Scania annual report 2004

coinciding with the carrying amount, and these instruments are therefore
not included in the table below.
2004 2003
Book Fair Book Fair
Fair value value value value value
Assets
Long-term holdings
of securities 1 25 25 56 69
Long-term interestbearing
receivables 2 12,756 12,630 11,796 11,917
Interest-bearing current
receivables 2 7,875 8,090 7,502 7,887
Short-term investments 1,379 1,384 704 703
Cash and bank balances 1,119 1,119 1,212 1,212
Currency forward contract
for hedging of net foreign
investments 3 0 0 – 1 – 1
Currency derivatives for
hedging of commercial
exposure 3, 4 31 110 54 113
Currency derivatives
for hedging of financial
exposure 3 109 110 58 58
Currency interest rate
swap agreements 3 – 108 – 117 – 62 – 64
Interest rate-related
derivatives 3 186 752 223 641
Total assets 23,372 24,103 21,542 22,535
Liabilities
Short-term borrowing 5,804 5,962 5,380 5,369
Long-term borrowing 19,809 21,093 20,827 22,370
Total liabilities 25,613 27,055 26,207 27,739
1 Reported in the balance sheet under “Holdings in associated companies etc”.
2 Operating leases amounting to SEK 5,809 m. (6,604) are not included in the table.
3 Reported in the balance sheet under “Other current receivables”.
4 Fair value of hedging instruments that were not included in the balance sheet on
the closing date totalled SEK 79 (76) m.
The main reason why the fair value of interest-bearing assets and liabilities
exceeded the book value is that general interest rates were lower at
year-end than when the contracts were entered into.
In some cases, the carrying amounts of assets with fixed interest rates
exceeded fair value as a consequence of changes in market interest
rates. Write-downs of these assets occur only when there is reason to
believe that the counterparty will not fulfil its contractual commitments,
not as a consequence of changes in market interest rates.
As a result of the transition to IAS 39 as per 1 January 2005, certain
financial assets and liabilities will be valued at fair value while others are
valued at accrued acquisition value. Valuation according to IAS 39 is
determined by how the asset or liability is classified and whether hedge
accounting is applied or not. The above table discloses the fair value of
financial assets and liabilities, regardless of valuation according to IAS 39.
Reporting and valuation
Financial assets are reported in the balance sheet on the sales or
transaction date at their acquisition value, which is equivalent to fair
value on that date. After the acquisition date, financial fixed assets are
valued at accrued acquisition value after subtracting probable credit
losses. Financial current assets are valued at the lower of accrued
acquisition value and market value.
Financial liabilities are recognised in the balance sheet at accrued
acquisition value. Premiums or deficits, including transaction costs, are
accrued over the life of the loan. Financial assets and liabilities in foreign
currencies are reported at the closing day rate.
Scania uses derivative instruments to control changes in exchange
rates and interest rates. Expected future payments in foreign currencies
are hedged mainly by selling currencies in forward contracts. Unrealised
gains or losses on contracts intended for hedging purposes are not
reported continuously in the income statement, but only on the same
date as the result of the hedged flow. In currency hedging of receivables
and liabilities with forward contracts, Scania uses the exchange rate on
the date the currency hedging occurs, at the valuation of the underlying
receivable or liability. The difference between the spot market rate and
the forward rate when the contract is entered into is accrued over the
life of the contract. Option premiums received and paid are accrued in a
corresponding way.
Scania uses interest rate swap agreements to achieve the desired
interest rate refixing period. Interest income and expenses related to
interest rate swap agreements are accrued continuously according to
the contract terms. To adapt borrowing to the desired funding currency,
currency swap agreements are used. When a loan in one currency has
been converted to another currency by means of swap agreements,
the loan and the swap agreement are valued at the exchange rate
prevailing on the closing day for the new currency.
Hedging of net assets in foreign subsidiaries occurs only to the
extent that a subsidiary has significant monetary assets in local currency.
The exchange rate difference in the forward contract is reported directly
against shareholders’ equity. The interest rate portion of the forward
contract is accrued over the life of the contract and is reported among
financial income and expenses.
Derivatives for which the requirements for hedge accounting are not
deemed as being fulfilled are valued in the balance sheet at the lower of
acquisition value and fair value.
NOTE 30 Net assets in foreign currencies
Net assets outside Sweden consist of net Group-external assets in
foreign subsidiaries, as well as net Group-external receivables and
liabilities of Swedish companies that are not hedged by funding in the
corresponding currency.
2004 2003 2002
Euro (EUR) 3,236 5,361 5,675
British pound (GBP) 936 846 863
Other European currencies 1,161 966 1,051
US dollar (USD) 191 – 285 103
South American local currencies 2,094 2,050 2,659
Other currencies 1,143 1,202 1,046
Total 8,761 10,140 11,397
For information on accumulated exchange rate differences that are
reported directly against shareholders’ equity, see Note 14.
NOTE 31 Currency exposure in operating income
The table below shows the net amount of operating revenue and
operating expenses exposed to foreign currencies, by currency.
2004 2003 2002
Euro (EUR) 8,300 8,400 7,900
British pound (GBP) 4,900 4,600 3,400
Other European currencies 2,300 2,100 2,100
Korean won (KRW) 800 1,500 1,300
US dollar (USD) 600 300 500
South American local currencies 1 300 0 –
Other currencies 1,900 1,400 1,200
Total 19,100 18,300 16,400
1 During 2002, local South American currencies fluctuated sharply, with significant
price and cost changes as a consequence. This means that a description of the
currency effect/exposure alone for that year is not meaningful.
In 2004, currency spot rate effects totalled about SEK –135 m., compared
to 2003. This was offset by positive currency hedging income of SEK
65 m., resulting in a negative net effect of SEK 70 m. During 2003,
currency hedging had a positive impact of SEK 620 m. Compared to
2002, the total currency rate effect was thus SEK – 690 m.
NOTE 32 Effect of exchange rate differences
NOTE 32 on net income
Net income was affected by exchange rate differences (excluding
flow-related forward contracts) as shown in the following table:
2004 2003 2002
Sales revenue – 85 – 80 45
Cost of goods sold 8 137 2
Selling expenses 0 – 16 26
Income from Customer Finance – 5 – 1 3
Operating income – 82 40 76
Financial income and expenses 18 – 58 – 160
Taxes 1 5 – 14
Effect on net income – 63 – 13 – 98
For information on accumulated exchange rate differences that are
reported directly against shareholders’ equity, see Note 14.
73 NOTES • SCANIA ANNUAL REPORT 2004