Note Summary of significant accounting policies
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
Revenue from contracts with customers are reported as Net
sales in the Consolidated Income Statement. AAK recognizes
revenue from contracts with customers based on the five-step
process described in IFRS 15. The five steps in the process
for recognizing revenue from contracts with customers are:
Identify the contract, identify separate performance obligations
in the contract, determine the transaction price, allocate
the transaction price to the separate performance obligations
and recognize revenue when each performance obligation
is satisfied. The Group’s performance obligation in contracts
with customers consists of providing the goods specified in
the contract. Revenue from the Group’s sales is recognized
when the control of the products is transferred to the customer
in accordance with the terms of the contract, which occurs
when the products are delivered to the customer and there
are no unfulfilled obligations that may affect the customer’s
acceptance and approval of the products.
Net sales are recognized based on the price specified in the
sales contract less any discounts. A contract with a customer
may include one or more variable considerations. The
IFRS 15 standard requires an entity to estimate the amount
of variable consideration and recognizes a minimum amount
of highly probably, not reversing revenue. Variable considerations,
such as price reductions, performance discounts and
bonuses are non-significant within the AAK Group. Based on
this, AAK follows the objective of the constraint as it is highly
probable that a significant reversal in the cumulative amount
of revenue recognized will not occur. 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 monthly. 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.
Other operating income relates to for instance rental
revenue, capital gains from the sale and scrapping of tangible
and intangible assets and exchange gains on operating
receivables and liabilities. Interest income is recognized
allocated over the maturity of the security using the effective
interest method. Dividend income is recognized when the
right to receive payment has been determined.
Employee benefits
a) Pension liabilities
A defined contribution plan is a pension plan under which
the Group pays fixed contributions into a separate legal
entity. The Group has no legal or constructive obligations
to pay further contributions if this legal entity does not hold
sufficient assets to pay all employee benefits relating to
employee service in the current or prior periods. The fees
paid in exchange for the employee performing services for the
company are recognized as expenses in the period in which
the services are performed.
A defined benefit pension plan is a pension plan that is not
a defined contribution plan. The characteristic feature of a
defined benefit plan is that it defines an amount of pension
benefit that an employee will receive on retirement, usually
dependent on one or more factors such as age, years of
service and remuneration.
The liability recognized in the balance sheet in respect
of defined benefit pension plans is the present value of the
defined benefit obligation at the end of the reporting period
less the fair value of plan assets. The defined benefit obligation
is calculated annually by independent actuaries using the
projected unit credit method. The present value of the defined
benefit obligation is determined by discounting the estimated
future cash flows using interest rates of high-quality mortgage
bonds that are denominated in the same currency in which
the benefits will be paid, and that have terms of maturity
approximating the terms in the related pension commitment.
Past-service costs are recognized immediately in the income
statement.
The net interest rate is calculated by the discount rate being
applied to defined benefit plans and to the fair value of plan
assets. This expense is included in the personnel costs in the
income statement.
Actuarial gains and losses as a result of experience-based
adjustments and changes in actuarial assumptions are
recognized in other comprehensive income in the period in
which they arise.
b) Termination benefits
Employees receive compensation on termination before
normal retirement age or when they voluntarily accept termination
in exchange for these benefits. The Group recognizes
termination benefits when it is demonstrably committed to
either terminating the employment of current employees
according to a detailed, formal plan without possibility of
withdrawal; or providing termination benefits as a result of an
offer made to encourage voluntary redundancy.
c) Variable remuneration
Annual variable remuneration is based on meeting set targets
determined on an annual basis. These targets are related
to the performance of the Company. The Group recognizes
costs as and when earnings occur.
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