The financial statements of the parent company, Wärtsilä Corporation, have been prepared in accordance with the provisions of the Finnish Accounting Standards (FAS).
The preparation of the financial statements requires management, in compliance with the regulations in force and good accounting practice, to make estimates and assumptions that affect the measurement and timing of the reported information. Actual results may differ from these estimates.
Transactions denominated in foreign currencies and derivatives
Business transactions in foreign currencies are recorded at the rates of exchange prevailing on the transaction date. Receivables and payables on the balance sheet date are valued at the exchange rates prevailing on that date. Exchange gains and losses related to business operations are treated as adjustments to other operating income and operating expenses. Exchange gains and losses related to financing operations are entered under financial income and expenses.
Derivatives are measured at fair value. Open currency derivatives, including interest components, are valued at the balance sheet date. The fair value of interest rate swaps is calculated by discounting the future cash flows. Derivative changes in fair value are immediately recognised in financial income or expenses in the statement of income.
Research and development costs
Research and development costs are expensed in the financial period in which they occur.
Receivables are valued to acquisition cost or to a lower probable value.
Fixed assets and depreciation and amortisation
Fixed assets are valued in the balance sheet at their direct acquisition cost less accumulated depreciation and amortisastion. Certain land areas also include revaluations.
Depreciation and amortisation is based on the following useful lives:
Other long-term expenditure 3–10 years
Buildings 20–40 years
Machinery and equipment 5–20 years
Lease payments are treated as rentals.
Provisions in the balance sheet comprise those items which the company is committed to covering either through agreements or otherwise, but which are not yet realized. Changes to provisions are included in the income statement.
Income taxes in the income statement include taxes calculated for the financial year based on Finnish tax provisions, as well as adjustments to taxes in prior years. Taxes allocated to extraordinary items are shown in the notes to the financial statements.
Dividends proposed by the Board of Directors are not recorded in the financial statements until they have been approved by the Annual General Meeting.