annual-and-sustainability-report-2014

More documents

Recommendations

Info

Notes to the consolidated accountsIFRIC 21 – Levies. The interpretation clarifies when a liability for levies should berecognised. Levies are fees and taxes charged to companies by governmental authoritiesin accordance with laws and regulations, except income taxes, penaltiesand fines. The interpretation clarifies that a liability should be recognised whena company has an obligation to pay due to a past event. A liability is recognisedprogressively if the obligating event occurs over a period of time. If an obligationto pay a levy is triggered when a minimum threshold is reached, the liability isnot recognised until the minimum threshold is reached. The interpretation, whichwill be applied starting in 2015, will have only a marginal effect on Vattenfall’sfinancial statements.Amendments to IAS 19 – Defined Benefit Plans: Employee Contributions, entailclarifications on how contributions to a pension plan from employees or thirdparties should be recognised. The clarifications do not change the way Vattenfallrecognises these fees.Annual improvements to IFRSs 2010–2012 Cycle and Annual improvements to IFRSs2011–2013 Cycle aim to streamline and clarify the accounting standards concerningpresentation, recognition and measurement, including changes in terminologyand amendments of an editorial nature. The amendments have no significanteffect on Vattenfall’s financial statements.New standards, amendments to standards and interpretations issued by IASB/IFRIC which at 31 December 2014 had not yet been endorsed by the EU:IFRS 9 – Financial Instruments is a new standard drawn up to supersede IAS 39– Financial Instruments: Recognition and Measurement. IFRS 9 was published in July2014 and consists of the following three parts: Classification and measurementof financial assets and financial liabilities, Impairment and Hedge accounting.Classification and measurement: IFRS 9 prescribes that financial assets are to bedivided into two categories – those measured at fair value and those measuredat amortised cost. Classification is made at the time the financial asset is initiallyrecognised based on the characteristics of the asset and the company’s businessmodel. The biggest change pertains to liabilities recognised at fair value. Forthese, the portion of the change in fair value that is attributable to own credit riskis to be reported in other comprehensive income instead of through profit or loss,insomuch as this does not cause an inconsistency in the reporting. Impairment: Anew model for impairment, the expected loss impairment model, has been introduced.The new model requires the recognition of expected credit losses from thepoint in time when a financial instrument is first reported. Hedge accounting: Thenew model represents a significant overhaul of hedge accounting and aligns theaccounting treatment with the company’s risk management. Vattenfall has not yetevaluated the effects of the new standard. Provided endorsement by the EU, IFRS9 is expected to be effective as from 2018.IFRS 14 – Regulatory Deferral Accounts is a standard entailing that an entity thatconducts operations whose income and profitability is regulated in some way mayaccount for regulatory deferral account balances upon initial adoption of IFRS.Companies that already report in accordance with IFRS may not apply IFRS 14.Since Vattenfall already applies IFRS, it is not affected by this standard. Providedendorsement by the EU, IFRS 14 is expected to be effective as from 2016.IFRS 15 – Revenue from Contracts with Customers is a new revenue recognitionmodel that provides a single, principles-based standard for all revenue recognition,regardless of the type of transaction or sector. IFRS 15 supersedes allpreviously issued standards and interpretations that address revenue recognition,including IAS 11, IAS 18, IFRIC 13, IFRIC 15 and IFRIC 18. Vattenfall is evaluatingthe effects of the new standard. Provided endorsement by the EU, IFRS 15 isexpected to be effective as from 2017.Amendments in IFRS 10 and IAS 28 – Sale or Contribution of Assets Between anInvestor and its Associate or Joint Venture address a conflict between IFRS 10 andIAS 28 and clarify that in a transaction involving an associate or joint venture,the extent of gain or loss recognition depends on whether the assets sold orcontributed constitute a business. The change is not expected to have any significanteffect on Vattenfall’s financial statements. The changes are expected to beeffective as from 2016 provided endorsement by the EU.Amendments in IAS 27 – Equity Method in Separate Financial Statements entailthat the equity method may be used as an accounting option for investments insubsidiaries, joint ventures and associates for entities that report in separatefinancial statements according to IAS 27. Vattenfall is not affected by thesechanges, as the accounts of Vattenfall’s parent company, Vattenfall AB, areprepared in accordance with the Annual Accounts Act and RFR 2 – Accountingfor Legal Entities.Amendments in IAS 16 and IAS 41 – Bearer Plants entail that so-called bearerplants are to be stated at cost in accordance with IAS 16 instead of at fair valuein accordance with IAS 41. The change will not have any significant effect onVattenfall’s financial statements. The changes are expected to be effective asfrom 2016 provided endorsement by the EU.Amendments in IAS 16 and IAS 38 entail a clarification of acceptable policiesfor depreciation and amortisation of tangible and intangible non-current assets.The clarification is not expected to have any significant effect on Vattenfall’sfinancial statements. The changes are expected to be effective as from 2016provided endorsement by the EU.Amendments in IFRS 11 add guidance clarifying that when a part-owner of ajoint operation acquires a business as defined in IFRS 3, the acquirer shall applyIFRS 3 when accounting for the acquisition. The change is not expected to haveany significant effect on Vattenfall’s financial statements. The changes areexpected to be effective as from 2016 provided endorsement by the EU.Annual improvements to IFRSs 2012–2014 Cycle aim to streamline and clarify theaccounting standards concerning presentation, recognition and measurement,including changes in terminology and amendments of an editorial nature.Vattenfall has not yet evaluated the effects of the new amendments. The changesare expected to be effective as from 2016 provided endorsement by the EU.Segment informationAn operating segment is a component of the Group that engages in businessactivities from which it may earn revenues and incur expenses and for whichdiscrete financial information is available. An operating segment’s result isreviewed regularly by “the chief operating decision maker”, who in Vattenfall is theChief Executive Officer, to assess its performance and to make decisions aboutresources to be allocated to the operating segment. Segmental information (seeNote 8 to the consolidated accounts) is only provided for the Group.Classification of current and non-current assets and liabilitiesAn asset is classified as a current asset when it is held primarily for the purposeof trading or is expected to be realised within twelve months after the balancesheet date or consists of cash and cash equivalents, provided it is not subject torestrictions on its exchange or use for regulating a liability at least twelve monthsafter the balance sheet date.All other assets are classified as non-current assets.A liability is classified as a current liability when it is held primarily for the purposeof trading or is expected to be settled within twelve months after the balancesheet date or one for which the Group does not have an unconditional right todefer settlement of for a minimum of twelve months after the balance sheet date.All other liabilities are classified as non-current liabilities.Assets held for saleNon-current assets (or disposal groups) are classified as held for sale if theircarrying amount will be recovered principally through a sale transaction ratherthan through continuing use. The assets are valued at the lower of their carryingamount and fair value less costs to sell and are not subject to amortisation ordepreciation.Assets (and liabilities) held for sale are classified as current assets (currentliabilities) when the sale transaction is expected to be settled within twelvemonths after the balance sheet date.Principles of consolidationStarting in 2014, the consolidated financial statements are prepared in accordancewith the principles set forth in IFRS 10 – Consolidated Financial Statements.The consolidated financial statements cover the Parent Company, subsidiaries,associated companies, joint ventures and joint arrangements that are reported asa joint operation according to IFRS 11.SubsidiariesSubsidiaries are all entities over which the Parent Company has control. Controlis considered to exist when the following three criteria are met: (i) the investor isexposed to or is entitled to a variable return from the investment, (ii) the investorhas the opportunity to influence the return through its opportunity to governthe company, and (iii) there is a link between the return that is received and theopportunity to govern the company. By influence is meant the rights that allow theinvestor to govern the relevant business, that is, the business which significantlyinfluences the company’s return.Business combinations are accounted for using the purchase method. Thismethod entails that the acquisition of a subsidiary is considered to be a transactionthrough which the Group indirectly acquires the subsidiary’s assets andtakes over its liabilities and contingent liabilities. The consideration transferredincludes the fair value of any asset or liability resulting from a contingent considerationagreement.Through purchase price allocation (PPA) of the business acquisition, the cost ofthe participating interests or business activities is established as well as the fairvalue of acquired identifiable assets, assumed liabilities and contingent liabilities.Deferred tax is taken into account for differences between the carrying amountand the corresponding tax base on all items except goodwill. The differencebetween the cost of the subsidiaries’ shares and the fair value of acquired assets,assumed liabilities and contingent liabilities constitutes goodwill. If the cost of thesubsidiaries’ shares is less than the fair value of the net assets of the subsidiaryacquired, the difference is recognised directly in the consolidated income statement.There is a choice on an acquisition-by-acquisition basis to measure thenon-controlling interest in the acquiree at fair value or at the proportionate shareof the acquiree’s net assets.Contingent payments are classified as liabilities subsequently remeasuredthrough profit or loss.All acquisition-related costs are expensed.The subsidiary’s financial statements, which are prepared in accordance withthe Group’s accounting policies, are included in the consolidated accounts fromthe point of acquisition to the date when control ceases.86 Vattenfall Annual and sustainability report 2014
Notes to the consolidated accountsAcquisitions and divestments of non-controlling interests in subsidiaries arerecognised in equity.When the Group ceases to have control in a subsidiary, any retained interestin the entity is remeasured to its fair value, with the change in carrying amountrecognised in profit or loss. The fair value is the initial carrying amount for thepurposes of subsequently accounting for the retained interest as an associatedcompany, joint venture or financial asset.A discontinued operation is reported separately from continuing operations ifthe discontinued operation amounts to a significant value.Joint arrangementsA joint arrangement is an arrangement over which two or more parties have jointcontrol. Joint arrangements are classified as a joint operation or joint venture. A jointoperation entails that the parties that have joint control of the arrange ment haverights to the assets, and obligations for the liabilities, relating to the arrangement.A joint venture entails that the parties that have joint control of the arrangementhave rights to the net assets of the arrangement. In a joint operation, the respectiveowners recognise in relation to their interest in the joint organisation: their assetsand liabilities as well as their respective share of assets and liabilities held orincurred jointly; revenue from the sale of their respective shares of the output of thejoint operation and their share of the revenue from the sale of the output of the jointoperation; and their expenses, including the share of any expenses incurred jointly.Joint ventures are reported in accordance with the equity method.Associated companiesAssociated companies are companies in which the Group has a significant – butnot controlling – influence or joint control with other owners over their operationaland financial management, usually through shareholdings correspondingto between 20% and 50% of the votes. In conjunction with the acquisition of anassociated company, a purchase price allocation similar to that of a businesscombination is made. Identifiable surplus values are handled in a similar manner tosurplus values in business combinations. From the point at which the significantinfluence is acquired, participations in associated companies are reported in theconsolidated accounts in accordance with the equity method. The equity methodentails that the value of the shareholding in associated companies reported in theconsolidated accounts corresponds to the Group’s share of the associated companies’equity plus consolidated goodwill and any unamortised value of consolidatedsurplus and deficit values less internal profit reserves. Dividends receivedfrom an associated company reduce the carrying amount of the investment.In the consolidated income statement, the item Participations in the results ofassociated companies is shown net after tax.The equity method is applied from the point of acquisition up to the point whenthe significant influence ceases.Transactions that are eliminated upon consolidationIntra-Group receivables and liabilities, income and expenses, as well as gainsor losses arising from intra-Group transactions between Group companies, areeliminated in their entirety when preparing the consolidated accounts.Gains arising from transactions with associated companies and joint venturesare eliminated to an extent that corresponds to the Group’s holding in the company.Losses are eliminated in the same manner as gains, but are treated as anindicator of impairment.Foreign currenciesTransactions in foreign currenciesTransactions in foreign currencies are translated to the functional currency at theexchange rate on the day of the transaction. On the balance sheet date, monetaryassets and liabilities in foreign currencies are translated to the functional currencyat the exchange rate applicable on that day. Exchange rate differences arisingfrom translation of currencies are reported in the income statement. Operationallyderived exchange gains and losses are shown under Other operating income andOther operating expenses, respectively. Financially derived exchange gains andlosses are shown as financial income and expenses, respectively.Financial reporting of foreign activitiesAssets and liabilities of foreign activities, including goodwill and other consolidatedsurplus and deficit values, are translated to SEK at the exchange rate ineffect on the balance sheet date. Income and expenses of foreign activities aretranslated to SEK using an average exchange rate. Translation differences arisingfrom foreign currency translation of foreign activities are reported in Othercomprehensive income.For the Vattenfall Group, key exchange rates applied in the accounts are providedin Note 6 to the consolidated accounts, Exchange rates.Revenue recognitionNet sales include sales proceeds from core businesses, that is, generation, salesand distribution of electricity, sales and distribution of heat, sales of gas, energytrading and other revenues such as service and consulting assignments andconnection fees.Sales of electricity, heat and gasSales of electricity, heat and gas and related distribution are recognised as revenueat the time of delivery, excluding value-added tax and excise taxes.Vattenfall’s electricity transactions between Nordic electricity generation andsales activities in the Nordic countries are transactions vis-à-vis the Nordic electricityexchange. The purchases that the sales activities make from the Nordicelectricity exchange are, at the Group level, offset against sales of generation tothe Nordic electricity exchange.The change in fair value of derivatives, including commodity derivatives, thatdoes not qualify for hedge accounting is reported in gross profit unless it does notrelate to derivative instruments used in financial activities.Other revenuesIn the case of service and consulting assignments, the percentage of completionmethod is applied, that is, revenues and expenses are reported in proportion tothe degree of completion. The degree of completion is established according tothe relation between accrued expenses on the balance sheet date and estimatedtotal expenses. In cases where losses are expected, a provision is establishedimmediately.Connection fees for electricity distribution and heat distribution are reportedas revenues to the extent that they are not required to cover future obligations.Government grantsGrants are reported at fair value when it can reasonably be assumed that thegrant will be received and that the Group will meet the conditions of the grant.A grant tied to a non-current asset reduces the reported cost of the asset.A grant intended to cover expenses is reported in the income statement asOther operating income.Operating expensesOperating leasesExpenses paid for operating leases are reported in the income statement on astraight-line basis over the leasing period. For a definition of operating leases, seebelow under the heading Property, plant and equipment/Leasing.Financial income and financial expensesFinancial incomeFinancial income consists of interest income on bank balances, receivablesand interest-bearing securities, returns from the Swedish Nuclear Waste Fund,dividend income, exchange rate differences, and positive changes in values offinancial investments and derivative instruments used in financial activities.Interest income is adjusted for transaction costs and any rebates, premiumsand other differences between the original value of the receivable and the amountreceived when due. Interest income is reported as it is earned. The calculationis made on the basis of the return on underlying assets in accordance with theeffective interest method.Dividend income is reported when the right to receive payment is established.Financial expensesFinancial expenses consist of interest expenses on loans, discounting effectsand interest attributable to provisions, exchange rate differences, and negativechanges in values of financial investments and derivative instruments used in thefinancial activities. Discounting effects are defined here as the periodic change ofthe present value which reflects the time value of money.Issue expenses and similar direct transaction costs for raising loans are distributedover the term of the loan in accordance with the effective interest method.Borrowing costs directly attributable to investment projects in non-currentassets which take a substantial period of time to complete are not reported asa financial expense but should be included in the cost of the non-current assetduring the construction period.Leasing fees pertaining to finance leases are distributed between interest expenseand amortisation of the outstanding debt. Interest expenses are distributedover the leasing period so that each accounting period is charged in the amountcorresponding to a fixed interest rate for the reported debt in each period. Variablefees are carried as an expense in the period in which they arise.Financial assets and financial liabilitiesGeneral principlesFinancial instruments are reported initially at cost, corresponding to the instrument’sfair value plus transaction costs for all financial instruments, except for those thatbelong to the category “financial assets at fair value through profit or loss” and allderivatives, which are reported at fair value excluding transaction costs.A financial asset or financial liability is recognised on the balance sheet whenVattenfall becomes a party to such in accordance with terms of the instrument’scontract. A trade receivable is recognised on the balance sheet when an invoicehas been sent. A liability is recognised when the counterparty has performed aservice and a contractual obligation to pay exists, even if the invoice has not yetbeen received. A trade payable is recognised when the invoice has been received.A financial asset is derecognised from the balance sheet when the rights underthe contract are sold, expire, or when Vattenfall no longer retains the risks andrewards of ownership of the asset. The same applies for parts of a financial asset.Vattenfall Annual and sustainability report 2014 87
Page 3 and 4:
Vattenfall’s integrated annual an
Page 5 and 6:
Overview | Results 2014Results 2014
Page 7 and 8:
Overview | CEO’s messagewill incr
Page 9 and 10:
Overview | Important eventsQ3 2014
Page 11 and 12:
Overview | Vattenfall’s value cha
Page 13 and 14:
Strategic direction | Market and bu
Page 15 and 16:
Strategic direction | Market and bu
Page 17 and 18:
4020090 91 92 93 94 95 96 97 98 99
Page 20 and 21:
Strategic direction | StrategyVatte
Page 22 and 23:
Strategic direction | Targets and t
Page 24 and 25:
Strategic direction | Stakeholder d
Page 26 and 27:
Strategic direction | Vattenfall’
Page 28 and 29:
Developments during the year | Sust
Page 30 and 31:
Page 32 and 33:
Page 34 and 35:
Page 36 and 37: Developments during the year | Sust
Page 38 and 39: Customer solutionsthat enable susta
Page 44 and 45: Ensuresustainability inthe supply c
Page 52 and 53: Corporate governance | Corporate go
Page 62 and 63: Corporate governance | Board of Dir
Page 64 and 65: Corporate governance | Executive Gr
Page 66 and 67: Risks and risk managementRisks and
Page 68 and 69: Risks and risk managementRiskPerson
Page 70 and 71: Risks and risk managementRiskLiquid
Page 72 and 73: Risks and risk managementRiskCurren
Page 74 and 75: Consolidated accountsConsolidated i
Page 76 and 77: Consolidated accountsConsolidated s
Page 78 and 79: Consolidated accountsComments on th
Page 80 and 81: Consolidated accountsSupplementary
Page 82 and 83: Consolidated accountsConsolidated s
Page 84 and 85: Notes to the consolidated accountsN
Page 88 and 89: Notes to the consolidated accountsA
Page 90 and 91: Notes to the consolidated accountsp
Page 92 and 93: Notes to the consolidated accountsS
Page 94 and 95: Notes to the consolidated accountsP
Page 96 and 97: Notes to the consolidated accountsC
Page 124 and 125: Notes to the consolidated accountsS
Page 126 and 127: Parent Company accountsParent Compa
Page 132 and 133: Notes to the Parent Company account
Page 134 and 135: Notes to the Parent Company account
Page 136 and 137:
Notes to the Parent Company account
Page 138 and 139:
Page 140 and 141:
Page 142 and 143:
Page 144 and 145:
Combined assurance reportCombined a
Page 146 and 147:
Ten-year overviewTen-year overviewA
Page 148 and 149:
Definitions and calculations of key
Page 150 and 151:
Facts about Vattenfall’s marketsF
Page 152 and 153:
Facts about Vattenfall’s marketsF
Page 154 and 155:
GRI indexGRI - Content and referenc
Page 156 and 157:
GRI indexGRI indexGeneral informati
Page 158 and 159:
GRI indexSpecific informationDMA an
Page 160 and 161:
GlossaryNet capacity The electric o
Page 162:
Vattenfall AB (publ)SE-169 92 Stock
show all

annual-and-sustainability-report-2014

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?