Scania Annual Report 2011

87
balance sheets of foreign subsidiaries are translated to the Group’s
reporting currency, Swedish kronor. All items in the income statements
of foreign subsidiaries are translated using the average exchange
rates during the year. All balance sheet items are translated using
the exchange rates on the balance sheet date (closing day rate). The
translation differences that arise when translating the financial statements
of subsidiaries outside Sweden are recognised under “Other
comprehen sive income” and accumulate in the currency translation
reserve in equity. Subsidiaries use the local currency as their functional
currency, aside from a few subsidiaries for which the euro is the
functional currenc y.
Monetary long-term items in a business outside Sweden for which
settlement is not planned or will probably not occur within the foreseeable
future are, in practice, part of the company’s net investment
in opera tions outside Sweden. Exchange rate differences on such
monetary items, which comprise part of the company’s net investment
(extended investment) are recognised under “Other comprehensive
income” and accumulate in the currency translation reserve in equity.
Hyperinflationary economies – adjustment of financial reports
Inflation adjustment of financial reports occurs for operations with a
functional currency that is the currency of a hyperinflationary country.
At present, none of the Group’s subsidiaries has a functional currency
that is regarded as a hyperinflationary currency.
Operating segment reporting
An operating segment is a component of the company that generate s
revenue and incurs expenses and whose operating results are
reviewe d by the Board of Directors and the Executive Board.
The operations of the Scania Group are managed and reported
on the basis of two operating segments, Vehicles and Services plus
Financial Services. These two segments have distinct products and
differentiated risk situations. The tied-up capital and accompanying
financing structure in Financial Services differ substantially from their
equivalents at Vehicles and Services. Internal reporting at Scania is
designed in accordance with this division into operating segments.
Finan cial expenses and taxes are reported at the segment level in
orde r to better reflect the operating segments. The Vehicles and
Services operating segment encompasses trucks, buses and engines,
including the services associated with these products. All products are
built using common basic components, with coordinated development
and production. In addition, the Vehicles and Services operating segment
is organised under common areas of responsibility.
The Financial Services operating segment encompasses financial
solutions for Scania customers, such as loan financing, lease contracts
and insurance solutions. The assets of this operating segment encompass
the assets that are directly used in its operations. Correspondingly,
the operating segment’s liabilities and provisions refer to those that are
directly attributable to its operations.
BALANCE SHEET – CLASSIFICATIONS
Scania’s operating cycle, that is, the time that elapses from the purchase
of materials until payment for goods delivered is received, is
less than twelve months. This means that operations-related items are
classified as current assets and current liabilities, respectively, if these
are expected to be realised/settled within twelve months, counting
from the balance sheet date. Cash and cash equivalents are classified
as current assets unless they are restricted. Other assets and liabilities
are classified as non-current. For classification of financial instruments,
see the section on financial assets and liabilities under “Recognition of
financial assets and liabilities”, page 88.
Classification of financial and operating leases (Scania as lessor)
Lease contracts with customers are carried as financial leases in cases
where substantially all risks and rewards associated with ownership of
the asset have been transferred to the lessee. At the beginning of the
leasing period, sales revenue and a financial receivable equivalent to
the present value of future minimum lease payments are recognised.
As a result, the difference between the sales revenue and the cost of
the leased asset is recognised as income. Lease payments received
are recognised as payment of the financial receivable and as financial
revenue.
Other lease contracts are classified as operating leases and are
carrie d as lease assets among tangible non-current assets. Revenue
from operating leases is recognised on a straight-line basis over the
leasing period. Depreciation of the asset occurs on a straight-line basis
to the estimated residual value of the asset at the end of the leasing
period.
Transactions that include repurchase obligations or residual value
guarantees, which mean that important risks remain with Scania, are
carried as operating leases; see above.
Lease obligations (Scania as lessee)
In case of a financial lease, when the risks and rewards associated with
ownership have been transferred to Scania, the leased asset is carried
as a tangible non-current asset and the future commitment as a lia bility.
The asset is initially carried at the present value of minimum lease
payments at the beginning of the leasing period. The leased asse t
is depreciated according to a schedule and the lease payments are
recognised as interest and principal payments on the liability. Operating
leases are not carried as assets, since the risks and rewards associated
with ownership of the asset have not been transferred to Scania.
Lease payments are expensed continuously on a straight-line basis
over the lease term.
financial reports Scania 2011