Purchase method of accountin g IFRS 3 The purchase method of accountin g is used to account for the acquisitions of subsidiaries and oper ations b y the Group F or acquisitions made before 2010 the cos t of an acquisition is measured at the fair v alue of the assets g iv en equit y ins truments issued and liabilities incurred or assumed at the date of e x chan g e plus cos ts directly at tribut able to the acquisition Identif able assets acquired and liabilities and contin g ent liabilities assumed in a business combination are measured initially at their fair v alues at the acqui sition date irrespectiv e of the e xtent of an y noncontrollin g interes t F or acquisitions made as from 2010 all pa yments to acquire a business are recor ded at fair v alue at the acquisition date with contin g ent consider ations and acquisition related option liabilities classifed as debt subsequently remeasured throug h the s t atement of income There is a choice on an acquisitionb y acquisition basis to measure the noncontrollin g interes t in the acquiree at fair v alue or at the noncontrollin g interes t s proportionate share of the acquiree s net assets All acquisition related tr ansaction cos ts are e xpensed These cos ts are in the Group accounted for on a line in the s t ate ment of income named acquisition related cos ts Cos ts accounted for on this line are tr ansaction cos ts re v aluation includin g discountin g of contin g ent consider ations and acquisition related option liabilities re v aluation to fair v alue of pre viously acquired shares in s tep acquisitions and acquisition related res tructurin g and inte gr ation cos ts F or all acquisitions the e x cess of the cos t of acquisition o v er the fair v alue of the Group s share of the identifable net assets acquired is recor ded as g oodwill If the cos t of acquisition is less than the fair v alue of the net assets of the subsidiar y acquired the diference is recogniz ed directly in the consoli dated s t atement of income The consolidated fnancial s t atements include companies acquired with efect from the date that the Group obt ains control Companies div es ted are e x cluded with efect from the date that the Group ceases to ha v e control Pricin g of deliv eries amon g Group companies is based on normal business principles Inter compan y tr ansactions balances and unrealiz ed gains bet w een Group companies are eliminated u nrealiz ed losses are also eliminated unless the tr ansaction pro vides e vidence of an impairment of the asset tr ansferred Noncontrollin g interes ts IAS 27 F or acquisitions made before 2010 the Group has adopted the principle of treatin g tr ansactions with noncontrollin g interes ts as tr ansactions with par ties outside the Group Acquisitions of noncontrollin g interes ts g iv e rise to g oodwill that is determined as the diference bet w een the purchase price paid and the acquired share of the book v alue of the subsidiaries net assets f or acquisitions made as from 2010 the Group treats tr ansactions with noncontrollin g interes ts as tr ansactions with equit y o wner s of the Group F or acquisitions from noncontrollin g interes ts the diference bet w een an y consider ation paid and the rele v ant share acquired of the carr yin g v alue of net assets of the subsidiar y is recor ded in equit y Gains or losses on disposals to noncontrollin g interes ts are also recor ded in equit y When the Group ceases to ha v e control an y ret ained interes t in the entit y is remeasured to its fair v alue with the chan g e in carr yin g amount recogniz ed in the s t atement of income The fair v alue is the initial carr yin g amount for the purposes of subsequently accountin g for the ret ained interes t In v es tments in associates IAS 28 The equit y method is used to account for shareholdin g s that are neither sub sidiaries nor joint v entures but where Securit as can e x ert a signifcant infu ence g ener ally accompan yin g a shareholdin g of bet w een 20 percent and 50 percent of the v otin g rig hts F or acquisitions made before 2010 the cos t of an acquisition is measured at the fair v alue of the assets g iv en an y contin g ent consider ations and acquisition related option liabilities that ha v e been es timated equit y ins truments issued and liabilities incurred or assumed at the date of e x chan g e plus cos ts directly at tribut able to the acquisition Identifable assets acquired and liabilities and contin g ent liabili ties assumed as a result of the acquisition are measured initially at their fair v alues at the acquisition date The acquisition of the associated companies Lon g Hai Securit y Ser vices Joint Stock Compan y Lon g Hai and W alson Ser vices P vt L td W alsons took place before 2010 and are consequently accounted for as per abo v e F or acquisitions made as from 2010 all pa yments to acquire a business are recor ded at fair v alue at the acquisition date with contin g ent consider ations and acquisition related option liabilities classifed as debt subse quently remeasured throug h the s t atement of income All acquisition related tr ansaction cos ts are e xpensed F or all acquisitions the e x cess of the cos t of acquisition o v er the fair v alue of the Group s share of the identifable net assets acquired is at tributed to g oodwill which is included in in v es tments in associated companies in the consolidated balance sheet If the cos t of acquisition is less than the fair v alue of the net assets of the associated compan y acquired the diference is recogniz ed directly in the consolidated s t atement of income The consolidated fnancial s t atements include associated companies with efect from the date of the acquisition Associated companies div es ted are e x cluded with efect from the div es tment date If the o wner ship interes t in an associate is reduced but signifcant infuence is ret ained only a propor tionate share of the amounts pre viously recogniz ed in other comprehensiv e income are reclassifed to the s t atement of income where appropriate Inter compan y tr ansactions balances and unrealiz ed gains bet w een the Group and its associated companies are eliminated to the e xtent of the Group s interes t in the associate u nrealiz ed losses are also eliminated unless the tr ansaction pro vides e vidence of an impairment of the asset tr ansferred Share in income of associated companies is recogniz ed in the consoli dated s t atement of income Dependin g on the purpose of the in v es tment share in income of associated companies is included either in oper atin g income if it is related to associated companies that ha v e been acquired to contribute to the oper ations oper ational or in income before t ax es as a separ ate line within net fnancial items if it is related to associated compa nies that ha v e been acquired as part of the fnancin g of the Group fnancial in v es tments In both cases the share in income of associated companies are net of t ax The associated companies Lon g h ai and W alsons are classi fed as oper ational associates The Group currently has no associated com panies that are accounted for as fnancial in v es tments In the consolidated balance sheet in v es tments in associated companies are s t ated at cos t includin g the cos t of the acquisition that is at tributed to g oodwill adjus ted for dividends and the share of income after the acquisi tion date see note 21 Joint v entures IAS 31 The proportional method is applied to joint v entures in which there is a shared controllin g interes t Accor din g to this method all s t atement of income and balance sheet items are s t ated in the consolidated s t atement of income the consolidated s t atement of cash fo w and the consolidated balance sheet in proportion to o wner ship The proportional method of consolidation is used with efect from the date when a shared controllin g interes t is achie v ed and up until a shared controllin g interes t ceases to e xis t The Group has used the proportional method to account for its in v es tment in Securit as Direct S A S witz erland up to the div es titure of this compan y on October 21 2011 see note 7 T r anslation of foreign subsidiaries IAS 21 The functional currenc y of each Group compan y is determined b y the pri mar y economic en vironment in which the compan y oper ates that is the currenc y in which the compan y primarily g ener ates and e xpends cash The functional currenc y of the Parent Compan y and the present ation currenc y of the Group that is the currenc y in which the fnancial s t atements are presented is S w edish kronor SEK The fnancial s t atements of each foreign subsidiar y are tr anslated accor din g to the follo win g method Each month s s t atement of income is tr anslated usin g the e x chan g e r ate pre v ailin g on the las t da y of the month which means that income for each month is not afected b y foreign e x chan g e fuctuations durin g subsequent periods B alance sheets are tr anslated usin g e x chan g e r ates pre v ailin g at each balance sheet date T r anslation diferences arisin g in the con v er sion of balance sheets are pos ted directly to other comprehensiv e income and thus do not afect net income for the y ear The tr anslation difer 76 Annual R eport Notes and comments to the consolidated fnancial s t atements Securit as Annual R eport 2012