AAK Annual Report 2020

AAK Annual Report 2020 69 Transactions with holders of non-controlling interests The Group handles transactions with holders of non-controlling interests in the same ways as transactions with the Group’s shareholders. In the event of acquisitions from holders of non-controlling interests, the company recognizes the difference between the purchase price paid and the actual acquired portion of the carrying amount of the subsidiary’s net assets in equity. Gains and losses on disposals to holders of non-controlling interests are also recog- nized in equity. When the Group no longer holds a controlling or significant influence, each shareholding is remeasured at fair value and the change in the carrying amount is recognized in the income statement. Fair value is used as the primary carrying amount and forms the basis for ongoing recognition of the remaining ownership interest as an associate company, joint venture or financial asset. All amounts relating to divested units previously recognized under “Other comprehensive income” are recognized as though the Group had directly disposed of the respective assets or liabilities. This can result in amounts previously recognized in “Other comprehensive income” being reclassified as earnings. If the equity interest in an associate is reduced but significant influence still remains, where relevant only a proportional share of the amounts previously recognized in “Other compre- hensive income” is recognized as earnings. Associated companies Associates are those companies where the Group has significant influence, but not a con- trolling influence over operational and financial management, usually through an owner- ship interest of between 20 and 50 percent of the voting rights. As of the date at which the significant influence is acquired, investments in associated companies are recognized in the consolidated financial statements using the equity method. The equity method means that the value of the shares in the associated companies recognized for the Group corresponds to the Group’s interest in the equity of the associates plus Group-related goodwill and any residual values of Group-related surplus or shortfall in value. The consolidated income state- ment reports the Group’s share of profit of associated companies, adjusted for any amor- tization, impairment or dissolution of acquired surplus or shortfall values, as other financial revenue. Dividends received from associated companies reduce the carrying amount of the investment. The equity method is used until significant influence ceases. Foreign currency translation of foreign subsidiaries’ financial statements Functional and presentation currency Items included in the financial statements of each of the Group’s subsidiaries are measured using the currency of the primary economic environment in which they operate (functional currency). The consolidated financial statements are presented in Swedish krona which is the Parent’s functional and presentation currency. Transactions and balance sheet items Foreign currency transactions are translated into the functional currency using the exchange rates prevailing on the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the closing rate are recognized as of the end of the reporting period in the income statement. Group companies The results and financial position of foreign subsidiaries (none of which has the currency of a hyperinflationary economy) that have a functional currency other than the presentation currency are translated into the Group’s presentation currency as follows: • Assets and liabilities are translated at the closing day rate. • Income and expenses are translated at average exchange rates. • All exchange differences are charged directly to other comprehensive income and are recognized as a separate part of equity. When a foreign subsidiary is sold, any exchange differences are recognized in profit or loss as part of the gain or loss on the sale. Goodwill and fair value adjustments arising in the acquisition of foreign operations are treated as assets and liabilities of the entity and translated at the closing day rate. Exchange rates The following rates were used to translate currency: Currency Average rate Closing rate EUR 10.47 10.04 DKK 1.40 1.35 GBP 11.85 11.22 MXN 0.43 0.41 USD 9.16 8.21 Segment reporting An operating segment is the part of the Group that conducts business operations from which it may generate revenue and incur expenses for which discrete financial information is available. The operating results of an operating segment are followed up by the Group’s chief operating decision-maker in order to evaluate its performance and allocate resources to the operating segment. The Group’s operations are divided up into operating segments based on which parts of the operations the Group’s chief operating decision-maker monitors, that is, according to the management approach. AAK’s business operations are organized in such a way that the Group’s highest executive decision-maker, that is the CEO, monitors earnings, returns and cash flows generated by the Group’s various products. Each operating segment has a manager who is responsible for day-to-day operations and who regularly reports to the CEO on the outcome of the operating segment’s performance and its resource requirements. Note 2 | Summary of significant accounting policies