ANNUAL REPORT 2002 - Skanska

Employee stock options
The synthetic option programs are reported
in the balance sheet as a provision if the
market price of a Skanska share exceeds the
respective exercise price on the balance
sheet date. The year’s change in the provision
is included in the income statement
and is reported among personnel expenses.
The obligations that the synthetic
option programs may cause have been
hedged with the aid of equity swaps related
to shares in Skanska AB. The difference
between the market price on the balance
sheet date and the initial prices of the swap
agreement is reported directly against
shareholders’ equity.
Writedowns
Writedowns are calculated by applying the
rules in Recommendation No. 17 of the
Swedish Financial Accounting Standards
Council, “Impairment of Assets.” Writedowns
are determined on the basis of the
market value of assets or estimated useful
values.
Reversals of writedowns occur when the
basis for the writedown has wholly or partly
disappeared. The term “writedowns” is also
used in conjunction with reappraisals of the
value of properties that have been reported
as current assets. However, appraisal of
these properties occurs according to the
lower value principle (using the lower of
cost or net realizable value) and thus follows
Recommendation No. 2 of the Swedish
Financial Accounting Standards Council,
“Reporting of Inventories.”
Separately reported operating items
Gains on sale of properties, share of income
in associated companies and joint ventures
(reported according to the equity method)
and items affecting comparability are separately
reported in the income statement.
Separate reporting of gains on sale of
properties, writedowns and reversals of
writedowns on properties occurs only for
properties that belong to the Group’s real
estate operations.
Share of income in associated companies
and in those joint ventures that are reported
according to the equity method is apportioned
in the consolidated income statement
between “Operating income” (share of
income after financial items) and tax
expenses. Share of income in partnerships
and limited partnerships, including their
foreign equivalents, is reported in its entirety
under operating income, except for a
small number of holdings in limited partnerships
of a financial nature that are
reported under net financial items.
Recommendation No. 4 of the Swedish
Financial Accounting Standards Council,
“Extraordinary Items” is applied, which
means that the effects on earnings or special
events and transactions of major importance
are specified. Examples of such events
and transactions are capital gains upon the
divestment of branches of operations and
significant fixed assets and writedowns.
Financial items
Effective from January 1, 2002, borrowing
costs during construction of a building are
included in acquisition cost and are thus no
longer reported as a financial expense in the
income statement. The general rule is that capitalization
of borrowing costs shall be limited
to assets that require considerable time for
completion, which in the case of the Skanska
Group means that capitalization includes the
construction of current-asset properties and
properties for the Group’s own operations
(business properties). Capitalization may
occur when expenditures that are part of the
acquisition cost have arisen and activities
aimed at completion of the building have
begun. Capitalization ceases when the building
is completed. Borrowing costs during a period
when work on completion of the building is
interrupted for a long time are not capitalized.
If separate borrowing has occurred for the
project, actual borrowing cost is used. In other
cases, the borrowing cost is estimated on the
basis of the Group’s borrowing cost.
To the extent that the year’s provisions
for a deficit in the pension fund are due to a
downturn in the value of the pension fund’s
assets, the provision is reported as a financial
expense.
In the Parent Company accounts, the net
amount of Group contributions, minus
shareholder contributions provided when
receiving Group contributions, is reported
as a financial income item.
Taxes on profit for the year
Income tax and deferred taxes are reported
in compliance with Recommendation No. 9
of the Swedish Financial Accounting Standards
Council, “Income Taxes.”
Taxes are reported in the income statement
except when the underlying transaction
is reported directly against shareholders’ equity,
in which case the accompanying tax effect
is reported in shareholders’ equity. Current
tax is tax to be paid or received that is related
to the year in question. This also includes
adjustment of current tax that is attributable
to earlier periods. Deferred tax is calculated
according to the balance sheet method, on the
basis of temporary differences between
reported values of assets and liabilities and
values for tax purposes. The amounts are calculated
based on how the temporary differences
are expected to be settled and by applying
the tax rates and tax rules that have been
decided or announced as of the balance sheet
date. Temporary differences are not taken into
account in goodwill in the consolidated
financial statements, nor in differences attributable
to shares in subsidiaries and associated
companies that are not expected to be taxed
within the foreseeable future. In the consolidated
financial statements, untaxed reserves
are divided into deferred tax liabilities and
shareholders’ equity. Deferred tax claims
related to deductible temporary differences
and loss carry-forwards are reported only to
the extent that they are likely to result in
lower tax payments in the future.
Balance sheet
Intangible fixed assets
Intangible fixed assets are reported at acquisition
cost minus accumulated amortization.
Goodwill that arises from acquisitions of
companies is valued in an acquisition analysis
in compliance with the rules in Recommendation
No. 1:00 of the Swedish Financial
Accounting Standards Council, “Business
Combination” (consolidated accounts).
In the consolidated financial statements,
goodwill attributable to an independent
business abroad in expressed in local currency.
Translation to SEK complies with
Recommendation No. 8 of the Swedish
Financial Accounting Standards Council,
“Reporting of Effects of Changes in Foreign
46 Skanska Annual Report 2002 – Accounting and valuation principles