Telia Company AB (publ) – Annual report – 31 December 2024
Industry: telecoms
C2. Judgements and key sources of estimation uncertainty (extract)
Accounts payables under vendor financing arrangements
Telia Company has arrangements with several banks under which the banks offer Telia Company’s vendors the option to receive earlier payment of Telia Company’s accounts payables. Vendors utilizing the financing arrangement pay a credit fee to the bank. The vendor financing portfolio also includes arrangements where the supplier issues a trade finance instrument, subsequently assigned to a bank specified by the supplier, and offers Telia Company to extend the payment terms in exchange for a price increase consideration paid by Telia Company. All arrangements in the vendor financing portfolio provide earlier payment for the vendors and extended payment terms for Telia Company. Telia Company uses all of the arrangements in the vendor financing portfolio as integrated parts of the commercial relationships with the vendors and the liabilities are part of the working capital in Telia Company’s normal operating cycle. Telia Company does not provide any additional collateral or guarantees to the banks. Based on Telia Company’s assessment the liabilities under the vendor financing arrangement are closely related to operating purchase activities and the financing arrangement does not lead to any significant change in the nature or function of the liabilities. These liabilities in the vendor financing portfolio are therefore classified as accounts payables. The credit period does not exceed 12 months and the accounts payable are therefore not discounted. Accounts payable under vendor financing arrangements were SEK 5,565 million per December 31, 2024 (11,527). See Note C25.
C3. Material accounting policies (extract)
Accounts payable under vendor financing arrangements
Based on Telia Company’s assessment the liabilities under vendor financing arrangements are closely related to operating purchase activities and the financing arrangement does not lead to any significant change in the nature or function of the liabilities. The liabilities in the vendor financing portfolio are therefore classified as accounts payable. The credit period does not exceed 12 months and the accounts payables are therefore not discounted.
Cash flow reporting (extract)
Cash flows from operating activities are reported using the indirect method and include dividends received from associated companies and other equity instruments, interest paid or received (except for paid interest capitalized as part of the acquisition or construction of non-current assets and therefore included in cash flows from investing activities), provisions, compensation from or contributions to the Swedish pension fund and taxes paid or refunded. Changes in non-interest bearing receivables and liabilities are reported in working capital. Terminal financing receivables are included in working capital. Cash flow from operating activities also includes cash flows from film and program rights and from accounts payable under vendor financing arrangements.
C25. Trade payables and other current liabilities
The carrying value of trade payables and other current liabilities were distributed as follows.
The main components of other current financial liabilities are accrued payables to suppliers and accrued interconnect and roaming charges, while other current liabilities mainly entail value-added tax liabilities, advances from customers and accruals of payroll expenses and social security contributions. Contract liabilities (deferred income) mainly relate to subscription and other telecom charges.
Vendor financing arrangements
Telia Company has arrangements with several banks under which the banks offer Telia Company’s vendors the option to receive earlier payment of Telia Company’s accounts payable. Vendors utilizing these financing arrangements pay a credit fee to the bank. The vendor financing portfolio also includes arrangements where the supplier issues a trade finance instrument, subsequently assigned to a bank specified by the supplier, and offers Telia Company to extend the payments terms in exchange for a price increase consideration paid by Telia Company. All arrangements in the vendor financing portfolio provide earlier payment for the vendors and extended payment terms for Telia Company. Telia Company uses all of the arrangements in the vendor financing portfolio as integrated parts of the commercial relationships with the vendors and the liabilities are part of the working capital in Telia Company’s normal operating cycle. Telia Company does not provide any additional collateral or guarantees to the banks. Based on Telia Company’s assessment the liabilities under the vendor financing arrangements are closely related to operating purchase activities and the financing arrangement does not lead to any significant change in the nature or function of the liabilities. The liabilities in the vendor financing portfolio are therefore classified as accounts payable. The credit period does not exceed 12 months and the accounts payable are therefore not discounted.
1) For accounts payable under vendor financing arrangements the majority of the balance has payment due dates closer to 360 days.
On September 4, 2024, Telia Company announced the ambition to restructure the vendor financing program and reduce the volume by 50% during the second half of 2024. The purpose of the restructuring is to drive simplification, reduce cash flow volatility and increase balance sheet transparency, while retaining the program’s benefit to Telia Company and its supplier. As of December 31, 2024, the carrying value for accounts payable under vendor financing arrangements has been reduced by 52%.
Suppliers’ science-based climate targets
Most of Telia Company’s total value chain Greenhouse Gas (GHG) (CO2) emissions are generated in its supply chain (including purchases of network construction and maintenance, network equipment, mobile phones and other hardware and other goods and services). In the procurement process, Telia Company assesses suppliers’ climate management maturity so that it can reward the best performers and influence the others. During 2024, Telia Company continued to engage with its suppliers, urging them to set science-based climate targets. By year-end 2024 suppliers responsible for 62% (52%) of Telia Company’s total supply chain GHG emissions were covered by such targets. Telia Company’s goal is that suppliers responsible for 72% of its total supply chain GHG emissions have set science-based targets by 2025. See Sustainability statements section Environment.
For information on financial instrument categories and fair values see Note C26 and for liquidity risk exposure and management see Note C27.
Accounts examples 