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plans, fixed fees are paid to another company, us
ually an insurance company, and there is no further obligation to the employee once the fee is paid. The extent of the employee’s post-employment benefits depends on the contributions paid and the capital return on these fees. Obligations for defined benefit plans are met partly through the PRI system and partly through an insurance policy at Alecta. Defined pension plans via the Alecta insurance policy are accounted for as a defined contribution pension plan. All pension premiums are thus expensed during the period they were earned. The liability accounted for in the Balance Sheet that is attributable to defined benefit pension plans is based in the current value of the defined benefit plan obligation at balance sheet closing date. The defined benefit pension plan is calculated annually by unaffiliated actuaries using the projected unit credit method. Current value of the defined benefit plan is established via discounting of estimated future cash flows using tax rates for first class mortgage bonds that have been issued in the same currency used for reimbursements in accordance with maturities that are relevant to the pension plan obligation. Revaluation gains and losses that arise as a result of precedence based adjustments and changes in actuarial estimates are accounted for under Other Comprehensive Income for the period they arise in. They are included under Retained Earnings under Changes in Equity and in the Balance Sheet. Costs attributable to services performed for previous periods are accounted for in the Income Statement. Reserves Reserves are accounted for in the Balance Sheet in the event the Group has a legal or informal commitment that has resulted from previous events, and when there is a likelihood that an outflow of resources may be required to regulate the commitment, and the amount can be projected with a degree of reliability. No reserves are held for future operative losses. Revenue recognition Revenue is valuated at fair value of the realized amount or the amount that will be realized for sold goods and services after deduction of discount returns and VAT. The Group reports revenue when the amount can be measured reliably, which entails a likelihood that future financial benefits will pass on to the company, and special criteria have been met for each of the Group's business operations. The Group bases its estimates in historical results and takes into consideration the type of customer, transaction and unique conditions for each individual case. In cases where the sale of goods is combined with a future repurchase commitment at a guaranteed residual value, a repurchase agreement, the transaction is recognized as an operating lease. The revenue is distributed linearly from the sales date to the repurchase date. The asset is accounted for as a fixed asset, and its disposal is accounted for under Other Liabilities. Provisions for transferred financial assets are accounted for continuously for the contract period. Leasing Leasing in which a significant amount of the risks and benefits of the ownership are retained by the lessor are classified as operational leasing. Payments made for the leasing period are expended in the Income Statement linearly for the leasing period. Financial leasing occurs in the event that the financial risks and benefits attributable to ownership are transferred to the lessee. Assets that are leased in accordance with financial leasing agreements are accounted for as fixed assets and are depreciated during the leasing period. Obligations for future leasing expenses are accounted for as long term and short term liabilities. Leasing payments are accounted for as interest and amortization of liability. Cash flow statement Cash flow analysis is established in accordance with the indirect method. Reported cash flow only includes transactions that involve cash payments. In addition to cash on hand, the company classifies cash and cash equivalents as balance available at banks and other credit institutions, and short-term liquid investments that are listed on a marketplace and have a maturity of less than three months from the acquisition date. Restricted cash is not classified as cash and cash equivalents. Changes in restricted cash are reported in investing activities. Parent Company accounting policies The Parent Company complies with RFR2 Accounting for legal entities as well as the Annual Accounts Act. The Parent Company applies other accounting policies than does the Group in the cases reported below. Income and balance sheets comply with the statement format of the Annual Accounts Act. The statement of changes in equity comply with the Group's statement format but shall include those columns indicated in the AAA. Further, this entails differences in the terminology used in the Consolidated Financial Statement, primarily with regards to financial income and expenses and equity capital. Shares in subsidiary companies are accounted for at acquisition value, less depreciation deductions. Group subsidies are accounted for in the Income Statement under Adjustments. Financial instruments are accounted for at acquisition value. All leasing agreements are accounted for as operational leasing agreements, including the first raised rent cost, but not including costs for services such as insurances and maintenance, accounted for linearly for the leasing period. NOTE 2 FINANCIAL RISK MANAGEMENT Financial risk factors The Group is exposed through its operations to a number of financial market risks (currency risks, interest risks) credit risks and liquidity risks. The Group's overall risk management policy includes carefully monitoring the developments in financial markets and to adopt appropriate measures to reduce potential disadvantageous effects on the Group's financial earnings. Risk management is supervised by a central financial division in accordance with policies adopted by the Board. The CEO approves the undertaken risk management measures in accordance with policies in close collaboration with the operative units in the Group. Currency risks The Group is exposed to currency risks that arise as a result of exposure to foreign currencies. Purchases made within the spare parts operations are primarily paid in USD while sales are received in EUR. Currency risks arise as a result of future business transactions, reported assets and net investments in operations abroad. Since the Group is exposed to currency risks to a limited extent, it has been decided to not secure current payment flows. If the Swedish Krona had been weakened or strengthened by 10% in relation to the US Dollar, all other variables constant, annual income as of 31/12/2015 would have amounted to 13,024 TSEK (7,833 TSEK) lower/higher as a result of changes in purchase prices. If the Swedish Krona had been weakened or strengthened by 10% in relation to the Euro, all variables constant, annual income as of 31/12/2015 would have been 1,608 TSEK (505 TSEK) lower/higher as a result of changes in purchase prices. Interest rate risks of borrowing The Group's interest rate risks arise as a result of long term borrowing. In general, the Group does not use derivative instruments to adjust underlying interest exposure. During 2014 and 2015, the Group's 72 ANDERS HEDIN INVEST AB ANNUAL REPORT / 2015