Notes including accounting and valuation principles
Note 19 Intangible assets
Intangible assets are recognized in compliance with IAS 38, ”Intangible assets,” See ”Accounting and valuation principles,” Note 1.
Intangible assets and useful life applied
Useful
2006 2005 life applied
Expressway concession 451 540 26 years
Other intangible assets, externally acquired 289 92 3–50 years Intangible assets, internally generated 0 12 3–5 years
Total 740 644
The expressway concession in Santiago, Chile went into full operation in mid- 2006. Amortization will occur over the concession period.
”Other intangible assets, externally acquired” consisted of the year’s allocation of acquired service contracts totaling SEK 112 M upon the acquisition of McNicholas as well as extraction rights for gravel pits and rock quarries in Sweden plus utilization rights for computer software. Extraction rights for rock quarries and gravel pits are amortized as material is extracted. Computer software is amortized in 3–5 years. The acquired service contracts upon the acquisition of McNicholas are being amortized in 3–6 years.
In 2005, computer software was recognized as internally generated intangible assets.
Amortization of other intangible assets by function
All intangible assets were amortized, because they have a limited useful life. of which amortization of internally generated assets Amortization by function 2006 2005 2006 2005
Cost of sales –34 –29 –12 –14
Selling and administration –41 –24 –1
Total –75 –53 –12 –15
Impairment losses/reversals of impairment losses on other intangible assets During 2006, impairment losses/reversals of impairment losses on other intangible assets amounted to SEK 0 M (0).
Information about cost, accumulated amortization and accumulated impairment losses
Intangible Other intangible assets, Expressway assets, internally concession externally acquired generated 2006 2005 2006 2005 2006 2005 Accumulated cost January 1 552 440 236 179 64 64 Acquisitions of companies 112 Other investments 2 5 37 46 Divestments –2 –2 Reclassifications 1 203 2
Exchange rate differences
for the year –75 107 –28 11
480 552 558 236 64 64
Accumulated amortization
January 1 –12 0 –142 –109 –52 –37
Reclassifications 1 –96
Amortization for the year –18 –12 –45 –26 –12 –15 Exchange rate differences
for the year 16 –7
–29 –12 –267 –142 –64 –52 Accumulated impairment losses
January 1 –2 –2
0 0 –2 –2 0 0
Carrying amount, December 31 451 540 289 92 0 12 Carrying amount, January 1 540 440 92 68 12 27
Other matters
Information about capitalized interest is presented in Note 15, ”Borrowing costs.” Direct research and development expenses amounted to SEK 72 M (47).
Notes, including accounting and valuation principles
Skanska Annual Report 2006 97
Note 20 Investments in joint ventures and associated companies
Investments in joint ventures and associated companies are reported according to the equity method of accounting.
Income from joint ventures and associated companies is reported on a separate line in operating income.
This income consists of the Group’s share of the income in joint ventures and associated companies after financial items, adjusted for any impairment losses in goodwill on consolidation and intra-Group profits.
Income from joint ventures and associated companies is presented in the fol- lowing table.
2006 2005
Share of income in joint ventures
according to the equity method 1 205 195 Share of income in associated companies
according to the equity method 1 18 14
Divestments of joint ventures 118 16
Transfers of intra-Group profits in Infrastructure
Development during useful life 16 12
Transfers of intra-Group profits in Infrastructure
Development through divestments 7
Total 364 237
1 When calculating the income of joint ventures and associated companies according to the equity method, the Group’s share of taxes is recognized on the ”Taxes” line in the income statement. The Group’s share of taxes in joint ventures amounted to SEK 3 M (–29) and its share of taxes in associated companies amounted to SEK –1 M (–6). See also Note 16, ”Income Taxes.”
Carrying amount according to the balance sheet and the change that occurred during 2006 can be seen in the following table.
Joint Associated
ventures companies Total
January 1 1,795 39 1,834
Investments 268 268
Divestments –71 –71
Reclassifications –3 –15 –18
Exchange rate differences for the year –136 –2 –138 The year’s provision for intra-Group
profit on contracting work –123 –123
The year’s change in share of income in associated companies and joint ventures
after subtracting dividends received 125 17 142
Carrying amount, December 31 1,855 39 1,894
Joint ventures
Joint ventures are reported in compliance with IAS 31, ”Interests in Joint Ven- tures.” See ”Accounting and valuation principles,” Note 1.
The Group has holdings in joint ventures with a carrying amount of SEK 1,855 M (1,795).
Infrastructure Development included a large carrying amount in joint ventures, SEK 1,990 M (1,896). The value of these companies in the consolidated accounts was reduced by intra-Group profits of SEK –395 M (–324), which arose due to contracting work for these joint ventures, among other things.
Income from joint ventures
Share of income in joint ventures is reported in the income statement, because these holdings are an element of Skanska’s business.
Share of income in joint ventures according to the equity method comes main- ly from Infrastructure Development operations.
Infrastructure Development specializes in identifying, developing and investing in privately financed infrastructure projects, such as roads, hospitals and power generating stations. The business stream focuses on creating new project oppor- tunities in the markets where the Group has operations.
The projects that had the largest effect during 2006 were:
The Autopista Central toll expressway in Santiago, Chile went into full operation in May 2006. Traffic revenue on the Autopista exceeded the original forecasts during 2006 as well. Since the project has gone into full operation, full expenses for interest and depreciation/amortization are being charged to earnings. This ini- tially means that the project will provide a negative contribution to earnings. This is normal for the project type – concessions with traffic risks – given the account- ing principles in effect.
During the year, the hospital in Coventry and the schools in Bexley, England went into operation and provided a positive contribution to earnings. The Breitener/Manaus power generating plant in Brazil was placed in operation dur- ing 2006. Overall, the project caused a loss for the full year. During the second half of the year, however, the project yielded positive earnings.
Two projects that showed a very good earnings trend are the Ponte de Pedra hydropower generating plant in Brazil and the Nelostie highway in Finland. In Ponte de Pedra, which went into operation in 2005, operational costs decreased. On the Nelostie highway, which has been in operation for years, traffic volume was substantially higher than in 2005.
During 2006, Skanska signed contracts for three projects: St. Bartholomew’s and the Royal London Hospital, as well as schools in Midlothian and Bristol, all in the U.K. This meant that Skanska received some contribution in the form of shares in income and interest payments during the year.
Skanska sold holdings in the Bridgend prison, Kings College Hospital and Maputo Port during the year with sizable gains. This meant that their contribu- tion to earnings was lower than in 2005 since these project holdings were only owned for part of the year. The gains on these divestment are reported on a separate line.
Notes, including accounting and valuation principles
98 Skanska Annual Report 2006
Specification of major holdings of shares and participations in joint ventures
Percentage Percentage Consolidated of capital of voting Currency carrying amount1
Company Operations Country stock power if not SEK 2006 2005
Joint ventures in Infrastructure Development
Autopista Central S.A.2 Expressway Chile 48 48 CLP 635 759
Breitener Energetica S/A Power station Brazil 35 35 BRL 175 151
Bristol PFI Development Ltd Education U.K. 50 50 GBP 0
Bristol PFI (Holdings) Ltd Education U.K. 61 46 GBP 60
Capital Hospitals (Holdings)3 Healthcare U.K. 38 38 GBP 92 1
Central Nottinghamshire Hospital (Holdings) Healthcare U.K. 50 50 GBP 1 2
Derby Healthcare Holdings Ltd Healthcare U.K. 25 50 GBP –18 –1
Gdansk Transport Company Highway Poland 30 30 PLN 16 19
Investors in Community (Bexley Schools) Ltd Education U.K. 50 50 GBP 32 32
LLC Nordvod Wastewater Russia 14 14 RUB 26 26
Midlothian Schools Holdings Ltd Education U.K. 50 50 GBP 2
Orkdalsvegen AS Highway Norway 50 50 NOK 11 8
Ponte de Pedra Energetica S/A Power station Brazil 50 50 BRL 350 361
Portus Indico S.A. Port Moçambique 24 24 EUR 22 31
Same, ownership in 2005 32 32
The Coventry and Rugby Hospital Comp.Ltd Healthcare U.K. 25 50 GBP 127 80
Tieyhtiö Nelostie Oy Highway Finland 50 41 EUR 38 51
Tieyhtiö Ykköstie Oy Highway Finland 41 41 EUR 26 16
Others –1
1,595 1,535
Sold in 2006
Bridgend Custodial Services Ltd Correctional care U.K. 20 9 GBP 14
HpC King´s College Hospital Ltd Healthcare U.K. 33 33 GBP 23
37
Other joint ventures 260 223
Total 1,855 1,795
1 Negative carrying amounts are explained by elimination of intra-Group profits.
2 There is also an investment in a concession fee. Its carrying amount was SEK 451 M (540). See Note 19, ”Intangible assets.” 3 Refers to the St. Bartholomew’s and the Royal London Hospital project.
Information on the Group’s share of the income statements and balance sheets of joint ventures reported according to the equity method
The amounts includ Infrastructure Development operations totaling Income statement 2006 2005 2006 2005 Revenue 4,367 2,209 3,598 1,707 Operating expenses –3,994 –1,931 –3,371 –1,502 Operating income 373 278 227 205 Financial items –168 –88 –142 –64
Income after financial items 205 190 85 141
Taxes 3 –29 29 –21
Profit for the year 208 161 114 120
Balance sheet Non-current assets 10,735 8,926 10,567 8,765 Current assets 8,549 5,340 7,653 4,051 Total assets 19,284 14,266 18,220 12,816 Equity attributable to equity holders1 2,234 2,101 1,976 1,878 Minority 16 8 Non-current liabilities 15,350 10,506 14,826 10,161 Current liabilities 1,684 1,651 1,418 777 Total equity and liabilities 19,284 14,266 18,220 12,816
1 Equity exceeded the carrying amount of shares in joint ventures by consolidated intra-Group profits on contracting work for Infrastructure Development, which was not charged to income in these operations and was thus not reported in the table.
Reconciliation with shares in joint ventures 2006 2005
Skanska’s portion of equity in joint ventures, adjusted
for surplus value and goodwill 2,234 2,101 – Intra-Group profit in consolidated financial statements –395 –324 + losses in Infrastructure Development not posted,
since Skanska’s portion is already zero 16 18
Carrying amount of shares 1,855 1,795
Assets pledged
Shares in joint ventures pledged as collateral for loans and other obligations amounted to SEK 1,344 M (1,444).
Other matters
Skanska’s portion of the total investment obligations of partly owned joint ven- tures amounted to SEK 9,862 M (6,998).
Skanska has undertaken to invest an additional SEK 913 M (535) in Infrastructure Development in the form of equity holdings and loans.
The remaining portion is expected to be financed mainly in the form of bank loans or bond loans in the respective joint venture and in the form of participa- tions and loans from other co-owners.
Contingent liabilities to joint ventures amounted to SEK 674 M (1,495).
Notes, including accounting and valuation principles
Skanska Annual Report 2006 99