Stock Exchange & Press Releases 2005

Elektrobit has utilized the exceptions allowed in the IFRS1 first-time adoption standard with regard to retrospective application of individual standards. The IFRS information presented has been prepared in accordance with the IFRS standards valid at the time of preparation. The opening balance sheet may still change if a standard or interpretation is changed before the annual IFRS financial statements for the accounting period from January 1, 2005 to December 31, 2005 are finalized.

 

The transition to IFRS standards will reduce shareholders' equity on the transition date January 1, 2004 by approximately 1.5 MEUR (1.9%), while the balance sheet total increases by some 3.5 MEUR (2.4%). The most significant changes in consolidated shareholders' equity at the time of transition are attributable to impairment of consolidation goodwill, as well as deferred tax entries. The amount of assets on the balance sheet is increased most by the inclusion of fixed assets acquired through finance lease agreements, and to a lesser extent by fixed costs included in inventories and by the recognition of financial instruments at fair value.

 

According to our analysis, the transition to IFRS standards will not cause any change in the amount of liabilities recognized for pension schemes on the consolidated balance sheet on January 1, 2004. Pensions in our Group companies are arranged through insurance companies. Pension schemes in our foreign subsidiaries have the nature of defined contribution plans, and the practice of recognizing the disability pension liabilities associated with Finnish TEL pension insurance is interpreted to be practically equivalent to the current FAS accounting practice. Disability pension is considered as other long-term employment benefit under IAS 19, the level of which is not dependent on the duration of employment in an enterprise preparing IFRS financial statements. According to the provisions of IAS 19.130, the so-called event leading to an obligation in the case of disability pension is an event of disability. Expenses and liabilities will be recognized once such an event has occurred.

 

The primary format of segment reporting is based on business segments, including Service business and Product business. Secondary reporting format is based on geographical segments, including Europe, the Americas and Asia.

 

For the time being, in order to preserve comparability with net sales information presented in accordance with Finnish Accounting Standards, the Group will present its net sales information not only as the data required for segment reporting but also separately for the Service business itemized into Contract R&D and Automotive business, as well as for the Product business itemized into Testing and Automation Solutions business.

 

The IAS 36 standard prescribes the procedures applicable to impairment testing of consolidation goodwill and certain other asset items. Consolidation goodwill at the time of transition to IFRS standards was tested as required by the IAS 36 standard. Testing resulted in a 2.3 MEUR impairment of consolidation goodwill, after which there was 2.7 MEUR of consolidation goodwill remaining.

The FAS consolidated financial statements for 2004 included a total of 13.3 MEUR of depreciation and impairment, 7.2 MEUR of which consists of consolidation goodwill. In compliance with IFRS regulations, the amount of depreciation and impairment associated with acquisitions of subsidiaries is 5.7 Meur in 2004.

 

 

Property, plant and equipment

Leasing agreements categorized as finance leases have been capitalized on the balance sheet in accordance with IAS17, which increased the book value of the balance sheet item by 3.1 MEUR. The remaining amount of the change is attributable to regrouping the asset items on the FAS balance sheet to comply with the method of presentation called for by the IFRS standards and concerns modernization expenses on rental properties.

 

Goodwill

The IFRS adjustment includes a impairment of 2.3 MEUR booked on the basis of impairment testing in accordance with IAS 36. The remaining amount of the change is attributable to regrouping the asset items on the FAS balance sheet to comply with the method of presentation called for by the IFRS standards and concerns product rights, which have been transferred to other intangible assets.

 

Intangible assets

The changes made to the FAS accounting balance arise entirely from regrouping the asset items to comply with the method of presentation called for by the IFRS standards. The changes include the transfer of modernization expenses on rental properties 0.4 MEUR to tangible fixed assets, as well as the transfer of product rights 0.2 MEUR from goodwill to intangible assets.

 

Investment properties

The book values of real estate categorized as investment properties in accordance with IAS 40 have been transferred from other investments to this balance sheet item. At the same time, in accordance with default acquisition cost as referred to in IFRS 1, the properties have been valuated at fair value at the time of IFRS transition.

 

Other investments

Most of the IFRS adjustment is attributable to valuating the Group's equity portfolio at fair value in accordance with IAS 39. The change in the valuation principle of the equity portfolio increased the book value of the asset item by 0.7 MEUR. The remaining part of the adjustment is caused by the transfer of a real estate investment owned through an equity holding 0.2 MEUR to constitute a part of the book value of an investment property.

 

Deferred tax assets

Deferred tax receivables have been recognized for all tax-deductible temporary differences between consolidated balance sheet value and taxable value for which a deferred tax receivable can probably be utilized in upcoming accounting periods. The introduction of the IAS 12 standard increased deferred tax receivables by 0.4 MEUR.

 

Inventories

Inventories have been valuated in accordance with IAS 2; the share of depreciation and fixed costs of acquisition and manufacturing allocated to inventories, totaling 0.6 MEUR, has been added to the FAS book value.

 

Accounts receivable and other receivables

The increase in the value of this balance sheet item, 0.3 MEUR, is attributable to the valuation of derivative instruments at fair value in accordance with IAS 39.

 

Retained earnings

The book value of retained earnings decreased by 1.5 MEUR, mainly due to the combined effect of the following standards:

 

 

Minority interest

The decrease in minority interest 0.2 MEUR is based on an adjustment in accordance with IAS 8.

 

Deferred tax liabilities

Deferred tax liabilities have been recognized for all taxable temporary differences between consolidated balance sheet values and taxable values. The introduction of the IAS 12 standard increased deferred tax liabilities by 1.7 MEUR, 1.1 MEUR of which is associated with consolidation assets included in the book value of buildings.

 

Interest-bearing liabilities

The increase in the balance sheet item, 3.5 MEUR, arises entirely from the recognition of finance lease liabilities on the balance sheet in accordance with IAS 17. The balance also includes debt associated with a property categorized as an investment property. Long-term finance lease liabilities account for 1.9 MEUR of the amount, with the remaining 1.6 MEUR being short-term.

 

 

In Oulunsalo, March 9, 2005

 

Elektrobit Group Plc.

The Board of Directors