General

The annual report and consolidated financial statements have been approved for issue by the Board of Directors on March 11, 2008. The income statements and balance sheets of the parent company and the Group are subject to adoption by the Annual General Meeting on March 31, 2008.

TeliaSonera's consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and, given the nature of TeliaSonera's transactions, in accordance with IFRSs as adopted by the European Union (EU).

In addition, concerning purely Swedish circumstances, the Swedish Financial Reporting Board has issued standard RFR 1.1 "Supplementary Rules for Consolidated Financial Statements" and other statements. As encouraged by the Board, TeliaSonera has pre-adopted RFR 1.1. The standard is applicable to Swedish legal entities whose securities are listed on a Swedish stock exchange or authorized equity market place on the balance sheet date and specifies supplementary rules and disclosures in addition to IFRS requirements, caused by provisions in the Swedish Annual Accounts Act.

Measurement bases, consolidation and accounting principles

The consolidated financial statements have been prepared mainly under the historical cost convention. Other measurement bases used and applied consolidation and accounting principles are described below.

Amounts and dates

Unless otherwise specified, all amounts are in millions of Swedish kronor (SEK) or other currency specified and are based on the twelve-month period ended December 31 for income statement and cash flow statement items, and as of December 31 for balance sheet items, respectively.

New accounting standards

Standards, amendments to issued standards and interpretations, effective in 2007 or pre-adopted

  • IFRS 7 "Financial Instruments: Disclosures" and an amendment on capital disclosures to IAS 1 "Presentation of Financial Statements" (effective for annual periods beginning on or after January 1, 2007). IFRS 7 adds certain new disclosure requirements and compiles all financial instruments disclosure requirements into one standard. It replaces the disclosure requirements in IAS 32 "Financial Instruments: Disclosure and Presentation." The amendment to IAS 1 introduces disclosures about the level of an entity's capital and how it manages capital.

  • IFRS 8 "Operating Segments" (effective for annual periods beginning on or after January 1, 2009; earlier application permitted). IFRS 8 replaces IAS 14 "Segment Reporting" and is aligned with the U.S. GAAP requirements of FAS 131. IFRS 8 requires an entity to report financial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components of an entity about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. TeliaSonera adopted IFRS 8 in 2007.

  • IFRIC 7 "Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies" (effective for annual periods beginning on or after March 1, 2006). IFRIC 7 is currently not relevant to TeliaSonera.

  • IFRIC 8 "Scope of IFRS 2" (effective for annual periods beginning on or after May 1, 2006). IFRIC 8 is currently not relevant to TeliaSonera.

  • IFRIC 9 "Reassessment of Embedded Derivatives" (effective for annual periods beginning on or after June 1, 2006). IFRIC 9 is currently not relevant to TeliaSonera.

  • IFRIC 10 "Interim Financial Reporting and Impairment" (effective for annual periods beginning on or after November 1, 2006) addresses the apparent conflict between the requirements of IAS 34 "Interim Financial Reporting" and those in other standards on the recognition and reversal of impairment losses on goodwill and certain financial assets. IFRIC 10 states that any such impairment losses recognized in an interim financial statement must not be reversed in subsequent interim or annual financial statements. TeliaSonera already in previous periods applied the principle stated by IFRIC 10.

Standards, amendment to issued standards and interpretations, not yet effective

Recently issued new standards and interpretations impacting TeliaSonera's consolidated financial statements on or after January 1, 2008, are as follows:

  • Amended IFRS 2 "Share-based Payment" (effective for annual periods beginning on or after January 1, 2009; earlier application permitted). The amendment clarifies that vesting conditions are service conditions and performance conditions only and further specifies that all cancellations, whether by the entity or by other parties, should receive the same accounting treatment. IFRS 2 is currently not relevant to TeliaSonera.

  • Revised IFRS 3 "Business Combinations" and amended IAS 27 "Consolidated and Separate Financial Statements" (effective for annual periods beginning on or after July 1, 2009; early adoption permitted). Among other things, the changes to the standards include: transaction costs expensed as incurred; contingent consideration always recognized at fair value and for non-equity-consideration post-combination changes in fair value affects the income statement; option added to on a transaction-by-transaction basis permit recognition of 100 percent of the goodwill of the acquired entity with the increased goodwill amount also increasing the non-controlling interest; in a step acquisition, on the date that control is obtained, the fair values of the acquired entity's assets and liabilities, including goodwill, are measured and any resulting adjustments to previously recognized assets and liabilities are recognized in profit or loss; acquiring additional shares in a subsidiary after control was obtained as well as a partial disposal of shares in a subsidiary while retaining control is accounted for as an equity transaction with owners; a partial disposal of shares a subsidiary that results in loss of control triggers remeasurement of the residual holding to fair value and any difference between fair value and carrying amount is a gain or loss, recognized in profit or loss. TeliaSonera expects that applying the revised IFRS 3 and the amended IAS 27 might lead to increased volatility in the income statement.

  • Revised IAS 1 "Presentation of Financial Statements" (effective for annual periods beginning on or after 1 January 1, 2009; early adoption is permitted). The revision is aimed at improving users' ability to analyze and compare the information given in financial statements. The changes made are to require information to be aggregated on the basis of shared characteristics and to introduce a statement of comprehensive income. The revisions include changes in the titles of some of the financial statements to reflect their function more clearly. The new titles will be used in accounting standards, but are not mandatory for use in financial statements. All owner changes in equity should be presented in the statement of changes in equity, separately from non-owner changes in equity.

  • Amended IAS 23 "Borrowing Costs" (effective January 1, 2009; earlier application permitted). The amendment removes the option of immediately expensing borrowing costs that are directly attributable to the acquisition, construction or production of an asset that takes a substantial period of time to get ready for use or sale. The amendment is of no consequence, as TeliaSonera already applied the existing alternative of capitalizing borrowing costs.

  • Amendments on puttable financial instruments and obligations arising on liquidation to IAS 32 "Financial Instruments: Presentation" and IAS 1 "Presentation of Financial Statements" (effective for annual periods beginning on or after January 1, 2009; earlier application permitted). The amendments are currently not relevant to TeliaSonera.

  • IFRIC 11 "IFRS 2 - Group and Treasury Share Transactions" (effective for annual periods beginning on or after March 1, 2007). IFRIC 11 is currently not relevant to TeliaSonera.

  • IFRIC 12 "Service Concession Arrangements" (effective for annual periods beginning on or after January 1, 2008). IFRIC 12 is not relevant to TeliaSonera.

  • IFRIC 13 "Customer Loyalty Programmes" (effective for annual periods beginning on or after July 1, 2008; earlier application permitted). IFRIC 13 explains how to account for obligations to provide free or discounted goods or services ('awards') to customers who redeem award credits. Entities are required to allocate some of the proceeds of the initial sale to the award credits and recognize these proceeds as revenue only when their obligations are fulfilled either by supplying awards themselves or engaging a third party to do so. TeliaSonera already defers revenue related to loyalty programs as required by IFRIC 13. However, IFRIC 13 requires that the deferred revenue be determined as the fair value of the goods or services to be delivered in the future, while TeliaSonera bases the deferral on estimated costs. The change following the adoption of IFRIC 13 is not expected to have a material impact on TeliaSonera's results or financial position.

  • IFRIC 14 "IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction" (effective January 1, 2008; earlier application permitted). IFRIC 14 provides general guidance on how to assess the limit in IAS 19 on the amount of the surplus that can be recognized as an asset and explains how the pension asset or liability may be affected when there is a statutory or contractual minimum funding requirement. No additional liability need be recognized by the employer unless the contributions payable under the minimum funding requirement cannot be returned to the company. IFRIC 14 is currently not relevant to TeliaSonera.

EU endorsement status

As of December 31, 2007, all standards, revisions to standards, and interpretations mentioned above had been adopted by the EU, except for amended IFRS 2, revised IFRS 3, revised and amended IAS 1, amended IAS 23, amended IAS 27, amended IAS 32, IFRIC 12, IFRIC 13 and IFRIC 14, which at the beginning of March 2008 were still waiting to be endorsed.

The EU Commission has announced that, if an IFRS (or equivalent) is endorsed after the balance sheet date but before the date the financial statements are issued, it can be treated as endorsed for the purposes of those financial statements if application prior to the date of endorsement is permitted by both the Regulation endorsing the document and the related IFRS.