Annual Report 2000 - Skanska

Accounting andvaluation principlesAnnual Accounting Act,new developments, principlesof consolidation etc.Annual Accounts Act and industry-widerecommendationThe Annual report has been prepared in compliancewith the provisions of the SwedishAnnual Accounts Act. It has mainly beenadapted to the industry-wide principles statedby the Swedish Construction Federation. TheAnnual Report complies with the Federation’srecommendation that revenue recognition incontracting operations take place on a percentageof completion basis.New developmentsThe following change has occurred:• expanded information on leasing in Note 2due to Recommendation No. 6:99 on leasingcontracts by the Swedish Financial AccountingStandards Council.Principles of consolidationThe consolidated financial statements encompassthe accounts of the Parent Company andthose companies in which the Parent Company,directly or indirectly, has a decisiveinfluence. This normally requires ownershipof more than 50 percent of the voting powerof all participations. In cases where holdingsare intended for divestment within a shorttime after acquisition, the company is notconsolidated.Skanska has applied Recommendation No.1 of the Swedish Financial Accounting StandardsCouncil in drawing up its consolidatedfinancial statements. Shareholdings in Groupcompanies have been eliminated according tothe purchase method of accounting. Acquiredand divested companies have been consolidatedor deconsolidated, respectively, from thedate of the acquisition/divestment.The principles for the translation of thefinancial statements of foreign subsidiariescomply with Recommendation No. 8 of theSwedish Financial Accounting StandardsCouncil,“Reporting of Effects of Changes inExchange Rates.” In the consolidated financialstatements, the income statements of foreignsubsidiaries have been included at the averageexchange rate for the year and their balancesheets at the year-end exchange rate (currentmethod). The change in initial shareholders’equity that is due to the change in exchangerate from prior years is reported as anexchange rate difference directly under shareholders’equity. In cases where a loan correspondingto the investment has been takenout for hedging purposes, the exchange rateadjustment in the loan taking into accounttax effects has been reported directly undershareholders’ equity. Skanska has applied thetransition rule in the recommendation onaccumulated exchange rate differencesreported before 1999.Associated companiesAssociated companies are defined as companiesin which the Skanska Group’s share ofvoting power amounts to a minimum of 20percent and a maximum of 50 percent, andwhere ownership is one element of a longtermconnection. Associated companies arenormally reported according to the equitymethod of accounting.Consortia (joint ventures)Companies that were established to carry outspecific contracting projects together withother construction companies are consolidatedaccording to the proportional methodof accounting.Receivables and liabilitiesin foreign currenciesReceivables and liabilities in foreign currencieshave been valued at the exchange rate prevailingon the balance sheet date or the exchangerate according to forward contracts.Offsetting of balance sheet itemsThe offsetting of receivables against liabilitiesoccurs only in cases where legislation permitsoffsetting of payments. The offsetting ofdeferred tax liabilities in one company againstdeferred tax claims in another company presupposes,in addition to matching time periods,that the companies are entitled to suchtax-related equalizations.Published Annual ReportThis published Annual Report presents figureson the number of employees and wages andsalaries in abbreviated form. Complete figuresare found in the version of the Annual Reportsubmitted to the Swedish Patent and RegistrationOffice.Income statementNet salesThe year’s project revenues, deliveries of materialsand merchandise, sales of investmentproperties, rental revenues and other operatingrevenues that are not reported separatelyon their own line are reported as net sales.Project revenues are reported according tothe percentage of completion method, in compliancewith the industry-wide recommendationof the Swedish Construction Federation onrevenue recognition of contracting assignments.This means that operating income is reportedsuccessively as a project accrues over time,instead of being listed as a balance sheet itemuntil the project is completed and a final financialsettlement with the client has been reached.The sale of investment and developmentproperties is normally reported as a revenueitem in the year when a binding agreement onthe sale is reached.The operating lease amounts stated in Note2 do not include rents from current-assetproperties, since these properties are intendedfor divestment in connection with the completionof the contracting project.Construction, manufacturingand property management expensesConstruction, manufacturing and propertymanagement expenses include direct andindirect manufacturing expenses, loss provisions,bad debt losses and warranty expenses.18 ACCOUNTING AND VALUATION PRINCIPLES Skanska Annual Report 2000