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Ingka Holding B.V. Annual report for financial year 2016
Corporate information
Ingka Holding B.V. (‘the Company’), Bargelaan 20, 2333 CT Leiden, is the ultimate parent
company of the IKEA Group of companies (‘IKEA Group’). IKEA Group’s financial year covering
the 12 month period ending August 31 2016 is referred to as ‘2016’ and the comparable year is
referred to as ‘2015’.
The IKEA vision is to provide a better everyday life for the many people. As per financial year-
end 2016, the operation of the IKEA Group is based on three main areas: Retail, Customer
Fulfilment and IKEA Centres. Retail owns and operates 340 stores in 28 countries. Customer
Fulfilment owns and operates the distribution centers and supports the retail business with
distribution services, retail logistics and other services such as home delivery and installation
services. IKEA Centres owns, develops and operates shopping centres in connection with IKEA
Retail stores.
At August 31, 2016 IKEA Group sold its product development, supply chain and production
companies (‘the Transaction’) to the Inter IKEA Group of companies with its ultimate parent Inter
IKEA Holding B.V. (‘Inter IKEA Group’).
Key figures:
2016 2015
Revenue (in EUR million) 35,074 32,658
Personnel (average number) 166,985 156,233
Total number of stores 340 328
Countries with IKEA stores owned by the Company 28 28
Our performance
For 2016, IKEA Group’s total sales of goods amounted to EUR 34.2 billion. Total sales of goods
translated into Euro increased by 7.1% and adjusted for currency impact, sales increased by
7.9%. Sales in comparable stores grew by 4.8% compared to 2015.
Together with the rental income of 0.9 billion from IKEA Centres, our total revenue amounted to
EUR 35.1 billion — an increase of 7.4% compared to 2015. Rental income increased with 18.0%
compared to 2015.
The year 2016 was a good year with 783 million visits to our stores, 2.1 billion visits to IKEA.com
and 425 million visits to our shopping centres. In all of our meetings with the customers, we want
to provide good quality products and inspiration for creating beautiful homes. Last year’s focus
on the theme “It starts with the Food”, covering kitchen, cooking, dining, eating, and the food-
business, was a strong success and appreciated by the customers.
On a journey to become the world’s leading multichannel home furnishing retailer, we are
increasing our focus on integrating physical and digital commerce to enable customers to shop
and interact with us in ways that suit their needs. In 2016 we offered e-commerce in 14 out of
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Ingka Holding B.V. Annual report for financial year 2016
28 countries and related sales grew by 29% to EUR 1.4 billion. We plan to roll out e-commerce
to all our markets in the coming years.
The gross margin increased with 1.9% points to 46.1% with positive purchase price developments
throughout the year and a one-off effect from the Transaction contributing to the higher gross
margin.
Our financial net result of EUR 0.9 billion includes a gain on the Transaction of EUR 0.7 billion.
The net financial result excluding the Transaction of 0.2 billion was below 2015, due to a very
positive result on currency instruments in the comparable year. We did not incur any significant
credit losses on our securities portfolio, which increased by EUR 6.6 billion to EUR 21.9 billion
during 2016.
Corporate taxes incurred in 2016 amounted to EUR 1.2 billion which means an effective tax rate
of 21.6% (2015: 18.9%).
This resulted in a net profit of EUR 4.2 billion, an increase of 19.6% compared to 2015. Excluding
the Transaction the net profit remains stable at EUR 3.5 billion.
Total assets increased during the year to EUR 54.0 billion from EUR 50.0 billion while we further
increased our solvency to 38.9 billion of equity at year-end. Based on available liquidity,
significant increase of external financing is not expected in the coming years.
Our markets
In 2016, our sales grew in 27 out of 28 markets with China remaining one of the fastest growing
countries for IKEA Group together with Canada, Poland and Australia. The five largest retail
markets based on sales value were Germany, USA, France, the UK and Sweden.
We opened 12 new stores, and 19 pick up and order points during 2016 and further developed
the multichannel distribution network to increase accessibility for our customers. In addition, we
continued working on opening our first stores in India and Serbia.
Our investments
During 2016, the IKEA Group made capital expenditures of EUR 3.2 billion in stores,
distribution, shopping centres, factories and renewable energy.
IKEA Group and Inter IKEA Group are two independent groups of companies with separate
management and owners operating under a franchise system established in the 1980s. IKEA
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Ingka Holding B.V. Annual report for financial year 2016
Group is the largest franchisee with around 90 percent of the total IKEA franchisee sales. IKEA
Group operates and owns 340 stores in 28 countries. Inter IKEA Group is franchisor and owner
of the IKEA brand and concept.
Historically, the product development and supply chain companies were owned and operated by
IKEA Group under a non-exclusive assignment from Inter IKEA Group.
Early 2015, Inter IKEA Group informed IKEA Group of its intention to operate the product
development and supply chain activities within the Inter IKEA Group. This led to discussions
between the parties to sell the relevant IKEA Group companies.
In May 2016, IKEA Group signed a Share Purchase Agreement to sell the companies executing
the assignments for product development and supply chain and in addition its production
companies. IKEA Group’s production companies were included in the Transaction as production is
closely linked to the supply chain and product development.
As a result of the Transaction, some 26,000 co-workers became part of the Inter IKEA Group.
The co-workers will continue to be employed by their current companies. The estimated
consideration in cash for the Transaction is EUR 5.2 billion. The gain on the Transaction of EUR 0.7
billion is reported as financial income in the consolidated income statement 2016.
Following the Transaction, the IKEA Franchise system provides a stronger platform for long-term
growth where IKEA Group will take an even stronger focus on the customer and on development
of multichannel retailing and distribution.
The strategy focuses on three areas where we can have the most positive impact:
• Inspire and enable millions of customers to live a more sustainable life at home.
• Strive for resource and energy independence.
• Take a lead in creating a better life for the people and communities impacted by our
business.
We report on how we progress towards our goals annually in the IKEA Group Sustainability Report,
publicly available on IKEA.com.
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Ingka Holding B.V. Annual report for financial year 2016
of Book 2 of the Netherlands Civil Code. In total, almost half of all our managers are women and
around 40% of our top 200 managers are women.
Risk management
Our company risk management approach provides senior management with insight into our key
business risks and risk management practices in the organisation. The IKEA Group risks are
periodically reviewed and consolidated into a Group risk register that is validated by the Risk
Management Committee (a committee of Group Management), discussed with the Audit
Committee of the Supervisory Board, and presented to the Supervisory Board. Representatives
of the business sitting in this Risk Management Committee decide every year on areas to focus
on (Goods Handling and Information Security in 2016). Business leaders are responsible for the
design and the implementation of the risk treatment plans.
Besides the risk management approach being designed to anticipate risks, reduce their likelihood
and mitigate their impact should they materialize, we use additional means of risk reduction, like
an internal control & compliance framework, crisis management and insurance.
IKEA Group relies on strong values and a culture that promotes the responsibility of
everyone to do the right thing. This is summarised in our Code of Conduct. In addition,
special efforts have been put in 2016 on compliance by defining and rolling out internal
control principles and designing an internal control process. Efficient internal control
activities in domains such as food safety, sustainability, property and accounting are key
success factors to risk mitigation. These efforts will continue in 2017.
We rely on a robust and well-deployed crisis management approach, also called Emergency
Response Handling. This ensures that risk impacts are minimised at unit, country and
Group level in all instances of crisis.
IKEA Group has several global insurance programs aiming to reduce the financial impact
of claims, damages or third-party compensation. The insurance covers are constantly
reviewed in line with IKEA Group’s need for risk transfers.
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Ingka Holding B.V. Annual report for financial year 2016
developed in 2016. The purpose is to secure the implementation of risk management and
compliance initiatives before 2020 to reach the wished maturity level of RCA capabilities. The
initiatives listed in this roadmap have been agreed with and are supported by business
stakeholders. They will progressively strengthen our existing risk management and compliance
practices.
In line with our strategic objectives and in respect of our values, IKEA Group pursues opportunities
which inherently include some risks. We commit to take those risks in a responsible and compliant
way. We have launched a key initiative in 2016 to further develop our risk appetite approach i.e.
our acceptance of risks. The purpose is to improve clarity and alignment in terms of
acceptance/tolerance to risks in all organisational units.
Some risk appetite statements are expressed in our Code of Conduct (for example, it stipulates
zero tolerance for corruption). Policies, standards, rules as well as manuals and standard
operating procedures further support the mitigation of risks.
In 2017, the relaunch of an Internal Audit function at Group level (under the joint responsibility
of the Audit Committee and the Chief Risk Officer) will also contribute to better risk management,
as the internal audit plan will be aligned with the IKEA Group risks.
Information security
Breach of confidentiality could harm customers or co-workers or give unfair advantages to our
competitors. IKEA Group continuously invests into implementing relevant industry standards and
to comply with regulations and legislations to lower the risk of damages to our stakeholders. In
case the risk materialises, we expect costs of internal damages, potential costs of compensation
and possible fines. We have a low appetite for this risk, therefore we support both Information
Management and Information Security initiatives aiming at implementing an updated governance
and securing sensitive information. It covers the aspects of confidentiality, integrity, and
availability, as well as relevance of information.
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Ingka Holding B.V. Annual report for financial year 2016
Brand reputation
More generally, any unfavourable media coverage, accurate or not, may have a negative impact
on brand reputation, at a local, national or international level. This may be allegations of different
nature, from diverse sources and through a variety of media including social media. We work and
operate in this environment of high media attention and volatile public opinion. We have a low
risk appetite for anything that can have a negative impact on the IKEA brand in the long term.
Therefore, we take all the necessary steps to ensure full compliance with laws and regulations,
to be positively perceived and positioned in the hearts and minds of our customers and key
stakeholders through a proactive public relations policy. Crisis management routines handle the
necessary reactive activities in case of negative media reports.
Geopolitical risks
IKEA Group is present as a retailer, in 28 countries and is sourcing products, from a large number
of other countries. Therefore unexpected geopolitical events or changes in the economic outlook
of such countries could have an impact on the turnover or the profitability of the company.
Regulatory changes could as wel affect our ability to do business in some countries. We aim to
anticipate all such changes to mitigate those risks and keep their impact to a minimum.
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Ingka Holding B.V. Annual report for financial year 2016
Financial risks
Currency volatility, credit risks and tax risks exists at IKEA Group. We have a low risk appetite in
this area, and we believe these risks are well monitored and handled. Refer to note 21 of the
financial statements for more information on financial risk management.
Organisational changes
Due to the Transaction with Inter IKEA Group on August 31, 2016, there is a short term risk of
disruption in ways of working as a significant change in the organisation will enable us to achieve
the opportunities of this new set-up. This risk is kept to a minimum by monitoring of all relevant
risks by each stakeholder in the Transaction, under the coordination of a Project Management
Office. IKEA Group has a shared responsibility with the Inter IKEA Group to contribute to
optimisation of the overall value chain in certain areas. IKEA Group has a low risk appetite for
inefficiencies in the value chain and works closely in certain areas with Inter IKEA Group in order
to keep fulfilling our mission to create a better everyday life for the many people.
For 2017, we plan for capital expenditures for an amount of EUR 4.1 billion. This includes
investments in stores, distribution and shopping centres as well as wind farms, solar power
sources and forestry. The principles to secure long-term sustainable growth; earning our money
before we spend it, being innovative, cost-conscious and customer focused will remain
unchanged.
P. Agnefjäll (Chairman)
A. Davidson
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Ingka Holding B.V. Annual report for financial year 2016
ASSETS
Fixed assets
Tangible fixed assets (4) 23,033 22,840
Intangible fixed assets (5) 1,144 1,215
Financial fixed assets (6) 811 1,300
Total fixed assets 24,988 25,355
Current assets
Inventories (7) 1,713 5,498
Receivables (8) 4,115 2,500
Securities (9) 21,878 15,278
Cash and short-term deposits (10) 1,273 1,381
Total current assets 28,979 24,657
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Ingka Holding B.V. Annual report for financial year 2016
Group equity
Capital Stock 1 1
Additional paid-in capital 51 51
Revaluation reserves 364 464
Other legal reserves 424 386
Other reserves 33,821 30,435
Result for the year 4,200 3,512
Total shareholder’s equity (11) 38,861 34,849
Minority interest 46 47
Total Group equity 38,907 34,896
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Ingka Holding B.V. Annual report for financial year 2016
2016 2015
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Ingka Holding B.V. Annual report for financial year 2016
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Ingka Holding B.V. Annual report for financial year 2016
1. CORPORATE INFORMATION
Ingka Holding B.V. (‘the Company’), Bargelaan 20, 2333 CT Leiden, is the ultimate parent
company of the IKEA Group of companies (‘IKEA Group’). The Company was incorporated on July
14, 1982 and is a wholly-owned subsidiary of Stichting Ingka Foundation, registered in
Amsterdam, the Netherlands. IKEA Group’s financial year covering the 12 month period ending
August 31 2016 is referred to as ‘2016’ and the comparable year is referred to as ‘2015’.
The vision of IKEA Group is to provide a better everyday life for the many people. As per financial
year-end 2016, the operation of the IKEA Group is based on three areas: Retail, Customer
Fulfilment and IKEA Centres. Customer Fulfilment supports the retail business with distribution
services, retail logistics and other services such as home delivery and installation services. IKEA
Centres develops and operates shopping centres in connection with IKEA Retail stores.
Ingka Holding B.V. has, through its subsidiaries, franchise agreements with Inter IKEA Systems
B.V., the company owning the IKEA brand and concept. Inter IKEA Systems B.V. is part of the
Inter IKEA Group of companies with its ultimate parent Inter IKEA Holding B.V. (‘Inter IKEA
Group’).
At August 31, 2016 IKEA Group sold its product development, supply chain and production
companies (‘the Transaction’) to Inter IKEA Group.
2. BASIS OF PREPARATION
Both the company financial statements and the consolidated financial statements have been
prepared in accordance with Part 9 of Book 2 of the Netherlands Civil Code. The financial
statements were prepared on November 30, 2016.
The consolidated financial statements of the Company are presented in euro (EUR) and are
prepared on a historical cost basis, except for the valuation of certain financial instruments that,
subsequent to initial recognition at cost, are remeasured to fair value, in accordance with Dutch
generally accepted accounting principles (Dutch GAAP).
The management of the Group makes various judgements and estimates, when applying the
accounting policies and rules for preparing the financial statements. The principal judgements
and estimates, including underlying assumptions relate to the useful life of fixed assets,
provisions, impairments and recoverability of deferred tax assets.
Basis of consolidation
The consolidated financial statements include the financial data of the Company and its group
companies at August 31 of the year under review. Group companies are legal entities and companies
over which the Company exercises control. In connection with this, financial instruments containing
potential voting rights that can be exercised immediately are also taken into account.
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Ingka Holding B.V. Annual report for financial year 2016
The consolidated financial statements include the accounts of the Company and its participating
interests over which management control is exercised. Group companies are fully consolidated as
from the date on which control is obtained and until the date that control no longer exists. The items
in the consolidated financial statements are determined in accordance with consistent accounting
policies. All significant intercompany balances, transactions and profits are eliminated.
Minority interests represent the portion of profit or loss and net assets not held by the Group and
are stated separately in the consolidated financial statements.
Joint ventures
Joint ventures are activities in which the Group has a joint controlling influence over the
operational and financial management through collaborative agreement with one or more parties.
In the consolidated accounts, joint ventures are accounted for on a net asset value basis.
Transactions denominated in foreign currencies are initially carried at the functional exchange
rates ruling at the date of transaction. Monetary balance sheet items denominated in foreign
currencies are translated at the functional exchange rates ruling at the balance sheet date. Non-
monetary balance sheet items that are measured at historical cost in a foreign currency are
translated at the functional exchange rates ruling at the date of transaction. Non-monetary
balance sheet items that are measured at current value are translated at the functional exchange
rates ruling at the date of valuation.
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Ingka Holding B.V. Annual report for financial year 2016
liabilities arising on the acquisition of a foreign activity are treated as assets and liabilities of the
foreign activity and translated at the rate of exchange ruling at the balance sheet date.
The assets and liabilities of foreign activities are translated into the Group’s presentation currency
at the rate of exchange ruling at the balance sheet date and the income and expenses of these
foreign activities are translated at the average rate of exchange for the year. Resulting exchange
differences are taken directly to the foreign currency translation reserve. On the disposal of a
foreign activity, the cumulative exchange differences, taken directly to the reserves, are taken to
the income statement as part of the gain or loss on the sale. In case of a partial disposal of a
foreign activity with no change in control, the proportionate cumulative exchange difference will
not be reclassified to the income statement.
Offsetting
Assets and liabilities are only offset in the financial statements, if and to the extent that:
an enforceable legal right exists to offset the assets and liabilities and settle them
simultaneously; and
the positive intention is to settle the assets and liabilities on a net basis or simultaneously.
Depreciation is calculated on a straight-line basis over their expected useful economic lives, taking
into account their residual value. Changes in the expected depreciation method, useful life and/or
residual value over time are treated as changes in accounting estimates.
The costs of dismantling, removing and restoring after the use of an asset are recognised as part
of the carrying amount of the asset, with a provision being formed for an equal amount at the
same time.
Retired tangible fixed assets are carried at the lower of cost and their fair value less costs. If the
expected fair value less costs is significantly higher than the carrying amount, with the assets
being held for sale, an incidental revaluation is carried out and taken to the revaluation reserve.
The revaluation is recognised as a separate item in the income statement account when the
increase in value is realised.
A tangible fixed asset is derecognised upon sale or when no further economic benefits are
expected from its continued use or sale.
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Ingka Holding B.V. Annual report for financial year 2016
Costs relating to intangible fixed assets not meeting the criteria for capitalisation (for example,
cost of research, internally developed brands, logos, trademark rights and client databases) are
taken directly to the income statement account.
Intangible fixed assets are carried at the lower of cost of acquisition or production net of
accumulated amortisation and their recoverable amount (being the higher of value in use and fair
value less costs to sell). Intangible fixed assets, except for land lease rights, are amortised on a
straight-line basis over their expected useful economic lives, subject to a maximum of 20 years.
The land lease rights are amortised over the contractually agreed period. If the estimated useful
life exceeds 20 years, an impairment test is performed at each financial year-end.
Development costs
Development costs are capitalised if they satisfy the technical, commercial and financial feasibility
criteria set for them. Currently development costs do not meet the criteria specified.
Research and development expenditures primarily relate to product development costs and are
presented as general and administrative expenses in the income statement.
Goodwill
Goodwill represents the difference between the cost of a business combination and the fair value
at the transaction date of the acquired equity value of the company. Goodwill is capitalised and
amortised over its expected useful life.
An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair
value less costs to sell and its value in use. When the carrying amount of an asset or CGU exceeds
its recoverable amount, the asset is considered impaired and is written down to its recoverable
amount. The impairment loss is recognised in the income statement under other expenses.
In assessing the value in use, the estimated future cash flows are discounted to their present
value using a market based pre-tax discount rate. In determining fair value less cost to sell,
recent market transactions are taken into account. If no such transactions can be identified, an
appropriate valuation model is used.
An assessment is made at each reporting date to determine whether there is an indication that
previously recognised impairment losses no longer exist or have decreased. If such indication
exists, the Group estimates the asset’s or CGU’s recoverable amount. A previously recognised
impairment loss is reversed only if there has been a change in the assumptions used to determine
the asset’s recoverable amount since the last impairment loss was recognised. The reversal is
limited so that the carrying amount of the asset does not exceed its recoverable amount, nor the
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Ingka Holding B.V. Annual report for financial year 2016
carrying amount that would have been determined, net of depreciation, if no impairment loss had
been recognised in prior years. Such reversal is recognised in the income statement.
The Company has the following subcategories for financial fixed assets:
Gains and losses are taken to the income statement, when the receivables are transferred to a
third party or impaired.
Investments in unlisted equity instruments, not forming part of a trading portfolio, are carried at
cost. Gains and losses are taken to the income statement, when the investments are transferred
to a third party or impaired. Dividends received are taken to the income statement.
Fair value
The fair value of the financial instruments is determined using available market information or
estimation methods. Under these estimating methods, the fair value is estimated:
on the basis of the fair value of its components or a similar instrument if the fair value of
its components or similar instruments can be reliably measured; or
by using generally accepted valuation models and techniques.
Amortised cost
Amortised cost is calculated using the effective interest rate method less any reductions for
impairment or uncollectibility. The calculation takes into account any discounts as well as
transaction cost at the transaction date.
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Ingka Holding B.V. Annual report for financial year 2016
Inventories
Inventories mainly comprise finished products and are carried at the lower of cost (first-in, first-
out basis) or net realisable value, net of a provision for obsolescence. Net realisable value is based
on estimated selling price, less further costs expected to be incurred for completion and disposal.
Receivables
Receivables are short-term in nature, initially measured at fair value and subsequently at
amortised costs (except for derivatives) less allowance for uncollectible amounts. The recognition
and measurement of derivatives are discussed in the section ‘Derivatives and hedge accounting’.
Securities
Following initial measurement, securities are carried at fair value without deduction of any
transaction costs on sale. Gains and losses arising from changes in the fair value are taken to the
income statement.
Provisions
A provision is formed for liabilities if it is probable that they will have to be settled and the amount
of the liability can be reliably estimated. The amount of the provision is determined based on a
best estimate of the amounts required to settle the liabilities and losses concerned at the balance
sheet date. Provisions are carried at non-discounted value, with the exception of:
the provision for pensions which is carried at discounted value; and
provisions for other employee benefits carried at discounted value if the effect of the time
value is material.
If expenses required to settle a provision are probable to be reimbursed by a third party, the
reimbursement is recognised as a separate asset.
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Ingka Holding B.V. Annual report for financial year 2016
Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling,
excluding any changes recorded as net interest and the return on plan assets (excluding net
interest), are recognised immediately in the balance sheet and equity (retained earnings).
Remeasurements are not reclassified to the income statement in subsequent periods.
Past service costs are recognised in the income statement on the earlier of:
The date of the plan amendment or curtailment; and
The date that the Group recognises restructuring-related costs.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset.
The Group recognises the following changes in the net defined benefit obligation under ‘general
and administrative expenses’ in the consolidated income statement:
Service costs comprising current service costs, past-service costs, gains and losses on
curtailments and non-routine settlements.
Net interest expense or income.
Income taxes
Deferred tax liabilities and deferred tax assets are carried on the basis of the tax consequences
of the realisation or settlement of assets, provisions, liabilities or accruals and deferred income
as planned by the Company at the balance sheet date. Deferred tax liabilities and deferred tax
assets are carried at non-discounted value.
A deferred tax liability is recognised for all taxable temporary differences. A deferred tax asset is
recognised for all deductible temporary differences and carry-forward losses, to the extent that it
is probable that future taxable profit will be available for set-off.
Deferred and other tax assets and liabilities are netted off if the general conditions for netting off
are met.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the
period when the asset is realised or the liability is settled, based on tax rates (and tax legislation)
that have been enacted or subsequently enacted at the balance sheet date.
Financial liabilities
Financial liabilities are recognised initially at fair value and in the case of loans and borrowings,
carried at amortised cost, this includes directly attributable transaction costs.
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Ingka Holding B.V. Annual report for financial year 2016
Financial liabilities are carried at original measured amount less principal payments and
amortisation. Gains or losses are recognised in the income statement when the liabilities are
derecognised, as well as through the amortisation process.
Leasing
Assessing whether an agreement contains a lease is based on the substance at the inception date
of the agreement. The agreement is regarded as a lease if the fulfilment of the agreement
depends on the use of a specific asset and the lease contains the right of use of a specific asset.
Capitalised lease property is depreciated over the shorter of the term of the lease and the useful
economic life of the property, if there is no reasonable certainty as to whether ownership of the
property is transferred to the lessee at the end of the term of the lease.
Under operating leases, the lease payments are charged to the income statement on a straight-
line basis over the term of the lease.
The Company documents at the inception of the transaction the relationship between hedging
instruments and hedged items as well as its risk management objective and strategy for
undertaking hedge transactions together with methods selected to assess hedge effectiveness.
IKEA Group also documents its assessment, both at hedge inception and on an ongoing basis, of
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Ingka Holding B.V. Annual report for financial year 2016
whether the derivatives that are used in hedging transactions are highly effective in offsetting
changes in future cash flows (the hedged items).
The effective portion of changes in the fair value of derivatives that are designated and qualify as
cash flow hedges are recognised in equity. The gain or loss relating to the ineffective portion is
recognised immediately in the income statement. Amounts accumulated in equity are recycled to
the income statement in the periods in which the hedged item will affect net profit. When a
hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge
accounting, any cumulative gain or loss existing in equity at that time remains in equity and is
recognised when the forecast transaction is ultimately recognised in the income statement. When
a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported
in equity is immediately transferred to the income statement.
Embedded derivatives
The Company separates an embedded derivative from the host contract if the following conditions
are met:
• There is no close relationship between the economic characteristics and risks of the embedded
derivative and those of the host contract;
• A separate instrument having the same characteristics as the embedded derivative would be
classified as a derivative; and
• The compound instrument is not measured at fair value with changes in fair value recognised
through the income statement.
Separable embedded derivatives are recognised at fair value in the balance sheet upon inception
of the contract. Changes in fair value are recorded in the income statement.
Income
Revenue represents the proceeds from the supply of goods and services, net of discounts, as well
as rental income.
The Company generates and recognises net sales to retail customers at the point of sale in its
stores and upon delivery to home shopping customers.
Interest
Interest income is recognised pro rata in the income statement, provided the income can be
measured and the income is probable to be received.
Expenses
Expenses, including interest, are determined with due observance of the aforementioned
accounting policies and allocated to the year to which they relate. Foreseeable and other
obligations as well as potential losses arising before the financial year-end are recognised if known
before the financial statements are prepared and provided all other conditions for forming
provisions are met.
Income taxes
Current income taxes are calculated on the income presented in the financial statements adjusted
to taxable income in accordance with local tax legislation.
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Ingka Holding B.V. Annual report for financial year 2016
The above definition has been used for the Statement of Cash Flows, which has been prepared
using the indirect method.
Cash flows in foreign currencies are translated at the average rate of exchange for the year.
Currency translation differences are presented separately in the statement of cash flows.
Government grants
Government grants are recognised where there is reasonable assurance that the grant will be
received and all attached conditions will be complied with. When the grant relates to an expense
item, it is recognised as income over the period necessary to match the grant on a systematic
basis to the costs that it is intended to compensate. If the grant relates to an asset, it reduces
the carrying amount and is recognised as income over the useful life of the asset as reduced
depreciation charge.
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Ingka Holding B.V. Annual report for financial year 2016
2016 2015
Cost
Opening balance 23,428 3,476 5,204 1,309 33,417
Translation adjustment 19 20 (36) (4) (1)
Additions 544 78 392 1,761 2,775
Acquisitions 405 - - - 405
Disposals (87) (21) (179) (11) (298)
Divestments (note 23) (803) (56) (1,739) (177) (2,775)
Impairment 26 2 14 - 42
Transfers 921 164 242 (1,327) -
Other (31) 29 11 (8) 1
Closing balance 24,422 3,692 3,909 1,543 33,566
Accumulated depreciation
Opening balance 5,465 1,763 3,349 - 10,577
Translation adjustment (14) 1 (26) - (39)
Additions 799 231 460 - 1,490
Disposals (9) (19) (148) - (176)
Divestments (note 23) (257) (27) (1,053) - (1,337)
Impairment 7 1 1 - 9
Other 1 1 7 - 9
Closing balance 5,992 1,951 2,590 - 10,533
Net book value 18,430 1,741 1,319 1,543 23,033
Tangible fixed assets carried at costs do not include capitalised interest charges.
Of the depreciation EUR 915 million (2015: EUR 811 million) is included in the selling expenses;
EUR 575 million (2015: EUR 484 million) is included in the general and administrative expenses
in the income statement.
The Company received investment grants in different jurisdictions. The investment grants
received during 2016 were not material.
During 2016 impairments on tangible fixed assets to recoverable amounts have been recorded
for an amount of EUR 3 million (2015: EUR 54 million). Reversals of previous years’ impairments
Page 24
Ingka Holding B.V. Annual report for financial year 2016
for an amount of EUR 36 million (2015: EUR 49 million) have been recognised, resulting in a net
gain of EUR 33 million (2015: EUR 5 million loss) recognised in other expenses.
The impairment loss recorded relates to 1 Cash Generating Unit (‘CGU’) within the following line
of business:
The impairments are mainly triggered by anticipated lower future rental income.
The impairment reversals recorded relates to 4 CGUs within the following line of business:
The impairment reversals are driven by improved business performance in combination with the
low interest rate environment in most countries.
Page 25
Ingka Holding B.V. Annual report for financial year 2016
Investment properties
Included below are investment properties valued at cost or lower market value, which are rented
out to third party tenants.
2016 2015
Accumulated depreciation
Opening balance 449 133 7 - 589
Translation adjustment 7 2 - - 9
Additions 207 74 13 - 294
Disposals (1) (1) (1) - (3)
Other 4 3 1 - 8
Closing balance 666 211 20 - 897
Net book value 4,421 638 24 470 5,553
The estimated useful lives of these commercial properties are comparable to the estimated useful
lives of the operational tangible fixed assets.
Rental income related to investment property amounted to EUR 883 million (2015: EUR 748
million). The operational cost (excluding depreciation) amounted to EUR 463 million in 2016
(2015: EUR 428 million).
The estimated market value of the investment property amounted to EUR 9.1 billion (2015:
EUR 8.4 billion).
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Ingka Holding B.V. Annual report for financial year 2016
The Group has entered into operating leases relating to investment property. The future minimum
lease receipts on these non-cancellable leases can be broken down as follows:
2016 2015
2016 2015
Land
lease
rights Goodwill Other Total
Cost
Opening balance 1,074 250 84 1,408
Translation adjustment (31) - 1 (30)
Additions 39 7 2 48
Acquisitions - 3 - 3
Disposals (6) - - (6)
Divestments (note 23) (30) (27) (2) (59)
Other 23 - - 23
Closing balance 1,069 233 85 1,387
Accumulated amortisation
Opening balance 79 57 57 193
Translation adjustment (2) 0 1 (1)
Additions 28 14 4 46
Divestments (note 23) (4) (12) (2) (18)
Other 23 - - 23
Closing balance 124 59 60 243
Net book value 945 174 25 1,144
The useful life of goodwill ranges from 5-20 years in accordance with the timeline of anticipated
future economic benefits arising in the investment. The estimated useful life of land lease rights
ranges from 30-50 years in accordance with the contractually agreed period.
Other intangible fixed assets mainly consist of capitalised franchise fees and intangible assets for
capitalised renewable energy incentives.
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Ingka Holding B.V. Annual report for financial year 2016
The amortisation of intangible fixed assets is included under other expense in the income
statement.
During 2016, no impairments on intangible fixed assets (goodwill) to recoverable amounts have
been recorded (2015: EUR 11 million).
2016 2015
Page 28
Ingka Holding B.V. Annual report for financial year 2016
Annual maturities of receivables scheduled for repayment during the next years are as follows:
2017 1,711
2018 64
2019 1
2020 101
2021 2
Thereafter 56
Total 1,935
The other investments mainly include positions related to other non-core related investments. No
impairments have been recognised during the year on these investments to reflect the expected
recoverable value.
7. INVENTORIES
2016 2015
The provision for obsolescence amounts to EUR 59 million at August 31, 2016
(2015: EUR 215 million). The decrease in inventory value mainly relates to the Transaction.
8. RECEIVABLES
2016 2015
Page 29
Ingka Holding B.V. Annual report for financial year 2016
2016 2015
2016 2015
Interest 2 14
Derivatives 330 496
Insurance premiums 22 22
Other prepaid and accrued income 210 273
Total 564 805
Derivatives include the unrealised gains on derivative financial instruments related to the
management of interest rate and currency risk. The prepaid expenses and accrued income balance
and the accrued liabilities and deferred income balance at August 31, 2016 include a net amount
receivable of EUR 16 million related to the fair value of derivatives, which are part of the macro cash
flow hedge program. This program hedges the foreign exchange risk of the expected purchase and
sales transactions, i.e. the commercial flows, of the group for the next financial year. For more
information on financial risk management refer to note 21.
9. SECURITIES
The Company is actively managing its excess cash liquidity through investments in securities. As at
August 31, 2016, the securities amount to EUR 21,878 million (2015: EUR 15,278 million). This item
mainly consists of investments in listed interest-earning securities with investment grade.
The maximum exposure per counterparty is limited to a maximum of EUR 200 million (EUR 50
million for BBB+, EUR 25 million for BBB or BBB-). This limitation does not apply to government
securities or their 100% owned agencies.
The credit risk profile of the securities portfolio is as follows (in %):
2016 2015
AAA to AA 64 67
AA- to A- 15 20
BBB+ to BBB- 20 13
Non-Investment Grade 1 -
100 100
Page 30
Ingka Holding B.V. Annual report for financial year 2016
The securities portfolio is diversified over the following issuer categories (in %):
2016 2015
Sovereign 62 60
Government Sponsored 16 16
Financial Corporation 11 13
Asset backed securities 4 2
Corporate 7 9
100 100
Changes in value of listed securities included in the income statement amount to EUR 38 million
loss (2015: EUR 150 million loss). This amount is included in the financial income and expenses
under revaluation gain/ (loss). Changes in value of listed securities are not included in the
revaluation reserve.
The duration of the interest earning securities at August 31, 2016 was 832 days (2015: 876
days).
Bonds for the amount of EUR 4,159 million at August 31, 2016 (2015: EUR 4,184 million) are
used as collateral for short-term borrowings.
The total balance, amounting to EUR 1,273 million as at August 31, 2016 (2015: EUR 1,381 million),
is available without restrictions to the Company except for EUR 460 million (2015: EUR 393 million)
of short-term deposits that have a set maturity date for a maximum duration of 3 months.
For details on shareholder’s equity, refer to note 3 in the Company financial statements.
12. PROVISIONS
2016 2015
For details on the provision for deferred taxation refer to note 19. For details on the provision for
pensions commitments refer to note 13.
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Ingka Holding B.V. Annual report for financial year 2016
2016 2015
Other includes tax, warranty, return and other provisions. Of the total balance an amount of
EUR 78 million (2015: EUR 93 million) is due within one year.
The Company has a number of defined benefit pension plans, predominantly in Sweden, the
Netherlands, Germany, France and Switzerland.
The nature of the benefits provided by the Company are based on final salary pension plans (62%),
contribution based plans with guarantee (33%) and other (5%).
There are minimum funding requirements for the pension plans in Belgium, the Netherlands and
Switzerland as set out by local legislation.
Net expense
The following table shows the pension and other post-employment benefit expenses recognised
in the income statement.
2016 2015
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Ingka Holding B.V. Annual report for financial year 2016
The movements in the liability for the net defined benefit obligations are as follows:
2016 2015
The fair value of the reimbursement rights amounts to EUR 5 million at August 31, 2016 (2015:
EUR 4 million).
2016 2015
assets assets
Opening balance 1,494 709 1,442 601
Company service cost 97 - 74 -
Net interest 32 14 35 13
Benefits paid (38) (38) (40) (40)
Plan participant contributions 13 13 9 9
Employer contributions (1) 59 (4) 53
Return on plan assets - 36 - 47
Changes due to employee transfers (7) (7) - -
Changes in demographic assumptions (13) - 18 -
Changes in financial assumptions 175 - (67) -
Experience adjustments 17 - (3) -
Currency translation (7) (4) 30 26
Divestments (refer to note 23) (335) (36) - -
Closing balance 1,427 746 1,494 709
Page 33
Ingka Holding B.V. Annual report for financial year 2016
2016 2015
2016 2015
The plan assets do not include investments in shares, issued debt or property owned by the
Company.
Assumptions
The principal assumptions used in determining the defined benefit obligations are shown below:
2016 2015
The average duration of the defined benefit plan obligation at August 31, 2016 is 20.8 years
(2015: 19.8 years).
The Company expects to contribute EUR 49.7 million to its defined benefit pension plans in 2017.
Sensitivity analysis
Page 34
Ingka Holding B.V. Annual report for financial year 2016
The non-current liabilities consist of long-term debt. The majority of the long-term debt includes
finance facilities related to the Company’s investments in land and buildings. Property mortgages
amount to EUR 3,167 million (2015: EUR 2,864 million).
The interest rates on these local currency facilities range between negative 0.4% (2015: negative
0.4%) and 13.6% (2015: 13.6%) with a weighted average of 3.85% (2015: 3.7%) in 2016. Of
the total loan portfolio EUR 664 million (2015: EUR 1,027 million) has a fixed interest rate and
EUR 1,229 million (2015: EUR 1,461 million) has a floating interest rate.
The average interest duration of the long-term debt is 1.26 years (2015: 1.95 years).
2016 2015
Annual maturities of debt scheduled for repayment during the next years are as follows:
2017 852
2018 290
2019 259
2020 292
2021 120
Thereafter 424
Total 2,237
Pledged assets amount to EUR 3,276 million (2015: EUR 2,980 million) and mainly consist of
property pledged as collateral for external liabilities.
Page 35
Ingka Holding B.V. Annual report for financial year 2016
2016 2015
Short-term borrowings at different finance institutions bear market interest rates according to local
conditions for currencies involved.
2016 2015
2016 2015
Revenue
2016 2015
Page 36
Ingka Holding B.V. Annual report for financial year 2016
2016 2015
Employees
2016 2015
Cost of sales, amounting to EUR 18,918 million as at August 31, 2016 (2015: EUR 18,221 million),
consists mainly of material cost.
Other income of EUR 370 million (2015: EUR 411 million) includes recharges to tenants (EUR 24
million), gain on sale of fixed assets (EUR 15 million), energy income (EUR 79 million), income
related to gift vouchers not expected to be redeemed (EUR 11 million), service fees (EUR 69 million)
and others.
Selling expenses of EUR 7,347 million (2015: EUR 6,699 million) represent retail core-business
related cost, including marketing cost and the relevant portion of staff cost, operational cost, and
depreciation.
General and administrative expenses of EUR 4,617 million (2015: EUR 3,998 million) are related to
non-retail activities and include staff cost, operational cost and depreciation.
Other expenses of EUR 63 million (2015: EUR 102 million) include reversal of impairment charges
on tangible fixed assets (EUR 36 million) and impairment charges on tangible fixed assets (EUR 3
million), loss on sale of fixed assets (EUR 12 million), amortisation of intangible fixed assets (EUR
47 million) and others.
Personnel expenses
2016 2015
Page 37
Ingka Holding B.V. Annual report for financial year 2016
2016 2015
Interest income includes accrued interest for the financial year relating to financial assets. Interest
expense relates to accrued interest for financial liabilities and net accruals on derivatives used to
hedge internal funding (refer to note 21 – interest rate risk). Revaluation gains and losses represent
the fair value development of securities and derivatives. Currency gains and losses show the result
of managing the currency rate risk on commercial flows and other currency translation in the Group
(refer to note 21 – exchange rate risk). The ineffective portion of the macro cash flow hedge program
is included in currency gains and losses. Share in profit of associates represents the share in the
result of investments in participating interests (refer to note 6 – financial fixed assets).
Result on sale of subsidiaries includes the result on the Transaction of EUR 714 million (refer to note
23 - discontinued operations).
Deferred income tax assets are mainly related to timing differences, primarily in connection with the
valuation of pension provisions and depreciation. Deferred tax assets arising from tax loss carry-
forwards are only recognised if recovery is reasonably certain. Of this amount, EUR 151 million
(2015: EUR 143 million) is expected to be used for set-off within one year.
The Group has unrecognised tax loss carry forwards available related to losses incurred in several
countries approximating EUR 698 million (2015: EUR 1,027 million). No deferred tax asset has
been recognised for these tax loss carry forwards due to uncertainty with respect to availability
of taxable profits in the future within the limitations imposed in enacted tax legislation in order
to utilise the tax losses.
Page 38
Ingka Holding B.V. Annual report for financial year 2016
2016 2015
Deferred taxation is provided, using the liability method, for all timing differences between tax and
financial reporting, principally regarding depreciation costs. Provisions are substantially long-term in
nature.
2016 2015
Of the movements in deferred tax, EUR 24 million impacted equity directly as per August 31, 2016
(2015: EUR 22 million) relating to actuarial remeasurements relating to the defined benefit pension
obligation.
2016 2015
Capital gain tax on the Transaction amounting to EUR 57 million is recorded as income tax
expense.
Page 39
Ingka Holding B.V. Annual report for financial year 2016
The reconciliation between the effective tax rate and the tax rate applicable to the consolidated
financial statements is as follows (in %):
2016 2015
As part of the Transaction a contingent consideration has been agreed for the benefit or loss of
IKEA Group. The contingent consideration is connected to the result on currency hedging activities
for the period September 1 2016, up until August 31,2017. No additional receivable or payable
has been accounted for at year-end 2016 as the contingent consideration cannot reliably be
estimated.
As part of the Transaction, IKEA Group has provided certain indemnifications and warranties to the
buyer in relation to the sold entities, including, but not limited to, corporate information, accounts,
guarantees, assets, intellectual property, information technology, contracts and other agreements,
employees, legal compliance, environment matters, litigation, insurance, products and taxes. The
majority of indemnifications and warranties are capped to an aggregate maximum amount of EUR
1.0 billion. A provision is taken in the balance sheet for these items if the criteria are met as described
in the relevant accounting policy around provisions.
In addition to the purchase consideration paid for the acquisition of 51% share in Inter Ikea
Centre Group in 2015, there is a contingent consideration in place. The contingent consideration
is connected to the rental income in 2018 on certain acquired properties. No additional payable
has been accounted for as it is not expected that the contingent consideration will materialise.
As per year-end, the Company and its subsidiaries have agreements to provide services in future
years relating to distribution, storage and handling of inventory in distribution centres with third
parties. Remuneration is variable and will be determined on a cost-plus basis for most of the
agreements.
Guarantees
Issued guarantees towards external parties amounted to EUR 60 million at August 31, 2016
(2015: EUR 86 million).
Page 40
Ingka Holding B.V. Annual report for financial year 2016
Construction commitments
Commitments for the construction of tangible fixed assets, including investment property, amounted
to EUR 736 million at August 31, 2016 (2015: EUR 1,143 million).
Purchase commitments
The Group has entered into purchase agreements without significant commitments, at August 31,
2016 (2015: EUR 8.1 billion). The significant decrease is due to the Transaction.
Legal proceedings
The Company is from time to time involved in legal proceedings in the ordinary course of business.
Management believes that no pending litigation to which the Company is a party will have a material
adverse effect to the financial position or the results from operations.
The Company and its subsidiaries have entered into lease and rental agreements for various periods.
Future minimum rental payable under non-cancellable operating leases as at August 31 is as follows:
2016 2015
Total lease payments of EUR 75 million (2015: EUR 69 million) are recorded in the income statement.
General
The use of financial instruments is closely related to the commercial flows and the cash flows of
the business. Treasury operations are centralised and executed according to the Policy, Standard
& Rules for Investment and Treasury as set by the Board.
The assets mainly consist of a securities portfolio, which has a fixed interest rate profile as result
of which the Company runs a fair value risk due to changing market rates of interest. Group
Treasury is actively monitoring the interest rate risk regarding the securities portfolio and enters
into interest rate derivatives with the objective to limit interest duration. No hedge accounting is
applied to the securities portfolio and the related interest rate derivatives.
Treasury companies receive fixed interest rates on internal funding provided to Group entities.
The fair value risk which is considered in those internal funding positions is swapped with external
Page 41
Ingka Holding B.V. Annual report for financial year 2016
banks. No hedge accounting is applied to those derivatives and positions. Fair value movements
of those derivatives are reported through the income statement.
The sensitivity analysis relates to the securities portfolio and derivatives for which no hedge
accounting is applied as described above.
Credit risk
The Company manages its credit risks on individual counterparties. Counterparty limits are based
on credit ratings and total aggregated exposure to counterparties. This aggregated exposure
includes the position held in securities. The Company’s policy determines that bank accounts are
held with investment grade rated financial institutions. Credit risk on all derivative positions is
covered using collateral margining process according to CSA agreements in place with all external
counterparties.
At August 31, 2016, the total fair value of the derivatives used to manage exchange rate risk is
EUR 113 million negative (2015: EUR 90 million positive). The fair value of these derivatives are
part of the derivatives position in note 8 and 15. The remainder of the total fair value in the two
notes relates to interest rate derivatives.
The EUR 113 million can be broken down in the following portfolios:
2016 2015
Page 42
Ingka Holding B.V. Annual report for financial year 2016
2016
+1% (1%)
The +1% and (1%) indicate the weakening and strengthening of the euro versus other currencies.
The sensitivity analysis relates to all currency derivatives for which no hedge accounting is
applied.
Commercial Flows
Purchase and sales transactions are denominated in many different currencies. Management
evaluates the net future forecasted currency exposure and manages the risk by the use of
currency derivatives.
At August 31, 2016, IKEA Group had derivatives in place for 2017 with an underlying value of
EUR 234 million (2015: EUR 3.1 billion) to reduce currency risk on commercial flows in the next
year of on total EUR 234 million (2015: EUR 3.3 billion). The decrease in derivatives as well as
the volume of commercial flows are connected to the Transaction.
In 2016, the hedging reserve as per year-end 2015 of EUR 77 million (gain) has been released
into the income statement. During 2016, EUR 67 million (gain) has been added to the hedging
reserve for hedging of commercial flows in 2017.
A profit of EUR 3 million is included in the income statement under financial income for the ineffective
portion of this hedge program, the loss is partly offset by a loss of EUR 9 million on currency options
not part of the hedge accounting calculation and therefore considered as fully ineffective
As a result of the Transaction at year-end, the currency risk on the majority of the commercial
flows and the relating hedging activities have been transferred to Inter IKEA Group. As a
consequence, the relating hedging reserve of EUR 67 million (gain) has been released into the
income statement as part of the result on sale of subsidiaries.
As IKEA Group will purchase the majority of goods in local currency following the Transaction,
there is no need for hedging these flows going forward. For currency risk on the remaining
commercial flows not sourced in local currency in 2017, hedges are in place but no hedge
accounting is applied (loss 2016: EUR 17 million).
Page 43
Ingka Holding B.V. Annual report for financial year 2016
The derivatives mainly relate to the following currencies and underlying positions (in EUR million):
Currency Diversification
At year-end 2016 the currency diversification portfolio consists in forward FX contracts in several
currencies for a total amount of EUR 2,857 million (2015: EUR 0 million).
Any sales to and purchases from related parties are entered into at arm’s length prices.
In May 2015, IKEA Group signed a letter of intent to sell its product development, supply chain
and production companies, being IKEA of Sweden AB, IKEA Supply AG and IKEA Industry Holding
B.V. and other connected companies to Inter IKEA Group.
Historically, the product development and supply chain companies were owned and operated by
IKEA Group under a non-exclusive assignment from Inter IKEA Group.
Early 2015, Inter IKEA Group informed IKEA Group of its intention to operate the product
development and supply chain activities within the Inter IKEA Group. This led to discussions
between the parties to sell the relevant IKEA Group companies.
On May 23, 2016, IKEA Group signed a Share Purchase Agreement to sell the companies
executing the assignments for product development and supply chain and in addition its
production companies. IKEA Group’s production companies were included in the Transaction as
production is closely linked to the supply chain and product development. The Transaction was
completed on 31 August 2016 and the transfer of ownership was made through sale of shares.
The estimated consideration is EUR 5,211 million of which an amount of EUR 4,547 million was
received in cash on August 31, 2016. In addition, IKEA Group received significant strategic
benefits, improving the franchisee position of IKEA Group in its markets including e-commerce.
The sold product development and supply chain companies were historically operating under a
non-exclusive assignment from Inter IKEA Group, which impacted the value of these companies
in the Transaction.
Page 44
Ingka Holding B.V. Annual report for financial year 2016
The companies sold were part of the Wholesale and Production segment. The total revenues of
the companies sold amount to EUR 21,593 million of which EUR 19,625 million relates to
Wholesale and EUR 1,968 million to Production.
The gain on sale includes EUR 61 million gain on recycling of hedging reserves and currency
translation reserves through the income statement.
In the consolidated income statement the companies sold are included as follows:
2016
In the consolidated cash flow statement the group of companies sold are included as follows:
2016
Carrying amounts of the assets and liabilities of the group of companies sold per 31 August 2016:
2016
Assets 9,026
Liabilities 4,468
Net assets 4,558
Page 45
Ingka Holding B.V. Annual report for financial year 2016
A. Davidson T. Bertilsson
L. Delgado
L. Fønss Schrøder
S. Bergfors
J. Kamprad
G. Lindahl
Page 46
Ingka Holding B.V. Annual report for financial year 2016
ASSETS
Fixed assets
Investments in consolidated subsidiaries (2) 38,836 34,814
Total fixed assets 38,836 34,814
Current assets
Other receivables from consolidated subsidiaries 29 36
Other receivables 22 20
Total current assets 51 56
SHAREHOLDER’S EQUITY
AND LIABILITIES
Current liabilities
Other payables to consolidated subsidiaries 22 18
Other payables and accrued liabilities 4 3
Total current liabilities 26 21
Page 47
Ingka Holding B.V. Annual report for financial year 2016
Page 48
Ingka Holding B.V. Annual report for financial year 2016
1. ACCOUNTING POLICIES
The accounting policies are the same as for the consolidated financial statements. In addition,
investments in consolidated subsidiaries are accounted for using the equity method.
The Company presents a condensed Company Income Statement, using the facility of Article 402
of Part 9, Book 2, of the Dutch Civil Code.
2016 2015
In accordance with Article 403, Book 2 of the Civil Code of the Netherlands, the Company has
guaranteed the liabilities of certain Dutch majority-owned subsidiaries. Separate financial
statements of these subsidiaries are therefore not filed at the Trade Register of the Chamber of
Commerce. At August 31, 2016, 403-statements has been issued for the following companies:
- Ingka Holding Europe B.V.
- IKEA Services B.V.
- Ingka Holding Scandinavia B.V.
- Ingka Holding Overseas B.V.
- Ingka Pro Holding B.V.
Page 49
Ingka Holding B.V. Annual report for financial year 2016
3. SHAREHOLDER’S EQUITY
The issued and outstanding share capital of the Company is comprised of 726,000 ordinary
shares, each with a par value of EUR 1.
Changes in shareholder’s equity for the year ended August 31, 2016 are as follows:
The (other) legal reserves at August 31, 2016 are not available for dividend distributions and
represents retained earnings set aside by law in certain countries. The foreign currency translation
reserve is used to record exchange differences arising from the translation of the reporting of
foreign activities.
4. AUDIT FEES
The audit fees invoiced by Ernst & Young Accountants LLP as Dutch auditor to legal entities within
the group in financial year 2016 in connection with the audits of the statutory financial statements
of these entities amount to EUR 1.4 million (2015: EUR 1.4 million). Audit related fees invoiced
by the auditors to these Dutch legal entities in financial year 2016 amount to EUR 0.3 million
(2015: EUR 0.7 million). Non-audit fees invoiced by the auditors to these Dutch legal entities in
financial year 2016 amount to EUR 0.3 million (2015: EUR 0.2 million) and no tax fees were
invoiced by the auditors (2015: nil).
5. INCOME TAXES
Since October 1, 2004, the Company is part of a fiscal unit with respect to Dutch income tax. This
implies that the Company is individually liable for Dutch income Tax of the fiscal unit as a whole.
Income taxes are accounted for as if each entity in the fiscal unity would been taxable for its own
results.
As part of the Transaction, IKEA Group has provided certain indemnifications and warranties to the
buyer in relation to the sold entities, including, but not limited to, corporate information, accounts,
guarantees, assets, intellectual property, information technology, contracts and other agreements,
employees, legal compliance, environment matters, litigation, insurance, products and taxes. The
majority of indemnifications and warranties are capped to an aggregate maximum amount of EUR 1
Page 50
Ingka Holding B.V. Annual report for financial year 2016
billion. A provision is taken in the balance sheet for these items if the criteria are met as described
in the relevant accounting policy around provisions.
7. EMPLOYEES
The Company has 2 employees as at August 31, 2016 (August 31, 2015: 2).
The remuneration of the current and former members of the Company’s board of managing
directors includes base salary, long-term incentive plans, employer’s pension commitments and
any other periodic contributions as provided by the Company and/or its consolidated subsidiaries.
The total compensation to the members of the board of managing directors amounts to
EUR 5.4 million for 2016 (2015: EUR 5.2 million). The remuneration of the members of the
Company’s board of supervisory directors amounts to EUR 0.9 million for 2016 (2015: EUR 1.1
million).
The Company incurred an amount of EUR 0.1 million (2015: EUR 0.2 million) in recurring and
non-recurring employer taxes related the remuneration of the board of directors for the 2016.
9. INVESTMENTS
Set forth below are all significant investments of the Company at August 31, 2016. Investments
are wholly owned unless otherwise indicated.
Page 51
Ingka Holding B.V. Annual report for financial year 2016
Finland IKEA Oy
Helsinki
Norway IKEA AS
Oslo
Page 52
Ingka Holding B.V. Annual report for financial year 2016
Lisbon
Switzerland IKEA AG
Zürich
Ikano Insurance Holding AG (49%)
Züg
CAPTAR AG
Spreitenbach
Page 53
Ingka Holding B.V. Annual report for financial year 2016
The following affiliated companies, which are included in the consolidated group financial statements
of Ingka Holding B.V. are in accordance with § 264b German Commercial Code (“HGB”) relieved of
drawing up, auditing and disclosing their financial statements, notes and management reports in line
with the regulations on the second paragraph within the third book of the German Commercial Code:
- IKEA Holding Deutschland GmbH & Co. KG
- IKEA Deutschland GmbH & Co. KG
- IKEA Distribution Services GmbH & Co. KG
- IKEA Centres Grundbesitz GmbH & Cie KG
Page 54
Ingka Holding B.V. Annual report for financial year 2016
A. Davidson T. Bertilsson
L. Delgado
L. Fønss Schrøder
S. Bergfors
J. Kamprad
G. Lindahl
Page 55
Ingka Holding B.V. Annual report for financial year 2016
OTHER INFORMATION
According to Article 12 of the Company’s statutes, the annual meeting of shareholders will decide
on the appropriation of the net income for the year including a transfer to specific reserves as
deemed necessary.
Dividend 840 -
Additions to reserves 3,360 3,512
Total 4,200 3,512
SUBSEQUENT EVENTS
Retail Parks
On September 9, 2016 a letter of intent was signed to sell certain investment property operations.
The sale is expected to be executed as per February 2017.
As per year-end 2016, the net assets of the group companies to be sold amount to EUR 0.4 billion
(assets of EUR 0.7 billion and liabilities of EUR 0.3 billion), revenues from companies outside of
the IKEA Group amount to EUR 0.08 billion and total income before taxation amounts to EUR 0.01
billion.
The financial statements have been audited and the independent auditor's report is included on the
next two pages.
Page 56
Ingka Holding B.V. Annual report for financial year 2016
To: the board of managing directors and shareholder of Ingka Holding B.V.
We have audited the accompanying financial statements for the year ended 31 August 2016 of
Ingka Holding B.V., Amsterdam, which comprise the consolidated and company balance sheet as
at 31 August 2016, the consolidated and company income statement for the year then ended
and the notes, comprising a summary of the accounting policies and other explanatory
information.
Management's responsibility
Management is responsible for the preparation and fair presentation of these financial
statements and for the preparation of the report from the board of managing directors, both in
accordance with Part 9 of Book 2 of the Dutch Civil Code. Furthermore management is
responsible for such internal control as it determines is necessary to enable the preparation of
the financial statements that are free from material misstatement, whether due to fraud or
error.
Auditor's responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing.
This requires that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor's
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial statements in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity's internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the financial
statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
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Ingka Holding B.V. Annual report for financial year 2016
Pursuant to the legal requirement under Section 2:393 sub 5 at e and f of the Dutch Civil Code,
we have no deficiencies to report as a result of our examination whether the report from the
board of managing directors, to the extent we can assess, has been prepared in accordance
with Part 9 of Book 2 of this Code, and whether the information as required under Section
2:392 sub 1 at b-h has been annexed. Further we report that the report from the board of
managing directors, to the extent we can assess, is consistent with the financial statements as
required by Section 2:391 sub 4 of the Dutch Civil Code.
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