Company’s field of business and its effect on the accounting principles applied to the financial statements
The company’s field of business is private equity and other related investment. The company aims to promote Finnish businesses by investing in venture capital and private equity funds and directly in companies.
The term of private equity funds is generally 10 years, during which the funds call in commitments given to the fund by investors. The company’s outstanding commitments are listed under contingent liabilities.
Liquid assets to cover unpaid commitments are entered as liquid securities in the balance sheet and as cash in hand and at banks in the balance sheet.
The distribution of profit from funds as well as sales gains and sales losses on liquid assets are entered in financial income and financial expenses in the income statement. Owing to the nature of the company’s operations, the company does not have any net sales. Sales gains arising from exits from direct investments are included in other operating income, and sales losses arising from exits from direct investments in other operating expenses, both in the income statement. Interest on loans is entered as income to the extent that its realisation can be deemed probable.
Accounting principles and scope of consolidated financial statements
Finnish Industry Investment Ltd’s wholly-owned subsidiaries Start Fund Management Oy, Tesi Fund Management Oy and Tesi Industrial Management Oy have been included in the consolidated financial statements using the acquisition cost method.
In December 2013 Finnish Industry Investment Ltd acquired 100% ownership of Tesi Industrial Management Oy, which bought 66.4% of Aker Arctic Technology Oy’s shares. Aker Arctic Technology Oy’s financial statements have not been combined with the Group’s financial statements for 2013 as under the provisions of Finland's Accounting Act (6:3.1) this was deemed unnecessary for giving a true and fair view of the Group’s operating result and financial position. The financial statements of Aker Arctic Technology Oy will be combined with the Group’s financial statements for 2014.
Finnish Industry Investment Ltd’s subsidiary Start Fund I Ky (wholly-owned through Start Fund Management Oy) has been included in the consolidated financial statements using the acquisition cost method.
No separate financial statements were prepared for subgroups Start Fund Management Oy and Start Fund I Ky.
Due to the nature of direct investments and shares in funds, these have not been treated as associated companies in the consolidated financial statements, although in some cases ownership exceeds 20%.
Valuation principles used in the financial statements
Intangible and tangible assets are entered in the balance sheet at acquisition cost less planned depreciation. Depreciation periods are:
Intangible assets, straight-line depreciation, 5 years
Machinery and equipment, reducing balance, 25%
Shares and holdings (Ky's) and other long-term investments are valued in the balance sheet at acquisition cost or at a lower fair value. Fair value has been defined based on the International Private Equity and Venture Capital Valuation Guidelines (IPEVG). Owing to the nature of the investments, the definition of the fair value of an investment calls for the discretion of Finnish Industry Investment Ltd’s Management Group and the use of estimates.
A reduction in value has been made on fund investments (Ky's) if the reduction was of significance (at least 20%) and permanent. Permanence was judged against the life of the fund (life of at least 48 months) and the amount invested (capital calls to fund totalling at least 40% of commitments).
Liquid securities are valued at acquisition cost or at a lower market value.
Deferred tax assets are calculated on the temporary differences between the taxable values and the book values of assets, as well as on confirmed losses.
As at 31 December 2013, the Group and parent company had deferred tax assets of €13.6m, of which €3.3m was entered in the balance sheet of the Group and of the parent company.
The total deferred tax asset is estimated to be the probable amount of the tax asset.