SECURITAS AB Annual Report 2011

78 Annual Report
Notes and comments to the consolidated financial statements
ment of income named acquisition related costs. Costs accounted for on this
line are transaction costs, revaluation (including discounting) of contingent
considerations and acquisition related option liabilities, revaluation to fair value
of previously acquired shares in step acquisitions and acquisition related
restructuring and integration costs.
For all acquisitions, the excess of the cost of acquisition over the fair value
of the Group’s share of the identifiable net assets acquired is recorded as
goodwill. If the cost of acquisition is less than the fair value of the net assets
of the subsidiary acquired, the difference is recognized directly in the consolidated
statement of income.
The consolidated financial statements include companies acquired with
effect from the date that the Group obtains control. Companies divested are
excluded with effect from the date that the Group ceases to have control.
Pricing of deliveries among Group companies is based on normal business
principles. Inter-company transactions, balances and unrealized gains between
Group companies are eliminated. Unrealized losses are also eliminated unless
the transaction provides evidence of an impairment of the asset transferred.
Non-controlling interests (IAS 27)
For acquisitions made before 2010, the Group has adopted the principle of
treating transactions with non-controlling interests as transactions with parties
outside the Group. Acquisitions of non-controlling interests give rise to
goodwill that is determined as the difference between the purchase price
paid and the acquired share of the book value of the subsidiaries’ net assets.
Disposals of non-controlling interests result in gains and losses for the
Group and are recognized via the statement of income. When the Group
ceases to have control over an entity, the carrying amount of the investment
at the date the control was lost becomes its cost for the purposes of subsequently
accounting for the retained interest.
for acquisitions made as from 2010 the Group treats transactions with
non-controlling interests as transactions with equity owners of the Group.
For acquisitions from non-controlling interests, the difference between any
consideration paid and the relevant share acquired of the carrying value of
net assets of the subsidiary is recorded in equity. Gains or losses on disposals
to non-controlling interests are also recorded in equity. When the Group
ceases to have control, any retained interest in the entity is remeasured to
its fair value, with the change in carrying amount recognized in the statement
of income. The fair value is the initial carrying amount for the purposes
of subsequently accounting for the retained interest.
Investments in associates (IAS 28)
The equity method is used to account for shareholdings that are neither subsidiaries
nor joint ventures, but where Securitas can exert a significant influence,
generally accompanying a shareholding of between 20 percent and 50
percent of the voting rights. For acquisitions made before 2010, the cost of
an acquisition is measured at the fair value of the assets given, any contingent
considerations and acquisition related option liabilities that have been
estimated, equity instruments issued and liabilities incurred or assumed at
the date of exchange, plus costs directly attributable to the acquisition.
Identifiable assets acquired and liabilities and contingent liabilities assumed
as a result of the acquisition are measured initially at their fair values at the
acquisition date.
For acquisitions made as from 2010, all payments to acquire a business
are recorded at fair value at the acquisition date, with contingent considerations
and acquisition related option liabilities classified as debt subsequently
re-measured through the statement of income. All acquisition
related transaction costs are expensed.
For all acquisitions, the excess of the cost of acquisition over the fair value
of the Group’s share of the identifiable net assets acquired is attributed to
goodwill, which is included in investments in associated companies in the
consolidated balance sheet. If the cost of acquisition is less than the fair
value of the net assets of the associated company acquired, the difference is
recognized directly in the consolidated statement of income.
Securitas Annual Report 2011
The consolidated financial statements include associated companies
with effect from the date of the acquisition. Associated companies divested
are excluded with effect from the divestment date. If the ownership interest
in an associate is reduced but significant influence is retained, only a proportionate
share of the amounts previously recognized in other comprehensive
income are reclassified to the statement of income where appropriate.
Inter-company transactions, balances and unrealized gains between the
Group and its associated companies are eliminated to the extent of the
Group’s interest in the associate. Unrealized losses are also eliminated
unless the transaction provides evidence of an impairment of the asset
transferred.
Share in income of associated companies is recognized in the consolidated
statement of income. Depending on the purpose of the investment
share in income of associated companies is included either in operating
income, if it is related to associated companies that have been acquired to
contribute to the operations (operational), or in income before taxes as a
separate line within net financial items, if it is related to associated companies
that have been acquired as part of the financing of the Group (financial
investments). In both cases the share in income of associated companies
are net of tax. The associated companies Long Hai Security Services Joint
Stock Company and Walsons Services Pvt Ltd are classified as operational
associates. Facility Network A/S, which is classified as an operational associate
in the comparatives, was divested in 2009.
In the consolidated balance sheet, investments in associated companies
are stated at cost including the cost of the acquisition that is attributed to
goodwill, adjusted for dividends and the share of income after the acquisition
date.
Joint ventures (IAS 31)
The proportional method is applied to joint ventures in which there is a
shared controlling interest. According to this method, all statement of income
and balance sheet items are stated in the consolidated statement of income,
the consolidated statement of cash flow and the consolidated balance sheet
in proportion to ownership. The proportional method of consolidation is used
with effect from the date when a shared controlling interest is achieved and
up until a shared controlling interest ceases to exist.
Translation of foreign subsidiaries (IAS 21)
The functional currency of each Group company is determined by the primary
economic environment in which the company operates, that is the
currency in which the company primarily generates and expends cash. The
functional currency of the Parent Company and the presentation currency
of the Group, that is the currency in which the financial statements are
presented, is Swedish kronor (SEK).
The financial statements of each foreign subsidiary are translated according
to the following method: Each month’s statement of income is translated
using the exchange rate prevailing on the last day of the month, which means
that income for each month is not affected by foreign exchange fluctuations
during subsequent periods. Balance sheets are translated using exchange
rates prevailing at each balance sheet date. Translation differences arising in
the conversion of balance sheets are posted directly to other comprehensive
income and thus do not affect net income for the year. The translation difference
arising because statements of income are translated using average
rates, while balance sheets are translated using exchange rates prevailing at
each balance sheet date, is posted directly to other comprehensive income.
Where loans have been raised to reduce the Group’s foreign exchange /
translation exposure in foreign net assets, and qualify for the hedge accounting
criteria, exchange rate differences on such loans are recognized together
with the exchange rate differences arising from the translation of foreign net
assets in other comprehensive income. The accumulated translation differences
are accounted for in translation reserve in equity. When a foreign
operation or part thereof is sold, such exchange differences are recognized
in the statement of income as part of the gain or loss on sale.