Annual Report 2006 (pdf) - EuroMaint Rail

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E u r o M a i n t A n n u a l R e p o r t 2 0 0 6 Notes Note 1 Accounting principles General information EuroMaint’s proposition to customers encompasses most forms of technical maintenance. EuroMaint Rail develops and produces technical system services and maintenance in the rail transport and engineering industries. EuroMaint Industry offers customers maintenance, component servicing and development of various types of production equipment. The consolidated financial statements and the Annual Report for EuroMaint AB (the parent company) for the 2006 financial year have been approved by the Board of Directors and the President for presentation to the AGM on 29 March 2007 for adoption. The parent company is a registered limited company domiciled in Stockholm, Sweden. The address of the head office is Svetsarvägen 10, SE-171 29 SOLNA. The Swedish state is the ultimate owner. The parent company of the largest Group in which EuroMaint AB, 556084-8458, is a subsidiary and in which consolidated financial statements are prepared, is AB Swedcarrier, 556036-3409, in Stockholm. Summary of important accounting principles The most important accounting principles applied in the preparation of these consolidated financial statements have been set out. Statement on compliance with the applied rules The consolidated financial statements for the EuroMaint Group have been prepared in accordance with International Financial Reporting Standards (IFRS). As the parent company is a company in the EU, only the IFRS as endorsed by the EU are applied. Moreover, the consolidated financial statements are prepared in accordance with Swedish legislation through the application of Swedish Financial Accounting Standards Council recommendation RR 30:05 (Supplementary financial reporting rules for Groups). The parent company Annual Report is prepared in accordance with Swedish law through the application of Swedish Financial Accounting Standards Council recommendation RR 32:05 (Financial reporting for legal entities). This means that IFRS valuation and disclosure principles are applied with the deviations specified in the section on parent company accounting principles. EuroMaint also follows the Stockholm Stock Exchange’s listing agreement with appendices and regulations from the Swedish Industry and Commerce Stock Exchange Committee (NBK). Foundation for preparing reports The consolidated financial statements for the EuroMaint Group have been prepared in accordance with International Financial Reporting Standards (IFRS). The accounts are primarily based on historical costs with the exception of certain financial instruments and investment property which are recognised at fair value. Altered accounting principle for investment property As of mid-2006 the Group measures its investment property at fair value. The effect of altering the accounting principle for investment property to fair value (IAS 40) entails an increase in equity in the opening balance of SEK 4.5 million upon transition to IFRS. Important estimates and assumptions for accounting purposes The Group makes estimates and assumptions about the future. The estimates for accounting purposes which result from these, by definition, will rarely equate to the actual result. The estimates and assumptions which entail a significant risk for considerable adjustments in carrying amounts for assets and liabilities over the coming financial year are discussed below. Critical accounting issues During the preparation of EuroMaint’s consolidated financial statements, the Board and President have, in addition to estimates, made a number of assessments of critical accounting issues which are highly significant to carrying amounts. This applies for the following areas: Fair value of acquired subsidiary EuroMaint Industry’s predominant customers operate in the automotive industry. This industry is undergoing heavy restructuring both nationally and internationally, which is henceforth likely to force players possibly to relocate their production facilities to regions with comparative advantages. Needless to say, this scenario means that valuations of customer relations and goodwill contain a degree of uncertainty. Uncertainty in estimates Certain assumptions about the future and certain estimates and assessments on the balance sheet date are of particular importance to the valuation of assets and liabilities in the balance sheet. The areas where the risk of changes in value during the subsequent year is greatest because the assumptions or estimates may need to be altered are discussed below. Impairment test for goodwill The value of recognised goodwill is tested at least once a year to determine any write-down requirement. The test requires an assessment of the value in use of the cash generating unit, or groups of cash generating units, to which the goodwill value is attributable. In turn, this requires an estimation of the expected future cash flow from the cash generating unit and a relevant discount rate must be established to calculate the present value of the cash flow. Obsolescence of inventories In terms of value, inventories mainly comprise items which have been acquired in accordance with an assessed maintenance plan for various train models. As these cycles are long-term in nature (5 to 12 years), there is an element of uncertainty in this assessment. The company has a far-reaching obligation to stock items (spare parts) for a long time for various train models which have a very long financial and technical life. Consolidated accounts Subsidiaries are all companies in which the Group is entitled to formulate financial and operational strategies in a way that usually accompanies a shareholding amounting to over half the voting rights. Subsidiaries are included in the consolidated financial statements from the day on which controlling influence passes to the Group. They are excluded from the consolidated financial statements from the day on which this controlling influence ceases. 49
E u r o M a i n t A n n u a l R e p o r t 2 0 0 6 Notes Note 1 Accounting principles Contd. Intra-Group transactions and balance sheet items, as well as profits on transactions between Group companies, are eliminated. Losses are also eliminated, unless the transaction is proof of a write-down requirement for the transferred asset. The accounting principles for subsidiaries have been changed where appropriate to guarantee consistent application of the Group’s principles. Business combinations IFRS 3 entails establishing the fair value of identifiable assets and liabilities in the acquired operation at the time of acquisition. Identifiable assets and liabilities also include assets, liabilities and provisions including obligations and demands from external parties not reported in the acquired operation’s balance sheet. No provisions are made for costs relating to planned restructuring measures resulting from the acquisition. The difference between the cost of the acquisition and the acquired proportion of net assets in the acquired operation is classified as goodwill and is recognised as an intangible asset in the balance sheet. The useful life of each individual intangible asset is established and the asset’s fair value is amortised over its useful life. If the useful life is deemed indefinite, no amortisation takes place. If the useful life of an intangible asset is deemed indefinite, all relevant conditions are taken into account and based on there being no foreseeable upper time limit for the net cash flow generated by the asset. The useful life for goodwill is generally assumed to be indefinite. Segment reporting As the subsidiaries conduct separate operations with separate products and services, their operations have been chosen as the primary segment. Sales between subsidiaries are based on market conditions. All assets and liabilities have been included for each subsidiary. Segment information per subsidiary is given in Note 3. Translation of foreign currencies Transactions in foreign currencies are translated at the rate used on the transaction date. Receivables and liabilities in foreign currencies are translated at the exchange rates in force on the balance sheet date. Exchange rate differences on loans and investments in foreign currencies are reported as financial revenues or financial expense. Other exchange differences are included in operating revenues. Tangible fixed assets Tangible fixed assets are recognised at cost less accumulated depreciation according to plan and accumulated write-downs. Depreciation takes place in accordance with a systematic plan over the useful life of the asset to an estimated residual value. Additional costs are added to the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is likely that future economic benefits associated with the asset will accrue to the Group and the asset’s cost can be measured in a reliable way. All other forms of repair and maintenance are recognised as expenses in the income statement for the period in which they arise. In order to distribute the cost of tangible fixed assets down to the estimated residual value, depreciation takes place linearly over the estimated useful life, in accordance with the following percentages. Machinery and equipment 10–20 Computers and terminals 33 Improvements to third-party property 10–20 The residual values and useful lives of assets are tested on each balance sheet date and adjusted as necessary. An asset’s carrying amount is depreciated immediately to its recoverable amount (the higher of the net selling price and value in use) if the asset’s carrying amount exceeds its estimated recoverable amount. Profits and losses from sales are established by means of a comparison between the sales proceeds and carrying amount and the result is recognised in the income statement. Intangible assets Goodwill Goodwill is the amount by which the cost exceeds the fair value of the Group’s proportion of the subsidiary’s identifiable net assets upon acquisition. Goodwill is recognised as an intangible asset. Profit or loss from the sale of a unit includes the remaining carrying amount of the goodwill pertaining to the sold unit. Goodwill is distributed between cash generating units upon testing to determine any write-down requirement. The write-down requirement for goodwill is tested as follows: the goodwill value established at the time of acquisition is distributed among cash generating units or groups of cash generating units, which are expected to bring benefits through the acquisition in the form of synergy effects. Assets and liabilities already within the Group at the time of acquisition may also be attributed to these cash generating units. Each cash flow of this kind to which goodwill is distributed, corresponds to the lowest level in the Group at which goodwill is monitored in the company’s Board and is not a larger part of the Group than a segment. A write-down requirement exists when the recoverable amount for a cash generating unit, or group of cash generating units, is lower than the carrying amount. In such cases a write-down is entered in the income statement. Other intangible assets/Customer relations In connection with corporate acquisitions, the Group has identified intangible assets which fulfil the criteria set out in IAS 38. Linear amortisation is applied over the useful life of the asset, which is taken as 8 years. The carrying amounts of intangible assets are tested to determine any write-down requirement when events or changes in circumstances indicate that the value may not be recoverable. Investment property Investment property is recognised at fair value, which equates to the market value and is established annually by external and internal valuers. Changes in fair value are recognised in the income statement as part of the Other operating revenues item. The “Land and buildings” header in Note 7 mainly recognises rebuilding of hired premises and investment property. 50
Page 1 and 2: euromaint ANNUAL REPORT EuroMaint u
Page 3 and 4: Contents EuroMaint in brief EuroMai
Page 5 and 6: The past year • Maintenance of St
Page 7 and 8: The CEO’s comments During the pas
Page 9 and 10: EuroMaint Rail • Maintenance of S
Page 11 and 12: EuroMaint Rail During 2006, EuroMai
Page 13 and 14: EuroMaint Rail Maintenance of Stock
Page 15 and 16: EuroMaint Rail New interior for Arl
Page 17 and 18: Sweden Baltic sea Estonia Latvia Je
Page 19 and 20: EuroMaint Rail Refurbishment contra
Page 21 and 22: EuroMaint Rail Creative development
Page 23 and 24: EuroMaint Industry • Production s
Page 25 and 26: EuroMaint Industry The past year ha
Page 27 and 28: EuroMaint Industry Production strea
Page 29 and 30: EuroMaint Industry Establishment in
Page 31 and 32: EuroMaint Industry Specially adapte
Page 33 and 34: EuroMaint • The role of the Group
Page 35 and 36: EuroMaint The role of the Group man
Page 37 and 38: EuroMaint Operational development M
Page 39 and 40: EuroMaint Personnel development Eur
Page 41 and 42: Five-year summary PRO FORMA PRO FOR
Page 43 and 44: E u r o M a i n t A n n u a l R e p
Page 49: E u r o M a i n t A n n u a l R e p
Page 67 and 68: Corporate Governance Report 2006 Eu
Page 69 and 70: Board report into internal control
Page 71 and 72: The Chairman’s comments In 2006 E
Page 73 and 74: The EuroMaint Board of Directors St
Page 75 and 76: EuroMaint Rail management Back row:
Page 77 and 78: EuroMaint Group management INGELA C
Page 79: EuroMaint unites innovative thinkin

Annual Report 2006 (pdf) - EuroMaint Rail

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