Page 81 - Loomis Annual Report 2017

Loomis Annual Report 2017
Notes – Group 77
Net debt
Interest-bearing liabilities less interest-bearing assets and liquid funds.
n/a
Not applicable.
Exchange rates used in the consolidated nancial statements
as a result of disputes. The valuation of identi able assets and liabilities also depends on the accounting environment in which the acquired company/operations were operational. This relates to, for example, the accounting norms according to which the nancial reporting was previously prepared and, thereby, the scale of the adaptations which must be made to the Group’s accounting principles, the regularity with which nancial state- ments were prepared, as well as data of various types which may be necessary for the valuation of identi able assets and liabilities. All balance sheet items are, in case of acquisitions, subject to certain estimates and assumptions. This also implies that a preliminary valuation may be required which is adjusted at a later date. All acquisition analysis are subject to nal adjust- ment one year after the acquisition date, at the latest. In light of the factors stated above, Loomis has chosen, on the condition that the adjustment in question is not considered signi cant, neither to provide separately, for each individual acquisition, the reasons why the rst reporting of the business combination is preliminary, nor to state the assets and liabilities for which the rst reporting is preliminary.
Deferred considerations that mature in the future and con- tingent considerations are reported as part of the purchase price and is recorded based on an assessment assuming that the appropriate terms and conditions agreed upon in connec- tion with the acquisition will be complied with. Deferred consid- erations and contingent considerations are reported at pres- ent value and the valuation is subject to assessment on each reporting occasion. For further information regarding acquisi- tions refer to Note 15.
Impairment testing of goodwill and other acquisition-related intangible assets
In connection with the impairment testing of goodwill and other acquisition-related intangible assets, the carrying amount is com- pared with the recoverable amount. The recoverable amount is determined by the greater of either an asset’s net realizable value or its value in use. As under normal circumstances, no listed mar- ket prices are available to assess an asset’s net realizable value, the carrying amount is normally compared with the value in use. The calculation of the value in use is based on assumptions
and assessments. The most important assumptions are organic growth, development of the operating margin, the utilization of operating capital employed and the relevant WACC rate used to discount future cash ows. All in all, this implies that the valua- tion of the balance sheet item Goodwill, which amounts to SEK 5,615 million (5,626), and of Acquisition related intangible assets, which amounts to SEK 349 million (261), is subject to critical esti- mates and assessments. A sensitivity analysis regarding organic growth, operating margin and WACC is provided in Note 15.
Reporting of income tax, VAT and other taxes
Reporting of income tax, VAT and other taxes is based on the applicable regulations in the countries in which the Group oper- ates. Due to the overall complexity of all rules concerning taxa- tion and reporting of taxes, the implementation and reporting is based on interpretations and assessments of possible outcomes.
Deferred tax is measured on temporary differences between the carrying amounts and tax base of assets and liabilities. There are two main types of assumptions and judgements that impact recognized deferred tax. These are assumptions and judgements to establish the carrying amount of various assets and liabilities, and those relating to future taxable pro ts in cases where future utilization of deferred tax assets is dependent on this.
At year-end, deferred tax assets were reported in the amount of SEK 418 million (426) and deferred tax liabilities in the amount of SEK 309 million (421).
Signi cant assumptions and judgements are also made in the recognition of provisions and contingent liabilities relating to tax risk and potential effects of ongoing tax audits. Tax audits are often lengthy processes lasting for several years. It is therefore
Cur- rency Norway NOK Denmark DKK UK GBP Switzerland CHF USA USD Czech Republic CZK Turkey TRY Argentina ARS Hong Kong HKD
United Arab
Emirates AED
Brazil BRL
Canada CAD People’s Re-
public of China CNY Singapore SGD Chile CLP EUR-countries EUR
Weighted average 2017
Weighted Dec. 31, average 2017 2016
1.02
1.29 11.53 8.65 8.59 0.35 2.83 0.58 1.11
2.35 2.32 6.48
1.33 6.28 n/a 9.47
Dec. 31, 2016
1.05
1.28 11.17 8.90 9.06 0.35 2.57 0.57 1.17
2.47 2.78 6.73
1.30 6.27 n/a 9.56
1.03
1.00
1.30
1.32
11.02
11.09
8.65
8.41
8.49
8.20
0.37
0.38
2.33
2.17
0.50
0.43
1.09
1.05
2.30
2.23
n/a
n/a
6.55
6.54
1.26
1.26
6.20
6.14
0.01
0.01
9.65
9.84
Critical accounting estimates and NOTE 4 assessments
The preparation of nancial statements and the application
of various accounting standards are often based on assess- ments made by management or on estimates and assump- tions that are deemed reasonable under the prevailing circum- stances. These estimates and assumptions are generally based on historical experience and other factors, including expecta- tions of future events. With different estimates and assumptions, the result could vary and by de nition, the estimates will seldom equal actual outcomes.
The estimates and assumptions that Loomis deems, at December 31, 2017, to have greatest impact on its results, assets and liabilities are discussed below.
Valuation of accounts receivable and provision for bad debt losses
Accounts receivable total SEK 2,173 million (2,001), and thereby, constitutes one of the largest items on the balance sheet. Accounts receivable is reported at net value, after pro- vision for bad debt losses. The provision for bad debt losses
of SEK –84 million (–52) is subject to critical estimations and assessments. For additional information on credit risk in the accounts receivable refer to Note 6 and Note 22.
Valuation of identi able assets and liabilities in connection with the acquisition of subsidiaries/operations
The valuation of identi able assets and liabilities in conjunction with the acquisition of subsidiaries or operations, as part of the purchase price allocation, requires that items in the acquired company’s balance sheet, as well as items that have not been reported in the acquired company’s balance sheet, such as customer relations, should be valued at fair value. Under normal circumstances, as listed market prices are not available for the valuation of the assets and liabilities to be valued, different val- uation methods must be applied. These valuation methods are based on a number of assumptions. Other items that may be dif cult to, both to identify and measure, are contingent liabili- ties that may have arisen in the acquired company, for example