ANNUAL REPORT 2009 - Saab

financial information > notesnation offer. In cases where the company terminates personnel, a detailedplan is drafted containing at the minimum the workplaces, positions andapproximate number of individuals affected as well as compensation for eachpersonnel category or position and a schedule for the plan’s implementation.Share-based paymentShare-based payment refers solely to remuneration to employees, includingsenior executives. Share-based payment settled with the company’s shares orother equity instruments is comprised of the difference between the fair valueat the time these plans were issued and the consideration received. Thisremuneration is recognised as staff costs during the vesting period. To theextent the vesting conditions in the plan are tied to market factors (such asthe price of the company’s shares), they are taken into consideration in determiningthe fair value of the plan. Other conditions (such as earnings pershare) affect staff costs during the vesting period by changing the number ofshares or share-related instruments that are expected to be paid.Share matching plan for employeesSaab introduced a Global Share Matching Plan for employees in autumn 2007where vesting rights accrue as of 2008. The payroll expenses for matchingshares in the plan are recognised during the vesting period based on the fairvalue of the shares. The employees pay a price for the share that correspondsto the share price on the investment date. Three years after the investmentdate, employees are allotted as many shares as they purchased three years earlierprovided that they are still employees of the Saab Group and that theshares have not been sold. In certain countries, social security expenses arepaid on the value of the employee’s benefit when matching takes place. Duringthe vesting period, provisions are allocated for these estimated socialsecurity expenses. Share repurchases to fulfil the commitments of Saab’sshare matching plans are recognised in equity. During the autumn 2008 anadditional share matching program was introduced with the same conditionsas the programme introduced 2007.In addition, a performance-based plan was introduced for senior executivesentitling them to 2–5 matching shares depending on the category theemployee belongs to. In addition to the requirement that the employeeremain employed by Saab after three years, there is also a requirement thatearnings per share grow in the range of 5 to 15 per cent. See also, Note 37.ProvisionsA provision is recognised in the balance sheet when the Group has a legal orinformal obligation owing to an event that has occurred and it is likely that anoutflow of economic resources will be required to settle the obligation and areliable estimate of the amount can be made. Where it is important when intime payment will be made, provisions are estimated by discounting projectedcash flow at a pre-tax interest rate that reflects current market estimatesof the time value of money and, where appropriate, the risks associatedwith the liability.GuaranteesA provision for guarantees is normally recognised when the underlyingproducts or services are sold if a reliable calculation of the provision can bemade. The provision is based on historical data on guarantees for the productsor similar products and an overall appraisal of possible outcomes in relationto the likelihood associated with these outcomes.RestructuringA provision for restructuring is recognised when a detailed, formal restructuringplan has been established and the restructuring has either begun orbeen publicly announced. No provision is made for future operating losses.Soil remediationIn accordance with the Group’s publicly announced environmental policyand applicable legal requirements, periodic estimates are made of Saab’s obligationsto restore contaminated soil. Anticipated future payments are discountedto present value and recognised as a provision.Loss contractsA provision for a loss contract is recognised when anticipated benefits are lessthan the unavoidable costs to fulfil the obligations as set out in the contract.Contingent liabilitiesA contingent liability exists if there is a possible commitment stemming fromevents whose occurrence is dependent on one or more uncertain futureevents and there is a commitment that is not recognised as a liability or provisionbecause it is unlikely that an outflow of resources will be required or thesize of the obligation cannot be estimated with sufficient reliability. Informationis provided as long as the likelihood of an outflow of resources is notextremely small.TaxesIncome taxes consist of current tax and deferred tax. Income taxes are recognisedin profit or loss unless the underlying transaction is recognised in netcomprehensive income or loss, in which case the related tax effect is also recognisedin net comprehensive income or loss.Current tax is the tax paid or received for the current year, applying thetax rates that have been set or essentially set as of the closing day to taxableincome and adjusting for current tax attributable to previous periods.Deferred tax is calculated according to the balance sheet method based ontemporary differences that constitute the difference between the carryingamount of assets and liabilities and their value for tax purposes. Deductibletemporary differences are not taken into account in the initial reporting ofassets and liabilities in a transaction other than a business combination andwhich, at the time of the transaction, do not affect either the recognised or taxableresult. Moreover, temporary differences are not taken into account if theyare attributable to shares in subsidiaries and associated companies that are notexpected to be reversed within the foreseeable future. The valuation ofdeferred tax is based on how the carrying amounts of assets or liabilities areexpected to be realised or settled. Deferred tax is calculated by applying the taxrates and tax rules that have been set or essentially are set as of the closing day.Deferred tax assets from deductible temporary differences and tax losscarry forwards are only recognised to the extent it is likely that they will beutilised. The value of deferred tax assets is reduced when it is no longer consideredlikely that they can be utilised.Significant differences between the Group’s and the Parent Company’saccounting principlesThe Parent Company follows the same accounting principles as the Groupwith the following exceptions.Associated companies and joint venturesShares in associated companies and joint ventures are recognised by the ParentCompany according to the acquisition value method. Revenue includesdividends received.Intangible fixed assetsAll development costs are recognised in profit or loss.Tangible fixed assetsTangible fixed assets are recognised after revaluation, if necessary. All leasesare recognised according to the rules for operating leasing.Borrowing costsThe Parent Company recognises borrowing costs as an expense in the periodin which they arise.Investment propertiesInvestment properties are recognised according to acquisition cost method.Financial assets and liabilities and other financial instrumentsThe Parent Company carries financial fixed assets at cost less impairment andfinancial current assets according to the lowest value principle. If the reasonfor impairment has ceased, it is reversed.The Parent Company does not apply the rules for setting off financialassets and liabilities.saab annual report 2009 77