Note 2 – Summary of important accounting principles
This Note sets forth the most important accounting principles applied in the preparation of the annual report. Subject to the exceptions stated below, these principles have been applied consistently for all presented years. The consolidated financial statements cover Duni AB and its subsidiaries.
2.1 Bases for preparation of the financial statements
The consolidated financial statements for the Duni Group have been prepared in accordance with the Swedish Annual Accounts Act, RFR 1, ” Supplementary Accounting Rules for Groups”, and International Financial Reporting Standards (IFRS) and interpretations from the IFRS Interpretations Committee (IFRS IC) as adopted by the EU. The consolidated financial statements had been prepared in accordance with the purchase method, other than with respect to reappraisals of buildings and land, valuation of financial assets and liabilities (including derivative instruments) at fair value through profit or loss and financial assets and liabilities (including derivative instruments) classified as hedge instruments and defined benefit pension plans – plan assets valued at fair value.
The preparation of financial statements in compliance with IFRS requires the use of a number of important estimations for accounting purposes. Furthermore, when applying the Group’s accounting principles, management must make certain assessments. The areas which involve a high degree of assessment, which are complex, or such areas in which assumptions and estimations are of material significance for the consolidated financial statements, are set forth in Note 4.
The Parent Company applies the Swedish Annual Accounts Act and RFR 2, Reporting for Legal Entities. In those cases where the Parent Company applies different accounting principles than the Group, such fact is stated separately in section 2.22, Parent Company’s accounting principles.
2.1.1 Changes in accounting principles and disclosure
Duni applies the new and amended standards and interpretations from IASB and statements from IFRIC as adopted by the EU and which are mandatory commencing January 1, 2016. Presented below are the standards that Duni applies for the first time with respect to the financial year commencing January 1, 2016, and which have had a material impact on the Group’s financial statements:
- Clarification of acceptable methods of depreciation and amortization – Amendments to IAS 16 and IAS 38
- Annual improvements of IFRS standards, the improvement cycle 2012-2014
- Disclosure Initiative: Amendments to IAS 1
Duni has also chosen to apply the following changes prematurely:
- Disclosure Initiative: Amendments to IAS 7
The application of the changes merely clarifies existing requirements and has had no impact on Duni’s accounting principles or disclosures for the current financial year or preceding financial years, and is not expected to have any impact in future periods.
Other standards, changes and interpretations which enter into force as regards the financial year commencing January 1, 2016 have no material impact on the consolidated financial statements.
A number of new standards and amendments of interpretations and existing standards enter into force as regards financial years beginning after January 1, 2016, and these have not been applied in conjunction with the preparation of the consolidated financial statements. None of the aforementioned is expected to have any material impact on the consolidated financial statements, except as stated below:
IFRS 9 Financial instruments (adopted by the EU)
IFRS 9 Financial Instruments addresses the classification, valuation and reporting of financial assets and liabilities and introduces new rules regarding hedge accounting. The complete version of IFRS 9 was issued in July 2014. It replaces the parts of IAS 39 covering the classification and valuation of financial instruments and introduces a new impairment model.
Although Duni has not yet conducted a detailed assessment of the debt instruments that are currently classified as financial assets that can be sold, they appear to satisfy the conditions for being valued at fair value in other comprehensive income based on the Company’s business model for such assets. Thus, the reporting of these assets will not be changed.
Other financial assets held by Duni include:
- Debt instruments that are currently classified as assets held until maturity and valued at amortized cost, which appear to satisfy the requirement for valuation at amortized cost in accordance with IFRS 9.
Duni does not expect the classification, valuation or reporting of the Group’s financial assets and liabilities to have any material impact. Nor will Duni’s reporting of financial liabilities be changed, since the new requirements only affect the reporting of financial liabilities that are reported at fair value in the income statement, and the Group has no liabilities of that type. The rules regarding removal from the balance sheet have been carried over from IAS 39 Financial Instruments: Reporting and Valuation, and have not changed.
The new hedge accounting rules in IFRS 9 are more compatible with the Company’s risk management in practice. Generally, it will become easier to apply hedge accounting since the standard introduces a more principle-based standard for hedge accounting. Duni has not yet assessed the effects in detail, but anticipates that, also going forward, current hedging will qualify for hedge accounting and can be reported in the same manner under IFRS 9. Accordingly, Duni does not expect any material impact on the Group’s hedge accounting.
The new model for the calculation of credit loss reserves is based on expected credit losses instead of established credit losses in accordance with IAS 39, which may result in an earlier reporting of credit losses. The model is to be applied to financial assets that are reported at amortized cost, instruments that are valued at fair value in other comprehensive income, contractual assets in accordance with IFRS 15 Revenue from Contracts with Customers, lease receivables, loans and certain financial guarantees.
Duni has not yet assessed how the Group’s reserves for credit losses will be affected by the new rules. They may result in credit losses being reported earlier than in accordance with current principles.
The new standard also introduces an enhanced disclosure requirement and changes in presentation.
IFRS 9 enters into force on January 1, 2018. According to the transitional rules in the full version of IFRS 9, early application in stages was permitted in respect of financial years commencing prior to February 1, 2015. After that date, the rules must be applied in its entirety.
Duni does not intend to apply IFRS 9 prematurely.
IFRS 15 Revenues from Contracts with Customers (adopted by the EU)
IFRS 15 is the new standard for revenue recognition. IFRS 15 replaces IAS 18 Revenue and IAS 11 Construction Contracts. IFRS 15 is based on the principle of revenues being reported when the customer gains control over the sold product or service – a principle which replaces the earlier principle that revenues are reported when risks and benefits have passed to the purchaser. A company may choose between “full retroactivity” or forward-looking application with additional disclosures.
Management is currently assessing the effects of the new standard and has identified the following areas which are likely to be affected:
- Consignment sales where revenue recognition depends on transfer of control rather than transfer of risks and benefits.
- The reporting of returned goods in the balance sheet will be changed since they must be be reported gross in accordance with IFRS 15 (separate reporting of the right to repossess goods from the customer and the obligation to make a refund).
At present, the Group is unable to estimate the quantitative impact of the new rules on the financial statements. Duni will conduct a detailed evaluation during the coming year.
IFRS 15 enters into force on January 1, 2018. At present, Duni does not intend to apply the standard prematurely.
IFRS 16 Leases
IFRS 16 was published in January 2016. Implementation of the standard will result in almost all leasing contracts being reported in the balance sheet, since a difference is no longer made between operational and financial leasing agreements. According to the new standard, an asset (the right to use a leased asset) and a financial obligation to pay leasing fees must be reported. Short-term contracts and contracts involving low amounts are exempted. For lessors, reporting will, in all essential, respects be unchanged.
The standard will primarily affect the reporting of Duni’s operational leasing agreements. On the closing date, the Group’s non-terminable operational leasing agreements amounted to SEK 251 m; see Note 37. Duni has not yet assessed the extent to which these obligations will be reported as assets and liabilities, and how this will affect the Group’s income and classification of cash flows.
Certain obligations may be covered by the exemption with respect to short-term contracts and contracts involving low amounts, and certain obligations may relate to arrangements that are not reported as leasing agreements in accordance with IFRS 16.
Operating income and equity ratio as well as debt/equity ratio will also be affected by the new standard. The size of the effect of this change on these items has not yet been assessed.
IFRS 16 enters into force on January 1, 2019. At present, Duni does not intend to apply the standard prematurely.
No other changes to the IFRS or IFRIC interpretations that have not yet entered into effect are expected to have any material impact on Duni.
2.2 Consolidated reporting
Subsidiaries are all companies (including companies for specific purposes) in which the Group is entitled to formulate financial and operational strategies in a manner which normally is a concomitant of a shareholding in excess of 50% of the voting rights of shares or participating interests or where the Group, through agreements, exercises a sole controlling influence. Subsidiaries are included in the consolidated financial statements commencing the day on which the controlling influence is transferred to the Group. They are removed from the consolidated financial statements as of the day on which the controlling influence ceases.
The purchase method is used for reporting the Group’s acquisitions of subsidiaries. The purchase price for the acquisition of a subsidiary consists of fair value of transferred assets, debts and the shares issued by the Group. The purchase price also includes the fair value of all assets or liabilities which are a consequence of an agreement regarding a conditional purchase price. Acquisition-related costs are booked when incurred. Identifiable acquired assets and assumed liabilities in a business acquisition are initially valued at fair value on the acquisition date. For each acquisition, Duni determines whether all non-controlling interests in the acquired company shall be reported at fair value, or proportionately to the share in the net assets of the acquired company represented by the holding.
The amount by which purchase price, any holding without controlling interest, as well as the value on the acquisition date of earlier shareholdings exceeds the fair value of the Group’s share of identifiable acquired net assets, is reported as goodwill. If the amount is less than fair value for the assets of the acquired subsidiary, in the event of a “bargain purchase”, the difference is reported directly in the Consolidated statement of comprehensive income.
Acquisition-related costs are booked as they arise.
Intra-group transactions and balance sheet items, as well as unrealized profits on transactions between group companies, are eliminated. Unrealized losses are also eliminated, but any losses are regarded as an indication of possible impairment. Where appropriate, the accounting principles for subsidiaries have been changed to ensure consistent application of the Group’s principles.
2.2.2 Transactions with non-controlling interests
The Group applies the principle of reporting transactions with non-controlling interests as transactions with the Group’s shareholders. Upon acquisitions from non-controlling interests, the difference between the purchase price paid and the actual acquired portion of the reported value of the subsidiary’s net assets is reported in equity. Profits or losses upon divestments to non-controlling interests are also reported in equity. Duni reports non-controlling interests in an acquired company either at fair value or at the proportionate share of the acquired company’s identifiable net assets. Duni has non-controlling interests recognized at fair value. This refers to Terinex Siam, which was acquired in 2016.
2.2.3 Affiliated companies
Affiliated companies are all companies in which the Group has a significant, but not controlling, influence, which generally is the case with stakes of between 20% and 50% of the voting capital. Holdings in affiliated companies are reported in accordance with the equity method and initially valued at the acquisition value. At present, Duni has no affiliated companies.
2.3 Segment reporting
Operating segments are reported in a manner which is consistent with the internal reporting provided to the highest executive decision-maker. The highest executive decision-maker is the function which is responsible for allocation of resources and assessment of the income of the operating segment. In Duni, this function has been identified as the group management which takes strategic decisions. As from January 1, 2014, Duni’s segment reporting covers five business areas, based on underlying operating income following allocation of shared expenses to each business area. For a detailed description, see Note 5.
2.4 Translation of foreign currency
2.4.1 Functional currency and reporting currency
Items included in the financial statements for the various units in the Group are valued in the currency which is used in the economic environment in which the relevant company primarily operates (functional currency). In the consolidated financial statements, Swedish kronor (SEK) are used; this is the Parent Company’s functional currency and reporting currency.
2.4.2 Transactions and balance sheet items
Transactions in foreign currency are translated to the functional currency in accordance with the exchange rates applicable on the transaction date. Currency gains and losses which arise in conjunction with payments of such transactions and in conjunction with translation of monetary assets and liabilities in foreign currency at the closing day rate are reported in the income statement. Exchange rate differences on lending and borrowing are reported in the net financial items, while other exchange rate differences are included in the operating income. Exceptions apply when the transactions constitute hedging which satisfies the conditions for hedge accounting of cash flows or of net investments, since profits/losses are reported in other comprehensive income. Duni applies hedge accounting via interest rateswaps, with part of the interest rate risk being hedged at a fixed rate.
2.4.3 Group companies
The results and financial position of all group companies (of which none has a high inflation currency as functional currency) which have a functional currency other than the reporting currency are translated to the Group’s reporting currency in accordance with the following:
a) assets and liabilities for each of the balance sheets are translated at the closing day rate;
b) income and expenses for each of the income statements are translated at the average exchange rate;
c) all exchange rate differences which arise are reported in the Consolidated statement of comprehensive income.
Upon consolidation, exchange rate differences which arise as a consequence of translation of net investments in foreign operations are transferred to the Consolidated statement of comprehensive income. Upon the full or partial divestment of a foreign business, the exchange rate differences which are reported in the Consolidated statement of comprehensive income are transferred to the income statement and reported as a part of capital gains/losses.
Goodwill and adjustments of fair value which arise upon the acquisition of a foreign business are treated as assets and liabilities of such business and translated at the closing day rate.
2.5 Cash flow statement
The cash flow statement is prepared in accordance with the indirect method. The reported cash flow covers only transactions which result in payments being received or made. Cash and cash equivalents in the cash flow statement accord with the definition of cash and cash equivalents in the balance sheet, see 2.13.
2.6.1 Revenue recognition
Revenue includes the fair value of what has been, or is to be, received for sold goods in the Group’s current operations. Revenue is reported exclusive of value added tax, returns and discounts and after elimination of intra-group sales.
Duni reports revenue when the amount thereof can be measured in a reliable manner and it is likely that future economic benefits will accrue to the Company. The amount of revenue is not deemed measurable in a reliable manner until all obligations associated with the sale have been fulfilled or have lapsed. Duni bases its assessments on historic results and thereupon takes into consideration the type of customer, type of transaction and special circumstances in each individual case.
Sales of goods are reported as revenue when a group company has delivered products to customers and when responsibility for the products has passed to the customer. The responsibility is governed by the delivery terms and conditions. The customer’s acceptance consists of delivery approval, conditions for approval having expired, or the fact that the Group has objective evidence that all criteria for approval are fulfilled. Delivery does not occur before the products have been dispatched to a designed place and the risks and possibilities associated with the products (obsolescence, result upon future sale) have passed to the customer.
In those cases where Duni’s products are sold with volume rebates and the customers are entitled to return defective products, the sales revenues are reported based on the price stated in the sales contract, net after estimated volume rebates and returns at the time of the sale. Accumulated experience is used to assess and make provision for rebates and returns. The assessment of volume rebates is based on expected annual purchases. No financial component is deemed to be involved since the sale takes place with an average credit period of 45 days, which is in accordance with market practice.
2.6.2 Dividend income
Dividend income is reported when the right to receive the payment has been established.
2.7 Intangible assets
Goodwill comprises the amount by which the acquisition value exceeds the fair value of the Group’s share of the identifiable net assets of acquired subsidiaries at the time of acquisition. Goodwill on acquisition of subsidiaries is reported as intangible assets. Goodwill is reviewed annually to identify any impairment and reported at acquisition value less accumulated impairment. Impairment of goodwill is not reversed. Profits or losses upon the divestment of a unit include remaining reported value on the goodwill which relates to the divested unit.
Detailed information regarding Duni’s definition of cash-generating units upon the allocation of goodwill is provided in Note 21.
2.7.2 Customer relations, trademarks and licenses
Identifiable acquired customer relations are reported at fair value and related to acquisitions made from 2013 onwards. Depreciation takes place on a straight-line basis over an assessed useful life of 10 years.
Acquired trademarks and licenses are reported at acquisition value. Trademarks and licenses have a determinable useful life and are reported at acquisition value less accumulated amortization. Amortization takes place on a straight-line basis in order to allocate the cost for trademarks and licenses over their assessed useful life (3-10 years).
2.7.3 Research and development
Capitalized research expenditures relate primarily to expenditures for the implementation of the SAP business system.
Research expenditures are booked when incurred.
Expenditures incurred in development projects (relating to design and testing of new or improved products) are reported as intangible assets when the following criteria are fulfilled:
(a) it is technically feasible to finish the intangible asset so that it can be used or sold;
(b) management intends to finish the intangible asset and use or sell it;
(c) conditions exist to use or sell the intangible asset;
(d) the way in which the intangible asset will generate probable future economic benefits can be demonstrated;
(e) adequate technical, financial and other resources exist to complete the development and to use or sell the intangible asset; and
(f) the expenditures which relate to the intangible asset during its development can be calculated in a reliable manner.
Other development expenditures which do not fulfill these conditions are reported as expenses when incurred. Development expenditures previously reported as an expense are not reported as an asset in a subsequent period. Capitalized development expenditures are reported as intangible assets and amortization takes place from the time when the asset is finished for use, on a straight-line basis over the assessed useful life (3-10) years.
2.8 Tangible fixed assets
Buildings and land include primarily plants and offices. All tangible fixed assets are reported at acquisition value less depreciation. The acquisition value includes expenditures directly related to the acquisition of the asset, as well as interest expenses in conjunction with the construction of qualifying assets.
Additional expenditures are added to the reported value of the asset or reported as a separate asset only where it is likely that the future economic benefits associated with the asset will vest in the Group and the asset’s acquisition value can be measured in a reliable manner. Reported value for the replaced part is removed from the balance sheet. All other forms of repairs and maintenance are reported as expenses in the income statement during the period in which they are incurred.
No depreciation takes place for land. Depreciation on other assets, in order to allocate their acquisition value down to the estimated residual value over the estimated useful life, takes place on a straight-line basis in accordance with the following:
|Type of asset||Useful life|
|Paper machinery||15-17 years|
|Other machinery||10 years|
|Equipment, tools and installations||3-8 years|
The residual value and useful life of the assets are assessed on each balance sheet date and adjusted as required.
Profits or losses from divestments are established through a comparison between the sales revenue and the reported value, and are reported in other operating income or other operating expenses in the income statement.
2.9 Impairment of non-financial assets
With respect to goodwill and other assets with an undetermined useful life, an annual assessment is conducted to ascertain that the recovery value, i.e. the net realizable value or the use value, whichever is higher, exceeds the reported value. With respect to other non-financial assets, a similar assessment is carried out as soon as there are indications that the reported value is too high. The asset’s value is written down to the recovery value as soon as it is shown that it is lower than the reported value.
Fixed assets which are used via leasing are classified in accordance with the financial terms of the leasing agreement. Leasing of fixed assets, where the Group in all essential respects holds the financial risks and benefits associated with ownership, is classified as financial leasing. Financial leasing is reported at the beginning of the leasing period at the fair value of the leasing object or the present value of the minimum leasing fees, whichever is the lower. Other leasing agreements are classified as operational leasing. Payments made during the leasing term (less deductions for any incentives from the lessor) are reported as an expense in the income statement on a straight-line basis over the leasing term.
2.11 Financial assets
The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, and loans and receivables. The classification depends on the purpose for which the financial asset was acquired. Management determines the classification of the financial assets on the first reporting occasion and reviews this decision on each subsequent reporting.
2.11.1 General principles
Purchase and sales of financial assets are reported on the transaction day – the date on which the Group undertakes to purchase or sell the asset. Financial instruments are initially reported at fair value plus transaction expenses, which applies to all financial assets which are not reported at fair value through profit or loss. Financial assets valued at fair value through profit or loss are reported initially at fair value, while related transaction expenses are reported in the income statement. Financial assets are removed from the balance sheet when the right to receive cash flows from the instrument has expired or has been transferred and the Group has largely transferred all risks and benefits associated with the ownership. Financial assets valued at fair value through profit or loss are reported after the acquisition date at fair value. Loans and receivables are reported at amortized cost applying the effective annual interest rate method.
Fair value of listed financial assets corresponds to the listed bid price on the balance sheet date. Fair value of unlisted financial assets is determined by using valuation techniques, for example recently completed transactions, the price of similar instruments or discounted cash flows. Fair value of currency forwards is determined based on the applicable forward rate on the balance sheet date, while interest rate swaps are valued based on future discounted cash flows.
The Group assesses on each balance sheet date whether there is any objective evidence of impairment of a financial asset or a group of financial assets, such as the discontinuation of an active market or that it is unlikely that the debtor will be to meet its obligations. The impairment is calculated as the difference between the reported value of the asset and the present value of estimated future cash flows, discounted to the financial asset’s original effective rate of interest. The reported value of the asset is written down and the impairment charge is reported in the consolidated income statement. If a loan or an investment which is held to maturity carries valuable interest, the relevant effect rate of interest established in accordance with the agreement is used as the discount rate when establishing impairment. As an expediency, the Group can establish impairment on the basis of the fair value of the instrument applying an observable market price. Impairment of accounts receivable is described below in the section on loans and receivables.
Financial assets and liabilities are set off and reported in a net amount in the balance sheet only when there is a legal right to set off the reported amounts and there is an intention to settle them with a net amount or to simultaneously realize the asset and settle the debt. The legal right may not be dependent on future events and must be legally binding on the company and the counterparty, both in normal business operations and in the event of suspension of payments, insolvency or bankruptcy.
2.11.2 Financial assets valued at fair value through profit/loss
Financial assets at fair value through profit or loss consist of financial assets that are held for trading. A financial asset is classified in this category if it is acquired primarily in order to be sold within a short time. Derivative instruments are classified as held for trading if they are not identified as hedge instruments. Duni holds derivative instruments in the form of currency forward contracts, interest-rate swaps on borrowing.
Duni applies hedge accounting in accordance with IAS 39 on the interest rate swaps entered for hedging payments of variable interest. Changes in value of derivatives designated for hedge accounting are reported in Other comprehensive income.
Assets in this category are classified as current assets if they are expected to be settled within 12 months; otherwise they are classified as fixed assets.
2.11.3 Hedge accounting
The effective partof changes in fair value on a derivative instrument which is identified as cash flow hedging and which satisfies the conditions for hedge accounting is reported in Other comprehensive income. The profit or loss attributable to the ineffective part is reported immediately in the income statement under Other net profits/losses. The profit or loss attributable to the effective part of an interest rate swap which hedges borrowing at a variable rate is reported in the income statement in Financial expenses..
Information regarding fair value for various derivative instruments used for hedging purposes is provided in Note 29. Changes in hedging provisions in equity are set forth in the Statement of changes in equity. The entire fair value of a derivative which constitutes a hedge instrument is classified as a fixed asset or long-term liability when the outstanding term of the hedged item exceeds 12 months, and as a current asset or current liability when the outstanding term of the hedged item is less than 12 months. Derivative instruments held for trading are always classified as current assets or current liabilities.
2.11.4 Loan receivables and accounts receivable
Loan receivables and accounts receivable are financial assets which are not derivative instruments. They have determined or determinable payments and are not listed on an active market. They are included in current assets, with the exception of items payable more than 12 months after the balance sheet date, which are classified as fixed assets. Impairment of accounts receivable is reported in the income statement in the sales function and impairment of loan receivables is reported as a financial item. Cash and cash equivalents in the balance sheet are also included in this classification.
Accounts receivable and loans receivables are initially reported at fair value and thereafter at accrued acquisition value applying the effective annual interest rate method, less any provisions for depreciation.
Provision is made for impairment of accounts receivable when there is objective evidence that the Group will be unable to receive all amounts which are due and payable according to the original terms of the receivables. Significant financial difficulties of the debtor, the probability that the debtor will go into bankruptcy or undergo financial restructuring, and non-payment or delayed payment (payment overdue by more than 30 days) are regarded as indications that impairment may exist. The size of the provision is determined by the difference between the reported value of the asset and the present value of assessed future cash flows.
Inventories are reported at the acquisition value or the net realizable value, whichever is lower. The acquisition value is determined using the first in, first out method (FIFO). The acquisition value of finished goods and work in progress consists of design expenses, raw materials, direct salaries, other direct expenses and associated indirect manufacturing expenses (based on normal production capacity). Loan expenses are not included. The net realizable value is the estimated sales price in the current operations, less applicable variable selling expenses.
2.13 Cash and cash equivalents
In both the balance sheet and the cash flow statement, cash and cash equivalents include cash, bank balances and other short-term investments which mature within three months of the date of acquisition.
2.14 Financial liabilities
The Group classifies its financial liabilities in the following categories: financial liabilities valued at fair value through profit or loss and financial liabilities valued at amortized cost . The classification depends on the purpose for which the financial liability was acquired. Management determines the specification of the financial liabilities on the first reporting occasion and reviews this decision on each subsequent reporting occasion.
2.14.1 Financial liabilities valued at fair value through profit or loss
Derivative instruments with a negative fair value which do not meet the criteria for hedge accounting are valued at fair value through profit or loss. For a description of the derivative instruments held by Duni and for further information regarding reporting, see section 2.11 “Financial assets at fair value through profit or loss.”
Derivative instruments which satisfy the rules for hedge accounting, including the interest rate swaps taken out by Duni, are reported at fair value via Other comprehensive income. For a more detailed description of the reporting of derivative instruments designated for hedging, see 2.11.3.
Liabilities in this category are classified as short-term liabilities if they are expected to be settled within 12 months; otherwise they are classified as long-term liabilities.
2.14.2 Financial liabilities valued at amortized cost
Borrowing as well as other financial liabilities, e.g. accounts payable, is included in this category. Accounts payable comprise obligations to pay for goods or services which have been acquired from suppliers in the course of ongoing operations. Accounts payable are classified as short-term liabilities if they fall due for payment within one year or less (or during a normal operational cycle if longer). If not, they are reported as long-term liabilities.
Financial liabilities are initially valued at fair value, net after transaction costs. Thereafter, financial liabilities are valued at amortized cost, and any difference between the amount received (net after transaction costs) and the repayment amount is reported in the income statement allocated over the loan period, applying the effective interest rate method. In the event of an early repayment of loans, any pre-payment interest penalties are reported in the income statement at the time of settlement. Loan expenses are charged to earnings for the period to which they relate. Distributed dividends are reported as a liability after the Annual General Meeting has approved the dividend.
Borrowing as well as other financial liabilities are classified as short-term liabilities unless the Group is unconditionally entitled to defer payment of the debt for at least 12 months after the balance sheet date.
2.15 Income taxes
Reported income taxes includes tax which is to be paid or received regarding the current year, adjustments regarding the relevant tax for previous years, and changes in deferred taxes.
All tax liabilities/tax assets are valued at the nominal amount in accordance with the tax rules and tax rates decided upon or announced and which in all likelihood will be adopted.
With respect to items reported in the income statement, the associated tax consequences are also reported in the income statement. The tax consequences of items reported in the Consolidated statement of comprehensive income are reported in the Consolidated statement of comprehensive income.
Deferred tax is calculated in accordance with the balance sheet method on all temporary liabilities which arise between reported and tax values of assets and liabilities.
Deferred tax assets with respect to loss carry-forwards and other future taxable deductions are reported to the extent it is likely that the deduction may be set off against surpluses in conjunction with future payments. Deferred tax liabilities relating to temporary differences attributable to investments in subsidiaries and branches are not reported in the consolidated financial statements since the Parent Company can, in all cases, determine the date for reversal of the temporary differences and it is not deemed likely that a reversal will take within the foreseeable future.
2.16 Employee benefits
Duni has various pension plans. The pension plans are normally financed through payments to insurance companies or manager-administered funds, where the payments are determined based on periodic actuarial calculations. Duni has both defined benefit and defined contribution pension plans. A defined contribution pension plan is a pension plan pursuant to which Duni pays fixed fees to a separate legal entity. Duni has no legal or informal obligations to pay additional fees if the legal entity has insufficient assets to pay all compensation to employees relating to the employee’s service during a current or earlier period. A defined benefit plan is a pension plan which is not a defined contribution plan. The distinguishing feature of defined benefit plans is that they state an amount for the pension benefit an employee will receive after retirement, normally based on one or more factors such as age, period of employment and salary.
The liability reported in the balance sheet with respect to defined benefit plans is the present value of the defined benefit obligation on the balance sheet date, less the fair value of the managed assets. The defined benefit pension obligation is calculated annually by independent actuaries applying the projected union credit method. The present value of a defined benefit obligation is determined by discounting the estimated future pension payments using the rate of interest on first class corporate bonds issued in the same currency as the currency in which payments are to be made, with terms to maturity comparable to the relevant pension liability. Approximately one half of pension obligations relate to Sweden. Swedish mortgage bonds considered to be corporate bonds.
Swedish mortgage bonds correspond to investment-grade corporate bonds in the sense that the market for mortgage bonds has a high turnover and is considered to be liquid and deep; furthermore, these bonds often have a triple A rating and thus are extremely creditworthy.
Actuarial gains and losses arising from experience-based adjustments and changes in actuarial assumptions are reported in “Other comprehensive income” during the period in which they arise.
Expenses relating to employment in earlier periods are reported directly in the income statement.
In respect of defined contribution plans, Duni pays fees to publicly or privately administered pension insurance plans pursuant to contractual obligations or on a voluntary basis. The Group has no further payment obligations when the contributions are paid. The contributions are reported as personnel expenses when they fall due for payment. Prepaid contributions are reported as an asset to the extent the Company may benefit from cash repayments or a reduction in future payments.
2.16.2 Compensation upon termination of employment
Compensation upon termination of employment is paid when an employee’s employment is terminated by Duni prior to the normal retirement date or when an employee accepts voluntary severance in exchange for certain compensation. Duni reports severance compensation when the Group is demonstrably obliged either to terminate an employee pursuant to a detailed formal plan without the possibility of recall, or to provide compensation upon termination as a result of an offer made to encourage voluntary retirement. Benefits payable more than 12 months after the balance sheet date are discounted to present value.
Provisions for, primarily, environmental restoration measures, restructuring expenses and any legal claims are reported when the Group has a legal or informal obligation as a consequence of earlier events, it is likely that an outflow of resources will be required to settle the obligation, and the amount can be calculated in a reliable manner. Duni reports allocations for restructuring expenses, see Note 9. No provisions are made for future operating losses.
2.18 Fixed assets held for sale and discontinued operations
Fixed assets which are held for sale (or divestment groups) are classified as fixed assets held for sale if their reported value will primarily be recovered through a sales transaction, not through ongoing use. Fixed assets (or divestment groups) classified as fixed assets which are held for sale are reported at the reported value or the fair value less selling expenses, whichever is the lower. Such assets may constitute a part of a company, a divestment group or an individual fixed asset. As regards the reported financial year, Duni has no fixed assets which meet the criteria for reporting as fixed assets held for sale.
2.19 Emission rights
Duni participates in the EU’s emission rights trading system. Received emission rights are initially valued at the acquisition value, i.e. SEK 0. Revaluations do not take place. A provision is made if an emission rights deficit is identified between owned rights and the rights which will need to be delivered due to emissions made. The value of any surplus emission rights is reported only when realized upon an external sale.
2.20 Government aid
Government aid is reported at fair value when there is reasonable certainty that the aid will be received and that Duni will satisfy the conditions associated with the aid. Government aid relating to costs is allocated over periods and reported in the income statement in the same periods as the costs which the aid is intended to cover.
2.21 The Parent Company’s accounting principles
The Parent Company prepares its Annual Report pursuant to the Swedish Annual Accounts Act and the Swedish Financial Reporting Board’s Recommendation RFR 2, Reporting for Legal Entities. RFR 2 entails that the Parent Company’s Annual Report for the legal entity shall apply all IFRS and statements approved by the EU, insofar as possible within the scope of the Swedish Annual Accounts Act and taking into consideration the connection between reporting and taxation. The Recommendation states which exceptions and supplements are to be made compared with reporting pursuant to IFRS.
The principles regarding the Parent Company are unchanged compared with the preceding year.
2.21.1 Differences between the Group’s and the Parent Company’s accounting principles
Differences between the Group’s and Parent Company’s accounting principles are set forth below. The accounting principles stated below have been applied consistently to all periods presented in the Parent Company’s financial statements.
Participating interests in subsidiaries are reported in the Parent Company pursuant to the purchase method. in the parent company, acquisition costs are reported as shares in subsidiaries. Received dividends and group contributions are reported as financial income.
Intangible fixed assets
Intangible fixed assets in the Parent Company are reported at acquisition value less deduction for accumulated amortization and any impairment. Reported goodwill in the parent company relates to acquisition goodwill; the useful life is thus assessed by company management at not more than 20 years. Amortization of goodwill takes place on a straight-line basis over an assessed useful life of 20 years.
Tangible fixed assets
Tangible fixed assets in the Parent Company are reported at acquisition value less deduction for accumulated depreciation and any impairment in the same manner as for the Group, but with a supplement for any revaluations.
All leasing agreements are reported in the Parent Company pursuant to the rules for operational leasing.
The Parent Company reports pension liabilities based on a calculation pursuant to the Swedish Pension Obligations (Security) Act.
Due to the connection between reporting and taxation, in the Parent Company the deferred tax liability on untaxed reserves is reported as a part of the untaxed reserves.
Presentation of income statement and balance sheet
The Parent Company complies with the form for presentation of income statements and balance sheets as set forth in the Swedish Annual Reports Act. This entails, among other things, a different presentation regarding equity and that provisions are reported as a separate main heading in the balance sheet.