Note Summary of significant accounting policies
Associated companies
Associates are those companies where the Group has
significant influence, but not a controlling influence over
operational and financial management, usually through an
ownership interest of between 20 percent and 50 percent
of the voting rights. As of the date at which the significant
influence is acquired, investments in associated companies
are recognized in the consolidated financial statements using
the equity method. The equity method means that the value
of the shares in the associated companies recognized for the
Group corresponds to the Group’s interest in the equity of
the associates plus Group-related goodwill and any residual
values of Group-related surplus or shortfall in value. The
consolidated income statement reports the Group’s share of
profit of associated companies, adjusted for any amortization,
impairment or dissolution of acquired surplus or shortfall
values, as other financial revenue. Dividends received from
associated companies reduce the carrying amount of the
investment.
The equity method is used until significant influence
ceases.
Foreign currency translation of foreign subsidiaries’
financial statements
Functional and presentation currency
Items included in the financial statements of each of the
Group’s subsidiaries are measured using the currency of the
primary economic environment in which they operate (functional
currency). The consolidated financial statements are
presented in Swedish krona which is the Parent’s functional
and presentation currency.
Transactions and balance sheet items
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing on the
dates of the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions and from
the translation of monetary assets and liabilities denominated
in foreign currencies at the closing rate are recognized as of
the end of the reporting period in the income statement.
Group companies
The results and financial position of foreign subsidiaries (none
of which has the currency of a hyperinflationary economy)
that have a functional currency other than the presentation
currency are translated into the Group’s presentation currency
as follows:
Assets and liabilities are translated at the closing day rate.
Income and expenses are translated at average exchange
rates.
All exchange differences are charged directly to other
comprehensive income and are recognized as a separate
part of equity. When a foreign subsidiary is sold, any
exchange differences are recognized in profit or loss as
part of the gain or loss on the sale.
Goodwill and fair value adjustments arising in the acquisition
of foreign operations are treated as assets and liabilities of the
entity and translated at the closing day rate.
Exchange rates
The following rates were used to translate currency:
Currency Average rate Closing rate
EUR 10.26 10.16
DKK 1.38 1.36
GBP 11.58 11.31
MXN 0.45 0.45
USD 8.71 8.87
Segment reporting
An operating segment is the part of the Group that conducts
business operations from which it may generate revenue
and incur expenses for which discrete financial information is
available. The operating results of an operating segment are
followed up by the Group’s chief operating decision-maker
in order to evaluate its performance and allocate resources
to the operating segment. The Group’s operations are
divided up into operating segments based on which parts of
the operations the Group’s chief operating decision-maker
monitors, that is, according to the management approach.
AAK’s business operations are organized in such a way that
the Group’s highest executive decision-maker, that is the
CEO, monitors earnings, returns and cash flows generated by
the Group’s various products. Each operating segment has
a manager who is responsible for day-to-day operations and
who regularly reports to the CEO on the outcome of the operating
segment’s performance and its resource requirements.
Where the CEO monitors profit/loss and determines resource
allocations based on the product that the Group produces and
sells, these constitute the Group’s operating segments.
The Group’s operations are organically divided into business
segments based on product. The marketing organization
also reflects this structure. Segment reporting is submitted
in accordance with IFRS 8 for the Group only. For each
segment, the results, assets and liabilities directly attributable
to or items that can reliably be attributed to the segment are
included in that segment. Assets and liabilities not attributed
to segments include tax assets and tax liabilities, financial
investments and financial liabilities, as well as cash and cash
equivalents and interest-bearing receivables.
Revenue recognition as from January 1, 2018
Revenue comprises the fair value of goods sold excluding
VAT and discounts after eliminating intra-group sales. Sales
are recognized as revenue at a point time when control of the
goods has transferred to the customer in accordance with
the terms of the contract, which occurs when the goods are
delivered to the customer. Revenue from sales is recognized
based on the price specified in the contract, net of discounts.
In addition to pre-agreed discounts, there are also volume
discounts which are set annually. The revenue is reduced
by the expected discounts at the time of sale. No element of
financing is deemed present as the sales are made with a
credit term of 30-45 days. The Group’s obligation to repair or
replace faulty products under the standard warranty terms
is recognized as a warranty provision on a monthly basis. A
receivable is recognized when the goods are delivered as
this is the point in time that the consideration is unconditional.
Prepayments are reported as a liability on the line item
Accrued expenses and prepaid income in the Balance Sheet.
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