Financial statements, atlas copco group1. Continuedloss resulting from hedging instruments is dependent on the type ofhedge relationship, i.e. which type of risk exposure that is secured bythe hedging instrument.Changes in the fair value of derivatives that are designated andqualify as fair value hedges are <strong>record</strong>ed in the income statement,<strong>to</strong>gether with any changes in the fair value of the hedged asset or liabilitythat are attributable <strong>to</strong> the hedged risk. These changes in the fairvalue of the hedged asset or liability are recognized in the incomestatement <strong>to</strong> offset the effect of gain or loss on the hedging instrument.Based on decisions taken in the Financial Risk ManagementCommittee, transaction exposure can be hedged using various derivativeinstruments. The overriding objective is <strong>to</strong> attain cash flow or fairvalue hedge accounting in the consolidated financial statements. Seenote 27 for additional information.Changes in the fair value of the derivative hedging instrumentdesignated as a cash flow hedge are recognized directly in equity <strong>to</strong>the extent that the hedge is effective. To the extent that the hedge isineffective, changes in fair value are recognized in the income statement.If the hedging instrument no longer meets the criteria for hedgeaccounting, expires or is sold, terminated or exercised, then hedgeaccounting is discontinued prospectively. The cumulative gain or losspreviously recognized in equity remains there until the forecast transactionoccurs. When the hedged item is a non-financial asset, theamount recognized in equity is transferred <strong>to</strong> the carrying amount ofthe asset when it is recognized. In other cases, the amount recognizedin equity is transferred <strong>to</strong> profit or loss in the same period that thehedged item affects profit or loss.The Group hedges a substantial part of net investments in foreignoperations. Gain or loss on the hedging instrument relating <strong>to</strong> theeffective portion of the hedge is recognized in equity. Gain or lossrelating <strong>to</strong> the ineffective portion is recognized immediately in theincome statement. Gains and losses accumulated in equity areincluded in the income statement on disposal of foreign operations.For derivatives which are not part of hedge accounting, changes infair value are reported as operating or financial income or expensebased on the purpose of the use of the derivatives and whether theinstruments relate <strong>to</strong> operational or financial items.Impairment of financial assetsFinancial assets, except for such assets classified as fair value throughprofit or loss, are assessed at each reporting date <strong>to</strong> determine whetherthere is any objective evidence that they are impaired. A financial assetis considered <strong>to</strong> be impaired if objective evidence indicates that one ormore events have had a negative effect on the estimated future cashflows of that asset. An impairment loss in respect of a financial assetmeasured at amortized cost is calculated as the difference between itscarrying amount and the present value of the estimated future cashflows discounted at the original effective interest rate. An impairmentloss in respect of an available-for-sale financial asset is calculated byreference <strong>to</strong> its current fair value. Individually significant financialassets are regularly tested for impairment on an individual basis or insome cases are assessed collectively in groups with similar credit risks.In respect of an available-for-sale financial asset, any cumulative losspreviously recognized in equity is recognized in the income statement.Impairment losses on financial assets of all other categories are recognizeddirectly in the income statement.An impairment loss is reversed if the reversal can be related objectively<strong>to</strong> an event occurring after the impairment loss was recognized.For financial assets measured at amortized cost and available-for-salefinancial assets that are debt securities, the reversal is recognized in theincome statement. For available-for-sale financial assets that areequity securities, the reversal is recognized directly in equity.EquityShares are classified as equity. Incremental costs directly attributable<strong>to</strong> the issue of ordinary shares and share options are recognized as adeduction from equity, net of any tax effect.When share capital recognized as equity is repurchased, the amoun<strong>to</strong>f the consideration paid, which includes directly attributable costs,net of any tax effects, is recognized as a deduction from equity.Repurchased shares are classified as treasury shares and are presentedas a deduction from <strong>to</strong>tal equity. When treasury shares are sold orsubsequently reissued, the amount received is recognized as anincrease in equity and the resulting surplus or deficit on the transactionis transferred <strong>to</strong> or from other paid-in capital.Income taxesIncome taxes include both current and deferred taxes in the consolidatedaccounts. Income taxes are reported in the income statementunless the underlying transaction is reported directly in equity. Inthose cases the related income tax is also reported directly in equity.A current tax liability or asset is recognized for the estimatedtaxes payable or refundable for the current or prior <strong>year</strong>s.The calculation of deferred taxes is based on, either the differencesbetween the values reported in the balance sheet and theirrespective values for taxation, which are referred <strong>to</strong> as temporarydifferences, or the carry forward of unused tax losses and tax credits.Temporary differences related <strong>to</strong> the following are not provided for:goodwill not deductible for tax purposes, the initial recognition ofassets or liabilities that affect neither accounting nor taxable profit,and differences related <strong>to</strong> investments in subsidiaries and associatedcompanies <strong>to</strong> the extent that they will probably not reverse in the foreseeablefuture.A deferred tax asset is recognized only <strong>to</strong> the extent that it is probablethat future taxable profits will be available against which the assetcan be utilized. Deferred tax assets are reduced <strong>to</strong> the extent that it isno longer probable that the related tax benefit will be realized. In thecalculation of deferred taxes, enacted tax rates are used for the individualtax jurisdictions.Assets held for sale and discontinued operationsThe Group classifies a non-current asset or disposal group as held forsale if its carrying amount will be recovered principally through a sale.For classification as held for sale, the asset or disposal group must beavailable for immediate sale in its present condition and its sale mustbe highly probable.A discontinued operation is a component of the Group’s business thatrepresents a separate major line of business or geographical area ofoperations or is a subsidiary acquired exclusively with a view <strong>to</strong> resale.Classification as a discontinued operation occurs upon disposalor when the operation meets the criteria <strong>to</strong> be classified as held for sale,if earlier. A disposal group that is <strong>to</strong> be abandoned may also qualify asa discontinued operation at the date on which it ceases <strong>to</strong> be used.Immediately before classification as held for sale, the measuremen<strong>to</strong>f the assets (and all assets and liabilities in a disposal group) isremeasured in accordance with applicable IFRSs. Then, on initialclassification as held for sale, noncurrent assets and disposal groupsare recognized at the lower of carrying amount and fair value lesscosts <strong>to</strong> sell. Impairment losses on initial classification as held for saleand subsequent gains or losses on remeasurement are recognized inthe income statement. Gains are not recognized in excess of anycumulative impairment loss.Non-current assets and disposal group assets and liabilities arereported separately in the balance sheet. Post-tax profits or losses aswell as gains and losses recognized on measurement <strong>to</strong> fair value lesscost <strong>to</strong> sell or on disposal are reported separately in the income statementfor discontinued operations. When an operation is classified as adiscontinued operation, the comparative income statement is restatedas if the operation had been discontinued from the start of the comparativeperiod.Contingent liabilitiesA contingent liability is a possible obligation or a present obligationthat arises from past events that is not reported as a liability or provision,due either <strong>to</strong> it being unlikely that an outflow of resources will berequired <strong>to</strong> settle the obligation or that a sufficiently reliable calculationof the amount cannot be made.46 <strong>Atlas</strong> <strong>Copco</strong> <strong>2008</strong>
1. ContinuedNew and amended IFRS standards and IFRIC interpretationsThe following standards, interpretations and amendments <strong>to</strong> standardshave been issued but have not become effective as of December31, <strong>2008</strong> and have not been applied by the Group. The assessment ofthe effect the implementation of these standards and interpretationscould have on the consolidated financial statements is preliminary.• Amended IFRS 2 Share-based Payment: Vesting conditions andcancellations clarifies the terms ‘vesting conditions’, other featuresof a share-based payment which are ‘non-vesting conditions’ andhow non-vesting conditions should be accounted for. The amendmentis effective for annual periods beginning on or after January1, 2009 and requires retrospective application. It is not expected <strong>to</strong>have a significant impact on consolidated financial statements.• Revised IFRS 3 Business Combinations and amended IAS 27Consolidated and Separate Financial Statements require changesin consolidated financial statements and accounting for businesscombinations. The revised standards are effective for annual periodsbeginning on or after July 1, 2009. The revised IFRS 3 will havean effect on how future business combinations are accounted for.The changes in the amended IAS 27 will mainly influence theaccounting of future transactions. (Not yet adopted by the EU.)• IFRS 8 Operating Segments introduces the “managementapproach” <strong>to</strong> segment reporting. IFRS 8, which becomes manda<strong>to</strong>ryfor the Group’s 2009 financial statements, will require the disclosureof segment information based on the internal reports regularlyreviewed by the Group’s Chief Operating Decision Maker inorder <strong>to</strong> assess each segment’s performance and <strong>to</strong> allocateresources <strong>to</strong> them. Currently, the Group presents segment informationin respect of its business and geographical segments. Theadoption of this standard will not require any change in the presentationof the segments, i.e. the operating segments agree with thebusiness segments.• Revised IAS 1 Presentation of Financial Statements: A RevisedPresentation requires certain changes in the presentation of thefinancial statements as well as proposed changes in the titles of thefinancial statements (not required <strong>to</strong> be adopted). The revisedstatement does not change the recognition and measurement of theamounts reported in the financial statements. The revised IAS 1 iseffective for annual periods beginning on or after January 1, 2009.The implementation will only <strong>to</strong> a limited extent affect the form ofpresentation for the consolidated financial statements.• Revised IAS 23 Borrowing Costs removes the option <strong>to</strong> expenseborrowing costs and requires that an entity capitalize borrowingcosts directly attributable <strong>to</strong> the acquisition, construction or productionof a qualifying asset as part of the cost of that asset. Therevised IAS 23 will become manda<strong>to</strong>ry for the Group’s 2009 financialstatements and will constitute a change in accounting policyfor the Group. In accordance with the transitional provisions, theGroup will apply the revised IAS 23 <strong>to</strong> qualifying assets for whichcapitalization of borrowing costs commences on or after the effectivedate. It is not expected <strong>to</strong> have a significant impact on the consolidatedfinancial statements.The following amended IFRS standards and new IFRIC interpretationsare not expected <strong>to</strong> have any impact on the consolidated financialstatements:• Amendments <strong>to</strong> IAS 27 Consolidated and Separate FinancialStatements: Cost of an Investment in a Subsidiary, JointlyControlled Entity or Associate• Amendments <strong>to</strong> IAS 32 Financial Instruments: Presentation andIAS 1 Presentation of Financial Statements named ‘PuttableFinancial Instruments and Obligations Arising on Liquidation’• Amendments <strong>to</strong> IAS 39 Financial Instruments: Recognition andMeasurement: Eligible Hedged Items• IFRIC 12 Service Concession Arrangements• IFRIC 13 Cus<strong>to</strong>mer Loyalty Programmes• IFRIC 15 Agreements for the Construction of Real Estate• IFRIC 16 Hedges of a Net Investment in a Foreign Operation• IFRIC 17 Distributions of Non-cash Assets <strong>to</strong> Owners• IFRIC 18 Transfers of Assets from Cus<strong>to</strong>mers• Improvements <strong>to</strong> IFRSs (2009)<strong>Atlas</strong> <strong>Copco</strong> <strong>2008</strong> 47
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Audit ReportTo the Annual Meeting o
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Sustainability ReportAtlas Copco’
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SUSTAINABILITY REPORTRoles and resp
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SUSTAINABILITY REPORTSociety and th
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SUSTAINABILITY REPORT10080604020050
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SUSTAINABILITY REPORTIn 2008, CO 2
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SUSTAINABILITY REPORTwinter and coo
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SUSTAINABILITY REPORTBusiness Partn
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SUSTAINABILITY REPORTShareholdersTh
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SUSTAINABILITY REPORTSustainability
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Corporate Governance ReportThe Boar
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Corporate Governance ReportBoard of
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Corporate Governance ReportGroup St
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Corporate Governance ReportRemunera
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Corporate Governance ReportBusiness
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The Atlas Copco ShareAt December 31
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the atlas copco shareOwnership stru
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Five Years in SummaryMSEK 2004 1) 2
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Financial InformationWelcome to the
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We are committed to yoursuperior pr