Annual Report 2008 - Skanska

Note
06 Continued
Credit risk
The maximum credit exposure for financial assets on the balance sheet date is equivalent
to their fair value. This credit risk is divided below into financial credit risk, which
refers to risk in interest-bearing assets, and customer credit risk, which refers to the risk
in trade accounts receivable. The risk in other operating receivables is also described.
Financial credit risk − Risk in interest-bearing assets and derivatives
This is the risk that the Group runs in its relations with financial counterparties in the
case of deposits of surplus funds, bank account balances and investments in financial
assets. Credit risk also arises when using derivatives and consists of the risk that a
potential gain will not be realized in case the counterparty does not fulfill its part of the
contract.
In order to reduce the credit risk in derivatives, Skanska has signed standardized netting
agreements with all financial counterparties with which it enters into derivative
contracts.
Skanska endeavors to limit the number of financial counterparties, which must possess
a rating at least equivalent to BBB+ at Standard & Poor’s or the equivalent rating at
Moody’s. The permitted exposure volume per counterparty is dependent on the counterparty’s
credit rating and the maturity of the exposure.
Exposure was SEK 15,411 M and maturity mainly within 3 months, as indicated by the
table headed “Liquidity reserve and maturity structure.”
At year-end, past-due interest-bearing assets and derivatives were SEK 0 M (0).
Impairment losses on interest-bearing receivables were SEK 0 M (0).
Customer credit risk − Risk in trade accounts receivable
Skanska’s credit risk with regard to trade receivables has a high degree of risk diversification,
due to the large number of projects of varying sizes and types with numerous different
customer categories in a large number of geographic markets.
The portion of Skanska’s operations related to construction projects extends only
limited credit, since projects are invoiced in advance as much as possible. In other operations,
the extension of credit is limited to customary invoicing periods.
Trade accounts receivable 2008 2007
Carrying amount 20,407 20,211
Impairment losses 575 277
Cost 20,982 20,488
Change in impairment losses, trade accounts receivable 2008 2007
January 1 277 245
Impairment loss/reversal of impairment
loss for the year 101 36
Impairment losses settled –15 –18
Reclassifications 176
Exchange rate differences 36 14
December 31 575 277
Risk in other operating receivables including shares
Other financial operating receivables consist of accrued interest income, deposits,
receivables for properties divested etc. No operating receivables became past-due and
there were no impairment losses on operating receivables.
Other financial operating receivables are reported by time interval with respect to
when the amounts fall due in the future.
2008 2007
Due within 30 days 83 25
Due in over 30 days but no more than 1 year 83 162
Due in more than one year 1 4
Total 167 191
Holdings of less than 20 percent of voting power in a company are reported as shares.
Their carrying amount is SEK 64 M (92). Shares are subject to changes in value. Impairment
losses on shares total SEK –34 M (–24), of which SEK –17 M (–11) during the year.
Liquidity risk
Liquidity risk is defined as the risk that Skanska cannot meet its payment obligations
due to lack of liquidity or to difficulties in obtaining or rolling over external loans.
The Group uses liquidity forecasting as a means of managing the fluctuations in
short-term liquidity. Surplus liquidity shall, if possible, primarily be used to repay the
principal on loan liabilities.
Funding
Skanska has several borrowing programs, which provide good preparedness for
temporary fluctuations in the Group’s liquidity requirements.
Bank credit facilities
Skanska’s committed bank credit facilities consist of:
• A syndicated bank loan with a ceiling of EUR 750 M and a final due date of June 30,
2014. On December 31, 2008, the degree of utilization was 0 percent, since the loan
facility had not yet been used.
• Two bilateral loan agreements with the Nordic Investment Bank amounting to
EUR 40 M and EUR 30 M, respectively. These loans fall due in 2012. The Group’s
unutilized credit lines at year-end amounted to SEK 8,914 M (7,318).
Market funding programs
Skanska has two market funding programs.
• Commercial paper (CP) program related to short-term borrowing for maturities of up
to one year. The loan ceiling in the CP program amounts to SEK 6,000 M. On December
31, 2008, the borrowed amount was SEK 0 M.
• Medium Term Note (MTN) program for borrowing with maturities between 1–10
years. The loan ceiling in the MTN program amounts to SEK 8,000 M. On December
31, 2008, the borrowed amount was SEK 0 M (665).
These borrowing programs are mainly intended for borrowing in the Swedish credit
market, but it is possible to borrow in EUR within the framework of these programs.
94 Notes, including accounting and valuation principles Skanska Annual Report 2008