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95 per cent of SEK 1,113 M, that was dueto a lower discount rate was classified asa financial expense. About 9 per cent ofemployees were not updated, which meansthat the pension liability for them was calculatedon a standardised basis. “Updated”means that SPV carries out a completereview of all of a State employee’s jobs forthe State, as well as for local authorities orprivate employers. If there are gaps in theemployment period, pension liability iscalculated on a standardised basis. Amongother things, this means that SPV assumesthat an employee has had a State job fromthe age of 28 and that liability is calculatedusing a factor of 0.95. This implies thatthe actual liability may be either larger orsmaller. The portion of pension liabilitycalculated on a standardised basis, includingspecial payroll tax, amounted to SEK30 M. In LFV’s judgement, its liability isnot understated. LFV has chosen to reportthe pension liability calculated by SPV.The reported pension liability consistsof LFV’s actuarially projected obligationsunder the PA 91 and PA 03 pensionagreements. This pension liability is calculatedaccording to the principles establishedby the Board of SPV. Pension liabilityincludes obligations to both activeand retired employees. Unvested commitments,i.e. those related to employees withretirement ages below 65, are includedin the liability, since these employees areexpected to qualify for pensions.The State enterprise pays the specialpayroll tax on pension disbursements. Theprovision for the special payroll tax is thusbased on the size of the pension liability atthe end of the financial year.Taxes and tax equivalentThe subsidiaries of LFV pay corporationtax. LFV is not liable for income tax but,in addition to the dividend, must remit a“tax equivalent” amount that is equivalentto the income tax that would be paid if itsoperations occurred in the form of a limitedliability company.The tax equivalent payable for the yearis to be calculated on the basis of reportedGroup profit according to the consolidatedaccounts, minus tax-exempt appropriationsequivalent to those available tolimited liability companies and minus thecorporation tax payments made by subsidiaries.The State enterprise reports a liabilityrelated to the estimated tax equivalent forthe financial year. The Government willdetermine the final dividend amount andthe year’s tax equivalent amount when itadopts the 2007 accounts of LFV.Both the State enterprise and theGroup report postponed (deferred) tax onthe difference between reported profit andprofit for tax purposes, in compliance withRecommendation RR 9 of the SwedishFinancial Accounting Standards Council.The equity portion of the untaxedreserves of subsidiaries and the utilisedportion of the State enterprise’s potentialextra depreciation on fixed assets areincluded in restricted reserves, which arereported both in the accounts of the Stateenterprise and the Group. The State enterprisehas the opportunity to carry outextra depreciation on fixed assets, SEK1,654 M as of December 31, 2007. SEK942 M was used for calculation of taxequivalent for 2007 and prior years.LFV pays State real estate taxes and thespecial payroll tax on pension expensesand is liable for taxation under the law onvalue-added tax. LFV also pays advertisingtaxes on revenues from renting outadvertising space at airports as well asenergy tax related to its energy consumption.MiscellaneousThe figures that are reported have beenrounded off in some cases. This meansthat tables and estimates do not alwaysadd up. In texts and tables, figures 0 and0.5 are reported as 0. If there is no figure,a dash is used.Profit for the yearThe LFV Group’s profit after financialitems in 2007 amounted to SEK -545 M(447), a deterioration of SEK 992 M comparedto the preceding year. The reasonfor the deterioration in profit was the nonrecurringeffect that occurred due to thenew actuarial principles for calculation ofpension liability. Operating profit excludingthe nonrecurring effect for higher pensionliability would have amounted to SEK568 M, which is an improvement of SEK121 M compared to 2006 − an improvementprimarily due to a favourable passengertrend, improved commercial earningsand the implementation of efficiencyraisingmeasures.Profit forecast for 2008Profit in 2008 is expected to be positive.RisksA-Banan Projekt ABA-Banan Projekt AB (A-Banan) is an associatedcompany of the State enterprise.The shares in A-Banan are owned on a50-50 basis by LFV and the National RailAdministration (Banverket, BV). In theautumn of 2007, the Swedish Governmentdecided that the Ministry of Enterprise,Energy and Communications will takeover management of the shares starting onJanuary 1, 2008. In conjunction with this,LFV no longer has any representative onthe Board of Directors of A-Banan, whichlimits LFV’s detailed knowledge of itsoperations. The issue of the unlimited capitalcoverage guarantee and of LFV’s obligationto compensate A-Banan for costsassociated with the project has not beenfinally settled.The task of A-Banan is to erect, ownand manage the “Arlanda Link”, whichconnects Arlanda Airport with theState-owned railway network and is alsoentrusted with overseeing the State’s rightsand obligations under the ArlandabananProject Agreement as well as participatingin the development of rail services atStockholm-Arlanda Airport. Through theProject Agreement, A-Train AB (A-Train)was assigned to build, finance and operatethe Arlanda Link, as well as be in chargeof the Arlanda Express airport shuttletrain service between Stockholm CentralStation and Stockholm-Arlanda Airport.A-Banan has limited equity. LFV andBV have issued an unlimited liquidity andcapital coverage guarantee that the companywill always be able to fulfil its contractualobligations. This commitment isbased on a decision by Parliament, whichthe Government conveyed to the twoauthorities in its appropriation directives.LFV and BV have signed a share managementand cooperation agreement. Sincethe contractual rights and obligations ofthe Swedish State in the project have beengathered in A-Banan, the State’s risk exposurewill be managed by that company.According to the Project Agreement,A-Train carries the entire commercial andtechnical risks of the project. LFV’s risk inthe project consists of actions by A-Bananor by LFV itself that affect these operations,plus the fact that as an owner ofA-Banan, LFV may be indirectly affectedby any problems with the project.The Arlanda Link is a very complexproject, since it concerns infrastructurethat is part of the national railway systemand essential for developing environmentallysounder ground transport servicesto Stockholm-Arlanda Airport. The contractualperiod is very long, and changesoccur and have occurred in its surroundingsthat are important to the Project.One such example is the new Railway Actand demands that more tasks within managementof railway infrastructure shallrequire permits from the Swedish RailAgency. A-Banan has applied for a permitto grant traffic service rights on theArlanda Link. Such a permit is crucial toenable A-Banan to fulfil its assignmentunder Sweden’s national traffic policy concerningthe development of rail traffic toStockholm-Arlanda Airport. This issue iscurrently being examined by the DalarnaCounty Administrative Court.In compliance with contracts andagreements, for many years A-Train hassubmitted information about technical,financial and traffic developments in theProject. A-Train has limited its submissionof information, which makes it moredifficult for A-Banan to follow changes inthe Swedish State’s risks in the Project. A-Train has proposed that dividends to theowner shall be allowed. In the opinion ofA-Banan and the National Debt Office,there are no contractual provisions fordividends. A-Train has requested that theissue be examined through arbitration.If A-Train does not fulfil its assignment42 > LFV 2007 < Accounts