Annual Report 2009 - Husqvarna Group

Notes Husqvarna Annual Report 2009 63
Amounts in SEKm unless otherwise stated.
Credit risk
Credit risk in trade receivables
Husqvarna sells to a substantial number of customers including
large retailers, buying groups, independent stores and
professional users. Sales are made on the basis of normal
delivery and payment terms. Customer financing solutions are
also normally arranged by third parties. The Credit Policy of
the Group ensures that the management process for customer
credits includes customer rating, credit limits, decision
levels and management of bad debts. The Board of Directors
decides on customer credit limits exceeding SEK 100m.
Husqvarna uses an internal classification of the creditworthiness
of its customers. The classification has different
levels, from low risk to high risk. In the table below, trade
receivables have been divided into three different intervals.
Credit portfolio
2009 2008
Total 3,385 4,184
Low to Moderate Risk 1,847 2,294
Medium Risk to Elevated 1,281 1,491
High Risk 257 402
As of 31 December 2009, net trade receivables, after provisions
for doubtful accounts, amounted to SEK 3,385m (4,184),
which consequently equals the maximum exposure to losses
in trade receivables. Hence, the book value equals the fair
market value of the receivables. The size of the credit portfolio
is, however, directly dependent upon the seasonal pattern
of Husqvarna’s sales. This means that credit expos ure is significantly
higher during the first six to nine months of each calendar
year. A provision for impairment of trade receivables is
established when there is objective evidence that Husqvarna
will not be able to collect all amounts due according to the
ori gin al terms of the receivables. The amount of the provision
is the difference between the asset’s carrying amount and the
present value of estimated future cash flows, discounted at
the effective interest rate. Provisions for doubtful trade
receivables at the end of the financial year amounted to
SEK 183m (137), of which SEK 182m refer to invoices due.
Overdue trade receivables
Trade receivables that were due but not yet written down
amounted to SEK 569m (782) as of 31 December 2009.
Ageing analyses for overdue trade receivables
Due but not written down
2009 2008
Due for
payment
Due for
payment
Up to 1 month 207 311
1 to 3 months 121 271
>3 months 241 200
569 782
The situation regarding overdue receivables has not changed
significantly since previous year-end taking the total volume
of outstanding trade receivables into account. The fair value
of collateral held for trade receivables due for payment was
SEK 74m (66).
A plan for repayment is normally first designed for customers
with overdue receivables at the same time as the account
is placed under special surveillance. At a later stage, unpaid
products may be repossessed or other securities be enforced.
Concentration of credit risk in trade receivables
Concentration
of credit risk
As of 31 Dec 2009 As of 31 Dec 2008
Number of
customers
Percent
of total
portfolio
Number of
customers
Percent
of total
portfolio
Exposure SEK
100m 2 13% 2 13%
Husqvarna has substantial exposure towards a limited number
of large customers, primarily in the US.
Credit risk in financial activities
Exposure to credit risk arises from the investment of liquid
funds and through counterparty risks related to derivatives. In
order to limit exposure to credit risk, a counterparty list has
been created specifying the maximum permissible exposure
for each counterparty. Normally, transactions are executed
only with counterparties having a long-term credit rating of at
least A–. A substantial part of the exposure arises from derivatives
transactions. The table below shows the gross volume
of outstanding derivative transactions.
31 Dec
2009
31 Dec
2008
Maturity 2010 2009
Amount sold –29,753 –43,062
Amount purchased 29,373 41,511
Net settled
derivatives (NDF) 0 –18
Net –380 –1,569
Fair value of financial instruments
The carrying amount of interest-bearing assets and liabilities
in the balance sheet can deviate from the fair value, e.g. as a
result of changes in market interest rates. As from January 1st,
2009 Husqvarna applies to the amendments in IFRS 7 for
financial instruments measured at fair value on the balance
sheet whereby an entity shall classify fair value measurements
using a fair value hierarchy that reflects the significance of
input used according to the following levels:
• Quoted prices (unadjusted) in active markets (Level 1),
• inputs other than quoted prices included within Level 1 that
are observable, either directly (ie as prices) or indirectly (ie
derived from prices) (Level 2); and
• inputs that are not based on observable market data
(Level 3).