 2005 |
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Suomeksi
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Notes to the consolidated financial statements |
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Accounting principlesBasis for accounting These are the first consolidated financial statements of Elisa in accordance with International Financial Reporting Standards. In the preparation, the IAS and IFRS standards and the SIC and IFRIC interpretations valid on 31 December 2005 have been followed. The International Financial Reporting Standards refer to standards and interpretations on them that have been approved to be applied in the EU in the Finnish Accounting Act and the provisions issued pursuant to it according to the procedures provided for in the EU regulation (EC) No. 1606/2002. Earlier, Elisa?s consolidated financial statements was based on Finnish Accounting Standards. During 2005, the Group adopted the international IFRS financial statements practice the adoption was done according to the IFRS 1 transitional standard. Elisa Group?s adoption date was 1 January 2004. The differences due to the introduction of IFRS standards have been presented in the matching calculations in the notes to the consolidated financial statements. The comparison information for 2004 has been converted according to IFRS standards. The financial statement information have been prepared under the historical cost convention except for investments available for sale and financial assets and liabilities that are recognised at fair value through profit or loss. Combinations of companies are valued at fair value on the acquisition date. In the case of the combination of operations taking place before 2004, the goodwill corresponds to the book value according to the previous financial statements regulations that have been used as the default acquisition cost according to IFRS. The preparation of consolidated financial statements in accordance with IFRS requires management to make estimates and assumptions. Although the estimates and assumptions are based on management?s best knowledge of current events and actions actual results may differ from the estimates. The estimates are primarily related to the useful lives of tangible and intangible fixed assets, income taxes and impairment testing. Subsidiaries The consolidated financial statements include the parent company, Elisa Corporation and those subsidiaries where the parent company controls, directly or indirectly, more than 50 per cent of the subsidiary?s voting rights or where the parent company otherwise exercises authority. Subsidiaries are consolidated from the time of acquisition. The purchase method is used in the elimination of internal ownership. All intra-group transactions, receivables, liabilities, unrealized profits and distribution of profits within the group have been eliminated. The distribution of the profit for the period to equity holders of the parent company and minority interests is presented in the income statement. Minority interest is presented as a separate item in equity. Associated companies Associated companies are companies where the Group exercises a considerable influence. A considerable influence is realised when the Group holds voting rights of 20?? per cent or when the Group otherwise exercises a considerable influence but not authority. Associated companies are consolidated using the equity method. If the Group?s share of losses exceeds the holding in the associated company, the investment is reduced to nil and recognition of further losses is discontinued, unless the Group has other obligations related to the associated company. An investment in an associated company includes the goodwill generated from its acquisition. Associated companies are consolidated from the day the company becomes an associate. Similarly, companies sold are consolidated until the day of sale. Joint ventures Joint ventures are companies where the Group exercises joint authority with other parties. The asset items under joint authority are consolidated using the proportionate consolidation method. Foreign currency translationThe consolidated financial statements have been presented in euro, which is the operating and presentation currency of the parent company. Foreign currency transactions have been translated into operating currency using the exchange rate valid on the transaction date. Monetary items have been translated using the exchange rate on the closing date and non-monetary items using the exchange rate on the transaction date, excluding items valued at fair value, which have been converted using the exchange rate on the valuation date. The profit and loss generated from the conversion have been recognised on the income statement. The exchange profits and losses from business operations are included in the corresponding items above operating profit. The exchange profits and losses from loans denominated in a foreign currency are included in financial income and expenses. The income statements of foreign Group companies are translated into euro using the weighted average rate of the financial year and the balance sheets using the exchange rates on the closing date. The translation of the profit for the financial year with different exchange rates in the income statement and balance sheet causes a translation difference that is recognised in shareholders? equity. Recognition principlesSales are recognised when the significant risks and benefits related to the ownership of the goods have been transferred to the buyer or once the service has been rendered. The income and expenses from a long-term project are recognised as income and expenses on the basis of the degree of completion when the result of the project can be assessed reliably. The degree of completion of a project is determined by the relation of accrued work hours to estimated overall work hours. When it is likely that the total costs necessary for completing a project exceed the total income from the project, the expected loss is immediately booked as an expense. Research and product developmentResearch costs are booked as expenses on the income statement. Product development expenses are recognised on the balance sheet from the date that the product is technically feasible, it can be utilised commercially and future financial benefit is expected from the product. In other cases, development costs are booked under annual expenses. Income taxesThe tax expenses on the income statement are formed from the tax based on the taxable income for the financial year and deferred taxes. The taxes for the financial year are calculated from the taxable income according to the valid tax rate and are adjusted by the possible taxes related to previous financial years. Deferred taxes are calculated from all temporary differences between book value and taxable value. Principal temporary differences arise from unused taxable losses and fair valuation of net asset in connection with acquisitions. Temporary differences are not provided for goodwill, which is not deductible for tax purposes. Deferred tax is not recognised for non-distributed profits of subsidiaries in so far as the difference is not likely to be discharged in the foreseeable future. A deferred tax asset has been recognised at the amount that it is likely that future taxable income will be available, against which the asset can be utilised. Intangible assetsGoodwill That part of the acquisition cost of subsidiaries exceeding shareholders? equity that has not been allocated to asset items acquired is presented as goodwill. The IFRS 3 ?combination of business operations? standard is applied to acquisitions made after 1 January 2004. Assets and liabilities of the company to be acquired that can be itemised are valued at fair value on the acquisition date. Goodwill is the amount by which the acquisition cost of the subsidiary exceeds the fair net value of assets, liabilities and conditional liabilities that can be itemised. Goodwill is no longer amortised, but it is tested annually for impairment. For the purpose of testing, goodwill is allocated to cash generating units. The goodwill of associated companies is included in the value of the associated companies. Goodwill is valued at original acquisition cost deducted by impairment losses. Other intangible assets An intangible asset is only recognised on the balance sheet if it is likely that the expected financial benefit due to the asset will benefit the Group and the acquisition cost of the asset can be determined reliably. Costs related to intangible assets to be realised later are only capitalised in the case that the financial benefit to the Group arising from them is increased in excess of the performance level originally assessed. In other cases, the costs are booked as an expense on the date they arise. In connection with the acquisition of business operations, intangible assets are valued at fair value. Other intangible assets are valued at original acquisition cost and depreciated as straight-line depreciation over their assessed useful life.
Tangible assets are recognised on the balance sheet at original acquisition cost. Tangible assets are valued on the balance sheet at acquisition cost deducted by accumulated depreciations and value adjustments. Depreciation according to plan is calculated on the basis of useful life as straight-line depreciation from the original acquisition cost. The residual value of the assets and their useful life are reviewed each time the accounts are closed and adjusted as necessary. Costs arising later, such as the costs of renovation and refurbishment projects, are capitalised when it is likely that the increase in financial benefit will benefit the Group in the future. Ordinary repair, service and maintenance costs are booked as expenses in the financial year during which they arise. Interest during building is not capitalised in tangible assets. The tangible asset systems have been harmonised in the Group as of the beginning of 2005. In this connection, the depreciation times of tangible assets have been harmonised for the acquisitions made as of the beginning of 2005. The harmonisation did not have a significant earnings impact in 2005.
Public subsidiesPublic subsidies, such as subsidies granted by the State related to the acquisition of tangible assets, have been recognised as a deduction in the book value of tangible assets. The subsidies are recognised as income in the form of smaller depreciations over the useful life of the asset. Product development subsidies and other public subsidies are booked under other operating income. Financial assets and liabilitiesThe Group has applied the IAS 39 ?Financial instruments: recording and valuation? standard since 1 January 2004. As of the beginning of 2004, the financial assets of the Group have been categorised according to the standard into financial assets to be recorded at fair value through profit or loss, loans and other receivables, and financial assets available for sale. This categorisation takes place on the basis of the purpose of the acquisition of the financial assets and they are categorised in connection with the original acquisition. The financial assets recorded at fair value through profit or loss are included in short-term assets. Both realised and unrealised profit and loss due to changes in fair value are recognised on the income statement in the financial year during which they arise. Loans and other receivables are valued at amortised cost have been designated as in short-term and long-term financial assets; as long-term financial assets if they fall due within more than 12 months. Financial assets available for sale are included in long-term assets. Equity investments, excluding investments in associated and real estate companies, are categorised as investments available for sale. Investments in shares are primarily valued at fair value. Securities whose value cannot be determined reliably are booked at acquisition cost. The changes in the fair value of shares are booked directly in shareholders? equity. When an investment is sold, the accumulated adjustment of fair value is booked through profit or loss. Liquid assets consist of cash in hand, short-term bank deposits and other short-term very liquid investments whose maturity is at most three months. Financial liabilities are originally booked at fair value in accounting on the basis of the consideration received. Later, all financial liabilities are valued by the effective interest method at amortised cost. The amortised cost may include management fees, trading costs and premiums or discounts, among others. Financial liabilities are included in long-term and short-term liabilities and they may be interest-bearing or interest-free. ImpairmentElisa assesses, at the time of closing the accounts, if there are any indications about the impairment of some asset item. If there are such indications, the amount of money that can be accrued from the asset item in question is assessed. The amount of money that can be accrued is also annually assessed for the following asset items regardless of if there are indications of impairment or not: goodwill, unfinished intangible assets and tangible assets with unlimited financial service life. The need for impairment is examined at the level of cash generating units. The amount of money that can be accrued is the fair value of the asset item deducted by costs incurred for assignment or the service value if it is higher. Service value refers to assessed future net cash flow that can be received from an asset item or a unit generating a cash flow that is discounted to its current value. An impairment loss is booked when the book value of an asset item is higher that the amount of money that can be accrued from it. An impairment loss is recognised immediately on the income statement. If the impairment loss is allocated to a unit generating cash flow, it is first allocated to reduce the goodwill allocated to the unit generating the cash flow and after this to the other asset items of the unit in equal proportions. An impairment loss is cancelled if there are indications that a change in circumstances has taken place and the amount of money that can be accrued from the asset has changed since the booking time of the value adjustment loss. However, an impairment loss is never cancelled by more than the impairment originally. An impairment booked on goodwill is not cancelled in any situation. An impairment test required by the transition standard has been performed for goodwill on the adoption date of the IFRS standards. Current assetsCurrent assets are valued at acquisition cost or at net realisation value if it is lower. A weighted average price is used in the valuation of current assets. Sales receivablesSales receivables are booked according to their original value. The amount of uncertain receivables is assessed at the time of the accounts closing and credit losses are booked as an expense on the income statement. Treasury sharesElisa Corporation?s shares owned by the subsidiaries and associated companies (treasury shares) are presented as a reduction in shareholders? equity. Treasury shares owned by associated companies are deducted by the share corresponding to the holding. ProvisionsA provision is booked when the company has an existing obligation due to earlier events (legal or factual) whose realisation is considered likely and the amount of which can be determined reliably. Employee benefitsPension obligations Pensions are classified as either defined contribution or defined benefit arrangements. The contributions to defined contribution plans are booked as expenses on the income statement of the financial year during which they arise. The pension arrangements of foreign subsidiaries are defined contribution arrangements. Finnish supplementary pension arrangements and pension arrangements under company?s own responsibility have been classified as defined benefit arrangements. According to the opportunity allowed by IFRS 1, the cumulative actuarial profits and losses of the defined benefit pension arrangements have been booked in the retained earnings at the transition date. Actuarial profits and losses after the adoption date are booked on the income statement during the average remaining working time of the employees participating in the arrangement in so far as they exceed 10 per cent of the current value of the defined benefit pension obligations of the arrangement or the fair value of the assets included in the arrangement if it is higher. Share-based payments Elisa applies the IFRS 2 ?Share-based payments? standard to all such share arrangements in which options have been granted after 7 November 2002 and the right to which has not arisen before 1 January 2005. No expenses for option arrangements earlier than this have been presented on the income statement. Option rights are valued at fair value at the time they are granted and booked as expenses on the income statement in equal instalments allocated over the period between the time of granting to the time when the right arises. Fair value is determined on the basis of the Black-Scholes pricing model. Option rights granted to the personnel falling within the scope of this standard have existed in one of Elisa?s subsidiaries which was sold in 2005. Elisa applies a share-based reward and incentive system for management. No new shares will be issued on the basis of the system. The managing director, the management group and other key persons included in the management fall within its scope. The aim of the system is to commit key persons to develop the profitability and the increase in value of the company in the long-term and, at the same time, to increase the share holdings of the management. LeasesProperty leased by finance lease contracts deducted by accumulated depreciation is booked under tangible assets and the obligations due to the contract correspondingly under interest-bearing liabilities. The lease payments are divided into financial expenses and reductions of the liability. Assets leased true through finance lease contracts is capitalised on the balance sheet and depreciated according to depreciation plan concerning tangible assets during the useful life of the asset or during the lease period if it is shorter. The Group has primarily leased telecommunication network and facilities and IT servers through finance lease. Lease contracts where the risks and benefits related to ownership remain with the lessor are handled as operating lease. Lease payments under an operating lease are booked as expenses on the income statement in equal instalments over the lease period. Accounting principles requiring the discretion of
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Financial Statements 2005 |
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Interim Report 1Ä9/2005 |
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Interim Report 1Ä6/2005 |
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Interim Report 1Ä3/2005 |
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Previous Annual Reports |
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News Release Search |
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Financial Info |
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Presentations |
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Downloads |
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ATTACHMENTS |
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Notes to the consolidated financial statements |
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1. Segment information |
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2. Acquisitions |
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3. Divestments |
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4. Revenue |
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5. LongÄterm projects |
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6. Other operating income |
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7. Materials and services |
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8. Employee benefit expenses |
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9. Research and development costs |
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10. Depreciation and amortisation |
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11. Financial income and expences |
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12. Income taxes |
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13. Property, plant and equipment |
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14. Intangible assets |
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15. Associates and joint ventures |
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16. AvailableÄforÄsale investments |
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17. LongÄterm receivables |
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18. Deferred tax receivables and liabilities |
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19. Inventories |
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20. Trade and other receivables |
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21. Financial assets at fair value through profit and loss |
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22. Cash and cash equivalents |
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23. Equity |
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24. ShareÄbased payments |
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25. Pension obligations |
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26. Provisions |
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27. InterestÄbearing liabilities |
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28. Trade payables and other nonÄinterest bearing liabilities |
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29. Derivative contracts |
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30. Operating leases |
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31. Collateral, commitments and other liabilities |
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32. Financial risk management |
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33. Related party transactions |
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34. Events after the balance sheet date |
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35. Effects of IFRS adoption on previously reported equity and result |
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TOPICS |
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Basic information on the company |
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Accounting principles |
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Foreign currency translation |
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Recognition principles |
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Research and product development |
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Income taxes |
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Intangible assets |
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Public subsidies |
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Financial assets and liabilities |
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Impairment |
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Current assets |
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Sales receivables |
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Treasury shares |
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Provisions |
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Employee benefits |
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Leases |
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Accounting principles requiring the discretion of the management and primary uncertainty factors related to estimates |
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Application of new and amended standards |
| Contact Info |