I.A. Hedin Bil - Annual Report 2018 1
Provisions Cash Flow Statement Provisions are rep
orted 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 settle the commitment, and the amount can be forecast with a degree of reliability. No provisions are made for future operating losses. Revenue recognition The recognized net sales mainly include revenues from sales of vehicles and aftersales services. Sales of vehicles include the sale of new vehicles as well as the sale of pre-owned vehicles. Vehicles In connection with sale of vehicles, customers can do direct payments or enter into agreements on various financing solutions such as instalment credits and financial leases. The financing solutions are then passed on to various finance corporations. The revenue is recognized when the control of the vehicle has been transferred to the customer. The time for transfer of control refers to the delivery day of the vehicle. The value of provided discounts and other variable compensation has been taken into account as part of the revenue recognition. An assessment regarding variable compensation such as residual value guarantees is made at the beginning of the contract with ongoing revaluation at each reporting period. Commissions on transferred financial assets are reported continuously during the term of the contract. In cases where a vehicle sale is combined with a repurchase agreement and there is a financial incentive for the customer to resell the vehicle, the control is not considered to be transferred to the customer. The revenue and the cost are then reported over the residual value commitment period in accordance with operational leasing. An asset, a residual value debt and a prepaid lease income are reported in the balance sheet. The asset is depreciated over the contract period and the prepaid lease income is accrued over the contract period. The residual debt remains unchanged until the end of the contract. In 2018, revenues from these operational leases amounted to MSEK 280. Service Market The service market includes the sale of spare parts, service, extended warranty and other aftermarket products. Revenue is recognized when the control has been transferred to the customer, normally when I.A. Hedin Bil has provided the aftermarket service and a cost of the execution has arisen. Then the customer can have benefit from the service provided. For spare parts, revenues are reported at the time they are delivered to the customer. For service and other aftermarket products, revenue is reported over the contract period. In cases where a payment is made in advance for service contracts, a contractual liability is reported. Bonus from suppliers Bonuses from suppliers on sold cars are reported as a reduced cost of commodities. Leasing Leasing in which a material proportion of the risks and benefits of ownership are retained by the lessor are classified as operational leases. Payments made for the leasing period are expensed on a straight-line basis in the Income Statement during the term of the lease. In financial leasing, the financial risks and benefits attributable to ownership are transferred to the lessee. Assets that are leased under financial leases are reported as fixed assets and are depreciated during the term of the lease. The obligation to pay future lease charges is reported as a non-current and current liability. Lease charges are reported as interest and repayment of the liability. The Income Statement and Balance Sheet comply with the statement format set out in the Annual Accounts Act. The statement of changes in equity complies with the Group’s statement format but must include the columns listed in the Annual Accounts Act. In addition, this entails differences in the terminology used compared with the Consolidated Financial Statements, primarily with regard to financial income and expense and equity. Shares in subsidiary companies are reported at the acquisition value, less deductions for depreciation. Group subsidies are reported in the Income Statement under Appropriations. Financial instruments are recognized at acquisition cost. All lease agreements are reported as operational leases, including the higher initial charge, but not including costs for services such as insurance and maintenance, which are reported on a straight-line basis over the term of the lease. 62 I.A. HEDIN BIL AB / ANNUAL REPORT / 2018 The parent company manages group-wide services and is reported under Segment reconciliation. The intra-group transactions consist primarily of lending. Interest and pricing are made at market prices. Parent Company financial reporting standards The Parent Company applies RFR 2 Accounting for legal entities as well as the Annual Accounts Act. The Parent Company applies different accounting principles compared to the Group in the cases listed below. The Cash Flow Statement is prepared in accordance with the indirect method. The reported cash flow only includes transactions that involve payments received or made. In addition to cash in hand, the company classifies cash and cash equivalents as balances available at banks and other credit institutions, as well as current liquid investments listed on a marketplace and with a maturity of less than three months from the acquisition date. Blocked funds are not classified as cash and cash equivalents. Changes in blocked funds are reported under Investment. Operating segments The reporting of operating segments is consistent with the internal reporting to the highest executive decision maker. The highest executive decision makers have been defined as Group Management responsible for allocating resources to the operating segments and evaluating their performance and are also the one who makes the strategic decisions. The operating segments have identified two separate divisions, where Hedin Bil, Bavaria and Belgium are regarded as operating segments in accordance with IFRS 8. Hedin Bil, Bavaria and Belgium Hedin Bil refers to the sale of new and pre-owned vehicles and aftersales service activities in Sweden under the brand of Hedin Bil for passenger cars, commercial vehicles and trucks. This includes additional services such as financing, insurance, private leasing, etc. Bavaria refers to the sale of new and pre-owned vehicles and aftersales service activities in Norway and Sweden under the brand of Bavaria. Belgium refers to the sale of new and pre-owned vehicles and aftersales service activities in Belgium under the brand of Hedin Automotive. Vehicle sales and After-market Vehicle sales cover the sale of new and pre-owned cars including commission income from financing and insurance. After-market covers service, workshop services and workshop products and spare parts.