Notes to the parent company’s financial statements
Basic information about the entity
HKScan Corporation is a Finnish public limited company established under the law of Finland. The Company is domiciled in Turku.
HKScan Corporation comprises Group management and Group administration.
HKScan Corporation’s A Share has been quoted on the Nasdaq Helsinki since 1997.
HKScan Corporation is a subsidiary of LSO Osuuskunta and part of the LSO Osuuskunta Group. LSO Osuuskunta is domiciled in Turku.
Copies of HKScan Corporation’s financial statements are available at the company’s registered office at Lemminkäisenkatu 48, 20520 Turku.
BASIS OF PREPARATION
The parent company’s financial statements have been prepared in compliance with valid Finnish Accounting Standards (FAS). The HKScan Group’s consolidated financial statements have been prepared in compliance with the IFRS (International Financial Reporting Standards) and the IAS and IFRS standards and SIC and IFRIC interpretations valid on 31 December 2016.
The amounts in the parent company income statement and balance sheet are in euros and the amounts in the cash flow statement and notes are in thousands of euros.
TRANSACTIONS IN FOREIGN CURRENCY
Foreign currency denominated transactions are recognized at the exchange rates valid on the transaction date. Trade receivables, trade payables and loan receivables denoted in foreign currencies and foreign currency bank accounts have been translated into the functional currency at the closing rate quoted by the European Central Bank on the balance sheet date. Gains and losses arising from business transactions in foreign currencies and from the translation of monetary items have been recognized in financial income and expenses in the income statement.
HKScan Oyj makes all external derivative contracts for the Group. Derivatives that are made for subsidiaries are handled with intercompany derivative contracts. Because of this HKScan Oyj has all the external derivatives of the Group and these are partly for the parent company and partly for subsidiaries.
Outstanding derivatives in foreign currencies are measured at the forward exchange rate quoted on the balance sheet date. Hedge accounting is not applied and changes in the value of foreign exchange contracts hedging commercial flows are recognized through profit or loss in other operating income or expenses, and changes in the value of foreign exchange contracts hedging financial items are recognized in the income statement in foreign exchange gains and losses from financing operations.
Commodity derivatives all relate to subsidiaries and intercompany derivatives have been made. There is no income statement effect as the cash flows from the derivatives are eliminated by the intercompany derivative contracts with subsidiaries. Hedge accounting is not applied. Fair values of these derivatives are netted in the balance sheet and they are reported in the notes.
Hedge accounting is applied on interest rate swaps for the part that they hedge parent company’s interest risk. The fair values of the derivatives are recorded in the balance sheet and changes in the fair values are recorded in the equity. Realised gains or losses on interest rate swaps hedging variable-interest loans are presented under financial items in the income statement. Hedge accounting is not applied on external interest rate swaps that relate to subsidiaries and intercompany derivatives. Income statement effect is eliminated by the intercompany derivative contract with subsidiaries. Fair values of these derivatives are netted in the balance sheet and they are reported in the notes.
The fair values of currency forward contracts are determined by using the market prices for contracts of equal duration at the reporting date. The fair values of interest rate swaps are determined using the net present value method supported by the market interest rate or other market information at the reporting date. If the market value given by a counterparty is used, the company also produces its own calculation using generally accepted valuation methods. The fair values of commodity derivatives are determined by using publicly quoted market prices. The fair values are equal to the prices which the company would have to pay or would obtain if it were to terminate a derivative instrument.
HKScan Corporation employees’ statutory pension provision has been organised through insurance in a pension insurance company. Statutory pension expenses have been charged in the year to which the contributions relate.
MANAGEMENT RETIREMENT BENEFIT OBLIGATIONS AND SEVERANCE PAYMENTS
The remuneration of the CEO consists of a fixed monthly salary, benefits, supplementary pension benefits and possible incentive awards under the company’s incentive scheme. Under the terms of the CEO’s executive agreement, the CEO’s employment may be terminated by the company and the CEO at six months’ notice. In the event that the company terminates the CEO’s executive agreement, the CEO will receive an amount that equals 12 months’ salary, in addition to the salary for the period of notice.
On 20 January 2016, HKScan announced that Hannu Kottonen will discontinue his duties as CEO of HKScan as of that day. In 2016, CEO Hannu Kottonen was paid a total salary and supplementary pension benefits of EUR 1.3 million.
In the interim, Aki Laiho, deputy CEO and COO, temporarily assumed the position of CEO. In 2016, deputy CEO and COO Aki Laiho was paid a total salary and supplementary pension benefits of EUR 0.5 million.
Jari Latvanen started as the new President and CEO of HKScan on 31 October. In 2016, CEO Jari Latvanen was paid a total salary and supplementary pension benefits of EUR 0.4 million.
Consolidated accounting principles are applied to income taxes and deferred tax assets and liabilities when allowed under Finnish accounting principles. The deferred tax liability on depreciation difference is disclosed as a Note.
All leasing payments have been treated as rent. Leasing payments based on unpaid leasing agreements are shown in contingent liabilities in the financial statements.
Accumulated appropriations consist of change in depreciation difference. The difference in depreciation according to plan and accounting depreciation is shown as an appropriation in the income statement and the accumulated difference in depreciation according to plan and accounting depreciation is shown in the balance sheet as accumulated appropriations.