G3. Contingent liabilities and pledged assets

AP ACCOUNTING PRINCIPLES

A contingent liability is recognized when there is a potential or actual obligation arising from events that have occurred that is not recognized as a liability or provision, either because it is improbable that an outflow of resources will be required to settle the obligation or because the amount cannot be calculated in a reliable manner.

Contingent liabilities

SEKm

2016

2015

2014

Guarantees for:

 

 

 

associates

13

15

17

customers and others

55

54

51

Tax disputes

1,302

1,554

Other contingent liabilities

227

256

262

Total

295

1,627

1,884

Other contingent liabilities above relates to recovery fees/taxes for packaging material in France where the requirements is subject to judicial review.

During 2000, SCA entered into a leasing transaction with US banks as counterparties relating to the Östrand pulp mill in Timrå, Sweden. The term of the transaction was originally 30 years. In January 2017, SCA discontinued this transaction with no resulting financial implications. At the time the transaction was entered into, the current value of the leasing amount that SCA had undertaken to pay amounted to about SEK 4bn, or USD 442m. Of this amount, in accordance with the agreement, an amount corresponding to SEK 3.6bn was partly invested in accounts in banks, partly in US securities, which at the time of the agreement had an AA and AAA rating, respectively. The value of outstanding deposits and US securities amounted to SEK 2.7bn at December 31, 2016. SCA carried the credit risk against the depositary bank. The advance payments and deposits have been netted in the balance sheet since 2000.

In 2007, SCA entered into a sale and leaseback transaction with a European bank relating to the new soda recovery boiler at the kraftliner plant in Obbola, Sweden. The original term of the contract is 25 years and SCA has a right to terminate the transaction in 2023 without any financial consequences. The present value of SCA’s future rental amounts was SEK 671m, which was invested in a security with an A rating issued by the counterparty and deposited in a Swedish bank assigned to handle rental payments during the term of the contract. Should the counterparty’s rating fall below BBB–, SCA is entitled, without incurring any financial consequences, to terminate the transaction in advance. Should SCA, as a result of extraordinary events (of a force majeure nature), elect not to fulfill, or cannot fulfill the leasing contract, SCA is liable to compensate the counterparty for any economic loss that may be incurred as a result. Compensation varies during the term and can amount to a maximum of 11% of the transaction amount. SCA has the use of the facility without operational restrictions. The lease and depositary arrangement have been recognized net in SCA’s balance sheet since 2007.

SCA signed a ten-year fixed-price agreement with a Norwegian electricity supplier comprising electricity deliveries corresponding to approximately 17% of SCA Graphic Sundsvall’s estimated consumption. The agreement became effective in 2009.

Pledged assets

 

Pledged assets related to financial liabilities

Other

Total

SEKm

2016

2015

2014

Liabilities for which some of these assets were pledged as collateral amounted to SEK 0m (5; 5).

Real estate mortgages

7

7

11

11

Chattel mortgages

35

20

55

52

56

Other

130

130

430

414

Total

42

150

192

493

481