Harmonisation of accounting standards: disclosure policies and practices of european commercial banks
par Michael Forzeh Fossung
Gothenburg University - Master of Science (MSc) Accounting 2002
As with FöreningsSparbanken's Annual Report of 2000, SEB's report was prepared in accordance with the Annual Accounts Act for Credit Institution and Securities Companies, the regulations and general advice of the Swedish Financial Supervisory Authority, and the recommendations of the Swedish Financial Accounting Standard Council.
The annual report of SEB started with a briefing on the bank's present and future economic environment and also contained the board of directors' report; a presentation of the firm's Operational Profit and Loss accounts (which was separated from the Statutory Profit and Loss Accounts) the presentation of the Balance Sheets; followed by a Cash Flow analysis. It is worth noting that the manner of reporting Operating Profit and Loss Accounts separately from Statutory Profit and Loss Accounts does not occur in the financial statements of FöreningsSparbanken, which only published the Operating profit.
Acquisition or historic cost was the method used in valuing financial fixed assets at SEB. The bank used the `lower of cost or market' method to value current assets, with transferable derivatives instruments and securities in the trading portfolio, as current assets may be valued at market. This is different from FöreningsSparbanken who valued it at fair value.
Interest bearing securities were accounted for using accrual accounting over the life of the instrument. Depreciation of tangible fixed assets was on a straight-line basis, except for equipment leased to clients, which was normally reported at acquisition value but depreciated on an annuity basis. Accrual accounting was used to account for financial cost of the financial liabilities.
SEB group includes SEB and each of those companies in which the bank directly or indirectly holds more than 50% of the voting power of the shares.
Company acquisition was accounted for using the purchase method. In acquisitions, goodwill was amortized over its estimated economic useful life, not exceeding 20 years.
The current rate method was used to translate foreign currency financial statements into Swedish kroner (the reporting currency). Any translation difference was recorded in the consolidated profit and loss account.
It is worth noting that both FöreningsSparbanken and Skandinaviska Enskilda Banken (SEB) have only adapted to the recommendations of Financial Supervisory Authority during 2000. For comparism, figures for 1999 and 1998 have been recalculated using these recommendations. One of the reasons behind this uniformity may be because of the merger plans of both companies announced at the end of 2000.
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