ELISA?S COMPARATIVE IFRS INFORMATION FOR 2004
ELISA CORPORATION STOCK EXCHANGE RELEASE 8 APRIL 2005 AT 8.30am
ELISAS COMPARATIVE IFRS INFORMATION FOR 2004
As from the beginning of 2005, the Finnish Accounting Standards (FAS)
have been replaced by International Financial Reporting Standards (IFRS)
in Elisa Corporations consolidated reporting. Elisa will disclose its
IAS 34 compliant first quarter interim report on Thursday, 28 April 2005.
This release includes the reconciliation of the equity and profit as per
transition date and comparative quarterly accounts, as well as the
quarterly income statements, balance sheets, segment information and key
ratios for 2004. Cumulative comparative information for 2004 is available
on Elisas Web site at elisa.fi. There are no substantial differences
between the cash flow statement pursuant to the IFRS and FAS standards.
Elisa uses the exemptions allowed by the IFRS 1 standard for the
retrospective application of single standards. The most significant
exemption concerns business combinations carried out before the
transition date. These acquisitions of subsidiaries and associates are
consolidated at original cost or consolidation method. The IFRS 3
standard is applied to acquisitions subsequent to 1 January 2004.
Impairment tests have been performed, and no impairments are recorded in
the balance sheet of the transition date nor are impairments booked in
the balance sheet of the subsequently terminated financial period.
An exemption is used for pensions classified as defined benefit plans.
According to this, the IAS 19 standard is not applied retrospectively,
but at the date of transition the liability of defined benefit plans are
recognised in the opening balance sheet and at fair value valid at the
time. Revaluations of non-current assets are reversed. After the
adjustment the groups total non-current assets are based on original
acquisition costs.
Key income statement items
FAS Change IFRS
1-12/2004 1-12/2004
Revenue, MEUR 1 356 1 356
EBITDA, MEUR 432 22 455
Depreciation, MEUR -239 26 -213
EBIT, MEUR 193 48 242
Financial income and expenses, -27 -2 -29
MEUR
Profit before taxes, MEUR 166 46 212
Net profit for the period, MEUR 107 45 152
Earnings per share, EUR 0.78 0.32 1.10
Key balance sheet items
FAS Change IFRS
31.12.2004 31.12.2004
Non-current assets, MEUR 1 253 124 1 377
Current assets, MEUR 488 -2 486
Equity and minority interest, 885 30 915
MEUR
Non-current liabilities, MEUR 566 93 658
Current liabilities, MEUR 274 17 291
Provisions for liabilities and
charges, MEUR 17 -17 0
Key financial ratios
FAS Change IFRS
1-12/2004 1-12/2004
Interest-bearing net liability 411 51 462
MEUR
Return on capital employed
(ROCE), % 13.6% 2.1% 15.7%
Return on equity (ROE), %
13.7% 5.5% 19.2%
Equity ratio, % 51.1% -1.8% 49.3%
Gearing ratio, % 46.4% 4.2% 50.6%
Adopting the IFRS reporting does not cause changes to revenue. The
percentage completion method pursuant to IAS 11 has in principal part
been used since the beginning of 2003.
The improved EBITDA is mainly due to EUR 11 million finance lease
agreements and the effect of the treatment of EUR 11 million defined
benefit pensions. The abolishment of goodwill amortisation will reduce
depreciation by EUR 45 million. New depreciation of EUR 18 million is
made on finance lease assets. Adopting the treatment of financial
instruments in compliance with IAS 39 and the interests of the finance
lease agreements will not have a significant impact on financial income
and expenses. The effect of the transition on the 2004 taxes will not be
substantial.
The increase in the balance sheet is mainly due to the reversal of
goodwill amortisation, finance lease handling as well as due to
derecognising the offsetting of tax assets and liabilities carried out in
2004. Shifting to amortised cost in loan recognition instead of nominal
value will reduce the balance sheet by EUR 14 million. In accordance
with IFRS, the minority interest is presented under equity. A GSM network
provision of EUR 7 million relating to finance lease agreements under
provisions for liabilities and charges will be derecognised. Other
provisions of EUR 11 million are grouped under non-current liabilities.
The differences between IFRS standards and FAS in this release are listed
under attached data. Principal changes in accounting principles are
described after the attached data.
The IFRS figures are unaudited.
A conference call for investors and analysts will commence at 13.00
Finnish time. The telephone number for conference is +358 9 8248 5799,
pin 4310.
ELISA CORPORATION
Velipekka Nummikoski
Vice President, Corporate Communications
For further information, please contact:
Ms Tuija Soanjärvi, CFO, tel. +358 10 262 2606
Distribution:
Helsinki Stock Exchange
Major media
ELISA CORPORATION
Statement of changes in equity
(EUR million)
Note 1.1.04 31.3.04 30.6.04 30.9.04 31.12.04
Consolidated equity according
to the Finnish accounting
standards 699 731 735 760 851
Effects of transition to IFRS
Amortisation on consolidated
goodwill 1 11 23 34 45
Employee benefits 2 -24 -23 -22 -20 -14
Leases 3 5 -2 -1 -1 -5
Revaluations of tangible assets 4 -11 -11
Financial instruments 5 1 1 0 1 1
Other adjustments 6 2 2 2 2 2
Income tax 7 3 5 4 3 4
IFRS adjustments, total -25 -18 5 18 33
Equity held by parent
company shareholders 674 713 741 778 884
Minority interest according
to the Finnish accounting
standards 77 76 65 64 34
IFRS adjustments 8 -4 -4 -4 -4 -3
Equity held by
parent company shareholders,
IFRS 73 71 61 60 31
Equity according to IFRS 748 784 802 838 915
Statement of changes in net profit
(EUR million)
Jan- Apr- Jul- Oct-
Mar Jun Sep Dec
Note 04 04 04 04
Net profit according
to the Finnish accounting standards 32 15 24 36
Effects of transition to IFRS
Consolidated goodwill 1 11 11 11 11
Employee benefits 2 1 1 1 7
Leases 3 -7 1 1 -4
Financial instruments 5 0 0 0 0
Others 6 0 0 0 0
Income tax 7 2 -1 -1 -1
IFRS adjustments, total 7 12 13 13
Net profit according to FAS 38 27 38 48
Items presented in the tables
for each row have been rounded.
ELISA CORPORATION
CONSOLIDATED INCOME STATEMENT
(EUR million)
FAS IFRS FAS IFRS
Jan- Jan- Apr- Apr-
Mar Mar Jun Jun
Note 04 04 Diff. 04 04 Diff.
Revenue 333 333 0 339 339 0
Other operating
income 7 7 0 4 4 0
Operating expenses 2,3,6 -221 -220 1 -248 -242 6
Depreciation and
impairments:
On tangible assets 3,6 -49 -53 -4 -49 -53 -4
On consolidated
goodwill 1 -11 0 11 -11 0 11
EBIT -59 67 8 35 48 13
Financial income
and expenses:
Income from associates 1 0 0 0 -1 0 1
Other financial income
and expenses 3,5 -8 -10 -2 -7 -7 0
Profit before tax 51 56 5 28 41 13
Income tax 7 -18 -17 1 -11 -12 -1
Minority interest 8 -1 -1 0 -2 -2 0
Net profit for the
period 32 38 6 15 27 12
Earnings per share,
basic (EUR/share) 0.23 0.28 0.05 0.11 0.20 0.09
Earnings per share,
diluted (EUR/share) 0.23 0,28 0.05 0.11 0.20 0.09
CONSOLIDATED INCOME STATEMENT
(EUR million)
FAS IFRS FAS IFRS
Jul- Jul- Oct- Oct-
Sep Sep Dec Dec
Note 04 04 Diff. 04 04 Diff.
Revenue 333 333 0 351 351 0
Other operating
income 1 0 -1 20 16 -4
Operating expenses 2,3,6 -229 -222 7 -257 -245 12
Depreciation and
impairments:
On tangible assets 3,6 -49 -54 -5 -48 -53 -4
On consolidated
goodwill 1 -11 0 11 -11 0 11
EBIT 45 57 12 55 69 15
Financial income
and expenses:
Income from associates 1 0 0 0 2 1 0
Other financial
income and expenses 3,5 -8 -7 1 -5 -6 -1
Profit before tax 36 50 13 51 65 14
Income tax 7 -11 -11 0 -13 -13 -1
Minority interest 8 -1 -1 0 -3 -3 0
Net profit for
the period 24 38 13 36 48 13
Earnings per share,
basic (EUR/share) 0.18 0.27 0.09 0.26 0.35 0.09
Earnings per share,
diluted (EUR/share) 0.18 0.27 0.09 0.26 0.35 0.09
ELISA CORPORATION
CONSOLIDATED BALANCE SHEET
(EUR million)
FAS IFRS FAS IFRS FAS IFRS
31.12. 1.1. 31.3. 31.3. 30.6. 30.6.
Note 03 04 Diff. 04 04 Diff. 04 04 Diff.
Non-current
assets
Intangible
assets 1,6 64 56 -8 54 48 -6 58 57 0
Consolidated
goodwill 1 460 460 0 446 457 11 439 457 18
Tangible
assets 3,4,6 856 1006 149 711 777 66 678 750 72
Investments
in associates 6 20 15 -5 17 12 -4 16 12 -4
Available-for-sale
financial
assets 1,5,6 12 9 -3 11 8 -3 11 7 -4
Receivables 5 3 2 -1 42 41 -1 47 46 -1
Deferred tax
asset 7 82 123 42 90 129 40 63 104 42
1497 1671 174 1371 1473 102 1312 1435 123
Current assets
Inventories 16 16 0 14 14 0 15 15 0
Tax asset 1 1 0 0 0 0 7 7 0
Trade and
other receivables 5 348 356 8 374 375 0 258 259 0
Financial asset
recognised in
profit or loss 6 6 0 24 24 0 114 114 0
Cash and cash
equivalents 61 61 0 44 43 0 39 39 0
433 440 8 456 456 0 433 433 0
Total assets 1930 2112 182 1827 1929 102 1745 1868 123
Capital and reserves
Issued capital 69 69 0 69 69 0 69 69 0
Capital paid-in in
excess of par value 517 517 0 517 517 0 517 517 0
Reserve fund 3 3 0 3 3 0 3 3 0
Revaluation reserve 0 0 0 0 0 0 0
Treasury shares -25 -25 0 -25 -25 0 -25 -25 0
Retained earnings 135 110 -25 135 110 -25 125 111 -14
Net profit for
the period 32 38 6 46 65 19
Minority interests 8 73 73 71 71 61 61
699 748 49 731 784 53 735 802 67
Minority interests 8 77 -77 75 -75 66 -66
Provisions for
liabilities and
charges 3 52 -52 31 -31 24 -24
Non-current
liabilities
Retirement benefit
obligation 2 24 24 23 23 22 22
Deferred tax
liability 7 40 40 36 36 40 40
Provisions 6 26 26 22 22 17 17
Non-current
liabilities 3,5 617 755 138 562 616 54 561 612 51
617 845 228 562 698 136 561 691 130
Current liabilities
Current portion of
non-current
liabilities 102 102 0 102 102 0 101 101 0
Tax liability 3 3 0 4 4 0 11 11 0
Current liabilities 3 380 414 34 322 342 19 247 263 16
485 519 34 428 447 19 359 375 16
Total equity
and liabilities 1930 2112 182 1827 1929 102 1745 1868 123
ELISA CORPORATION
CONSOLIDATED BALANCE SHEET
(EUR million)
FAS IFRS FAS IFRS
30.9. 30.9. 31.12. 31.12.
Note 04 04 Diff. 04 04 Diff.
Non-current assets
Intangible assets 1,6 55 55 0 63 76 13
Consolidated
goodwill 1 428 457 29 441 466 26
Tangible assets 3,4,6 665 736 71 650 724 74
Investments in
associates 6 16 12 -4 16 12 -5
Available-for-sale
financial
assets 1,5,6 11 7 -4 13 10 -2
Receivables 5 61 47 -14 58 46 -11
Deferred tax asset 7 48 86 38 14 43 29
1283 1400 117 1253 1377 124
Current assets
Inventories 15 15 0 15 15 0
Tax asset 3 3 0 0
Trade and other
receivables 5 302 302 0 310 308 -2
Financial asset
recognised
in profit or loss 129 129 0 96 96 0
Cash and cash
equivalents 89 89 0 67 67 0
538 538 0 488 486 -2
Total assets 1821 1938 117 1741 1864 122
Capital and reserves
Issued capital 69 69 0 71 71 0
Capital paid-in
in excess of par value 517 517 0 562 562 0
Reserve fund 3 3 0 3 3 0
Revaluation reserve -1 -1 0 0
Treasury shares -25 -25 0 -3 -3 0
Retained earnings 125 111 -14 111 99 -12
Net profit for the
period 71 103 32 107 152 45
Minority interests 8 60 60 31 31
760 838 78 851 915 64
Minority interests 8 64 -64 34 -34
Provisions for
liabilities and charges 3 21 -21 17 -17
Non-current liabilities
Retirement benefit
obligation 2 20 20 15 15
Deferred tax liability 7 38 38 30 30
Provisions 6 14 14 10 10
Non-current
liabilities 3,5 574 608 34 566 604 38
574 680 107 566 658 93
Current liabilities
Current portion of
non-current liabilities 101 101 0 0 0 0
Income tax liability 5 5 0 2 2 0
Current liabilities 3 297 314 17 272 289 17
403 420 17 274 291 17
Total equity and
liabilities 1821 1938 117 1741 1864 122
ELISA CORPORATION
KEY FIGURES BY SEGMENT
(EUR million)
EBITDA EBITDA
Jan-Mar Apr-Jun
04 04 04 04
FAS IFRS Diff. FAS IFRS Diff.
Segment: Mobile communications 66 64 -2 44 47 3
Consolidated entries
Total 66 64 -2 44 47 3
Segment: Fixed network 52 55 3 45 48 3
Consolidated entries
Total 52 55 3 45 48 3
Other companies
Comptel 3 3 0 5 6 1
Other companies*) 0 0 0 0 -1 -1
Consolidated entries
Total 3 3 0 5 5 0
Unallocated expenses **) -2 -2 0 1 1 0
Group, total 119 120 1 95 101 6
EBITDA EBITDA
July-Sept Oct-Dec
04 04 04 04
FAS IFRS Diff. FAS IFRS Diff.
Segment: Mobile communications 57 60 3 52 57 5
Consolidated entries
Total 57 60 3 52 57 5
Segment: Fixed network 47 50 3 42 48 6
Consolidated entries
Total 47 50 3 42 48 6
Other companies
Comptel 3 3 0 5 6 1
Other companies*) 0 1 1 1 1 0
Consolidated entries **)
Total 3 4 1 6 7 1
Unallocated expenses **) -2 -2 0 14 10 -4
Group, total 105 112 7 114 122 8
*)Includes Yomi IT companies
and the parent company of
Yomi Group, for instance.
**) Includes corporate staff
and corporate administration.
ELISA CORPORATION
KEY FIGURES BY SEGMENT
(EUR million)
EBIT EBIT
Jan-Mar Apr-Jun
04 04 04 04
FAS IFRS Diff. FAS IFRS Diff.
Segment: Mobile communications 45 42 -3 25 25 0
Amortisation of consolidated
goodwill -8 8 -10 10
Total 37 42 5 15 25 10
Segment: Fixed network 26 27 1 20 20 0
Amortisation of consolidated
goodwill -1 1 -1 1
Total 25 27 2 19 20 1
Other companies
Comptel 3 3 0 5 4 -1
Other companies*) -2 -1 1 -2 0 2
Amortisation of consolidated
goodwill
Total 1 1 0 3 4 1
Unallocated expenses **) -4 -4 0 -2 -1 1
Group, total 59 67 8 35 48 13
EBIT EBIT
Jul-Sep Oct-Dec
04 04 04 04
FAS IFRS Diff. FAS IFRS Diff.
Segment: Mobile communications 35 36 1 32 35 3
Amortisation of consolidated
goodwill -10 10 -10 10
Total 25 36 11 23 35 13
Segment: Fixed network 21 24 3 16 20 4
Amortisation of consolidated
goodwill -1 1
Total 21 24 3 15 20 5
Other companies
Comptel 3 3 0 5 5 0
Other companies*) -2 -2 0 -1 -1 0
Amortisation of consolidated
goodwill 0 0
Total 1 1 0 3 4 1
Unallocated expenses **) -3 -3 0 13 10 -3
Group, total 45 57 12 55 69 15
*)Includes Yomi IT companies and
the parent company of Yomi Group,
for instance.
**) Includes corporate staff and
corporate administration.
ELISA CORPORATION
KEY FIGURES FAS IFRS
31.12. 1.1.
03 04 Diff.
Equity/share, (EUR) 5.09 4.91 -0.18
Gearing ratio 87 % 114 %
Equity ratio 40 % 36 %
Interest-bearing liabilities,
(EUR million) 747 922 176
Non-interest bearing liabilities,
(EUR million) 407 442 35
Adjusted number of shares
on average 137320789 137320789
Adjusted number of shares at
the balance sheet date 137320789 137320789
FAS IFRS FAS IFRS
31.3. 31.3. 30.6. 30.6.
04 04 Diff. 04 04 Diff.
Equity/share, (EUR) 5.32 5.19 -0.13 5.36 5.40 0.04
Gearing ratio 76 % 87 % 64 % 72 %
Equity ratio 44 % 41 % 46 % 43 %
Interest-bearing
liabilities,
(EUR million) 680 754 74 666 733 67
Non-interest bearing
liabilities,
(EUR million) 341 391 51 278 333 55
Adjusted number
of shares on
average 137320789 137320789 137320789 137320789
Adjusted number
of shares at
the balance
sheet date 137320789 137320789 137320789 137320789
FAS IFRS FAS IFRS
30.9. 30.9. 31.12. 31.12.
04 04 Diff. 04 04 Diff.
Equity/share, (EUR) 5.54 5.67 0.13 6.00 6.23 0.23
Gearing ratio 56 % 61 % 46 % 51 %
Equity ratio 45 % 43 % 51 % 49 %
Interest-bearing
liabilities,
(EUR million) 679 730 52 573 625 52
Non-interest bearing
liabilities,
(EUR million) 319 370 51 283 324 41
Adjusted number
of shares
on average 137320789 137320789 137569703 137569703
Adjusted number
of shares at
the balance
sheet date 137320789 137320789 141778437 141778437
Notes on the IFRS tables
1. Goodwill
Subsidiaries and associates acquired before 1 January 2004 are
consolidated by using the acquisition cost or consolidation method
in accordance with FAS. The IFRS 3 standard applies to acquisitions
made after 1 January 2004.
The depreciation according to plan on consolidated goodwill
pursuant to FAS has been reversed. The annual impact of the
reversal is EUR 45 million. The total amount of goodwill in the
balance sheet of the transition date as at 1 January 2004 was EUR
462 million. Of the acquisition of Finnet International Ltd in June
2004, EUR 3.5 million was targeted at intangible assets. EUR 11.2
million from the acquisition of Yomi Plc was directed to customer
relationships, EUR 1.6 million to available-on-sale IT business,
and EUR 8.9 million was recognised as goodwill. On 31 December
2004, the total amount of goodwill was EUR 473 million.
2. Employee benefits
The pension security and supplementary pension arrangements of the
statutory Finnish pension scheme (TEL), which in principal are
taken care by the Elisa Pension Fund, are calculated as a defined
benefit plan in the balance sheet as at the transition date. In
defined benefit pensions, the IAS 19 standard is not applied
retrospectively, but on the transition date the liability of
defined benefit plan is booked in the opening balance at fair value
valid at the time (pension liability on 1 Jan 2004 EUR 24 million).
Due to the changes in calculation bases approved by the Ministry of
Social Affairs and Health in December 2004, the disability element
of TEL is calculated as a defined contribution plan in the IFRS
balance sheet as per 31 December 2004. As a consequence of this,
the TEL liability arranged in insurance companies and entered in
the balance sheet on the day of the transition was capitalised in
total in the fourth quarter 2004. The liability for the employment
pension and supplementary pension security arranged in the Pension
Fund was capitalised during the last quarter of 2004. This was due
to the amendments in the TEL legislation and the layoffs taken
place during 2004. The treatment of the retirement benefit
obligation arranged in the Pension Fund will continue as a defined
benefit plan. The balance sheet as at 31 December 2004 included EUR
14.8 million defined benefit liability, of which the share of the
Pension Fund arrangements accounts for 12.8 million, the companys
own liability EUR 1.7 million, and the share of insurance company
arrangements EUR 0.3 million.
3. Leases
The Elisa group has categorised several leases to be treated as
finance lease agreements in accordance with the IAS 17 Leases
standard. The most significant changes in the categories apply to
the leasing and rental agreements of the telecom network, leasing
and rental agreements of IT servers and a number of real estate.
According to the previous practice, these agreements were disclosed
in notes under leasing and rental liabilities.
The share of the telecom premises, EUR 3.6 million, from the
capital gain on the former main office is reversed because a long-
term agreement was signed on the premises. The agreement is
classified as a finance lease agreement, For this part, the capital
gain will be capitalised during the lease period.
Assets leased through finance lease agreements less accumulated
depreciation are booked under property, plant and equipment, and
correspondingly, liabilities from the agreement are recognised as
interest-bearing liabilities. Leases generated by finance lease
agreements have been replaced by entries in financial expenses and
repayment of debt.
At the end of 2004, tangible assets included finance lease assets
of EUR 59 million (EUR 146 million on 1 Jan 2004) and liabilities
included finance lease liability of EUR 72 million (EUR 179 million
on 1 Jan 2004). The balance sheet of the transition date included
EUR 72 million Germany-based finance lease assets and finance lease
liability of EUR 79 million. Provisions of EUR 7 million (EUR 30
million on 1 Jan 2004) from the provisions for liability and charges
pursuant to FAS were reversed on the GSM network.
4. Revaluation of tangible assets
Revaluations recognised in the carrying amounts of real estate in
accordance with FAS have been reversed (EUR 11 million on 1 Jan
2004). After the adjustment the groups non-current assets are
entirely based on original acquisition costs.
5. Financial instruments
Elisa complies with the IAS 39 standard as of 1 January 2004.
In accordance with FAS, borrowings are valued at their amortised
cost instead of nominal capital. The change in the value method
will reduce the interest-bearing net liability by EUR 13.4 million
during the third quarter 2004.
The groups derivative contracts consist of Comptel Corporations
forward currency contracts. Comptel adopted hedge accounting on 1
January 2005, and the company has deployed FAS in handling forward
currency contracts in its comparative information. Forward currency
contracts are measured at fair value in Elisas opening balance
sheet and re-valued at fair value at the end of comparative annual
quarters. Changes in value are recognised as income in financial
income and expenses.
The treatment of financial instruments had no major impact on the
2004 result.
6. Other adjustments
The capitalisation principles relating to product development have
been specified mainly for the part of the capitalisation of own
work. After the adjustment of software product development
expenses, intangible assets rose by EUR 3.0 million in 2004 (EUR
2.9 million on 1 Jan 2004).
Equities which entitle to the management of real estate companies
are consolidated by using the proportionate consolidation method in
accordance with IAS 31. As a result of the consolidation, the item
presented as the value of the equities is principally reported as
part of the buildings.
The anticipated dismantlement costs of treated telephone poles are
recognised as environmental liability. Dismantlement costs, EUR
1.7 million on 1 Jan 2004, are capitalised in non-current assets.
The corresponding debt is presented under provisions.
Elisa will apply the IFRS 2 Share-based Payment standard to all
stock option schemes in which the options have been granted after 7
November 2002 and which do not vest before 1 January 2005. Option
arrangements prior to this have not been presented as expenses in
the income statement. Stock options are measured at fair value at
the time they are granted, and they are expensed on a straight-line
basis in the income statement over the period from the date they
were granted to commencement of the right to exercise them. The
fair value of the options is determined on the basis of the Black-
Scholes pricing model. Stock options granted to the personnel
pursuant to the application of this standard exist in Elisas
subsidiary Comptel. The impact on earnings was not substantial in
2004.
Reporting lines in the income statement and balance sheet have also
been regrouped.
7. Income tax
Deferred taxes have been entered for IFRS adjustments causing
temporary differences. Deferred taxes are not recognized for
goodwill and other permanently tax free or non-deductible items.
The deferred tax assets and liabilities settled on a net basis
according to FAS have been derecognised. Deferred tax liabilities
are grouped under non-current liabilities in IFRS reporting.
8. Minority interests
The changes brought about by IFRS reporting also concern
subsidiaries with minority interests. These changes have an effect
on the respective subsidiaries equity and thereof on the groups
minority interests. Minority interests are grouped under corporate
equity in IFRS reporting.
PRINCIPAL CHANGES IN ACCOUNTING PRINCIPLES
Consolidation principles
Business combinations before the date of transition to IFRS on 1
January 2004 are reported as they were recognized under FAS.
Acquisitions after 1 January 2004 are recognised in accordance with
IFRS 3.
In accordance with IAS 36, depreciation according to plan is no
longer made on goodwill but is instead tested annually for
impairment. Goodwill is allocated to the segments. Impairment tests
in segments are performed at the date of the transition, and
annually thereafter and always when there is a particular reason.
In accordance with IAS 31, equities of real estate companies are
consolidated by using the proportionate consolidation method. As a
result of the consolidation, the item presented as the value of the
equities is principally reported as part of the buildings.
Segment-specific information
Business segments are defined as Elisas primary segments under
IFRS reporting: Fixed network business, Mobile communications and
Other businesses. Thus, the segment breakdown of the present
reporting will not change when transferring to IFRS reporting.
Geographical segments Finland and Other countries are defined
as secondary segments under IFRS reporting.
Property, plant and equipment
Leases
In Elisa, several leases have been classified to be treated as
finance lease agreements in compliance with the IAS 17 Leases
standard. The most significant changes in the classifications
concern the leasing and rental agreements of the telecom network,
IT servers and leasing and rental agreement of a number of real
estate.
Property rented with finance lease agreements less accumulated
depreciation is booked under property, plant and equipment, and
obligations from the agreements are correspondingly recognised in
interest-bearing liabilities. Rents due to finance lease agreements
are replaced by entries in financial expenses and repayment of
debt. The assets financed with finance leasing agreements pursuant
to the IAS 17 standard are capitalised in the balance sheet and
amortised in accordance with the depreciation plans relating to
property, plant and equipment during the economic life of the
commodity or during a shorter period of the lease agreement.
Revaluations
Revaluations recognised in the carrying amounts of real estate in
accordance with FAS have been reversed in the IFRS balance sheet.
After the adjustment the groups non-current assets are entirely
based on original acquisition costs.
Financial instruments
Investments in equity instruments, except for investments in
associates and real estate companies, are classified as available-
for-sale instruments. Investments in equity instruments are valued
at fair value. Unlisted securities, for which the values cannot be
measured reliably, are recognized at cost. Changes in the fair
value of equities are recognized directly in equity. When the
investment is sold, the accumulated fair value adjustment is
recognized in income.
Investments in money market instruments and fixed income securities
are classified as financial assets at fair value and recognised in
income. Borrowings are valued at their amortised cost instead of
nominal capital. The acquisition cost may include management fees,
trading costs and issue gains or losses.
In accordance with the IAS 39 standard, derivative agreements are
measured at fair value and recognised as income, unless hedge
accounting is applied. Hedge accounting is applied as of 1 January
2005 in Comptel to non-euro items that relate to the outstanding
order book. When hedging is efficient the change in the fair value
of these forward contracts is directly recognised in the equity.
Retirement benefit obligation
Elisa has a number of pension arrangements both in the Pension Fund
and in pension insurance companies. Pension arrangements are
different, depending on each countrys legislation and practice. As
a rule, pension security and supplementary pension under the
Finnish statutory pension scheme (TEL) have been organised through
Elisas Pension Fund.
In IFRS reporting pensions are either defined contribution plans or
defined benefit plans. Payments made on defined contribution plans
are booked as expenses in the income statement of the respective
financial period. Pension arrangements of foreign subsidiaries are
defined contribution plans. The difference in financial statement
practices is due to the different handling of pension arrangements
classified as defined benefit pension plans in IFRS financial
statements.
The IAS 19 standard is not retrospectively applied to defined
benefit pensions, but the liability of the defined benefit plans is
booked in the opening balance sheet at fair value. In the long run
actuarial gains or losses to be recognised in the income statement
will be divided by the expected average remaining working lives of
the employees participating in that plan for each defined benefit
plan for the portion that exceeds 10% of the present value of the
defined benefit pension obligation or of the greater fair value of
any plan assets.
Stock options
Elisa will apply the IFRS 2 Share-based Payment standard to all
stock option schemes in which the options have been granted after 7
November 2002 and which do not vest before 1 January 2005. Option
arrangements prior to this have not been presented as expenses in
the income statement.
Stock options are measured at fair value at the time they are
granted, and they are expensed on a straight-line basis in the
income statement over the period from the date they were granted to
commencement of the right to exercise them. The fair value of the
options is determined on the basis of the Black-Scholes pricing
model.
Treasury shares
Treasury shares are presented in their own line under equity.
Previously treasure shares were deducted from retained earnings.
ELISA CORPORATION
Velipekka Nummikoski
Vice President, Corporate Communications
Additional information:
Tuija Soanjärvi
Executive Vice President, Corporate Finance, tel. +358 50 3822606
Distribution:
Helsinki Exchanges
Major media
