Sweden: Doing Business In Sweden - Significant Accounting Practices

Last Updated: 28 February 1996
Consolidated Accounts

Companies are required to consolidate all entities including partnerships in which they control, directly or indirectly, more than 50% of the votes.

Acquisitions of subsidiaries are generally accounted for by the purchase method. The great majority of Swedish consolidated accounts are prepared on this basis, but other methods are occasionally used. Under certain specific circumstances, the pooling-of-interests method is acceptable.

The Financial Accounting Standards Council's first recommendation pertain to the following consolidated accounting issues:

- Goodwill must be computed using the market value of all assets in the acquired company. It should be amortised against operating income either on a straight-line or a declining-balance method, preferably over 10 but no more than 20 years.
- Untaxed reserves should be divided into the deferred tax portion, which is treated as a tax liability, and the balance, which is recorded as non-distributable equity in the consolidated _nancial statements.
- Trademarks that are not recorded by a subsidiary may be reported separately from other goodwill, provided they are subject to the same amortisation rules.

Associated Companies

In the separate financial statements, income from associated companies is reflected only to the extent that it has actually been distributed in the form of dividends. Undistributed earnings are not reflected because the equity method of accounting is not recognised in separate financial statements in Sweden. For consolidated financial statements, the Swedish Institute of Authorized Public Accountants has proposed that associated companies are accounted for either by the cost method or the equity method. An associated company is normally defined as an investment representing more than 20% of the investee's voting stock.

In computing earnings per share, any undistributed earnings of the investee must be included.

Foreign-Currency Translation

Receivables and payables denominated in foreign currencies should be converted to Swedish kronor (SEK) at the exchange rates on the balance sheet date. The resulting unrealised gain or loss on current (short-term) receivables and payables is included in earnings for the period. An amount equal to unrealised profits on non-current receivables and liabilities shall be provided for under untaxed reserves in the balance sheet and as tax appropriations in the income statement.

If balances in foreign currency have been covered by forward contracts or hedged, the contracted rate of exchange should be used in the balance sheet.

The net profit or loss on receivables from customers and payables to suppliers is included in operating income in the statement of earnings. The net profit or loss on amounts loaned or borrowed is accounted for as a financial item.

Deferred Taxes

Deferred taxes are normally only accounted for in consolidated accounts, and then normally only related to the tax liabilities in untaxed reserves and tax receivables and liabilities determined after allowing for the tax effect of restating identifiable assets and liabilities in acquired companies to their fair values.

Property, Plant and Equipment

Property, plant and equipment are normally capitalised at original cost. The Company Act allows revaluation of these assets with certain restrictions. Land and buildings may not be revalued above their tax assessment value, which shall approximate 75% of current market value. Plant and equipment may not be revalued over their current value to operation, and for real estate not over the tax assessment value.

The revaluation of fixed assets may be accounted for as write-downs of other fixed assets. It may also, for limited companies, be used for a bonus issue of capital stock or alternatively be deferred to a revaluation reserve as part of restricted equity.

Depreciation

Depreciation for financial statement purposes is determined according to plan, that is, based on rates related to the assets' economic lives. Any difference between depreciation based on economic lives and depreciation allowed for tax purposes is accounted for as an allocation to untaxed reserves. Tax depreciation and depreciation based on economic lives on buildings and land improvements are approximately the same, but for plant and equipment is tax depreciation often more liberal than depreciation based on economic lives.

Inventories

Inventories are normally stated at the lower of first-in, first-out (FIFO) cost and market. Market is usually the net realisable value, but replacement cost, if lower, is also permissible for raw material and purchased semi-finished products.

A standard provision of 3% of actual acquisition value of total inventory is allowed for tax purposes if inventory has been valued at the lower of cost or market. Combinations of replacement valuation and the 3% standard provision format are not permissible for tax purposes.

Long-term projects are usually accounted for on the completed contract basis, but the percentage-of-completion method is permissible.

Whether the completed contract or the percentage-of-completion method is applied, any estimated loss at completion should be fully recognised when determined and any costs should be accrued up to that point of time.

Intangible Assets

Goodwill may be capitalised only if acquired through acquisition of assets or operations and must be amortised over a period of preferably 10 but no more than 20 years.

Expenditures for technical assistance, research and development, pilot operations, marketing research and similar activities may be capitalised if they represent important future benefits for the company. Such expenditures must be amortised over a period of no more than five years, unless a longer period can be justified.

Leases

Operating lease accounting is generally used to account for leases. However, the Financial Accounting Standards Council has recently issued a recommendation on accounting for lease agreements, which will be effective from January 1, 1997. The recommendation is in all material respects similar to IAS statement 17 "Accounting for Leases".

Related-Party Transactions

Year-end balances with parent company and subsidiaries as well as the identity of the parent company, and if applicable the parent's parent company, must be disclosed in the financial statements. Investments in shares of other members of a company group, as well as sales and purchases to and from such companies, must also be disclosed. Remuneration and loans to board members are also required to be disclosed.

Earnings Per Share

Public companies are encouraged to disclose earnings per share. To be meaningful, however, earnings per share must be calculated on the basis of income before allocations to untaxed reserves, less an assumed tax amount, based on the statutory tax rates and the estimated amount of tax credits available to the company.

Untaxed Reserves

The most common appropriations to untaxed reserves are:

-depreciation in excess of plan and
-the Profit allocation reserve (Periodiseringsfond)

The tax law requires that these appropriations are recorded in the companies' separate financial statements as tax appropriations in the income statement and as untaxed reserves in the balance sheet, in order to qualify for tax deduction. See also Tax reserves, and Consolidated accounts in 'Significant Accounting Practices'.

Pension Commitments

The Swedish Institute of Authorized Public Accountants has recommended that unfunded pension liabilities be accounted for as liabilities. The Accounting Act however, also admits that unfunded pension commitments are accounted for as contingent liabilities.

The contents of this article are intended as a general guide to the subject matter. Specialist advice should be sought for your specific circumstances.

For further information contact Per Snellman on Tel: +468 613 9000 0r Fax: +468 791 7511; or enter a text search 'Ernst & Young' and 'Business Monitor'.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions