months from the
balance sheet date.
Other financial liabilities
Other financial liabilities are any financial liabilities that are not included
under financial liabilities designated as hedged item in a fair value hedge.
They are included in current liabilities except for maturities later than
12 months from the balance sheet date.
Derivatives designated for hedging
Derivatives designated for hedging are instruments designated as hedging
instruments and qualifying for hedge accounting. The Group normally only
enters into derivative contracts when they either qualify for hedge accounting
or when there is a natural off-set in the accounting.
Most of the Group’s current assets are loans and receivables (including
accounts receivable and most other current receivables). Financial assets
or financial liabilities at fair value through profit or loss (with exception for
derivatives), held-to-maturity investments and available-for-sale financial
assets are normally categories in which the Group has no or very limited
positions. Financial liabilities designated as the hedged item in a fair value
hedge include both long-term and short-term loans designated as hedged
items that are hedged effectively via derivatives designated for hedge
accounting. Other financial liabilities comprise all other financial liabilities
including such items as accounts payable and other current liabilities and
also any long-term and short-term loans not included in financial liabilities
designated for hedging. Further information is provided in the table Financial
instruments by category – carrying and fair values in Note 6.
Securitas Annual report 2008
Recognition and subsequent measurement
Purchases and sales of financial instruments are recognized on the trade date
– the date on which the Group commits to purchase or sell the instrument.
Financial assets and liabilities are initially recognized at fair value plus
transaction costs for all financial assets or financial liabilities not carried at
fair value through profit or loss. Financial assets or liabilities carried at fair
value through profit or loss are recognized at fair value, and any transaction
costs are charged to the profit or loss.
Financial assets are derecognized when the rights to receive cash flows
from the instruments have expired or have been transferred and the Group
has transferred substantially all risks and rewards of ownership. Financial
liabilities are removed when the obligation is discharged, cancelled or has
expired.
Financial assets or financial liabilities at fair value through profit or loss
and available-for-sale financial assets are subsequently carried at fair value.
Loans and receivables and held-to-maturity investments are carried at amortized
cost using the effective interest method. Realized and unrealized
gains and losses arising from changes in the fair value of the financial assets
or liabilities at fair value through profit or loss category are included in the
statement of income in the period in which they arise.
Financial liabilities with the exception of financial liabilities at fair value
through profit or loss and financial liabilities designated for hedging are subsequently
carried at amortized cost.
Financial liabilities designated as the hedged item in a fair value hedge
are carried at amortised cost but are adjusted for changes in the fair value
due to the hedged risk. changes in the fair value are included in the statement
of income in the period in which they arise. The corresponding gain or
loss from re-measuring the hedging instrument at fair value is also included
in the statement of income in the same period as that in which the gain or
loss on the hedged item arises.
Cash flow hedging instruments are carried at fair value in the balance
sheet and the gains or losses from re-measuring the hedging instruments
at fair value are recognized in the hedging reserve in equity with a reversal
from the hedging reserve to the statement of income in the period of which
the cash flow of the hedged item impacts the statement of income. Exchange
rate gains and losses on derivatives that are part of a net investment hedge
relationship are recognized in equity.
Actual cash flows (accruals) that arise from interest-rate derivative contracts
are recognized as interest income and/or interest expense in the period
to which they relate. changes in fair value (after accruals) for both the
hedged item and the hedging instrument (derivative) are recognized separately
as revaluation of financial instruments. The line revaluation of financial
instruments is included within financial income and/or financial expense.
The fair values of quoted financial instruments are based on current bid
prices. If the market for a financial instrument is not active (and for unlisted
securities), the Group establishes fair value by using valuation techniques.
These include the use of recent arm’s length transactions, reference to other
instruments that are substantially the same, discounted cash flow analysis,
and option pricing models refined to reflect the issuer’s specific circumstances.
Impairment of financial assets
The Group assesses at each balance sheet date whether there is objective
evidence that a financial asset or a group of financial assets is impaired.