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Compensation principles and employment terms for
senior management
Prior to the Annual General Meeting 2006, the Board will present for resolution a
proposal on the principles of compensation and other employment terms for the
senior management in accordance with the Code’s rules. The proposal addresses
the relationship between fi xed and variable remuneration and the relationship
between performance and remuneration, non-monetary benefi ts, issues related
to pensions, dismissal and severance payments and how the Board deals with
these issues. For further details on salaries, other remuneration and conditions
of employment for senior management, refer to Note 25–26 on page 55 in the
Annual Report.
The Board’s complete proposal for the principles for remuneration and other
terms of employment for senior management is available on the Company’s
web site.
Incentive programs
For information on stock-related compensation, refer to Note 27 on page 56.
QUALITY ASSURANCE IN FINANCIAL
REPORTING AND COMMUNICATION WITH
THE COMPANY’S AUDITOR
In accordance with the provisions of the Companies Act and the Code, the Board
is ultimately responsible for the quality of fi nancial reporting, which is ensured
through internal control work conducted by each unit within Intrum Justitia. The
purpose of internal control is to control the accuracy, thoroughness and reliability
of the fi nancial reporting and ensure compliance with stated guidelines for fi nancial
reporting.
The Board bases its control of the quality of fi nancial reporting on the following
principal governing documents, control routines and delegation of responsibility:
Control of reporting by Group companies
The Intrum Justitia Group is organized in matrix form, where fi nancial follow-up
is made primarily by geographic region, and secondarily by service line. In the
geographic regions, each country manager has substantial responsibility. The
Parent Company exerts control, in part through representation on the local company’s
board and through the Parent Company’s business controllers and fi nancial
controllers, who monitor the operations of subsidiaries from various perspectives.
Each controller is responsible for monitoring a number of countries.
Every subsidiary fi les monthly accounts with an income statement divided
along service lines, a balance sheet, volume data, etc. The accounts are
consolidated at the Group level and included in a monthly report to the senior
management and the Board.
Consolidated accounts are prepared each month for internal use. Financial
reporting is submitted in the form of fi gures in a Group-wide reporting system
and written comments according to a special template. Instructions and rules
on written reports and fi gures can be found in Intrum Justitia’s Handbook (see
below). The results in the monthly accounts are compared with the previous
year, budgeted fi gures and the latest forecast, which is updated quarterly. Along
with revenue and earnings, the indicators include the volume of new collection
cases, the value of the existing caseload and collected amounts.
Internal audit
As a complement to the external audit and the internal controls described
above, an internal audit is conducted each year to ensure compliance with the
Handbook’s rules, judge the effi ciency of current processes and propose
improvements to subsidiaries’ internal controls. During the year internal auditors
visited and conducted audits of approximately half of the Group’s companies,
where they examined the local management, sales organization, production
organization, client service departments and human resources unit. Every visit
is documented in an analysis of strengths and weaknesses and proposals for
improvements. The reports are presented to the senior management and the
Audit Committee, and in summarized form to the Board. The internal audit leads
to periodic evaluations and follow-ups to ensure that any defi ciencies are
alleviated. Since 2003 the internal audit function is outsourced to an external
accounting fi rm.
IT and manual controls
Intrum Justitia’s fi nancial reporting and risk management are also based on a
number of control activities at various levels in companies and business areas.
They are conducted through both IT systems that support various operating
processes and more conventionally designed manual controls to prevent, detect
and correct errors and deviations. Examples of manual controls include authorization
routines and requirements for approval from superiors for verifi cations,
as well as logbooks of transactions and changes in basic data. Emphasis is
placed on the inclusion of only approved business transactions in the fi nancial
reporting.
Special internal control project
In 2003 a special internal control project was initiated in which each subsidiary
in the Group responded to a questionnaire on the status of internal control within
their company. A similar internal survey is conducted again in 2006 with special
focus on the companies’ accounting organization. Using the outcome of the
survey as a basis, defi ciencies will be identifi ed and alleviated. At the same time
it will identify companies with the highest level of internal control within each
area to facilitate knowledge transfers.
Group Management Team
The Group Management Team (GMT), which plays an advisory function, consists
of the President of the Parent Company, the CFO and the regional managers.
The Group Purchased Debt Director and Chief Information Offi cer attend
the meetings when needed. The GMT meets regularly and discusses economic
and fi nancial results, strategic issues and Group-wide guidelines. These discussions,
decisions and guidelines are also part of the control of fi nancial reporting.
Intrum Justitia Handbook
The Group also uses a Handbook that describes Group-wide rules on business
ethics, authorization and accounting rules. All fi nancial reporting follows the
Handbook’s accounting, reporting and authorization instructions, which in turn
are based on IFRS. The Handbook’s rules are primarily based on the guidelines
and rules laid down by the Company’s Board of Directors, the GMT and each
responsible senior executive.
The Handbook is updated when needed by one or more of the persons at
the Group level responsible for the Handbook within their areas. The Group’s
CFO has chief responsibility for the contents of the Handbook.
Conferences
Conferences are held once or twice a year for the subsidiaries’ accounting and
fi nancial managers for the purpose of maintaining a high level of quality in fi nancial
reporting by discussing issues concerning the Group’s accounting principles
and examining the requirements placed on internal control. The conferences are
the responsibility of the Group’s CFO.
Communication with the Company’s auditor
As an element in the audit, the auditor elected by the Annual General Meeting,
KPMG Bohlins AB, also reviews a sample of controls. KPMG reports on its
fi ndings and suggests actions to the Audit Committee/Board of Intrum Justitia AB
twice a year. Prior to these meetings, observations from audits of subsidiaries
have been presented to each local management group. These observations are
acted upon and followed up in a systematic manner within each unit.
Further information
In accordance with the recommendation regarding the Board’s reporting on
internal control for 2005 as issued by Kollegiet för svensk bolagsstyrning (Swedish
Corporate Governance Board), the Board has refrained from expressing an
opinion on how well the internal control of the fi nancial reporting has functioned
during the year. For further information, reference is made to the Board’s formal
report, which is included in its entirety on page 70 below.
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