ANNUAL REPORT INTRUM JUSTITIA A N N U A L R EP O R T 2 0 ...

56
Notes
term so that each reporting period is charged
with an amount corresponding to a fixed interest
rate for the liability recognized in each period.
Variable fees are expensed in the period in
which they arise.
In operating leasing, lease payments are expensed
over the lease term. Payments are recognized
through profit or loss on a straight-line
basis over the lease term. Benefits received in
connection with the signing of an operating
lease are recognized as part of the total lease expense
through profit or loss.
Taxes
The Group applies IAS 12 Income Taxes.
Income taxes consist of current tax and deferred
tax. Income taxes are recognized through profit or
loss unless the underlying transaction is recognized
directly in total comprehensive income, in
which case the related tax effect is also recognized
in total comprehensive income. Current tax is the
tax paid or received for the current year, applying
the tax rates that apply as of the balance sheet date,
including adjustments for current tax attributable
to previous periods.
Deferred tax is calculated according to the balance
sheet method based on temporary differences
between the carrying value of assets and liabilities
and their value for tax purposes. The following
temporary differences are not taken into account:
temporary differences that arise in the initial reporting
of goodwill, the initial reporting of assets
and liabilities in a transaction other than a business
combination and which, at the time of the
transaction, do not affect either the recognized or
taxable result, or temporary differences attributable
to participations in subsidiaries and associated
companies that are not expected to be reversed
within the foreseeable future. The valuation of
deferred tax is based on how the carrying values
of assets or liabilities are expected to be realized or
settled. Deferred tax is calculated by applying the
tax rates and tax rules that have been set or essentially
are set as of the balance sheet date.
Deferred tax assets from deductible temporary
differences and tax loss carryforwards are only recognized
if it is likely they will be utilized within the
foreseeable future. The value of deferred tax assets
is reduced when it is no longer considered likely
they can be utilized.
Equity
Share repurchases and transaction expenses are
recognized directly against equity. Dividends
are recognized as a liability after they are approved
by the Annual General Meeting.
Provisions
The Group applies IAS 37 Provisions, Contingent
Liabilities and Contingent Assets.
A provision is recognized in the balance sheet
when the Group has a legal or informal obligation
owing to an event that has occurred and it is
likely that an outflow of economic resources will
be required to settle the obligation and a reliable
estimate of the amount can be made. Where it is
important when in time payment will be made,
provisions are estimated by discounting the forecast
future cash flow at a pretax interest rate that
reflects current market estimates of the time value
of money and, where appropriate, the risks associated
with the liability.
A provision for restructuring is recognized
when a detailed, formal restructuring plan has
been established and the restructuring has either
begun or been publicly announced. No provision
is made for future operating losses.
A provision for termination costs is recognized
only if the persons in question have known or presumed
to have expected to be terminated by the
balance sheet date.
A provision for a loss contract is recognized
when anticipated benefits that the Group expects
to receive from a contract are less than the unavoidable
costs to fulfill the obligations as set out
in the contract.
A provision for dilapidation agreements on
leased premises is recognized if there is a contractual
obligation to the landlord, within the foreseeable
future, to restore the premises to a certain
condition when the lease expires.
Unidentified receipts and excess payments
The Group receives large volumes of payments
from debtors for itself and its clients. There are instances
where the sender’s reference information is
missing or incorrect, which makes it difficult to allocate
the payment to the right case. There are also
situations where payments are received on closed
cases. In such instances a reasonable search and attempt
is made to contact the payment sender, but
failing this the payment is recognized as income
after a certain interval. A provision is recognized in
the balance sheet corresponding to the anticipated
repayments of incorrectly received payments on a
probability analysis.
Contingent liabilities
A contingent liability is recognized when there is
a possible obligation that arises from past events
and whose existence will be confirmed only by one
or more uncertain future events or when there is
an obligation that is not recognized as a liability
or provision because it is not probable that an outflow
of resources will be required.
Impairment
The Group applies IAS 36 Impairment of Assets.
The carrying value of the Group’s assets, with
certain exceptions, is tested on each balance sheet
date for any indication of impairment. IAS 36 is
applied to impairment testing of all assets with the
exception of financial assets, which are valued according
to IAS 39, investment assets for pension
liabilities, which are valued according to IAS 19
Employee Benefits, and tax assets, which are valued
according to IAS 12.
If there is any indication of impairment, the
asset’s recoverable value is estimated. For goodwill
and other intangible assets with an indeterminate
period of use and intangible assets not yet ready for
use, recoverable values are calculated annually. If
essentially independent cash flows cannot be isolated
for individual assets, the assets are grouped
at the lowest level where essentially independent
cash flows can be identified, i.e., a cash-generating
unit. Intrum Justitia’s operations in each country
or group of countries are considered the Group’s
cash-generating units in this regard.
An impairment loss is recognized when the
carrying value of an asset or cash-generating unit
exceeds its recoverable value. Impairment losses are
recognized through profit or loss. Impairment losses
attributable to a cash-generating unit are mainly
allocated to goodwill, after which they are divided
proportionately among other assets in the unit.
The recoverable amount of cash-generating
units is the higher of their fair value less costs to
sell and value in use. Value in use is measured by
discounting future cash flows using a discounting
factor that takes into account the risk-free rate of interest
and the risk associated with the specific asset.
Impairment of goodwill is not reversed. Impairment
of other assets is reversed if a change has been
made in the assumptions that served as the basis
for determining the recoverable amount. Impairment
is reversed only to the extent the carrying
value of the assets following the reversal does not
exceed the carrying value that the asset would have
had if the impairment had not been recognized.
Employee benefits
The Group applies IAS 19 Employee Benefits,
IFRS 2 Share-based Payment and statement UFR
7 IFRS 2 and social security contributions for
listed enterprises from the Swedish Financial Reporting
Board.
Pension obligations
The Group’s pension obligations are, for the most
part, secured through official pension arrangements
or insurance solutions. Pension obligations
vary between countries on the basis of legislation
and different pension systems. See also Note 23 for
a further description.
Defined contribution pension plans are plans
where the company’s obligation is limited to the
fees it has committed to pay. The size of the employee’s
pension depends in part on the fees the
company pays to an insurance company and in
part on the return generated and actuarial factors.
Consequently, it is the employee who assumes the
investment risk and actuarial risk. The company’s
obligations for defined contribution pension plans
are expensed through profit and loss as they are
vested by employees who render services on behalf
of the company.
For defined benefit pension plans, the pension
obligation does not cease until the agreed pensions
have been paid. The Group’s net obligation for defined
benefit pension plans is calculated separately
for each plan by estimating future compensation
the employees has earned in current and previous
periods; this compensation is discounted present
value. The calculation is performed by an actuary
using the so-called Projected Unit Credit Method.
The fair value of Intrum Justitia’s share of any investment
assets as of the balance sheet date is calculated
as well.
Actuarial gains and losses may arise in the determination
of the present value of the obligation
and the fair value of investment assets. They arise
either because the actual outcome deviates from
previous assumptions or the assumptions change.
Intrum Justitia applies a corridor rule, which
means that the portion of the accumulated actuarial
gains and losses exceeding ten percent of the
higher of the commitments’ present value and the
fair value of assets under management is recognized
over the anticipated average remaining pe-