Kesko's Annual Report 2009

Kesko financial statements 2009
Notes to the parent's financial statements
Principles used for preparing the parent's
financial statements
Kesko Corporation's financial statements have been prepared in
compliance with the Finnish Accounting Standards (FAS).
Non-current assets
Intangible assets
Intangible assets are stated in the balance sheet at cost less
depreciation according to plan.
Depreciation plan
Other capitalised expenditure 5–14 years
Tangible assets
Tangible assets are stated in the balance sheet at cost less depreciation
according to plan.
Depreciation plan
Depreciation according to plan is calculated on a straight line
basis so as to write off the cost of tangible assets over their estimated
useful lives.
The periods adopted for depreciation are as follows:
Buildings 15–33 years
Fixtures and fittings 8 years
Machinery and equipment 8 years
or machinery and equipment
purchased since 1999 25% reducing balance method
Transportation fleet 5 years
Information technology equipment 3–5 years
Other tangible assets 5–14 years
Land has not been depreciated. The total of depreciation according
to plan and the change in depreciation reserve comply with
the Finnish tax legislation. The change in depreciation reserve
has been treated as appropriations in the parent company.
Valuation of financial assets
Marketable securities have been valued at lower of cost or net
realisable value.
Foreign currencies
Items denominated in foreign currencies have been translated
into Finnish currency at the average exchange rate of the European
Central Bank at the balance sheet date. If a receivable or a
debt is tied to a fixed rate of exchange, it has been used for
translation. Exchange rate differences have been recognised in
profit or loss.
Derivative financial instruments
Interest rate derivative contracts
Interest rate derivatives are used to modify loan durations. The
target duration is three years and it is allowed to vary between
one and a half and four years. Cash flows arising from interest
rate derivative contracts are recognised during the financial year
as interest income or expenses, according to the maturity date.
In the financial statements, open forward agreements, futures,
options and swaps are stated at market values. Unrealised
revaluation is not stated as income. Any valuation losses are
included in interest expenses.
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Currency derivative contracts
Currency derivative instruments are used for hedging against
translation and transaction risks. Forward exchange contracts are
valued at the exchange rate of the balance sheet date. The rate
differences arising from open derivative contracts are reported in
financial items. If a derivative instrument has been used to
hedge a foreign-currency-denominated asset, the value change
has been recognised against that of the asset item. The premiums
of option contracts are included in the balance sheet accruals
until they expire, or if a value change at the balance sheet
date so requires, recognition in profit or loss.
Commodity derivatives
Kestra Kiinteistöpalvelut Oy, a Kesko Corporation subsidiary, uses
electricity derivatives to balance the energy costs of the Group
and its retailers. Kesko's subsidiaries engaged in the agricultural
trade use grain derivatives to hedge against the grain price risk.
Kesko Corporation is an external counterparty in electricity and
grain derivative contracts made with the bank, and internally
hedges the corresponding price with the subsidiary. At no stage
does Kesko Corporation have derivative positions, and thus there
are no effects on profit or loss. The electricity price risk is
reviewed on a 3-year time span. With respect to derivative contracts
hedging the price of electricity supplied during the financial
year, changes in value are recognised in Kesko under interest
income and expenses. The unrealised gains and losses of contracts
hedging future purchases are not recognised through profit
or loss. With respect to grain derivative contracts, the open contracts
in the income statement are recognised at market prices.
Valuation differences related to open contracts are recognised in
Kesko under financial items.
Pension plans
The pension insurances of Kesko Corporation's personnel are
arranged through the Kesko Pension Fund. The Fund's A department,
which provides supplementary pension benefits, was
closed on 9 May 1998. The job-based retirement age agreed for
some of the personnel is 60 or 62 years. Pensions are expensed
in the income statement.
Provisions
Provisions stated in the balance sheet include items bound to by
agreements or otherwise, but remain unrealised. Changes in provisions
are included in the income statement. Rent liabilities for
vacant rented premises no longer used for the Group business
operations, as well as the losses resulting from renting the
premises to outsiders, are included in provisions.
Income tax
Income tax includes the income tax payments for the period
based on the profit for the period, and taxes payable for prior
periods, or tax refunds. Deferred taxes are not included in the
parent's income statement and balance sheet.