The consolidated financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS) as adopted by the EU and with application of RFR 1 – Supplementary Accounting Rules for Groups. The annual report for the Parent Company has been prepared in accordance with the Swedish Annual Accounts Act (Årsredovisningslagen (1995:1554)) and with application of RFR 2 – Accounting for Legal Entities. The most important accounting policies applied are specified below. Unless stated otherwise, these are unchanged compared with preceding years. New or revised IFRSs and IFRIC interpretations have not had any effect on the Group’s or Parent Company’s result of operations or position. Similarly, it has been determined that the forthcoming rules will not have any effect on the Group’s or Parent Company’s result of operations or position.
Principles of consolidation
Industrivärden is classified as an Investment Entity, and as such does not consolidate certain subsidiaries. Subsidiaries that serve in a supporting function to the Parent Company are consolidated in accordance with the acquisition method, while subsidiaries and associated companies that are investments (portfolio companies) are not consolidated, but are stated at fair value.
Parent company reporting
The Parent Company reports shares in subsidiaries at cost, while associated companies and other holdings are carried at market value. The capital gain or loss generated upon the sale of shares is calculated accordingly.
The Group’s and Parent Company’s functional currency is Swedish kronor (SEK), which is also the reporting currency. Transactions in foreign currency are translated to the functional currency using the exchange rates in effect on the transaction date. Assets and liabilities in foreign currency are translated to the functional currency using the exchange rate in effect on the balance sheet date.
Dividend income from equities
Dividend income is recognized when the right to receive the dividend has been determined.
Reporting of financial assets and liabilities
Financial assets and liabilities are classified in the following categories: financial assets and liabilities at fair value in the income statement, loan receivables, and other financial liabilities carried at amortized cost. The classification depends on the purpose for which the financial item was acquired. Purchases and sales of financial instruments are reported as per the transaction date. Industrivärden has chosen to report continuing changes in value of all listed shareholdings and equity derivatives in the income statement.
Reporting of convertible and exchangeable bonds
The convertible bond, which is issued in euros (EUR), consists of a host contract in the form of a bond and an issued option to convert a set number of shares in Swedish kronor to a set amount in euros.
The exchangeable bond, which is issued in Swedish kronor, consists of a host contract in the form of a bond and an issued option to either repay the loan with shares in ICA Gruppen or in cash.
The host contract was initially measured at fair value and thereafter at amortized cost using the effective interest method. This means that the loan is indexed over its term at nominal value. This indexing is recognized as a change in value in the income statement, while the coupon interest is recognized as an interest expense. The option component is measured on a continuing basis at fair value in the income statement in the item Change in value of stocks, etc. Transaction costs are allocated over the term of the bond and are included in the change in value recognized in the income statement.
For the convertible bond, the conversion right is treated as an imbedded derivative. The option component is reported as a liability instead of as an equity instrument, since the conversion price is in a currency other than the functional currency. In addition, the option component is measured at fair value in the income statement in the item Change in value of stocks, etc.
Issued stock options
Option premiums received are booked as a liability and are deducted from premiums paid upon repurchase. If an issued option expires without being exercised, the premium is recognized as income. Upon exercise of an issued option, the premium increases the exercise price upon the sale of shares or reduces the exercise price upon the purchase of shares. On the balance sheet date, the market value of issued options is determined, and the difference between the market value and provisioned premiums is recognized in income. The outstanding options are carried on the balance sheet as other current liabilities.
Cash and cash equivalents
Cash and cash equivalents include – in addition to cash and bank balances – short-term financial investments with remaining terms of less than three months.
Property, plant and equipment
Property, plant and equipment is reported at cost less accumulated depreciation and any impairment losses. Depreciation is recognized on a straight-line basis over the asset’s estimated useful life, which is estimated to be three to five years. Estimation of an asset’s residual value and useful life is done yearly.
The Group has both defined contribution and defined benefit pension plans. Costs for defined contribution pension plans are expensed in pace with payment of premiums. Defined benefit pension plans with Alecta are reported as defined contribution plans, since insufficient information is available to report these as defined benefit plans. The pension liability refers to defined benefit pension obligations, calculated annually for the Group in accordance with IAS 19 with the assistance of an external actuary. All changes in the net pension liability are recognized immediately when they arise. Service and interest costs are recognized in the income statement, while remeasurements such as of actuarial gains and losses are recognized in other comprehensive income.
Long-term incentive program
Industrivärden’s long-term incentive programs are cash-settled programs in which the employees can invest a certain portion of their fixed salary in Industrivärden shares, and after three years receive performance and matching shares, provided that they are still employed. The cost of the program is allocated over a three-year period and is reported under the item Management cost. The liability for the program is remeasured at fair value at the end of each accounting period. Industrivärden has entered into a share swap in order to limit the cost. The share swap’s change in value is reported under the item Management cost.