Notes to the parent company financial statements (FAS)
1. ACCOUNTING PRINCIPLES USED IN PREPARING THE PARENT COMPANY FINANCIAL STATEMENTS
Basware Corporation’s financial statements for 2012 have been prepared in accordance with the Finnish Accounting Act. The Group has applied the International Financial Reporting Standards (IFRS) in its reporting as from January 1, 2005.
Transactions in foreign currencies
Transactions in foreign currencies are recorded at the exchange rates prevailing at the transaction dates. At the end of the accounting period, the unsettled balances on foreign currency receivables and liabilities are valued at the rates of exchange prevailing at the end of the accounting period. Foreign exchange gains and losses related to normal business operations are entered in the appropriate income statement account before operating profit and foreign exchange gains and losses associated with financing are entered as a net amount under financial income and expenses.
Revenue recognition of product sales requires that there is a binding agreement of the sale, the product has been delivered, proceeds from the transaction can be reliably specified, the financial gain will benefit the company with sufficient probability, and significant benefits and risks related to ownership or rights of use of the product have been transferred to the buyer. License agreements with a right of return or conditions related to the product's functionality or implementation project are recognized as revenue once the right of return has expired or the above-mentioned conditions have been fulfilled.
Service revenue is recognized at the time of delivery. Revenue and costs of fixed-price business transactions are recognized as revenue and expenditure on the basis of the percentage of completion when the outcome of the business transaction can be reliably estimated. The degree of completion of business transactions is specified as the proportion of hours worked of the estimated total number of hours. If the resulting costs and recognized profits exceed the amount invoiced for the transaction, the difference is presented in “Trade and other receivables” on the balance sheet. If the resulting costs and recognized profits are lower the invoicing for the transaction, the difference is presented in “Trade payables and other liabilities” on the balance sheet. When it is likely that the total costs required for completing the business transaction exceed the total revenue from the transaction, the expected loss is recognized as an expense immediately.
Maintenance revenue is allocated over the contract period.
Automation Services revenue is mainly comprised of start-up, transaction, and use fees. Start-up fees are recognized as revenue when the work related to the start-up procedure has been completed and the customer has been connected to the service environment. Transaction revenue is recognized on the basis of actual transaction volumes and use charges on a monthly basis on the basis of the existence of an agreement.
When net sales are calculated, sales revenue is adjusted for exchange rate differences of foreign currency sales.
Research and development costs
Research expenses are recognized as an expense as they are incurred. Product development expenses are recognized so that development costs of new products and product versions with significant enhancements are capitalized and amortized. Maintenance of existing products and minor enhancements are recognized as they are incurred. Public subsidies related to capitalized development expenses are deducted from the acquisition costs.
The statutory pension coverage of Basware Corporation employees is provided through insurance policies taken out with a pension institution. The statutory pension expenses are recognized as expenses in the year they are incurred.
Intangible assets include software, goodwill, capitalized product development costs, other long-term expenses, and merger losses. They are recognized in the original acquisition costs less accumulated depreciation. Public subsidies related to the acquisition of intangible assets are deducted from the acquisition cost of the asset and recognized as income by reducing the depreciation charge of the asset they are related to. The useful lives of intangible assets are 3 to 10 years.
Tangible assets are recognized in the balance sheet at the original acquisition cost less accumulated depreciation. The useful lives of tangible assets are 3 to 5 years.
In the parent company financial statements, leasing payments are recognized as annual expenses in accordance with the Finnish Accounting Standards.
Liquid assets include cash, bank balances and other liquid securities.
Income taxes have been recognized in accordance with Finnish tax legislation.