Getinge 2022 Annual Report

Getinge 2022 Annual Report Note 28 cont. Introduction Strategy Corporate Governance Annual Report Sustainability Report Other information Contents Credit and counterparty risks The Group's financial transactions cause credit risks with regard to financial counterparties. Financial credit risks or counterparty risks constitute the risk of losses if the counterparties do not fully meet their commitments. The management of the Group's financial credit risk is regulated in the finance policy through accepting only creditworthy counterparties and fixed limits, which are continuously controlled. As of December 31, 2022, the total counterparty exposure in derivative instruments was SEK 39 M (0). The Group has signed standard netting agreements (ISDA) with counter- parties for currency transactions and interest-rate swaps. These agreements permit relevant financial assets and liabilities to be offset. Transactions take place within established limits and exposures are continuously monitored. Commercial credit risks are limited by a diversified customer base with a high credit rating. The Group's customers are found primarily in the public sector, which means that its credit risk is generally very low. The credit risk for Getinge's customers in the private sector is also deemed to be low. When deemed necessary, credit risk is managed using letters of credit or export credit- related guarantees. The provision for doubtful receivables at year-end totaled SEK 256 M (253). The Group's accounts receivable are presented in Note 14, which shows that the share of past due accounts receivable on December 31, 2022 amounted to SEK 1,440 M in relation to the total volume of accounts receivable, which amounted to SEK 5,531 M. For 43% of past due accounts receivable, payment is past due by a maximum of one month. Financial derivatives Getinge uses financial derivatives to manage interest and currency exposure arising in its business. The effectiveness of a hedge is assessed when the hedging relationship is entered into. The hedged item and the hedging instrument are continuously assessed to ensure that the relationship meets the requirements for hedge accounting. When the Group hedges purchases and sales in foreign currency, a hedging relationship is entered into whereby the critical terms of the hedging instrument match the terms of the hedged item. In this way, a qualitative assessment of the effective- ness of the hedging relationship is performed and the relationship is expected to be effective for the period for which it is valid. The Group also enters into interest-rate swap agreements that have the same critical terms as the hedged item. Critical terms may be benchmark interest rates, reset dates, currency, maturities and nominal amount. The Group does not hedge 100% of the principal and thus identifies only a portion of the principal outstanding that corresponds to the nominal amount of the swap. The Group applies hedge accounting. All derivatives are classified under level 2 of the value hierarchy. Fair value measurements for currency forwards are based on published forward rates in an active market. The measurement of interest-rate swaps is based on forward rates as expressed in market yield curves. Getinge has no interest-rate swaps outstanding as of December 31, 2022. Based on changes to existing loan agreements, Getinge has waived its right to draw the currencies and tenors affected by the current IBOR reform for the syndicated loan (EUR 490 M), effective January 2022. Interest on the loan outstanding of USD 75 M (maturing in July 2024) was renegotiated and thus no LIBOR exposure exists on December 31, 2022. Fair value disclosures pertaining to borrowing and other financial instruments Essentially, all loans have floating interest rates and, accordingly, the fair value is assessed as corresponding to the carrying amount. Contingent considerations are measured at fair value at Level 3 of the fair value hierarchy. For other financial assets and liabilities, fair value is assessed as corresponding to the carrying amount due to the short expected maturity in time. Contingent considerations Getinge signed agreements on contingent considerations in connection with acquisitions of business and subsidiaries. The liabilities for these additional purchase prices are measured at fair value through profit or loss. In most cases, the additional purchase prices are contingent on securing government approval for the acquired product development projects and, to a lesser extent, contingent of the earnings performance of the acquired businesses. The future cash flows are discounted if the planned disbursement date exceeds 12 months. Assessments about future cash flows linked to the contingent considerations are regularly reviewed by company management and the fair value is adjusted if necessary. The discount effect is recognized on an ongoing basis in profit or loss under financial items. Business combinations Payments Contingent considerations Opening balance 2022 2021 404 38 100 364 -19 21 2 65 0 571 404 Discount effect Translation differences Closing balance Contingent considerations are included in the item Other provisions in the balance sheet, of which SEK 273 M is classified as non-current and SEK 298 M is classified as current. 105

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