RFR 2.1

This recommendation constitutes a translation of the Swedish recommendation RFR 2.1. In case of uncertainty, the Swedish version takes precedence.

December 2007

ACCOUNTING FOR LEGAL ENTITIES

Contents

Page

INTRODUCTION __________________________________________________________

3

SCOPE __________________________________________________________________

6

PRINCIPAL RULE _________________________________________________________

6

EXCEPTIONS AND ADDITIONS TO IFRS/IAS ___________________________________

7

IFRS 1 IFRS 2 IFRS 3 IFRS 4 IFRS 5 IFRS 6 IFRS 7 IFRS 8 IAS 1 IAS 2 IAS 7 IAS 8 IAS 10 IAS 11 IAS 12 IAS 14 IAS 16 IAS 17 IAS 18 IAS 19 IAS 20 IAS 21 IAS 23 IAS 24 IAS 26 IAS 27 IAS 28 IAS 29 IAS 31 IAS 32 IAS 33 IAS 34 IAS 36 IAS 37 IAS 38

First-time Adoption of International Financial Reporting Standards _________________________ Share-based Payment ________________________________ Business Combinations _______________________________ Insurance Contracts _________________________________ Non-current Assets Held for Sale and Discontinued Operations ______________________ Exploration for and Evaluation of Mineral Resources ________ Financial Instruments: Disclosures ______________________ Operating Segments _________________________________ Presentation of Financial Statements ____________________ Inventories _________________________________________ Cash Flow Statements _______________________________ Accounting Policies, Changes in Accounting Estimates and Errors _______________________ Events after the Balance Sheet Date ____________________ Construction Contracts _______________________________ Income Taxes ______________________________________ Segment Reporting __________________________________ Property, Plant and Equipment _________________________ Leases ____________________________________________ Revenue __________________________________________ Employee Benefits __________________________________ Accounting for Government Grants and Disclosure of Government Assistance ________________ The Effects of Changes in Exchange Rates _______________ Borrowing Costs ____________________________________ Related Party Disclosures _____________________________ Accounting and Reporting by Retirement Benefit Plans ______ Consolidated and Separate Financial Statements __________ Investments in Associates _____________________________ Financial Reporting in Hyperinflationary Economies _________ Interests in Joint Ventures _____________________________ Financial Instruments: Presentation _____________________ Earnings per Share __________________________________ Interim Financial Reporting ____________________________ Impairment of Assets _________________________________ Provisions, Contingent Liabilities and Contingent Assets _____ Intangible Assets ____________________________________

8 9 9 9 9 9 10 10 10 11 11 11 12 12 12 12 12 14 14 15 19 19 20 21 21 22 23 24 24 24 24 24 24 25 25

1

Page IAS 39 IAS 40 IAS 41 IFRIC 1

Financial Instruments: Recognition and Measurement _______ Investment Property _________________________________ Agriculture _________________________________________ Changes in Existing Decommissioning, Restoration and Similar Liabilities _______________________ IFRIC 2 Members’ Shares in Co-operative Entities and Similar Instruments ________________________________________ IFRIC 4 Determining whether an Arrangement contains a Lease _____ IFRIC 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds ________ IFRIC 6 Liabilities arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment ________________ IFRIC 7 Applying the Restatement Method under IAS 29 Financial Reporting in Hyperinflationary Economies _________ IFRIC 8 Scope of IFRS 2 _____________________________________ IFRIC 9 Reassessment of Embedded Derivatives _________________ IFRIC 10 Interim Financial Reporting and Impairment _______________ IFRIC 11 IFRS 2 – Group and Treasury Share Transactions _________ SIC7 Introduction of the Euro _______________________________ SIC10 Government Assistance – No Specific Relation to Operating Activities _________________________ SIC13 Jointly Controlled Entities – Non-Monetary Contributions by Venturers ____________________________ SIC15 Operating Leases – Incentives _________________________ SIC21 Income Taxes – Recovery of Revalued Non-Depreciable Assets ______________________ SIC25 Income Taxes - Changes in the Tax Status of an Entity or its Shareholders __________________________________ SIC27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease _____________________ SIC29 Service Concession Arrangements: Disclosures____________ SIC31 Revenue – Barter Transactions Involving Advertising Services SIC32 Intangible Assets – Web Site Costs _____________________

26 27 28

TRANSITIONAL RULES _____________________________________________________

30

EFFECTIVE DATE _________________________________________________________

30

WITHDRAWAL OF RR 32:06 _________________________________________________

30

ANNEX 1 COMPARISON WITH RR 32:06 _______________________________________________

31

ANNEX 2 STANDARDS AND INTERPRETATIONS ADOPTED SINCE PUBLICATION OF RR 32:06 __________________________________

32

28 28 28 28 28 28 28 28 29 29 29 29 29 29 29 29 29 28 29 29

ANNEX 3 STANDARDS AND INTERPRETATIONS PUBLISHED BUT NOT YET ENDORSED______

2

33

INTRODUCTION IFRS/IAS

in the consolidated financial statements - RFR 2 in legal entity

Under Regulation (EC) No 1606/2002 of 19 July 2002 of the European Parliament and of the Council on the application of international accounting standards, with effect from 1 January 2005 companies whose 1) securities at the balance sheet are admitted to trading on a regulated 2) market in the EU must prepare their consolidated accounts in conformity with IFRS/IAS adopted by the European Commission (the EU). Legal entities, on the other hand, as in the past are to prepare their annual accounts in conformity with the Annual Accounts Act (1995:1554). In April 2007, the Swedish Financial Reporting Board (the Board) assumed responsibility for standardisation for legal entities whose transferable securities are admitted to trading on a regulated market in Sweden (including listed legal entities stated below) from the Swedish Financial Accounting Standards Council. As a consequence, the Board took over responsibility for the updating of recommendations RR 30, RR 31 and RR 32 and for URA 5–7 and 42–47. To clarify the change in responsibility for standardisation, the Board has decided to change the designation of the recommendations to Recommendations of the Swedish Financial Reporting Board (RFR) and to introduce a new number series. RR 30 is hereafter designated RFR 1 and RR 32 is hereafter designated RFR 2. In addition, the designations of URA 5 and changed in the version which is to apply transferable securities are admitted to trading Sweden. The new designation is Statements Reporting Board.

7 and 42–47 are being to legal entities whose on a regulated market in of the Swedish Financial

The Board’s view is that financial reporting for parent companies must be of the same quality as reporting for groups. In order to maintain this quality requirement, this recommendation, RFR 2, states that legal entities whose securities at the balance sheet date are listed on a regulated market in Sweden must as a principal rule apply the IFRS/IAS standards 1)

Under the Law on the Time of Application by Certain Undertakings of the Regulation (EC) No 1606/2002 of the European Parliament and of the Council on the Application of International Accounting Standards (2004:1172), enterprises which have to prepare their consolidated accounts in conformity with IFRS/IAS under Article 4.1 of this Regulation and only have debt instruments admitted to trading on a regulated market do not need to apply the Regulation until the financial year starting immediately after 31 December 2006.

2)

Regulated market is understood as meaning at present OMX Nordic Exchange Stockholm AB and Nordic Growth Market NGM AB. IFRS/IAS is understood in this recommendation as meaning International Financial Reporting Standards and International Accounting Standards with associated interpretations from the International Financial Reporting Interpretations Committee and the Standing Interpretations Committee.

3

which are applied in the consolidated accounts. Certain exceptions and additions are made to this rule in RFR 2, due to − application of IFRSs conflicting with Swedish law, − application of IFRSs leading to a tax situation which deviates from that which applies to other Swedish enterprises, or − there being other significant reasons why the Board should deviate from the main principle in recommendations In addition, the Board makes allowances for relief regarding qualitative disclosures which according to IFRS have to be made in ways indicated in paragraph 3. Regarding the provisions on the Directors' report, reference should be made to Chapter 6 of the Annual Accounts Act, on publication to Chapter 8 of the Annual Accounts Act, on signature and certification to Chapter 2 of the Annual Accounts Act and Chapter 16 of the Securities Markets Act and on appeal to Chapter 10 of the Annual Accounts Act. Statutory provisions regarding issues which are not dealt with in IFRS/IAS are not commented upon in the recommendation.

Relation between RFR 2 and standards issued by the IASB RFR 2 is based upon the standards and statements issued by the IASB and IFRIC which have been adopted by the EU. When new or revised IFRS standards are adopted by the EU or Swedish legislation is amended, the Board will decide on exceptions and additions to IFRS/IAS and issue change notices regarding RFR 2. These will then be collated and form part of an annual edition of RFR 2. The change notices and the previous versions of the recommendation will always be kept available on the Board’s website www.radetforfinansiellrapportering.se. RFR 2 indicates exceptions and additions to the standards issued by the and statements issued by IFRIC. Exceptions and additions are to be applied from the date on which the listed legal entity applies the indicated standard or statement in its consolidated financial statements. IASB

This recommendation, RFR 2, supersedes RR 32:06 (published in December 2006) and must be applied to financial statements pertaining to periods beginning on or after 1 January 2008. Earlier application is encouraged. More important changes in comparison with RR 32:06 are commented upon in Annex 1 to the recommendation. Annex 2 indicates which standards and standards have been published since the last edition. In addition, Annex 3 indicates which standards and statements have not yet been adopted by the EU.

4

Relation between RFR 2 and Swedish Financial Supervisory Authority regulations As well as statutory provisions and the Board’s recommendations, the presentation of financial statements for credit institutions, securities companies and insurance companies is affected by regulations and general guidelines from the Swedish Financial Supervisory Authority. In the exceptional cases in which these indicate different reporting than the Board’s recommendations, the regulations and general guidelines of the Swedish Financial Supervisory Authority are applied. IFRS/IAS not

IAS

yet endorsed and rejected by the EU 1

The EU has indicated in published comments ) what is applicable in consolidated accounts when a standard is not adopted. The following are apparent from the comments: If a standard is not endorsed by the EU, it is accordingly not necessary or in certain instances not permitted for it to be applied by a company preparing its financial statements further to the IAS Regulation. – If a standard which has been rejected or has not yet been endorsed by the EU is not inconsistent with endorsed standards and is consistent with the conditions set out in IAS 8 paragraphs 10–12, it may be used as guidance. – To the extent that a standard which has not been yet been endorsed by the EU or which has been rejected by the EU conflicts with a standard which has been endorsed – for example where an endorsed standard is amended and consequently comes into conflict with endorsed standards – the standard which has not yet been endorsed or has been rejected may not be applied. The enterprise must continue to fully apply the standard endorsed by the EU. The EU clarified at the end of 2005 that in cases where the IASB publishes a new or revised standard before the balance sheet date which has been endorsed by the EU and is not published in the Official Journal until after the balance sheet date, but is published before the financial statements are presented, it may be applied by the company provided that the standard permits application at the balance sheet date. –

The above also applies in a legal entity with the exceptions and additions stated in RFR 2, when a standard is not adopted.

1

)

Comments concerning certain articles of the Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards and the Fourth Council Directive 78/660/EEC of 25 July 1978 and the Seventh Council Directive 83/349/EEC of 13 June 1983 on accounting.

5

ACCOUNTING FOR LEGAL ENTITIES

SCOPE This recommendation is to be applied in accounting for legal entities whose transferable securities at the balance sheet date are admitted to trading on a regulated market in Sweden (also referred to below as listed legal entities).

1

This recommendation is based on the IFRS, IAS, IFRIC and SIC standards and interpretations adopted by the EU at 14.12.2007.

PRINCIPAL RULE An enterprise has to present its financial statements for the listed1 legal entities in conformity with all provisions in all applicable IFRSs/IASs, including interpretations from IFRIC/SIC, which are adopted by the EU for application in the EU with the exceptions and additions indicated below.2 In those cases where enterprises voluntarily apply IFRS in their consolidated financial statements, the parent should apply RFR 2 in its financial statements.3 The Board will, as stated above, regularly issue change notices regarding amendments to RFR 2 as the EU adopts new IFRSs/IFRICs. The amendments will be applicable from the date on which the enterprise chooses to apply the new standard/statement in its consolidated financial statements. The amendment is, however, to be applied no later than the formal effective date of the standard/statement.

1)

2)

Listed is understood to mean enterprises whose transferable securities are admitted to trading on a regulated market in Sweden. The Recommendation will be continuously updated as new or revised are adopted by the EU or Swedish legislation is amended.

IFRS/IAS standards 3)

6

See the Swedish Accounting Standards Board (BFN) Statement on application of the recommendations and statements of the Swedish Financial Accounting Standards Council (BFNAR 2000:2).

2

EXCEPTIONS AND ADDITIONS TO IFRS/IAS A number of exceptions and additions to International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS) and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) and the Standing Interpretations Committee (SIC) are indicated in paragraphs 4–97. The deviations are principally due to provisions of the Annual Accounts Act.1 The relation between accounting and taxation has also justified some deviations with the aim of making different accounting possible in a legal entity than in a group. In addition, the Act on Safeguarding of Pension Obligations has necessitated exceptions to the rules on the accounting of defined-benefit plans in IAS 19 Employee Benefits. The following additionally applies with regard to supplementary disclosures for a listed legal entity in Sweden which is a parent company and prepares consolidated financial statements. In cases where the disclosures in the consolidated financial statements are also applicable to the parent company and where the disclosures are made in such a way that it is evident that they pertain to both group and parent, the IFRS disclosure requirements in the parent are limited to the requirements which apply to specifications of carrying amounts. This limitation does not apply to the disclosure requirements which follow from the Annual Accounts Act or the regulations and general guidelines of the Swedish Financial Supervisory Authority. If IFRS disclosures other than specifications of carrying amounts which are to be made in accordance with this recommendation are missing, and this means that the requirement of Chapter 2, section 3 of the Annual Accounts Act for a true and fair view is not met in the parent, however, such disclosures are to be made. 1) The Board bases this recommendation only on the Annual Accounts Act and alternative wording in the Act on Annual Accounts for Insurance Companies and the Annual Accounts Act for Credit Institutions and Securities Companies.

7

3

IFRS 1 First-time Adoption of International Financial Reporting Standards is only applicable in the case of a transition to IFRS/IAS in the sense indicated in the standard. IFRS 1 therefore does not have to be applied to a legal entity. A company which applies this recommendation for the first time may, however, choose to apply one or more of the following relaxation rules in IFRS 1 in the legal entity: y Business combinations (paragraph 15). y Employee benefits (paragraphs 20 and 20A) in the event that the company presents its defined-benefit plans in accordance with IAS 19. y Cumulative translation differences (paragraphs 21 and 22). y Compound financial instruments (paragraph 23). y Designation of previously recognised financial instruments (paragraph 25A). y Share-based payment transactions (paragraphs 25B and 25C). y Insurance contracts (paragraph 25D). y Decommissioning, restoration and similar liabilities included in the cost of property, plant and equipment (paragraph 25E). y Leases (paragraph 25F). y Fair value measurement of financial assets or financial liabilities in first-time reporting (paragraph 25G). y Derecognition of financial assets and financial liabilities (paragraph 27 and 27A). y Hedge accounting (p. 28–30). y Estimates (p. 31–34). y Application of IFRS 5 – Assets classified as held for sale and discontinued operations. (p. 34A and 34B). Other relaxation rules in IFRS 1 are not to be applied, as they are not consistent with the Annual Accounts Act. IFRS 1

8

4

IFRS 2 Share-based Payment

5

No exceptions or additions.

IFRS 3 Business Combinations IFRS 3 is applied to a legal entity on acquisition of businesses. IFRS 3 paragraph 54–55, which is concerned with measurement of goodwill, is not, however, to be applied. The provisions on depreciation in Chapter 4 of the Annual Accounts Act are applied instead.

6

The wording of Chapter 4, section 4 of the Annual Accounts Act is as follows: Fixed assets with a limited period of use shall be depreciated systematically over such a period. The period of use for an intangible fixed asset specified in section 2 shall be deemed not to exceed 5 years, unless another longer period can be established with a reasonable degree of certainty. Where such longer depreciation period is applied, information thereon shall be provided in a note. Such note shall also specify the reason for the longer depreciation period. Depreciation shall be reported in the profit and loss account. However, other accounting may be applied, where special cause exists and such is reconcilable with the provisions of Chapter 2, sections 2 and 3 of Law (2004:1173).

IFRS 4 Insurance Contracts

7

No exceptions or additions.

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations paragraph 25, which states that an entity is not to depreciate (or amortise) a non-current asset while it is classified as held for sale, is not to be applied. Such an asset is instead to be depreciated in accordance with Chapter 4, section 4 of the Annual Accounts Act.

IFRS 5

8

Chapter 4, section 4 of the Annual Accounts Act is reproduced in paragraph 6. IFRS 5 paragraphs 33 (a) and 38 state that certain information concerning discontinued operations and non-current assets held for sale is to be disclosed in the income statement and balance sheet. This is not in agreement with the formats in the annexes to the Annual Accounts Act. The information in question, as well as other information stated in IFRS 5, is therefore to be presented in notes.

9

IFRS 6 Exploration for and Evaluation of Mineral Resources

10

No exceptions or additions.

9

IFRS 7 Financial Instruments: Disclosures IFRS 7 contains three different kinds of disclosure requirements. 1. Qualitative descriptions of the nature of the risks arising from financial instruments and the objectives, policies and processes for managing the risks.

11

2. Quantitative disclosures on the risk and capital situation. 3. Specifications concerning carrying amounts. Joint risk management is applied in many cases to all units in a group. Full application in a legal entity which is a parent and which prepares consolidated financial statements of requirements under IFRS 7 regarding qualitative and quantitative risk information in such cases need not be a prerequisite for a true and fair view. The same applies to the disclosures on capital in IAS 1 paragraph 124A–124C.

IFRS 8 Operating Segments IFRS 8 paragraph 4 states that a legal entity that prepares consolidated accounts need not disclose segment information for the legal entity. On the other hand, information has to be presented in accordance with Chapter 5, section 5 of the Annual Accounts Act on the breakdown of net sales between lines of business and geographical markets.

12

IAS 1, Presentation of Financial Statements In addition to what is stated in IAS 1 paragraph 23–24 concerning the principle of going concern, if the financial statements have not been prepared on the basis of the assumption of going concern information has to be disclosed in accordance with Chapter 2, section 4 of the Annual Account Act on the effects on recorded amounts in the balance sheet and income statement.

13

paragraphs 68 and 81–84, which are concerned with the structure and contents of the financial statements and state minimum requirements regarding the contents of the balance sheet and income statement, are not to be applied. The balance sheet and income statement are instead to be prepared in accordance with the provisions of the Annual Accounts Act. The formats for the balance sheet can be found in Annex 1 and for the income statement in Annex 2 to the Annual Accounts Act. In addition, the provisions of Chapter 3 section 4 a of the Annual Accounts Act are to be followed with regard to the format for the balance sheet.

14

IAS 1

The balance sheet is also to contain the following items, which are specified in IAS 1 paragraph 68: a) Liabilities and assets for current tax. b) Deferred tax liabilities and deferred tax assets. In addition to what is stated in IAS 1 paragraph 52, which is concerned with classification of assets and liabilities according to maturity, an entity in accordance with Chapter 5, section 10 of the Annual Accounts Act is to state for each liability item (excluding provisions) the portion falling due for 10

15

payment more than five years after the balance sheet date. IAS 1

paragraph 68A, which states that assets not held for sale and assets and liabilities in disposal groups are to be disclosed in the balance sheet is not to be applied.

16

IAS 1 paragraphs 71–73 and 75 are not to be applied as they relate to minimum requirements regarding the content of the balance sheet in IAS 1 paragraph 68 which according to paragraph 14 of this recommendation are not to be applied.

17

Under Chapter 5, section 14 of the Annual Accounts Act, an enterprise has to present a statement of changes in equity during the period in the balance sheet or in notes to it. In the view of the Board this requirement is met if reference is made to the financial statement indicated in IAS 1 paragraph 8 (c) (i).

18

In addition to what is stated in IAS 1 paragraph 76, under Chapter 6, sections 1 and 2 of the Annual Accounts Act limited companies have to provide disclosures in the Directors’ report among other things on proposed treatment of the company’s profit or loss.

19

IAS 1 paragraphs 88–94 are not to be applied as they relate to minimum requirements regarding the contents of the income statement in IAS 1 paragraphs 81–84 which according to paragraph 14 of this recommendation are not to be applied. With regard to exceptions in relation to disclosures on capital in IAS 1 paragraph 124A–124C, reference is made to paragraph 11 under the heading of IFRS 7.

20

IAS 2 Inventories IAS 2 paragraph 2 (c) states that the standard is not applicable to biological assets related to agricultural activity and agricultural produce at the point of harvest and refers to IAS 41 Agriculture. IAS 41 states that assets covered by the standard are to be reported at fair value. This is not expected to be permitted under the Annual Account Act until annual financial periods beginning on or after 1 January 2009 at the earliest, and IAS 41 is therefore not to be applied to a legal entity. For this reason the exception rule contained in IAS 2 paragraph 2 (c) is not to be applied and assets covered by IAS 41 are instead to be recognised in accordance with IAS 2 Inventories and IAS 16 Property, Plant and Equipment. Under Chapter 4, section 11 second paragraph of the Annual Accounts Act, an entity has to state in a note substantive differences between recorded value of inventories and their net sale value, broken down into the items recorded in the balance sheet.

21

22

IAS 7 Cash Flow Statements

23

No exceptions or additions.

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

24

No exceptions or additions.

11

IAS 10 Events after the Balance Sheet Date No exceptions or additions.

IAS 11 Construction Contracts

25 26

Owing to the relationship between accounting and taxation the rules contained in IAS 11 regarding revenue accounting (paragraphs 11–15, 22– 35 and 38) need not be applied to a legal entity. Under Chapter 2, section 4 of the Annual Accounts Act a construction contract may alternatively be reported when the construction has been completed. Until then, work in progress on behalf of third parties relating to construction contracts is reported in accordance with Part 4, section 9 of the Annual Accounts Act. Under the Income Tax Act, expenditure on work in progress on current account in a building, construction, craft or consultancy business need not be recorded as an asset. Because of the relationship between accounting and taxation, expenditure on such work in progress on current account need not be recorded as an asset in a legal entity.

IAS 12 Income Taxes The sums allocated to untaxed reserves constitute taxable temporary differences. Because of the relationship between accounting and taxation, the deferred tax liability attributable to the untaxed reserves is not accounted for separately in a legal entity. The untaxed reserves are thus presented at their gross amount in the balance sheet. The appropriations are presented at their gross amount in the income statement.

27

IAS 14 Segment Reporting IAS 14 paragraph 6 states that a legal entity that prepares consolidated accounts need not present segment information for the legal entity. On the other hand, information has to be presented in accordance with Chapter 5, section 6 of the Annual Accounts Act on the breakdown of net sales between lines of business and geographical markets.

28

IAS 16 Property, Plant and Equipment

12

IAS 16

paragraph 3 (b) states that the standard is not applicable to biological assets related to agricultural activity and refers to IAS 41 Agriculture. IAS 41 states that assets covered by the standard are to be reported at fair value. This is not expected to be permitted under the Annual Account Act until annual financial periods beginning on or after 1 January 2009 at the earliest, and IAS 41 is therefore not to be applied to a legal entity. For this reason the exception rule contained in IAS 16 paragraph 3 (b) is not to be applied and assets covered by IAS 41 are instead to be reported in accordance with IAS 2 Inventories and IAS 16 Property, Plant and Equipment.

29

In addition to what is stated in IAS 16 paragraph 30, an enterprise may apply the rules regarding write-up contained in Chapter 4, section 6 of the Annual Accounts Act, The preamble to the Act (SOU 1994:17) indicates that if write-up is done, it should be done consistently. Application of the rules

30

on write-up in the Annual Accounts Act should therefore be limited to exceptional cases in which a write-up of a particular category of assets can be done according to a systematic method. The wording of Chapter 4, section 6 of the Annual Accounts Act is as follows: The fixed assets of a limited company or a co-operative association which have a reliable and permanent value which significantly exceeds book value pursuant to section 3, section 4, first paragraph, section 5, first to third paragraphs and section 12 may be written up to a value not exceeding the book value. However, write-up may only take place where the write-up amount is used for allocation to a revaluation reserve or, in the case of a limited company, for an increase of share capital through a bonus issue or new issue of shares. In conjunction with these write-ups, information regarding the tax treatment of the write-up amount shall be provided in a note. Following write-ups, depreciation and write-downs of those assets which have been written-up shall be calculated based on the written-up value. Law (2004:1173).

The rules regarding the revaluation model in IAS 16 paragraphs 31–42 are not expected to be consistent with the Annual Accounts Act until annual financial periods beginning on or after 1 January 2009. They are therefore not to be applied to a legal entity.

31

In addition to what is stated in IAS 16 paragraph 73, under Chapter 5, section 3 of the Annual Accounts Act an enterprise has to provide information on the following:

32

a) b) c) d)

Undepreciated written-up amount. Aggregated depreciations. Aggregated write-downs. Aggregated write-ups.

e) Aggregated extra depreciation for tax. f)

1)

Changes during the year in aggregated extra depreciations for tax.1)

With reference to the relationship between accounting and taxation what is known as three-year equipment can be directly recognised as an expense. Regarding assets for which depreciation for tax is disconnected from the accounts, as is the case with properties, however, no extra depreciation for tax is recognised. The information required under Chapter 5, section 3 last paragraph of the Annual Accounts Act is instead to be presented in a note. Any difference between the carrying amount and value for tax of the assets is recognised in accordance with IAS 12 Income Taxes. If capitalisation of estimated costs of decommissioning, removal and restoration is judged to pose an obstacle to right of deduction for tax, the allocation for such expenses in a legal entity can instead be made successively over the period of use. 1)

In the view of the Board, book aggregated extra depreciation for tax should be reported among Untaxed reserves and changes in book aggregate extra depreciation for tax among Appropriations.

13

Under Chapter 5, section 4 an enterprise has to provide information on taxable value for properties which are fixed assets, allocated across the balance sheet items and in such notes as are specified in Chapter 3, section 4, fourth paragraph, of the Annual Accounts Act.

33

The wording of Chapter 3, section 4 of the Annual Accounts Act is as follows: Items preceded by Arabic numerals may be consolidated, where, 1. 2.

they are of marginal significance taking into consideration the requirements of Chapter 2, section 3 for a true and fair view, or consolidation promotes clarity and the items and, where appropriate, the sub-items, are specified in a note. Law (1999:1112).

IAS 17 Leases Full application of the rules on financial leases contained in IAS 17 paragraphs 20–32 and paragraphs 36–48 is not always feasible in practice because special rules on taxation based on such accounting are missing or incomplete. Financial leases can therefore be reported in a legal entity according to the rules which apply to operating leases, including disclosure requirements.

34

If the selling price in a sale and lease-back transaction, where the lease is a financial contract, differs from the carrying amount of the asset, the difference is also to be treated in a legal entity in the manner stated in IAS 17 paragraph 59. This also applies if the lease is accounted for according to the rules applicable to operating leases.

35

IAS 18 Revenue Under Section 17, section 26 of the Income Tax Act, expenditure on work in progress on current account in a building, construction, craft or consultancy business need not be recorded as an asset. Because of the relationship between accounting and taxation, expenditure on such work in progress on current account need not be recorded as an asset in a legal entity.

36

There are significant similarities in limited-company law between dividends from subsidiaries and group contributions. Dividends and group contributions are used separately or in combination to transfer profits to the owner enterprise. There is therefore reason to account for these in a similar manner.

37

For tax reasons group contributions in the donor and recipient enterprises are accounted for in the year to which the group contribution pertains. Group contributions are a deductible expense for the donor and taxable income for the recipient pertaining to the annual financial period in which it is reported. There is thus a relation between the accounting and taxation of group contributions. By analogy to the recognition of group contributions, a parent has to account for anticipated dividend from subsidiaries in the event that the parent has the right to decide alone on the size of the dividend and the parent has taken a decision on the size of the dividend before its financial statements are published and has ensured that the dividend does not exceed the subsidiary's dividend payment capacity.

14

IAS 19 Employee Benefits The Act on Safeguarding of Pension Obligations contains rules which lead to different accounting than that stated in IAS 19. Principles of accounting on the basis of these rules can be found in FAR SRS accounting recommendation No 4 Accounting of pension liability and pension expense, RedR 4. Right to tax deduction is conditional on application of the Act on Safeguarding of Pension Obligations. The rules contained in IAS 19 regarding defined-benefit plans (paragraphs 48–125) and the associated Annexes A-C need not be applied in a legal entity. Information is provided in accordance with relevant parts of what is stated in IAS 19. Information has to be provided which forms a basis for assessing the pension plans and the financial effects they have had during the period. Accounting of actuarial gains and losses in accordance with the principle contained in IAS 19 paragraph 93A is not to be applied in a legal entity as this method is not consistent with the fundamental principles of accounting contained in Chapter 3, section 2 of the Annual Accounts Act. Disclosures are to at least be made where applicable on the basis of the following description and example: General description of the pension plans.

Specification of sums recognised in the balance sheet has been calculated as follows:

XX-XX-200X YY-YY-200Y

-

Present value of obligations (calculated according to Swedish principles) pertaining to wholly or partially funded pension plans

+

Fair value at end of period pertaining to specially identified assets (in pension benefit plans and equivalent)

=

1)

Surplus in pension benefit plan or equivalent (+) Net obligation (-)

-

1)

1)

Present value of obligations (calculated according to Swedish principles) pertaining to unfunded pension plans

-

Non-recognised surplus in pension benefit plan or equivalent

1)

-

Liability recognised in excess of present value of obligations

2)

-

Net liability in balance sheet (-) (excluding untaxed reserves attributable to pension obligations)

1) This line is only applicable when safeguarding is done through a pension benefit plan or equivalent 2) This line is only applicable in cases where an enterprise recognises in the balance sheet a larger provision for pensions than the present value of the obligations. The tax rules allow a reduction in the total obligation not to lead directly to a reduction in recognised provision.

15

38

Specification of the changes in the net liability recognised in the balance sheet pertaining to pensions: XX-XX-200X YY-YY-200Y Net liability at start of year pertaining to pension commitments - Expense recognised in the income statement for pensions under own auspices excl. taxes - Provision for pension benefit plan

1)

- Pension payments

1)

+ Reimbursement from pension benefit plan + - Effects from acquired divested operations = Net liability at end of year

1) This line is only applicable when safeguarding is done through a pension benefit plan or equivalent SEK x (y) thousand of the net liability is covered by the Act on the Safeguarding of Pension Obligations. Specification is to be provided for the items in the balance sheet in which the sums which make up “Net liability” as above are recognised. Specification of expense and income for the period pertaining to pensions:

200X 200Y Pension under own auspices

3)

Cost of earning pensions etc. +-

Difference between reimbursement from pension benefit plan or equivalent and pensions disbursed

+

2)

Interest expense (calculated discount effect)

-

Actual return on specially identified assets

+-

Profit/loss effect of redemption of obligations etc.

=

Cost of pensions under own auspices excl. taxes

2)

Pension through insurance +

Insurance premiums or equivalent

=

Pension expense for year, excl. tax

-+

Expenses covered by surplus in specially identified assets increase in surplus in specially identified assets

=

Recognised net cost attributable to pensions, excl. taxes

1) “Expense of earning of pensions etc.” above is calculated as change in the capital value of the obligations excl. effect of discounting, payment of pensions, effects of redemptions and effects of acquired/divested operations. The capital value of commitment to early retirement pensions or other substantial changes in capital value which do not pertain to pension rights earned during the period are recognised on a separate line in this layout if the sums are substantial. 2) This line is only applicable in the case of safeguarding through a pension benefit plan or equivalent. 3) The term Pension under own auspices is used in relation to pension obligations safeguarded by provision for pensions in the balance sheet or pension benefit plan and equivalent legal entities. The terms defined-benefit pensions and defined-contribution pensions do not exist in Swedish accounting practice for pensions. Percentage return on specially identified assets x% (y%). Information is to be provided on how the recognised net expense attributable to pensions is broken down between operational and net financial items.

16

Fair value of assets in pension benefit fund broken down into principal categories, e.g.: XX-XX-200X YY-YY-200Y Shares Interest-bearing assets Properties Other assets

The most important actuarial assumptions are to be stated, exemplified here by: Discount rate x% (y%) The commitments are calculated based on level of salaries applicable at the balance sheet date.

Next year’s expected disbursement pertaining to defined-benefit pension plans totals SEK x thousand.

The fair value of pension benefit plans’ holdings of - financial instruments issued by the reporting enterprise, broken down into the same categories as the assets of the pension benefit plan presented above, and - other assets used by the reporting enterprise.

In addition, the classification and disclosure requirements in accordance with FAR SRS Red R 4 section 1 "Accounting as liability" second paragraph are applied. An enterprise has to provide the following information for each annual financial period under the Annual Accounts Act: a) The average number of employees during the annual financial period with information on gender breakdown. If the enterprise has employees in more than one country, the average number of employees and the gender breakdown in each country has to be stated. See Chapter 5, section 18 of the Annual Accounts Act. b) Information on the absence of employees due to sickness during the annual financial period. Total sickness absence is to be stated as a percentage of the total ordinary working hours of the employees. Information is also to be provided on 1. the portion of sickness absence which pertains to absence during a continuous period of 60 or more days, 2. sickness absence for women and men, and 3. sickness absence for employees broken down into the age groups of 29 or under, 30–49 and 50 or over. Sickness absence for each group of women and men and for each group of employees in the age groups of 29 or under, 30–49 or 50 or over is to be stated as a percentage of the group's total ordinary working hours. Such information is not to be stated if the number of employees in the group is no more than ten and if the information can be attributed to a single individual. The provisions do not apply to employees outside Sweden. See Chapter 5, section 18 a of the Annual Accounts Act.

17

39

c) The gender breakdown among the members of the board of directrors, the managing director and other persons in the management of the enterprise. The distribution among members of the board of directors and among other executive employees is to be separately reported. The information provided is to relate to the situation prevailing on the balance sheet date. See Chapter 5, section 18 b of the Annual Accounts Act. d) Personnel costs comprising (i) salaries and other compensation and (ii) social security costs, with separate information regarding pension expenses. See Chapter 5, section 19 of the Annual Accounts Act. e) The consolidated sum of the salaries and other compensation for the annual financial period for members of the board of directors, the managing director and comparable senior officers and former members of the doard of directors and former managing director officer, and for other employees. Bonus payments and equivalent compensation are to be specified separately. All of the persons in the company’s management are to belong to the group for which the company has to disclose the consolidated sum of salaries and other compensation for the annual financial period. The number of persons in this group is to be specified. In addition, information is to be provided on salaries and other compensation for the annual financial period at individual level for each of the members of the board of directors and for the managing director and, where appropriate, former such executive employees. Deputy members of the board of directors are placed on a par with members of the board of directors and deputy managing director are placed on a par with managing director. An exception applies, however, to employee representatives. See Chapter 5, sections 20, 23 and 24 of the Annual Accounts Act. f)

The consolidated sum of expenses and obligations relating to pensions and similar benefits for members of the board of directors, the managing director and comparable senior officers as well as for former members of the board of directors and former managing director. All of the persons in the company’s management are to belong to the group for which the company has to disclose the consolidated sum of expenses and obligations relating to pensions or similar benefits for the annual financial period. The number of persons in this group is to be stated. In addition, information is to be provided on expenses and obligations for the annual financial period at individual level for each of the members of the board of directors and for the managing director and, where appropriate, former such executive employees. Deputy members of the board of directors are placed on a par with members of the board of directors and deputy managing director is placed on a par with managing director. An exception applies, however, to employee representatives. See Chapter 5, sections 22, 23 and 24 of the Annual Accounts Act. g) If the enterprise has entered into agreements on severance pay or similar benefits for members of the board of directors, the managing director or other persons in the management of the enterprise, information is to be provided on the agreements and on the most significant terms and conditions of the agreements. See Chapter 5, section 25 of the Annual Accounts Act. BFN R 4 contains more detailed instructions on the information to be provided. 18

IAS 20, Accounting for Government Grants and Disclosure of Government Assistance IAS 20 p. 2 (d) states that the standard does not deal with government grants covered by IAS 41 Agriculture. IAS 41 states that assets covered by the standard are to be reported at fair value. This is not expected to be permitted under the Annual Account Act until annual financial periods beginning on or after 1 January 2009, and IAS 41 is therefore not to be applied to a legal entity. For this reason the exception rule contained in IAS 20 paragraph 2 (d) is not to be applied and grants covered by IAS 41 are instead to be recognised in accordance with IAS 20.

40

IAS 21 Effects of Changes in Foreign Exchange Rates Under Chapter 5, section 2 of the Annual Accounts Act, a company has to disclose according to which principles assets and liabilities in another currency have been translated into the reporting currency.

41

IAS 21 paragraphs 19 and 38, which state that financial statements are to be presented in any currency, are not to be applied. IAS 21 paragraph 21, which states that foreign currency transactions are to be continuously recorded in the functional currency is not be to applied either. Under Chapter 2, section 6 of the Annual Reports Act, the financial statements are instead to be presented in the enterprise’s accounting currency in accordance with Chapter 4, section 6 of the Book-keeping Act. The enterprise’s accounting currency is therefore to be Swedish kronor or euro.

42

IAS 21 paragraph 32, which deals with the accounting of exchange differences arising on monetary items that form part of a reporting entity's net investment in a foreign operation, is not to be applied. Such exchange differences are instead to be reported in a fund for fair value instead of in the income statement in accordance with Chapter 4, section 14 d of the Annual Reports Act.

43

The wording of Chapter 4, section 14 d of the Annual Accounts Act is as follows: Where valuation takes place in accordance with Section 14 a, the change in value since the previous balance sheet date shall be reported in the profit and loss account. In the following circumstances, the change in value shall be reported in the actual value reserve instead of the profit and loss account: 1.

the change in value relates to a hedge instrument and the principles applied for hedge accounting allow all or part of the change in value not to be reported in the profit and loss account, or

2.

the change in value is caused by an exchange rate fluctuation for a monetary item which constitutes a portion of the undertaking’s new investment in a foreign entity. A change in value of a financial asset which is neither held for trade purposes nor constitutes a derivative instrument may be reported in the actual value reserve instead of the profit and loss account. The reserve shall be adjusted when there no longer exists a reason to report an amount in the actual value reserve. Law (2004:1173).

19

Liabilities which constitute hedge instruments pertaining to a legal entity’s investment in subsidiaries/associates/joint ventures need not be revalued at the exchange rate on the balance sheet date if hedge accounting takes place in accordance with the description of currency hedging contained in Annex 2 to RR 8 Accounting of effects of changed exchange rates. This signifies continued application of what is stated in BFN R 7 Valuation of receivables and liabilities in foreign currency paragraph 8, paragraph 15 and 19. The reason for this exception to IAS 21 and the hedge accounting rules contained in IAS 39 is the relation between accounting and taxation.

44

IAS 23 Borrowing Costs. In addition to what is stated in IAS 23 paragraph 29, under Chapter 4, section 3 of the Annual Accounts Act an enterprise is to provide information on the portion of the acquisition value of an asset comprising interest.

45

contains a principal rule (paragraphs 7–9) and an alternative rule (paragraph 10–28). Because of the relation between accounting and taxation, an enterprise may apply the principal rule, which means direct cost accounting of all interest expenditure, even if the enterprise applies the alternative rule in its consolidated accounts.

46

IAS 23

20

IAS 24 Related Party Disclosures Under Chapter 5, section 12 of the Annual Accounts Act, an enterprise is to provide information on loans, pledged assets and other security as well as contingent liabilities entered into for the benefit of a member of the board of directors, managing director or comparable senior officer of the 1) company or of another group company. The information is to contain: – The size of loans made. – Principal terms of loan. – Interest rates. – Sums repaid during the annual financial period. – The nature of pledged assets and contingent liabilities entered into. – The sum of the loans for which assets have been pledged. – The borrower’s connection to the company.

47

Under Chapter 5, section 26 of the Annual Accounts Act, an enterprise which is a subsidiary is to provide information on the name, corporate identity number or, where appropriate, personal identity number and registered office of the parent enterprises which prepare consolidated accounts for the largest and smallest groups in which the enterprise is a subsidiary. Information is also to be provided on where it is possible to obtain access to the consolidated accounts of foreign parent enterprises.

48

Under Annex 1 to the Annual Accounts Act, receivables from and liabilities to group companies, associates and joint ventures in the form of jointly controlled enterprises are to be disclosed either in the balance sheet or in a note.

49

Under Annexes 2 and 3 to the Annual Accounts Act, financial income from group companies and financial expenses to group companies are to be disclosed either in the profit and loss account or in a note.

50

IAS 26 Accounting and Reporting by Retirement Benefit Plans is not applicable in those legal entities which are covered by the recommendation. IAS 26

1)

Chapter 21, sections 1-6 of the Annual Accounts Act prohibits limited companies from making loans and pledging security for loans, among others, to a member of the board of directors or managing director of the company or another company in the same group. Under Chapter 21, sections 8-9 of the Annual Accounts Act such loans may, however, be made or security pledged under certain circumstances after permission has been obtained. Such loans are to be disclosed in the balance sheet in accordance with Annex 1 to the Annual Accounts Act. Information is also to be provided for such loans as have been made to members of the board of directors and managing directors before they took up their current positions in the company.

21

51

IAS 27 Consolidated and Separate Financial Statements Under IAS 27 paragraph 38, IAS 27 paragraphs 37, 39 and 41–42, which deals with the accounting in a legal entity of investments in subsidiaries, joint ventures that are jointly controlled entities and associates, is applicable when an enterprise prepares financial statements for the legal entity in accordance with IFRS/IAS. They are thus not applicable to the preparation of financial statements for Swedish legal entities, as these reports are not prepared in accordance with IFRS/IAS. Investments in subsidiaries, joint ventures that are jointly controlled companies and associates are accounted for in a legal entity in accordance with the Annual Accounts Act. The equity method is not, however, to be applied.

52

Under the acquisition cost method, the owner enterprise accounts for its interest in subsidiaries, associates and joint ventures that are jointly controlled entities at acquisition cost. Only dividends received are accounted for as income, and are so accounted for on condition that they derive from profits earned after the acquisition. Dividends that exceed these profits are regarded as repayment of the investment and reduce the carrying amount of the investment. Chapter 4, sections 3 and 5–8 of the Annual Accounts Act are applied in accounting for holdings in subsidiaries, associates and joint ventures that are jointly controlled entities.

53

The wording of Chapter 4, section 3 of the Annual Accounts Act is as follows: Fixed assets shall be reported in an amount equivalent to expenses for acquisition or manufacture of the asset (acquisition value), unless otherwise provided in sections 4–6, 12, 13 a, 14 a, 14 e or 14 f. The acquisition value of an acquired asset shall include, in addition to the purchase price, expenses directly attributable to the acquisition. The acquisition value of a manufactured asset shall include, in addition to costs directly attributable to the production of the asset, a reasonable share of the indirect manufacturing costs. Interest on capital borrowed to finance the manufacture of an asset may be included in the acquisition value to the extent that the interest is attributable to the manufacture period. Where interest has been included in the acquisition value, information thereon and the amount included in the calculation shall be provided in a note. Expenses for value-enhancement improvements of an asset may be included in the acquisition value, provided that they have been expended during the annual financial period or brought forward from previous years. Law (2004:1173). The wording of Chapter 4 Section 5 of the Annual Accounts Act is as follows: Where the value of a fixed asset is lower on the balance sheet date than the value which results from the application of section 3 and section 4, first paragraph, the asset shall be written down to the lesser value if the decrease in value can be deemed permanent. A financial fixed asset may be written down to such lower value as the asset has on the balance sheet date notwithstanding that the decrease in value cannot be deemed permanent. A write-down pursuant to the first or second paragraph shall be reversed where the reason for the write-down no longer exists. Write-downs and reversals specified in the first to third paragraphs shall be reported in the profit and loss account. Law (1995:1554). Chapter 4, section 6 of the Annual Accounts Act is reproduced in paragraph 30. The wording of Chapter 4, section 7 of the Annual Accounts Act is as follows:

22

54

A company or a co-operative association may use the revaluation reserve to: 1. 2.

increase the share capital by a bonus issue or new issue of shares, cover losses according to the adopted balance sheet when the loss cannot be covered by non-restricted equity.

A resolution to use the revaluation reserve to cover a loss pursuant to the first paragraph, sub-paragraph 2 may only be adopted after examination by the auditors. Resolutions regarding dividends may be adopted within three years from a resolution to use the revaluation reserve only with leave of the Swedish Companies Registration Office or, in disputed matters, a court of general jurisdiction, or where the share capital has increased by an amount not less than an amount equivalent to the loss which has been covered by the write-up amount. The provisions of Chapter 20, sections 25–29 of the Companies Act (2005:551) shall apply, mutatis mutandi, to questions regarding the Swedish Companies Registration Office or leave of court. The wording of Chapter 4 Section 8 of the Annual Accounts Act is as follows: In conjunction with depreciation pursuant to section 4 or write-down pursuant to section 5, or in conjunction with a sale or disposal of the asset, the revaluation reserve shall be decreased by a comparable amount, however not exceeding that portion of the revaluation reserve which corresponds to the asset. Reduction of the revaluation reserve in circumstances specified in the first paragraph may be made only by: 1. using the fund pursuant to section 7; 2. transferring to non-restricted equity that portion of the revaluation reserve which corresponds to the depreciation or write-down; or 3. transferring to non-restricted equity that portion of the revaluation reserve which corresponds to a sold asset. Law (1995:1554).

Under Chapter 5, section 8 of the Annual Accounts Act the owner enterprise or co-owner of each subsidiary and associate which is owned directly by the owner enterprise and for each holding in a jointly controlled enterprise owned directly by the co-owner is to provide information on: a) the name, corporate identity number and registered office of the other enterprise, b) the legal form of the other enterprise where the owner enterprise/coowner is a partner with unlimited liability, c) the share of equity of the owner company/co-owner (owner share of the equity) in the other enterprise, d) the share of votes held by the owner enterprise/co-owner, where this differs from the share of equity, e) the number of participating interests held and their value according to the balance sheet.

55

Part 5 section 9 of the Annual Accounts Act states the circumstances under which information as above need not be provided.

IAS 28 Investments in Associates Investments in associates under IAS 28 paragraph 35 are to be accounted for in a legal entity in accordance with IAS 27 paragraphs 37–42. These paragraphs are only applicable, however, in cases where the financial statements are prepared in accordance with IFRS/IAS. They are thus not applicable to the preparation of financial statements for Swedish legal entities, as these reports are not prepared in accordance with IFRS/IAS. Paragraphs 52–55 are applied instead in this recommendation. 23

56

IAS 29 Financial Reporting in Hyperinflationary Economies IAS 29

is not applicable to Swedish legal entities.

57

IAS 31 Interests in Joint Ventures Investments in joint ventures that are jointly controlled entities in accordance with IAS 31 paragraph 46 are to be accounted for in accordance with IAS 27 paragraphs 37–42. These paragraphs are only applicable, however, in cases where the financial statements are prepared in accordance with IFRS/IAS. They are thus not applicable to the preparation of financial statements for Swedish legal entities, as these reports are not prepared in accordance with IFRS/IAS. Paragraphs 52–55 are applied instead in this recommendation.

58

IAS 32 Financial Instruments: Presentation In the acquisition of own equity instruments, in accordance with Chapter 5, section 14 of the Annual Accounts Act unrestricted equity is to be reduced by the expenditure on the acquisition. On transfer of own shares, unrestricted equity is to be increased by the income from the transfer.

59

In addition to what follows from IFRS 7, an enterprise is to provide information on own shares in accordance with Chapter 6, section 1 of the Annual Accounts Act.

60

IAS 33 Earnings per Share No exceptions or additions. IAS 33 states that when an entity prepares consolidated financial statements disclosures in accordance with IAS 33 need not be presented for a legal entity.

61

IAS 34 Interim Financial Reporting Enterprises that are parent companies in a group are to prepare interim financial statements in compliance with the requirements stated in the Annual Accounts Act and the Securities Markets Act.

62

Legal entities whose transferable securities on the balance sheet date are admitted to trading on a regulated market in Sweden and which do not form part of a group are to prepare interim reports in accordance with IAS 34 taking account of the exceptions and additions to IFRS/IAS stated in RFR 2. Whether and when listed legal entities are to prepare interim reports is governed by Chapter 9 of the Annual Accounts Act and Chapter 16 of the Securities Markets Act.

IAS 36 Impairment of Assets Under Chapter 5, section 5 of the Annual Accounts Act, an enterprise is to provide information on the sum of write-downs and reversals of previous write-downs that have affected the fair value reserve. 24

63

IAS 37 Provisions, Contingent Liabilities and Contingent Assets

64

No exceptions or additions.

IAS 38 Intangible Assets The rules regarding the revaluation model in IAS 38 paragraphs 75–87 are not expected to be consistent with the Annual Accounts Act until annual financial periods beginning on or after 1 January 2009. They are therefore not to be applied to a legal entity.

65

IAS 38

p. 107, which states that intangible assets with an indefinite useful life are not to be amortised, is not to be applied. Such assets are instead to be amortised according to the same rules as apply to other intangible assets.

66

When the depreciation period for an intangible asset exceeds five years from the time when an enterprise starts to use the asset, in accordance with Chapter 4, section 4 of the Annual Accounts Act the enterprise is to provide information on this and on the reason why such a longer depreciation period is applied.

67

In the financial reporting of a legal entity such expenditure on development which under IAS 38 paragraph 57 is to be reported as an asset in the balance sheet can be carried as an expense. Such accounting is permitted under Chapter 4, section 2 and a condition to be met for tax deductibility to be obtained during the tax year in which the expense arises.

68

In addition to what is stated in IAS 38 paragraph 74, an enterprise may apply the rules regarding write-up contained in Chapter 4 Section 6 of the Annual Accounts Act. The preamble to the Act (SOU 1994:17) indicates that if write-up is done, it should be done consistently. Application of the rules on write-up in the Annual Accounts Act should therefore be limited to exceptional cases in which a write-up of a particular category of assets can be done according to a systematic method.

69

The wording of Chapter 4, section 6 of the Annual Accounts Act is as follows: The fixed assets of a limited company or a co-operative association which have a reliable and permanent value which significantly exceeds book value pursuant to section 3, section 4, first paragraph, section 5, first to third paragraphs and section 12 may be written up to a value not exceeding the book value. However, write-up may only take place where the write-up amount is used for allocation to a revaluation reserve or, in the case of a limited company, for an increase of share capital through a bonus issue or new issue of shares. In conjunction with these write-ups, information regarding the tax treatment of the write-up amount shall be provided in a note. Following write-ups, depreciation and write-downs of those assets which have been written-up shall be calculated basis on the written-up value. Law (2004:1173).

25

In addition to what is stated in IAS 38 paragraphs 118–122, under Chapter 5 section 3 of the Annual Accounts Act an enterprise has to provide information on the following: a) Undepreciated written-up amount. b) Aggregated depreciations. c) Aggregated write-downs. d) Aggregated write-ups.

70

IAS 39 Financial Instruments: Recognition and Measurement Section (b) in the section ‘A financial asset or financial liability at fair value through profit or loss’ under the heading of ‘Definition of four categories of financial instruments’ in IAS 39 paragraph 9 and IAS 39 paragraph 11A may only be applied in cases where the Annual Accounts Act permits accounting at fair value. Chapter 4, section 14 b of the Annual Accounts Account, which indicates cases in which the Annual Accounts Act does not permit accounting at fair value, is worded as follows: Section 14 b. The following financial instruments may not be valued pursuant to section 14 a: 1. financial instruments which are held to maturity and which do not constitute derivative instruments; 2. loan receivables and other receivables which derive from the undertaking and which are not intended for trading; 3. interests in subsidiaries, affiliates, or joint ventures; 4. equity instruments issued by the undertaking itself; 5 agreements regarding conditional payment in conjunction with acquisition and merger; 6. liabilities, with the exception of liabilities which are included as part of a trading portfolio or which constitute derivative instruments; and 7. other financial instruments which are of such special character that generally accepted practice prescribes that they should be reported in some other manner. Valuation pursuant to section 14 a may also not take place where such a valuation would not give a trustworthy value for the financial instrument at issue. Law (2003:774).

26

71

The rules in IAS 39 concerning financial guarantee contracts (paragraphs 43 and 47 (c) (i)) need not be applied in a legal entity with regard to

72

guarantee contracts in favour of subsidiaries, associates and joint ventures. When this exception is applied, the rules on recognition and measurement in IAS 37 (see paragraphs 14 and 36 of IAS 37) are to be followed instead of the excepted rules in IAS 39. The reason for this exception from accounting for financial guarantees with regard to guarantee contracts in favour of subsidiaries, associates and joint ventures is the relation between accounting and taxation. With regard to the relationship between accounting and taxation, an enterprise need not apply IAS 39. Enterprises that do not follow IAS 39 are to apply a method based on acquisition value in accordance with the Annual Accounts Act for all financial instruments.

73

IAS 40 Investment Property The rules regarding fair value in IAS 40 paragraph 33–55 are not expected to be consistent with the Annual Accounts Act until annual financial periods beginning on or after 1 January 2009 at the earliest. They are therefore not to be applied in a legal entity. In order to avoid repeated changes of accounting policy, enterprises intending to apply the revaluation method in IAS 40 need not apply IAS 40 until the annual financial period starting on or after 1 January 2009. Until that time RR 24 Investment Properties and RR 12 Tangible Assets in the wording applicable at 31 December 2004 are to be applied.

74

In addition to what is stated in IAS 40 paragraph 40, in order to fulfil requirements contained in Chapter 5, section 3 of the Annual Accounts Act an enterprise has to provide information on the following:

76

a) b) c) d)

Undepreciated written-up amount. Aggregated depreciations. Aggregated write-downs. Aggregated write-ups.

To the extent that an investment property has been depreciated or written down solely for tax reasons, under Chapter 5, section 3, last paragraph of the Annual Accounts Act information has to be provided on this with an indication of the size of the depreciation or write-down. The information is to be provided in a note. Any difference between the carrying amount and value for tax of the investment assets is recognised in accordance with IAS 12 Income Taxes.

27

75

IAS 41 Agriculture states that the assets covered by the standard are to be recognised at fair value. This is not expected to be permitted under the Annual Accounts Act until annual financial periods beginning on or after 1 January 2009, and IAS 41 is therefore not to be applied to a legal entity.

IAS 41

77

IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities No exceptions or additions.

78

IFRIC 2 Members’ Shares in Co-operative Entities and Similar Instruments No exceptions or additions.

79

IFRIC 4 Determining whether an Arrangement contains a Lease No exceptions or additions.

80

IFRIC 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds No exceptions or additions.

81

IFRIC 6 Liabilities arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment No exceptions or additions.

82

IFRIC 7 Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies IFRIC 7

is not applicable to Swedish legal entities.

83

IFRIC 8 Scope of IFRS 2 No exceptions or additions.

84

IFRIC 9 Reassessment of Embedded Derivatives No exceptions or additions.

28

85

IFRIC 10 Interim Financial Reporting and Impairment

86

No exceptions or additions.

IFRIC 11 IFRS 2 – Group and Treasury Share Transactions

87

No exceptions or additions.

SIC-7 Introduction of the Euro

88

No exceptions or additions.

SIC10 Government Assistance — No Specific Relation to Operating Activities

89

No exceptions or additions.

SIC – 13 Jointly Controlled Entities — Non-Monetary Contributions by Venturers

90

No exceptions or additions.

SIC - 15 Operating Leases — Incentives

91

No exceptions or additions.

SIC - 21 Income taxes — Recovery of Revalued NonDepreciable Assets

92

No exceptions or additions.

SIC – 25 Income taxes — Changes in the Tax Status of an Entity or its Shareholders

93

No exceptions or additions.

SIC – 27 Evaluating the Substance of Transactions involving the Legal Form of a Lease

94

No exceptions or additions.

SIC – 29 Service Concession Agreements: Disclosures

95

No exceptions or additions.

29

SIC - 31 Revenue — Barter Transactions involving Advertising Services No exceptions or additions.

96

SIC – 32 Intangible Assets — Web Site Costs SIC – 32, which states that expenditure on web sites in certain cases is to be recognised as an asset, need not be applied in a legal entity.

97

TRANSITIONAL RULES Changes in accounting policy as a consequence of amendments to IFRS/IAS are to be reported in accordance with the IASB'S rules on change in accounting policy. Other changes in accounting policy as a consequence of amendments to RFR 2 are to be reported in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. An enterprise which applies IFRS/IAS for the first time in its consolidated accounts may apply the relaxation rules stated in paragraph 4 in the legal entity.

98

EFFECTIVE DATE RFR 2 is to be applied in the presentation of financial statements that relate to annual financial periods beginning on or after 1 January 2008. Earlier application is encouraged.

99

WITHDRAWAL OF RR 32:06 This recommendation supersedes the previous recommendation RR 32:06, published in December 2006, with regard to annual financial periods beginning on or after 1 January 2008.

30

100

ANNEX 1

COMPARISON WITH RR 32:06 The previous edition of the recommendation was published in December 2006 and became effective on 1 January 2007. It is referred to hereafter as RR 32:06.

RFR 2 becomes effective on 1 January 2008. Earlier application is encouraged. Substantive changes to RFR 2 in comparison with 32:06 are as follows: a) An exception has been introduced in paragraph 3 regarding certain qualitative disclosure requirements. b) An exception has been introduced in paragraph 11 regarding certain disclosure requirements in IFRS 7. c) An exception has been introduced in paragraph 20 for IAS 1 paragraphs 124A–124C d) It is clarified in paragraph 26 that the invoicing method is also permitted for work in progress on current account for a listed legal entity d) It is clarified in paragraph 36 that the invoicing method is also permitted for work in progress on current account for a listed legal entity e) It is clarified in paragraph 38 that enterprises do not need to apply IAS 19 in a legal entity. f) The disclosure requirements for defined-benefit obligations have been amended in paragraph 38. g) It is clarified in paragraph 62 that the Annual Accounts Act and the Securities Markets Act decide when an interim report has to be prepared. h) It is clarified in paragraph 73 that an enterprise covered by RFR 2 does not need to apply IAS 39.

31

ANNEX 2

STANDARDS AND INTERPRETATIONS ADOPTED SINCE PUBLICATION OF RR 32:06 The following new standards and interpretations have been adopted by the EU since RR 32:06 was published in December 2006: a) IFRS 8 Operating Segments b) IFRIC 10 Interim Financial Reporting and Impairment c) IFRIC 11 IFRS 2 – Group and Treasury Share Transactions

32

ANNEX 3

STANDARDS AND INTERPRETATIONS PUBLISHED BUT NOT YET ENDORSED The following standards and new interpretations have been published but not yet adopted by the EU as at 14.12.2007: a) IAS 1 – Presentation of Financial Statements (Revised 2007) b) IAS 23 – Borrowing Costs (Revised 2007) c) IFRIC 12 – Service Concession Arrangements. d) IFRIC 13 – Customer Loyalty Programmes. e) IFRIC 14 – IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction.

33

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