Tangible fixed assets Equipment
of the asset's contractual cash flows. The Group classifies its financial assets into the following categories: a) Financial assets measured at amortised cost Financial assets measured at accrued cost are initially valued at fair value with the addition of transaction costs. Accounts receivable are initially reported at fair value, which normally corresponds to the invoiced value. After initial recognition, the assets are valued using the effective interest method. Assets classified at amortised cost are held, according to the business model, to collect contractual cash flows that are only payments of capital amount and interest on the outstanding capital amount. The assets are subject to a loss provision for expected credit losses. The Group's assets classified at amortised cost consist of accounts receivable, cash and cash equivalents and other current receivables. b) Financial liabilities measured at amortised cost Financial liabilities measured at amortised cost are initially valued at fair value, including transaction costs. After the first accounting period, they are valued at amortised cost using the effective interest method. The Group's financial liabilities classified at amortised cost consist of liabilities to credit institutions, accounts payable, accrued expenses and the portion of other current liabilities relating to financial liabilities. Impairment of financial instruments The Group's financial assets, except those that are classified at fair value through profit or loss, are subject to impairment losses for expected credit losses. Impairments for credit losses in accordance with IFRS 9 are forward- looking and a loss provision is made when there is an exposure to credit risk, usually at the first accounting date. Expected credit losses reflect the present value of all cash flow deficits attributable to payments due, either for the next 12 months or for the expected remaining maturity of the financial instrument, depending on the type of asset and the deterioration in credit since the first reporting date. Expected credit losses reflect an objective, probability- weighted outcome that takes into account the majority of scenarios based on reasonable and verifiable forecasts. The simplified model is applied for accounts receivable. In the simplified model, a loss reserve is reported for the receivable's or the asset's expected remaining maturity.
Equipment is reported at cost minus depreciation. The acquisition value includes expenses that can be directly attributed to the acquisition of the asset. Additional expenses are added to the asset's carrying amount or reported as a separate asset, whichever is appropriate, only when it is probable that the future economic benefits associated with the asset will benefit the Group and the asset's acquisition value can be measured reliably. The carrying amount of the replaced part is removed from the balance sheet. All other types of repairs and maintenance are reported as expenses in the report on the comprehensive income during the period in which they arise. Depreciation of assets, in order to distribute the acquisition value down to the estimated residual value over the estimated useful life, is made linearly as follows:
G1 G2 G3 G4 G5 G6 G7 G8 G9
• Equipment 2-5 years
The assets' residual values and useful lives are tested at the end of each reporting period and adjusted if necessary. An asset's carrying amount is immediately written down to its recoverable amount if the asset's carrying value exceeds its estimated recoverable amount. Gains and losses on divestitures are determined by comparing sales revenue with the carrying amount and are reported under other operating income/ other operating expenses - net in the report on comprehensive income. Impairment losses of non-financial assets Assets with an indefinite useful life (goodwill and trademark) or intangible assets that are not ready for use are not amortised but are tested annually for any impairment. Assets that are amortised are assessed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is with an amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of the asset's fair value less selling costs and its utility value. When assessing impairment, assets are grouped at the lowest levels where there are essentially independent cash flows (cash- generating units), which for the Hemnet Group AB (publ) refers to the Group. For assets (other than goodwill) that have previously been written down, a review is made on each balance sheet whether a reversal should be made. Financial instruments Financial instruments are any form of agreement that gives rise to a financial asset in one company and a financial debt or equity instrument in another company. Financial instruments recognised in the balance sheet include on the asset side cash and cash equivalents, accounts receivable and other receivables. On the liabilities side, there are liabilities to credit institutions, other liabilities and accounts payable. The accounting depends on how the financial instruments have been classified. Accounting and removal A financial asset or financial liability is recognised in the balance sheet when the company becomes a party in accordance with the contractual terms of the instrument. Rent receivables and accounts receivable are recognised in the balance sheet when an invoice has been sent and the company's right to compensation is unconditional. Debt is recognised when the counterparty has performed and a contractual obligation to pay exists, even if an invoice has not yet been received. Accounts payable are recognised when an invoice is received. Financial assets and financial liabilities are offset and recognised with a net amount in the balance sheet only when there is a legal right to set off the amounts and there is an intention to settle the items with a net amount or to simultaneously sell off the asset and settle the debt. A financial asset is removed from the balance sheet when the rights in the agreement are realised, expire or when the company loses control of them. The same applies to part of a financial asset. At each reporting date, the company evaluates whether there are objective indications that a financial asset or group of financial assets is in need of impairment. The same applies to part of a financial liability.
G10 G11 G12 G13 G14 G15 G16 G17 G18 G19 G20 G21 G22 G23 G24 G25 G26 G27 G28 G29
For other items subject to expected credit losses, the general method is applied using a three-stage impairment model.
Initially, as well as on each balance sheet date, a loss reserve is reported for the next 12 months, or for a shorter period of time depending on the remaining term (stage 1). If there has been a significant increase in credit risk since the first accounting date, which results in a rating below investment grade, a loss reserve for the remaining maturity of the asset is reported (stage 2). An assessment of whether a significant increase in credit risk exists is based on whether payment is delayed for more for 30 days, or if a significant deterioration in rating occurs, resulting in a rating below investment grade. The Group has defined default as when payment of the claim is delayed by 90 days or more, or if other factors indicate payment default. For assets that are considered to be credit impaired, reserves are still kept for expected credit losses for the remaining term (stage 3). For credit impaired assets and receivables, the calculation of interest income is based on the asset's carrying amount, net of loss provision, as opposed to the gross amount as in the previous stages.
P1 P2 P3 P4 P5 P6 P7 P8 P9
The Group's assets have been assessed to be in stage 1, that is, there has been no significant increase in credit risk.
The valuation of expected credit losses is based on different methods. The method for accounts receivable is based on historical accounts receivable combined with forward-looking factors. Other receivables and assets are written down according to a rating-based method based on probability of default, expected loss at default and exposure for default, through the application of an external credit rating or assessed rating. Expected credit losses are valued as the product of the probability of default, loss due to default and exposure for default. For credit-impaired assets and receivables, an individual assessment is made taking into account historical, current and forward-looking information. The valuation of expected credit losses takes into account any collateral and other credit enhancements in the form of guarantees included in the contract terms.
Profits and losses from items removed from the balance sheet as well as modifications are reported in the income statement.
Classification and valuation The Group's classification of financial assets that are debt instruments is based on the Group's business model for asset management and the nature
48 · HEMNET GROUP | ANNUAL AND SUSTAINABILITY REPORT 2021
Financial statements
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