Securitas Annual Report 2007

Note 40. Accounting principles
The Parent Company’s financial statements are from January 1, 2005 prepared in accordance with the Swedish Annual Accounts Act and RR 32:06 Reporting by Legal Entities. The Parent Company thus follows the same accounting principles as the Group when relevant and except in the cases stated below. The differences that exists between the Parent Company’s and the Group’s accounting principles are a result of the restrictions that the Swedish Annual Accounts Act, the Swedish Act on Safeguarding of Pension Commitments, etc and the options in RR 32:06 allow for the adoption of IFRS in the Parent Company.
IAS 17 Leasing
Finance leases cannot be accounted for on legal entity level since specific ordinances for the taxation are not available or are not complete. Finance leases can therefore on legal entity level be accounted for according to the requirements for operational leases. This limitation lacks practical implications since the Parent Company has not entered into any leasing agreements that could be classified as finance leases.
IAS 19 Employee benefits
According to the Swedish Act on Safeguarding of Pension Commitments, etc the Parent Company cannot recognize defined benefit plans on legal entity level. This limitation has no material impact on the employee benefits relating to the employees of the Parent Company. Pension solutions either fall within the framework of the ITP-plan that is insured via Alecta, and which is described under the Group’s accounting principles or in all material aspects consist of other defined contribution plans.
IAS 39 Financial instruments: recognition and measurement
The Parent Company adopted IAS 39 from January 1, 2006. IAS 39 was adopted with the exception of financial guarantees in relation to subsidiaries. The adoption of IAS 39 was accounted for as a change in accounting principle as of January 1, 2006. The impact of the change in accounting principle is disclosed in changes in shareholders’ equity. For further information regarding the accounting principles refer to the principles adopted by the Group for recognition and measurement of financial instruments in Note 2 Accounting principles. Note that the principles in force for the Group until December 31, 2004 remained in force for the Parent Company until December 31, 2005, these principles are described below.
Financial instruments recognition and measurement – to December 31, 2005
Short-term investments are accounted according to the lower of cost or market principle if they pertain to transferable securities, and at acquisition value for bank deposits.
Convertible debenture loans are compound financial instruments whose financial liability (the loan) and the shareholders’ equity-related instrument (the issued put) should be accounted separately at the time of issue. Because the convertible debenture loan 2002/2007 series 1–4 was issued at market interest, the related shareholders’ equity-related instrument constituted an insignificant portion of the issue proceeds, whereupon the convertible debenture loan was classified as a financial liability in its entirety.
Bond loans issued are accounted at amortized cost, which means the present value of future payments calculated by the effective historical rate of interest at the time of issue.
Commercial paper has been issued as part of a short-term Swedish commercial paper program and accounted under Other short-term loan liabilities at the original settlement value. Accrued interest is accounted under Accrued interest expenses using a linear valuation method. Due to the short tenor of issued commercial paper, the difference between accrued interest estimated linearly and by discounting is immaterial.
Loan receivables and loan liabilities hedged through forward currency contracts are valued at the spot rate on the day the hedge was entered into. Forward premiums and discounts, that is the difference between the forward rate and the spot rate, are accounted as interest. Interest rate derivatives are used for hedging purposes only and accounted through the deferral of unrealized gains and losses, known as deferral hedge accounting. As a result, the Group’s gains or losses from interest rate derivatives comprise only interest income and interest expenses based on actual cash flows from interest rate derivatives. Option premiums paid are expensed over the term of the hedged position and are accounted as interest expenses.
IAS 21 Effects of changes in foreign exchange rates
Paragraph 32 in IAS 21 states that exchange differences that form part of a reporting entity’s net investments in a foreign operation shall be recognized via the statement of income in the separate financial statements of the reporting entity. Paragraph 43 in RR 32:06 states that such exchange differences instead should be recognized directly in shareholders’ equity in accordance with paragraph 14 d in chapter 4 of the Swedish Annual Accounts Act. Securitas AB follows Paragraph 43 in RR 32:06 and recognizes exchange differences that fulfills the criteria for net investment hedges, that is for which settlement is neither planned nor likely to occur in the foreseeable future, via the translation reserve in equity.
URA 7 Group contributions and capital contributions
Group contributions received by the Parent Company are deemed to be dividends and are thus recognized as a financial income in the Parent Company.
Anticipated dividends
An anticipated dividend from a subsidiary is recognized as income in the Parent Company if the Parent Company has the right to both decide and approve the amount of the dividend from the subsidiary. The Parent Company must furthermore ensure that the dividend is in line with the subsidiary’s dividend capacity.
Note 41. Transactions with related parties
Transactions between the Parent Company and subsidiaries are priced in accordance with business principles.
Parent Company’s transactions with subsidiaries comprise    
MSEK 2007 2006 2005
Administrative contributions and other      
revenues from subsidiaries 360.0 460.5 474.3
– of which discontinued operations 81.4 70.5
Result of sale of shares in subsidiaries1 15.1 –46.4
– of which discontinued operations
Dividends from subsidiaries 2,434.2 5,337.8 4,618.7
– of which discontinued operations 301.9
Interest income from subsidiaries 643.1 577.6 487.0
– of which discontinued operations 26.1 30.7
Interest expenses to subsidiaries –1,150.8 –737.0 –479.5
– of which discontinued operations –6.4 –2.5
1 For 2007 the result from liquidation of associated company and for 2005 the result of sale of shares
in subsidaries in relation to internal restructuring. Receivables and liabilities from/to subsidiaries and their distribution between interest-bearing and non-interest-bearing items are reported in the balance sheet. For information regarding benefits provided to senior management, refer to the Group information in Notes 8 and 12 to the Consolidated financial statements and Note 44. For pledged assets and contingent liabilities on behalf of subsidiaries, refer to the information on pledged assets and contingent liabilities in connection with the balance sheet and in Notes 57 and 58.
Note 42. Financial risk management
The Parent Company has, as stated in Note 40 above, adopted IAS 39 Financial instruments; recognition and measurement as of January 1, 2006. Refer to Note 2 and Note 6 for further information about financial risks that are applicable also for the Parent Company.
Revaluation of financial instruments    
MSEK 2007 2006
Recognized in the statement of income    
Financial expenses –4.1 –38.6
Deferred tax 1.1 10.8
Impact on net income for the year –3.0 –27.8
Recognized via hedging reserve in shareholders' equity    
Transfer to hedging reserve before tax 4.6 30.6
Deferred tax on transfer to hedging reserve –1.3 –8.6
Transfer to hedging reserve net of tax 3.3 22.0
Transfer to statement of income before tax –33.1 –11.0
Deferred tax on transfer to statement of income 9.3 3.1
Transfer to statement of income net of tax –23.8 –7.9
Derivatives in the balance sheet    
MSEK 2007 2006
Interest-bearing financial fixed assets    
Fair value hedges 1,121.8
Cash flow hedges 13.1 19.4
Other derivative positions
Total derivatives included in    
interest-bearing financial fixed assets 13.1 1,141.2
Interest-bearing current receivables from subsidiaries    
Fair value hedges
Cash flow hedges
Other derivative positions 10.2 42.1
Total derivatives included in interest-bearing    
current receivables from subsidiaries 10.2 42.1
Other interest-bearing current assets    
Fair value hedges 1,421.2
Cash flow hedges 8.2 18.0
Other derivative positions 4.1 148.3
Total derivatives included in    
other interest-bearing current assets 1,433.5 166.3
Other long-term loan liabilities    
Fair value hedges
Cash flow hedges 14.6
Other derivative positions
Total derivatives included in other long-term loan liabilities 14.6
Interest-bearing current liabilities to subsidiaries    
Fair value hedges
Cash flow hedges
Other derivative positions 7.3 71.1
Total derivatives included in interest-bearing    
current liabilities to subsidiaries 7.3 71.1
Other short-term loan liabilities    
Fair value hedges
Cash flow hedges
Other derivative positions 17.3 61.3
Total derivatives included in other short-term loan liabilities 17.3 61.3
Note 43. Operating expenses
Audit fees and reimbursements      
MSEK 2007 2006 2005
PricewaterhouseCoopers      
– audit assignments 7.7 8.2 6.9
– other assignments1 3.1 12.7 3.0
Total PricewaterhouseCoopers 10.8 20.9 9.9
       
Other auditors      
– audit assignments
Total 10.8 20.9 9.9
1 The cost of other assignments carried out by PricewaterhouseCoopers includes fees for audit-
related advisory services relating to accounting, including IFRS, IT, acquisitions, divestments and matters concerning the Group’s internal bank.
Note 44. Personnel
Average number of employees; distribution by gender                  
      Women     Men     Total
  2007 2006 2005 2007 2006 2005 2007 2006 2005
Sweden 20 19 14 13 13 15 33 32 29
In 2007 the number of Board members and Presidents was 9 (10, 11) of whom 3 (3, 2) were women.              
Personnel costs                        
      2007     2006     2005   Of which bonuses
MSEK Salaries Social benefits (of which pensions) Salaries Social benefits (of which pensions) Salaries Social benefits (of which pensions) 2007 2006 2005
Board of Directors                        
and Presidents 16.1 8.3 (2.6) 6.1 2.5 (–) 4.7 1.8 (–) 2.0
Other employees 40.0 22.7 (9.7) 36.0 21.0 (9.4) 28.9 25.0 (15.6) 0.0 6.2 9.4
Total 56.1 31.0 (12.3) 42.1 23.5 (9.4) 33.6 26.8 (15.6) 2.0 6.2 9.4
In addition to personnel costs for 2005 Securitas AB made a provision for a pension for Juan Vallejo, a member of the Group Management.        
Sick leave      
  2007 2006 2005
Total number of hours reported      
as sick leave among employees 1,493.1 770.2 599.7
Men, by age: 54.4 52.5 37.5
<30 years 15.0
30–49 years 54.4 52.5 22.5
>49 years
       
Women, by age: 1,438.8 717.7 562.2
<30 years 195.0
30–49 years 362.5 195.0 352.2
>49 years 1,076.3 522.7 15.0
       
Normal annual working hours per person:      
Employees’ total normal working hours 64,350 62,400 56,550
Men 25,350 25,350 27,300
Women 36,000 37,050 29,250
       
Sick leave as % of normal working hours:      
Men 0.21 0.21 0.14
Women 3.69 1.94 1.90
Note 45. Other financial income and expense, net
MSEK 2007 2006 2005
Impairment losses, shares in subsidiaries1 –638.9 –1,539.1
Exchange rate differences, net –314.5 –106.0 –243.8
Bank costs and similar income/expense items –12.5 –34.3 –12.1
Revaluation of financial instruments (IAS 39)2 –4.1 –38.6
Other items, net –1.9 –8.2 –14.6
Total other financial income      
and expense, net –971.9 –1,726.2 –270.5
1 The value of shares in subsidiaries was written down in connection with the receipt by the Parent
Company of dividends from the subsidiary and in connection with recognition of impairment losses
of goodwill in the Netherlands in 2007 where an impairment was also recognized for shares in
subsidiaries, and intra-group restructuring in connection with the dividend of Securitas Direct AB and
Securitas Systems AB in 2006. IAS 39 has been applied by the Parent Company since January 1, 2006.  
Note 46. Taxes
Statement of Income Tax expense      
MSEK 2007 2006 2005
Tax on income before taxes      
– current taxes –13.6 –27.7 –32.4
– deferred taxes –10.5 28.8 96.8
Total taxes –24.1 1.1 64.4
The Swedish Corporate tax rate was 28 percent in 2007, 2006 and 2005. Deferred taxes for 2005 have been adjusted for effects of change of accounting principle according to IAS 21 concerning translation reserve. See also note 40.
Difference between statutory Swedish tax rate and actual tax expense for the Parent Company      
MSEK 2007 2006 2005
Tax based on the Swedish tax rate 28% –172 –805 –1,106
Tax from prior years 0 –7 2
Tax effect related to non-taxable income 371 1,246 1,114
Tax effect related to non-deductible expenses –223 –433 –58
Tax effect on loss carryforwards 112
Actual tax charge –24 1 64
Tax effect of non-taxable income mainly relates to dividends from subsidiaries. Tax effect of non-deductible expenses mainly relates to write-down of shares in subsidiaries.
Tax loss carryforwards
The tax loss carryforwards for the Parent Company amounted to MSEK 0 (0 and 0) as of December 31, 2007.
Note 40. Accounting principles
The Parent Company’s financial statements are from January 1, 2005 prepared in accordance with the Swedish Annual Accounts Act and RR 32:06 Reporting by Legal Entities. The Parent Company thus follows the same accounting principles as the Group when relevant and except in the cases stated below. The differences that exists between the Parent Company’s and the Group’s accounting principles are a result of the restrictions that the Swedish Annual Accounts Act, the Swedish Act on Safeguarding of Pension Commitments, etc and the options in RR 32:06 allow for the adoption of IFRS in the Parent Company.
IAS 17 Leasing
Finance leases cannot be accounted for on legal entity level since specific ordinances for the taxation are not available or are not complete. Finance leases can therefore on legal entity level be accounted for according to the requirements for operational leases. This limitation lacks practical implications since the Parent Company has not entered into any leasing agreements that could be classified as finance leases.
 
IAS 19 Employee benefits
According to the Swedish Act on Safeguarding of Pension Commitments, etc the Parent Company cannot recognize defined benefit plans on legal entity level. This limitation has no material impact on the employee benefits relating to the employees of the Parent Company. Pension solutions either fall within the framework of the ITP-plan that is insured via Alecta, and which is described under the Group’s accounting principles or in all material aspects consist of other defined contribution plans.
 
IAS 39 Financial instruments: recognition and measurement
The Parent Company adopted IAS 39 from January 1, 2006. IAS 39 was adopted with the exception of financial guarantees in relation to subsidiaries. The adoption of IAS 39 was accounted for as a change in accounting principle as of January 1, 2006. The impact of the change in accounting principle is disclosed in changes in shareholders’ equity. For further information regarding the accounting principles refer to the principles adopted by the Group for recognition and measurement of financial instruments in Note 2 Accounting principles. Note that the principles in force for the Group until December 31, 2004 remained in force for the Parent Company until December 31, 2005, these principles are described below.
Financial instruments recognition and measurement – to December 31, 2005
Short-term investments are accounted according to the lower of cost or market principle if they pertain to transferable securities, and at acquisition value for bank deposits.
 
Convertible debenture loans are compound financial instruments whose financial liability (the loan) and the shareholders’ equity-related instrument (the issued put) should be accounted separately at the time of issue. Because the convertible debenture loan 2002/2007 series 1–4 was issued at market interest, the related shareholders’ equity-related instrument constituted an insignificant portion of the issue proceeds, whereupon the convertible debenture loan was classified as a financial liability in its entirety.
 
Bond loans issued are accounted at amortized cost, which means the present value of future payments calculated by the effective historical rate of interest at the time of issue.
Commercial paper has been issued as part of a short-term Swedish commercial paper program and accounted under Other short-term loan liabilities at the original settlement value. Accrued interest is accounted under Accrued interest expenses using a linear valuation method. Due to the short tenor of issued commercial paper, the difference between accrued interest estimated linearly and by discounting is immaterial.
 
Loan receivables and loan liabilities hedged through forward currency contracts are valued at the spot rate on the day the hedge was entered into. Forward premiums and discounts, that is the difference between the forward rate and the spot rate, are accounted as interest. Interest rate derivatives are used for hedging purposes only and accounted through the deferral of unrealized gains and losses, known as deferral hedge accounting. As a result, the Group’s gains or losses from interest rate derivatives comprise only interest income and interest expenses based on actual cash flows from interest rate derivatives. Option premiums paid are expensed over the term of the hedged position and are accounted as interest expenses.
 
IAS 21 Effects of changes in foreign exchange rates
Paragraph 32 in IAS 21 states that exchange differences that form part of a reporting entity’s net investments in a foreign operation shall be recognized via the statement of income in the separate financial statements of the reporting entity. Paragraph 43 in RR 32:06 states that such exchange differences instead should be recognized directly in shareholders’ equity in accordance with paragraph 14 d in chapter 4 of the Swedish Annual Accounts Act. Securitas AB follows Paragraph 43 in RR 32:06 and recognizes exchange differences that fulfills the criteria for net investment hedges, that is for which settlement is neither planned nor likely to occur in the foreseeable future, via the translation reserve in equity.
URA 7 Group contributions and capital contributions
Group contributions received by the Parent Company are deemed to be dividends and are thus recognized as a financial income in the Parent Company.
 
Anticipated dividends
An anticipated dividend from a subsidiary is recognized as income in the Parent Company if the Parent Company has the right to both decide and approve the amount of the dividend from the subsidiary. The Parent Company must furthermore ensure that the dividend is in line with the subsidiary’s dividend capacity.
 
Note 41. Transactions with related parties
Transactions between the Parent Company and subsidiaries are priced in accordance with business principles.

Parent Company’s transactions with subsidiaries comprise    
MSEK 2007 2006 2005
Administrative contributions and other      
revenues from subsidiaries 360.0 460.5 474.3
– of which discontinued operations 81.4 70.5
Result of sale of shares in subsidiaries1 15.1 –46.4
– of which discontinued operations
Dividends from subsidiaries 2,434.2 5,337.8 4,618.7
– of which discontinued operations 301.9
Interest income from subsidiaries 643.1 577.6 487.0
– of which discontinued operations 26.1 30.7
Interest expenses to subsidiaries –1,150.8 –737.0 –479.5
– of which discontinued operations –6.4 –2.5
1 For 2007 the result from liquidation of associated company and for 2005 the result of sale of shares
in subsidaries in relation to internal restructuring. Receivables and liabilities from/to subsidiaries and their distribution between interest-bearing and non-interest-bearing items are reported in the balance sheet. For information regarding benefits provided to senior management, refer to the Group information in Notes 8 and 12 to the Consolidated financial statements and Note 44. For pledged assets and contingent liabilities on behalf of subsidiaries, refer to the information on pledged assets and contingent liabilities in connection with the balance sheet and in Notes 57 and 58.
 
Note 42. Financial risk management
The Parent Company has, as stated in Note 40 above, adopted IAS 39 Financial instruments; recognition and measurement as of January 1, 2006. Refer to Note 2 and Note 6 for further information about financial risks that are applicable also for the Parent Company.

Revaluation of financial instruments    
MSEK 2007 2006
Recognized in the statement of income    
Financial expenses –4.1 –38.6
Deferred tax 1.1 10.8
Impact on net income for the year –3.0 –27.8
Recognized via hedging reserve in shareholders' equity    
Transfer to hedging reserve before tax 4.6 30.6
Deferred tax on transfer to hedging reserve –1.3 –8.6
Transfer to hedging reserve net of tax 3.3 22.0
Transfer to statement of income before tax –33.1 –11.0
Deferred tax on transfer to statement of income 9.3 3.1
Transfer to statement of income net of tax –23.8 –7.9
 

Derivatives in the balance sheet    
MSEK 2007 2006
Interest-bearing financial fixed assets    
Fair value hedges 1,121.8
Cash flow hedges 13.1 19.4
Other derivative positions
Total derivatives included in    
interest-bearing financial fixed assets 13.1 1,141.2
Interest-bearing current receivables from subsidiaries    
Fair value hedges
Cash flow hedges
Other derivative positions 10.2 42.1
Total derivatives included in interest-bearing    
current receivables from subsidiaries 10.2 42.1
Other interest-bearing current assets    
Fair value hedges 1,421.2
Cash flow hedges 8.2 18.0
Other derivative positions 4.1 148.3
Total derivatives included in    
other interest-bearing current assets 1,433.5 166.3
Other long-term loan liabilities    
Fair value hedges
Cash flow hedges 14.6
Other derivative positions
Total derivatives included in other long-term loan liabilities 14.6
Interest-bearing current liabilities to subsidiaries    
Fair value hedges
Cash flow hedges
Other derivative positions 7.3 71.1
Total derivatives included in interest-bearing    
current liabilities to subsidiaries 7.3 71.1
Other short-term loan liabilities    
Fair value hedges
Cash flow hedges
Other derivative positions 17.3 61.3
Total derivatives included in other short-term loan liabilities 17.3 61.3

Page 87

 
Note 43. Operating expenses
 

Audit fees and reimbursements      
MSEK 2007 2006 2005
PricewaterhouseCoopers      
– audit assignments 7.7 8.2 6.9
– other assignments1 3.1 12.7 3.0
Total PricewaterhouseCoopers 10.8 20.9 9.9
       
Other auditors      
– audit assignments
Total 10.8 20.9 9.9
1 The cost of other assignments carried out by PricewaterhouseCoopers includes fees for audit-
related advisory services relating to accounting, including IFRS, IT, acquisitions, divestments and matters concerning the Group’s internal bank.
 
Note 44. Personnel
 

Average number of employees; distribution by gender                  
      Women     Men     Total
  2007 2006 2005 2007 2006 2005 2007 2006 2005
Sweden 20 19 14 13 13 15 33 32 29
In 2007 the number of Board members and Presidents was 9 (10, 11) of whom 3 (3, 2) were women.              
 

Personnel costs                        
      2007     2006     2005   Of which bonuses
MSEK Salaries Social benefits (of which pensions) Salaries Social benefits (of which pensions) Salaries Social benefits (of which pensions) 2007 2006 2005
Board of Directors                        
and Presidents 16.1 8.3 (2.6) 6.1 2.5 (–) 4.7 1.8 (–) 2.0
Other employees 40.0 22.7 (9.7) 36.0 21.0 (9.4) 28.9 25.0 (15.6) 0.0 6.2 9.4
Total 56.1 31.0 (12.3) 42.1 23.5 (9.4) 33.6 26.8 (15.6) 2.0 6.2 9.4
In addition to personnel costs for 2005 Securitas AB made a provision for a pension for Juan Vallejo, a member of the Group Management.        
 

Sick leave      
  2007 2006 2005
Total number of hours reported      
as sick leave among employees 1,493.1 770.2 599.7
Men, by age: 54.4 52.5 37.5
<30 years 15.0
30–49 years 54.4 52.5 22.5
>49 years
       
Women, by age: 1,438.8 717.7 562.2
<30 years 195.0
30–49 years 362.5 195.0 352.2
>49 years 1,076.3 522.7 15.0
       
Normal annual working hours per person:      
Employees’ total normal working hours 64,350 62,400 56,550
Men 25,350 25,350 27,300
Women 36,000 37,050 29,250
       
Sick leave as % of normal working hours:      
Men 0.21 0.21 0.14
Women 3.69 1.94 1.90
 
Note 45. Other financial income and expense, net
 

MSEK 2007 2006 2005
Impairment losses, shares in subsidiaries1 –638.9 –1,539.1
Exchange rate differences, net –314.5 –106.0 –243.8
Bank costs and similar income/expense items –12.5 –34.3 –12.1
Revaluation of financial instruments (IAS 39)2 –4.1 –38.6
Other items, net –1.9 –8.2 –14.6
Total other financial income      
and expense, net –971.9 –1,726.2 –270.5
1 The value of shares in subsidiaries was written down in connection with the receipt by the Parent
Company of dividends from the subsidiary and in connection with recognition of impairment losses
of goodwill in the Netherlands in 2007 where an impairment was also recognized for shares in
subsidiaries, and intra-group restructuring in connection with the dividend of Securitas Direct AB and
Securitas Systems AB in 2006. IAS 39 has been applied by the Parent Company since January 1, 2006.  
 
Note 46. Taxes
 

Statement of Income Tax expense      
MSEK 2007 2006 2005
Tax on income before taxes      
– current taxes –13.6 –27.7 –32.4
– deferred taxes –10.5 28.8 96.8
Total taxes –24.1 1.1 64.4
The Swedish Corporate tax rate was 28 percent in 2007, 2006 and 2005. Deferred taxes for 2005 have been adjusted for effects of change of accounting principle according to IAS 21 concerning translation reserve. See also note 40.
 

Difference between statutory Swedish tax rate and actual tax expense for the Parent Company      
MSEK 2007 2006 2005
Tax based on the Swedish tax rate 28% –172 –805 –1,106
Tax from prior years 0 –7 2
Tax effect related to non-taxable income 371 1,246 1,114
Tax effect related to non-deductible expenses –223 –433 –58
Tax effect on loss carryforwards 112
Actual tax charge –24 1 64
Tax effect of non-taxable income mainly relates to dividends from subsidiaries. Tax effect of non-deductible expenses mainly relates to write-down of shares in subsidiaries.
 
Tax loss carryforwards
The tax loss carryforwards for the Parent Company amounted to MSEK 0 (0 and 0) as of December 31, 2007.