LFV Annual report 2018 1
L F V 2018 A CC OUNTING AND V AL U A TION PRIN CI
PLE S Financial instruments held to maturity are financial assets and financial liabilities that have fixed or determinable payments and fixed terms, 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. Accrued acquisition value is the amount at which a financial asset or financial liability is recognised after acquisition, taking into consideration: • accrual of interest according to the effective interest method, • repayment of principal, and • write-downs, as appropriate. A financial asset or a financial liability is recognised in the balance sheet when the group becomes a party to the financial instrument’s contractual terms. Independent sales are recognised each trade day. ACCOUNTS RECEIVABLE Accounts receivable are carried at the amount with which they are expected to be received. Provisions for the expected risk of loss relating to outstanding accounts receivable are made after individual assessment. RECEIVABLES AND LIABILITIES IN FOREIGN CURRENCIES Monetary receivables and liabilities in foreign currencies are recalculated at the exchange rate at the accounting yearend. Hedged monetary receivables and liabilities are recognised based on the hedge rate. Non-monetary receivables and liabilities are recognised at the rate at time of acquisition. Revaluation of non-monetary items in foreign currencies is recognised at the exchange rate on the date when the revaluation occurs. Exchange rate differences are recognised in the profit and loss account for the financial year in which they arise. Exchange gains are recognised as financial revenue, and exchange losses as financial costs under the heading where the difference has arisen. 54 PUBLIC CAPITAL /EQUITY Under the item Public Capital, the following are accounted for as applicable: • allocated funds used by the authority to finance fixed assets, and • specially-allocated funds used by the authority to finance working capital. PROVISIONS AND CONTINGENT LIABILITIES A provision is defined as a liability of an uncertain amount and/or uncertain date when it will be settled. A provision is recognised in the balance sheet when: 1. the group has an obligation (legal or informal) as a result of a past event, 2. it is probable that an outflow of resources will be required to settle the obligation, and 3. a reliable estimation of the amount can be made. Provisions are made for restructuring when an approved comprehensive restructuring plan exists and the persons concerned have been informed. Future commitments regarding agreements with employees concerning occupational pensions or partial pensions, paid leave of absence, and those who have been made redundant due to a shortage of work where a future commitment through the Swedish Job Security Foundation may be invoked are also recognised under Provisions. The group discounts obligations that are pending settlement after more than twelve months. The increase in the provision that is due to the passing of time is accounted for as an interest expense. PENSIONS As of 1 January 2016, a new pension agreement applies for the State – PA 16 – which consists of two sections. Section I is an entirely defined contribution plan and applies to employees born in or after 1988. Section II is defined benefit and to some extent a defined contribution. This corresponds to the PA03 agreement and applies to employees born before 1988. PA16 thus entails a change of the state pension system that fully impacts employees born in 1988 and later, who transition to a defined contribution pension plan. Employees born before 1988 have been transferred to PA16 with some adjustments, but retain a defined benefit pension. Defined benefit pensions in accordance with PA16 section II apply to employees born from 1943 to 1973 or employees with an annual income of at least 7.5 times the income base amount (468,750 SEK in 2018; 461,250 SEK in 2017). Persons born before 1943 and having a retirement age of 65 are covered by PA-91. PA-91 applies to air traffic controllers if they were born prior to 1948. The pension liability includes defined benefit retirement pensions, survivor’s pensions, disability pensions and temporary retirement pensions for air traffic controllers aged 60–65. For controllers born in 1988 or later, the exception relating to temporary retirement pensions from age 60 does not apply since PA16. Pension liability is calculated by the National Government Employee Pensions Board (SPV) according to promised retirement benefits, and means that earned pension rights are discounted. The calculation is based on the current interest rate as per the decision of SPV’s board of directors regarding the actuarial grounds for calculating pension liability. The defined benefit part is adjusted upwards annually with the change in the price base amount. The present value of the pension liability, as of 31 December 2018, has been calculated in accordance with the bases of calculation for 2019. A gross rate of -0.7 percent has been used, with deductions for estimated yield tax of 0.1 percent and overheads of 0.2 percent, i.e., a net rate of -1 percent. The present value of the pension liability as of 31 December 2017 was calculated in accordance with the bases of calculation for 2018, which means a gross rate of -0.6 percent, with deductions for estimated yield tax of 0.1 percent and overheads of 0.2 percent, i.e., a net rate of -0.9 percent.