Annual Report 2004 - HL Display

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NOTES Notes Note 1 ACCOUNTING AND VALUATION PRINCIPLES The annual accounts and consolidated accounts have been drawn up in accordance with the Annual Accounts Act, the Swedish Financial Accounting Standards Council’s recommendations and the Swedish Emerging Issues Task Force statements. As from 1 January 2004 RR 29 Employee benefits has been applied. This has had the effect that defined benefit plans in the Group are reported and calculated in accordance with principles that are different to those previously applied. The change in the net pension liability reported in the accounts as a result of this change of principle has been posted to equity. In accordance with the recommendation there has been no conversion of the comparative year. Valuation Assets and liabilities have been valued at their acquisition value unless otherwise stated. Classification Fixed assets, long-term liabilities and provisions essentially consist of amounts that are expected to be recovered or settled after more than twelve months from the balance sheet date. Current assets and current liabilities essentially consist of amounts that are expected to be recovered or settled within twelve months of the balance sheet date. Consolidated financial statements The consolidated financial statements have been prepared in accordance with the Swedish Financial Accounting Standards Council’s recommendation on consolidated financial statements, RR 1:00. Acquisitions of companies are reported according to the purchase method of accounting. The Group’s closing accounts include companies in which the parent company, either directly or indirectly, holds more than 50 per cent of voting rights, or has a controlling interest in any other way. Subsidiaries are considered to be integrated, and foreign subsidiaries are translated in accordance with the monetary method. Monetary items in the subsidiaries’ balance sheets are converted at the exchange rate on the balance sheet date, while non-monetary items are converted at the exchange rate on the investment date. In the income statement, depreciation is reported at the historical exchange rate and other items at the average rate for the year. Cost of goods sold is translated at the average exchange rate, as the turnover rate is high. Translation differences are reported under financial items in the income statement. Associated Companies and Joint Ventures Associated companies refers to companies which are not subsidiaries but in which the parent company, directly or indirectly, owns more than 20 per cent of the votes or has a controlling interest in some other way. The joint ventures in the Group are jointly owned companies run by HL Display and one or more other party. The proportional method is used for consolidation of joint ventures. Revenue recognition Revenue recognition follows the Swedish Financial Accounting Standards Council’s recommendation RR 11 Revenues. The Group’s net sales consist almost entirely of sale of goods. Revenues are reported in the income statement at the time when the future financial benefits are expected to fall to the company and when these benefits can be calculated in a reliable way. Sales are reported excluding VAT and discounts. Reporting of segments – lines of business and geographical areas HL Display is applying RR 25 Reporting of segments – lines of business and geographical areas. HL Display is a typical niche company with production and sales of a homogeneous product range. The products have somewhat different functions, but are intended for the same areas of application (merchandising HL DISPLAY ANNUAL REPORT 2004 36 and in-store communication). The company’s opportunities and risks are in a global market where the determining success factor is to become a supplier to the leading national and multinational retail chains and brand manufacturers (key accounts). HL Display achieves this through global key account management, by being a leader with regards to cost efficient production, logistics and sales, through innovative product development and design, and by offering a broad range of products. As the primary basis of division, HL Display accounts for a single, vertically integrated, line of business and as a secondary basis of division geographical areas. These bases of division are in-line with the company’s internal reporting. Leasing The Swedish Financial Accounting Standards Council’s recommendation RR 6:99 Leasing agreements is applied for the reporting of leasing. Leasing agreements are classified as either financial or operating leasing in the consolidated financial statements. A lease is considered financial if the economic risks and benefits associated with ownership of the asset have, to a material degree, been transferred to the leasee. If this is not the case, the leasing is reported as operating leasing. Assets leased under leasing agreements which are to be classified as financial are reported as plant and machinery and are written off in accordance with the depreciation principles. Future leasing agreements are reported as liabilities, and the reported liability is reduced by the leasing charges paid during the year, after interest has been deducted. The annual leasing charge for leasing agreements classified as operating is reported as an operating expense in the income statement. Research and development Costs of research and development that are posted in the income statement comprise costs of research into production, materials and products, as well as product development costs until a decision is made to complete development of the product. After a development decision has been made, the development costs are capitalised in accordance with the Swedish Financial Accounting Standards Council’s recommendation RR 15 Intangible assets. However, as the subsequent product development work almost exclusively involves constructing the production equipment needed to manufacture the product, the costs are capitalised as tangible fixed assets. Employee benefits Employee benefits are reported in the consolidated accounts in accordance with the Swedish Financial Accounting Standards Council’s recommendation RR 29 Employee benefits, which has been applied as from 1 January 2004. Defined benefit plans have been reported in the consolidated accounts up to and including 2003 in accordance with local rules and regulations, with no conversion to common principles. As from 2004, defined benefit plans have been reported in the consolidated accounts in accordance with common principles and calculation methods. The difference compared with the previous year has affected opening balance of equity 2004. Income taxes Deferred tax is recognised for loss-carry forwards and temporary differences between reported and fiscal values of assets and liabilities. Deferred tax assets are recognised only to the extent that it is likely that they will be utilised. Receivables Receivables are entered in the amounts which are expected to be paid, based on an individual assessment. Receivables and liabilities in foreign currencies Receivables and liabilities in foreign currencies are valued at the closing rate of exchange.
Financial instruments An explanation of the accounting principles in respect of financial instruments is provided in note 2. Hedging Most of the foreign subsidiaries’ net values of monetary assets and monetary liabilities are hedged, as are most of the parent company’s loan receivables from foreign subsidiaries. Currency effects of the hedging instruments are offset against the translation difference that arises on conversion of the foreign subsidiary’s income statements and balance sheet, and against exchange rate differences in the parent company’s loan portfolio. Inventories Inventories are valued at the lower of acquisition value and market value. Balanced average prices are applied to calculate the acquisition value. Products manufactured by the company and products in progress are valued at the manufacturing cost including a reasonable proportion of indirect manufacturing overheads. Fixed assets Depreciation according to plan is based on the original acquisition value and the estimated utilisation period as follows: – IT systems 4 years – Goodwill 5 years – Buildings 33 years – Plant and machinery 5 - 12 years – Inventory, tools, fixtures and fittings 3 - 7 years – Renovation of other parties’ property 20 years Write-downs In accordance with the Swedish Financial Accounting Standards Council’s recommendation RR 17 Impairment of Assets, the reported values of the Group’s intangible and tangible fixed assets are tested on the balance sheet date to determine whether there is any indication of a write-down requirement. If such an indication is identified, the recoverable value of the asset is calculated as the higher of value in use and net realisable value. A write-down is carried out if the recoverable value is less than the reported value. When calculating the value in use, the future cash flows are discounted at a rate of interest which before tax takes into account the market’s assessment of risk-free interest and risk associated with the specific asset. An asset which is dependent on other assets is included with the smallest cash-generating unit which generates independent cash flows. A write-down is reversed if there has been a change in the estimates used to determine the recoverable value. However, a reversal is made only to the extent that the asset’s carrying value does not exceed the carrying value that would have been determined, net of depreciation, had there been no write-down. Provisions Provisions are reported in the balance sheet in accordance with the Swedish Financial Accounting Standards Council’s recommendation RR 16 Provisions, Contingent Liabilities and Contingent Assets, when the company has a legal or informal undertaking arising from contingent events in which it is likely that payments will be required to fulfil the commitment and where it is possible to make a reliable estimate of the amount to be paid. 37 Earnings per share Earnings per share is calculated, in accordance with RR 18 Earnings per share, as the Group’s profit after tax divided by the number of shares. In earnings per share after dilution the number of shares has been increased by the number of shares involved in the three option schemes. Dilution only arises if certain conditions are fulfilled. Dilution does not occur if, for example, the present value is less than the average share price during the period, or in the case of a negative result. Group contributions and shareholders’ contributions Shareholders’ contributions are posted directly to equity at the recipient and are capitalised as shares and interests at the issuer, if no write-down is required. Group contributions are reported according to their financial nature. This means that group contributions issued or received for the purpose of reducing the group’s total tax are posted directly to retained profits with a deduction for its current tax effect. A group contribution that is equivalent to a dividend is posted as such, i.e. group contribution received, and its current tax effect is posted in the profit and loss account. Group contribution issued is posted directly to retained profits with a deduction for its current tax effect. A group contribution that is equivalent to a shareholder contribution is for the recipient posted, with due consideration of its current tax effect, directly to retained profits. The issuer reports the group contribution and its current tax effect as shares in group undertakings, if no write-down is required. Events after the year-end If any significant events occur after the year-end but before the date on which the financial reports are signed, and they are not of such a nature that the balance sheet and profit and loss account have to be changed, the information is included in the directors’ report or a separate note. NOTES HL DISPLAY ANNUAL REPORT 2004
Page 1 and 2: HL Display Annual Report 2004
Page 3 and 4: The year in brief . Group net sales
Page 5 and 6: ments. These customers have now ins
Page 7 and 8: panies are measured on the basis of
Page 9 and 10: DEVELOPMENT OF OPERATING EXPENSES,
Page 11 and 12: HL Display’s new Slimline shelf-e
Page 13 and 14: emphasis on further developing its
Page 15 and 16: The new EasyShelf system makes it e
Page 17 and 18: the region attractive to the multin
Page 19 and 20: Developments during the year Sales
Page 21 and 22: Competitors The competitive situati
Page 23 and 24: 21 Super GB uses colour codes to he
Page 25 and 26: the company’s products. This mean
Page 27 and 28: EMPLOYEE FACTS Employee categories
Page 29 and 30: Customer agreements are normally re
Page 31 and 32: 29 THE HL DISPLAY SHARE Options sch
Page 33 and 34: Income statement Comments on the co
Page 35 and 36: 33 Group Parent Company BALANCE SHE
Page 37: Cash flow statement 35 CASH FLOW ST
Page 41 and 42: Note 3 BREAKDOWN OF NET SALES BY GE
Page 43 and 44: Note 15 TAX ON PROFIT FOR THE YEAR
Page 45 and 46: Note 21 SHARES IN GROUP UNDERTAKING
Page 47 and 48: Note 28 LONG-TERM LIABILITIES Of lo
Page 49 and 50: Note 35 TRANSACTIONS WITH RELATED P
Page 51 and 52: Nine year summary 49 NINE-YEAR SUMM
Page 53 and 54: Board procedures 2004 HL Display’
Page 55 and 56: 50 years of HL Display It was 50 ye

Annual Report 2004 - HL Display

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