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 Interpretation Committee (IFRIC) have not had any effect on the Group’s or Parent Company’s result of operations or financial position.
Principles of consolidation
In accordance with 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 (portfolio companies) are not consolidated, but are measured at fair value through profit and loss and are presented under the item Equities. For further information, see Notes 11 and 28.
Parent Company reporting
The Parent Company reports shares 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 from shares
Dividend income is recognized when the right to receive the dividend has been determined.
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 assets’ contractual terms. Industrivärden recognizes continuing changes in value of listed shareholdings and equity derivatives in the income statement. Purchases and sales of financial instruments are recognized as per the transaction date. For further information, see Note 3 and 4.
In 2014 an exchangeable bond was issued, which matured on 15 May 2019. The exchangeable was issued in SEK and consisted 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. Change in value of shares, etc. is reported in the income statement as:
- Continuous measurement of the option at fair value
- Indexing of the loan at nominal value over its term
- Transaction costs that are allocated over the term of the bond
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.
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. No current employees have 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 independent actuary. All changes in the 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 programs
Industrivärden’s current long-term incentive programs are in the form of a share savings program in which the employees can invest a certain portion of their fixed annual salary in Industrivärden shares, and after three years receive performance and matching shares, provided that they are still employed and outcome based on performance targets. For more information about the programs, see Note 7. At the end of the 2020 financial year the current programs in their entirety included conditions that entail that the share savings programs in accordance with IFRS 2 Share-based Payment shall be classified as equity-settled programs. 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 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 the 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 aforementioned programs. 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 in the income statement.
Unless specified 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.