Tecnomen's transition to IFRS standards
Tecnomen Corporation STOCK EXCHANGE RELEASE
31 March 2005 at 1.30 pm
TECNOMEN´S TRANSITION TO IFRS STANDARDS
Tecnomen Corporation adopted IFRS (International Financial Reporting
Standards) as of 1 January 2005. The first financial statements
according to IFRS will be prepared for the financial year ending
31 December 2005 and the first interim report for the quarter ending
31 March 2005.
Exemptions for applying certain standards retrospectively allowed by
the First-Time Adoption standard (IFRS 1) have been applied for
business combinations, defined benefit plans and accumulated
translation differences.
This release describes the main effects of the transition to IFRS
standards on the financial information of 2004, which was originally
reported according to the Finnish Accounting Standards (FAS) set for
public listed companies in Finland.
KEY FIGURES
IFRS FAS
2004 2004
Net sales, MEUR 51.6 51.5
Operating result, MEUR 3.9 1.6
Result before taxes, MEUR 4.9 2.6
Result for the period, MEUR 4.0 2.1
Earnings per share, EUR 0.07 0.04
Earnings per share, diluted, EUR 0.07 0.04
Equity per share, EUR 1.16 1.17
Return on equity, % 6.0 3.2
Return on investment, % 7.4 4.1
Equity ratio, % 88.8 88.1
Balance sheet, MEUR 76.9 77.5
Capitalisation of development costs has a significant positive effect
on Tecnomen´s result for the period 1 January31 December 2004. When
calculated according to IFRS the result for the period improved by
EUR 1.9 million, of which EUR 1.5 million is due to the change in
accounting principle for development costs.
IFRS RECONCILIATION
RECONCILIATION OF FAS IFRS IFRS
CONSOLIDATED OPENING 1.1.2004 adjustments 1.1.2004
BALANCE, MEUR
Long-term assets
Fixed assets 10.1 0.0 10.1
Other long-term assets 2.5 -0.9 1.6
Current assets
Inventories 2.2 0.0 2.2
Trade receivables 24.8 -18.4 6.4
Other financial assets 3.1 15.3 18.3
Cash and bank balances 34.8 0.1 34.9
ASSETS 77.5 -4.0 73.5
Shareholders equity 65.2 -2.2 63.0
Long-term liabilities
Provisions 0.6 0.3 0.9
Interest-bearing 0.5 0.0 0.5
liabilities
Non-interest-bearing 0.3 0.0 0.3
liabilities
Deferred tax liability 0.1 0.0 0.1
Current liabilities
Interest-bearing 0.2 0.0 0.2
liabilities
Non-interest-bearing 10.6 -2.0 8.5
liabilities
EQUITY AND LIABILITIES 77.5 -4.0 73.5
RECONCILIATION OF EQUITY, MEUR 1.1. 31.3. 30.6. 30.9. 31.12.
2004 2004 2004 2004 2004
Shareholders equity according to 65.2 64.5 66.2 67.4 67,5
FAS
IFRS transition:
1. IAS 11 Construction contracts -2.0 -1.8 -1.3 -1.8 -1.5
2. IAS 12 Income taxes 0.0 -0.1 -0.3 -0.5 -0.5
3. IAS 19 Employee benefits -0.2 -0.3 -0.3 -0.3 0.0
4. IAS 38 Intangible assets 0.0 0.3 0.9 1.5 1.5
5. IAS 39 Financial instruments 0.1 0.1 0.1 0.1 0.2
7. IFRS 3 Business combinations 0.0 0.0 0.1 0.1 0.1
Total -2.2 -1.8 -0.8 -0.8 -0.1
Shareholders equity according to 63.1 62.7 65.5 66.6 67.5
IFRS
RECONCILIATION OF CONSOLIDATED Q1 Q2 Q3 Q4
INCOME STATEMENT, MEUR 2004 2004 2004 2004 2004
Result for the period according to -0.8 1.8 1.1 0.0 2.1
FAS
IFRS-transition:
1. IAS 11 Construction contracts 0.2 0.5 -0.5 0.4 0.5
2. IAS 12 Income taxes -0.1 -0.2 -0.1 -0.0 -0.4
3. IAS 19 Employee benefits 0.0 0.0 0.0 0.3 0.2
4. IAS 38 Intangible assets *) 0.3 0.6 0.6 0.0 1.5
6. IFRS 2 Share based payments 0.0 0.0 -0.1 -0.1 -0.2
7. IFRS 3 Business combinations 0.0 0.0 0.0 0.0 0.1
Total 0.4 0.9 -0.1 0.6 1.9
Result for the period according to -0.4 2.8 1.0 0.7 4.0
IFRS
*) Both the capitalisation and amortisation of development costs are
included in the figure of last quarter of 2004.
A. IFRS ACCOUNTING PRINCIPLES WITH REFERENCE TO THE NUMBERS IN THE
TABLE ABOVE
1. REVENUE RECOGNITION
Tecnomen´s deliveries are divided into project or product and service
deliveries.
Project deliveries are recognised according to IAS 11 (Construction
contracts) by stage of completion at the balance sheet date when the
outcome of a project can be estimated reliably. At Tecnomen the stage
of completion is defined by cost-to-cost method i.e by relation of
actual costs to estimated costs.
Outcome of projects containing substantial amount of customer specific
features cannot always be reliably estimated. In such cases revenue
recognition equals only to the actual costs.
Project losses are expensed immediately.
A change in balance sheet classification between trade receivables and
other financial assets has been made in transition to revenue
recognition by stage of completion.
Product and service deliveries are recognised according to IAS 18
when the amount of revenue can be measured reliably and it is probable
that the economic benefits associated with the transaction will flow
to the enterprise. For example, system deliveries of short duration
and supplementary deliveries like maintenance, licences, training,
documentation and spare parts. Revenue from fixed term maintenance
contracts are normally recognised during the contract period by
straight-line basis.
2. INCOME TAXES
According to IAS 12 deferred tax liabilities are to be recognised in
full and deferred tax assets based on estimated probable benefit. Tax
rate valid on the balance sheet date is used in measuring the deferred
taxes. At Tecnomen the most significant deferred taxes arise from
development cost capitalisations. Confirmed losses are not recognised
as a deferred tax asset.
3. EMPLOYEE BENEFITS
The disability pension obligation under the Finnish pension system
(Employees Pension Act, TEL) is reported according to IAS 19 as
defined benefit plan.
The First-Time Adoption standard IFRS 1 has been applied when defining
the employee obligations. The actuarial gains and losses arising
before 1.1.2004 are recognised in the opening IFRS balance sheet.
After the transition period the actuarial gains and losses are
expensed into the income statement by the expected average remaining
working lives of employees to the share exceeding the greater of:
10 per cent of the present value of the defined benefit obligations or
the fair value of plan assets. Defined contribution plans are expensed
during the periods to which the payment relates.
The effect of employee benefit plans on equity is EUR 0.2 million on
1 January 2004.
4. INTANGIBLE ASSETS
The development costs of new products are capitalised and amortised
over the assets expected useful life provided they fulfil the
criteria defined in IAS 38. At Tecnomen, when the IFRS criteria are
met, the capitalisation of development costs is started, when
operation, production and testing requirements are ready and accepted
together with the project plan. The expected useful life of
capitalised development costs varies from three to five years.
In 2004 research and development costs were EUR 11.5 million of which
EUR 1.5 million is capitalised on the IFRS balance sheet 31 December
2004. A significant part of Tecnomen´s R&D activities are directly
related to customer projects or do not fulfil the IAS 38 criteria for
capitalisation.
5. FINANCIAL INSTRUMENTS
Tecnomen applies IAS 39 in accounting and valuation for financial
instruments in IFRS reporting from 1 January 2004.
Hedging of receivables is done for 12 months and derivatives are
accounted by using fair value at the balance sheet date. Tecnomen does
not apply hedge accounting according to IAS 39, therefore the changes
in the fair values of derivatives are accounted in other income or
expenses in income statement.
The adoption of IFRS standards for financial instruments does not
cause significant adjustments to the income statement or to the
balance sheet of Tecnomen Corporation.
Own shares held by the company are recognised according to IAS 32 as
deduction of shareholders´ equity.
6. SHAREBASED PAYMENTS
According to IFRS 2 the option rights granted after November 7, 2002
and not vested before January 1, 2005 are to be measured at the fair
value on the grant date and expensed during their vesting period.
7. AMORTISATION OF GOODWILL
According to standard IFRS 3 Business combinations depreciations are
not made according to the plan but the impairment of the goodwill will
be tested according to the standard IAS 36 on a yearly basis. There
was no need for any impairment based on the test made on the
transition date.
B. OTHER IMPACTS OF IFRS
IMPAIRMENT OF ASSETS
According to the standard IAS 36 company has to test whether there is
any indication that assets may be impaired. To identify any
impairment, the assets carrying value are tested against its
recoverable amount. At Tecnomen these impairment tests are done based
on value in use and on cash-generating unit level. Value in use is the
present value of estimated net future cash flows arising from the use
of an asset.
In the opening balance of 2004, impairment tests for intangible and
tangible assets, including the goodwill, indicated that assets value
in use exceeded the carrying amount.
In interim reports during the year 2004 there has been no indication
that the value of any intangible or tangible cash-generating unit has
been impaired.
SEGMENTS
Tecnomen´s organisation consists of three functions: sales and
customer operations, operations, finance and administration. Project
deliveries are priced by products and components, but the total
contract price is set for the whole project including all Tecnomen´s
and third party products and services. Tecnomen´s management reporting
is done by the whole company´s profitability, by single customer and
customer project profitability, by sales and sales margin per office
and by the costs per cost centre of the functions. Tecnomen´s risk
profile is the same, regardless of the geographical area or the
product.
From the beginning of 2005 Tecnomen reports the Group as primary
segment and the geographical areas as secondary segments. The
geographical segments are the Americas (North, Central and South
America), EMEA (Europe, the Middle East and Africa) and APAC (Asia
Pacific).
LEASES
According to standard IAS 17 the lease agreements are classified
either finance leases or operating leases. A finance lease is a lease
agreement where the risks and rewards of the assets are substantially
transferred to its owner. The assets under the finance leases should
be recognised in assets and depreciated according to the same plan as
property, plant and equipment. Tecnomen Corporation doesnt have any
notable finance lease agreements.
CASH FLOW STATEMENTS
According to IRFS, the capitalisation of development costs causes
classification change between the cash flow from business operations
and the cash flow from investments. The adjusted cash flow statements
are not presented, as in Tecnomen Corporation there are no other
significant differences between the cash flow statements according to
IFRS and FAS.
When preparing the comparative data, all IAS/IFRS standards valid on
the releases date have been taken into account.
The IFRS figures are unaudited.
Tecnomen´s interim report for January-March 2005 will be published on
4 May 2005.
APPENDIX
Tecnomen Corporation´s financial information for 2004 according to
IFRS standards
TECNOMEN CORPORATION
Board of Directors
FURTHER INFORMATION
Jarmo Niemi, President and CEO, tel. +358 (0)9 8047 8799
Riitta Järnstedt, CFO, tel. +358 (0)9 8047 8650
DISTRIBUTION
Helsinki Exchanges
Main media
APPENDIX
TECNOMEN CORPORATION´S FINANCIAL INFORMATION FOR 2004 ACCORDING TO
IFRS STANDARDS
IFRS Q1 2004 COMPARATIVE FIGURES
CONSOLIDATED INCOME STATEMENT, IFRS FAS IFRS
MEUR Q1 Q1 adjustments
NET SALES 13.1 11.7 1.4
Other operating income 0.0 0.0 0.0
Materials and services -3.4 -3.4 0.0
Employee benefits expense -5.4 -5.7 0.3
Depreciation -0.6 -0.6 0.0
Other operating expenses -4.0 -2.8 -1.2
OPERATING RESULT -0.4 -0.8 0.4
Financial income and expenses 0.2 0.2 0.0
RESULT BEFORE TAXES -0.2 -0.7 0.5
Income taxes -0.2 -0.2 0.1
RESULT FOR THE PERIOD -0.4 -0.8 0.4
Earnings per share, EUR -0.01 -0.01
Earnings per share, diluted, -0.01 -0.01
EUR
CONSOLIDATED BALANCE SHEET, IFRS FAS IFRS
MEUR 31.3. 31.3. adjustments
Long-term assets
Fixed assets 10.3 9.9 0.3
Other long-term assets 1.6 2.5 -0.9
Current assets
Inventories 2.7 2.7 0.0
Trade receivables 11.7 30.5 -18.8
Other financial assets 17.9 1.6 16.3
Cash and bank balances 30.3 30.2 0.1
ASSETS 74.4 77.4 -3.0
Shareholders´ equity 62.7 64.5 -1.8
Long-term liabilities
Provisions 0.9 0.6 0.3
Interest-bearing liabilities 0.6 0.6 0.0
Non-interest bearing 0.3 0.3 0.0
liabilities
Deferred tax liabilities 0.2 0.1 0.1
Current liabilities
Interest-bearing liabilities 0.1 0.1 0.0
Non-interest bearing 9.6 11.2 -1.6
liabilities
EQUITY AND LIABILITIES 74.4 77.4 -3.0
IFRS Q2 2004 COMPARATIVE FIGURES
CONSOLIDATED INCOME IFRS FAS IFRS IFRS FAS IFRS
STATEMENT, MEUR Q2 Q2 adjustments Q1-Q2 Q1-Q2 adjustments
NET SALES 14.4 13.6 0.9 27.6 25.3 2.3
Other operating income 0.0 0.0 0.0 0.0 0.0 0.0
Materials and services -2.1 -2.1 0.0 -5.5 -5.5 0.0
Employee benefits -4.6 -5.1 0.5 -10.1 -10.8 0.8
expense
Depreciation -0.5 -0.6 0.0 -1.1 -1.2 0.1
Other operating -4.0 -3.7 -0.3 -8.1 -6.6 -1.5
expenses
OPERATING RESULT 3.1 2.0 1.1 2.8 1.2 1.6
Financial income and -0.2 -0.2 0.0 0.0 0.0 0.0
expenses
RESULT BEFORE TAXES 3.0 1.9 1.1 2.8 1.2 1.6
Income taxes -0.2 0.0 -0.2 -0.5 -0.2 -0.3
RESULT FOR THE PERIOD 2.8 1.8 0.9 2.3 1.0 1.3
Earnings per share, 0.05 0.02 0.04 0.02
EUR
Earnings per share, 0.05 0.02 0.04 0.02
diluted, EUR
CONSOLIDATED BALANCE SHEET, MEUR IFRS FAS IFRS
30.6. 30.6. adjustments
Long-term assets
Fixed assets 10.7 9.7 1.0
Other long-term assets 0.5 1.0 -0.5
Current assets
Inventories 2.7 2.7 0.0
Trade receivables 13.3 30.9 -17.6
Other financial assets 17.2 1.8 15.5
Cash and bank balances 31.6 31.5 0.1
ASSETS 76.0 77.5 -1.5
Shareholders´ equity 65.5 66.2 -0.8
Long-term liabilities
Provisions 0.9 0.6 0.3
Interest-bearing liabilities 0.6 0.6 0.0
Non-interest-bearing 0.3 0.3 0.0
liabilities
Deferred tax liabilities 0.4 0.1 0.3
Current liabilities
Interest-bearing liabilities 0.1 0.1 0.0
Non-interest-bearing 8.3 9.6 -1.3
liabilities
EQUITY AND LIABILITIES 76.0 77.5 -1.5
IFRS Q3 2004 COMPARATIVE FIGURES
CONSOLIDATED INCOME IFRS FAS IFRS IFRS FAS IFRS
STATEMENT, MEUR Q3 Q3 adjustments Q1-Q3 Q1-Q3 adjustments
NET SALES 11.7 12.5 -0.8 39.2 37.8 1.5
Other operating income 0.0 0.0 0.0 0.0 0.0 0.0
Materials and services -2.5 -2.5 0.0 -8.1 -8.1 0.0
Employee benefits -4.6 -4.9 0.3 -14.7 -15.8 1.1
expense
Depreciation -0.5 -0.6 0.0 -1.7 -1.8 0.1
Other operating -3.1 -3.6 0.5 -11.2 -10.1 1.0
expenses
OPERATING RESULT 0.9 0.9 0.0 3.7 2.1 1.6
Financial income and 0.4 0.4 0.0 0.4 0.4 0.0
expenses
RESULT BEFORE TAXES 1.4 1.3 0.0 4.1 2.5 1.6
Income taxes -0.3 -0.2 -0.1 -0.8 -0.4 -0.4
RESULT FOR THE PERIOD 1.0 1.1 -0.1 3.3 2.1 1.2
Earnings per share, EUR 0.02 0.04 0.06 0.04
Earning per share, 0.02 0.04 0.06 0.04
diluted, EUR
CONSOLIDATED BALANCE SHEET, MEUR IFRS FAS IFRS
30.9. 30.9. adjustments
Long-term assets
Fixed assets 11.3 9.6 1.6
Other long-term assets 0.9 0.9 0.0
Current assets
Inventories 2.7 2.7 0.0
Trade receivables 14.3 31.5 -17.2
Other financial assets 16.4 2.3 14.1
Cash and bank balances 31.8 31.6 0.1
ASSETS 77.3 78.6 -1.3
Shareholders´ equity 66.6 67.4 -0.8
Long-term liabilities
Provisions 0.9 0.6 0.3
Interest-bearing liabilities 0.6 0.6 0.0
Non-interest-bearing 0.3 0.3 0.0
liabilities
Deferred tax liabilities 0.6 0.2 0.4
Current liabilities
Interest-bearing liabilities 0.1 0.1 0.0
Non-interest-bearing 8.3 9.5 -1.2
liabilities
EQUITY AND LIABILITIES 77.3 78.6 -1.3
IFRS Q4 2004 COMPARATIVE FIGURES
CONSOLIDATED INCOME IFRS FAS IFRS IFRS FAS IFRS
STATEMENT, MEUR Q4 Q4 adjustments Q1-Q4 Q1-Q4 adjustments
NET SALES 12.4 13.7 -1.4 51.6 51.5 0.1
Other operating income 1.4 0.0 1.4 1.4 0.0 1.4
Materials and services -3.2 -3.2 0.0 -11.3 -11.3 0.0
Employee benefits -5.2 -5.4 0.3 -19.9 -21.2 1.4
expense
Depreciation -0.6 -0.5 -0.1 -2.3 -2.3 0.0
Other operating -4.6 -5.0 0.4 -15.8 -15.1 -0.6
expenses
OPERATING RESULT 0.1 -0.5 0.6 3.9 1.6 2.3
Financial income and 0.6 0.6 0.0 1.0 1.0 0.0
expenses
RESULT BEFORE TAXES 0.8 0.1 0.6 4.9 2.6 2.3
Income taxes -0.1 -0.1 -0.0 -1.0 -0.5 -0.4
RESULT FOR THE PERIOD 0.7 0.0 0.6 4.0 2.1 1.9
Earnings per share, EUR 0.01 0.00 0.07 0.04
Earning per share, 0.01 0.00 0.07 0.04
diluted, EUR
CONSOLIDATED BALANCE SHEET, MEUR IFRS FAS IFRS
31.12. 31.12. adjustments
Long-term assets
Fixed assets 11.1 9.4 1.7
Other long-term assets 0.5 0.5 0.0
Current assets
Inventories 2.2 2.2 0.0
Trade receivables 12.7 32.1 -19.4
Other financial assets 19.6 2.7 16.9
Cash and bank balances 30.8 30.6 0.2
ASSETS 76.9 77.5 -0.6
Shareholders´ equity 67.5 67.5 -0.1
Long-term liabilities
Provisions 0.1 0.1 0.0
Interest-bearing liabilities 0.5 0.5 0.0
Non-interest-bearing 0.0 0.0 0.0
liabilities
Deferred tax liabilities 0.6 0.2 0.5
Current liabilities
Interest-bearing liabilities 0.1 0.1 0.0
Non-interest-bearing 8.1 9.2 -1.1
liabilities
EQUITY AND LIABILITIES 76.9 77.5 -0.6
