G15 Right-of-use assets

Leases with Sandvik as lessee

Right-of-use assets
	Land and buildings	Plant and machinery	Fixtures and fittings	Total
Accumulated acquisition cost
At January 1, 2021	3,190	345	990	4,523
Additions	895	106	327	1,329
Remeasurements	44	6	9	60
Business combinations	469	46	8	522
Divestments and disposals	–207	–105	–202	–513
Reclassifications	2	0	2	2
Translation differences for the year	149	9	36	195
At December 31, 2021	4,542	407	1,172	6,121

Depreciation and impairment losses
At January 1, 2021	983	159	489	1,632
Depreciation for the year	613	126	334	1,073
Reversal of impairment losses	0	–3	0	–3
Divestments and disposals	–178	–102	–193	–473
Reclassifications	–8	1	–19	–26
Translation differences for the year	53	5	20	78
At December 31, 2021	1,463	187	631	2,281

Net carrying amount
At December 31, 2021	3,079	221	540	3,840

Accumulated acquisition cost
At January 1, 2022	4,542	407	1,172	6,121
Discontinued operations	–213	–43	–114	–369
Additions	903	108	324	1,335
Remeasurements	311	16	–2	325
Business combinations	476	–2	49	523
Divestments and disposals	–383	–59	–246	–689
Reclassifications	0	0	–17	–14
Translation differences for the year	391	27	89	508
At December 31, 2022	6,028	454	1,254	7,740

Depreciation and impairment losses
At January 1, 2022	1,463	187	631	2,281
Discontinued operations	–76	–28	–60	–165
Depreciation for the year	801	104	310	1,215
Impairment losses	21	2	1	23
Reversal of impairment losses	–1	0	0	–1
Divestments and disposals	–361	–54	–239	–654
Reclassifications	–31	0	–37	–67
Translation differences for the year	107	11	47	165
At December 31, 2022	1,922	223	653	2,798

Net carrying amount
At December 31, 2022	4,106	231	602	4,941

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Depreciation per line in the income statement

2021¹⁾

2022

Cost of goods and services sold

–294

–375

Selling expenses

–269

–381

Administrative expenses

–346

–370

Research and development expenses

–87

–88

Total

–996

–1,215

1)	The income statement for 2021 has been reclassified since SMT was classified as discontinued operations in 2022. Consequently the figures for the Balance sheet and Income statement will not reconcile for 2021.

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Impairment losses/reversal of impairment losses per line in the income statement

2021¹⁾

2022

Cost of goods and services sold

–1

Selling expenses

–1

Other operating expenses

–22

Total

–22

1)	The income statement for 2021 has been reclassified since SMT was classified as discontinued operations in 2022. Consequently the figures for the Balance sheet and Income statement will not reconcile for 2021.

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Amounts recognized in the income statement

2021¹⁾

2022

Depreciations for the year

–996

–1,215

Impairment losses/reversal of impairment losses

–22

Interest expenses related to lease liabilities

–108

–165

Expenses for low value assets

–50

–52

Expenses for short-term leases

–25

–49

Expenses related to variable lease expenses not included in the lease liability

–5

–21

Gains/losses related to sale and leaseback transactions

–1

Total amounts recognized in the income statement

–1,183

–1,524

The total cash outflow for leases during the year

–1,137

–1,500

1)	The income statement for 2021 has been reclassified since SMT was classified as discontinued operations in 2022. Consequently the figures for the Balance sheet and Income statement will not reconcile for 2021.

Contracts not yet commenced

Contracts not yet commenced amounted to SEK 989 million (186). For maturity analysis of the lease liability, see note G28.

Sandvik as lessor

The Group’s investments in financial leases amounted to SEK 5,573 million (4,237). Finance income was SEK 233 million (190). Average margin was 27 (28) percent. Unguaranteed residual values accruing to the benefit of the lessor were minor.

The planned residual value of the Group’s rental fleet is SEK 1,327 million (1,133). Depreciation for the year amounted to SEK 510 million (562). Loss on disposed assets was SEK –6 million (9). Variable fees amounted to SEK –71 million (–6).

As of December 31, 2022, the future minimum lease payments under non-cancellable operating leases amounted to SEK 783 million (648).

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Maturity analysis of lease payments receivable	Finance leases	Operating leases
2023	2,741	482
2024	1,530	201
2025	828	98
2026	331	2
2027	115	0
2028 or later	28	0
Total undiscounted lease payments	5,573	783

Accounting principles

Sandvik as a lessee

Lease contracts are recognized as Right-of-Use (RoU) assets and interest bearing liabilities in the balance sheet.

The lease liability is presented within other interest-bearing liabilities and measured by the present value of future unpaid lease payments. The measurement of the initial lease liability includes fixed payments, variable lease payments, payments under residual value guarantees, purchase and termination options as well as penalties. The lease payments are discounted using the interest rate Sandvik would have been given if the investment had been financed through a loan from a financial institute. Payments are distributed between amortization of the lease liability and interest paid.

The RoU asset is presented within non-current assets and valued at cost less amortization and impairment, if applicable. The measurement of the RoU asset includes amount of initial measurement of lease liability, lease payments at or before the commencement date, any initial direct cost and restoration costs. The asset is deprecated on a straight-line basis.

For each lease contract Sandvik assess if it is reasonably certain to extend the lease, to purchase the underlying asset or terminate the lease. In cases of open-ended contracts local law can provide protection to the lessee from being given notice. This requires Sandvik to determine the contract period instead of considering the termination clause. The lessee determines the length of the contract period based on factors such as the importance of building to the business and any planned or made leasehold investments.

Sandvik separate non-lease components from the lease components in contracts referring to buildings. The non-lease component costs are recognized as an expense and are not be included in the calculation of a RoU asset and lease liability for asset class buildings. For all other asset classes, non-lease components are included in the calculation of a RoU asset and lease liability.

Sandvik applies the two expedients concerning leases, leases shorter than one year and low value assets that are not considered in the RoU assets and lease liabilities.

Sandvik as a lessor

Lease contracts are classified as operating or a ﬁnancial lease. The substance of the transaction rather than the form of the contract determines if it is a ﬁnance or operating lease. This also includes contracts identified under IFRS 15 Revenue from Contracts with Customers containing buy-back clauses, which means under certain circumstances that control hasn’t transferred to the customer and instead lease accounting under IFRS 16 Leases apply.

A ﬁnance lease transfers substantially all the risks and rewards resulting from ownership of an underlying asset to the lessee. An operating lease does not transfer substantially all the risks and rewards as a result from ownership of an underlying asset.

In a financial lease contract Sandvik recognizes a non-current and current customer-financing receivable at an amount equal to the net investment in the lease. Expected credit losses is reflected in the valuation of the customer-financing receivable at initial recognition and the provision is reassessed during the contract period. Revenue is recognized in accordance with revenue recognition principles.

In an operating lease contract the asset is classified as rental fleet and is subject to the Group’s depreciation policies. The cost of an asset comprises the acquisition value and any initial direct costs related to the contract. The lease revenue is recognized on a straight-line basis over the lease contract period.

Sandvik Financial Services offers financing of equipment, mainly to customers in the mining and construction sectors.

Sandvik Financial Services is responsible for identifying and assessing its key risks related to end customer financing, as well as managing and monitoring them. Risk management is carried out in accordance with the Sandvik policies. For more information see G28.