Effects of adoption of International Financial Reporting Standards
From 1 January 2005, Billerud AB (publ) is applying the International Financial Reporting Standards (IFRS) as approved by the EU Commission. The interim report for the first quarter of 2005 will be the first financial report presented by Billerud in accordance with IFRS. Figures for comparison have been re-calculated from 1 January 2004. This press release provides detailed information about the overall effects of adopting IFRS for Billerud.
The accounting rules included in IFRS (previously called IAS, International Accounting Standards) were decided by the International Accounting Standards Board, the IASB. Before the rules come into effect within the EU, they must first be given special approval by the EU. The recommendations made by the Swedish Financial Accounting Standards Council have been harmonised with IFRS, especially in recent years. However, the Swedish recommendations have neither covered all the areas dealt with by IFRS nor been fully updated as changes have been made to individual IFRS rules. Billerud has followed the recommendations (RR) of the Swedish Financial Accounting Standards Council and has therefore gradually applied practices in accordance with IFRS. Transfer to IFRS The transfer to IFRS has been carried out in accordance with ”First time adoption of International Financial Reporting Standards” which contains special instructions for introducing the standards and making re- calculations. The special adoption rules are contained in IFRS 1. The effects on Billerud’s results and financial position depend partly on the choices Billerud makes in areas where choices can be made. Billerud has chosen to apply IAS 39 (Recognition and Measurement) from 1 January 2005, and thereby not report comparable figures for 2004 (the adjustments are included in the adjusted balance sheet as of January 1, 2005). Billerud’s 2005 Annual Report will be produced in accordance with IFRS, and comparable figures for 2004 will be re-calculated in accordance with IFRS. The net effect of the changed accounting principles upon the adoption is reported directly under shareholders’ equity as of 1 January 2004, and the net effects of the application of IAS 39 is reported directly under shareholders’ equity as of 1 January 2005. The survey concerning the effect of the adoption of IFRS is complete and this is further described in the enclosed summary of adjustments and estimated effects on earnings for those areas which are expected to materially affect Billerud’s income statement and balance sheet for the full year 2004. There is also a description of the effects of applying IAS 39 from 1 January on Billerud’s balance sheet as of 1 January 2005. Below the effects on Billerud’s key figures 2004 are shown: Key Figures 2004 According to Swedishaccounting According to IFRS rules Return on capital employed, % 17 17 Return on shareholders’ equity, % 17 16 Debt/equity ratio 0.48 0.48 Earnings per share, SEK 9.75 9.66 The following IAS/IFRS standards are considered to have the largest impact on Billerud’s comparable figures for 2004: · Reporting of pension liabilities in accordance with IAS 19( Employee Benefits). From 1 January 2004, Billerud has applied RR29, which is in agreement with IAS 19 (Employee Benefits). · Reporting of restructuring reserves in connection with acquisitions, in accordance with IFRS 3 (Business Combinations). According to IFRS 3, restructuring reserves may be included in the acquisition balance only if they have already been reported in the acquired company. Billerud applies IFRS 3 as from 1 January 2004. Billerud has no goodwill on its balance sheet. The rules in IFRS 3 regarding depreciation of goodwill will therefore not affect the comparable figures for 2004. Impact of other IAS/IFRS standards · IAS 16 (Property, Plant and Equipment). Billerud has previously to all extents and purposes applied so-called component depreciation, which is why the clearer requirements for the use of this depreciation method according to the reworked IAS 16 will not have a significant impact. · IAS 32 and IAS 39 (Financial Instruments: Disclosure and Presentation; Recognition and Measurement), which both refer to financial instruments, will be applied starting from 1 January 2005. A recalculation for comparable figures in 2004 will not be made. The new rules mean that most financial instruments, including derivatives, will be assessed at market value. Billerud uses derivatives mainly for managing currency risks on future payment flows connected with sales and purchases, price risks when buying electricity and also for interest rate risks. The rules that will apply, or may be applied, at the end of 2005 have not yet been fully established. A preliminary assessment of the revaluation effects as of 1 January 2005 regarding these instruments, however, indicates a positive impact of around MSEK 43 on shareholders’ equity after the expected tax effect. · No material effects occur in the Cash Flow Analysis as a consequence of IAS 7 (Cash Flow Statements). The information concerning the first-time adoption has been presented according to IFRS principles that are expected to be applied as of 31 December 2005. IFRS is subject to continuous monitoring and approval by the EU, which is why further changes are still possible. Furthermore, the accounts for 2004 will be subject to adoption by the Annual General Meeting of Billerud shareholders to be held on 3 May 2005. Stockholm, 29 March 2005 Billerud AB (publ) Peter Davidson Acting Managing Director and CEO For further information, please contact Nils Lindholm, CFO, +46 8 553 335 07