Annual Report 2006 (pdf) - EuroMaint Rail

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
Note 1
Accounting principles Contd.
Write-downs
Assets with an indefinite useful life are not depreciated/amortised but
tested annually to determine any write-down requirement. The assets
which are depreciated/amortised are assessed in terms of decrease
in value whenever an event or a change in circumstances indicates
that the carrying amount may not be recoverable. A write-down is
carried out for the amount by which the asset’s carrying amount
exceeds its recoverable amount. The recoverable amount is the higher
of an asset’s fair value less selling expenses, or its value in use. On
determining the write-down requirement, the assets are grouped at
the lowest levels at which there are separate, identifiable cash flows
(cash generating units). Goodwill is tested annually to identify any
write-down requirement and is recognised at cost less accumulated
write-downs.
Financial instruments
Financial instruments recognised as assets in the balance sheet
include cash equivalents, accounts receivable, derivatives and other
receivables. Those recognised as liabilities include accounts payable,
borrowings, derivatives and other liabilities.
A financial asset or financial liability is recognised in the balance
sheet when the company becomes party to the instrument’s contractual
terms. Accounts receivable are recognised in the balance sheet
once an invoice has been sent. Liabilities are recognised once the
counterparty has completed its task and there is a contractual obligation
to pay, even though an invoice may not yet have been received.
Accounts payable are recognised once the invoice has been received.
A financial asset is excluded from the balance sheet once the
contractual rights have been realised, have expired or the company
has lost control over it. The same applies for part of a financial asset.
A financial liability is removed from the balance sheet once the obligation
in the contract has been fulfilled or has in some other way been
extinguished. The same applies for part of a financial liability.
Financial assets
Acquisitions and sales of financial assets are reported on the business
day, i.e. the day on which the company commits to acquiring or
selling the asset.
Borrowing
Loans are initially recognised at the loan amount and are subsequently
entered at the loan amount less reductions. Borrowing is classified as
a current liability if the payment of the liability will be made within 12
months of the balance sheet date.
Derivative instruments
The Group uses derivative instruments to secure parts of its exposure
to currency risks in ongoing payment flows. Management is in
accordance with the financial rules established by the Board. Hedge
accounting is not applied, instead all derivatives are categorised as
financial assets and liabilities valued at fair value through the income
statement. This means that the change in value of the derivatives is
recognised in the income statement under financial items. Derivatives
with positive values are entered as assets and derivatives with
negative values are entered as liabilities. Fair value is established by
obtaining the costs or revenue which would have arisen if the contract
had expired on the balance sheet date.
Inventories
Material stores and finished goods inventories are valued at the lower
of cost or net selling price. The Group applies the first-in, first-out
method (FIFO). The net selling price is the estimated selling price in
operating activities less applicable variable selling expenses.
Accounts receivable
Accounts receivable are reported at the invoiced amount less any reserve
for decrease in value. A reserve for decrease in value of accounts
receivable is set up when there is objective proof that the Group will
not be able to receive all amounts due in accordance with the original
terms of the receivables. The size of the reserve is the difference between
the asset’s carrying amount and the value of assessed future cash
flows. The decrease in value is reported in the income statement.
Cash and cash equivalents
Cash and cash equivalents include cash and bank balances. In
the balance sheet, the bank overdraft facility utilised is entered as
borrowing under current liabilities.
Income tax
The tax burden is affected by appropriations and other tax adjustments
made in each company. The tax rate used is 28%. Deferred tax is
recognised in its entirety on all temporary differences comprising
the difference between the tax base for assets and liabilities and their
carrying amounts. Deferred tax is calculated through the application
of tax rates and laws which have been decided or notified on the balance
sheet date and which are expected to apply when the deferred tax
assets in question are realised or the deferred tax liability is cleared.
Deferred tax assets are recognised for tax-deductible temporary
differences and unused loss carry-forwards to the extent it is likely
that future taxable profit will be available against which the temporary
differences or unused loss carry-forwards may be used.
Remuneration to employees
Pension obligations
The Group companies have different pension plans. The pension
plans are financed through payment of insurance premiums or
through a provision in the balance sheet. The Group has both defined
benefit and defined contribution pension plans. For employees in
the Group previously employed by the public enterprise, the Swedish
State Railways, the Swedish state is responsible for earned and not
paid pension commitments for the time prior to conversion into
companies at the end of 2000/beginning of 2001.
A defined contribution pension plan is a plan for which the Group
holds no further payment obligation once the contributions are
paid. Defined contribution pension plans in the Group are PA-03,
Alternativ ITP (supplementary pensions for higher earners), and ITP
supplementary pensions for salaried employees, Alecta. ITP pensions
in Alecta are recognised as defined contribution plans due to a
deficiency in the information required to classify the plan as a defined
benefit pension. According to a statement from the Swedish Financial
Accounting Standards Council’s Emerging Issues Task Force,
URA 42, these are defined benefit plans encompassing several
employers. EuroMaint has not had access to such information for
the 2006 financial year that would make it possible to enter this
plan as a defined benefit plan.
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