Annual report 2013
VVO is a housing service Group. The housing rental service uses privately financed and state-subsidised housing stock.
The Group’s parent company, VVO-group plc, is a public limited company domiciled in Helsinki. Its registered address is Mannerheimintie 168a, FI-00300 Helsinki. A copy of the consolidated financial statements is available at www.vvo.fi or from the parent company head office.
The consolidated financial statements have been compiled as a combination of the Group companies’ income statements and balance sheets and their notes. The Group’s accounting policies have been uniformly applied to the individual financial statements of the Group companies. The consolidated financial statements include, in addition to VVO-group plc, the companies in which the parent company directly or indirectly holds more than 50 per cent of the votes or exercises actual control. Housing companies included in inventories, whose ownership is on a short-term basis and which are intended to be sold are not consolidated in full in the financial statements. The loan portions of these inventory companies have been consolidated in the financial statements.
Mutual shareholdings have been eliminated using the cost method. The difference between subsidiaries’ acquisition costs and the equity corresponding to the holding and the deferred tax liability based on this have been allocated to land areas and buildings. Companies acquired during the financial year are consolidated in the financial statements from the day of acquisition or from the moment when the Group gained control in the company, and divested subsidiaries have been excluded from the financial statements when control has ceased.
Intra-Group transactions, receivables and liabilities, and essential internal margins and internal profit distribution have been eliminated in the consolidated financial statements. The distribution of the profit for the financial period between the parent company shareholders and the minority is presented in the income statement, the minority interest of shareholders’ equity being presented as a separate item in the balance sheet.
Affiliates are companies which do not belong to the Group but in which the parent company directly or indirectly has considerable influence. Considerable influence is defined as the Group holding at least 20 per cent of the votes vested in the company’s shares or the Group otherwise exercising influence but not control in the company. Affiliates have been consolidated using the equity method. The share of the affiliates’ profit for the financial period, corresponding with the Group’s holding, is presented as a separate item in the income statement.
Some affiliates have different financial periods; the latest financial statements or a more recent interim report, if available, have been used when consolidating such affiliates. VVO-group plc’s 50 per cent holding in Suomen Asumisoikeus Oy and SV-Asunnot Oy is not consolidated in the financial statements. Due to the current right-of occupancy housing legislation, the shareholders cannot, in practice, expect any return on their investment in the company.
Income related to rental services
Income from rental services is recognised on an accrual basis during the lease period.
Tangible and intangible assets are recognised in the balance sheet at original purchase cost less depreciation according to plan and possible impairment. Contributions related to the acquisition of tangible assets are deducted from the purchase cost of the object. Contributions are recognised through smaller depreciation during the assets’ useful life. Depreciations according to plan are calculated as straight-line depreciation based on the estimated useful life of the assets (prior to 1996, some of the depreciation was based on maximum amounts approved in taxation).
The depreciation periods according to plan, based on the useful life, are:
Costs generated later are included in the book value of a tangible asset only if it is likely that the future economic benefit related to the asset will benefit the Group. Other repair and maintenance costs are recognised through profit or loss when they materialise.
The recognition practice for VVO Group repair expenses has been specified. Repair expenses not increasing the ability to generate revenue are recognised as expenses. The income statement and balance sheet for 2012 have been altered to correspond to the changes made. The change in recognition practices increased repair expenses for 2013 by EUR 11.4 (7.8) million.
Positive and negative goodwill allocated to fixed asset items is written off in accordance with the depreciation rules of the item group in question. Sales gains from fixed assets are recorded under other operational income and sales losses under other operational costs.
When the financial statements are prepared, the fair value of rental apartments and business premises in the rental apartment buildings are determined on the basis of the company’s own evaluation. Fair values are determined every six months and reported as part of official reporting. An external expert gives a statement on the valuation.
The fair values of rental apartments are based on
The fair values of business premises in the rental apartment buildings are determined as:
Under the transaction value method, benchmark information for transaction prices for the 24 months preceding the valuation date is used. The value is not depreciated with deferred tax liability.
Development costs are recognised as expenses in the income statement in the financial year in which they are generated.
The Group’s inventories consist of the following items:
Inventories are recognised at acquisition cost, or at disposal price if it is likely to be lower.
Financial securities are recognised at purchase price, or at market price if it is lower.
Interest income and costs caused by derivative agreements are allocated over the agreement period, and are used to adjust the interest rates of the hedged object. Changes in the value of the hedging agreement are presented in the notes to the financial statements. VVO Group has separate operating instructions for the use of interest rate derivatives.
Future costs and apparent losses that will no longer generate future income and which the Group is obliged and committed to perform and whose monetary value can be reasonably estimated are recognised as losses in the income statement and as statutory provisions in the balance sheet.
Appropriations consist of residential building provisions and accumulated depreciation differences. The change in the difference between depreciation according to plan and tax depreciation in subsidiaries’ individual financial statements is presented as appropriations in the income statements and accumulated appropriations in the balance sheet. In the consolidated balance sheet, the accumulated appropriations are divided into shareholders’ equity, minority interest and deferred tax liabilities. The difference in residential building provisions and depreciation difference generated during the financial period is divided in the income statement into changes in deferred tax liability, minority interest in the profit for the period, and profit for the period.
The pension cover of Group companies is handled by external pension insurance companies. Pension costs are recognised as costs in the income statement.
Deferred tax assets or liabilities have been calculated on the temporary differences between taxation and the financial statement, using the tax rate confirmed for the coming years on the closing date. From 2006, a deferred tax liability has also been calculated on allocated goodwill from acquisitions; no tax liability has been recognised for acquisitions made prior to this.
The balance sheet includes the entire deferred tax liability and the deferred tax asset at the estimated amount. The deferred tax asset has been deducted from the tax liability and the net amount is presented as a separate item in non-current liabilities.
Of the Group companies, VVO Asunnot Oy and VVO Korkotukikiinteistöt Oy are companies subject to profit-sharing limitations in accordance with the housing legislation amendments that entered into force at the beginning of 2000. They can at most pay their owner, VVO-group plc, an 8 per cent return on the original investment made by the owner. When determining the basis for the return, i.e. the original investment, and also in paying the return, VVO Group companies subject to profit sharing limitations can be considered a single group. This has no effect on the parent company's distributable unrestricted shareholders' equity.
The consolidated cash flow statement has been compiled based on the information in the consolidated income statement and balance sheet and any supplementary information. Changes in the Group structure have primarily been taken into consideration based on the difference in the balance sheet total in the opening and closing balance sheets.
Cash and cash equivalents include bank accounts, liquid deposit notes and certificates of deposits.
At the closing date, the Group had no receivables or liabilities denominated in foreign currencies.
Interest rate swaps made in order to hedge against the interest rate risks of long-term loans have not been entered in the balance sheet; they are reported in the notes to the financial statements.
The interest income and costs based on derivative agreements are allocated over the agreement period and are used to adjust the interest rates of the hedged object.