Annual Report 2012.pdf - Karo Bio

Accounting and valuation principles
Pensions and other post-employment benefits
Employees in Sweden are entitled to retirement and family
pension benefits in accordance with the nationwide ITP Plan.
Commitments for these pensions are secured through an insurance
arrangement with Alecta Pension Insurance (Alecta). In
accordance with an announcement (UFR 3) from the Swedish
Financial Reporting Council, this arrangement is considered a
defined benefit multi-employer plan. Karo Bio has not had access
to such information to facilitate reporting of the plan as a defined
benefit plan. Consequently, the ITP plan that is secured through
an insurance arrangement with Alecta is reported, in accordance
with IAS 19 Employee Benefits, as a defined contribution plan.
Under a defined contribution plan, fixed payments are made to an
unaffiliated entity and thereafter no legal or constructive obligation
exists to pay further contributions. Premiums for pension insurance
written with Alecta are expensed in the year they relate to.
Termination benefits are payable when employment is
terminated before the normal retirement date, or whenever an
employee accepts voluntary redundancy in exchange for these
benefits. Karo Bio recognizes termination benefits when it is
demonstrably committed to either terminating the employment
with current employees according to a detailed formal plan without
possibilities of withdrawal; or providing termination benefits
as a result of an offer made to encourage voluntary redundancy.
Lease agreements
Karo Bio has entered into lease agreements with third parties in
the ordinary course of business. These contracts are for office and
laboratory space, laboratory equipment, automobiles and other
equipment. Leasing contracts are classified as either financial or
operating depending on the terms of the lease.
A financial lease transfers substantially all the risks and benefits
incidental to ownership of the leased asset to Karo Bio. All other
lease contracts are considered operating leases.
Financial leases are capitalized at the inception of the lease at
fair value of the leased property or, if lower, at the present value of
the minimum lease payments. Thus, the equipment under lease is
recorded as an asset and the net present value of future minimum
lease payments is recorded as a liability.
Lease payments are apportioned between finance charges and
reduction of the lease liability so as to achieve a constant rate of
interest on the remaining balance of the liability. Finance charges
are charged directly against income.
Capitalized leased assets are depreciated over the shorter of the
estimated useful life of the asset and the lease term, if there is
no reasonable certainty that the Karo Bio Group will obtain
ownership by the end of the lease term. Property, plant and
equipment are depreciated as described under the heading
Depreciation and amortization of non-current assets.
Operating lease payments are recognized in the income statement
over the lease term in the period they relate to.
Stock option program
Karo Bio currently has no share-based incentive programs.
Segment reporting
Operating segments are reported in a manner consistent with
the internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible
for allocating resources and assessing performance of the
operating segments In Karo Bio this function has been identified
as the Group’s executive management team. Karo Bio’s operations
entail only one segment; research and development of drugs, and
the consolidated income statement, balance sheet, cash flow statement
and the associated notes regard this single segment.
THE PARENT COMPANY
The annual report of the Parent Company is prepared in accordance
with the Swedish Annual Accounts Act and in compliance
with the Swedish Financial Accounting Standards Council’s
Recommendation RFR 2 and statements from the Financial Accounting
Standards Council. The Parent Company’s accounting
and valuation principles are the same as the Group’s with the exception
for leasing. All leasing contracts are reported as operating
leases in the Parent Company.
KARO BIO Annual Report 2012 27