Effects of adoption of International Financial Reporting Standards

2005-03-29 17:29

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

Pressrelease with supplement
Last updated: 2012-06-01