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 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. 51
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. The ITP pension, which is secured through an insurance policy with Alecta, is therefore entered as a defined contribution plan. Fees for the year for pension plans issued by Alecta amount to SEK 15 (19) million. Some employees are entitled to exchange part of their ITP plan for a premium-based pension solution where the company’s sole obligation is to pay the set premiums. The fees are reported as costs of personnel when they fall due for payment. Prepaid fees are recognised as an asset to the extent that cash repayment or a reduction in future payments may accrue to the company. A defined benefit pension plan guarantees the employee a pension equivalent to a certain percentage of his or her final salary. The liability recognised in the balance sheet regarding defined benefit pension plans is the present value of the defined benefit obligation on the balance sheet date net the fair value of the plan assets, with adjustments for unrecognised actuarial gains/losses for past service. The defined benefit pension obligation is calculated annually by independent actuaries. The present value of the defined benefit obligation is established by discounting the estimated future cash flow at an interest rate for government bonds issued in the same currency in which the remuneration will be paid out, and with durations comparable to the pension provision in question. Actuarial gains and losses arising from experience-based adjustments and changes in actuarial assumptions exceeding the higher of 10% of the value of the plan assets and 10% of the defined benefit obligation, are taken up as expense or revenues over the estimated average remaining period of service of the employees. Past service cost is recognised directly in the income statement, unless the changes in the pension plan are conditional on the employee remaining in service for a set period (entitlement period). In such cases, the past service cost is recognised on a straight-line basis over the entitlement period. Remuneration on termination of employment Remuneration on termination of employment is paid when an employee’s position is terminated prior to standard retirement or when an employee accepts voluntary redundancy from the position in exchange for such remuneration. The Group recognises severance pay when it is demonstrably obliged either to make the employee redundant in accordance with a detailed formal plan with no opportunity for recall, or to provide remuneration upon redundancy due to an offer made to encourage voluntary redundancy among personnel. Benefits due after 12 months of the balance sheet date or longer are discounted at the present value. Provisions Provisions are recognised when the Group has an existing legal or constructive obligation as a result of a past event, and it is more probable than not that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. No provisions are made for future operating losses. If there are a number of similar obligations, the probability that an outflow of resources will be required to settle is assessed generally for this entire group of obligations. A provision is also reported if the probability of an outflow regarding a specific item in this group of commitments is only slight. Revenue recognition Net turnover encompasses sales of services and goods within maintenance, new construction and refurbishment of rolling stock, as well as maintenance and implementation of production facilities for the engineering industry. For maintenance contracts guaranteeing availability, known as ‘TSC contracts’ (Total Service Concept), and new construction and refurbishment contracts, revenues and costs pertaining to the assignment are recognised relative to the degree of completion of the assignment. This accounting principle is based on the view that the task is fulfilled in line with the work being carried out, and means that profit is recognised progressively based on the degree of completion of each assignment when the assignment’s final outcome can be measured in a reliable way. For availability contracts, the degree of completion is determined on the basis of work carried out in relation to the maintenance plan. For new construction and refurbishment contracts, the degree of completion is determined in relation to accrued assignment costs. If an assignment’s final outcome cannot be measured in a reliable way but no loss is feared, revenue corresponding to accrued costs is recognised. A feared loss for an assignment is immediately charged in its entirety to the period’s results. Leases Leases where the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made during the lease term are taken up as expenses in the income statement on a straight-line basis over the lease term. Cash flow analysis The indirect method is applied in recognising cash flow from operating activities. Related parties Related companies to the EuroMaint Group are defined as state companies with market requirements where the state has a controlling influence. Persons closely associated with the Group are defined as Board members, senior personnel and close family members of these people. Disclosures are provided about transactions with related parties which entail the transfer of resources, services or obligations between related parties, whether or not remuneration is paid. The information contains details of the nature of the relationship and information about the effect of the relationship on the financial reports. Parent company The parent company applies the same accounting principles as the Group, along with RR 32:05. 52
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 51: 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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