N OTES
Notes for the financial statements and accounting principles
Note 1 ACCOUNTING PRINCIPLES COMPLIANCE WITH STANDARDS AND LEGISLATION
The annual report and the consolidated accounts have been prepared in accordance with BFNAR 2012:1 Annual Report and Consolidated Accounts (K3). Where guidance is not available from the K3 regulation, it has been obtained from the Swedish Annual Accounts Act (1995:1554). The Parent Company applies the same accounting principles as the Group, other than as indicated below in the section “Parent Company’s accounting principles”. Divergences between the Parent Company’s and the Group’s principles arise from limitations in the application of K3 to the Parent Company through the requirements of the Swedish Annual Accounts Act and, in some instances, tax considerations. BASIS FOR THE PREPAR ATION OF THE FINANCIAL STATEMENTS OF THE PARENT COMPANY AND THE GROUP
The Parent Company’s functional currency is the Swedish krona (SEK), which is also the reporting currency for the Parent Company and the Group. The financial statements are therefore presented in SEK. Assets and liabilities are recognised at historical cost, with the exception of certain financial assets and liabilities that are measured at fair value. The preparation of financial statements under K3 requires the company management to make judgements, estimates and assumptions that affect application of the accounting principles and the amounts recognised for assets, liabilities, income and expenses. The estimates and assumptions are based on historical experience and a number of other factors that in the prevailing circumstances are judged to be reasonable. The results of these estimates and assumptions are then used to assess the carrying amounts for assets and liabilities that are not otherwise revealed clearly from other sources. The actual outcome may differ from these estimates and judgements. These estimates and judgements are typically made during preparation of the year-end and half-year accounts. As a result of changes at the company or in its business environment, it might become necessary to revise these estimates and judgements. CHANGES IN ACCOUNTING PRINCIPLES AND DISCLOSURE REQUIREMENTS
No new accounting policies have come into effect with any impact on the Group during 2020. CLASSIFICATION ETC.
Fixed assets and non-current liabilities of the Parent Company and the Group essentially only consist of amounts expected to be recovered or
ANNUAL REPORT 2020
paid after more than 12 months from the balance sheet date. Current assets and current liabilities in the Parent Company and the Group essentially only consist of amounts expected to be recovered or paid within 12 months calculated from the balance sheet date. PRINCIPLES OF CONSOLIDATION
Subsidiaries are entities over which IVL exercises a controlling influence. A controlling influence consists of a right, directly or indirectly, to control the financial and operational strategies of another company in order to gain economic benefits. In establishing whether a controlling influence exists, account shall be taken of shares with potential voting rights that may be used or converted without delay. Subsidiaries are accounted for using the proportional method. Under this method, as large a proportion as possible of the jointly owned company’s income and expenses, and of its assets and liabilities, are recognised in the consolidated accounts. The reason for choosing this principle of consolidation is that IVL was involved in the original establishment of Group companies and did not acquire them at a surplus or deficit value. Intragroup receivables and liabilities, income and expenses and unrealised gains or losses arising from transactions between Group companies are eliminated in their entirety during preparation of the consolidated accounts. FOREIGN CURRENCY
Foreign currency transactions are translated to the functional currency at the exchange rate prevailing on the transaction date. Monetary assets and liabilities in foreign currencies are translated to the functional currency at the exchange rate prevailing on the balance sheet date. Exchange rate differences arising from recalculations are recognised in the income statement. Non-monetary assets and liabilities recognised at historical cost are recalculated at the exchange rate on the transaction date. Non-monetary assets and liabilities recognised at fair value are recalculated to the functional currency at the rate prevailing at the time of measurement at fair value, and any exchange rate difference is then recognised in the same way as for other changes in value for the asset or liability. The functional currency is the currency of the countries in which the companies included in the Group conduct their operations. The functional and reporting currency of the Parent Company is the Swedish krona (SEK). The reporting currency of the Group is the SEK. Assets and liabilities of foreign operations are translated to SEK at the exchange rate prevailing on the balance sheet date. Income and expenses in foreign operations are translated to SEK at an average rate that is an approximation of the rates at the times of the respective transactions. Any translation differences arising during translation of foreign net investments are recognised in other comprehensive income. 73
