General information about the Group and general accounting principles
3.1 General information about the Group and general accounting principles
Fingrid Oyj is a Finnish public limited liability company responsible for electricity transmission in the high-voltage transmission system in Finland. Fingrid’s nationwide grid is an integral part of the power system in Finland. The transmission grid is the high-voltage trunk network which covers all of Finland. Major power plants, industrial plants and electricity distribution networks are connected to the grid.
Finland’s main grid is part of the Nordic power system, which is connected to the system in Central Europe via high-voltage direct current transmission links. Finland also has DC links with Russia and Estonia.
The transmission system encompasses more than 14,000 kilometres of 400, 220 and 110 kilovolt transmission lines, plus more than 100 substations.
Fingrid is in charge of planning and monitoring the operation of the main grid and for maintaining and developing the system. An additional task is to participate in work carried out by ENTSO-E, the European Network of Transmission System Operators for Electricity, and in preparing European market and operational codes as well as network planning.
Fingrid offers grid, cross-border transmission and balance services to its contract customers: electricity producers, network operators and the industry. Fingrid serves the electricity market by maintaining adequate electricity transmission capacity, by de-bottlenecking cross-border transmission links and by providing market data.
The consolidated financial statements include the parent company Fingrid Oyj and its wholly owned subsidiaries Finextra Oy and Datahub Oy. The consolidated associated companies are Nord Pool Spot AS (ownership 18.8%) and eSett Oy (ownership 33.3%). The Group has no joint ventures.
Fingrid issues bonds under the Euro Medium Term Note (EMTN) programme. Fingrid Oyj’s issuances under the EMTN programme are listed on the London Stock Exchange. Fingrid shares are not listed.
Critical accounting estimates and judgements
When the consolidated financial statements are drawn up in accordance with the IFRS, the company management needs to make estimates and assumptions which have an impact on the amounts of assets, liabilities, income and expenses recorded and conditional items presented. These estimates and assumptions are based on historical experience and other justified assumptions which are believed to be reasonable under the conditions which constitute the foundation for the estimates of the items recognised in the financial statements. The actual amounts may differ from these estimates. In the financial statements, estimates have been used for example, when specifying the economic lives of tangible and intangible asset items, and in conjunction with deferred taxes and provisions. Critical estimates and judgements by management are described by topic in the notes, and the judgement or estimates related to which are in accordance with the following table.
|Estimate of the purchase and sale of imbalance power||Chapter 3.3|
|Inter-Transmission System Operator Compensation (ITC)||Chapter 3.3|
|Deferred tax assets and liabilities||Chapter 3.9|
|Determination of the fair value measurement of grid assets||Chapter 4.1|
|Determination of the depreciation periods of property, plant and equipment, and intangible assets||Chapter 4.2|
In preparing these consolidated financial statements, the Group has followed the same standards as in 2015. New standards, interpretations and changes took effect during the year, but these have not had a material effect on the consolidated financial statements, with the exception of the following change. The financial statement structure was revised in 2016 with the aim of making it more reader friendly and more focussed on information relevant to Fingrid. The revised version is in line with the changes in IAS 1 Presentation of Financial Statements, which entered into force on 1 January 2016 and which clarify that when drawing up their financial statements, companies may exercise their judgement in presenting, emphasising and consolidating their financial reports. Fingrid furthermore adopted, ahead of their 1 January 2017 entry into force, the amendments to IAS 7 Statement of Cash Flows, according to which companies must now present disclosures on changes in liabilities arising from financing activities. This includes changes from financing cash flows (e.g. drawdowns and payments of debt), as well as changes in non-cash items, such as procurements, disposals, interest accruals and unrealised foreign currency exchange differences. The new note is presented in chapter 5.3.
IASB has published the following new and amended standards and interpretations, which the company has not yet applied. The company will begin applying the standard and interpretation from the date of its entry into force. The estimated impact of the standards is described in the notes listed in the table.
IFRS 9 Financial instruments, effective 1 January 2018
IFRS 15 Revenue from Contracts with Customers, effective 1 January 2018
IFRS 16 Leases, effective 1 January 2018
The entire business of the Fingrid Group is deemed to comprise grid operations in Finland with system responsibility, only constituting a single segment. There are no essential differences in the risks and profitability of individual products and services. For that reason, segment reporting in accordance with the IFRS 8 standard is not presented. The operating segment is reported in a manner consistent with the internal reporting to the chief operating decision-maker. The chief operating decision-maker is the company’s Board of Directors. Fingrid operates only in Finland, which is also why geographical data is not presented.
Foreign currency transactions
The consolidated financial statements are presented in euros, which is the functional currency of the parent company. Transactions and financial items denominated in foreign currencies are recognised at the foreign exchange mid-rate quoted by the European Central Bank (ECB) at the transaction date. Receivables and liabilities denominated in foreign currencies are valued in the financial statements at the mid-rate quoted by the ECB at the closing date. Foreign exchange gains and losses from business are included in the corresponding items above operating profit. Foreign exchange gains and losses from financial instruments are recognised at net amounts in finance income and costs.
Earnings per share
The Group has calculated undiluted earnings per share in accordance with standard IAS 33. Undiluted earnings per share are calculated using the weighted average number of shares outstanding during the financial year. Since Fingrid has no share option schemes or benefits bound to shareholders’ equity or other equity financial instruments, there is no dilutive effect.