LFV Annual report 2021 1
A CC OUNTING AND V AL U A TION PRIN CIPLE S L F V
2021 Interest and dividends are recognised as revenue when it is likely that the Group will receive the financial benefits associated with the transaction and that the income can be reliably calculated. Valuation of ongoing assignments For fixed-price service assignments, the income and expenditure attributable to a completed service assignment are recognised as revenue and cost, respectively, in relation to the degree of completion of the assignment at the balance sheet date (successive profit settlement). An assignment’s degree of completion is determined by comparing expenditure incurred at the balance sheet date with estimated total expenditure. When the outcome of an assignment cannot be calculated with reasonable certainty, revenue is recognised only to the extent equivalent to the expenditure incurred for the assignment that are likely to be reimbursed by the purchaser. Known or anticipated losses are immediately recognised as a cost. For service assignments on current account, the income attributable to a completed service assignment is recognised as revenue when the services are rendered and/or materials are delivered or used. GENERAL VALUATION PRINCIPLES Unless otherwise stated below, assets, liabilities, and provisions have been valued at cost of acquisition. FIXED ASSETS Intangible fixed assets LFV applies ESV's regulations and general guidance on reporting research and development expenditure. Expenditure on development of significant value to the operations in coming years is recorded as an intangible fixed asset, provided all the conditions specified in the regulations exist. LFV reports expenditure for purchased licenses and other software whose useful life is estimated to exceed three years and externally acquired materials and services for the development and production of intangible assets as intangible assets when they otherwise meet the criteria for being recognised as assets. Expenditure for internally generated development (Work performed by the company for its own use) is added to the cost of acquisition when the criteria for capitalisation are otherwise met. Research expenditure may not in any case be recorded as a fixed asset. Straight-line depreciation is made according to plan throughout the asset's useful life. The useful life of intangible assets is more than five years in cases where it can be determined with a reasonable degree of certainty that the useful life is longer, as is mainly the case for operational air traffic management and goodwill. Tangible fixed assets Tangible fixed assets are valued at their acquisition value with a deduction for planned depreciation. Expenses for time spent in production of fixed assets are added to the acquisition value. Where appropriate, write-downs are performed in the manner indicated below. Planned depreciation is calculated by accruing the acquisition value linearly over the course of the estimated useful life. Depreciation begins when an asset is ready to be used for its intended purpose. When an asset includes significant components with different useful lives, the rules on so-called component depreciation are applied. Depreciation periods are continuously reassessed. Ongoing investment projects related to tangible fixed assets are reported under the heading Fixed assets under construction. The item also includes advance payments to suppliers relating to tangible fixed assets. Planned depreciation: Software rights and other intangible assets Goodwill Installations in the field Buildings Maintenance expenses on third-party property Electrical installations Telecommunications equipment Vehicles, machinery and equipment Leased assets write-downs is determined using ESV's General Guidance, Chapter 5, Section 5, Write-downs. LEASING Leasing is classified as either financial or operational leasing. The classification is made using ESV's General Guidance on financial leasing. Agreements classified as financial leasing, mainly vehicles, are reported as fixed assets with a nominal cost of acquisition with deduction for planned depreciation, and obligations to make future lease payments are reported as liabilities. Operational leasing expenditure is written off on a straight-line basis over the leasing term. FINANCIAL INSTRUMENTS Financial instruments primarily held to generate yield or appreciation are valued at fair value unless otherwise indicated below. The fair value is determined based on the market value of the instrument. The change in value since the previous balance sheet date is reported in the income statement. Financial instruments not held to generate yield or appreciation are valued at amortised cost using the effective interest method, with the exception of shares in wholly and partly owned companies, financial guarantee contracts, and leasing agreements. The following financial instruments may not be valued at fair value: 1. financial instruments held to maturity 2. loan claims and other claims arising from the activities and that are not held for trading purposes 3. shares and participations in wholly or partly owned companies 3-12 years 10 years 15-30 years 15-30 years 5-10 years 5-20 years 4-15 years 3-15 years 3-5 years When there are indications that an asset has decreased in value, the need for 4. liabilities, with the exception of liabilities included as part of a trading portfolio. Financial instruments held to maturity are financial assets and financial liabilities with fixed or determinable payments and fixed maturities and which the Group intends to keep until maturity. Loan claims and other claims are financial assets with fixed or determinable payments but that are not derivative instruments. Amortised cost is the amount at which a financial asset or financial liability is recognized after acquisition, taking into account: 49