New standards and interpretations

Hufvudstaden applies IFRS 16 Leases from January 1, 2019 and has selected the simplified transition method and does not apply the standard retroactively. Reported rights of use will be assigned the same value as the reported lease liability as at January 1, 2019. In its capacity as lessee, Hufvudstaden has identified site leasehold agreements as being the single most material lease category. The lease liability as at January 1 was SEK 788 million, of which SEK 676 million referred to site leasehold agreements.

According to IFRS 16, site leaseholds are defined as perpetual leases. They are reported at fair value and will therefore not be depreciated. The value of the right of use asset remains the same until the next renegotiation of each ground rent. The leasing liability is not amortized, and the value remains unchanged until each ground rent is renegotiated.

Ground rents are reported in their entirety as a financial expense, which differs from the previous application according to IAS 17 Leases, where they are reported as operating expenses charged to gross profit and loss.

Other leases identified by Hufvudstaden within the framework of the definition of leases according to IFRS 16, are mainly external premises, office equipment and similar. These leases are reported as right of use assets and are equivalent to leasing liabilities as at January 1, 2019. Right of use assets are depreciated over the term of the lease, while interest accrues to the leasing liabilities and is amortized over the term of the lease. Hufvudstaden continuously analyses the valuation of the lease liability based on changes or additional leases. In its capacity as lessor, Hufvudstaden, has noted that application of IFRS 16 has not had any material impact on the Consolidated Financial Statements.

In accordance with the simplified transition method, the comparison figures for 2018 have not been recalculated. This has also meant that the comparability of certain income statement and balance sheet items and performance measures have been affected. In the tables below, income statement and balance sheet items and performance measures for 2019 have been reported excluding the effects of the application of IFRS 16. Other new and amended standards that came into effect in 2019 have not had any material impact on the Consolidated Financial Statements.