VVO's business consists of the ownership and rental of apartments. Its operations are divided into two segments: VVO Non-subsidised and VVO State-subsidised.
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, Finland. A copy of VVO's 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 under short-term ownership with the intention of being sold are included in inventories but 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 of the company. Divested subsidiaries have been excluded from the financial statements from the date when control 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 year 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 profit for the financial period accounted for by affiliates, corresponding to the Group’s holding, is presented as a separate item in the income statement.
Some affiliates use different financial periods; the latest financial statements or, if available, a more recent interim report have been used when consolidating such affiliates.
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 asset’s 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 economic lifetimes and planned depreciation of fixed assets were reviewed during the financial period. Planned depreciation has been updated so that the chosen method and period correspond to the estimated economic lifetime of the asset in question.
Positive and negative goodwill allocated to fixed asset items is written off in accordance with the depreciation rules of the item group in question. Capital gains from the sale of fixed assets are recorded under other operational income and losses under other operational costs.
When the financial statements are prepared, the fair value of rental apartments and the business premises in rental apartment buildings are determined on the basis of the company’s own evaluation. Fair values are determined quarterly 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 value of business premises is determined using the revenue value. If business premises are located in a residential building whose fair value is determined on the basis of its balance sheet value, then the fair value of these business premises is also based on the balance sheet value.
When using the transaction value method, the 24 months preceding the valuation date are used as comparison data for transaction prices. 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 completed apartments unsold at the closing date.
Inventories for the comparison period also contain land areas (including acquisition costs for projects that have not yet begun) and other inventories (primarily planned projects).
Inventories are recognised at acquisition cost, or at disposal price if this is likely to be lower.
VVO Group ceased to recognise founder contracting during the 2014 financial year, and the recognition of incomplete property developments was regrouped under non-current assets. Under the new grouping, the Group consists of 13 subsidiaries and 4 affiliates. Comparison figures have not been altered to conform with current practices.
Financial securities have been recognised at purchase price, or at market price on the closing date if this was lower.
Changes in the value of interest rate derivative agreements are presented in the notes to the financial statements. However, swaptions are valued at fair value according to the market price on the closing date. VVO Group has separate 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. In the income statement, the difference in residential building provisions and the depreciation difference generated during the financial period is divided 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 using the temporary differences between taxation and the financial statements, using the tax rate for the coming years that was confirmed on the closing date. As of 2006, deferred tax liability has also been calculated using allocated goodwill from acquisitions; no tax liability has been recognised for acquisitions made prior to this.
The balance sheet includes deferred tax liability in its entirety, and deferred tax assets at the estimated amount. Deferred tax assets have been deducted from tax liabilities, and the net amount is presented as a separate item under non-current liabilities.
VVO exercises caution with regard to the confirmed losses made by subsidiaries, and these losses have not been included in deferred tax liabilities.
VVO Asunnot Oy and VVO Korkotukikiinteistöt Oy are Group companies that are subject to profit-sharing limitations in accordance with the housing legislation amendments that entered into force at the beginning of 2000. These companies can pay their owner, VVO-group plc, a maximum eight per cent return on own funds invested in them that have been confirmed by the Housing Finance and Development Centre of Finland (ARA). This has no effect on the parent company's distributable unrestricted shareholders' equity.
The consolidated cash flow statement has been compiled on the basis of the information in the consolidated income statement and balance sheet, and their supplementary information. Changes in Group structure have primarily been considered using the difference between the opening and closing balance sheet totals.
Cash and cash equivalents include bank accounts, liquid deposit notes, and certificates of deposit.
All of the Group's receivables and liabilities are euro-denominated.
Except for swaptions, interest rate swaps that hedge against the interest rate risks of long-term loans have not been entered into the balance sheet; they are reported in the notes to the financial statements. Swaptions have been valued at fair value using the market price at the closing date. Changes in the fair value have been recognised through profit or loss as financial income and expenses.
The interest income and expenses based on derivative agreements are allocated over the agreement period and are used to adjust the interest rates of the hedged object.
Derivatives used to hedge against the price of electricity have not been entered into the balance sheet. The fair value of electricity derivatives is presented in the notes to the financial statements under other operating expenses.