Equities and fund investments as well as loan receivables are valued at the lower of the acquisition cost or fair value in the financial statements. The value of investment is based on risk classification and other factors affecting the value. The value of the investments is monitored continuously.
Some of capital loans are in practice equity investments. Income from these investments is paid only when the company's financial situations permits. Interest from such capital loans is recorded in accounting only when paid. Also a part of interest income from loans that are written off is recorded only when paid.
In the profit and loss account write-offs and their cancellations have been included in the item of Reduction in value of investments.
Fund balance sheet values deducted by the paid management fees are compared with the fund manager’s estimate of the portfolio’s fair value. When the fund’s investment period is ending or has ended, the balance sheet value can be no more than 90% of the manager’s valuation.
Special risk finance
Special risk finance is the term used to describe the class of projects in which Finnfund has been indemnified, by a decision of the Finnish government on 20 September 2012 and in force until 31 December 2015, against investment losses or write-offs. Projects indemnified before the deadline remain within this class afterwards. To be subject to indemnification, investments and loans must be separately approved by the Board of Directors.
Projects with the company’s risk classification of C, CC or CCC are eligible for the special risk finance class. The corresponding level of losses indemnified by the government is 40%, 50% and 60%. The investment risk is borne partly by Finnfund and partly by the government. Government's share of the risk is a percentage of the disbursed investments deducted by repayments.
The deferred value of claims on the government for its share of net losses from special risk finance projects is stated separately in the company’s accounts. Separate application must be made to the government for payment of the indemnity, which cannot exceed EUR 5 million annually.
Other investments in current assets
Securities have been valued at the acquisition cost or the probable transfer price, whichever is lower.
Derivatives include foreign exchange forwards and a cross currency swap. The fair values of these derivatives are the banks' mark-to-market valuations on the balance sheet date. Changes in fair values from open derivative contracts are recognised on the profit and loss account under other financial expenses. Derivatives are used to hedge the principals of the loan investments.
Foreign currency items
Receivables, debts and liabilities denominated in foreign currency have been translated into euros at the exchange rate on the balance sheet date.
Intangible and tangible assets
Intangible and tangible assets are entered in the balance sheet at their acquisition cost less depreciation according to plan.
Other capitalised long-term expenses 4-5 years
Machinery and equipment 3-5 years
Pensions for the company’s employees have been arranged in an external pension insurance company. Pension expenditure is booked in the year of accrual.
The managing director’s pension liability is covered partly by an existing group pension insurance and partly by an annual reserve in the company’s balance sheet. The annual payment is 26.51% of the managing director’s gross annual earnings.