Page 75 - Loomis Annual Report 2017

Loomis Annual Report 2017
Notes – Group 71
tions. Net investments in foreign operations have been hedged by foreign currency loans being recognized on the closing day exchange rate. The translation difference for the foreign currency loan is recognized as hedging of net investments in subsidiaries and included in other comprehensive income. In hedge accounting the asset (net investment in foreign opera- tions) and the liability (foreign currency loan) are linked, which means that only net changes in value are recognized through other comprehensive income.
Receivables and liabilities in foreign currencies
Currency forward contracts are used to hedge receivables or liabilities against foreign exchange rate risk. Hedge account- ing is not applied. Both the underlying receivable or liability and the hedging instrument are recognized at the exchange rate on the closing day and the translation differences are recognized in pro t or loss. Changes in value of receivables and liabilities relating to operations are recognized in operating income while changes in value of nancial receivables and liabilities are rec- ognized in nancial income/expense.
Scope of the consolidated nancial statements
The consolidated nancial statements cover the Parent Com- pany Loomis AB and all of the subsidiaries. Subsidiaries are all companies over which the Group has control. The Group con- trols an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the company. Sub- sidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
Acquisition method (IFRS 3)
The Group applies the acquisition method to account for busi- ness combinations. All considerations transferred for the acqui- sition of an operation are reported at fair value on the acquisi- tion date. Revaluation of any deferred considerations and con- tingent considerations over and above that which was assessed at the time of the acquisition are recognized through the state- ment of income/statement of other comprehensive income. When the nal outcome is available, any effect of contingent con- sideration/repayment of consideration is recycled to the state- ment of income. Holdings without a controlling interest in the acquired operations can, for each acquisition, either be valued
at fair value, or at the proportional share of the acquired opera- tions’ net assets, held without a controlling interest. According to IFRS, transactions with non-controlling interests are recognized as a transaction within equity. There is, however, a lack of speci c rules concerning revaluation of option liabilities for these hold- ings. Revaluations of option liabilities for non-controlling inter- ests are recognized as transactions within equity, the accounting is thereby made similarly to other transactions with non-control- ling interests. As of December 31, 2017, there were no non- controlling interests within the Group. The surplus arising from the difference between the acquisition price and the fair value of the Group’s share of identi able acquired assets, liabilities and con- tingent liabilities is reported as goodwill.
Acquisition-related costs
Loomis recognizes acquisition-related costs attributable to transaction costs, revaluation of deferred considerations, nal effects of contingent considerations/repayments, restructur-
ing and/or integration of acquired operations in the Group as
a separate item in the statement of income. The item includes acquisition-related costs attributable to ongoing, completed and discontinued acquisitions. Restructuring costs are expenses reported in accordance with the speci c criteria for provisions for restructuring. Provisions for restructuring are made when a detailed formal plan of action is in place and a well-founded expectation has been created by the parties concerned. No
provisions are made for future operating losses. Restructur-
ing costs may be expenses for various activities necessary
in the preparation for the integration, for example, severance pay, provisions for leased premises which will not be utilized or leased at a loss, as well as other lease agreements which can- not be cancelled and will not be utilized. Integration costs nor- mally consist of activities that cannot be reported as provisions. Such activities may include a change of brand name (new logo on buildings, vehicles, uniforms etc.) but may also be person- nel costs related to, for example, training, recruitment, reloca- tion and travel, certain customer-related costs and other costs related to the adaptation of the operations. The following criteria must also be ful lled for costs to be classi ed as restructuring/ integration costs; i) the costs would not have been applicable if the acquisition had not taken place, and ii) the cost is attribut- able to a project that management has identi ed and monitored, either as a stage in the integration program implemented in con- junction with the acquisition, or as a direct result of an immedi- ate review after the acquisition.
Translation of foreign subsidiaries (IAS 21)
The functional currency of each of the Group’s subsidiaries, that is, the currency in which the company normally has incoming and outgoing payments, is normally determined by the primary eco- nomic environment in which the company operates. The func- tional currency of the Parent Company and the presentation cur- rency of the Group, that is, the currency in which the nancial statements are presented, is the Swedish Krona (SEK). The nan- cial statements of each foreign subsidiary are translated accord- ing to the following: each month’s statement of income is trans- lated applying the exchange rate in effect on the last day of that month. Thus the income for each month is not affected by foreign exchange uctuations during subsequent periods.
Balance sheets are translated using the exchange rates in effect on each balance sheet date. The translation difference aris- ing as a result of statements of income being translated apply- ing average rates, while the balance sheets are translated apply- ing the exchange rates prevailing at each balance sheet date, is reported in other comprehensive income. In cases in which loans have been raised to reduce the Group’s foreign exchange/trans- lation exposure in foreign net assets, and where these satisfy the hedge accounting requirements, the translation differences on such loans are reported in other reserves in shareholders’ equity, together with the translation differences arising from the transla- tion of foreign net assets. When a foreign operation or part thereof is sold, such translation differences that have been reported in shareholders’ equity are reported in the statement of income as part of the capital gains or loss on the sale.
Receivables and liabilities in foreign currency (IAS 21)
Foreign currency transactions are translated to the functional currency using the exchange rates prevailing at each transac- tion date. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation at year- end exchange rates of monetary assets and liabilities denom- inated in foreign currencies, are reported in the statement of income. Exceptions are transactions in which gains or losses are reported in other comprehensive income as qualifying cash ow hedges or qualifying net investment hedges.
Translation differences on non-monetary nancial assets and liabilities, such as shares reported at fair value via the statement of income, are reported in the statement of income as part of fair value gains/losses.
Intra-Group transactions (IAS 24 and IFRS 3)
Pricing of intra-Group transactions is based on normal business principles. Intra-Group receivables and liabilities, as well as trans- actions between companies in the Group, and any related gains/ losses, are eliminated. Unrealized losses are also eliminated,
but any losses are regarded as an indication of an impairment