Atlas Copco - Annual Report 1999

for sale and recorded at fair value with the unrealized gains
and losses excluded from net profit and reported, net of
applicable income taxes, as a separate component of shareholders’
equity.
Translation of foreign currency financial
statements in hyper-inflationary economies
For subsidiaries that operate in hyper-inflationary economies,
primarily Latin America, the Group in consolidation remeasures
the financial statements of the subsidiary as if USD was the functional
currency.
Under US GAAP, the group would be required to translate
the financial statements of subsidiaries that operate in hyperinflationary
economies as if the reporting currency, SEK,was
the functional currency of the subsidiary.
Restructuring provisions
Under US GAAP, the recognition of restructuring cost is deferred
until a commitment date is established, generally the date that
management having the appropriate level of authority commits
the company to the restructuring plan, identifies all significant
actions, including the method of disposition and the expected date
of completion, and in the case of employee termination, specifies
the severance arrangements and communicates them to employees.
The guidance under Swedish GAAP is not as prescriptive and
in certain circumstances allow for earlier recognition.
Leases
Under Swedish GAAP, leases are reported in the consolidated
financial statements as either financial or operating leases. A
financial lease entails the transfer to the lessee, to a material
extent, the economic risks and benefits generally associated with
ownership. If this is not the case, the lease is reported as an operating
lease and the lease payments are expensed as incurred.
The lease accounting rules under US GAAP are generally more
NOTES TO THE FINANCIAL STATEMENTS
prescriptive and would require leases that either transfer ownership,
contain minimum payments in excess of 90 percent of fair
market value of the leased asset, or the lease term is equal to or
greater than 75 percent of the estimated economic life in the
property, or contain a bargain purchase option are to be treated
as a capital or finance lease.
Sale and lease back
Under Swedish GAAP, capital gains from property sold are
recognized at the time of sale even when an operating lease is
signed with the new owner.
Under US GAAP, gains realized would be deferred over the
duration of the lease contract.
Revaluation of assets
Under Swedish GAAP, properties may under certain circumstances
be written up and reported at values in excess of the
acquisition cost. Such revaluation of assets is not permitted in
accordance with US GAAP.
International Accounting Standards (IAS)
Retirement benefits
Similarly to US GAAP, the actuarial methods and assumptions
prescribed under IAS vary from Swedish GAAP with IAS also
requiring the use of the projected unit credit method. Likewise
actuarial assumptions and the treatment of actuarial gains and
losses and plan changes may differ from Swedish GAAP.
Income taxes
In accordance with IAS, deferred tax is provided in respect of
temporary differences which are differences between the accounting
and tax measurement of assets and liabilities. Liabilities are
provided in full and assets are recognized to the extent that it is
probable that a future taxable profit will be available against
which the deferred tax asset may be utilized.
ATLAS COPCO 1999 35