IAS 1 para 55, vendor finance arrangement disclosure

Telia Company AB (publ) – Annual report – 31 December 2017

Industry: telecoms

C2 JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (extract)

Accounts payables under vendor financing arrangements

Telia Company has an arrangement with a bank under which the bank offers 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. Telia Company does not pay any credit fees and does not provide any additional collateral or guarantee to the bank. 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 are therefore classified as accounts payables with separate disclosures in the notes. The credit period does not exceed 12 months and the accounts payables are therefore not discounted. Account payables under vendor financing arrangements were SEK 1,678 million per December 31, 2017 (SEK 684 million). See note C24 “Trade payables and other current liabilities”.

C3 SIGNIFICANT ACCOUNTING POLICIES (extract) 

Trade receivables and trade payables – measurement

Trade receivables are initially recognized at fair value, nor­mally being the invoiced amount, and subsequently carried at invoiced amount less impairment (bad debt losses), which equals amortized cost since the terms are generally 30 days and the recognition of interest would be immate­rial. An estimate of the amount of doubtful receivables is made when collection of the full amount is no longer prob­able. An impairment loss on trade receivables is calculated as the difference between the carrying amount and the present value of the estimated future cash flow. Bad debts are written-off when identified and charged to Selling and marketing expenses. Accrued trade payables are recog­nized at the amounts expected to be billable.

Trade payables are initially recognized at fair value, normally being the invoiced amounts, and subsequently measured at invoiced amounts, which equals amortized cost, using the effective interest rate method, since generally the payments terms are such that the impact of discounting would be immaterial.

Accounts payables 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. These liabilities are therefore classified as accounts payables, but are specified in the disclosures. The credit period does not exceed 12 months and the accounts payables are there­fore not discounted.

C24 TRADE PAYABLES AND OTHER CURRENT LIABILITIES

Trade payables and other current liabilities were distributed as follows.

telia1

1) Includes short term liability regarding rights for the Finnish ice hockey league amounting to SEK 84 million.

For accounts payable and current liabilities, the carry­ing value equals fair value as the impact of discounting is insignificant. Refer to Note C25 “Financial assets and liabilities by category and level” for more information on financial instruments classified by category/fair value hierarchy level and to Note C26 “Financial risk manage­ment” on management of liquidity risk. Telia Company has an arrangement with a bank under which the bank of­fers 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. Telia Company does not pay any credit fees and does not provide any additional collateral or guarantee to the bank.

As of December 31, 2017, contractual cash flows for liabilities at amortized cost represented the following expected maturities.

telia2

Corresponding information for currency derivatives held-for-trading are presented in section “Liquidity risk manage­ment” to Note C26 “Financial risk management.”

The main components of current liabilities are accrued payables to suppliers and accrued interconnect and roam­ing charges, while other current liabilities mainly entail value-added tax, advances from customers and accruals of payroll expenses and social security contributions.

Deferred income mainly relate to subscription and other telecom charges.

 

 

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