Annual and Sustainability Report 2011 - Teracom

Notes
Contents
Note Description Page
1 Accounting and valuation principles 67
2 Operating income 72
3 Leases 72
4 Segment reporting 73
5
Work performed by the company for its own use and
capitalized
73
6 Employees and remuneration 74
7 Pensions 76
8 Depreciation/amortization 78
9 Impairment 78
10 Other expenses 78
11 Remuneration to auditors 78
12 Financial income and financial expenses 78
13 Tax on profit for the year 79
14 Information concerning closely related parties 79
15 Property, plant and equipment 80
Note Description Page
16 Goodwill and other intangible assets 81
17 Other financial assets 83
18 Deferred tax 83
19 Inventories 84
20 Accounts receivable 84
21 Financial instruments and financial risk management 84
22 Prepaid expenses and accrued income 87
23 Equity 88
24 Accrued expenses and deferred income 88
25 Provisions 88
26 Shares and participations in Group companies 89
27 Acquired businesses 89
28 Pledged assets 89
29 Contingent liabilities/guarantees 89
Note 1. Accounting and valuation principles
Basis for the preparation of the financial statements
The consolidated financial statements have been prepared in accordance with
IAS 27 and through application of International Financial Reporting Standards
(IFRS) as adopted by the EU. The application of these standards has been
supplemented by the interpretations issued by the International Financial
Reporting Interpretations Committee (IFRIC).
The consolidated financial statements were prepared in accordance with
the cost method with the exception of financial assets and liabilities (including
derivative instruments) valued at fair value via the income statement.
Some disclosures are prepared in accordance with Swedish Financial Reporting
Board Recommendation RFR 1, the Annual Accounts Act and the requirements
set forth by the Government Ownership Policy. The Parent Company's
financial statements are prepared in accordance with the same accounting
principles as the consolidated financial statements, with the exception of that
described in the section Parent Company Accounting Principles.
The consolidated financial statements and annual report for the financial
year ending on 31 December 2011 were approved for issue by the Board of
Directors and Group CEO/President on 16 March 2012 and will be brought
forth for adoption at the Annual General Meeting on 18 April 2012.
Consolidated financial statements
The consolidated financial statements are prepared in accordance with the
purchase accounting method. This method implies that the identified assets,
liabilities and contingent liabilities of the operations acquired are reported
at fair value at the time of the acquisition, in accordance with a prepared
acquisition analysis. The acquisition cost for an acquisition includes the fair
value of assets submitted as consideration and liabilities incurred or assumed
on the day of transfer. This amount includes the fair value of assets or liabilities
resulting from agreements for additional consideration. Expenses directly
attributable to the acquisition are recognized as they are incurred. Goodwill
arises and is reported as an asset whenever the consideration exceeds fair
value as determined by the acquisition analysis.
The Group's consolidated financial statements include the financial statements
of the Parent Company and its directly or indirectly owned subsidiaries
after the elimination of intra-Group transactions, unrealized gains from
inventories and amortization of acquired surplus values.
Definition of Group companies
The consolidated financial statements include Teracom Group AB and all
subsidiaries. Subsidiaries are companies in which Teracom Group AB either
directly or indirectly holds more than 50 percent of the voting rights or in
some other way exercises a controlling influence.
With regard to companies acquired or divested during the year, the following
applies:
- Companies acquired during the year were included in the consolidated
income statement as of the date control of the company was obtained.
- Companies divested during the year are included in the consolidated income
statement up until the date Teracom's control was terminated.
Transactions with closely related parties
All transactions with closely related parties are based on market prices.
Foreign currency translation
The consolidated financial statements are prepared in SEK, which is the Parent
Company's functional and reporting currency.
Transactions in foreign currencies are converted to the relevant currency
using the exchange rate applicable on the transaction date. Financial assets
and liabilities expressed in foreign currencies are reported in the balance sheet
after valuation at the exchange rate prevailing on the balance sheet date.
Exchange rate differences arising during the period due to operating receivables
and operating liabilities are reported as part of operating profit (loss),
whereas exchange rate differences attributable to financial assets and liabilities
are reported as part of the profit (loss) from financial investments. The
portion of the exchange rate differences that comprises an effective hedge of
net investments is reported under Other comprehensive income.
The balance sheets of foreign subsidiaries were translated to SEK using the
exchange rate prevailing on the balance sheet date. Goodwill and adjustments
to fair value arising from acquisitions of foreign companies are treated as
assets and liabilities in the foreign subsidiary and translated at the exchange
rate prevailing on the balance sheet date. The income statements were translated
using the average exchange rate for the year. The translation difference
arising from the translation is reported directly under Other comprehensive
income.
67