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PrOPerTy, PLanT anD eQUiPMenTThe Group Parent Company
Land and buildings 2010 2009 2010 2009
Opening cost, 1 January 573 601 574 601
– acquisitions 586 – – –
– investments 11 1 11 1
– Sales/disposals 0 –31 0 –30
– exchange rate differences –10 – – –
– reclassifications 3 2 3 2
Closing accumulated cost, 31 December 1,163 573 588 574
– Opening depreciation, 1 January –373 –370 –374 –370
– Sales/disposals 0 13 0 12
– Depreciation for the year –19 –16 –15 –16
Closing accumulated depreciation, 31 December –392 –373 –389 –374
Closing carrying amount, net, 31 December 771 200 199 200
The Parent Company’s properties and buildings on non-freehold property are generally taxed as special properties and are exempt from property tax under the Property Tax act (SFS 1979:1152). Land improvements are included in the carrying amount together with buildings and land.
The Group Parent Company
Plant and machinery 2010 2009 2010 2009
Opening cost, 1 January 4,281 4,393 4,216 4,328
– acquisitions 837 – – –
– investments 18 47 16 47
– Sales/disposals –40 –275 –40 –275
– exchange rate differences –15 0 0 0
– reclassifications 135 116 135 116
Closing accumulated cost, 31 December 5,216 4,281 4,327 4,216
– Opening depreciation –2,949 –2,857 –2,883 –2,791
– Sales/disposals 39 133 39 134
– Dissolution retroactive depreciation 0 2 0 0
– Depreciation for the year –235 –227 –221 –226
Closing accumulated depreciation, 31 December –3,145 –2,949 –3,065 –2,883
– Opening impairment losses, 1 January –2 –14 –3 –15
– Sales/disposals 0 0 0 0
– reclassifications 2 0 0 0
– impairment losses for the year 0 12 0 12
Closing accumulated impairment losses, 31 December 0 –2 –3 –3
Closing carrying amount, net, 31 December 2,071 1,330 1,259 1,330
The reversal of impairment losses during 2009 on plant and machinery for SeK 12 million was related to customer specific equipment within the Teracom Sweden segment.
TERACOM GROuP | annual report 2010
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The Group Parent Company
Equipment, tools, fixtures and fittings 2010 2009 2010 2009
Opening cost, 1 January 358 546 296 492
– investments 21 11 21 5
– acquisitions 3 1 –8 0
– Sales/disposals –9 –238 0 –239
– reclassifications 0 38 0 38
Closing accumulated cost, 31 December 373 358 309 296
– Opening depreciation, 1 January –328 –498 –277 –457
– Sales/disposals 8 196 8 196
– Depreciation for the year –18 –26 –14 –16
Closing accumulated depreciation, 31 December –338 –328 –283 –277
– Opening impairment losses, 1 January 0 0 0 0
– reclassifications –2 0 0 0
– impairment losses for the year 0 0 0 0
Closing accumulated impairment losses, 31 December –2 0 0 0
Closing carrying amount, net, 31 December 33 30 26 19
The Group Parent Company
Construction-in-progress 2010 2009 2010 2009
Opening cost, 1 January 115 149 115 149
– investments 192 129 192 129
– Sales –2 –7 –2 –7
– reclassifications –141 –156 –141 –156
Closing accumulated cost, 31 December 164 115 164 115
Closing carrying amount, net, 31 December 164 115 164 115
investment projects and the inventory of spare parts related to investment projects is for construction-in-progress.
Continuation Note 16
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inTanGiBLe aSSeTSDuring the third quarter of 2010, Teracom aB acquired 100 percent of the shares in the Danish terrestrial network operator, BSD (name is being changed to Teracom a/S). according to the preliminary acquisition analysis, SeK 144 million of the company’s total value has been allocated to customer agreements, customer relations and goodwill, see note 28.
in 2009, Teracom aB acquired 51 percent of the shares in the Finnish Pay-Tv operator, Digi Tv Plus Oy. in accounting terms, the acquisition analysis comprises 100 percent since Teracom aB has a put option on the remaining 49 percent of the shares and Teracom aB also has a call option to acquire the same percentage, see note 28.
as of 31 December 2010, Goodwill pertained to Boxer Tv-access aB, Digi Tv Plus Oy and BSD (name is being changed to Teracom a/S).
The Group
2010
Intangible assets Goodwill Brand
Patents, licenses and
similar rights agreementsCustomer Customer relations Total accumulated cost
– Opening balance, 1 January 1,158 84 209 0 84 1,535
– investments 0 0 42 0 0 42
– acquisitions 112 0 120 20 12 264
– exchange rate differences –37 –11 –7 0 –11 –66
Closing accumulated cost, 31 December 1,233 73 364 20 85 1,775
accumulated amortization and impairment losses
– Opening balance, 1 January –16 0 –108 0 –6 –130
– reclassifications –3 0 0 0 0 –3
– Depreciation for the year – – –47 –2 –10 –59
– impairment losses for the year 0 0 –18 0 0 –18
Closing accumulated amortization and impairment losses,
31 December –19 0 –173 –2 –16 –210 Carrying amount 1 January 1,142 84 101 0 78 1,405 31 December 1,214 73 191 18 69 1,565 The Group 2009
Intangible assets Goodwill Brand
Patents, licenses and
similar rights Customer relations Total accumulated cost
– Opening balance, 1 January 865 0 416 0 1,281
– investments 0 0 113 0 113
– acquisitions 307 89 0 88 484
– Disposals 0 0 –318 0 –318
– exchange rate differences –14 –5 –2 –4 –25
Closing accumulated cost, 31 December 1,158 84 209 84 1,535
accumulated amortization and impairment losses
– Opening balance, 1 January –16 0 –201 0 –217
– Disposals 0 0 115 0 115
– reclassifications 0 0 –4 0 –4
– Depreciation for the year – – –18 –6 –24
Closing accumulated amortization and impairment losses, 31 December –16 0 –108 –6 –130
Carrying amount
1 January 849 0 215 0 1,064
31 December 1,142 84 101 78 1,405
TERACOM GROuP |annual report 2010
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Parent Company
2010 2009
Intangible assets and similar rights Patents, licenses and similar rights Patents, licenses
accumulated cost
– Opening balance, 1 January 77 384
– investments 5 5
– Sales/disposals 0 –315
– reclassifications 0 3
Closing accumulated cost, 31 December 82 77
accumulated amortization
– Opening balance, 1 January –52 –171
– Sales/disposals 0 133
– Depreciation for the year –7 –14
Closing accumulated depreciation, 31 December –59 –52
accumulated impairment losses
– Opening balance, 1 January 0 0
– Årets nedskrivning –10 0
Closing accumulated impairment losses, 31 December –10 0
Carrying amount
1 January 25 213
31 December 13 25
Testing for impairment of goodwill
Goodwill is allocated to the Group’s cash generating units that have been identified by operating segment.
a summary of the allocation of goodwill to each operating segment is provided below.
Goodwill
The Group's operating segments
SeK millions 2010 Teracom Sweden 0 Boxer Sweden 832 Teracom Denmark 110 Boxer Denmark 0 PlusTv Finland 272 Total 1,214
The Teracom Group’s goodwill and intangible assets that have an uncertain useful life are not amortized. rather, they are tested annually for impair- ment. when testing for impairment, the recoverable amount for each cash generating unit (CGU) is calculated. The recoverable amount is either the fair value or the value-in-use of the CGU (whichever is higher).
The recoverable amount of a CGU has been established based on calcu- lations of the value-in-use. These calculations are derived from an estima- tion of future cash flows before tax, based on the most recent financial business plans that have been approved by the Group management team. The Teracom Group has selected a discount rate after tax that reflects cur- rent market assessments of the time value of money and the risks specific to the asset. The discount rate does not reflect risks for which future cash flows have been adjusted. The starting point for calculating the discount rate is the company’s weighted average cost of capital.
Boxer Sweden
impairment testing of Boxer Sweden is based on a calculation of the value- in-use. The calculated value is based on cash flow forecasts through 2015, which are based on reasonable and verifiable assumptions representing the Group’s best estimates of the financial conditions that are expected to prevail during the period. The estimated future cash flows are comparable to the amount that would most likely be received in a sale between inde- pendent parties. The present value of the forecasted cash flows has been calculated using a discount rate of approximately 11.5%. The expected future scenario is based on prior experience and external sources. The
Group management team has determined that there have not been any changes to important assumptions such that the calculated value-in-use is now less than the carrying amount.
PlusTV Finland
impairment testing of PlusTv Finland is based on a calculation of the value- in-use. The calculated value is based on cash flow forecasts through 2017, which are based on reasonable and verifiable assumptions representing the Group’s best estimates of the financial conditions that are expected to pre- vail during the period. The calculations apply to periods that are more than five years in the future because the company is still in the start-up phase and it will be quite some time before long-term stable profitability is achieved. The estimated future cash flows are comparable to the amount that would most likely be received in a sale between independent parties. The present value of the forecasted cash flows has been calculated using a discount rate of approximately 11.5%. Price-earnings ratios, improved mar- gins and growth in sales are important variables to consider when calculat- ing PlusTv’s value-in-use. The expected future scenario is based on prior experience and external sources. The Group management team has deter- mined that there have not been any changes to important assumptions such that the calculated value-in-use is now less than the carrying amount.
Boxer Denmark
impairment testing of the value of shares in Boxer Tv a/S is based on a calculation of the value-in-use. The calculated value is based on cash flow forecasts through 2019, which are based on reasonable and verifiable assumptions representing the Group’s best estimates of the financial condi- tions that are expected to prevail during the period. The calculations apply to periods that are more than five years in the future because the company is still in the start-up phase and it will be quite some time before long-term stable profitability is achieved. The estimated future cash flows are compa- rable to the amount that would most likely be received in a sale between independent parties. The present value of the forecasted cash flows has been calculated using a discount rate of approximately 11.5%. important variables to consider when calculating Boxer Denmark’s value-in-use are improved margins, growth in sales and price-earnings ratios. The expected future scenario is based on prior experience and external sources. The Group management team has determined that there have not been any changes to important assumptions such that the calculated value-in-use is now less than the carrying amount.
Continuation Note 17
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OTher FinanCiaL aSSeTSThe Group Parent Company
Other financial assets 2010 2009 2010 2009
net asset, pensions 51 40 0 0
Prepaid broadcasting rights in Denmark 0 28 0 0
Long-term loan receivable 56 26 56 26
endowment insurance 1 1 1 1
Other 6 0 0 0
Total 114 95 57 27
a detailed description of the item, “net asset, pensions” is provided in note 7.
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DeFerreD TaXThe Group Parent Company
2010 2009 2010 2009
Deferred tax assets 120 12 9 9
Deferred tax liabilities –482 –446 – –
Deferred tax asset/tax liability, net –362 –434 9 9
The tables below present deferred tax assets and liabilities for the Group and the Parent Company according to category and how the assets and liabilities changed during the year.
THE GROuP
Deferred tax assets/liabilities
Untaxed reserves intangible assets Pension liability Deficit
deduction Other Total
Opening balance, 1 January –422 –46 –19 44 9 –434
acquisitions 0 0 –6 –6
exchange rate differences 6 –6 7 7
Taken up as income during the year –27 2 1 96 –1 71
Closing balance, 31 December 2010 –449 –38 –18 134 9 –362
PARENT COMPANy Deferred tax assets/liabilities
real estate
Pension
liability Total
Opening balance, 1 January 6 3 9
Taken up as income during the year 1 –1 0
Closing balance, 31 December 2010 7 2 9
as of the reporting date, the Group did not have any unutilized deficit deductions related to the Swedish business.
The total deficit pertaining to the Danish operations was SeK 572 (271) million on the closing date, which corresponds to a deferred tax asset of SeK 143 (68) million (using the Danish tax rate). having taken into consideration uncertainties about future profits and other factors, a deferred tax asset of SeK 105 (0) million has been reported by the Boxer Denmark segment. Unuti- lized deficit deductions for the Danish operations amount to SeK 151 (271) million.
For the Finnish operations, the total deficit as of the closing date was SeK 571 (526) million, which corresponds to a deferred tax asset of SeK 148 (137) million (using the Finnish tax rate). For the PlusTv Finland segment, SeK 38 (44) million has been reported as a deferred tax asset having taken into consideration uncertainties about future profits and other factors. Unutilized deficit deductions for the Finnish operations amount to SeK 424 (358) million.
The unutilized deficit deductions have an unlimited life, except for the deduction in Finland, which has a 10-year life.
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invenTOrieSThe Group
Type of goods 2010 2009
Finished goods and goods for resale 25 62
Total 25 62
valued at cost 25 62
Total 25 62
TERACOM GROuP | annual report 2010
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FinanCiaL inSTrUMenTS anD FinanCiaL riSK ManaGeMenTTeracom’s operations expose the Group to various types of financial risk. The Group’s overall financial operations and management of financial risk are centralized to the Teracom Group’s Finance department. These activi- ties are based upon the finance policy established by the Board of Direc- tors, which is characterized by the desire to maintain a low level of risk. The Group’s financial strategy and goals are designed to achieve maximum return on equity based upon reliable, cost-effective financial management practices that help ensure adequate control and high quality risk manage- ment within the Group. The overriding principle is to minimize all factors that could have a negative impact on earnings and cash flow due to short- term fluctuations in financial markets. This applies to both the Parent Company and the Group, in its entirety.
The Group may use derivative instruments in order to hedge certain exposures to risk, however, only for the following purposes: – To convert future payments for electricity consumption to a fixed
electricity price.
– To convert future expected commercial payments in foreign currencies (primarily eUr) to Swedish crowns (SeK).
– To convert the fixed interest term for borrowing.
Financial risks are categorized as follows: currency risk, interest rate risk, electricity price risk, credit risk, liquidity risk and capital risk.
CuRRENCy RISK
This is the risk that changes in exchange rates will negatively impact the Group’s financial position. This type of risk is divided into two categories (below): transactional and translational.
Transactional exposure
Transaction exposure encompasses all future contractual and forecasted income and expenses in foreign currencies, which thus involve a risk that the Group’s profitability will be negatively impacted by changes in exchange rates. The Teracom Group has limited transactional exposure. This is because the value-added from international business activities is primarily created locally by having expenses in the same currency as the sales revenues. as a result, the Group’s financial currency risks are low. as of the reporting date, currency derivatives aimed at minimizing trans- action exposure amounted to SeK 0 (0) million.
Sensitivity analysis of currency risk
The Teracom Group’s currency transactions are primarily in SeK, eUr and DKK. During 2010, the net outflow of eUr was an amount corresponding to SeK –146 (–88) million. in 2010, the average exchange rate for eUr was SeK 9.0664. a fluctuation in the exchange rate of +/– 15 percent would impact profits by SeK +/– 22 million. The net outflow of DKK was an amount corre- sponding to SeK –102 (–199) million. in 2010, the average exchange rate for DKK was SeK 1.2165. a fluctuation in the exchange rate of +/– 15 percent would impact profits by SeK +/– 15 million.
Translation exposure
Because the company has international business activities, there is also a certain translation exposure. This is rooted in the value of foreign invest- ments as well as the profits generated on an ongoing basis. Such profits are translated using the average rate for the year as the opening value and comparing it to the year’s ending rate, which is provided by the Swedish Central Bank. The difference is reported against equity. accordingly, the only time that an actual cash flow is involved is in connection with dis- posals, investments and dividends from subsidiaries. hedging primarily involves loans in local currencies.
it is possible to hedge net investments in foreign operations by financ- ing the acquisition of foreign companies with loans in the same foreign currency. any exchange gains/losses that arise because of such loans are dealt with via an adjustment of translation differences against equity such that the loans act as a currency hedge on the acquired net assets. The translation difference on the foreign subsidiary is then reported upon consolidation against the Group’s equity.
Translation exposure on net assets in foreign subsidiaries amounted to SeK 33 (22) million.