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Notes to the parent company's financial statements
Note 1. Principles used for preparing the financial statements
Kesko Corporation's financial statements have been prepared in compliance with the Finnish Accounting Standards (FAS).
In the financial year 2016, K-talouspalvelukeskus Oy, K-Plus Oy, K-instituutti Oy, Rautakesko Ltd, Musta Pörssi Ltd and Keslog Ltd merged into Kesko Corporation.
Non-current assets
Intangible assets
Intangible assets are stated in the balance sheet at cost less depreciation according to plan and possible amortisations.
Depreciation plan
Other capitalised expenditure
IT software and licences
5−20 years
3−5 years
Tangible assets
Tangible assets are stated in the balance sheet at cost less depreciation according to plan and possible amortisations.
Depreciation plan
Depreciation according to plan is calculated on a straight line basis so as to write off the cost of tangible assets over their estimated useful lives.
The most common estimated useful lives are:
Fixtures and fittings
Machinery and equipment
Transportation fleet
Other tangible assets
10−33 years
8 years
25% reducing balance method
5 years
5−14 years
Land has not been depreciated. The total of depreciation according to plan and the change in depreciation reserve comply with the Finnish Business Tax Act. The change in depreciation reserve has been treated as appropriations.
Valuation of inventories
Inventories are stated, using the moving-average cost method, at lower of direct purchase cost, replacement cost and probable selling price.
Valuation of financial assets
Marketable securities have been valued at the lower of cost and net realisable value.
Foreign currency items
Foreign currency transactions have been recorded in euros using the rate of exchange at the date of transaction. Foreign currency receivables and payables have been translated into euros using the rate of exchange at the balance sheet date. If a receivable or a payable is tied to a fixed rate of exchange, it has been used for translation. Exchange rate differences have been recognised in profit or loss.
Derivative contracts
Interest rate derivatives
Interest rate derivatives are used to modify the durations of borrowings. The target duration is three years and it is allowed to vary between one and a half and four years. Cash flows arising from interest rate derivatives are recognised during the financial year as interest income or expenses, according to the maturity date. In the financial statements, outstanding interest rate forward contracts, interest rate future contracts, interest rate option contracts and interest rate swap contracts are stated at market values, but unrealised revaluation is not stated as income. Any valuation losses are included in interest expenses.
Foreign currency derivatives
Foreign currency derivatives are used for hedging against translation and transaction risks. Foreign exchange forward contracts are valued using the forward exchange rate of the balance sheet date. The exchange differences arising from outstanding derivative contracts are reported in financial items. If a derivative has been used for hedging a foreign-currency-denominated asset, the change in value has been recognised against that of the asset item. The premiums of option contracts are included in the balance sheet accruals until they expire, or if a value change at the balance sheet date so requires, recognition in profit or loss.
Commodity derivatives
Ankkuri-Energia Oy, a Kesko Corporation subsidiary, uses electricity derivatives to balance the energy costs of the Group and its retailers. Kesko Corporation is an external counterparty in electricity derivatives with a bank, and enters into corresponding internal hedge with Ankkuri-Energia Oy. At no stage does Kesko Corporation have derivative positions, and thus there are no effects on profit or loss. The electricity price risk is reviewed on a 5-year time span. With respect to derivatives hedging the price of electricity supplied during the financial year, change in fair value is recognised at Kesko under finance income and cost. Unrealised gains and losses on contracts hedging future purchases are not recognised in profit or loss.
Pension plans
Personnel's statutory pension provision is organised through pension insurance companies and the voluntary supplementary pension provision is mainly organised through Kesko Pension Fund. Pension costs are recognised as expense in the income statement.
Provisions stated in the balance sheet include items committed to under agreements or otherwise but not yet realised. Changes in provisions are included in the income statement. Rent liabilities for vacant rented premises no longer used for the Group's business operations, as well as losses resulting from renting the premises to third parties, are included in provisions.
Income tax
Income tax includes the income tax payments for the period calculated based on the profit for the period, and taxes payable for prior periods, or tax refunds. Deferred taxes are not included in the parent company's income statement and balance sheet.