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Annual Report 2012.pdf - Cherry

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FUNCTIONAL AND<br />

REPORTING CURRENCY<br />

The parent company uses Swedish kronor (SEK)<br />

as its functional currency, which is also used<br />

as the reporting currency for the group and<br />

the parent company. Financial reports are<br />

therefore presented in Swedish kronor and all<br />

amounts are, unless otherwise stated, rounded<br />

off to the nearest thousand.<br />

FOREIGN CURRENCY<br />

TRANSACTIONS AND BALANCE SHEET<br />

ITEMS IN FOREIGN CURRENCY<br />

Transactions in foreign currency are converted<br />

to the functional currency according to the exchange<br />

rates applicable on the transaction date,<br />

or the date when the items are re-valued. Exchange<br />

rate profits and losses incurred during<br />

the payment of such transactions are reported<br />

in the income statement as other operating income<br />

or other operating expenses.<br />

Receivables and liabilities related to operations<br />

in foreign currency are valued at the yearend<br />

rate. Exchange rate differences incurred<br />

during conversion are reported in the income<br />

statement as other operating income or other<br />

operating expenses.<br />

Currency rate profits and losses attributable<br />

to loans and liquid assets are reported in the income<br />

statement as financial income or expenses.<br />

CONVERSION OF FOREIGN OPERATIONS<br />

Assets and liabilities in foreign operations are<br />

converted in the consolidated financial statements<br />

from the functional currencies of the<br />

operations at the year-end rates. Earnings and<br />

costs are converted at the average rate for the<br />

year. The currency rates are taken from the<br />

Riksbank. Conversion differences incurred<br />

during conversion are reported in other comprehensive<br />

income and accumulated in a separate<br />

component in equity, designated conversion<br />

differences.<br />

Goodwill and adjustments of fair value incurred<br />

during the acquisition of a foreign operation<br />

are treated as assets and liabilities for this<br />

activity, and are converted at the year-end rate.<br />

Exchange rate differences are reported in other<br />

comprehensive income.<br />

ASSESSMENTS AND ESTIMATES<br />

The preparation of financial statements in<br />

accordance with IFRS requires the executive<br />

management to make assessments and estimates<br />

and to make assumptions that influence<br />

the application of the accounting principles<br />

and reported amounts for assets, liabilities,<br />

earnings and costs.<br />

Estimates and assumptions are regularly reviewed<br />

and based on historical experience and<br />

other factors, including expectations of future<br />

events, that are considered to be justified in<br />

the prevailing conditions. The results of these<br />

estimations and assumptions are used to assess<br />

the reported values of assets and liabilities,<br />

which otherwise would not be clear from other<br />

sources. The actual result can deviate from<br />

these estimations and assessments.<br />

During the preparation of <strong>Cherry</strong>’s consolidated<br />

financial statements the board and the<br />

CEO have come to the conclusion that the valuation<br />

of gaming agreements and concessions,<br />

customer and restaurant receivables and the<br />

write-down of goodwill are the critical areas<br />

where other estimates and assessments would<br />

have an effect on the financial position and<br />

results.<br />

WRITE-DOWNS<br />

When the group assesses the write-down requirements<br />

for gaming agreements and concessions<br />

the utility value is assessed on the basis<br />

of forecast future cash flows from the cash<br />

generating units defined as ventures. The most<br />

important assumptions in these calculations<br />

refer to the expected rate of growth of turnover<br />

and development of the operating margin.<br />

The write-down requirement for goodwill<br />

is assessed annually be comparing the recovery<br />

value with the reported value of the asset.<br />

The most important assumptions in these calculations<br />

refer to the expected rate of growth<br />

of turnover, growth rate or forecast period,<br />

and interest. Write-downs of goodwill are not<br />

restored. For a description of write-downs of<br />

goodwill in 2012, see Note 15.<br />

CUSTOMER AND RESTAURANT RECEIVABLES<br />

Customer and restaurant receivables constitute<br />

an important part of <strong>Cherry</strong>’s balance sheet.<br />

Provisions for uncertain receivables are based<br />

on the credit worthiness of the debtor and<br />

the amount that expected to be received. For<br />

a more detailed description of the executive’s<br />

assessment of customer and restaurant receivables,<br />

see Note 19 and 20.<br />

SUPPLEMENTARY PAYMENTS<br />

In conjunction with the acquisitions made in<br />

recent years the acquisition price has been made<br />

up of supplementary payments paid during an<br />

agreed time after the acquisition, and based on<br />

the development of turnover and earnings and<br />

other parameters. The executive assess on a regular<br />

basis the expected result of supplementary<br />

payments. The fair value of conditional purchase<br />

amounts is estimated through the application<br />

of the so-called productive value method.<br />

The estimates are based on a discount rate of<br />

interest with the assumption of an expected re-<br />

sult of the supplementary payment.<br />

As of 31 December 2012 there were no supplementary<br />

payments related to the acquisitions<br />

of the last few years that would involve payments<br />

in the future. The terms and conditions<br />

required for payment have not been achieved<br />

and the revaluation of previously reported liabilities<br />

is reported in the income statement as<br />

other operating income.<br />

CONSOLIDATED FINANCIAL<br />

STATEMENTS – GROUNDS FOR<br />

CONSOLIDATION<br />

The consolidated financial statements include<br />

the parent company <strong>Cherry</strong> AB and all the<br />

subsidiaries. The subsidiaries are all the companies<br />

where the group is entitled to arrange<br />

financial and operative strategies with a view to<br />

achieving financial benefits, in a way normally<br />

employed for a shareholding of more than half<br />

of the voting rights. Subsidiaries are included<br />

in the consolidated financial statements as of<br />

the date the controlling influence is transferred<br />

to the group. They are excluded from the consolidated<br />

financial statements as of the date<br />

when the controlling influence is no longer<br />

valid.<br />

The group applies the acquisition method<br />

for acquisitions.<br />

ACQUISITIONS 2010 AND LATER<br />

All payments to acquire a business operation<br />

are reported at the fair value on the date of acquisition.<br />

The revaluation of any supplementary<br />

payments over and above what was assessed at<br />

the time of the acquisition is reported in the<br />

income statement. Holdings without a controlling<br />

interest in the acquired business can<br />

optionally for each acquisition be valued at either<br />

the fair value or the proportional share of<br />

the net assets in the acquired business, which<br />

are held without controlling interest. All acquisition<br />

related transaction costs are recognised<br />

and reported in the consolidated income statement<br />

as sales and administration expenses.<br />

The excess consisting of the difference between<br />

the acquisition value and the fair value<br />

of the group’s share of identifiable acquired<br />

assets, liabilities and contingent liabilities is<br />

reported as goodwill.<br />

ACQUISITIONS 2009 AND EARLIER<br />

All payments to acquire a business operation<br />

are reported at the fair value on the date of acquisition.<br />

The revaluation of any supplementary<br />

payments over and above what was assessed<br />

at the time of the acquisition is adjusted in relation<br />

to the acquisition value. All acquisition related<br />

transaction costs are reported as a part of<br />

the acquisition value for the acquired business<br />

annual report 2012 |<br />

37

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