ANNUAL REPORT INTRUM JUSTITIA A N N U A L R EP O R T 2 0 ...

54
Notes
and expenses, and unrealized gains and losses that
arise from transactions within the Group are eliminated
in their entirety in the consolidated accounts.
Unrealized gains from transactions with associated
companies and joint ventures are eliminated
to the extent they correspond to the Group’s
ownership interest in the company. Unrealized
losses are eliminated in the same way as unrealized
gains, to the extent there is an indication of
impairment.
Associated companies
The Group applies IAS 28 Investments in Associates.
Associated companies are companies that are
not subsidiaries but where the Parent Company,
directly or indirectly, has at least 20 percent of the
votes or otherwise exercises significant influence
without having control over the partly owned
company.
Participations in associated companies are recognized
in the consolidated accounts according to
the equity method, which means that the holding
in the associated company is recognized at cost
and subsequently adjusted to the Group’s share of
the change in the associated company’s net assets.
The value of the shares includes goodwill from
the acquisition. The consolidated income statement
includes the Group’s profit participation less
goodwill impairment. The amount is recognized
on the line, Participations in associated companies.
Dividends received from the associated company
are not recognized through profit or loss and instead
reduce the carrying value of the investment.
Any difference between the cost of an acquisition
and the owner’s share of the net fair value of
the associated company’s identifiable assets, liabilities
and contingent liabilities is recognized in accordance
with IFRS 3.
The equity method is applied from the date a
significant influence arises until the time it ceases
or the associated company becomes a subsidiary.
If the Group’s share of reported losses in the associated
company exceeds the carrying value of its
participations, the value of those participations is
reduced to nil. Losses can also be offset against the
Group’s unsecured receivables from the associated
company if they constitute part of the net investment.
Further losses are not recognized provided
the Group has not issued guarantees to cover them.
Joint ventures
The Group applies IAS 31 Investments in Joint
Ventures.
Joint ventures pertain to companies in which
Intrum Justitia and other part-owners manage
operations jointly in accordance with a shareholder
agreement. The Group’s joint ventures all
constitute legal entities, which are reported in the
consolidated financial reports in accordance with
the proportional method. This means that Intrum
Justitia’s share of assets, liabilities, revenues
and expenses in the jointly owned company is
consolidated, item for item, with corresponding
items in the consolidated income statement and
balance sheet.
Only equity earned subsequent to acquisition
is recognized in the Group’s equity. The proportional
method is applied from the date when
shared control is obtained until the date it ceases.
foreign currency
The Group applies IAS 21 Effects of Changes in
Foreign Exchange Rates.
Transactions in foreign currency
Group companies prepare their accounts in the
local functional currency in the country where
they have their operations. Transactions in a
currency other than the local currency are recognized
at the exchange rate in effect on the transaction
day. When such transactions are offset or
settled, the exchange rate may deviate from the
one that applied on the transaction day, in which
case a (realized) exchange rate difference arises.
Moreover, monetary assets and liabilities in foreign
currency are translated at the exchange rates
on each balance sheet date, due to which an (unrealized)
exchange rate difference arises. Both realized
and unrealized exchange rate differences
of this type are recognized through profit or
loss – in operating earnings if, for example, they
refer to accounts receivable or accounts payable,
or in net financial items if they refer to financial
investments and borrowing in foreign currency.
To avoid exchange rate differences, receivables
and liabilities in foreign currency are sometimes
hedged through forward exchange contracts.
The Group’s holding of forward exchange
contracts is marked to market on each balance
sheet date, and changes in value are recognized
through profit or loss.
Translation of the financial
statements of foreign operations
Assets and liabilities in foreign operations, including
goodwill and other Group surplus and deficit
values, are translated from the functional currency
to the Group’s reporting currency, Swedish kronor,
at the exchange rate on balance sheet date. Revenue
and expenses are translated at the average
rate, which serves as an approximation of the rate
that applied on each transaction date. Translation
differences arise in the translation of subsidiary
accounts in part because the balance sheet date
rate changes each period and in part because the
average rate deviates from balance sheet date rate.
Translation differences are recognized directly in
total comprehensive income as the year’s change
in the translation reserve.
Long-term receivables and liabilities between
the Parent Company and subsidiaries can be seen
as an extension or reduction of the net investment
in each company. Such translation differences are
therefore recognized in the consolidated financial
statements in total comprehensive income.
When foreign operations are sold, accumulated
translation differences attributable to those operations
are realized.
The company has zeroed accumulated translation
differences attributable to the period prior to
January 1, 2004, the date of transition to IFRS.
During the year the Group did not hedge any other
flow exposure pertaining to anticipated receipts or
disbursements in foreign currency.
financial assets and liabilities
The Group applies IAS 39 Financial Instruments:
Recognition and Measurement.
A financial instrument is defined as any form of
agreement giving rise to a financial asset in a com-
pany and a financial liability or equity instrument
in a counterparty.
Financial instruments recognized in the balance
sheet include, on the asset side, cash and bank balances,
accounts receivable and other equity instruments,
loans receivable, purchased debt and derivatives.
Client funds are recognized on a separate line
in the balance sheet and therefore are not included
in the Group’s reported liquid assets. Included
among liabilities and equity are accounts payable,
client funds payable, debt and equity instruments
in issue, loan liabilities and derivatives.
Financial instruments are initially recognized
at cost, corresponding to the instrument’s fair
value plus transaction expenses. An exception is
made for financial instruments in the category
financial assets, which are recognized at fair value
through profit or loss. They are recognized at fair
value excluding transaction expenses. Subsequent
measurement depends on how they are classified,
as indicated below.
A financial asset or financial liability is recognized
in the balance sheet when the company becomes
party to the instrument’s contractual terms.
Accounts receivable are recognized in the balance
sheet when an invoice has been sent. Liabilities are
recognized when the counterparty has performed
and there is a contractual obligation to pay, even
if an invoice has not yet been received. Trade accounts
payable are recognized when an invoice is
received.
A financial asset is removed from the balance
sheet when the rights in the agreement are realized,
expire or the company loses control over them.
A financial liability is removed from the balance
sheet when the obligation in the agreement has
been discharged or otherwise extinguished.
The fair value of listed financial assets corresponds
to their listed market price on the balance
sheet date. The fair value of unlisted financial assets
is determined by using valuation techniques,
e.g., recently conducted transactions, the price
of similar instruments and discounted cash flows.
For further information, see Note 37.
Long-term receivables and other receivables
Long-term receivables and other current receivables
are receivables that arise when the company
provides money without the intent to trade its
claim. If the anticipated maturity is longer than
one year they constitute long-term receivables,
and if it is shorter they are other receivables.
These receivables fall into the category Loans
and receivables.
Accounts receivable
Accounts receivable are classified in the category
loans and receivables. Accounts receivable are
recognized at the amount expected to be received
after deducting impaired receivables, which are
determined individually or according to statistical
models based on historical experience in each
country. The need to write-down receivables will
be taken into account when a certain number of
days have passed since they fell due. The number
will vary from country to country. Provisions for
impaired receivables are recognized as sales and
marketing expenses. The anticipated maturity of
accounts receivable is short, so they are carried at
nominal amount without discounting.