2.1 Compliance with standards and laws

The consolidated accounts were prepared per International Financial Reporting Standards (IFRS) published by the International Accounting Standards Board (IASB) as well as interpretive statements from the International Financial Reporting Interpretations Committee (IFRIC) as approved for application within the EU,. The Swedish Financial Reporting Board’s recommendation RFR 1 Supplementary Accounting Regulations for Groups has also been applied when preparing the consolidated accounts.

The parent company applies the same accounting policies as the Group, except where otherwise stated below in the parent company accounting policies section.

The parent company’s functional currency is the Swedish krona, which is also the reporting currency for the parent company and the Group. The financial statements are therefore presented in the Swedish krona. All amounts are rounded off to the nearest thousand, unless otherwise specified.

The accounting policies specified belowf, with their detailed exceptions, were applied consistently to all periods presented in the consolidated financial statements.

2.1.1 New and amended standards applied by the Group

The next section describes the amended accounting policies that the Group has applied since 1 January 2010. Other IFRS amendments effective as of 2010 had no material impact on the consolidated accounts.

Business combinations and consolidated accounts
As of 1 January 2010, the Group applies the revised IFRS 3 Business Combinations and amended IAS 27 Consolidated and Separate Financial Statements. The amended accounting policies involve: changes to the definition of business activities, expensing transaction fees for business combinations, fixing contingent considerations at fair value on the date of acquisition, and recognising effects of revaluation of liabilities related to contingent considerations as income or expense in profit/loss for the year. Other news includes two alternative methods for recognising non-controlling interest and goodwill, either at fair value, e.g. goodwill is included in non-controlling interest, or the non-controlling interest is included in net assets. Choice of method is determined individually for each acquisition. Acquisitions made after receiving controlling interest are considered owner transactions and are recognised directly in equity, constituting a change to the CDON Group’s previous policy, which was to recognise surplus amounts as goodwill.

Changes to the policies have not had a retroactive effect on the Company’s financial statements, so no figures in the financial statements have been adjusted.

Presentation of the financial statements
The IASB’s annual improvements that were published in May 2010 changed the requirements of IAS 1 Presentation of Financial Statements regarding the presentation of the statement of changes in equity. The company has elected to implement these changes early, starting with the 2010 annual report. The changes mean that reconciliation of the year’s change in each component of equity in the statement of changes in equity, such as reserves for accumulated other comprehensive income, do not need to specify each item of other comprehensive income. The company has, as permitted under this amendment, chosen to provide information with such detailed reconciliation of reserves and other components of equity in the notes instead of in the statement of changes in equity. Such detailed reconciliation was also provided in the notes of the 2009 annual report, but appears to be required in the statement of changes in equity under the version of IAS 1 that applies to 2010, without said early adoption. Though, in accordance with the wording of the amended IAS 1, the previous year’s comprehensive income line item has been split up with separate specification of profit/loss for the year and other comprehensive income for the year in the statement of changes in equity. The presentation changes apply to the current year and the comparative year. The changes did not result in any adjustments to amounts in the financial statements.

2.1.2 New IFRSs that have not yet been implemented

Several new or amended IFRSs will not go into effect until coming financial years and were not adopted early in preparing these financial statements. New standards or amendments effective for future financial years will not be adopted early.

As of 2013, the new IFRS 9 Financial Instruments is intended to replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 may not be applied as it is not approved yet by the EU. Its effect on the Group is considered insignificant.

These changes in accounting policies with future application should not have any effect on the consolidated financial statements:

-   Amendments to IAS 24 Related Party Disclosures, mainly regarding information on government-related companies, but also on the definition of related parties

-   Amendments to IAS 32 Financial Instruments: Presentation, regarding presentation of new share issues

-   Amendments to IFRS 7 Financial Instruments: Disclosures, regarding new disclosure requirements for transferred financial assets  

-   Amendments to IFRIC 14/IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction, regarding advance payments to cover minimum funding requirements

-   IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments

-   Annual improvements to IFRSs that are not already adopted, especially among those published in May 2010

2.2 Classification

Non-current assets and non-current liabilities are essentially expected to be recovered or paid 12 months or more after the reporting date. Current assets and current liabilities essentially comprise amounts expected to be recovered or paid within 12 months of the reporting date.

2.3 Operating segment reporting

An operating segment is a Group entity that engages in activities that may earn revenue and incur expenses, and for which separate financial information is available. Operating segment earnings are reviewed by the Company’s executive management to assess performance and allocate resources to the segment. See Note 4 for more information on the division and presentation of operating segments.

2.4 Consolidation principles and business combinations

Subsidiaries
Subsidiaries are companies over which CDON Group AB has a controlling interest. Controlling interest means, directly or indirectly, the right to formulate a company’s financial and operational strategies with the aim of receiving economic benefits. When judging whether there is a controlling interest, potential voting shares that can be used or converted immediately are taken into account.

Acquisitions on or after 1 January 2010
Subsidiaries are recognised using acquisition accounting. With this method, acquisition of a subsidiary is regarded as a transaction whereby the Group indirectly acquires the subsidiary’s assets and assumes its liabilities. The acquisition analysis establishes the fair value of acquired identifiable assets and assumed liabilities on the acquisition date, as well as any non-controlling interest. Transaction expenses, except for transaction fees attributable to issued equity or debt instruments, are recognised directly in profit/loss for the year.

In business combinations in which the transferred payment, any non-controlling interest, and fair value of previously held interest (for incremental acquisitions) exceeds the fair value of acquired assets and assumed liabilities that are recognised separately, the difference is recognised as goodwill. When the difference is negative, it is recognised directly in profit/loss for the year.

Compensation transferred in connection with the acquisition does not include payments for the settlement of past business relationships. This type of settlement is recognised in profit/loss.

Contingent considerations are recognised at fair value on the date of acquisition. In cases where contingent considerations are presented as equity instruments, no revaluation is done and adjustments are made in equity. Other contingent considerations are revalued at each reporting date and the change is recognised in profit/loss for the year.

Non-controlling interest arises in cases where the acquisition does not include 100% of the subsidiary. There are two options for recognising non-controlling interest:
(1) recognise the non-controlling interest’s share of proportional net assets, or
(2) recognise non-controlling interest at fair value, which means that non-controlling interest is part of goodwill. Choosing between the two options for recognising non-controlling interest can be done individually for each acquisition.

The acquisition of Lekmer AB on 31 March 2010, where non-controlling interest amounted to 9.9%, was recognised at fair value.

For incremental acquisitions, goodwill is determined on the date control is taken. Previous holdings are assessed at fair value and changes in value are recognised in profit/loss for the year.

Disposals leading to loss of controlling interest but where holdings are retained are assessed at fair value, and the change in value is recognised in profit/loss for the year.

Acquisitions completed before 31 December 2009
For acquisitions made before 31 December 2009 in which the acquisition price exceeds the fair value of acquired assets and assumed liabilities as well as contingent liabilities that are recognised separately, the difference is recognised as goodwill. When the difference is negative, it is recognised directly in profit/loss for the year.

Transaction expenses, except for transaction fees attributable to issued equity or debt instruments, are included in the acquisition price.

Acquisition of non-controlling interest
Acquisition from non-controlling interest is recognised as a transaction in equity, that is, between the parent company’s owners (in retained profits) and the non-controlling interest. Therefore, no goodwill arises in these transactions. The change in non-controlling interest is based on its proportional share of net assets.

Sale of non-controlling interest
Sale of non-controlling interest, where some controlling interest is retained, is recognised as a transaction in equity; that is, between the parent company’s owners and the non-controlling interest. The difference between retained liquidity and the non-controlling interest’s proportional share of acquired net assets is recognised in retained profits.

Transactions eliminated in consolidation
Intra-group receivables and liabilities, income or expenses, and unrealised gains or losses that arise from intra-group transactions between Group companies are entirely eliminated in preparation of the consolidated accounts. 

2.5 Foreign currency

2.5.1 Foreign currency transactions

Foreign currency transactions are translated into the functional currency at the exchange rate that applied on the transaction date. The functional currency is the currency used in the primary economic environments in which the companies operate. Monetary assets and liabilities in foreign currencies are translated into the functional currency at the exchange rate on the reporting date. Exchange differences arising from the translations are recognised in profit/loss for the year.

2.5.2 Financial statements of foreign operations

Assets and liabilities in foreign operations, including goodwill and other Group surpluses and deficits, are translated from the functional currency of the foreign operation to the Group’s reporting currency, the Swedish krona, at the exchange rate applicable on the reporting date. Income and expenses in foreign operations are translated to the Swedish krona at an average rate that is an approximation of the exchange rates on the respective transaction date. Translation differences that arise from currency translation of foreign operations are otherwise recognised in comprehensive income and are accumulated in a separate component of equity called the translation reserve. In the event that the foreign operation is wholly owned, the translation difference is allocated to non-controlling interest based on its proportional participating interest. When divesting foreign operations, they are realised in the operation for accumulated translation differences, where they are reclassified from translation reserve in equity to profit/loss for the year. In cases where disposal occurs but controlling interest is retained, the proportional share of cumulative translation differences are transferred from other comprehensive income to non-controlling interest.

2.6 Revenue

2.6.1 Sale of goods and rendering of services

Revenue from the sale of goods is recognised in accordance with the terms of sale, that is, when the goods are submitted to the transport agent, net of returns.

Revenue from the sale of services is recognised when services are delivered.

2.6.2 Bartering

Bartering refers to the exchange of gift certificates for other goods or services. Bartering is recognised at the fair value of the goods or services. The fair value is determined from existing contracts for the same type of services with other customers. Revenue from bartering is recognised when the gift certificate is redeemed; the expense is booked when the goods or services are used.

2.7 Leasing

2.7.1 Operating leases

Expenses pertaining to operating leases are recognised in profit/loss for the year on a straight-line basis over the lease term. Incentives received in conjunction with signing a lease agreement are recognised in profit/loss for the year as a reduction of the leasing payments on a straight-line basis over the lease term. Variable charges are expensed in the periods in which they arise.

2.8 Financial income and expenses

Financial income comprises interest income on invested funds.

Financial expenses comprise interest expenses on loans. Borrowing costs are recognised in earnings using the effective interest method.

Exchange gains and exchange losses are recognised at net.

Effective interest is the interest that discounts estimated future payments and disbursements during a financial instrument’s expected term at the financial asset’s or liability’s recognised net value. The calculation includes all fees paid or received by the parties to the contract that are part of the effective interest, transaction costs, and all other surplus and deficit values.

2.9 Taxes

Income taxes comprise current and deferred tax. Income taxes are recognised in profit/loss for the year, except when the underlying transaction is recognized in other comprehensive income or equity, in which case the related tax effect is recognised in other comprehensive income or equity.

Current tax is tax that is payable or receivable for the current year, according to the tax rates enacted or for all practical purposes enacted on the reporting date. Current tax also includes adjustment of current tax attributable to previous periods.

Deferred tax is calculated using the balance sheet method, based on temporary differences between the carrying amounts and tax bases of assets and liabilities. Temporary differences are not considered in consolidated goodwill or for differences that arose in initial recognition of assets and liabilities that are not business combinations, which at the time of the transaction affect neither recognised nor taxable earnings. Also not considered are temporary differences that are attributable to interests in subsidiaries that are not expected to be reversed within the foreseeable future. Measurement of deferred tax is based on how underlying assets or liabilities are expected to be realised or settled. Deferred tax is calculated using the tax rates and rules enacted or for all practical purposes enacted on the reporting date.

Deferred tax assets regarding deductible temporary differences and loss carry-forwards are only recognised where it is deemed probable that they can be used. The value of deferred tax assets is reduced when their use is no longer deemed probable.

Any additional income tax that arises in conjunction with dividends is recognised when the dividend is recognised as a liability.

2.10 Financial instruments

Financial instruments recognised on the statement of financial position include cash and cash equivalents, loan receivables, and accounts receivable among the assets and accounts payable and loans payable among the liabilities.

2.10.1 Recognition on and derecognition from the statement of financial position

A financial asset or financial liability is recognised on the statement of financial position when the company becomes a party to the contractual provisions of the instrument. Accounts receivable are entered on the statement of financial position when an invoice is sent. Liabilities are entered when the counterparty has rendered a service or supplied a product and there is a contractual obligation to pay, even if an invoice has not yet been received. Accounts payable are recognised when an invoice is received.

Financial assets are removed from the statement of financial position when the entitlements of agreements are realised, fall due, or the Company loses control of them. The same applies to part of a financial asset. Financial liabilities are removed from the statement of financial position when contractual obligations are fulfilled or are otherwise extinguished. The same applies to part of a financial liability.

Financial assets and financial liabilities are offset and recognised at the net amount on the statement of financial position only when there is a legal offset right for the amounts and the intention is to (1) settle the items at a net amount, or (2) realise the asset and settle the liability simultaneously.

Acquisitions and disposals of financial assets are recognised on the settlement date, which is the date the asset is delivered to or from the Company.

2.10.2. Classification and measurement

Financial instruments that are not derivatives are initially recognised at cost corresponding to the fair value of the instrument, plus transaction costs for all financial instruments apart from those in the category of financial assets at fair value through profit or loss; these are recognised at fair value excluding transaction costs. A financial instrument is presented at initial recognition based in part on the purpose for which it is acquired. The classification determines how the financial instrument is valued after initial recognition, as described below.

Cash and cash equivalents consist of cash.

2.10.3 Loans receivable and accounts receivable

Loans receivable and accounts receivable are non-derivative financial assets that have fixed or determinable payments and are not quoted on an active market. These assets are valued at amortised cost, which  is determined on the basis of the effective rate as calculated at the time of acquisition. Accounts receivables are recognised at the amounts expected to be received, that is, less bad debts.

2.10.4 Other financial liabilities

This category contains loans and other financial liabilities, such as accounts payable. Liabilities are valued at amortised cost.

Consolidated financial assets and liabilities are allocated to the categories described in Note 20 Financial Instruments and Risk Management. Recognition of financial income and expenses is also described in item 2.8 above.

2.11 Convertible bonds

Convertible bonds can be converted to shares if the counterpart exercises the option to convert the receivable into shares, recognised as a compound financial instrument divided into a debt portion and an equity portion. The fair value of liabilities on the date of issue is calculated on the basis of future cash flows, which are discounted using the current market rate for similar liabilities, with no rights of conversion. The value of equity instruments is calculated as the difference between the issue proceeds when the convertible promissory note was issued and the fair value of the financial liability on the date of issue. Any deferred tax liability on the date of issue is deducted from the carrying value of the equity instrument. Transaction costs associated with the issue of a compound financial instrument are distributed between the debt portion and the equity portion in proportion to the distribution of the issue proceeds. Interest expense is recognized in profit/loss for the year and is calculated using the effective interest method.

2.12 Property, plant, and equipment

Property, plant, and equipment are recognised in the consolidated accounts at cost, less accumulated depreciation and any impairment losses. Cost includes the purchase price and expenses directly attributable to ensuring the asset is in place and in the right condition to be used as intended. Borrowing costs that are directly attributable to the purchase, construction, or production of assets that require a substantial amount of time to ready for their intended use or sale are included in the cost.

The carrying amount of an item of property, plant, or equipment is derecognised from the statement of financial position upon disposal or sale or when no future financial benefits are expected from the asset’s use, disposal, or sale. Gains or losses that arise from an asset’s sale or disposal comprise the difference between the selling price and the carrying amount, less direct selling expenses. Gain and loss are recognised as other operating income/expense.

2.12.1 Depreciation principles for property, plant, and equipment

Depreciation occurs on a straight-line basis over the estimated useful life of the asset. The impairment methods used, residual values, and useful lives are reassessed at each year-end.

Estimated useful lives:

2.13 Intangible assets 

2.13.1 Intangible assets with indefinite useful lives

2.13.1.1 Goodwill
Goodwill is valued at cost, less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is tested at least once a year for impairment (see accounting policy 2.15).

2.13.1.1 Trademarks
Trademarks are carried at cost, less any accumulated impairment losses. Trademarks are allocated to cash-generating units and are tested at least once a year for impairment (see accounting policy 2.15).

2.13.2 Intangible assets with defined useful lives

2.13.2.1 Development expenses
Development expenditures for creating new or improved products or processes are recognised as assets in the statement of financial position if the product or process is technically and commercially viable and the Group has sufficient resources to complete the development. The carrying amount includes direct costs and, where applicable, expenditure for salaries and share of indirect expenses. Other expenses are recognised in the income statement as expenses when they arise. In the statement of financial position, recognised expenses are carried at cost, less accumulated amortisation and any impairment losses. Capitalised expenditures refer mainly to software and software platforms.

2.13.2.1 Domains
Domains are recognised at cost less accumulated amortisation (see below) and any impairment loss (see accounting policy 2.16).

2.13.2.1 Customer relationships
Customer relationships are carried at cost less accumulated amortisation (see below) and any impairment loss (see accounting policy 2.16).

2.13.3 Amortisation method for intangible assets

Amortisations are recognised in profit/loss for the year on a straight-line basis over the estimated useful life of the intangible asset, provided such useful life is indefinite. Useful lives are reassessed at least once a year. Goodwill and trademarks with indefinite useful lives are tested for impairment annually and when there are indications that the asset has lost value. Intangible assets with determinable useful lives are amortised from the date on which they become available for use. Estimated useful lives:

2.14 Inventories

Inventories are valued at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and sale. The cost of inventory is based on weighted averages and includes expenditures incurred in the acquisition of goods and bringing the goods to their form and location. Provisions for obsolescence are included in cost of goods sold.

2.15 Impairment losses

The Group’s recognised assets are assessed on every reporting date to determine whether indications of impairment exist. IAS 36 is applied to impairment of assets other than financial assets, which are recognised as per IAS 39.

2.15.1 Impairment of tangible and intangible assets

The recoverable amount of the asset is calculated if there is indication of impairment (see below). The recoverable amount is also calculated annually for goodwill, trademarks, and intangible assets that are not yet ready for use. If substantially independent cash flows to an individual asset cannot be established, and if the asset’s fair value less selling expenses cannot be used, then assets are grouped in impairment testing at the lowest level at which substantially independent cash flows can be identified – this grouping is called a cash-generating unit (CGU).

An impairment charge is recognised when the carrying amount of an asset or CGU (group of units) exceeds the recoverable amount. Impairment loss is recognised in profit/loss for the year as an expense. When impairment has been identified for a CGU (group of units), the impairment loss is first allocated to goodwill. Thereafter, impairment losses are distributed proportionately among other assets included in the unit (group of units).

The recoverable amount is the higher of the fair value less selling expenses and value in use. When calculating the value in use, future cash flows are discounted using a discount rate that accounts for risk-free interest and the risk associated with the specific asset.

2.15.2 Impairment of financial assets

On each reporting date, the Company determines if there is any objective evidence that a need exists to recognise an impairment loss on any financial asset or group of assets. Objective evidence comprises (1) observable past events that adversely affect the possibility of recovering the cost and (2) a significant or prolonged decline in the fair value of a financial investment classified as an available-for-sale financial asset.

Accounts receivable impairment is determined based on historical experience of bad debts on similar receivables. Accounts receivable with impairment is recognised at present value of expected future cash flows. Receivables with a short duration are not discounted, however.

2.15.3 Reversal of impairment losses

Impairment losses on assets included in the scope of IAS 36 are reversed if there is
(1) an indication that impairment has ceased and (2) a change in the assumptions that formed the basis of calculating the recoverable amount. Impairment losses on goodwill are never reversed. A reversal only occurs to the extent that the asset’s carrying amount (after reversal) does not exceed the carrying amount that would have been recognised (less depreciation or amortisation, where applicable), had no impairment loss been recognised.

Impairment losses on loans and accounts receivables carried at amortised cost are reversed if the previous reasons for impairment no longer exist and full payment from the customer is expected to be obtained.

2.16 Capital payments to shareholders

2.16.1 Dividends

Dividends are recognised as a liability after approval at the Annual General Meeting.

2.17 Earnings per share

The calculation of earnings per share is based on the consolidated profit/loss for the year attributable to the parent company’s shareholders and the weighted average number of shares outstanding during the year. In calculating diluted earnings per share, earnings and the average number of shares are adjusted to account for effects of diluted potential ordinary shares, which derive from convertible bonds during the periods reported. The larger the difference between the redemption and market prices, the greater the dilution. Dilution from convertible bonds is estimated by increasing the number of shares by the total number of convertible shares and increasing earnings by the recognised interest expense after tax.

2.18 Employee benefits

2.18.1 Short-term employee benefits

Short-term employee benefits are calculated without discounting and are recognised as a cost when the related services are rendered.

A provision is reported for the expected cost of bonus payments when the Group has an applicable legal or informal obligation to make such payments due to services being rendered by employees, and the commitment can be reliably calculated.

2.18.2 Defined contribution pension plans

Defined contribution pension plans are presented as plans for which the Company’s obligation is limited to the charges the Company undertook to pay. In such cases the size of the employee’s pension depends on (1) the contributions that the Company pays to the plan or to an insurance company and (2) the contributions’ return on capital. The employee thus bears the actuarial risk (that the remuneration will be lower than expected) and the investment risk (that the invested assets will not suffice to pay out the expected remuneration). The Company’s obligations for contributions to defined contribution plans are recognised as an expense in profit/loss for the year at the rate earned by the employee performing services for the Company over a period.

2.18.3 Benefits compensation

An expense for remuneration paid on termination of employment is only recognised if the Company is demonstrably committed – without realistic option of withdrawal – to a detailed formal plan to terminate an employment contract before the normal end date. If benefits are offered to encourage voluntary redundancy, an expense is recognised if it is probable that the offer will be accepted and that the number of employees who will accept the offer can be reliably estimated.

2.18.4 Share-based compensation

The Group previously had a program for share-based compensation, but it was closed in connection with the Group’s initial public offering. The effect of the closure of the program was that the earlier provisions for social security costs related to the program were reversed (see Note 17).

2.19 Provisions

A provision differs from other liabilities because of prevailing uncertainty about payment date or the amount required to settle the provision. A provision is recognised on the statement of financial position when there is an existing legal or informal obligation due to a past event, and it is probable that an outflow of economic resources will be required to settle the obligation, and the amount can be reliably estimated.

The amount allocated to a provision is the best estimate of what is required to settle the existing obligation on the reporting date. When the payment date has a material impact, provisions are calculated by discounting the expected future cash flow at an interest rate before tax that reflects (1) current market estimates of the time value of money and
(2) where applicable, the risks associated with the liability.

2.20 Contingent liabilities

A contingent liability is recognised when there is a possible obligation from past events, and the occurrence of the obligation is only confirmed by one or more uncertain future events, or when there is an obligation that is not recognised as a liability or provision since it is not probable that an outflow of resources will be required.

2.21 Parent company accounting policies

The parent company prepared its annual accounts as per the Swedish Annual Accounts Act (1995:1554) and Recommendation RFR 2 Accounting for Legal Entities (December 2010) of the Swedish Financial Reporting Board. The Swedish Financial Reporting Board’s statement on listed companies is also applied. RFR 2 means that, in the annual report for the legal entity, the parent company must apply all EU-approved IFRS and interpretations as far as possible within the framework of the Annual Accounts Act and the Act on Safeguarding of Pension Commitments, and with regard to the connection between accounting and taxation. The recommendation states which exceptions from and additions to IFRS must be applied.

2.21.1 Differences between accounting policies of the Group and parent company

The differences between Group and parent company accounting policies are stated below. The parent company’s accounting policies described below were applied consistently to all periods reported in the parent company’s financial statements.

2.21.1.1 Changes to accounting policies
Unless otherwise indicated below, changes to the parent company’s accounting policies in 2010 were the same as stated above for the Group.

The changed accounting policies for the revised IFRS 3 Business Combinations and amended IAS 27 Consolidated Accounts and separate financial statements that are used in the Group are not applicable to the parent company as regards transaction fees and contingent considerations. More information is available below in the Subsidiaries section.

2.21.1.2 Classification and presentation
The parent company uses the names Balance Sheet and Cash Flow Statement for the reports that in the Group are called Consolidated Statement of Financial Position and Consolidated Statement of Cash Flows. The parent company’s income statement and balance sheet are prepared in accordance with the Swedish Annual Accounts Act’s schedule, while the statement of comprehensive income, statement of changes in equity, and cash flow statement are based on IAS 1 Presentation of Financial Statements and IAS 7 Statement of Cash Flows. The differences in parent company reporting versus Group reporting as seen in the parent company income statement and balance sheet mainly comprise reporting of financial income and expenses, equity, and the occurrence of provisions as a separate heading in the balance sheet. 

2.21.1.3 Subsidiaries
Participations in subsidiaries are recognised in the parent company using the cost method. This means that transaction costs are included in the carrying amount for holdings in subsidiaries. In the consolidated accounts, transaction costs related to subsidiaries are recognised directly in earnings when they arise.

Contingent considerations are valued based on the probability that the purchase price will be payable. Any changes to the provision/receivable increases/decreases the cost. In the consolidated accounts, contingent considerations are recognised at fair value with changes in value via earnings.

2.21.1.4 Group contributions and shareholder contributions for legal entities
The Company reports Group contributions and shareholder contributions per the Swedish Financial Reporting Board’s UFR 2 statement. Shareholder contributions are recognised directly in the equity of the recipient and are capitalised in shares and participating interests of the issuer, to the extent impairment is not applicable. Group contributions are recognised according to financial implications. This means that Group contributions made and received with the objective of minimising total Group tax are recognised directly against retained profits after deduction for its actual tax effect.

Group contributions that are the equivalent of a dividend are recognised as a dividend. This means that the Group contributions received and their tax effects are recognised in the income statement. Group contributions provided and their current tax effects are recognised directly against retained profits.

Group contributions that are the equivalent of shareholder contributions are recognised by the recipient directly against retained profits with consideration given to the current tax effect. The issuer reports Group contributions and their current tax effects as an investment in participations in subsidiaries, unless impairment is needed.