Executive Management has together with the Board of Directors discussed developments, selections and information regarding the Group’s important accounting principles and assessments, as well as the application of these principles.

Certain important accounting estimates made when applying the Group’s accounting principles are described below.

The sources of uncertainty in the assessments given below refer to those that entail a risk that the value of assets or liabilities may have to be significantly adjusted in future financial years.

Peab’s operative operations are sensitive to changes in, among other things, volumes and margins. The financial risks are associated with tied up capital, the need for capital, the interest rate risk and the currency risk in operations. Peab’s business is also exposed to risks linked to the environment and climate. For more information see the section Risks and risk management in The Board of Directors’ Report and Climate risks and opportunities according to TCFD on page 51.

For information on how changes in important variables affect the Group’s result, see the sensitivity analysis in Risks and risk management in The Board of Directors’ Report.

Construction contracts recognized over time

Profit/loss recognized for construction projects in progress is calculated over time based on the degree of completion of the project. This requires that project revenue and expenses can be calculated in a reliable manner. A prerequisite is a well functioning system for calculation, forecasting and project monitoring. Forecasts regarding the final outcome of the projects are critical estimates crucial to profit/loss recognition during the project. Project forecasts are evaluated on a regular basis as each project progresses and if necessary adjusted. There is a risk that the final profit/loss of a project may deviate from the profit/loss recognized over time.

Impairment tests of goodwill

Total Group goodwill amounts to SEK 3,162 million (3,309). Of the goodwill value SEK 2,772 million (2,776) refers to business area Industry of which SEK 1,397 million is connected to the acquisition of the Nordic paving and mineral aggregates operations in April 2020.

When calculating cash generating units’ recoverable amount in order to assess the need to write-down goodwill several estimations and assessments about the future have been made. They are presented in note 16. As is apparent in the description in note 16, changes beyond what can reasonably be expected during 2024 in these estimations and assessments could have an effect on goodwill. An analysis has been made as to whether a negative adjustment of the estimations concerning the discount rate and operating profit would result in a material write-down of goodwill. Based on this analysis there is no apparent need for an impairment of goodwill.

Regarding the acquired paving and mineral aggregates operations in the business area Industry, the difference between recoverable values and booked values is less than in older acquisitions. The acquired operations have developed well since the acquisition in 2020 although in 2022 paving and mineral aggregates operations were affected by the high energy and fuel costs, which lowered profitability. In 2023 this has been compensated by prices to customers along with streamlining operations. Peab does not believe there is any significant risk for a material write-down of goodwill in the coming fiscal year.

Project and development property

Project and development property amounts to SEK 18,061 million (19,178), of which SEK 17,892 million (18,846) refers to owned assets and SEK 169 million (332) refers to leased assets. The recognized value for owned assets has been calculated as the lowest of the purchase price and the net sales price based on current price levels in the respective locations. Changes in supply and demand may alter recognized values and write-downs may be required. Peab uses an internal model to test the value of project and development property. As a complement to this valuation external market values are annually reviewed for some of the properties. Peab does not believe there is any significant risk for a material write-down of property values in the coming fiscal year. For more information on project and development property, see note 24.

Disputes

Peab’s business is largely project-related. There are a number of different contract forms where risk levels vary depending on the type of contract. However, with any type of contract ambiguities can arise concerning the terms, which can lead to delimitation issues that create a dispute with the customer. The actual outcome in disputed amounts may deviate from those recognized according to the best estimate. For more information on disputes, see note 32.

A decision in the case between Peab and Unibail Rodamco Westfield regarding the contract for Mall of Scandinavia in Solna was handed down in Peab´s favor on June 30, 2023. In August Unibail Rodamco Westfield petitioned the Swedish Court of Appeal to set aside the judgment in its entirety in a so-​called protest action. During the process the judgement is suspended and cannot be enforced and therefore the time of payment has been deferred. Peab’s previously communicated assessment of the estimated effects on profit has not changed. Peab continues to have an outstanding receivable of about SEK 1,500 million on Unibail Rodamco Westfield per December 31, 2023. After a thorough legal trial through arbitration lasting nearly seven years Peab cannot see any grounds for a protest action. Peab will counter the protest action in the further process. For more information, see Other information and appropriation of profit.