ANNUAL REPORT 2006 - Skanska

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Note 14 Net financial items Note 16 Income taxes 2006 2005 Financial income Interest income 406 308 Dividends 0 3 Change in fair value 2 19 Net exchange rate differences 37 Net other financial items 21 466 330 Financial expenses Interest expenses –107 –137 Change in fair value –120 Net exchange rate differences –28 Net other financial items –17 –45 –244 –210 Income from associated companies 1 0 Total 223 120 Net interest items Net interest items in 2006 amounted to SEK +299 M (+171). Interest income improved by SEK 98 M, from SEK 308 M to SEK 406 M, as a consequence of higher average interest-bearing assets during 2006 as well as higher interest rates. Interest expenses meanwhile decreased by SEK 30 M, from SEK –137 M to SEK –107 M. This was because on average, Skanska borrowed less during 2006. Interest income was received at an average interest rate of 2.81 (2.34) percent. Interest expenses, excluding interest on pension liability, were paid at an average interest rate of 3.74 (4.15) percent. During 2006, consolidated interest expenses of SEK –34 M (–28) were capitalized. Net change in fair value Derivatives as well as certain other assets and liabilities have been carried at fair value starting in 2005, in compliance with IAS 39. The item consists mainly of gains and losses on derivatives. Net other financial items In 2006 these items included loan redemption discounts as well as various financial fees, mainly related to Skanska Latin America. In 2005, the item consisted exclusively of financial fees at Skanska Latin America. Income from associated companies Skanska’s holdings in the equity of aircraft leasing companies are recognized in ”Net financial items.” During 2006, SEK 1 M (0) was recognized in income. Holdings in other associated companies are part of the Group’s operations and are thus recognized under ”Operating income.” Note 15 Borrowing costs Borrowing costs related to investments that require a substantial period for completion are capitalized. See ”Accounting and valuation principles,” Note 1. During 2006, borrowing costs were capitalized at an interest rate of about 4 percent Interest capitalized during the year Total accumulated capitalized interest included in cost 2006 2005 2006 2005 Intangible assets 2 5 94 92 Property, plant and equipment 0 0 0 0 Current-asset properties Commercial Development 21 16 150 148 Other commercial properties 10 10 Residential Development 11 7 11 18 Total 34 28 265 268 Income taxes are reported in compliance with IAS 12, ”Income Taxes.” See ”Accounting and valuation principles,” Note 1. Tax expenses 2006 2005 Current taxes –1,196 –1,115 Deferred tax benefits/expenses from change in temporary differences 53 –72 Deferred tax expenses from change in loss carry-forwards –189 –8 Taxes in joint ventures 3 –29 Taxes in associated companies –1 –6 Total –1,330 –1,230 Tax items recognized directly in equity 2006 2005 Deferred taxes attributable to cash flow hedging 4 –13 Deferred taxes attributable to pensions –217 495 Total –213 482 There was no deferred tax attributable to financial assets classified as held for sale. Taxes related to divested businesses Capital gains tax Tax expenses for the year in each company Company 2006 2005 2006 2005 Divestments in 2006 Divestments in 2005 Skanska Prefab Mark 2 Skanska Modul –34 Total 0 0 0 –32 Relation between taxes calculated at weighted average tax rate and taxes recognized The Group’s weighted average tax rate was estimated at 30 (28) percent. Tax rates in effect in Skanska’s largest home markets 2006 2005 Sweden 28% 28% Norway 28% 28% Denmark 28% 28% Finland 26% 26% Poland 19% 19% Czech Republic 24% 26% United Kingdom 30% 30% United States 35–45% 35–45% The relation between taxes calculated according to an aggregation of the tax rates in effect and recognized taxes is explained in the table below. 2006 2005 Income after financial items 4,985 5,120 Tax according to aggregation of the tax rates in effect, 30 (28) percent –1,495 –1,433 Tax effect of: Goodwill impairment losses –41 Property/company divestments/ disposal of businesses 226 317 Losses not offset by deferred tax assets –109 –57 Other items 48 –16 Recognized tax expenses –1,330 –1,230 92 Notes, including accounting and valuation principles Skanska Annual Report 2006
Note 16 continued Deferred tax assets 2006 2005 Deferred tax assets for loss carry-forwards 64 253 Deferred tax assets for shares 43 132 Deferred tax assets for other assets 277 138 Deferred tax assets for provisions for pensions 579 910 Deferred tax assets for other liabilities 1,013 849 Total 1,976 2,282 Deferred tax assets for loss carry-forwards are expected to be mainly utilized to offset deferred tax liabilities. Deferred tax assets other than for loss carry-forwards refer to temporary differences between carrying amounts for tax purposes and carrying amounts recognized in the balance sheet. These differences arise, among other things, when the Group’s valuation principles diverge from those applied locally by a subsidiary. These deferred tax assets are mostly realized within five years. Deferred tax assets arise, for example, when a recognized depreciation/amortization/impairment loss on assets becomes deductible for tax purposes only in a later period, when eliminating intra-Group profits, when the provisions for defined-benefit pensions differ between local rules and IAS 19, when the required provisions become tax-deductible in a later period and when advanced payments to ongoing projects are taxed according to the cash principle. Deferred tax assets for ongoing projects were included in ”Deferred tax assets for other liabilities” in the amount of SEK 231 M. Temporary differences and loss carry-forwards that are not recognized as deferred tax assets 2006 2005 Loss carry-forwards that expire within one year 75 745 Loss carry-forwards that expire in more than one year but within three years 344 346 Loss carry-forwards that expire in more than three years 1,770 1,475 Total 2,189 2,566 The loss carry-forwards are found in a number of different countries. These loss carry-forwards are not recognized as deferred tax assets because the right to offset them against other income is limited or current earnings generation in some of these countries makes it impossible to assess the likelihood that a loss carryforward can be utilized. Provisions for taxes 2006 2005 Deferred tax liabilities on shares and participations 309 348 Deferred tax liabilities on other assets 704 812 Other deferred tax liabilities 1 879 1671 Total 2 892 2 831 Deferred tax liabilities on other assets and other deferred tax liabilities refer to temporary differences between carrying amounts for tax purposes and carrying amounts in the balance sheet. These differences arise, among other things, when the Group’s valuation principles diverge from those applied locally by a subsidiary. These deferred tax liabilities are mostly realized within five years. For example, deferred tax liabilities arise when depreciation/amortization for tax purposes in the current period is larger than the required economic depreciation/amortization and when recognized profits in ongoing projects are taxed only when the project is completed. Deferred tax assets for ongoing projects are included in ”Other deferred tax liabilities” in the amount of SEK 1,030 M. Temporary differences attributable to investments in subsidiaries, branches, associated companies and joint ventures for which deferred tax liabilities were not recognized totaled SEK 0 M (0). In Sweden and a number of other countries, divestments of holdings in limited companies are tax-exempt under certain circumstances. Temporary differences thus do not normally exist for shareholdings by the Group’s companies in these countries. Net change in deferred taxes in the balance sheet 2006 2005 Net deferred tax liabilities, January 1 549 1 097 Transferred to assets classified as held for sale –9 Recognized in equity 213 –482 Deferred tax expenses 136 80 Acquisitions of companies –4 Divestments of companies –3 –9 Exchange rate differences 25 –128 Net deferred tax liabilities, December 31 916 549 Note 17 Property, plant and equipment Property, plant and equipment are reported in compliance with IAS 16, ”Property, Plant and Equipment.” See Note 1, ”Accounting and valuation principles.” Office buildings and other buildings used in the Group’s business are recognized as property, plant and equipment. Machinery and equipment are recognized as a single item. Property, plant and equipment by asset class 2006 2005 Property 1,690 1,614 Plant and equipment 3,602 3,527 Property, plant and equipment under construction 165 102 Total 5,457 5,243 Depreciation of property, plant and equipment by asset class and function Sales and Cost of sales administration Total 2006 2005 2006 2005 2006 2005 Property –53 –49 –17 –15 –70 –64 Plant and equipment –861 –818 –141 –138 –1,002 –956 Total –914 –867 –158 –153 –1,072 –1,020 Impairment losses/reversals of impairment losses on property, plant and equipment Impairment losses/reversals of impairment losses of SEK –23 M (–30) were recognized during the year. Buildings and Machinery and Impairment losses/reversals of land equipment impairment losses by function 2006 2005 2006 2005 Cost of sales Impairment losses –10 –25 –22 –10 Reversals of impairment losses 17 5 3 Sales and administration Impairment losses –6 –5 Total 1 –20 –24 –10 Amount of impairment losses/reversals is based on Net realizable value 4 –12 –13 –2 Value in use –3 –8 –11 –8 Total 1 –20 –24 –10 Property, plant and equipment held for sale At year-end 2005, the carrying amount of property, plant and equipment classified as held for sale was SEK 33 M. This item was transferred back to property, plant and equipment on January 1, 2006 Skanska Annual Report 2006 Notes, including accounting and valuation principles 93
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ANNUAL REPORT 2006
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Business streams and organization C
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During 2007 we closed and began con
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Skanska’s core businesses Skanska
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Ambitious financial and qualitative
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0—15 MUSD, 25% • 15—30 MUSD,
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expertise can be kept in projects.
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largest group, with about 60 millio
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To the left: At Norra Bantorget in
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To the left: The Palace of Justice
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CONSTRUCTION MORE THAN 200 STORES U
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During 2006 Skanska USA Civil furth
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CONSTRUCTION NEW SUCCESSES IN THE G
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To the left: In Kärra, 10 km (6 mi
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To the left: Today the former Films
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RESIDENTIAL DEVELOPMENT LIVING CLOS
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yggande, förvaltning och försälj
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Skanska is developing Norra Bantorg
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The Danish unit of Svenska Handelsb
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COMMERCIAL DEVELOPMENT THE INNER HA
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To the left: The first phase of Der
Page 43 and 44: Market risk concession, example Ava
Page 45 and 46: 0 6,7% 7,7% 8,7% 9,7% 10,7% 11,7% 1
Page 47 and 48: INFRASTRUCTURE DEVELOPMENT FIRST WI
Page 49 and 50: % Number 100 80 60 40 20 0 Environm
Page 51 and 52: Awards and achievements During 2006
Page 53 and 54: Zero tolerance to corruption At the
Page 55 and 56: Report of the Directors The Board o
Page 57 and 58: tive effect of about SEK 90 M due t
Page 59 and 60: SEK M 2006 2005 Strategic investmen
Page 61 and 62: Slovakian company. The fine in Skan
Page 63 and 64: The dilution effect during 2006 is
Page 65 and 66: Consolidated balance sheet SEK M No
Page 67 and 68: Consolidated cash flow statement SE
Page 69 and 70: Parent Company balance sheet SEK M
Page 71 and 72: Notes including accounting and valu
Page 73 and 74: income,” “Financial expenses”
Page 75 and 76: Internal profits Internal profits t
Page 77 and 78: it nor taxable profit. Also not tak
Page 79 and 80: IAS 39, “Financial Instruments: R
Page 81 and 82: Note 3 Effects of changes in accoun
Page 83 and 84: Note 4 continued Central, eliminati
Page 85 and 86: Note 4 continued C. Other informati
Page 87 and 88: Note 6 continued Liquidity reserve
Page 89 and 90: Note 7 Business combinations Busine
Page 91 and 92: Note 10 Operating income Operating
Page 93: Note 13 Impairment losses/Reversals
Page 97 and 98: Note 18 Goodwill Goodwill is recogn
Page 99 and 100: Note 20 Investments in joint ventur
Page 101 and 102: Note 20 continued Note 21 Financial
Page 103 and 104: Note 22 continued Carrying amount P
Page 105 and 106: Note 26 continued Equity attributab
Page 107 and 108: Note 28 continued Pension obligatio
Page 109 and 110: Note 31 Specification of interest-b
Page 111 and 112: Note 33 Assets pledged Assets pledg
Page 113 and 114: Note 34 continued Effect on the Gro
Page 115 and 116: Note 35 Cash flow statement Aside f
Page 117 and 118: Note 36 Personnel Wages, salaries,
Page 119 and 120: Note 37 continued C. Benefits to th
Page 121 and 122: Note 40 Leases Skanska is a lessee
Page 123 and 124: Note 43 Five-year Group financial s
Page 125 and 126: Financial ratios etc. 5 In complian
Page 127 and 128: Parent Company notes Note 45 Financ
Page 129 and 130: Note 52 Holdings in Group companies
Page 131 and 132: Note 59 Expected recovery periods o
Page 133 and 134: Proposed allocation of earnings The
Page 135 and 136: Corporate governance report of Skan
Page 137 and 138: Attendance at Board and Committee m
Page 139 and 140: Senior Executive Team Johan Karlstr
Page 141 and 142: Curt Källströmer Head of Chairman
Page 143 and 144: More information Worldwide The Skan
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Abbreviations BOT Build Own/Operate
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Addresses Skanska AB SE-169 83 Soln
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ANNUAL REPORT 2006 - Skanska

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