Conformity with norms and laws
The consolidated financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) as endorsed by the EU. In addition, Swedish Financial Reporting Board recommendation RFR 1, Supplementary Reporting Rules for Groups, has been applied.
The annual report for the Parent Company has been prepared in accordance with the Swedish Annual Accounts Act and with application of RFR 2, Accounting for Legal Entities.
New or revised IFRSs and interpretations from the IFRS Interpretations Committee (IFRIC) have not had any effect on the Group’s or Parent Company’s result of operations or financial position.
Principles of consolidation
According to IFRS 10 Industrivärden is classified as an Investment Entity and as such does not consolidate certain subsidiaries.
Subsidiaries that serve in a supporting function for the Parent Company are consolidated in accordance with the acquisition method. Subsidiaries and associated companies that are investments are not consolidated, but are measured at fair value through profit and loss and are presented under the item Equities.
Parent Company reporting
The Parent Company reports participations in subsidiaries at cost, while associated companies and other holdings are carried at fair value. The capital gain or loss generated upon the sale of shares is calculated accordingly.
Functional currency and presentation currency
The financial statements are presented in Swedish kronor (SEK), which is the Parent Company’s functional currency and also the presentation currency for the Parent Company and Group.
Transactions in foreign currency are translated to the functional currency using the exchange rate 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 is recognized when the right to receive the dividend has been determined.
The shares received in Alleima are recognized as revenue in the income statement within the line item Change in value of shares, etc., and a corresponding expense pertaining to the negative change in value for Sandvik is reported within the same line item.
The distribution in kind received from Handelsbanken in 2021 in the form of Industrivärden Class A shares has been determined to constitute a dividend from the holding in Handelsbanken. The distribution in kind, which is equated with dividends from other holdings, is recognized in the Group as dividend income in the income statement. This thus affects key ratios based on the income statement. Since the Group cannot report any value of own shares, a corresponding reduction has been made of shareholders’ equity.
The Group’s total income tax consists of current tax and deferred tax. According to the Income Tax Act, the Parent Company is classified as an investment company and therefore applies certain, special tax rules. Other companies in the Group apply the general rules of the Income Tax Act.
The main principles concerning taxation of investment companies are that dividends received and interest income are taxable, while dividends paid, interest expenses and management costs are tax deductible. In addition, capital gains on sales of shares are tax exempt, but in return, a standardized level of income, which amounts to 1.5% of the market value of the equities portfolio at the start of the financial year, is taxed. The standardized level of income does not apply for unlisted shares and market listed shares where the holding corresponds to at least 10% of the number of votes. In order for market listed shares to be excluded from the standardized income calculation, they must have been held for at least one year. The tax rules for investment companies entail that the Parent Company, as an intermediary, has the option to avoid a taxable surplus by paying a dividend. Any tax loss carryforwards are deductible and may be accumulated in order to be deducted from future taxable surpluses. As a result of applicable rules, the Parent Company normally does not pay any income tax and therefore nor does it report any deferred tax assets for tax loss carryforwards. Subsidiaries that are taxed in accordance with the general rules of the Income Tax Act report, where applicable, deferred tax calculated on temporary differences. In addition, the tax rules for invest- ment companies also entail that the Parent Company can neither pay nor receive Group contributions.
Financial assets and liabilities are classified in the following categories: financial assets and liabilities measured at amortized cost, and financial assets and liabilities measured at fair value through profit and loss. The classification is based on the Group’s business model and the contractual terms of the assets and liabilities.
Industrivärden recognizes continuing changes in value of all listed shareholdings and equity derivatives through profit and loss. Purchases and sales of financial instruments are recognized as per the transaction date.
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 fair value of issued options is determined, and the difference between the fair value and provisioned premiums is recognized in income. The outstanding options are carried on the balance sheet as Other non-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.
Tangible fixed assets
Equipment is carried at cost after deducting 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 between three and five years. Estimation of an asset’s residual value and useful life is done yearly.
Leases are recognized as a right of use measured at cost less depreciation. In addition, a lease liability is recognized, measured as the present value of lease payments that have not been paid at that point in time.
Rights of use coupled to leased assets are included on the balance sheet among Tangible fixed assets. The lease liability is included in Non current financial liabilities and in Current financial liabilities.
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. No current employees have defined benefit plans. The pension liability pertains to defined benefit pension obligations, calculated annually for the Group in accordance with IAS 19 with the assistance of an independent actuary. All changes in the pension liability are recognized 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 programs
Industrivärden’s current long term incentive programs are share savings programs where employees can invest a certain portion of their fixed annual salary in Industrivärden shares, and after three years receive performance and matching shares, conditional upon continued employment and outcome based on performance targets. The share savings programs are classified as equity settled programs in accordance with IFRS 2 Share based Payment. Reporting of such share based compensation programs entails that the instrument’s fair value on the grant date is allocated over the term of the program and is reported under the line Management cost in the income statement, with a corresponding adjustment of shareholders’ equity. On every book closing date during the vesting period, the expected number of granted shares and the effect of any change of previous assessment of the number of granted shares is reported in the income statement under the line Management cost with a corresponding adjustment of shareholders’ equity. Social security costs attributable to a share savings program are expensed over the term of the program. Industrivärden has entered into a share swap agreement to limit the cost of the programs described above. The share swap is remeasured on a continuing basis at fair value in accordance with IFRS 9, and the change in value is reported in the income statement under the line Management cost.
Significant assessments and estimations
In preparation of the financial statements, the Executive Management has determined that there are no significant areas that rely on large assessments and estimations that affect reported amounts.
Unless stated otherwise, all amounts stated are rounded off to the nearest million Swedish kronor (SEK M), which means that tables and calculations do not always sum up. In text and tables, figures between 0 and 0.5 are reported as 0.