Getinge 2022 Annual Report

Getinge 2022 Annual Report NOTE 1 Accounting policies Introduction Strategy Corporate Governance Annual Report Sustainability Report Other information Contents General information Getinge AB (publ), which is the Parent Company of Getinge Group, is a limited liability company with its registered offices in Gothenburg, Sweden. A description of the company's operations is included in the Administration Report on page 58. The consolidated financial statements for the fiscal year ending December 31, 2022 have been approved by the Board on March 30, 2023 and will be presented to the AGM on April 26, 2023 for adoption. Accounting and measurement policies Getinge's consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB), as adopted by the EU. In addition, the Swedish Financial Reporting Board's recommendation RFR 1 has been applied. The consolidated financial statements include the financial statements for Getinge AB (publ) and its subsidiaries and were prepared in accordance with the cost method. The Parent Company applies the same accounting policies as the Group, except in the instances stated below in the section "Parent Company's accounting policies." The differences that arise between the Parent Company and the Group's accounting policies are attributable to the limited opportunities for the application of IFRS in the Parent Company, as a result of the Swedish Annual Accounts Act and the Swedish Pension Obligations Vesting Act. The Parent Company's functional currency is Swedish kronor (SEK), which is also the Parent Company's and Group's presentation currency. This means that the financial statements are presented in Swedish kronor (SEK). Unless otherwise stated, all amounts are given in millions of Swedish kronor (SEK M). For practical reasons, the figures in this Annual Report have not been rounded off, which is why notes and tables may not total correct amounts. Significant estimates and assessments To prepare the financial statements in accordance with IFRS, the company management is required to make assessments and assumptions that affect the recognized amounts of assets and liabilities and other information in the financial statements as well as the revenues and expenses recognized during the period. Assumptions, assessments and estimates are reviewed on a regular basis. The actual outcome may diverge from these assumptions, assessments and estimates. The Board of Directors and Getinge Executive Team have deemed that the following areas may have a significant impact on Getinge's earnings and financial position: Measurement of identifiable assets and liabilities in connection with acquisitions In conjunction with acquisitions, all identifiable assets and liabilities in the acquired company are measured at fair value, including the value of assets and liabilities in the previously owned share as well as the share attributable to non-controlling interests. Goodwill and intangible assets with an indefinite useful life The impairment requirement for goodwill and other intangible assets with an indefinite useful life is tested annually by Getinge in accordance with the accounting policy described here in Note 1. The recoverable amount for cash generating units (CGUS) has been established through the measurement of value in use. For these calculations, certain estimations must be made (see Note 12). Pension commitments Recognition of the costs of defined-benefit pensions and other applicable retirement benefits is based on actuarial valuations, relying on key assumptions for discount rates, future salary increases and expected inflation. In turn, the discount rate assumptions are based on rates for high-quality fixed-interest investments with durations similar to the pension plans (see Note 24). Write-down of inventories Inventories are recognized at the lower of cost according to the first in/first out principle, and net realizable value. The value of invento- ries is adjusted for the estimated decrease in value attributable to products no longer sold, surplus inventories, physical damage, lead times for inventories, and handling and sales overheads. If the net realizable value is lower than the cost, the inventories are written down to this amount (see Note 13). Deferred tax The measurement of loss carryforwards and the company's ability to utilize unutilized loss carryforwards is based on the company's assessments of future taxable income in various tax jurisdictions and includes assumptions regarding whether expenses that have not yet been subject to taxation are tax deductible. Deferred tax is recognized in profit or loss unless the deferred tax is attributable to items recognized in other comprehensive income, in which case the deferred tax is recognized together with the underlying transaction in other comprehensive income (see Note 8). Capitalized product development costs Costs for product development projects are capitalized to the ex- tent that the costs can be expected to generate financial benefits. Capitalization starts when management believes that the product will be technically or financially viable. This means that established criteria must be met before a development project is capitalized as an intangible asset. Capitalization ends and amortization of the capitalized development costs starts when the asset is ready for use. Capitalized development costs are tested for impairment when there are indications of a decline in value. Determining the amor- tization period and testing for impairment require management to make assessments. Disputes and claims for damages Provisions for disputes and claims for damages represent manage- ment's best estimate of the future cash flow required to settle the obligations. The disputes primarily relate to contractual commit- ments in contracts with customers and suppliers and damages related to product liability. Management's assessment is that the need for a provision or contingent liability depends on the legal processes in the country in question and the course of the proceed- ings. Opinions from external and internal advisors are taken into consideration, as is experience from similar cases. The results of complicated disputes and claims for damages may nevertheless be difficult to predict and disputes could be both time-consuming and costly (see Notes 22 and 26). 78

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