Scania annual report 2004

ate). This method is usually called the current
Exchange rate differences on loans and
Depreciation occurs mainly on a straight-line
Scania’s research and development activities are
method. The changes in the shareholders’ equity
other financial instruments in foreign currencies
basis over the estimated useful life of an asset,
classified into a research phase and a develop-
of the Group that arise due to different exchange
that are intended for hedging of foreign net
and in those cases where a residual value exists,
ment phase. Expenditures that arise during the
rates on the closing day compared to the
assets are reported directly against shareholders’
the asset is depreciated down to this value.
research phase are charged to earnings as they
exchange rate on the preceding closing day are
equity.
Useful life and depreciation methods are exami-
arise. Expenditures during the development
reported directly against shareholders’ equity.
All subsidiaries use the local currency as their
functional currency, aside from some markets
Classification in the balance sheet
Scania’s operating cycle, that is, the time that
ned regularly and adjusted in case of changed
circumstances.
phase are capitalised as an intangible fixed asset,
beginning on the date when the expenditures are
highly likely to lead to future economic benefits.
in eastern Europe for which the euro is the
elapses from the purchase of materials until pay-
The following useful life is applied:
The amortisation of capitalised development
functional currency. The justifications for this
ment for goods delivered is received, is less than
Machinery and equipment
5 –15 years
expenditures begins when the asset is placed
have been that cost and price levels for the
twelve months. This means that a current liability
Buildings
25 years
in service and continues during its estimated
companies have had a high correlation to the
is a liability that falls due for payment within twelve
Land
No depreciation
useful life. For capitalised product development
euro. Items (transactions) in local currencies have
months, counting from the balance sheet date.
expenditures, the average useful life is currently
been translated into the functional currency using
Other liabilities are classified as long-term.
Depreciation is charged to earnings for the
estimated at five years. For capitalised software
the monetary/non-monetary method, after which
Current assets are assets that are expected to
period. If there is any indication on the balance
development expenditures, the useful life is
a translation from the functional currency to
be realised within twelve months, counting from
sheet date that a tangible asset has diminished
estimated at between three and five years.
Swedish kronor has occurred using the current
the balance sheet date, or that consist of liquid
in value, the recoverable amount of the asset is
If there is any indication on the balance sheet
method. Beginning in 2004, for industrial opera-
assets. Other assets are classified as fixed
estimated. If the recoverable amount is less than
date that an intangible asset has diminished in
tions in Brazil and Argentina the previous func-
assets.
the carrying amount, the asset is written down
value, the recoverable amount of the asset is
tional currency, the American dollar (USD), has
been replaced with local currencies. The justification
is that in recent years, there has been an
increasingly large disengagement of local price
and cost trends from the former functional
currency, USD.
Receivables and liabilities in foreign currencies
are valued at the closing day rate. In applic-
Classification of financial and
operating leases (Scania as lessor)
Leasing contracts with customers are reported
as financial leases in cases where substantially all
risks and rewards associated with ownership of
the asset have been transferred to the lessee.
Other leasing contracts are classified as operating
to its recoverable amount.
In case of a financial lease, where Scania is
the lessee, the leased asset is reported as a
tangible asset and the future commitment as a
liability.
Intangible fixed assets
Scania’s intangible fixed assets consist of goodwill
estimated. If the recoverable amount is less than
the carrying amount, the asset is written down
to its recoverable amount.
Inventories
Inventories are valued at the lower of acquisition
value and net realisable value according to the
first in, first out (FIFO) principle. An allocable
able cases, receivables and liabilities are valued
leases and are reported among tangible fixed
on consolidation plus fixed capitalised expenditures
portion of indirect expenses is included in the
at the underlying hedging rate.
assets. If a sale is combined with a repurchase
for development of new products as well as soft-
value of the inventories.
Currency forward contracts entered into in
order to hedge future commercial flows are
reported among earnings on the same date as
the commercial flow. Premiums received or paid
for currency options that are intended for hedging
of currency flows in business transactions are
obligation or a residual value guarantee, the
transaction is reported as an operating lease provided
that important risks remain with Scania.
Valuation principles
Assets, liabilities, provisions and derivatives have
ware.
Goodwill on consolidation arises when the
acquisition value of shares in a subsidiary exceeds
the value of that company’s net assets according
to the acquisition analysis. The amortisation
period for goodwill in the consolidated financial
Liquid assets and short-term
investments
Liquid assets consist of cash and bank balances
as well as short-term investments. In certain
cases, short-term investments consist of invest-
reported as income or expenses over the con-
been valued at acquisition value unless otherwise
statements is established on the basis of indi-
ments with maturities that are formally longer
tract period. Currency forward contracts that do
stated.
vidual examination. In deciding the amortisation
than 90 days, but which can easily be turned
not meet the criteria for hedge accounting are
valued according to the lower of cost or net realisable
value.
Tangible fixed assets
Tangible fixed assets are reported at acquisition
period, the main principles used are as follows:
• Small acquisitions that are a supplement to
existing operations and that are integrated
into liquid assets.
Short-term investments are valued at the
lower of accrued acquisition value and fair value.
When valuing financial assets and liabilities
where the original type of currency was changed
through a currency swap, the loan amount and the
value less accumulated depreciation and any
impairment losses. If a tangible fixed asset includes
major components with a divergent useful life
with them are amortised in five years.
• Larger acquisitions that involve establishment
of operations in new markets are amortised in
Financial instruments
Financial assets, including interest-bearing
swap agreement are translated to Swedish kronor
(depreciation period), these are reported as
ten years if they are established operations
receivables in Customer Finance, are reported
while taking into account the closing day rate.
separate assets.
with a strong market position.
at accrued acquisition value minus probable
ACCOUNTING PRINCIPLES • SCANIA ANNUAL REPORT 2004 54