Kemira went over to IFRS reporting as from 1 January 2004. The opening balance sheet at 1 January 2003 and the comparison figures for 2003 have been converted from reporting in accordance with Finnish accounting practice to IFRS. The Group adopted IFRS 1 (First-time Adoption of IFRS) and used the exemptions from the requirements of IAS 19 (Employee Benefits) and IAS 22 (Business Combinations).
Even previously, Kemira's accounting policy has been based on IAS/IFRS to the extent permitted by Finnish practice. For this reason, the most important changes resulting from the transition to IFRS are related to the reporting of employee benefits under IAS 19 and the measurement of available-for-sale assets under IAS 39 (Financial Instruments).
The main differences between IFRS and Finnish practice are the following:
Defined benefit pension plans *1)
The Group has various pension plans in accordance with the local conditions and practices in the countries where it operates. Under Finnish accounting practice, the Group's pension liabilities are as a rule booked according to local regulations, and pension liabilities in accordance with IAS 19 have been disclosed in the notes to the financial statements. In financial statements according to IFRS, defined benefit pension plans are treated in the manner prescribed in IAS 19.
The funded portion of the Finnish system under the Employees' Pensions Act (TEL) and the disability portion are treated as a defined benefit plan in respect of the pension plans that are managed by the Group's own pension funds. Thus, the assets of Kemira's own pension funds are measured according to IAS 19. In respect of the TEL plans that are managed by insurance companies, the disability portion is likewise treated as a defined benefit plan.
For defined benefit plans, the liability arising from the difference between the present value of pension obligations and the fair value of plan assets is entered in the opening balance sheet. In accordance with IFRS 1, actuarial gains and losses on defined benefit plans were entered in the balance sheet at the date of transition on 1 January 2003. The corridor method under IAS 19 is applied to actuarial gains and losses arising after the date of transition.
When the transition to IFRS was made, certain items that were previously reported in pension liabilities were regrouped under provisions with the aim of uniform presentation of pension liabilities in the balance sheet.
Financial instruments
Financial assets are classified in the manner prescribed in IAS 39 (Financial Instruments) as financial assets held for trading, receivables originated by the enterprise and available-for-sale assets. Kemira has classified other shares as available-for-sale assets. *1)
Application of fair value under IAS 39 had a major impact on the measurement of available-for-sale shares *2). These primarily included shares in Teollisuuden Voima Oy. The shares included in the class of available-for-sale assets are measured at fair value, whereby the value of the shares in Teollisuuden Voima Oy has been considered to be measurable with a sufficient degree of reliability. In accordance with IAS 39, Kemira enters unrealized changes in the value of available-for-sale shares directly in shareholders' equity up to the time of sale, when they are transferred to the income statement.
Derivatives have previously been entered at fair value in the balance sheet and, all in all, changes in the measurement of financial instruments, with the exception of shares, have not caused major changes in the opening IFRS balance sheet *3).
Other changes
Forest areas are measured at fair value under IAS 41 (Agriculture) *4). Reporting for tangible assets under IAS 16 (Property Plant and Equipment) has been further specified, among other things, in respect of major inspection and overhaul costs occurring at regular intervals *5). In the IFRS financial statements, certain loan receivables from associates have been classified, due to the terms of the agreements, as value of investment when the equity of accounting method is applied *4).
Deferred taxes have been entered for all the above-discussed adjustments to the IFRS balance sheet in the manner prescribed in IAS 12 (Income Taxes) *6).
Comparison figures
Presented below are the consolidated income statement for 2003 as well as the balance sheets at 31 December 2002 and 31 December 2003 as adjusted in accordance with IFRS. In addition, the earnings trend is presented by business area on a quarterly basis for 2003 as well as reconciliation statements for the previously reported net profit and shareholders' equity.
*1) Notes 1-6 refer to adjustments made to equity and net profit in connection with transition to IFRS and are presented in Table "Adjustments to equity and net income for 2003".
The Press Release including tables can be downloaded from the following link:
