STOCKMANN'S COMPARATIVE IFRS INFORMATION
STOCKMANN plc STOCK EXCHANGE RELEASE February 15, 2005, at 11.45
STOCKMANN'S COMPARATIVE IFRS INFORMATION
As from the beginning of 2005, Finnish Accounting Standards (FAS) have been replaced by International Financial Reporting Standards (IFRS) in Stockmann's consolidated financial statements. The following information is presented in order to provide information on the effects of the adoption of IFRS on the consolidated income statement, balance sheet and key ratios. From Stockmann's point of view, the most significant effects of the transition to IFRS relate to the treatment of revaluation of property, plant and equipment, treasury shares, some vehicle leasing and hire-purchase agreements, the recognition of financial instruments and segment reporting.
The table below shows the effect of the adoption of IFRS on some Group key financial ratios:
|Group key financial ratios 2004||FAS 2004||Effect of||IFRS|
|Net profit for the period, EUR million||58.2||1.1||59.3|
|Earnings per share, undiluted EUR||1.11||0.02||1.13|
|Earnings per share, diluted EUR||1.09||0.02||1.11|
|Total assets EUR million||750.4||(1.4)||749.0|
|Return on capital employed, per cent||14.3||0.5||14.8|
|Return on shareholders' equity, per cent||11.2||1.0||12.2|
|Equity ratio, per cent||65.5||(3.2)||62.3|
Additional information and comparative IFRS information for 2004
Contents: General information Balance sheet reconciliation and reconciliation of shareholders' equity at 31 December 2004 and 31 December 2003 Reconciliation of net profit Definitions of key financial ratios
Stockmann converted from Finnish Accounting Standards (FAS) to International Financial Reporting Standards (IFRS) on 1 January 2005 in consolidated financial statements. The company has prepared an opening balance sheet as at the date of transition, which is 1 January 2004. The interim financial reports for 2005 will be presented in accordance with IFRS.
The change in accounting standards impacts, amongst others, the following accounting principles:
The measurement and revaluation of property, plant and equipment
Stockmann applies the cost model as defined in IAS 16 (Property, Plant and Equipment) when measuring tangible assets. Contrary to the company's prior accounting practice, depreciation on the revaluation surplus of buildings is recorded over their useful lives in the IFRS financial statements. An adjustment equivalent to the accumulated depreciation has been done to equity in the IFRS opening balance sheet. Deferred tax liabilities as required by IFRS have been recorded on the revaluations.
Finance lease agreements
Motor vehicles under lease agreements, used by Stockmann Auto as courtesy and showroom cars have been recognised in the IFRS financial statements in accordance with IAS 17 (Leases) as assets and liabilities. According to the previous practice, these agreements were disclosed in the notes.
In accordance with IAS 39 (Financial Instruments: Recognition and Measurement) the company's own shares held by it have not been recognised in the balance sheet. The elimination of these shares decreases non- current investments and equity when compared to what was reported previously.
Investments in equity instruments measured at fair value
In terms of IFRS, investments in listed companies are measured at fair value at balance sheet date in accordance with IAS 39. The difference between the market value and book value is recognised in equity. Previously, investments in equity instruments were measured at no higher than cost.
Hire-purchase agreements transferred to finance companies when financing customer motor vehicle purchases have been recognised in accordance with IAS 39 (Financial Instruments: Recognition and Measurement). Agreements where all risks, rewards and control have not transferred to the transferee, are recognised in the IFRS balance sheet in receivables and debts. Under the previous reporting, these agreements were disclosed only in the notes to the financial statements. The interest income on these agreements is recognised over the duration of the agreement, whereas previously it was recognised in total at the inception of the agreement. As from 1 January 2004, hire-purchase agreements have been recognised in accordance with IAS 39, in conjunction with the transitional provisions of IFRS 1.
Derivatives and hedge accounting
Derivatives are measured at fair value in accordance with IAS 39. Stockmann uses in its IFRS reporting IAS 39 compliant hedge accounting when recognizing derivatives hedging forecasted foreign currency purchases and sales.
Deferred tax liabilities and assets
A deferred tax liability or asset is recognised for all temporary differences between the carrying amount of an asset or liability and its tax base in accordance with IAS 12 (Income Taxes). The most significant liabilities arise from the property, plant and equipment of foreign subsidiaries and revaluations included in the carrying amounts of buildings and property. In terms of the previous accounting practice, no deferred tax assets and liabilities were calculated on these differences
Cumulative translation differences have been combined with retained earnings at the date of transition to IFRS (1 January 2004), as permitted by IFRS 1.
The Finnish pension scheme (TEL)
The Finnish pension scheme (TEL) has been accounted for as a defined contribution plan under FAS. Under IFRS, the disability element of TEL is also accounted for as a defined contribution plan. At the date of transition to IFRS, the total TEL disability obligation is estimated at 17.5 million Euros.
The introduction of IFRS will result in a change in the current segment reporting structure. A property unit whose income consists mainly of intragroup rentals, will fall away. In the IFRS reporting, property held by the group has been allocated to segments with business operations by including it in the assets of each segment. In the segment income statements, depreciation and other costs relating to the buildings will be reported instead of the previous internal rentals. Under IFRS, other operating income has been allocated to the segments, whereas under FAS they were reported at group level. The identification of segments is based on the group structure and internal reporting. The primary or business segments are the Department Store Division, Stockmann Auto, Hobby Hall and Seppälä. The secondary or geographical segments are Finland, the Baltic states and Russia.
Reconciliation of assets, liabilities and equity at 1 January 2004 and 31 December 2004
|Note||Million euros||FAS 31||Effect||IFRS 1||FAS 31||Effect of||IFRS|
|December||of January Decembe||transition||31|
|2003 transiti||2004||r 2004||to IFRS Decemb|
|5||Cash and cash||121.3||1.0||122.3||41.4||41.4|
2. At the date of transition, treasury shares of 6.2 million Euros and shares in mutual property companies of 14.8 million Euros were removed from financial assets. Listed shares held by the company have been classified according to IAS 39 as assets available for sale and transferred from non-current assets to current assets. The carrying amount of these shares amounted to 0.5 million Euros at the date of transition. The corresponding reclassifications to the 2004 FAS balance sheet 2004 are 6.1 million Euros for own shares and 14.8 million Euros for mutual property companies.
3. In accordance with IAS 39, receivables of 12.9 million Euros originating from hire-purchase contracts that have been transferred to financing companies, have been added to accounts receivables in the 2004 FAS financial statements. Of these receivables, 7.4 million Euros are non- current.
4. At the date of transition, a deferred tax receivable of 0.3 million Euros arising from the measurement of derivatives was added to other receivables. In 2004 accrued income of 0.8 million Euros relating to the measurement of financial instruments and a deferred tax asset of 0.2 million Euros relating to derivatives were added to other receivables
5. The listed shares, with a book value of 0.5 million Euros, are included in cash and cash equivalents in the IFRS balance sheet. In the FAS balance sheet these shares were disclosed in non-current assets. The difference between the quoted price of the shares and their carrying amount at the balance sheet date, which was 0.5 million Euros at the date of transition, was added to cash and cash equivalents in the IFRS balance sheet. Most of these shares were sold in 2004.
6. A liability, representing finance lease agreements for courtesy and showroom cars was added to interest-bearing liabilities. At the date of transition, the liability was 2.0 million Euros and it was 1.9 million Euros at the end of 2004. A share of the liabilities of mutual property companies, corresponding to the company's share of equity in these companies, was added to interest-bearing liabilities. This share of liabilities amounted to 0.3 million Euros both at the date of transition and at the end of the year 2004.
7. In accordance with IFRS, other liabilities include an accrual relating to the measurement of financial instruments. This accrual was 0.9 million Euros at the date of transition and 0.5 million Euros at the end of the year 2004. Of the 12.9 million Euro liability, relating to car hire purchase agreements transferred, 5.5 million Euros are presented in current liabilities and 7.4 million Euros in non-current liabilities.
8. Tax liabilities arising from revaluations, from differences between the carrying amounts and tax bases of property, plant and equipment in foreign subsidiaries and from the measurement of financial instruments were added to deferred tax liabilities. These deferred tax liabilities were 7.8 million Euros at the date of transition and 6.6 million Euros at the end of the year 2004.
Consolidated statement of changes in equity
|Million||Share||Share Treasu Legal Other Minori Transl||Retained Total|
|Euros||capit premium||ry reser reser||ty||.||earnings|
|al||shares||ve ves * intere||Diff.|
|Equity at||105.3||147.1||6.2||0.2||43.7||0.0||0.0||244.6 547.1|
Reconciliation of profit for 2004 Note Million Euros FAS Effect of IFRS transition to IFRS
|Raw materials and consumables||951.5||0.0||951.5|
|12||Other expenses from operations||395.1||(0.2)||394.9|
|Profit before taxes||79.1||(0.3)||78.9|
|Profit for the period||58.2||1.1||59.3|
11. Depreciation Depreciation on the revaluations of 0.5 million Euros was added to the depreciation calculated according to former accounting standards.
12. Other operating expenses Share issue costs of 0.2 million Euros, formerly included in other operating expenses, were deducted from the share premium under IFRS.
13. Finance income Profit from sale of shares of 0.7 million Euros, formerly included in other operating income, was transferred to finance income. The change in the fair values of financial instruments, 0.4 million Euros, was added to finance income. Interest income from transferred Stockmann Auto leasing contracts that will be recognized during the remaining contract period in the IFRS financial statements, totalling 0.3 million Euros, was deducted from finance income.
14. Taxes Deferred tax liabilities arising from the IFRS adjustments decreased by 1.4 million Euros, mainly due to a change in the tax rate in Finland, and deferred tax assets reduced by 0.1 million Euros.
Calculation of key financial ratios
Earnings per share: Profit for the period divided by the average number of shares during the period adjusted for share issues
Return on capital employed, per cent: Profit before taxes plus interest and other financial expenses, divided by capital employed, multiplied with 100
Capital employed: Total assets less deferred tax liability and other non- interest-bearing liabilities (average over the year)
Return on equity, per cent: Profit for the period, divided by capital and reserves plus minority interest (average over the year), multiplied with 100
Equity ratio, per cent: Capital and reserves plus minority interest, divided by total assets less advance payments received, multiplied with 100
Hannu Penttilä CEO
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