Page 79 - Loomis Annual Report 2017

Loomis Annual Report 2017
Notes – Group 75
used to hedge net investments and which meet the require- ments for hedge accounting. Hedge accounting for derivatives is described in the paragraph below. As assets in this category are not considered tangible, they are recognized as current nancial assets or current liabilities in the balance sheet.
Derivative instruments and hedging transactions
Derivatives are recognized in the balance sheet on the transac- tion date and are measured at fair value, both initially and when subsequently revalued. The method used to recognize the gain or loss arising from revaluation depends on whether the deriva- tive has been identi ed as a hedging instrument, and, if so, the nature of the item being hedged. As of the end of the year, Loo- mis was holding currency swaps and loans used to hedge net investments and these meet the criteria for hedge accounting.
When transactions are entered into, the Group documents the relationship between the hedging instrument and the hedged item, the risk management objective and the risk strategy. At the inception of a hedge as well as subsequently, the effectiveness of the derivative instruments is documented. Information on the fair value of various derivative instruments used for hedging can be found in Note 6. Changes in the hedge reserve in equity are described in Note 27. The entire fair value of a derivative that is a hedging instrument is classi ed as a xed asset or long-term liability when the hedged item has a term to maturity of more than 12 months, and as a current asset or current liability when the hedged item has a term to maturity of less than12 months. Derivative instruments held for trading are always classi ed as current assets or current liabilities.
(a) Fair value hedges
Fair value hedges that meet the criteria for hedge account-
ing are revalued through the statement of income to match the revaluation of the hedged asset or liability.
(b) Cash ow hedging
The effective portion of changes in fair value of a derivative instrument that is identi ed as a cash ow hedge and that meets the criteria for hedge accounting, is recognized in other com- prehensive income. The ineffective portion is recognized directly through the statement of income and is included in operating income. Accumulated amounts in equity are reversed through the statement of income in the periods the hedged item affects the earnings. When a hedging instrument matures or is sold, or when the hedge no longer meets the criteria for hedge account- ing, any remaining gains/losses remain in equity and are rec- ognized as pro t or loss at the same time as the forecast trans- action is nally recognized through the statement of income (if this is not expected to be the case, the cumulative gain or loss
is recognized directly through statement of income). As of the balance sheet date the Group had no cash ow hedges.
(c) Hedging net investments
A hedge of a net investment in a foreign operation is recog- nized in a similar way as a cash ow hedge; effective hedges are recognized in other comprehensive income and ineffec- tive portions are recognized through the statement of income. Cumulative gains or losses in equity are recognized through the statement of income when the foreign operation is dis- posed of wholly or in part.
Employee bene ts (IAS 19)
The Group operates, or otherwise participates in, a number
of de ned bene t and de ned contribution pension plans.
A de ned contribution plan is a pension plan under which the Company pays xed contributions to a separate legal entity and to which it has no legal or informal obligations to pay further contributions. De ned bene t plans are pension plans provid- ing bene ts after termination of service other than those bene- ts provided by de ned contribution plans. Calculations for the
de ned bene t plans are carried out by independent actuaries on a continuous basis. Costs for de ned bene t plans are esti- mated using the Projected Unit Credit method resulting in a cost distributed over the individual’s period of employment. Obliga- tions are valued at the present value of expected future cash ows applying a discount rate corresponding to the interest
rate on rst-class corporate bonds or government bonds with a duration that is approximately the same as that of the obliga- tions. Plan assets are reported at fair value.
Similar to previous years, Loomis recognizes gains and losses related to changes in actuarial assumptions via Other comprehensive income on the lines Actuarial gains and losses. The actuarial gains and losses refers to changes due to experi- ence, changes in nancial assumptions and changes in demo- graphic assumptions. These actuarial gains and losses are reported for all de ned bene t plans relating to post-employ- ment bene ts in the period in which they occur.
If the recognition of a de ned bene t plan results in an asset, this is recognized as an asset in the consolidated balance sheet under “Interest-bearing nancial xed assets.” If the net result is a liability, it is reported as a provision under “Provisions for pen- sions and similar commitments.” Provisions for pensions and similar commitments are included in net debt. The interest com- ponent relating to de ned bene t plans is recognized as nan- cial expense/income.
Expenses relating to earlier periods of service are reported directly in the statement of income.
Severance pay is paid when the Group terminates an employ- ee’s employment before the pensionable age or when an em- ployee accepts voluntary redundancy in return for such bene- ts. Severance pay is reported as an expense when the Group is demonstrably obliged to terminate employment as a result
of a detailed formal plan or to pay compensation in cases of voluntary redundancy.
Share-based Remuneration (IFRS2)
Incentive scheme
The Group has introduced an incentive scheme in which those taking part receive a bonus, of which two thirds of the total amount is paid out in cash during the year after the bonus was earned, and the remaining third being used to purchase shares at the market rate, which are, subsequently, allotted to the employees one year after their purchase, on condition that the employee in question remains employed by the Group.
The cost for Loomis is reported in the statement of income
in the year during which the bonus is earned. The share-based reserve is classi ed as a part of equity and not as a liability. At the conclusion of the program, any deviations from the origi- nal estimates, for example, as a result of an employee leaving the Group without receiving their allotted shares, are reported in the statement of income and corresponding adjustments are made in shareholders’ equity. Refer to Note 11 for further infor- mation.
Share swaps relating to share-based remuneration
For the purpose of securing the share component in Loomis’ share-based incentive scheme, Loomis AB has entered into a swap agreement with a third party. The swap agreement has been classi ed as an equity instrument and is recognized in equity as a reduction of retained earnings. For further informa- tion refer to Note 11.
Provisions (IAS 37)
Provisions are reported when the Group has a present legal or constructive obligation as a result of past events, it is likely that an out ow of resources will be required to settle the obligation, and when a reliable estimation of this amount can be made.
Provisions regarding restructuring are made when a detailed, formal plan of measures exists and valid expectations have been raised among those who will be affected. No provisions