ASSA ABLOY Annual Report 2016

FY2016 Annual Report · ASSA ABLOY

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Annual Report
2016

The global leader in
door opening solutions

“Leading the development of digital and mobile door
opening solutions that create value for customers.”

Contents

Report on operations
ASSA ABLOY in brief
Statement by the President and CEO
Market overview
Value creation strategy
Goals and outcomes
Market presence
Product leadership
Cost-efficiency
Profitable growth

Divisions
ASSA ABLOY divisions
EMEA division
Americas division
Asia Pacific division
Global Technologies division
Entrance Systems division

Sustainability report
Sustainable development

Report of the Board of Directors
Report of the Board of Directors

Significant risks and risk management
Corporate governance
Board of Directors
Executive Team
Internal control – financial reporting
Remuneration guidelines for senior
management

Financial statements
Sales and income
Consolidated income statement and
Statement of comprehensive income
Comments by division
Results by division
Financial position
Consolidated balance sheet
Cash flow
Consolidated statement of cash flows
Changes in consolidated equity
Parent company financial statements
Notes
Comments on five years in summary
Five years in summary
Quarterly information
Definitions of key ratios
Proposed distribution of earnings
Auditor’s report

Shareholder information
The ASSA ABLOY share
Information for shareholders

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COVER PHOTO

Leading the development of
digital and mobile security
solutions

The sliding doors that ASSA ABLOY delivered to Fotografiska museum in
Stockholm help to reduce energy consumption in the building and provide
a convenient entrance to museum visitors and employees. The door solu-
tion also contributes to a comfortable indoor climate. Photographer Pieter
Ten Hoopen is one of the highly esteemed artists whose works have been
exhibited at the museum during the year.

ASSA ABLOY in brief

WHO ARE WE?

ASSA ABLOY is the global leader in
door opening solutions with sales of SEK
71 billion and 47,000 employees. The
strategies for profitable growth are mar-
ket presence, product leadership and
cost-efficiency.

WHAT DO WE DO?

1
#

71
SEK bn

47,000
employees

ASSA ABLOY is the global leader in door opening solutions and
offers mechanical and electromechanical locks, digital door locks,
security doors, entrance automation, hotel security and secure

identity solutions, primarily in identity and access management,
as well as a number of other related products and services.

ASSA ABLOY’s BRANDS

ASSA ABLOY has considerable value in
its well-known brands, several of which
have been acquired through the Group’s
many acquisitions. ASSA ABLOY is the
global master brand and is often com-
bined with individual brands well estab-
lished in local knowledge, regulations
and security standards. The Group thus
increases the visibility of the ASSA
ABLOY master brand, which unites the
Group’s sales departments and repre-
sents innovation, leading technology
and total door opening solutions.

Approximately 70 percent of Group sales are under the ASSA ABLOY master brand
or a combination of the master brand and local brands.

FOR WHOM?

Institutional and commercial
customers

Residential market

Aftermarket

ASSA ABLOY covers all needs for door opening solutions and service
for institutional and commercial customers, as well as for the residen-

tial market. The Group has the largest installed base of products in the
world, with a large share of sales in the stable aftermarket.

WHERE ARE WE?

ASSA ABLOY has leading
positions in most of Europe,
North and South America, Asia
and Oceania.

Share of Group sales
by region 2016

EUROPE
AFRICA
NORTH AMERICA
SOUTH AMERICA
ASIA
OCEANIA

38%
1%
40%
3%
15%
3%

(37)
(1)
(39)
(2)
(17)
(4)

The master brand is complemented by global brands, which are all
leaders in their respective market segments: Yale in the residential
market, HID in access control, secure card issuance and identification

technology, and ABLOY in high security locks. The Group also has
product brands that are not associated with ASSA ABLOY, such as
Entrematic in entrance automation.

STRATEGY

Market presence

Product leadership

Cost-efficiency

Growth and profitability

FINANCIALS IN BRIEF 2016

Sales increased by 5 percent to SEK 71,293 M (68,099)
driven by continued rapid growth for electromechanical
products.

Continued good earnings and strong cash flow achieved
during the year. Operating margin excluding items affect-
ing comparability was 15.8 percent (16.3).

13 acquisitions were completed during the year, which
contributed 3 percent growth for 2016, including divest-
ments.

Investments in product development continued at a high
pace and a number of new products were launched.

Key figures

Sales, SEK M
of which: Organic growth, %
of which: Acquired growth, %
of which: Exchange rate effects, %
Operating income (EBIT), SEK M
Operating margin, %
Income before tax (EBT), SEK M
Operating cash flow, SEK M2
Return on capital employed, %

Data per share

Earnings per share after tax and dilution (EPS), SEK/share
Equity per share diluted, SEK/share
Dividend, SEK/share
Weighted average number of shares, diluted, thousands

1 Excluding items affecting comparability.
2 Excluding restructuring payments
3 As proposed by the Board of Directors.
4 Key data have been restated due to the 3:1 share split in 2015.

2014

56,843
3
9
5
9,257
16.3
8,698
8,238
16.9

2015

68,099
4
3
13
11,079
16.3
10,382
9,952
17.8

2016

71,293
2
3
0
11,2541
15.81
10,5491
10,467
16.5

2014
5,794
32.504
2.174
1,110,7764

2015

6.93
37.43
2.65
1,110,776

2016
7.091
42.51
3.003
1,110,776

Change

2%
5%

Change

2%
14%
13%

SALES AND OPERATING INCOME (EBIT)

“The Group’s global market leader-

Sales, SEK M

Sales

Operating income (EBIT)

EBIT, SEK M

ship, high rate of innovation and

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

1, 2

effective cost control strategy

position us for continued profitable
growth.

Johan Molin
President and CEO

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

1 Excluding items affecting comparability.
2 Reclassification has been made.

ASSA ABLOY ANNUAL REPORT 2016

THE YEAR IN BRIEF 1

THE GROUP

Statement by the President and CEO

Innovation drives our
market leadership

2016 was once again a good year for ASSA ABLOY and it was very encouraging to see good growth
once again in the mature markets. The trend in the emerging markets, however, was weak. Digitiza-
tion and sustainable products, where the Group is the market leader, are becoming increasingly
important growth drivers. We are clearly strengthening our customer offering and gaining market
share. Sales increased by 5 percent to SEK 71,293 million. The organic growth was 2 percent.
Operating income increased by 2 percent to SEK 11,254 million1. The Group’s global market
leadership, high rate of innovation and effective cost control strategy position us for continued
profitable growth.

Global demand for door opening solutions continued to
strengthen in 2016, though at a somewhat slower pace,
in an environment of uneven economic development
and political uncertainty. Sales growth was strong in the
Americas division and solid in the Global Technologies,
EMEA and Entrance System divisions with organic growth
of 3–5 percent. However, sales dropped in Asia Pacific,
due to a continued sharp decline in China following an
extended period with an overheated construction mar-
ket. The Group’s growth during the year totaled 5 per-
cent, of which 2 percent was organic. Acquired growth
from 13 acquisitions was 4 percent while divested opera-
tions had an impact of minus 1 percent. ASSA ABLOY’s
sales have increased by about 130 percent over the past
ten years, despite a challenging market development and
a financial crisis.

The demand development reflects the problems experi-
enced by the emerging economies associated with
lower prices for export commodities and oil. In mature
markets, low interest rates and measures to stimulate
consumption contributed to increased investments in
security. An important driver is also the technology shift
toward electromechanics with more and more digital
and mobile solutions, as well as demands for greater sus-
tainability in both new construction and the aftermarket.
The Group’s performance in 2016 is well in line with
its long-term goals. The operating income of SEK 11,254
million, adjusted for restructuring costs, represents an
improvement of 2 percent. The operating margin
has remained stable around the Group target of 16–17
percent over the past five years. With equally strong
development in operating cash flow and a good equity
ratio, the financial freedom of movement and stability is
reassuring.

¹ Excluding items affecting comparability.

Read more about profitability and growth

p26

DEVELOPMENT OF KEY FIGURES

SALES AND OPERATING INCOME

INCOME BEFORE TAX AND OPERATING CASH FLOW

Sales
SEK M

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

Operating income
SEK M

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

Sales
Operating income1

1 Excluding items affecting

comparability 2013 and 2016.

SEK M

12,000

10,000

8,000

6,000

4,000

2,000

Income before tax1
Operating cash flow2

¹ Excluding items affecting
comparability 2013 and 2016.
² Excluding restructuring payments.

STATEMENT BY THE PRESIDENT AND CEO

ASSA ABLOY ANNUAL REPORT 2016

THE DIVISIONS

“ASSA ABLOY is a product-driven company where innovation
and product development are central to our target of
5 percent organic growth per year.”

The geographically varied demand trend influenced the
performance in our divisions.

The EMEA division, with 23 percent of the Group’s

total sales, has encountered a varied and subdued
demand for several years, especially in southern Europe.
Improvement was seen in 2016 with strong growth in
Northern Europe and a recovery in Spain and parts of
Eastern Europe. The UK and the Benelux countries also
initiated a recovery during the year. In Africa, demand
was good, while sales fell substantially in the Middle East.
Organic growth of 3 percent (4) represents gains in mar-
ket share. Five acquisitions contributed 4 percent (4)
acquired growth and one divested operation had an
effect of –4 percent. Demand for electromechanical
solutions with ASSA ABLOY as market leader increased
sharply.

The Americas division, with a share of 24 percent of
the Group’s total sales, has experienced strong demand
in the US for several years. This demand continued in
2016 in both the residential and the commercial mar-
kets. Institutional demand also improved following some
weak years. The technology shift is accelerating with a
sharp increase in sales of digital door opening solutions.
Growth was also very good in the door segment. Mexico
and several other emerging markets in Central and South
America continued to grow at a rapid pace. However,
demand weakened in the major Brazilian market as a
result of weak growth in the commodities sector and
increased political instability. Organic growth in the
division was 5 percent (7) and acquired 3 percent (2).
The Asia Pacific division, which accounts for 12 per-
cent of the Group’s total sales, had a weak development.
The main explanation is the development in China,
where the construction market is undergoing a sharp
correction after years of overheating. Unfortunately,

we also found accounting irregularities at some of our
companies in China and we have made corrections in the
accounting. The division is implementing substantial
streamlining measures in China to adapt to lower
demand. Sales growth continued to be good in most of
the other Asian countries, especially in India where the
Group is now building up broad market coverage. In
Australia and New Zealand sales increased sharply. The
division’s organic growth was –9 percent (–3), and –5
percent if adjusted for overstated sales in 2015. The
acquired growth was 1 percent (9).

Global Technologies, which accounted for 13 percent

of the Group’s total sales, is the Group’s global division
for products and solutions in identity and access man-
agement. Growth was strong in access control, GovID
and Quantum Secure, lower in identification technology,
though with improved demand from the institutional
segment. The division plays a key role in the technology
shift towards digital and mobile technologies, with cut-
ting edge expertise and a strong focus on innovation and
product development. Hospitality, which gathers
together the division’s products and solutions for hotels
and cruise ships, continued to show strong growth and
profitability, delivering complete digital system solutions
to several global hotel chains. Organic growth in the divi-
sion was 3 percent (7) and acquired 3 percent (2).

Entrance Systems, which accounted for 28 percent of

the Group’s total sales, is the Group’s division for com-
plete entrance automation solutions. Entrance Systems
continued to see strong sales growth in most segments
in the US and in several emerging markets with the
exception of China, where the decline continued during

Read more on page 33

entre

ASSA ABLOY’S DIVISIONS

ASSA ABLOY ANNUAL REPORT 2016

EMEA

Continued strong growth for
electromechanical solutions

Demand continued to increase in 2016 and sales grew organically by
3 percent. Sales of electromechanical locks and solutions increased
sharply. Product development continued at a high pace and efficiency
and streamlining programs produced good results.

Market development
Demand growth in the division continued to be varied in 2016. Sales increased strongly
in Scandinavia, Germany and Spain, were good in the UK, Benelux, Italy, Eastern Europe
and Africa, while sales were stable or slightly negative in France and Finland, and
strongly negative in the Middle East. The strong demand for electromechanical
products seen in recent years accelerated further, with strong interest for digital and
mobile solutions in the residential market, especially in northern Europe. Another
strong demand trend is sustainable solutions, where EMEA has a market-leading range
of products and solutions that meet ever-increasing demands, for example from
environmental classification of buildings in the EU.

The division is shifting more and more resources to marketing initiatives. Under the
Group’s Seamless Flow project, administrative information flows, processes and opera-
tions are being automated, freeing staff to develop direct customer relationships.
Nearly 60 percent of the sales staff are now working in direct sales, and the proportion
has grown by more than 10 percentage points over the past five years. The division’s
e-commerce initiative was further expanded, with about 40 percent of external orders
now handled electronically and seamlessly. Digital support is offered to architects
and security consultants in the specification process with Openings Studio, a BIM-
enabled tool (Building Information Modeling). The division now has over 200 specifiers
of its own.

Acquisitions are part of the growth strategy. Acquisitions during the year included

Mauer, a leading manufacturer of cylinders and locks in Bulgaria, Trojan Holdings, a
leading supplier of fittings for doors and windows in the UK, and Seawing, Hungary’s
leading access control company. The Car Lock business, with sales of SEK 550 million,
was divested.

Product leadership
The high pace of product development continued during the year. The share of new
products introduced over the past three years was 28 percent of total sales. More than
200 product development projects are expected to result in new products that reach
the market over the next few years. The digital products have been highly successful.
The CLIQ system, with programmable keys and cylinders, is being expanded to new seg-
ments with great success. The same applies for new Bluetooth-based applications and
ASSA ABLOY’s Seos mobile keys. “Close Motion,” a new and innovative door closer, was
introduced during the year. It has a unique and patented solution for noise-free closing.
The division’s High Impact products continued to be successful. They have been devel-
oped with the purpose of being sold in large volumes in all markets in the division.

Cost-efficiency
The division’s restructuring program to reduce the number of plants and to concen-
trate on assembly close to customers continued according to plan. As a result, compo-
nent production was moved to low-cost countries with consolidation of sub-contrac-
tors, leaving fewer and larger partners. The number of direct suppliers decreased by
12 percent during the year. Streamlining of production continued at a high pace with
lean projects and increased investment in robots. The Seamless Flow initiative is pro-
ducing significant results, and the division is well on the way to consolidating 60 enter-
prise resource planning systems into a single application over the next few years.
Integration of the Group’s various PDM (Product Data Management) systems is
approaching completion. More than 70 percent of users are now on the same platform.

FACTS ON EMEA

Financials in brief 2016
• Sales: SEK 16,837 million (16,524) with 3 percent

organic growth.

• Operating income (EBIT): SEK 2,722 million

(2,620).1

• Operating margin: 16.2 percent (15.9).1

1 Excluding items affecting comparability 2016.

See key figures for EMEA

p59

SALES AND OPERATING INCOME

Sales
SEK M

17,000

16,000

15,000

14,000

13,000

12,000

Operating income
SEK M

3,000

2,800

2,600

2,400

2,200

2,000

Sales
Operating income1

1 Excluding items affecting

comparability 2013 and 2016.

SALES BY PRODUCT GROUP

Mekaniska lås, låssystem
och tillbehör, 54%

Mechanical locks, lock
systems and fittings, 54%

Elektromekaniska
och elektroniska, 31%

Säkerhetsdörrar
och beslag, 15%

Electromechanical and
electronic, 31%

Security doors and
hardware, 15%

Offering: Mechanical and electromechanical locks, digital
door locks, security and fire doors, and fittings.

Markets: EMEA is the leader in its product areas in Europe,
the Middle East and Africa. The commercial segment
accounts for around 60 percent of sales and the residential
segment for 40 percent. EMEA comprises a large number of
Group companies with a good knowledge of their local and
in many respects diverse markets. Products are sold primar-
ily through a number of distribution channels, but also
directly to end-users.

Acquisitions 2016: Mauer in Bulgaria, Trojan in the UK and
Seawing in Hungary.

ASSA ABLOY ANNUAL REPORT 2016

ASSA ABLOY’S DIVISIONS 29

Säkerhetsdörrar och beslagElekromekaniska och elektroniskaMekaniska lås, låssystem och tillbehörAmericas

Good growth and strong
operating income

Sales continued to increase at a good rate in 2016, with 5 percent organic
growth. Growth was good in the US and Canada and very good in South
America, with the exception of Brazil. The sales trend for electromechani-
cal products was particularly strong. Continuing streamlining and effi-
ciency initiatives contributed to an increase in operating income and
a very good operating margin.

Market development
The division’s largest market, the US, showed a positive trend in the commercial and
institutional markets, which together account for about three-quarters of the division’s
sales. The residential market was stable, with growth for the sixth consecutive year.
Sales increased in Canada despite weaker demand. Latin American countries showed
good growth, with particularly strong performance in Mexico, Colombia and Peru.
The ongoing recession in Brazil led to lower sales.

The demand for advanced electromechanical solutions continues to grow rapidly in
all markets and segments. Sales of digital door locks under the Yale brand increased rap-
idly in both North and South America. The strong trend towards wireless lock solutions
and increased sustainability through energy savings is an important feature of future
demand growth.

One small acquisition was completed during the year of ADAEZ in the US. It is a fast-
growing innovative company specialized in energy efficient door closer/operator hybrid.

Product leadership
The division has a very competitive offering of new products due to its high innovation
rate. Investments in innovation and product development have increased by 363 per-
cent since 2006. New products launched in the past three years accounted for 25 per-
cent of total sales in 2016. In all, 100 new products were launched during the year and
an additional 172 products are heading for the market.

FACTS ON AMERICAS

Financials in brief 2016
• Sales SEK 17,044 M (15,665) with 5 percent organic

growth.

• Operating income (EBIT) SEK 3,640 M (3,363).1
• Operating margin: 21.4 percent (21.5).1

1 Excluding items affecting comparability 2016.

See key figures for Americas

p59

SALES AND OPERATING INCOME

Sales
SEK M

18,000

16,000

14,000

12,000

10,000

8,000

Operating income
SEK M

4,000

3,500

3,000

2,500

2,000

1,500

Sales
Operating income1

1 Excluding items affecting

comparability 2013 and 2016.

Demand for products with high sustainability performance is strong. In recent years

SALES BY PRODUCT GROUP

the division has introduced a large number of products that cover a broad spectrum
from frames, doors and locks to access control and home control systems. They are
made of recycled materials, using less natural resources in the manufacturing process
all while assisting building owners to reduce their own operating costs, decrease energy
consumption and help them meet their sustainability goals. The division is the market
leader for smart home connected locks, where Yale has been positioned with a range of
innovative wireless digital lock products that may be integrated with products from
partners. During the year the first solar-powered access control lock was introduced for
the commercial market.

Cost-efficiency
The division continues with a strong focus on efficiency improvements, an important
component of which are the Group-wide restructuring programs. In recent years, sig-
nificant portions of component production have been moved to low-cost countries,
while customized final assembly, meeting complex demands has been concentrated
close to customers. The number of plants has been reduced from 47 to 26 since 2006.
The number of employees in direct production has been reduced to 4,533 (–39 per-
cent). Sourcing has increased sharply and the number of suppliers has been cut by
41 percent since 2006.

The division has a long tradition of lean practices, which provide significant efficiency

gains each year. Seamless Flow initiatives cover the entire administrative information
flow, with a focus on the customer-oriented processes to strengthen and deepen cus-
tomer relationships. The transition to a common business system is proceeding accord-
ing to plan. A large number of products have been updated and processes simplified
using VA/VE methods. Investments in robots accelerated during the year with 70 new
robots for a total of 248.

Mekaniska lås, låssystem
och tillbehör, 41%

Mechanical locks, lock
systems and fittings, 41%

Elektromekaniska
och elektroniska, 15%

Säkerhetsdörrar
och beslag, 44%

Electromechanical and
electronic, 15%

Security doors and
hardware, 44%

Offering: Mechanical and electromechanical locks, digital
door locks, cylinders, door fittings, security doors, door
frames, and industrial high-security fencing and gates.

Markets: US, Canada, Mexico, Central America and South
America. The majority of sales are in the US and Canada,
where ASSA ABLOY has an extensive sales organization and
sells its products through distributors. Institutional and
commercial customers are the largest end-customer seg-
ments. These segments account for 85 percent of sales,
while the residential segment accounts for 15 percent of
sales.
Sales in South America and Mexico take place mainly
through distributors, wholesalers and home improvement
stores. Sales in these markets are more evenly distributed
between the non-residential and residential segments.

Acquisitions 2016: ADAEZ in the US.

ASSA ABLOY’S DIVISIONS

ASSA ABLOY ANNUAL REPORT 2016

Säkerhetsdörrar och beslagElekromekaniska och elektroniskaMekaniska lås, låssystem och tillbehörAsia Pacific

Weak development in
China weighed on Asia

The division’s sales declined due to the sharp decline in China, despite a
good performance in most other markets in the region. Product develop-
ment continued at a record-breaking pace. Major streamlining measures
are being implemented in China, which accounts for nearly half of the
division’s sales.

Market development
Demand in China continued to weaken, primarily in the residential segment, which
accounts for most of the division’s sales in the country. The commercial segment grew,
but is still a smaller part of the business. Sales in China decreased sharply and, unfortu-
nately, accounting irregularities were also found at some companies. Growth was
strong in India, where the division is now building up a leading market position.
Demand was good in New Zealand, Thailand, Singapore, the Philippines and Japan.
The trend was favorable in South Korea, stable in the rest of Southeast Asia and some-
what weaker in Australia.

Strong market trends in the entire region are digital and mobile solutions, where
South Korea is leading the way as a global pioneer. Digital door locks are a very popular
product that continued to show good growth. Demand for sustainable and climate-
smart solutions go hand in hand with the digital trend and increased sharply from a low
level, especially in China where the desire to address environmental problems has now
become an important driver. Efforts associated with market segmentation and increas-
ing resources at the market level are producing good results. ASSA ABLOY is taking over
as sole master brand for a growing range of products for the commercial market and
Yale is concentrating on the residential market. No acquisitions were completed during
the year.

Product leadership
The division has clear product leadership in its markets, with several years of increased
investments in innovation and new products. The number of development engineers
continues to increase in the division’s 15 development centers, including in China,
where products are also developed for the entire region. The initiative is in response to
advanced demand from a large, young and tech-savvy consumer generation. Products
introduced over the past three years accounted for 37 percent of total sales, substan-
tially higher than the Group target of 25 percent. Interest in sustainable rated products
is rapidly growing, especially in China, Australia and New Zealand. The division has the
widest range of products with high sustainability performance and a rapidly growing
number of environmental product declarations.

Cost-efficiency
The division is dealing with the sharp slowdown in Chinese demand through measures
that include a substantial reduction of staff. The number decreased during the year by
about 1,500 to a total of 11,700. As a result the number of employees in the division
declined by 21 percent in three years. This reduction is supported in part by the con-
tinued streamlining of the division’s plant structure in accordance with the Group’s
restructuring program. Other measures include increasing the pace of outsourcing
with more purchasing, improving efficiency in production by investing in more robots
and expanding the lean program for smarter production flows.

The Seamless Flow initiative also continued successfully during the year and the tran-
sition to a common business system continued at a good pace. Streamlining of adminis-
trative information flows broadened to include more processes such as product data,
order and billing systems, as well as marketing with the expansion of e-commerce. This
initiative allowed more resources to be transferred to direct customer relationships.

FACTS ON ASIA PACIFIC

Financials in brief 2016
• Sales SEK 9,189 M (10,171), an organic decline
with 9 percent and with 5 percent adjusted for
overstated sales in 2015.

• Operating income (EBIT) SEK 787 M (1,436).1
• Operating margin: 8.6 percent (14.1).1

1 Excluding items affecting comparability and including SEK 300 M

write-down of working capital 2016.

See key figures for Asia Pacific

p59

SALES AND OPERATING INCOME

Sales
SEK M

12,000

10,000

8,000

6,000

4,000

2,000

Operating income
SEK M

1,500

1,300

1,100

900

700

500

Sales
Operating income1

1 Excluding items affecting

comparability 2013 and 2016.

SALES BY PRODUCT GROUP

Mekaniska lås, låssystem
och tillbehör, 51%

Mechanical locks, lock
systems and fittings, 51%

Elektromekaniska
och elektroniska, 18%

Säkerhetsdörrar
och beslag, 31%

Electromechanical and
electronic, 18%

Security doors and
hardware, 31%

Offering: Mechanical and electromechanical locks, digital
door locks, high-security doors, fire doors and hardware.

Markets: The Asian countries are emerging markets without
established security standards. New construction accounts
for around three-quarters of sales. In China, the same types
of lock, handle and hardware are often used in both homes
and workplaces. The production units in China also produce
for ASSA ABLOY’s other divisions. Australia and New Zealand
are mature markets with established lock standards. Reno-
vations and upgrades account for the majority of sales.

ASSA ABLOY ANNUAL REPORT 2016

ASSA ABLOY’S DIVISIONS 31

Säkerhetsdörrar och beslagElekromekaniska och elektroniskaMekaniska lås, låssystem och tillbehörGlobal Technologies

High rate of development
and strong earnings growth

Global Technologies, which consists of HID Global and ASSA ABLOY
Hospitality, continued to have good sales growth of 3 percent organically.
Demand was good in most of HID Global’s product segments in mature
markets. ASSA ABLOY Hospitality also continued to grow.

HID GLOBAL
Underlying global demand continues to be strong with growing security needs and
upgrades to electromechanical technology with digital and mobile solutions. The year
showed good sales growth in the mature markets, especially in Europe and North
America. Emerging markets showed a mixed picture with very good sales in Africa, good
sales in China, while the rest of Asia, South America and the Middle East had a negative
development.

The commercial segment is spearheading the rapid development toward digital
and mobile solutions with a high growth rate. In the institutional segment demand
increased after several years of relatively weak growth. Physical access control and
identification technology both reported a year of good growth in most markets, while
printer products, with a large proportion of sales in emerging markets, were weaker.
The software company Quantum Secure, acquired in 2015, had a strong increase in
sales, while authentication solutions remained unchanged. The great success of the
division’s mobile access control solutions with a significant increase in the number of
customers was particularly gratifying.

HID Global has global product leadership with a continued high pace of product
development. New products launched in the past three years account for almost 40
percent of sales, compared with the Group average of approximately 30 percent. One
strong driver is the technology shift to digital and mobile solutions with increased soft-
ware content that requires regular updates.

The business unit’s access control products, with global leadership, undergo con-
stant development with new features and adaptations to different mobile platforms.
In the field of printers, new products were launched with better sustainability perfor-
mance, lower operating costs and higher resolution. HID Global has seen a rapid
increase in the number of new products based on the Seos platform, including readers
and cards. One important launch was the first solution for ID cards and driver’s licenses
in the mobile phone. The solution has great potential for the future as legislation is
adapted to this technology. The US is in the lead here with legislation in the individual
states. Similarly, HID Global has developed new authentication techniques that permit
logging in to online banking on the mobile phone.

Cost-efficiency improvements continued at a good pace during the year, with posi-
tive effects. Within the Group-wide restructuring program, certain operations in access
control and ID cards are now being moved from Ireland to Malaysia. The number of
development centers has been consolidated. The aim is to create fewer units with
larger critical mass for product development, while increasing engineering capacity in
emerging markets. The division also continued to consolidate its supplier base, result-
ing in lower costs while improving sustainability. Work on the Seamless Flow initiative
intensified with major advances, especially in marketing and sales.

ASSA ABLOY HOSPITALITY
ASSA ABLOY Hospitality continued growth from last year with high operating income and
strong margin growth. The main driver is the continued rapid growth of demand for elec-
tromechanical door opening solutions using digital and mobile technology. Once again,
demand growth is better in mature markets than in emerging markets, where China
remains weak with a low growth rate in the new construction market. Several large global
hotel chains are now customers for installation of advanced electromechanical systems
with both hardware and software. Demand remains high for renovations and upgrades as
a result of strongly increased investments in new technological solutions in recent years.

FACTS ON GLOBAL TECHNOLOGIES

Financials in brief 2016
• Sales SEK 9,697 M (9,100) with 3 percent organic

growth.

• Operating income (EBIT) SEK 1,752 M (1,647),

a 6 percent increase.1

• Operating margin (EBIT) 18.1 percent (18.1).1

1 Excluding items affecting comparability 2016.

See key figures for Global Technologies

p59

SALES AND OPERATING INCOME

Sales
SEK M

10,000

8,000

6,000

4,000

2,000

Operating income
SEK M

1,800

1,600

1,400

1,200

1,000

800

Sales
Operating income1

1 Excluding items affecting

comparability 2013 and 2016.

SALES BY PRODUCT GROUP

Passerkontroll, 73%

Access control, 73%

Hotellås, 21%

Service, 6%

Hotel locks, 21%

Service, 6%

Offering: HID Global is a global leader in trusted identity
solutions, primarily in identity and access management, and
in contactless identification technology solutions. Custom-
ers comprise companies, healthcare, education, financial,
government and state institutions.
ASSA ABLOY Hospitality manufactures and sells electronic
lock systems, safes, energy management systems and mini-
bars for hotels and cruise ships under the VingCard and
Elsafe product brands. It is the world’s best-known brands for
lock systems and in-room safes, with products installed in
over seven million hotel rooms in more than 42,000 hotels
worldwide.

Markets: Customers are mainly in the institutional and
commercial sectors worldwide.

Acquisitions 2016: Demoteller and Bluvision in the US.

ASSA ABLOY’S DIVISIONS

ASSA ABLOY ANNUAL REPORT 2016

ServiceHotellåsPasserkontrollEntrance Systems

Increased sales and
higher margin

In 2016 demand developed well with strong sales growth in North
America, Pacific and western Europe, while growth in emerging markets
was subdued. The pace of product development was high with many new
product launches. The division is leading the development toward more
sustainable and energy-efficient solutions. The restructuring programs
are proceeding according to plan with reduced costs.

Market development
The division’s positive organic growth continued during the year with an increase
of 4 percent. It was particularly strong in North America in all market segments. In
northern and central Europe, demand was good, while it improved from low levels in
southern Europe. Growth in emerging markets was slower, in part because of weak
growth in China, a market that accounts for a minor portion of the division’s sales.
The division continues to invest in emerging markets with the aim of increasing their
share of sales from 11 percent to 25 percent.

In the various segments, sales increased strongly for automatic doors, industrial
doors and high-performance doors. Growth was good in garage doors and warehouse
and logistics solutions, while it was negative in the European residential segment.

The service offering, which accounts for almost one third of the division’s sales con-
tinued to perform well. New service concepts based on long-term contracts, preventive
maintenance and modernization strengthen customer relationships and provide good
opportunities for upselling.

Acquisitions are an important part of the growth. During the year four companies
were acquired: Nassau in Denmark, which holds a strong position in Europe in industrial
overhead sectional doors, Lighthouse and Greenville in the US, two regional distribu-
tors of overhead sectional doors and loading docks, and Construction Specialties, a
leader in sales and installation of docking products, overhead sectional doors and
high-performance doors in Mexico.

Product leadership
The launch rate for new products continued at a high pace. New products launched in
the past three years accounted for 32 percent of sales, clearly above the Group target of
25 percent. The product development organization is functioning well with new and
modular development platforms that reduce complexity and provide significant effi-
ciency gains in the use of resources. Product launches included a new range of overhead
sectional doors for the North American and European markets, new solutions for load-
ing docks, high-performance doors for specific industry applications and sliding doors
for emerging markets.

The Group is spearheading developments toward more energy-saving and sustain-
able solutions. The division has a large and growing range of energy-efficient solutions,
such as products that can be quickly opened and closed, that have good insulation, or
with various intelligent sensors and digital technology to control energy consumption.

Cost-efficiency
Consolidation of the production structure proceeded according to plan. During the year,
production in Italy was moved to the division’s plants in the Czech Republic. The strategy
is to place customized final assembly close to the customer and to move component
production to low-cost countries, while concentrating purchases to fewer and larger
suppliers. Streamlining is facilitated by investments in robotics, as well as the use of Lean
practices and VA/VE for resource efficiency at every level. The Seamless Flow project dur-
ing the year included the continued implementation of a common business system for
the division. In addition, it covered more and more aspects of the division’s information
flows, including increased digitization of marketing and customer relations, as well as
implementation of more effective digital solutions in the service organization.

FACTS ON ENTRANCE SYSTEMS

Financials in brief 2016
• Sales SEK 19,789 M (17,957) with 4 percent organic

growth.

• Operating income (EBIT) SEK 2,753 M (2,436).1
• Operating margin: 13.9 percent (13.6).1

1 Excluding items affecting comparability 2016.

See key figures for Entrance Systems

p59

SALES AND OPERATING INCOME

Sales
SEK M

20,000

16,000

12,000

8,000

4,000

Operating income
SEK M

3,000

2,500

2,000

1,500

1,000

500

Sales
Operating income1

1 Excluding items affecting

comparability 2013 and 2016.

SALES BY PRODUCT GROUP

Produkter, 73%

Products, 73%

Service, 27%

Offering: Entrance automation products, components and
service. The product range includes automatic swing, sliding
and revolving doors, industrial doors, garage doors,
high-performance doors, docking solutions, hangar doors,
gate automation, hardware for overhead sectional doors
and sensors.

Markets: Entrance Systems is a global leader with sales
worldwide. It has sales companies in 35 countries and dis-
tributors in 90 countries. Service operations account for
nearly one-third of sales. The products are sold through
three channels. In the direct channel, new equipment and
comprehensive service are sold direct to end-customers
under the ASSA ABLOY brand. The indirect channel mainly
targets large and medium-sized distributors under the
Entrematic brand. The third channel, Cardo, sells compo-
nents and hardware for doors in the industrial and residen-
tial segments and sensors for the door and elevator industry.

Acquisitions 2016: Nassau in Denmark, Lighthouse and
Greenville in the US and Construction Specialties in Mexico.

ASSA ABLOY ANNUAL REPORT 2016

ASSA ABLOY’S DIVISIONS 33

ServiceProdukterPractical examples of ASSA ABLOY’s
security solutions

Mobile access control for
Vodafone Italy’s employees

Spectacular building
for car dealers

CUSTOMER: Vodafone Italy wanted to update the physical access control system at its head-

quarters, Vodafone Village in Milan.

CHALLENGE: Initially a pilot project was carried out in which a group of employees were able to

use their smartphones to open the doors at Vodafone Village. The phones could also be used to
make cashless payments and report time and attendance.

SOLUTION: The choice fell to HID Mobile Access. The
system is used with iCLASS SE readers that works with both
the old access cards and the new mobile ID cards, which
allows users to switch to mobile access control at their own
pace. HID Global collaborated with Digitronica.IT and
Honeywell Building Solutions (HBS) to install the solution.

HID Global’s mobile access solution was integrated into
the customer’s existing identification platform. The readers
are easy to configure and support several different applica-
tions, making it possible to quickly install the new system.
The users appreciate the increased ease of use when they
move between different departments and use their phones
in various ways. In addition, it is very easy to issue, manage
and lock mobile ID cards, which saves both time and money.
Vodafone Italy implemented the new system in 2016, and
the plan is to initially issue 8,000 mobile ID cards.

CLIQ ensures power supply in North
West England

CUSTOMER: Electricity North West, a British
power company responsible for management
and maintenance of the power grid that sup-
plies about 5 million people in North West
England.

CHALLENGE: The customer wanted an
access solution for its facilities in urban and
rural areas. They needed locks that meet the
industry standard to protect against vandalism
in order to ensure a continuous and reliable
supply of electricity. They also wanted custom-
made padlocks and better key control, as well
as the ability upon request to track events and
identify when the keys and locks were used.

SOLUTION: ASSA ABLOY provided security

for the electricity company using the CLIQ
locking system, a flexible solution that com-
bines mechanical cylinders, certified padlocks
and electromechanical devices. Approxi-
mately 15,000 cylinders and padlocks have
been installed, along with over 40 CLIQ pro-
gramming devices for remote updating of key
authorization. Almost 2,000 programmable

CLIQ keys are now used in the system. By
updating these keys, authorization can be
granted for a specific door at a certain time.
The dynamic software, CLIQ Web Manager,
eliminates any potential security risks, by acti-
vating and changing the keys’ authorization.

CUSTOMER: Rioja Motor is the authorized dealer for
Volkswagen Group, with sales and repair shops all over
Spain. The company has built a new facility, with an
ultra-modern showroom and a shop for repairing
mechanical and electronic components.

CHALLENGE: Rioja Motor wanted the building to
have a spectacular full-height glass facade, since it is
important for the cars on display to be visible from out-
side. They also had ambitious sustainability goals for
the building, which ASSA ABLOY Entrance Systems had
to take into account when developing an entrance
solution for the project.

SOLUTION: In order to present a complete solution
that met the customer’s requirements for design and
sustainability, ASSA ABLOY worked in close collabora-
tion with both the architect and the construction com-
pany. By installing the fully glazed overhead sectional
doors, the natural lighting was maximized and met
Rioja Motors’ requirements for high visibility. Trans-
parent doors that opened and closed quickly were
installed to increase the energy savings, and attractive
sliding doors were installed at the main entrance.
These intelligent doors adjust the size of the opening
to the number of people entering and exiting the
building, and they are not open any longer than
necessary, which reduces energy consumption.

Sheraton Dubrovnik Riviera Hotel

CUSTOMER: Sheraton Dubrovnik Riviera Hotel, a newly built Starwood hotel and Croatia’s

largest hotel and conference facility, with 239 rooms and 11 luxury suites.

CHALLENGE: The Sheraton Dubrovnik Riviera Hotel wanted to give guests the same secure

and relaxing experience that they have come to expect when staying at a Sheraton hotel. In
addition to the high standard associated with the Sheraton brand, the hotel management
also needed to take into account Starwood’s requirements to use the latest security and
access control solutions.

SOLUTION: Following Starwood’s recommendation, The Sheraton Dubrovnik chose to
install VingCard Classic RFID locks combined with the Visionline software, and Elsafe Sentinel
II digital in-room safes. Designed for enhanced guest satisfaction, the VingCard Classic RFID
locks are extremely user-friendly for guests of all ages, since keycards do not have to be
inserted into the lock. This simple and convenient access is paired with high security for both
guests and staff, thanks to encrypted technology that prevents unauthorized key card copy-
ing. The software was installed and integrated with the hotel’s booking system within one
business day, with ASSA ABLOY Hospitality’s local partners helping to integrate the hotel’s
additional online systems. As a result, the hotel has experienced more convenient and
efficient operations and security procedures.

ASSA ABLOY secures
modern landmark in
Suzhou

CUSTOMER: Modern Media Plaza in Suzhou, China –

which was completed in 2016 and is owned by the Suzhou
Broadcasting System – consists of two spectacular L-shaped
buildings with a total area of 328,000 square meters. The
47-storey building complex was designed by Hiroshi Miyak-
awa and includes a 2,000-square meter television and news-
paper office, an office building, hotel, and retail space.

CHALLENGE: The Suzhou Broadcasting System set high

standards for both products and services. The door solu-
tions must protect users and their property, and also be
affordable, flexible, easy to handle and used in many differ-
ent applications.

SOLUTION: ASSA ABLOY China collaborated with the
owner and architect for over a year. The Group’s project
managers, salespeople and technicians worked together
to formulate bids for the different phases of the project
and fine-tuned the cost-effective solution: a combination
of products that meet ANSI and EN standards. ASSA ABLOY
developed separate master key systems for the real estate
company CBRE and the hotel, as well as custom fittings for
the aesthetic design of the buildings.

Cooperation and BIM software were the key to the successful
project for the University of Houston’s new stadium

CUSTOMER: John O’Quinn Field at TDECU Stadium, with

40,000 seats is the home stadium for the University of
Houston’s Cougars football team. It includes a football stadium
with concourses, an ultra-modern dressing room of almost 500
square meters, four party plazas, a more than 1,000-square-foot
club section and 26 VIP suites.

CHALLENGE: The project involved three architectural firms,
which were responsible for various parts of the facility, includ-
ing playing fields, concourses and office space. The 600 door-
ways required a number of special doors, such as acoustic doors
to the dressing room and press box to block out the sound of
the spectators.

SOLUTION: ASSA ABLOY used its proprietary software, Open-

ings Studio, including BIM (Building Information Modeling)
tools that make it possible to create, visualize and modify doors,
frames and hardware in 3D. In Openings Studio everyone has
access to the same information simultaneously and can make
immediate changes, resulting in better cooperation and trans-
parency while reducing the risk of expensive and time-consum-
ing changes. ASSA ABLOY installed doors, door frames, accesso-
ries and mechanical and electromechanical access control at
the stadium.

Sustainable development

Good progress in sustainability

ASSA ABLOY’s sustainability initiatives continued to make good progress in 2016. The new five-year
sustainability plan is in line with the objectives. A Group-wide strategy will provide a stronger safety
culture throughout the organization. Efforts to reduce energy consumption continue, with an
increased focus on transportation and logistics, as well as renewable energy.

Commercial driver
Customers are increasingly asking for sustainable prod-
ucts and solutions. Sustainability initiatives are inte-
grated into the Group’s strategies for increased market
presence, product leadership and cost-efficiency. The
divisions have operational responsibility, but governance
is based on the Group-wide Code of Conduct that applies
to all employees and the Group-wide Business Partner
Code of Conduct. ASSA ABLOY reports the results of the
sustainability initiatives in greater detail in a separate
sustainability report, and applies the sustainability
reporting framework, the Global Reporting Initiative
(GRI).

Clearer performance monitoring
In 2016 ASSA ABLOY began working based on a new sus-
tainability program for the period until 2020. The pro-
gram includes several key figures and provides faster and
more detailed monitoring. The results from the first year
are positive and in line with the plan.

One important area of focus involves reducing energy

consumption throughout the operation through more
efficient processes and intelligent control systems.
ASSA ABLOY is working to increase the proportion of
renewable energy with the target of obtaining 20 per-
cent of total energy consumption from renewable
sources by 2020. A focused approach to energy will
enable ASSA ABLOY to reduce the Group’s total carbon
emissions.

The Group’s water consumption is largely related to
surface treatment processes. Increasing the degree of
water purification will make it possible to reuse water
multiple times, which reduces consumption.

Good results have been achieved in the effort to
reduce the use of chlorinated organic solvents. They are
primarily used for painting products and more and more
plants are now using alternatives with lower environ-
mental impact, such as water-based varnish.

The Group’s units are actively working to reduce waste

generation, through measures such as intelligent manu-
facturing processes and packaging. The goal is to sepa-
rate an increasing proportion of waste to the greatest
extent possible for reuse in order to minimize the
amount of waste going to the landfill.

The Group’s streamlining program for the production
structure combined with other efficiency activities such
as Seamless Flow and smarter IT systems provide reduced
resource consumption and thereby reduced environ-
mental impact.

The Group’s goal is for all units with significant envi-
ronmental impact to have an environmental manage-
ment system to comply with ISO 14001. As new compa-
nies are acquired such systems are gradually introduced,
if they are not already in place. A total of 124 units had
environmental management systems at the end of the
year, which means that the system covers approximately
76 percent of employees in the Group’s factories.

ASSA ABLOY is working systematically with its suppli-

ers to improve sustainability performance across the
supply chain. Evaluation and improvement of the sup-
plier base is a continuous process, with a special focus on
audits of suppliers in low-cost countries. To verify the
quality of the audits, external auditors have assessed the
work processes and confirmed the audit outcomes.

Sustainable products
ASSA ABLOY is the global leader in innovation, product
development and sales of environmentally certified
products, which are products that comply with various
standards and certified by a third party. The Group has an
increased proportion of products with industry-leading
sustainability characteristics, several of which are certi-
fied by a third party, such as the “Green Circle.”

In 2016, the Group initiated an internal reporting sys-
tem to monitor sales of sustainable and environmentally
certified products.

Strong safety culture
An important initiative involves a safer working environ-
ment, an area where the Group aims to reduce the injury
rate and improve the safety culture. A Group-wide safety
manual has been formulated and is the basis for struc-
tured safety initiatives within the Group’s units. Key
features include education, risk identification and pro-
moting a good safety culture. The Group has introduced
an in-depth reporting system for accidents and incidents,
as well as key figures for detailed analyzes.

Read more about ASSA
ABLOY’s sustainability
initiatives in the 2016
Sustainability Report.

THE GROUP’S REPORTING
UNITS

Number

350

300

250

200

150

100

The number of reporting units in
the Group amounts to 347 (338).

SUSTAINABLE DEVELOPMENT

ASSA ABLOY ANNUAL REPORT 2016

Continued focus on development

Employee commitment and expertise are crucial for delivering results based on the strategy’s three
components, increased market presence, product leadership and cost-efficiency. ASSA ABLOY’s basic
values of transparency, accountability and valuing results and performance along with a clear innovation
culture shape the Group’s employer brand. ASSA ABLOY is actively working to offer stimulating work
tasks with clarity and development opportunities, where the contributions of every employee are visible.

Internal mobility and development
ASSA ABLOY’s recruitment policy gives priority to internal
candidates provided they have equal qualifications to
external applicants. All job vacancies are advertised on the
Group’s global intranet to encourage internal mobility. The
Group has a system through which employees are offered
opportunities to switch jobs with coworkers, or to work
together during periods, which increases productivity and
contributes to mobility. Development to meet the require-
ments of the future organization, especially the digital
conversion, is a priority. During the year a new version of
the digital and interactive training program “Entrance to
ASSA ABLOY” was initiated.

Diversity and gender equality
The Code of Conduct states that gender, nationality, social
or ethnic origin, age, religion, physical disability, sexual
orientation and political opinion must not be the basis for
negative discrimination. The Group operates at all levels in
order to achieve good diversity, which contributes to more
dynamic structures and perspectives. One target is to have
30 percent of management positions held by women by
2020. They held 25 percent of management positions in
2016. Managers are expected to prioritize the underrepre-
sented gender in the recruitment process, provided that
they have equal qualifications, to ensure compliance with
local legislation, and to have at least one person from the
underrepresented gender among the final candidates. The
Group currently has 28 different nationalities in the senior
management structure.

Employee survey
ASSA ABLOY conducts an employee survey every two years.
Areas covered include how employees view the work situa-
tion, ASSA ABLOY as an employer, occupational health and
safety, conditions and equal opportunities for professional

development. The results are broken down into over 300
units in the Group and form the basis for concrete action
plans. The 2016 survey had a very high response rate of
92 percent. The responses showed improvements on a
number of points compared with the 2014 survey, as well
as the need for increased efforts. One such area is health
and safety, where the Group is now implementing an exten-
sive Group-wide program to improve the working environ-
ment and strengthen the safety culture.

Development and career
Annual performance reviews are important tools for moni-
toring and planning employees’ professional develop-
ment. Another is the internal labor market with rotation
across borders and disciplines. This approach spreads
knowledge, experience and values in the Group.

Leadership development is aimed at promoting active
leadership based on continuous feedback, with the motto
“know your people,” where each employee is seen as an
individual. The Group has a well-established global develop-
ment process for senior managers, the Talent Management
Process, which is aimed at ensuring that the Group has the
expertise it needs to meet the demands of the future. The
foundation consists of two development programs for
senior managers: ASSA ABLOY MMT and ASSA ABLOY IMD
“Leading the future.” MMT has three modules based on the
Group’s three basic strategies: market presence, product
leadership and cost-efficiency. About 430 of the Group’s
senior managers from 30 countries have participated in the
IMD training program, which is conducted in cooperation
with the world-famous Swiss management school IMD in
Lausanne. The collaborative effort also includes the custom-
ized IMD program with about 30 participants per session.
Its aim is to support the implementation of the Group’s
strategies, with a focus on problem solving and activities
based on an analysis of various case studies.

WOMEN AT DIFFERENT LEVELS OF THE ORGANIZATION

NATIONALITIES – ASSA ABLOY’S MANAGEMENT TEAMS

Share of women, %

Level

20121

20131

2014

2015

2016

2 – reports to CEO
3 – reports to level 2
4 – reports to level 3
5 – reports to level 4
Levels 2–5
All employees

18
16
18
23
22
35

27
12
19
24
22
31

27
16
17
24
22
31

27
17
16
25
23
31

27
21
17
27
25
31

1 The definition of management positions was revised in 2014. 2012 and 2013 have

been restated for comparability with 2014.

Europe excl. Sweden, 34%

Sweden, 21%

North America, 19%

Asia, 16%

Africa och Middle East, 5%

South America, 4%

Pacific, 1%

ASSA ABLOY ANNUAL REPORT 2016

SUSTAINABLE DEVELOPMENT 37

Pacific

South America

Africa ME

Asia

North America

Sweden

Europe

Report of the Board of Directors
and Financial statements
Contents

Report of the Board of Directors

Significant risks and risk management

Corporate governance

Board of Directors

Executive Team

Internal control – financial reporting

Remuneration guidelines for senior management

Sales and income

Consolidated income statement and
Statement of comprehensive income

Comments by division

Results by division

Financial position

Consolidated balance sheet

Cash flow

Consolidated cash flow statement

Changes in consolidated equity

Parent company financial statements

Notes

1 Significant accounting and valuation principles

2 Sales

3 Auditors’ fees

4 Other operating income and expenses

5 Share of earnings in associates

6 Operating leases

7 Expenses by nature

8 Depreciation and amortization

9 Exchange differences in the income statement

10 Financial income

11 Financial expenses

12 Tax on income

13 Earnings per share

14 Intangible assets

15 Property, plant and equipment

16 Shares in subsidiaries

17 Investments in associates

18 Deferred tax

19 Other financial assets

20 Inventories

21 Trade receivables

22 Parent company’s equity

23 Share capital, number of shares and dividend

per share

24 Post-employment employee benefits

25 Other provisions

26 Other current liabilities

27 Accrued expenses and deferred income

28 Contingent liabilities

29 Assets pledged against liabilities to credit

institutions

30 Business combinations

31 Profit from discontinued operations

32 Cash flow

33 Employees

34 Financial risk management and financial

instruments

Comments on five years in summary

Five years in summary

Quarterly information

Definitions of key ratios

Proposed distribution of earnings

Auditor’s report

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2016

Report of the Board of Directors

The Annual Report of ASSA ABLOY AB (publ.), corporate identity number 556059-3575, contains
the consolidated financial statements for the financial year 1 January through 31 December 2016.
ASSA ABLOY is the global leader in door opening solutions, dedicated to satisfying end-user needs
for security, safety and convenience.

Significant events
Sales and income
Sales for the year totaled SEK 71,293 M (68,099), with
organic growth of 2 percent (4) and acquired growth of
3 percent (3). The exchange rate impact on sales was 0 per-
cent (13).

Operating income (EBIT) excluding items affecting com-
parability increased by 2 percent to SEK 11,254 M (11,079),
equivalent to an operating margin of 15.8 percent (16.3).
Items affecting comparability consists of costs for the new
restructuring program launched during the year.

Impairment of operating assets and correction of past

incorrect reporting in China resulted in one-off costs of
approximately SEK 700 M. Taking into account the reversal
of deferred acquisition payments in China, the total negative
impact on operating income for these items is SEK 300 M.
Net financial items were SEK –705 M (–697). Income before
tax excluding items affecting comparability totaled
SEK 10,549 M (10,382).

Operating cash flow increased by 5 percent to

SEK 10,467 M (9,952). Earnings per share after full dilution,
excluding items affecting comparability, increased 2 percent
to SEK 7.09 (6.93).

Restructuring
A new restructuring program that covers all divisions was
launched in 2016. About fifty closures of plants and offices
are planned and some production will be outsourced. The
program affects approximately 2,500 people. The total
restructuring cost is estimated at SEK 1,597 M before tax and
was fully expensed in 2016. The payback period for the pro-
gram is expected to be less than three years.

A number of activities were also implemented in 2016
within the framework of previously launched restructuring
programs aimed at generating further efficiencies and
savings. The most recently launched program from 2013 is
still active, but was largely implemented by year-end 2016.
At year-end 2016, 12,162 employees had left the Group,
of which 1,412 employees during the year, as a result of the
changes in the production structure since the programs
began in 2006. A total of 76 plant closures have been imple-
mented, including three closures during the year. A large
number of plants in high-cost countries have switched from
production to final assembly.

The Group’s production is increasingly concentrated in its
own plants in China, central and eastern Europe and to exter-
nal suppliers in low-cost countries.

Payments for the restructuring programs totaled

SEK 442 M (375) for the year. At year-end 2016, the remain-
ing provisions for restructuring measures amounted to
SEK 1,572 M (551).

Acquisitions and divestments
In February 2016, ASSA ABLOY acquired 100 percent of the
share capital of the Swiss company CEDES, a leading supplier
of sensor technology to the door and elevator industry.
The acquisition forms part of the strategy of providing more
intelligence in entrance automation to create new innova-
tive, integrated customer solutions. CEDES is headquartered
in Landquart, Switzerland.

In March 2016 ASSA ABLOY acquired 100 percent of the

share capital of Lighthouse, a US distributor of industrial
doors and docking systems. The acquisition of Lighthouse
represents another important step in the strategy of expand-
ing the Group’s market presence in the US in the area of
entrance automation. The operation is headquartered in
Charlotte, North Carolina, USA.

In October 2016, ASSA ABLOY acquired 100 percent of
the share capital of Trojan, a leading British supplier of fit-
tings for doors and windows. The acquisition is a good com-
plement to ASSA ABLOY’s product offering in the UK. Trojan
is headquartered in Walsall, UK.

In November 2016 ASSA ABLOY acquired 100 percent of

the share capital in Nassau, a major European supplier of
industrial overhead sectional doors. The acquisition pro-
vides good coverage and expanded service in the product
area for a number of European markets. Nassau is head-
quartered in Ringe, Denmark.

In December 2016 ASSA ABLOY acquired 100 percent of

the share capital of Bluvision, a leading US supplier of solu-
tions in the market for the Internet of Things (IoT). Bluvision
is headquartered in Fort Lauderdale, Florida, USA.

Other acquisitions during the year included Construction
Specialties (Mexico), which strengthens the leading position
in entrance automation, and Mauer (Bulgaria), which
strengthens ASSA ABLOY’s presence in the emerging mar-
kets.

A total of 13 businesses, including minor acquisitions,
were consolidated during the year. The total purchase price
of these acquisitions was SEK 3,023 M on a debt-free basis,
and acquisition analyses indicate that goodwill and other
intangible assets with an indefinite useful life amounted to
SEK 2,395 M. No additional acquisitions of non-controlling
interests occurred during the year (990).

In September 2016 the Group sold its car locks business
to the Japanese company, ALPHA Corporation. The car locks
operation, headquartered in Tyniste, Czech Republic, had
sales of about SEK 570 M in 2015. The disposal resulted in
a small capital gain and will have a positive impact on
ASSA ABLOY’s operating margin moving forward, all else
being equal.

ASSA ABLOY ANNUAL REPORT 2016

REPORT OF THE BOARD OF DIRECTORS 39

Report of the Board of Directors

Research and development
ASSA ABLOY’s expenditure on research and development
during the year totaled SEK 2,218 M (1,932), equivalent to
3.1 percent (2.8) of sales.

The pace of innovation remained high throughout the
year, including in areas such as digital door opening solu-
tions, products with increased sustainability and energy-
saving products. New products launched in the past three
years accounted for 30 percent of sales for the year.

Sustainable development
ASSA ABLOY’s operations in Sweden carry on licensable and
notifiable activities under the Swedish Environmental Code
in Entrance Systems division in Gothenburg.

Tax matters
In 2015 the Administrative Court in Sweden decided not to
allow tax deductions for interest expenses relating to one of
the Group’s subsidiaries for the years 2008–2012 on the
grounds that the deductions were misallocated. The deci-
sion was appealed to the Administrative Court of Appeal
during the year. The total tax exposure amounts to just over
SEK 800 M.

In 2015 the Finnish Tax Administration decided not to
allow tax deductions for interest expenses in the Finnish
operations for the years 2008–2012. The decision was
appealed to a higher court during the year. The total tax
exposure amounts to around SEK 750 M.

ASSA ABLOY’s assessment is that the decisions will not

Several units outside Sweden carry on licensable activi-

have an impact on the Group’s earnings.

ties and hold equivalent licenses under local legislation.
ASSA ABLOY’s units worldwide are working systematically
and purposefully to reduce their environmental impact.

The 2016 Sustainability Report, reporting on the Group’s

prioritized environmental activities and providing other
information on sustainable development, is available on the
company’s website: www.assaabloy.com.

Internal control and financial reporting
During the year, weaknesses in internal control and misstate-
ments in financial reporting were discovered for parts of the
Chinese operation in the Asia Pacific division. Work con-
tinued during the year to correct the financial reporting and
to strengthen internal control and compliance.

Transactions with related parties
No transactions occurred between ASSA ABLOY and related
parties that significantly affected the company’s financial
position and performance.

Significant events after the financial year-end
No significant events occurred after the financial year-end
and up to the date of adoption of the Annual Report for
ASSA ABLOY AB.

Outlook
Long-term outlook
ASSA ABLOY anticipates an increase in demand for security
solutions in the long term. A focus on customer value and
innovations as well as leverage on the Group’s strong posi-
tion will accelerate growth and increase profitability.

Organic sales growth is expected to continue at a good
rate. The operating margin (EBIT) and operating cash flow
are expected to develop well.

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2016

Report of the Board of Directors

Significant risks and risk management

Risk management
Uncertainty about future developments and the course of
events is a natural risk for any business. Risk-taking in itself
provides opportunities for continued economic growth, but
naturally the risks may also have a negative impact on busi-
ness operations and company goals. It is therefore essential
to have a systematic and efficient risk assessment process
and an effective risk management program in general. The
purpose of risk management at ASSA ABLOY is not to avoid
risks, but to take a controlled approach to identifying, man-
aging and minimizing the effects of these risks. This work is
based on an assessment of the probability of the risks and
their potential impact on the Group.

ASSA ABLOY is an international group with a wide geo-
graphical spread, involving exposure to various forms of stra-
tegic, operational and financial risks. Strategic risks refer to
changes in the business environment with potentially signifi-
cant effects on ASSA ABLOY’s operations and business objec-
tives. Operational risks comprise risks directly attributable
to business operations, entailing a potential impact on the
Group’s financial position and performance. Financial risks
mainly comprise financing risk, currency risk, interest rate
risk, credit risk, and risks associated with the Group’s pension
obligations.

Organization
ASSA ABLOY’s Board of Directors has overall responsibility
for risk management within the Group and determines the
Group’s strategic focus based on recommendations from
the Executive Team. In view of the decentralized structure of
the Group, and to keep risk analysis and risk management as
close as possible to the actual risks, a large proportion of
operational risk management takes place at division and
business unit levels.

Responsibility
ASSA ABLOY’s Board of Directors has overall responsibility
for the Group’s strategic direction in close consultation with
the Executive Team. Divisions and business units have overall
responsibility for management of operational risks, in accor-
dance with the Group’s decentralized approach to organiza-
tion, responsibility and authority. In the case of financial
risks, allocation of responsibilities and control of the Group’s
financing activities are regulated in a financial policy
adopted by the Board of Directors. Group Treasury then has
the main responsibility for financial risks within the frame-
work established in the financial policy, with the exception
of credit risks relating to operational business activities,
which are managed locally at company level and monitored
at division level.

Review
Strategic risks, such as competitors, brand positioning and
so on, are regularly reviewed at ASSA ABLOY AB’s board
meetings. The Group’s operational risk management is con-
tinuously monitored by the Executive Team through divi-
sional reporting and divisional board meetings. For further
information on monitoring and management of operational
risks, see page 43.

ASSA ABLOY’s Group Treasury monitors the Group’s
short and long-term financing, financial cash management,
currency risk and other financial risk management. Financial
operations are centralized in a Treasury function, which
manages most financial transactions as well as financial risks
with a Group-wide focus.

ASSA ABLOY ANNUAL REPORT 2016

REPORT OF THE BOARD OF DIRECTORS 41

Report of the Board of Directors

Significant risks and risk management

ASSA ABLOY’s risks

STRATEGIC RISKS

OPERATIONAL RISKS

FINANCIAL RISKS

Changes in the business environment with
potentially significant effects on opera-
tions and business objectives.

Risks directly attributable to business oper-
ations with a potential impact on financial
position and performance.

• Country-specific risks etc.
• Customer behavior
• Competitors
• Brand positioning
• Reputational risk

• Legal risks
• Environmental risks
• Tax risks
• Acquisition of new businesses
• Restructuring measures
• Price fluctuation and availability

of raw materials

• Credit losses
• Insurance risks
• Risks relating to internal control

Financial risks with a potential impact on
financial position and performance.

• Financing risk
• Currency risk
• Interest rate risk
• Credit risk
• Risks associated with pension

obligations

Strategic risks
The risks of this nature encountered by ASSA ABLOY include
various forms of business environment risks with an impact
on the security market in general, mainly changes in cus-
tomer behavior, competitors and brand positioning. In addi-
tion, there are country-specific risks.

Country-specific risks etc.
ASSA ABLOY has global market penetration, with sales and
production in a large number of countries. The emphasis is
on western Europe and North America, but the proportion of
sales in Asia and in central and eastern Europe has increased
in recent years. The Group is therefore naturally exposed to
both general business environment risks and country-
specific risks, including political decisions and comprehen-
sive changes in the regulatory framework.

Customer behavior
Changes in customer behavior in general and the actions of
competitors affect demand for different products and their
profitability. Customers and suppliers, including the Group’s
relationships with them, are subject to continuous local
review.

Competitors
As regards competitors, risk analyses are carried out both
centrally and locally.

Brand positioning
The Group owns a number of the strongest brands in the
industry, including several global brands that complement
the ASSA ABLOY master brand. Local product brands are
gradually being linked increasingly to the master brand.

Reputational risk
Activities to maintain and further strengthen ASSA ABLOY’s
good reputation are constantly ongoing. These include
ensuring compliance with ASSA ABLOY’s Code of Conduct
for employees as well as ASSA ABLOY’s Business Partner
Code of Conduct. These Codes define the Group’s values
with regard to business ethics, human rights and labor
standards, environment, health and safety.

Operational risks
Operational risks comprise risks directly attributable to
business operations, with a potential impact on the Group’s
financial position and performance. They include legal and
environmental risks, tax risks, acquisition of new businesses,
restructuring measures, availability and price fluctuations of
raw materials, and customer dependence. Risks relating to
compliance with laws and regulations and to internal control
and financial reporting are also included in this category.
The table on page 43 describes in more detail the

management of these risks.

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2016

ASSA ABLOY’s operational risks and risk management

Operational risks

Risk management

Comments

Legal risks

The Group continuously monitors anticipated and
implemented changes in legislation in the coun-
tries in which it operates. Ongoing and potential
disputes and other legal matters are reported regu-
larly to the Group’s central legal function.

Policies and guidelines on compliance with current
competition, export control and anti-corruption
legislation have been implemented.

At year-end 2016, there are considered to be no
outstanding legal disputes that may lead to sig-
nificant costs for the Group.

Environmental risks

Ongoing and potential environmental risks are reg-
ularly monitored in the operations. External exper-
tise is brought in for environmental assessments
when necessary.

Prioritized environmental activities and other
information on sustainable development are
reported in the Group’s Sustainability Report.

Tax risks

Ongoing and potential tax cases are regularly
reported to the Group’s central tax function.

At year-end 2016, there are considered to be no
ongoing tax cases with a significant impact on
the Group’s earnings. Two tax cases in Sweden
and Finland have been appealed to a higher
court. For further information see the Report of
the Board of Directors.

Acquisition of new businesses

Acquisitions are carried out by a number of people
with considerable acquisition experience and with
the support of, for example, legal and financial con-
sultants.

During the year ASSA ABLOY acquired 13 busi-
nesses. The Group’s acquisitions in 2016 are
reported in the Report of the Board of Directors
and in Note 30, Business combinations.

Restructuring measures

The restructuring programs
mainly entail some production
units changing direction princi-
pally to final assembly, while cer-
tain units are closed.

Price fluctuations and
availability of raw materials

Credit losses

Insurance risks

Risks relating to internal
control

Acquisitions are carried out according to a uniform
and predefined Group-wide process. This consists
of four documented phases: strategy, evaluation,
implementation and integration.

The restructuring programs are carried on as a
series of projects with stipulated activities and
schedules. The various projects in the respective
restructuring program are systematically moni-
tored on a regular basis.

Raw materials are purchased and handled primarily
at division and business unit level. Regional com-
mittees coordinate these activities with the help of
senior coordinators for selected material compo-
nents.

Trade receivables are spread across a large number
of customers in many markets. No individual cus-
tomer in the Group accounts for more than 1 per-
cent of sales.

Commercial credit risks are managed locally at
company level and monitored at division level.

A Group-wide insurance program is in place, mainly
relating to property, business interruption and lia-
bility risks. This program covers all business units.

The Group’s exposure to the risk areas listed above
is regulated by means of its own captive insurance
company.

The organization is considered to be relatively
transparent, with a clear allocation of responsibili-
ties. A well-established Controller organization at
both division and Group level monitors financial
reporting quality.

Instructions about the allocation of responsibilities,
authorization and procedures for ordering, sourc-
ing and plant management are laid down in an
internal control manual. Compliance is evaluated
annually for all operating companies, combined
with an action plan for concrete improvements.

An annual internal audit of financial reporting is
performed for selected Group companies on a
rotating basis.

At year-end 2016 a new restructuring program
entailing closure of around fifty plants and
offices was launched. The scope, costs and
savings of the restructuring programs are pre-
sented in more detail in the Report of the Board
of Directors.

For further information about procurement of
materials, see Note 7, Expenses by nature.

Receivables from each customer are relatively
small in relation to total trade receivables. The
risk of significant credit losses for the Group is
considered to be limited, but has increased
somewhat in pace with the Group’s increased
share of operations in emerging markets,
mainly with respect to China.

The Group’s insurance cover is considered to
be generally adequate, providing a reasonable
balance between assessed risk exposure and
insurance costs.

During the year a special review of both finan-
cial reporting and internal controls were made
for the Chinese operation because of misstate-
ments discovered in financial reporting. Inter-
nal control and other related issues are
reported in more detail in the Report of the
Board of Directors, section on Corporate gover-
nance.

Further information on risk management relat-
ing to financial reporting can be found in the
Report of the Board of Directors, section on
Corporate governance. See also the section
‘Basis of preparation’ in Note 1.

ASSA ABLOY ANNUAL REPORT 2016

REPORT OF THE BOARD OF DIRECTORS 43

Report of the Board of Directors

Significant risks and risk management

Financial risks
The Group’s financial risks mainly comprise financing risk,
currency risk, interest rate risk, credit risk, and risks associ-
ated with the Group’s pension obligations. A large number
of financial instruments are used to manage these risks.
Accounting principles, risk management and risk exposure
are described in more detail in Notes 1 and 34, as well as
Note 24, Post-employment employee benefits.

Financing risk
Financing risk refers to the risk that financing the Group’s
capital requirements and refinancing outstanding loans
become more difficult or more expensive. It can be reduced
by maintaining an even maturity profile for borrowing and a
solid credit rating. The risk is further reduced by substantial
unutilized confirmed credit facilities.

Currency risk
Since ASSA ABLOY sells its products in countries worldwide
and has companies in a large number of countries, the Group
is exposed to the effects of exchange rate fluctuations. These
fluctuations affect Group earnings when the income state-
ments of foreign subsidiaries are translated to Swedish kro-
nor (translation exposure), and when products are exported
and sold in countries outside the country of production
(transaction exposure). Translation exposure is primarily
related to earnings in USD and EUR. This type of exposure is
not hedged. Currency risk in the form of transaction expo-
sure, i.e. the relative values of exports and imports of goods,
is expected to increase over time due to rationalization of
production and sourcing. In accordance with financial policy,
the Group only hedged a very limited part of current cur-
rency flows in 2016. As a result, exchange rate fluctuations
had a direct impact on business operations.

Exchange rate fluctuations also affect the Group’s
debt-equity ratio and equity. The difference between the
assets and liabilities of foreign subsidiaries in the respective
foreign currency is affected by exchange rate fluctuations
and causes a translation difference, which affects the Group’s
comprehensive income. A general weakening of the Swedish
krona leads to an increase in net debt, but at the same time
increases the Group’s equity. At year-end, the largest foreign
net assets were denominated in USD and EUR.

Interest rate risk
With respect to interest rate risks, interest rate changes have
a direct impact on ASSA ABLOY’s net interest expense. The
net interest expense is also impacted by the size of the
Group’s net debt and its currency composition. Net debt was
SEK 23,127 M (22,269) at year-end 2016. Debt was mainly
denominated in USD and EUR. Group Treasury analyzes the
Group’s interest rate exposure and calculates the impact on
income of interest rate changes on a rolling 12-month basis.
In addition to raising variable-rate and fixed-rate loans, vari-
ous interest rate derivatives are used to adjust interest rate
sensitivity.

Credit risk
Credit risk arises in ordinary business activities and as a result
of financial transactions. Trade receivables are spread across
a large number of customers, which reduces credit risk.
Credit risks relating to operational business activities are
managed locally at company level and monitored at division
level.

Financial risk management exposes ASSA ABLOY to cer-
tain counterparty risks. Such exposure may arise, for exam-
ple, as a result of the placement of surplus cash, borrowings
and derivative financial instruments. Counterparty limits are
set for each financial counterparty and are continuously
monitored.

Pension obligations
At year-end 2016, ASSA ABLOY had obligations for pensions
and other post-employment benefits of SEK 8,184 M (7,421).
The Group manages pension assets valued at SEK 5,063 M
(4,660). Provisions in the balance sheet for defined benefit
and defined contribution plans and post-employment medi-
cal benefits totaled SEK 3,121 M (2,761). Changes in the
value of assets and liabilities from year to year are due partly
to the development of equity and debt capital markets and
partly to the actuarial assumptions made. Significant remea-
surement of obligations and plan assets is recognized on a
current basis in the balance sheet and in other comprehen-
sive income. The assumptions made include discount rates
and anticipated inflation and salary increases.

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2016

Solutions from ASSA ABLOY Entrance Systems have helped a building
in Stockholm gain top marks in sustainability

CUSTOMER: When creating the specifications for a new building in Stock-
holm’s city center, developer NCC set ambitious sustainability targets. The
resulting construction is one of very few buildings in the world to have ever
achieved “Outstanding” certification from the Building Research Establishment
Environmental Assessment Method (BREEAM).

CHALLENGE: To meet the requirements for BREEAM Outstanding certification,
NCC had to choose its building materials with great care, and only work with sup-
pliers that could live up to BREEAM’s high standards. NCC wanted the best pos-
sible entrance solutions for reducing energy consumption in the new building.

SOLUTION: ASSA ABLOY Entrance Systems solution consists of a high-

performance door and several sliding door systems and swing door operators,
equipped with ECO radar and safety sensors. After an analysis of the flow of
people in and out of the building, the swing door operators, which meet the
European safety standard EN16005, were set so that the door only opens wide
enough for the right number of people to pass through. The door also opens
and closes at the right moment to ensure a good user experience for the people
entering, while preventing unnecessary energy loss. Moreover, the solution
contributes to the building’s superior sustainability performance.

The Minnesota Vikings Kicked Off
2016 Season With New $1.1B
U.S. Bank Stadium

CUSTOMER: The new $1.1 billion U.S. Bank Stadium encompasses 1.5 million

square feet and 65,000 seats that will provide fans with the ultimate game
experience. The stadium was uniquely designed to protect visitors from differ-
ent weather elements, while maintaining a connection to the outdoors. Its
most striking feature is a transparent roof that covers 60% of the facility.

CHALLENGE: The project required a very compressed time line by all vendors.

The project was completed in just 30 months, six weeks ahead of schedule. In
comparison, the project of Target Field where the Minnesota Twins play, was a
project half the size, yet it took longer time to complete. With 1,500 workers on
site at the peak of construction, it was vital that ASSA ABLOY make its solutions
turnkey.

SOLUTION: A key success factor was the pre-assembly of hardware on more
than 1,000 hollow metal doors and frame openings at one of ASSA ABLOY’s fac-
tories. ASSA ABLOY’s competence to bring finished product to the site reduced
the potential for incurring damage or lost goods around the busy construction
site, where the delivery of different components would not have been beneficial.
Pre-assembly of the components allowed the team to resolve issues before

arriving at the site. The installation went almost flawlessly, which was impres-
sive due to the size of the project.

Photo © U.S. Bank Stadium

Report of the Board of Directors

Corporate governance

ASSA ABLOY is a Swedish public limited liability company
with registered office in Stockholm, Sweden, whose Series B
share is listed on the Nasdaq Stockholm.

The Group’s corporate governance is based on the
Swedish Companies Act, the Annual Accounts Act, the
Nasdaq Stockholm Rule Book for Issuers and the Swedish
Code of Corporate Governance, as well as other applicable
external laws, regulations and recommendations, and inter-
nal rules and regulations.

This Corporate Governance Report has been prepared as

part of ASSA ABLOY’s application of the Swedish Code of
Corporate Governance. The report is audited by ASSA
ABLOY’s auditor.

ASSA ABLOY’s objective is that its activities should gener-

ate good long-term returns for its shareholders and other
stakeholders. An effective scheme of corporate governance
for ASSA ABLOY can be summarized in a number of inter-
acting components, which are described below.

Shareholders
At year-end, ASSA ABLOY had 27,638 shareholders
(22,232). The principal shareholders are Invest-
ment AB Latour (9.5 percent of the share capital and 29.5
percent of the votes) and Melker Schörling AB (3.9 percent
of the share capital and 11.4 percent of the votes). Foreign
shareholders accounted for around 64 percent (64) of the
share capital and around 44 percent (44) of the votes. The
ten largest shareholders accounted for around 40 percent
(38) of the share capital and 59 percent (58) of the votes.
For further information on shareholders, see page 105.
A shareholders’ agreement exists between Gustaf
Douglas, Melker Schörling and related companies and
includes an agreement on right of first refusal if any party
disposes of Series A shares. The Board of Directors of
ASSA ABLOY is not aware of any other shareholders’
agreements or other agreements between shareholders
in ASSA ABLOY.

Corporate governance structure

7
7
8

General Meeting

Board of Directors

CEO

Executive Team

Divisions

Shareholders

3
9

5
6

Nomination Committee

Auditor

Remuneration Committee

Audit Committee

Important external rules and regulations
• Swedish Companies Act
• Annual Accounts Act
• Nasdaq Stockholm Rule Book for Issuers
• Swedish Code of Corporate Governance

(www.bolagsstyrning.se)

Important internal rules and regulations
• Articles of Association
• Board of Directors’ rules of procedure
• Financial Policy
• Accounting Manual
• Communication Policy
• Insider Policy
• Internal control procedures
• Code of Conduct and Anti-Corruption Policy

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2016

Share capital and voting rights
ASSA ABLOY’s share capital amounted at year-end to SEK
370,858,778 distributed among 57,525,969 Series A shares
and 1,055,050,365 Series B shares. The total number of votes
was 1,630,310,055. Each Series A share carries ten votes and
each Series B share one vote. All shares have a par value of
around SEK 0.33 and give shareholders equal rights to the
company’s assets and earnings.

Repurchase of own shares
Since 2010, the Board of Directors has requested and received
a mandate from the Annual General Meeting to repurchase
and transfer ASSA ABLOY Series B shares. The aim has been,
among other things, to secure the company’s undertakings
in connection with its long-term incentive programs (LTI).
The 2016 Annual General Meeting authorized the Board of
Directors to acquire, during the period until the next Annual
General Meeting, a maximum number of Series B shares so
that after each repurchase ASSA ABLOY holds a maximum
10 percent of the total number of shares in the company.

ASSA ABLOY holds a total of 1,800,000 (1,800,000) Series B

shares after repurchase. These shares account for around 0.2
percent (0.2) of the share capital and each share has a par
value of around SEK 0.33. The purchase consideration
amounted to SEK 103 M (103). No shares were repurchased
in 2016.

Share and dividend policy
ASSA ABLOY’s Series B share is listed on the Nasdaq Stockholm
Large Cap list. At year-end, ASSA ABLOY’s market capitalization
amounted to SEK 187,832 M. The Board of Directors’ objective
is that, in the long term, the dividend should be equivalent to
33–50 percent of income after standard tax, but always taking
into account ASSA ABLOY’s long-term financing requirements.

General Meeting
Shareholders’ rights to decide on the affairs of ASSA
ABLOY are exercised at the General Meeting. Share-
holders who are registered in the share register on the record
date and have duly notified their intent to attend are entitled
to take part in the General Meeting, either in person or by
proxy. Resolutions at the General Meeting are normally passed
by simple majority. For certain matters, however, the Swedish
Companies Act prescribes that a proposal should be sup-
ported by a higher majority. Individual shareholders who wish
to submit a matter for consideration at the General Meeting
can send such request to ASSA ABLOY’s Board of Directors at
a special address published on the company’s website well
before the Meeting.

The Annual General Meeting should be held within six
months of the end of the company’s financial year. Matters
considered at the Annual General Meeting include: dividend;
adoption of the income statement and balance sheet; dis-
charge of the Board of Directors and the CEO from liability;
election of members of the Board of Directors and Chairman
of the Board of Directors; election of the Nomination
Committee and auditors; and determination of remuneration
guidelines for senior management and fees for the Board of
Directors and auditors. An Extraordinary General Meeting may
be held if the Board of Directors considers this necessary or
if ASSA ABLOY’s auditors or shareholders holding at least
10 percent of the shares so request.

2016 Annual General Meeting
The Annual General Meeting in April 2016 was attended by
shareholders representing 55.9 percent of the share capital
and 70 percent of the votes.

At the Annual General Meeting, Lars Renström, Carl Douglas,
Eva Karlsson, Birgitta Klasén, Eva Lindqvist, Johan Molin, Jan
Svensson and Ulrik Svensson were re-elected as members of
the Board of Directors. Ulf Ewaldsson was elected a new mem-
ber of the Board of Directors. Further, Lars Renström was
re-elected as Chairman of the Board of Directors, and Carl
Douglas as Vice Chairman. The Annual General Meeting
re-elected PricewaterhouseCoopers AB (PwC) as the compa-
ny’s auditor up to the end of the 2017 Annual General Meeting.
The Annual General Meeting approved a dividend of SEK
2.65 per share, in accordance with the proposal of the Board
of Directors. In addition, the Annual General Meeting passed
resolutions on fees payable to the Board of Directors, remu-
neration guidelines for senior management, authorization of
the Board of Directors regarding repurchase and transfers of
own Series B shares, implementation of a long-term incentive
program for senior management and other key staff in the
Group (LTI 2016), as well as elected members of the Nomina-
tion Committee up to and including the 2017 Annual General
Meeting.

Nomination Committee
Up to and including the 2017 Annual General
Meeting, the Nomination Committee comprises

Carl Douglas (Investment AB Latour), Mikael Ekdahl (Melker
Schörling AB), Liselott Ledin (Alecta), Marianne Nilsson
(Swedbank Robur fonder) and Anders Oscarsson (AMF and
AMF fonder).Carl Douglas is Chairman of the Nomination
Committee. Carl Douglas is also Vice Chairman of ASSA
ABLOY’s Board of Directors. The Nomination Committee thus
deviates from the Swedish Code of Corporate Governance in
that the Vice Chairman of the Board of Directors is Chairman
of the Nomination Committee. The reason for this deviation is
that the Nomination Committee considers it important to
have the representative from the largest shareholder as
Chairman of the Nomination Committee.

If a shareholder represented by one of the members of the
Nomination Committee ceases to be among the major share-
holders in ASSA ABLOY, the Committee has the right to
appoint another representative of one of the major share-
holders to replace such a member. The same applies if a mem-
ber of the Nomination Committee ceases to be employed by
such a shareholder or leaves the Nomination Committee
before the 2017 Annual General Meeting.

The Nomination Committee has the task of, on behalf of
the shareholders, preparing and submitting proposals for;
election of Chairman of the Annual General Meeting, election
of Chairman, Vice Chairman and other members of the Board
of Directors, election of auditor, determination of fees to the
auditor and the Board of Directors (including distribution of
fees among the Chairman, Vice Chairman and the other mem-
bers of the Board of Directors and remuneration for commit-
tee work) as well as election of members of the Nomination
Committee and determination of the assignment of the
Nomination Committee.

Prior to the 2017 Annual General Meeting, the Nomination

Committee makes an assessment of whether the current
Board of Directors is appropriately composed and fulfills the
demands made on the Board of Directors by the company’s
present situation and future direction. The annual evaluation
of the Board of Directors and its work is part of the basis for
this assessment. The search for suitable board members is
carried on throughout the year and proposals for new board
members are based in each individual case on a profile of
requirements established by the Nomination Committee.

Shareholders wishing to submit proposals to the Nomina-

tion Committee can do so by e-mailing:
nominationcommittee@assaabloy.com.

ASSA ABLOY ANNUAL REPORT 2016

REPORT OF THE BOARD OF DIRECTORS 47

Report of the Board of Directors

Corporate governance

The Nomination Committee’s proposals for the 2017 Annual
General Meeting are published at the latest in conjunction
with the formal notification of the Annual General Meeting,
which is expected to be published around 22 March 2017.

Board of Directors
In accordance with the Swedish Companies Act, the
Board of Directors is responsible for the organization

and administration of the Group and for ensuring satisfactory
control of bookkeeping, asset management and other finan-
cial circumstances. The Board of Directors decides on the
Group’s overall objectives, strategies, significant policies,
acquisitions and divestments as well as investments of major
importance. Acquisitions and divestments with a value (on a
debt-free basis) exceeding SEK 200 M are decided by the
Board of Directors. This amount presumes that the matter
relates to acquisitions or divestments in accordance with the
strategy agreed by the Board of Directors. The Board of Direc-
tors approves the Annual Report and Interim Reports, pro-
poses dividend and remuneration guidelines for senior man-
agement to the Annual General Meeting, and makes decisions
concerning the Group’s financial structure.

The Board of Directors’ other ongoing duties include:

• appointing, evaluating and if necessary dismissing the CEO,
• approving the CEO’s significant assignments outside the

company,

• establishing appropriate guidelines to govern the com-
pany’s conduct in society with the aim of ensuring long-
term value-creating capability.

• ensuring that appropriate systems are in place for monitor-
ing and control of the company’s operations and the risks
for the company associated with its operations,

• ensuring that there is satisfactory control of the company’s
compliance with laws and other regulations relevant to the
company’s operations, and its compliance with internal
guidelines, and

• ensuring that external information provided by the com-

pany is transparent, accurate, relevant and reliable.

The Board of Directors’ rules of procedure, including instruc-
tions for the CEO and instructions relating to financial report-
ing and internal control, are updated and adopted at least
once a year.

concerning the ownership structure. The Chairman should
also, when necessary, take part in particularly important exter-
nal discussions and, in consultation with the CEO, in other
matters of particular significance. The Chairman should ensure
that the Board receives satisfactory information and docu-
mentation to enable it to conduct its work, and ensure that
Board decisions are implemented. In addition, the Chairman
should ensure that the work of the Board of Directors is evalu-
ated annually, and that new members of the Board of Directors
receive appropriate training.

The Board of Directors has at least four scheduled meetings

and one statutory meeting per year. A scheduled meeting is
always held in connection with the company’s publication of
its Year-end Report and Interim Reports. At least once a year
the Board of Directors visits one of the Group’s businesses,
combined with a board meeting. In addition, extraordinary
board meetings are held when necessary. All meetings follow
an approved agenda. Prior to each meeting, a draft agenda,
including documentation, is provided to all members of the
Board of Directors.

The Board of Directors has a Remuneration Committee and

an Audit Committee. The purpose of these Committees is to
deepen and streamline the work of the Board of Directors and
to prepare matters in these areas. The members of the Com-
mittees are appointed annually by the Board of Directors at
the statutory board meeting. Instructions for the Committees
are included in the Board of Directors’ rules of procedure.

Board of Directors’ composition
The Board of Directors is elected annually at the Annual
General Meeting for the period until the end of the next
Annual General Meeting and shall, according to the Articles of
Association, comprise a minimum of six and a maximum of ten
members elected by the Meeting. Two of the members are
appointed by the employee organizations in accordance with
Swedish law. The employee organizations also appoint two
deputies. In 2016 the Board of Directors consisted of nine
elected members and two employee representatives1. With
the exception of the CEO, none of the board members are
members of the Executive Team. The CEO has no significant
shareholdings or partnerships in companies with significant
business relationships with ASSA ABLOY.

In addition to organising and leading the work of the Board

of Directors, the Chairman’s duties include maintaining con-
tact with the CEO to continuously monitor the Group’s opera-
tions and development. The Chairman should consult the CEO
on strategic issues and represent the company in matters

Board of Directors’ work in 2016
During the year the Board of Directors held nine meetings
(seven scheduled meetings, one statutory meeting and one
extraordinary meeting). At the scheduled board meetings
the CEO reported on the Group’s performance and financial

1 Ulrik Svensson left his position as board member of ASSA ABLOY AB at year-end

2016 in connection with his resignation as CEO of Melker Schörling AB.

SUMMARY OF BOARD OF
DIRECTORS’ WORK AND
COMMITTEE MEETINGS
IN 2016

Scheduled board meeting
Year-end results
Proposed distribution of earnings
Approval Annual Report
Final audit report
Proposals to Annual General Meeting
Evaluation Executive Team
Acquisitions

Scheduled board meeting
Interim Report Q1
Acquisitions
Presentation Entrance Systems

January

February

March

April

May

June

Remuneration committee
meeting

Audit committee meeting

Extraordinary board meeting
Notice Annual General Meeting

At the scheduled board meetings the CEO also reported on the Group’s performance
and financial position, including the outlook for the coming quarters.

Audit committee meeting

Statutory board meeting
Appointment committee members
Adoption Board of Directors’ rules of procedure and significant policies
Signatory powers

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2016

position, including the outlook for the coming quarters.
Acquisitions and divestments were also discussed to the
extent they arose.

More important matters dealt with by the Board of Direc-

tors during the year comprised divestment of the car locks
business to Japanese ALPHA Corporation, as well as a number
of acquisitions, including Trojan, Lighthouse and Bluvision
During the year, the Board of Directors conducted in-depth
reviews of the Group’s operations in the Entrance Systems
division, APAC division, and Global Technologies division’s
Hospitality business unit, and visited the Americas division’s
operations in New Haven, Connecticut, in the US. The Board of
Directors’ work is summarized in the timeline on pages 48–49.
An evaluation of the Board of Directors’ work is conducted
annually in the form of a web-based survey, which each board
member responds to individually. A summary of the results is
reported to the Board of Directors at the board meeting in
November. Board members who wish can access the complete
results of the evaluation. The Secretary to the Board of Direc-
tors presents the complete results of the evaluation to the
Nomination Committee.

Remuneration Committee
In 2016 the Remuneration Committee comprised
Lars Renström (Chairman), Jan Svensson and

Ulrik Svensson.

The Remuneration Committee has the task of drawing up
remuneration guidelines for senior management, which the
Board of Directors proposes to the Annual General Meeting for
resolution. The Board of Directors’ proposal for guidelines prior
to the 2017 Annual General Meeting is set out on page 55.

The Remuneration Committee also prepares, negotiates and
evaluates matters regarding salaries, bonus, pension, severance
pay and incentive programs for the CEO and other senior execu-
tives. The Committee has no decision-making powers.

The Committee held two meetings in 2016. Its work
included preparing a proposal for the remuneration of the
Executive Team, evaluating existing incentive programs, and
preparing a proposal for a long-term incentive program for
2017. Committee meetings are minuted and a verbal report is
given at board meetings.

Audit Committee
In 2016 the Audit Committee comprised Ulrik
Svensson (Chairman), Birgitta Klasén and Jan Svensson.

The duties of the Audit Committee include continuous
monitoring and quality assurance of ASSA ABLOY’s financial
reporting. Regular communication is maintained with the
company’s auditor on matters including the focus and scope
of the audit. The Audit Committee is also responsible for
evaluating the audit assignment and informing the Board of

Directors and the Nomination Committee of the results, as
well as continuously monitoring the current risk status of legal
risks in the operations. The Audit Committee also has the task
of supporting the Nomination Committee by providing pro-
posals for the appointment of auditors and auditor fees. The
Audit Committee sets guidelines for procurement of services
other than audit services from the company’s auditor, but
other wise, the Committee has no decision-making powers.
The Audit Committee held four meetings in 2016, which
were attended by committee members, the company’s audi-
tor and representatives of senior management. More import-
ant matters dealt with by the Audit Committee during the year
included internal control, financial statements and valuation
matters, tax matters, insurance and risk management matters,
IT security, and legal risk areas. Committee meetings are
minuted and a verbal report is given at board meetings.

Remuneration of the Board of Directors
The Annual General Meeting passes a resolution on the remu-
neration to be paid to board members. The 2016 Annual
General Meeting passed a resolution on board fees at a total
of SEK 5,950,000 (excluding remuneration for committee
work) to be allocated between the members as follows:
SEK 1,850,000 to the Chairman, SEK 800,000 to the Vice
Chairman, and SEK 550,000 to each of the other members
elected by the Annual General Meeting and not employed by
the company. As remuneration for committee work, the
Chairman of the Audit Committee is to receive SEK 250,000,
the Chairman of the Remuneration Committee SEK 150,000,
members of the Audit Committee (except the Chairman)
SEK 125,000 each, and members of the Remuneration
Committee (except the Chairman) SEK 75,000 each.

The Chairman and other board members have no pension
benefits or severance pay agreements. The CEO and employee
representatives do not receive board fees. For further informa-
tion on the remuneration of board members in 2016, see
Note 33.

Attendance 2016, Board of Directors and Committees

Name
Lars Renström
Carl Douglas
Ulf Ewaldsson
Eva Karlsson
Birgitta Klasén
Eva Lindqvist
Johan Molin
Jan Svensson
Ulrik Svensson
Bert Arleros
Mats Persson

Board of
Directors
9/9
7/9
6/6
9/9
9/9
9/9
9/9
9/9
8/9
8/9
9/9

Audit
Committee

Remuneration
Committee
2/2

4/4

4/4
4/4

2/2
2/2

The maximum number of meetings varies due to appointment in 2016.

Scheduled board meeting
Interim Report Q2
Acquisitions

Scheduled board meeting
Presentation APAC
Acquisitions

Scheduled board meeting and
visit to operations
Visit Americas
Acquisitions

Scheduled board meeting
Interim Report Q3

Scheduled board meeting
Presentation Hospitality
Acquisitions

July

August

September

October

November

December

Audit committee meeting

Remuneration committee
meeting

Audit committee meeting

ASSA ABLOY ANNUAL REPORT 2016

REPORT OF THE BOARD OF DIRECTORS 49

Report of the Board of Directors – Corporate governance

Board of Directors

Elected by the 2016 Annual General Meeting

Lars Renström

Carl Douglas

Ulf Ewaldsson

Eva Karlsson

Birgitta Klasén

Eva Lindqvist

Johan Molin

Lars Renström
Chairman.
Board member since 2008.
Born 1951.
Master of Science in Engineering and Master of Science in
Business and Economics.
President and CEO of Alfa Laval AB 2004–2016. President and
CEO of Seco Tools AB 2000–2004. President and Head of Division
of Atlas Copco Rock Drilling Tools 1997–2000. Previously a
number of senior positions at ABB and Ericsson.
Other appointments: Chairman of Tetra Laval Group.
Shareholdings (including through companies and related
natural parties): 30,000 Series B shares.

Carl Douglas
Vice Chairman.
Board member since 2004.
Born 1965.
BA (Bachelor of Arts) and D. Litt (h.c.) (Doctor of Letters).
Self-employed.
Other appointments: Vice Chairman of Securitas AB. Board
member of Investment AB Latour.
Shareholdings (including through companies and related
natural parties): 41,595,729 Series A shares and 63,900,000
Series B shares through Investment AB Latour.

Ulf Ewaldsson
Board member since 2016.
Born 1965.
Master of Science in Engineering and Business Management.
Senior Vice President and Chief Technology Officer at Ericsson
Group since 2012 as well as of 2016 Head of Strategy. Various
managerial positions within the Ericsson Group since 1990,
including Head of Product Area Radio. Ulf has worked
internationally for over 11 years (China, Japan and Eastern
Europe).
Other appointments: Board member of KTH Royal Institute of
Technology and Telecom Management Forum. Various telecom
advisory assignments within EU, member of the Royal Swedish
Academy of Engineering Sciences (IVA).
Shareholdings (including through companies and related
natural parties): –

Eva Karlsson
Board member since 2015.
Born 1966.
Master of Science in Engineering.
President and CEO of Armatec AB since 2014. CEO of SKF Sverige
AB and Global Manufacturing Manager 2011–2013, Director of
Industrial Marketing & Product Development Industrial Market
AB SKF 2005–2010, various positions in the SKF Group mainly in
Manufacturing Management.
Other appointments: Board member of Bräcke diakoni.
Shareholdings (including through companies and related
natural parties): –

Birgitta Klasén
Board member since 2008.
Born 1949.
Master of Science in Engineering.
Independent IT consultant (Senior IT Advisor). CIO and Head of
Information Management at EADS (European Aeronautics
Defence and Space Company) 2004–2005. CIO and Senior Vice
President at Pharmacia 1996–2001 and previously CIO at Telia.
Various positions at IBM 1976–1994.
Other appointments: Board member of Avanza AB.
Shareholdings (including through companies and related
natural parties): 21,000 Series B shares.

Eva Lindqvist
Board member since 2008.
Born 1958.
Master of Science in Engineering and Master of Science in
Business and Economics.
Senior Vice President of Mobile Business at TeliaSonera AB
2006–2007. Previously several senior positions at TeliaSonera
AB, including President and Head of Business Operation
International Carrier, and various positions in the Ericsson Group
1981–1999.
Other appointments: Board member of companies including
Caverion Oy, Sweco AB and Bodycote plc. Member of the Royal
Swedish Academy of Engineering Sciences (IVA).
Shareholdings (including through companies and related
natural parties): 7,650 Series B shares.

Johan Molin
Board member since 2006.
Born 1959.
Master of Science in Business and Economics.
President and CEO of ASSA ABLOY AB since 2005. CEO of Nilfisk-
Advance 2001–2005. Various positions mainly in Finance and
Marketing, later divisional head in the Atlas Copco Group
1983–2001.
Other appointments: Chairman of Sandvik AB.
Shareholdings (including through companies and related
natural parties): 1,932,382 Series B shares.

Appointments and shareholdings as at 31 December 2016. This information is
updated regularly at www.assaabloy.com.

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2016

Appointed by employee organizations

Jan Svensson

Ulrik Svensson

Bert Arleros

Mats Persson

Rune Hjälm

Bjarne Johansson

Jan Svensson
Board member since 2012.
Born 1956.
Degree in Mechanical Engineering and Master of Science in
Business and Economics.
President and CEO of Investment AB Latour since 2003.
Previously CEO of AB Sigfrid Stenberg 1986–2002.
Other appointments: Chairman of AB Fagerhult, Nederman
Holding AB, Oxeon AB, Tomra Systems ASA, and Troax Group AB.
Board member of Loomis AB and Investment AB Latour.
Shareholdings (including through companies and related
natural parties): 6,000 Series B shares.

Bert Arleros
Board member since 2015.
Born 1954.
Employee representative, IF Metall.
Shareholdings (including through companies
and related natural parties): –

Mats Persson
Board member since 1994.
Born 1955.
Employee representative, IF Metall.
Shareholdings (including through companies
and related natural parties): –

Rune Hjälm
Deputy board member since 2005.
Born 1964.
Employee representative, IF Metall. Chairman
of European Works Council (EWC) in the
ASSA ABLOY Group.
Shareholdings (including through companies
and related natural parties): –

Bjarne Johansson
Deputy board member since 2015.
Born 1966.
Employee representative, IF Metall.
Shareholdings (including through companies
and related natural parties): –

Ulrik Svensson1
Board member since 2008.
Born 1961.
Master of Science in Business and Economics.
CEO of Melker Schörling AB 2006–2016. CFO of Swiss
International Airlines Ltd. 2003–2006. CFO of Esselte AB
2000–2003, and Controller/CFO of the Stenbeck Group’s
foreign telecom ventures 1992–2000.
Other appointments: Board member of AAK AB, Loomis AB,
Hexagon AB, Hexpol AB, Flughafen Zurich AG and Absolent
Group AB.
Shareholdings (including through companies and related
natural parties): 9,000 Series B shares.

Independence of the Board of Directors

Name

Position

Lars Renström
Carl Douglas
Ulf Ewaldsson
Eva Karlsson
Birgitta Klasén
Eva Lindqvist
Johan Molin
Jan Svensson
Ulrik Svensson1

Chairman
Vice Chairman
Board member
Board member
Board member
Board member
Board member, President and CEO
Board member
Board member

ASSA ABLOY’s Board of Directors fulfills the require-
ments for independence in accordance with the
Swedish Code of Corporate Governance.

Independent of the
company and its
management

Independent of the
company’s major
shareholders

Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes

Yes
No
Yes
Yes
Yes
Yes
–
No
No

The Board of Directors’ composition and shareholdings

Name

Position

Elected

Lars Renström
Carl Douglas
Ulf Ewaldsson
Eva Karlsson
Birgitta Klasén
Eva Lindqvist
Johan Molin
Jan Svensson
Ulrik Svensson1
Bert Arleros
Mats Persson
Rune Hjälm
Bjarne Johansson

Chairman
Vice Chairman
Board member
Board member
Board member
Board member
Board member, President and CEO
Board member
Board member
Board member, employee representative
Board member, employee representative
Deputy, employee representative
Deputy, employee representative

2008
2004
2016
2015
2008
2008
2006
2012
2008
2015
1994
2005
2015

Born

1951
1965
1965
1966
1949
1958
1959
1956
1961
1954
1955
1964
1966

Remuneration
Committee

Audit
Committee

Series A shares2

Series B shares2

Chairman
–
–
–
–
–
–
Board member
Board member
–
–
–
–

–
–
–
–
Board member
–
–
Board member
Chairman
–
–
–
–

–
41,595,729
–
–
–
–
–
–
–
–
–
–
–

30,000
63,900,000
–
–
21,000
7,650
1,932,382
6,000
9,000
–
–
–
–

1 Ulrik Svensson left his position as board member of ASSA ABLOY AB at year-end 2016

in connection with his resignation as CEO of Melker Schörling AB.

2 Shareholdings through companies and related natural parties.

Appointments and shareholdings as at 31 December 2016. This information is
updated regularly at www.assaabloy.com.

ASSA ABLOY ANNUAL REPORT 2016

REPORT OF THE BOARD OF DIRECTORS 51

Report of the Board of Directors – Corporate governance

Executive Team

Johan Molin

Carolina Dybeck Happe

Magnus Kagevik

Thanasis Molokotos

Johan Molin
President and CEO since 2005 and Head
of Global Technologies division since
2007.
Born 1959.
Master of Science in Business and
Economics.
Previous positions: CEO of Nilfisk-Advance
2001–2005. Various positions mainly in
Finance and Marketing, later divisional
head in the Atlas Copco Group
1983–2001.
Other appointments: Chairman of
Sandvik AB.
Shareholdings (including through
companies and related natural parties):
1,932,382 Series B shares.

Carolina Dybeck Happe
Executive Vice President and Chief
Financial Officer (CFO) since 2012.
Born 1972.
Master of Science in Business and
Economics.
Previous positions: CFO of Trelleborg AB
2011–2012. Previously various positions
in the ASSA ABLOY Group, including CFO
of ASSA ABLOY EMEA 2007–2011 and
ASSA ABLOY Central Europe 2002–2006.
Previous to that various positions in
finance at EF Education First.
Other appointments: Member of the
Supervisory Board of E.ON.
Shareholdings: 17,550 Series B shares.

Magnus Kagevik
Executive Vice President and Head of Asia
Pacific division since 2014.
Born 1967.
Master of Science in Mechanical
Engineering.
Previous positions: Various positions in
the ASSA ABLOY Group, including Head of
East Europe EMEA 2011–2014 and Vice
President Operations EMEA 2007–2011.
Previously various positions in Whirlpool
Corporation.
Shareholdings: 48,741 Series B shares.

Thanasis Molokotos
Executive Vice President and Head of
Americas division since 2004.
Born 1958.
Master of Science in Engineering.
Previous positions: President of
ASSA ABLOY Architectural Hardware
2001–2004. Previously various positions
and later President of Sargent Manu-
facturing 1993–2001.
Shareholdings: 143,571 Series B shares.

Organization
CEO and Executive Team
The Executive Team consists of the CEO, the Heads

of the Group’s divisions, the Chief Financial Officer and the
Chief Technology Officer. For a presentation of the CEO and
the other members of the Executive Team, see pages 52–53.

Divisions – decentralized organization
ASSA ABLOY’s operations are decentralized.
Operations are organizationally divided into five
divisions: EMEA, Americas, Asia Pacific, Global Technologies
and Entrance Systems. The fundamental principle is that the
divisions should be responsible, as far as possible, for busi-
ness operations, while various functions at ASSA ABLOY’s
headquarters are responsible for coordination, monitoring,
policies and guidelines at an overall level. Decentralization is
a deliberate strategic choice based on the industry’s local
nature and a conviction of the benefits of a divisional control
model. The Group’s structure results in a geographical and
strategic spread of responsibility ensuring short decision-
making paths.

ASSA ABLOY’s operating structure is designed to create
maximum transparency, to facilitate financial and opera-
tional monitoring, and to promote the flow of information
and communication across the Group. The five divisions are
divided into around 50 business units. These consist in turn
of a large number of sales and production units, depending
on the structure of the business unit concerned. Apart from
monitoring by unit, monitoring of products and markets is
also carried out.

Policies and guidelines
Significant policies and guidelines in the Group include
financial control, communication issues, insider issues, the
Group’s brands, environmental issues, business ethics and
export control. ASSA ABLOY’s financial policy and account-
ing manual provide the framework for financial control and
monitoring. The Group’s communication policy aims to
ensure that information is provided at the right time and in
compliance with applicable rules and regulations. ASSA
ABLOY has adopted an insider policy to complement appli-
cable insider legislation. This policy applies to individuals in

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2016

Christophe Sut

Ulf Södergren

Juan Vargues

Stefan Widing

Tzachi Wiesenfeld

Christophe Sut
Executive Vice President and Head of
Global Technologies business unit
ASSA ABLOY Hospitality since 2016.
Born 1973.
Master of Science in Business and
Marketing, Bachelor of Science in
Language and Mathematics.
Previous positions: Various positions in
the ASSA ABLOY Group, 2001–2010
and 2012–2014, including CTO and
Vice President Business Development
ASSA ABLOY Hospitality and Platform
Director for ASSA ABLOY AB. Niscayah
Group 2010–2012. SPIT France (ITW
group) 1999–2001 and SAM Outillage
1997–1999.
Shareholdings: 1,539 Series B shares.

Ulf Södergren
Executive Vice President and Chief
Technology Officer (CTO) since 2006.
Born 1953.
Master of Science in Engineering and
Master of Science in Business and
Economics.

Previous positions: Various positions
in the ASSA ABLOY Group, including
Regional Manager of ASSA ABLOY
Scandinavia 2003–2006 and COO and
Senior Vice President ASSA ABLOY
2000–2003. Previously various senior
positions in Electrolux 1984–2000.
Shareholdings: 112,567 Series B
shares.

Juan Vargues
Executive Vice President and Head of
Entrance Systems division since 2006.
Born 1959.
Degree in Mechanical Engineering,
MBA.
Previous positions: Various positions in
the Besam Group, including President
and CEO of Besam 2004–2005, Execu-
tive Vice President and Head of Besam
EMEA 1998–2003, and CEO of Besam
Ibérica 1992–1997. Previously various
positions in the SKF Group 1982–1991.
Shareholdings: 232,926 Series B
shares.

Stefan Widing
Executive Vice President and Head of
Global Technologies business unit HID
Global since 2015.
Born 1977.
Master of Science in Applied Physics
and Electrical Engineering and
Bachelor of Social Science in Business
Administration.
Previous positions: Various positions
in the ASSA ABLOY Group, including
Director of Product Management
and General Manager of Shared Tech-
nologies Unit 2006–2015. Previously
various positions in the Saab Group
2001–2006.
Shareholdings: 4,776 Series B shares.

Tzachi Wiesenfeld
Executive Vice President and Head of
EMEA division since 2006.
Born 1958.
Bachelor of Science in Industrial
Engineering, MBA.
Previous positions: Various positions
in the ASSA ABLOY Group, including
Market Region Manager and Managing
Director ASSA ABLOY UK 2004–2006,
and President and CEO of Mul-T-Lock
Ltd. 2000–2003. Previously various
senior positions in Mul-T-Lock
1990–2000.
Shareholdings: 20,694 Series B shares.

Appointments and shareholdings as at 31
December 2016. This information is updated
regularly at www.assaabloy.com.

leading positions at ASSA ABLOY AB (including subsidiaries)
as well as certain other categories of employees. Brand
guidelines aim to protect and develop the major assets that
the Group’s brands represent.

accountant Bo Karlsson would remain the auditor in charge.
In addition to ASSA ABLOY, Bo Karlsson, born 1966, is
responsible for auditing SKF, Scania and Investment AB
Latour.

In 2016 ASSA ABLOY’s Code of Conduct for employees
was revised and a separate ASSA ABLOY Code of Conduct for
business partners was adopted. The Codes, which are based
on a set of internationally accepted conventions, define the
values and guidelines that should apply both within the
Group and for ASSA ABLOY’s business partners with regard
to business ethics, human rights and labor standards, envi-
ronment, as well as health and safety. ASSA ABLOY has also
adopted an anti-corruption policy and an export control
policy that apply to the whole Group.

Auditor
At the 2016 Annual General Meeting, Pricewater-
houseCoopers (PwC) was re-elected as the com-

pany’s external auditor up to the end of the 2017 Annual
General Meeting. In connection with the 2016 Annual
General Meeting, PwC notified that the authorized public

PwC has been the Group’s auditor since its formation in
1994. PwC submits the audit report for ASSA ABLOY AB, the
Group and a large majority of the subsidiaries worldwide.
The audit of ASSA ABLOY AB also includes the administration
by the Board of Directors and the CEO. The auditor in charge
attends all Audit Committee meetings as well as the Febru-
ary board meeting, at which he reports his observations and
recommendations concerning the Group audit for the year.
The external audit is conducted in accordance with Inter-

national Standards in Auditing (ISA), which has been good
auditing practice in Sweden since 2011. The audit of the
financial statements for legal entities outside Sweden is
conducted in accordance with statutory requirements and
other applicable rules in each country. For information about
the fees paid to auditors and other assignments carried out
in the Group in the past three financial years, see Note 3 and
the Annual Report for 2015, Note 3.

ASSA ABLOY ANNUAL REPORT 2016

REPORT OF THE BOARD OF DIRECTORS 53

Report of the Board of Directors – Corporate governance

Internal control – financial reporting

ASSA ABLOY’s internal control process for financial reporting
is designed to provide reasonable assurance of reliable finan-
cial reporting, which is in compliance with generally
accepted accounting principles, applicable laws and regula-
tions, and other requirements for listed companies. The pro-
cess is inspired by the internal control framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).

dance with the plan annually adopted by the Audit Commit-
tee. The results of the financial evaluations are submitted to
the Audit Committee and the auditors.

In 2016 a special review of financial reporting and internal

control was conducted for parts of the Chinese operation
in the Asia Pacific division due to deficiencies discovered
in compliance and internal controls, as well as errors in
financial reporting.

Control environment
The Board of Directors is responsible for effective internal
control and has therefore established fundamental docu-
ments of significance for financial reporting. These docu-
ments include the Board of Directors’ rules of procedure
and instructions to the CEO, the Code of Conduct, financial
policy, and an annual financial evaluation plan. Regular meet-
ings are held with the Audit Committee. The Group has an
internal audit function whose primary objective is ensuring
reliable financial reporting and good internal control.

All units in the Group apply uniform accounting and

reporting instructions. Internal control guidelines have been
established and are reviewed annually for all operating com-
panies. These Group-wide guidelines have a relatively broad
scope and concern various processes such as ordering,
sourcing, financial statements, plant management, compli-
ance with various policies, legal matters, and HR matters.
The Code of Conduct was most recently reviewed and
updated in 2016, and compliance is monitored systemati-
cally in operations.

Risk assessment
Risk assessment includes identifying and evaluating the risk
of material errors in accounting and financial reporting at
Group, division and local levels. A number of previously
established documents govern the procedures to be used
for accounting, finalizing accounts, financial reporting and
review. The entire Group uses a financial reporting system
with pre-defined report templates.

Control activities
The Group’s controller and accounting organization at both
central and division levels plays a significant role in ensuring
reliable financial information. It is responsible for complete,
accurate and timely financial reporting.
A global financial internal audit function has been estab-
lished and carries out annual financial evaluations in accor-

Information and communication
Reporting and accounting manuals as well as other financial
reporting guidelines are available to all employees con-
cerned on the Group’s intranet. A regular review and analysis
of financial outcomes is carried out at both business unit and
division levels and as part of the Board of Directors’ estab-
lished operating structure. The Group also has established
procedures for external communication of financial informa-
tion, in accordance with the rules and regulations for listed
companies.

Review process
The Board of Directors and the Audit Committee evaluate
and review the Annual Report and Interim Reports prior to
publication. The Audit Committee monitors the financial
reporting and other related issues, and regularly discusses
these issues with the external auditors. All business units
report their financial results monthly in accordance with the
Group’s accounting principles. This reporting serves as the
basis for quarterly reports and a monthly legal and operating
review. Operating reviews conform to a structure in which
sales, earnings, cash flow, capital employed and other
important key figures and trends for the Group are compiled,
and form the basis for analysis and actions by management
and controllers at different levels.

Financial reviews take place quarterly at divisional board
meetings, monthly in the form of performance reviews and
through more informal analysis. Other important Group-
wide components of internal control are the annual business
planning process and monthly and quarterly forecasts.

The Group-wide internal control guidelines are reviewed

during the year in all operating companies through self-
assessments and in some cases a second opinion from exter-
nal auditors. An action plan was implemented in 2015 to
further improve basic processes with an impact on the
company’s financial position.

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2016

Report of the Board of Directors

Remuneration guidelines for
senior management

The Board of Directors’ proposal for remuneration
guidelines for senior management
The Board of Directors of ASSA ABLOY proposes that the
Annual General Meeting adopts the following guidelines for
the remuneration and other employment conditions of the
President and CEO and the other members of the ASSA
ABLOY Executive Team. The proposed guidelines below do
not involve any material change, compared with the guide-
lines adopted by the 2016 Annual General Meeting. The
basic principle is that remuneration and other employment
conditions should be in line with market conditions and
competitive. ASSA ABLOY takes into account both global
remuneration practice and practice in the home country of
each member of the Executive Team. The total remuneration
of the Executive Team should consist of basic salary, variable
components in the form of annual and long-term variable
remuneration, other benefits and pension.

The total remuneration of the Executive Team, including
previous commitments not yet due for payment, is reported
in Note 33.

Fixed and variable remuneration
The basic salary should be competitive and reflect responsi-
bility and performance. The variable part consists of remu-
neration paid partly in cash and partly in the form of shares.
The Executive Team should have the opportunity to receive
variable cash remuneration, based on the outcome in rela-
tion to financial targets and, when applicable, individual tar-
gets. This remuneration should be equivalent to a maximum
of 75 percent of the basic salary (excluding social security
costs).

In addition, the Executive Team should, within the frame-

work of the Board of Directors’ proposal for a long-term
incentive program, be able to receive variable remuneration
in the form of shares, based on the outcome in relation to a
range determined by the Board of Directors for the perfor-

mance of the company’s earnings per share in 2017. This
remuneration model also includes the right, when purchas-
ing shares under certain conditions, to receive free matching
shares from the company. This remuneration should, if the
share price is unchanged, be equivalent to a maximum of 75
percent of the basic salary (excluding social security costs).
The company’s annual cost of variable remuneration for
the Executive Team as above, assuming maximum outcome,
totals around SEK 66 M (excluding social security costs and
financing cost). This calculation is made on the basis of the
current members of the Executive Team.

Other benefits and pension
Other benefits, such as company car, extra health insurance
or occupational healthcare, should be payable to the extent
this is considered to be in line with market conditions in the
market concerned. All members of the Executive Team
should be covered by defined contribution pension plans,
for which pension premiums are allocated from the execu-
tive’s total remuneration and paid by the company during
the period of employment.

Notice and severance pay
If the CEO is given notice, the company is liable to pay the
equivalent of 24 months’ basic salary and other employment
benefits. If one of the other members of the Executive Team
is given notice, the company is liable to pay a maximum of six
months’ basic salary and other employment benefits plus an
additional 12 months’ basic salary.

Deviation from guidelines
The Board of Directors should have the right to deviate from
the remuneration guidelines for senior management
adopted by the Annual General Meeting, if there are particu-
lar reasons for doing so in an individual case.

ASSA ABLOY ANNUAL REPORT 2016

REPORT OF THE BOARD OF DIRECTORS 55

Consolidated financial statements

Sales and income

• Net sales increased by 5 percent to SEK 71,293 M (68,099). Organic growth was 2 percent (4),

while acquired growth was 3 percent (3).

• Operating income (EBIT) excluding items affecting comparability increased by 2 percent to

SEK 11,254 M (11,079), equivalent to an operating margin of 15.8 percent (16.3).

• Earnings per share after dilution and excluding items affecting comparability increased by

2 percent to SEK 7.09 (6.93).

Sales
The Group’s sales totaled SEK 71,293 M (68,099), equivalent
to an increase by 5 percent.

Change in sales

Organic growth
Acquisitions and divestments
Exchange rate effects
Total

2015

2016

4
3
13
20

2
3
0
5

The total change in sales for 2016 was 5 percent (20).
Organic growth was 2 percent (4) and acquired and divested
units made a contribution of 4 percent (3) and –1 (–).

Sales by product group
Mechanical locks, lock systems and fittings accounted for
28 percent (29) of total sales. Electromechanical and elec-
tronic locks increased to 54 percent (51) of sales, of which
entrance automation accounted for 28 percentage points
(26). Security doors and hardware accounted for 18 percent
(20) of sales.

Cost structure
Total wage costs, including social security expenses and
pension expenses, amounted to SEK 21,231 M (18,995),
equivalent to 30 percent (28) of sales. The average number
of employees was 46,928 (45,994).

The Group’s material costs amounted to SEK 26,067 M

(25,128), equivalent to 37 percent (37) of sales.

Other purchasing costs totaled SEK 12,675 M (11,588),

equivalent to 18 percent (17) of sales.

Depreciation and amortization of non-current assets
amounted to SEK 1,580 M (1,433), equivalent to 2 percent
(2) of sales.

Operating income
Operating income (EBIT) excluding items affecting compara-
bility increased by 2 percent to SEK 11,254 M (11,079),
mainly due to con tinued good growth in operations and
efficiency savings. The operating margin was 15.8 percent
(16.3). Exchange rate effects in operating income amounted
to SEK –12 M (881).

Operating income before depreciation and amortization
(EBITDA) totaled SEK 12,833 M (12,512). The corresponding
margin was 18.0 percent (18.4).

Items affecting comparability
A restructuring program was launched during the year for a
cost of SEK 1,597 M (–) before tax. The program involves the
closure of about fifty plants and offices over a three-year
period.

Income before tax
Income before tax excluding items affecting comparability
totaled SEK 10,549 M (10,382). The exchange rate effect
amounted to SEK –2 M (796). Net financial items was
SEK –705 M (–697). The profit margin, defined as income
before tax in relation to sales, was 14.8 percent (15.2).

The Parent company’s income before tax was SEK 4,191 M

(3,142). The improvement in income compared with pre-
vious years is mainly due to increased revenue from sub-
sidiaries and lower financial expenses.

Tax
The Group’s tax expense totaled SEK 2,328 M (2,689),
equivalent to an effective tax rate of 26 percent (26).

Earnings per share
Earnings per share before and after full dilution excluding
items affecting comparability amounted to SEK 7.09 (6.93),
an increase of 2 percent.

SALES AND OPERATING INCOME

SEK M

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

SEK M

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

Sales
Operating income1

1 Excluding items affecting

comparability 2013 and 2016.

CONSOLIDATED FINANCIAL STATEMENTS

ASSA ABLOY ANNUAL REPORT 2016

Consolidated financial statements

Consolidated income statement and
Statement of comprehensive income

Note

4
5
6–9, 24, 33

10
9, 11, 24

13
13

Note

Income statement, SEK M

Sales
Cost of goods sold
Gross income

Selling expenses
Administrative expenses
Research and development costs
Other operating income and expenses
Share of earnings in associates
Operating income

Financial income
Financial expenses
Income before tax

Tax on income
Net income from continuing operations

Profit from discontinued operations
Net income

Net income attributable to:
Parent company’s shareholders
Non-controlling interest

Earnings per share
Before and after dilution, SEK
Before and after dilution and excluding items affecting comparability, SEK

Statement of comprehensive income, SEK M

Net income

Other comprehensive income:
Items that will not be reclassified to profit or loss
Actuarial gain/loss on post employment benefit obligations
Deferred tax from actuarial gain/loss on post-employment benefit obligations
Total

Items that may be reclassified subsequently to profit or loss
Share of other comprehensive income of associates
Cashflow hedges
Net investment hedges
Other hedges
Exchange rate differences
Total

Total comprehensive income

Total comprehensive income attributable to:
Parent company’s shareholders
Non-controlling interest

2015

68,099
–41,704
26,395

–10,441
–3,066
–1,932
–10
134
11,079

22
–719
10,382

–2,689
7,693

–
7,693

7,693
0

6.93
6.93

2015

7,693

150
–33
117

–28
8
89
–
75
143

7,953

7,953
0

2016

71,293
–44,319
26,974

–11,543
–3,473
–2,218
–210
127
9,657

9
–714
8,952

–2,328
6,625

28
6,653

6,651
1

5.99
7.09

2016

6,653

–138
36
–102

126
7
–31
18
1,955
2,077

8,627

8,627
1

SALES BY PRODUCT GROUP, 2016

EARNINGS PER SHARE AFTER TAX AND DILUTION

Mekaniska lås, låssystem
Mechanical locks, lock systems
och tillbehör, 28% (29)
and fittings, 28% (29)
Entréautomatik, 28% (27)
Entrance automation,
Elektromekaniska och
28% (26)
elektroniska lås, 26% (23)
Electromechanical and
Säkerhetsdörrar och
electronic locks, 26% (25)
beslag, 18% (20)
Security doors and hardware,
18% (20)

SEK

Earnings per share before
Vinst per aktie efter
skatt och utspädning1
and after dilution1

1 Excluding items affecting

comparability 2013 and 2016.

ASSA ABLOY ANNUAL REPORT 2016

CONSOLIDATED FINANCIAL STATEMENTS 57

Consolidated financial statements

Comments by division

ASSA ABLOY is organized into five divisions. EMEA (Europe, Middle East and Africa) division,
Americas (North and South America) division and Asia Pacific (Asia and Pacific) division manu-
facture and sell mechanical and electromechanical locks, security doors and hardware in their
respective geographical markets. Global Technologies division operates worldwide in the product
areas of access control systems, secure card issuance, identification technology and hotel locks.
Entrance Systems division is a global supplier of entrance automation products and service.

EMEA
Sales totaled SEK 16,837 M (16,524), with organic growth of
3 percent (4). Acquired units contributed 0 percent (4) to
sales. Operating income excluding items affecting compara-
bility amounted to SEK 2,722 M (2,620), with an operating
margin (EBIT) of 16.2 percent (15.9). Return on capital
employed was 19.9 percent (20.4). Ope r ating cash flow
before interest paid was SEK 2,577 M (2,622).

Growth in Europe was good but was unevenly distributed
across the different regions. Demand for electro mechanical
solutions was very strong during the year with great success
for digital products. A continuing focus on innovation and
new products, increased marketing campaigns and stream-
lining initiatives contributed to EMEA’s good growth and
high operating margin.

Global Technologies
Sales totaled SEK 9,697 M (9,100), with organic growth of
3 percent (7). Acquired units contributed 3 percent (2) to
sales. Operating income excluding items affecting compara-
bility amounted to SEK 1,752 M (1,647), with an operating
margin (EBIT) of 18.1 percent (18.1). Return on capital
employed was 16.6 percent (18.8). Ope rating cash flow
before interest paid was SEK 1,724 M (1,557).

Growth was generally good for Europe and the US, but the

trend for emerging markets was mixed. Strong growth was
seen in Access management and Identification technology
for the HID Global business unit. ASSA ABLOY Hospitality
showed growth and good profitability, driven by continued
increased demand for door opening solutions with digital
and mobile technology.

Americas
Sales totaled SEK 17,044 M (15,665), with organic growth of
5 percent (7). Acquired units contributed 3 percent (2) to
sales. Operating income excluding items affecting compara-
bility amounted to SEK 3,640 M (3,363), with an operating
margin (EBIT) of 21.4 percent (21.5). Return on capital
employed was 25.0 percent (24.1). Operating cash flow
before interest paid was SEK 3,447 M (3,217).

Growth was good in the US and South America, with the
exception of Brazil. The trend was positive in the important
commercial and institutional customer segments in the US,
in part due to the high pace of innovation and new product
launches. Stronger demand for digital door opening solu-
tions and increased sustainability represent a clear trend.
Profitability remained good due to strong growth in key
customer segments and continuous rationalizations.

Asia Pacific
Sales totaled SEK 9,189 M (10,171), with organic growth of
–9 percent (–3). Acquired units contributed 1 percent (9) to
sales. Operating income excluding items affecting compara-
bility amounted to SEK 787 M (1,436), with an operating
margin (EBIT) of 8.6 percent (14.1). Impairment of operating
assets and the reversal of deferred acquisition payments
affected operating income by a total of SEK –300 M. Return on
capital employed was 6.6 percent (12.6). Ope rating cash flow
before interest paid was SEK 1,564 M (1,235).

Demand remained weak in China during the year, espe-
cially regarding the residential segment. Growth was seen in
the majority of the rest of Asia and was stable in the Pacific.
The operating margin decreased during the year because of
weak sales and impairment losses, but the effect was offset by
continued streamlining initiatives and improved efficiency.

Entrance Systems
Sales totaled SEK 19,789 M (17,957), with organic growth of
4 percent (5). Acquired units contributed 6 percent (1) to
sales. Operating income excluding items affecting compara-
bility amounted to SEK 2,753 M (2,436), with an operating
margin (EBIT) of 13.9 percent (13.6). Return on capital
employed was 15.7 percent (14.9). Ope rating cash flow
before interest paid was SEK 2,713 M (2,637).

All market segments in North America reported strong

growth. Growth in North and Central Europe was strong,
though generally weaker in the emerging markets. New
product launches, a strong service offering and consolida-
tion of the production structure were strong contributing
factors to the trend of continued strong growth, cash flow
and increasing operating margins.

Other
The costs of Group-wide functions, such as corporate man-
agement, accounting and finance, supply management and
Group-wide product development, totaled SEK 401 M (422).
Elimination of sales between the Group’s segments is
included in ‘Other’.

EXTERNAL SALES, 2016

Legend
EMEA, 23% (24)
Legend
Americas, 24% (23)
Legend
Asia Pacific, 12% (14)
Legend
Global Technologies, 13% (13)
Legend
Entrance Systems, 28% (26)

CONSOLIDATED FINANCIAL STATEMENTS

ASSA ABLOY ANNUAL REPORT 2016

Operating income (EBIT) excluding
items affecting comparability
Operating margin (EBIT) excluding items
affecting comparability

Operating income (EBIT)
Operating margin (EBIT)
Net financial items
Tax on income
Profit from discontinued operations
Net income

Capital employed
– of which goodwill
– of which other intangible assets and

property, plant and equipment
– of which investments in associates
Return on capital employed excluding
items affecting comparability

Operating income (EBIT)
Restructuring costs
Depreciation and amortization
Investments in property, plant and
equipment and intangible assets
Sales of property, plant and equipment
and intangible assets
Change in working capital
Cash flow 2

Non-cash items
Interest paid and received
Operating cash flow2

Consolidated financial statements

Results by division

EMEA

Americas

Asia Pacific

Global
Technologies

Entrance
Systems

Other

Total

SEK M

Sales, external
Sales, internal

Sales

2015

2016

2015

2016

16,220 16,535 15,588 16,963
81

302

304

2015

9,401
770

2016

8,491
698

2015

9,031
69

2016

2015

2016

2015

2016

2015

2016

9,619 17,858 19,685

0
0
104 –1,3173 –1,2623

68,099 71,293
–

–

16,524 16,837 15,665 17,044 10,171

9,189

9,100

9,697 17,957 19,789 –1,317 –1,262 68,099 71,293

Organic growth
Share of earnings in associates

4%
–

3%
–

7%
–

5%
–

–3%
16

–9%
23

7%
–

3%
–

5%
118

4%
104

–
–

4%
134

2%
127

2,620

2,722

3,363

3,640

1,436

787

1,647

1,752

2,436

2,753

–422

–401 11,079 11,254

Items affecting comparability1

–

–781

–

–34

–

–258

–

–148

–

–207

15.9%

16.2%

21.5%

21.4%

14.1%

8.6%

18.1%

13.6%

13.9%

2,620
15.9%

1,942
11.5%

3,363
21.5%

3,606
21.2%

1,436
14.1%

529
5.8%

1,647
18.1%

1,603
16.5%

2,436
13.6%

2,546
12.9%

–422
–

–

16.3%

15.8%

–168

–

–1,597

–

–569 11,079
16.3%
–697
–2,689
–
7,693

9,657
13.5%
–705
–2,328
28
6,653

12,916 13,275 13,908 15,749 11,689 11,803
7,920
9,903 11,012

7,857

8,348

7,690

9,815 11,331 16,030 18,291
9,891 11,480
7,437

8,784

3,210
8

3,296
9

3,184
0

3,516
–

3,908
452

3,900
496

2,300
–

2,499
–

3,939
1,450

4,282
1,605

–509
–

107
–

–98
–

63,848 70,351
42,777 47,544

125
–

16,649 17,618
2,109

1,910

20.4%

19.9%

24.1%

25.0%

12.6%

6.6%

18.8%

16.6%

14.9%

15.7%

–

17.8%

16.5%

2,620
–
398

1,942
781
402

3,363
–
300

3,606
34
330

1,436
–
268

529
258
283

1,647
–
232

1,603
148
296

2,436
–
231

2,546
207
257

–422
–
4

–569
168
11

11,079
–
1,433

9,657
1,597
1,580

–555

–480

–346

–385

–251

–221

–219

–239

–161

–222

–24

–28

–1,555

–1,575

206
–47
2,622

8
–75
2,577

21
–120
3,217

13
–152
3,447

13
–231
1,235

9
705
1,564

8
–110
1,557

1
–86
1,724

67
63
2,637

65
–141
2,713

–
–57
–499

–269
–548

97
314
0
62
–502
–188
–607 10,770 11,418

–354
–597

–354
–269
–548
–597
9,952 10,467

Average number of employees

10,886 10,835

7,957

8,961 13,651 12,481

3,583

3,907

9,686 10,505

231

240

45,994 46,928

1 Items affecting comparability consist of restructuring costs.
2 Excluding restructuring payments.
3 Of which eliminations SEK –1,262 M (–1,317).

The segments have been determined on the basis of report-
ing to the CEO, who monitors the overall performance and
makes decisions on resource allocation.

The breakdown of sales is based on customer sales in the
respective country. Sales between segments are carried out
at arm’s length.

The different segments generate their revenue from the
manufacture and the sale of mechanical, electromechanical
and electronic locks, lock systems and fittings, and security
doors and hardware.

For further information on sales, see Note 2.

OPERATING INCOME, 20161, 2

AVERAGE NUMBER OF EMPLOYEES, 2016

Legend
EMEA, 23% (23)
Legend
Americas, 31% (29)
Legend
Asia Pacific, 7% (13)
Legend
Global Technologies, 15% (14)
Legend
Entrance Systems, 24% (21)

1 “Other” is not included in the calcu-
lation. See section Comments by
division for what is included in
“Other”.

2 Excluding items affecting compar-

ability.

Legend
EMEA, 23% (24)
Legend
Americas, 19% (17)
Legend
Asia Pacific, 27% (30)
Legend
Global Technologies, 8% (8)
Legend
Entrance Systems, 22% (21)

ASSA ABLOY ANNUAL REPORT 2016

CONSOLIDATED FINANCIAL STATEMENTS 59

Consolidated financial statements

Financial position

• Capital employed amounted to SEK 70,351 M (63,848).

• Return on capital employed remained high at 16.5 percent (17.8).

• The net debt/equity ratio was 0.49 (0.54).

SEK M

Capital employed
– of which goodwill
Net debt
Equity
– of which non-controlling interests

2015

63,848
42,777
22,269
41,579
4

2016

70,351
47,544
23,127
47,224
5

Capital employed
Capital employed in the Group, defined as total assets less
interest-bearing assets and non-interest-bearing liabilities
including deferred tax liabilities, amounted to SEK 70,351 M
(63,848). The return on capital employed excluding items
affecting comparability was 16.5 percent (17.8).

Intangible assets amounted to SEK 57,096 M (51,863).
The increase is mainly due to the effects of completed acqui-
sitions. During the year, goodwill and other intangible assets
with an indefinite useful life have arisen to a preliminary
value of SEK 2,451 M as a result of completed acquisitions
and adjustments of acquisitions made in previous years.
A valuation model, based on discounted future cash flows, is
used for impairment testing of goodwill and other intangible
assets with an indefinite useful life.

Property, plant and equipment amounted to SEK 8,066 M

(7,562). Capital expenditure on property, plant and equip-
ment and intangible assets, less sales of property, plant and
equipment and intangible assets, totaled SEK 1,478 M
(1,241). Depreciation and amortization amounted to
SEK 1,580 M (1,433).

Trade receivables amounted to SEK 12,648 M (11,775)
and inventories totaled SEK 9,565 M (8,348). The average
collection period for trade receivables was 56 days (56).
Material throughput time was 95 days (90). The Group is
making systematic efforts to increase capital efficiency.

Net debt
Net debt amounted to SEK 23,127 M (22,269), of which pen-
sion commitments and other post-employment benefits
accounted for SEK 3,121 M (2,761).

Net debt was increased by acquisitions, exchange rate
effects and the dividend to shareholders during the year,
while it was reduced by a continued strong positive operat-
ing cash flow. Over the whole period net debt changed
marginally although it fluctuated during the year.

External financing
The Group’s long-term loan financing mainly consists of a
Private Placement Program in the US totaling USD 542 M, of
which USD 442 M (542) is long-term, a GMTN program of
SEK 9,915 M (9,111), of which SEK 8,524 M (7,886) is long-
term, as well as loans from financial institutions such as the
European Investment Bank (EIB) of EUR 73 M (92) and
USD 154 M (0) and the Nordic Investment Bank of
EUR 110 M (110). During the year, four new issues were
made under the GMTN program for a total amount of
SEK 1,635 M. In addition, a new loan was obtained from the
EIB for USD 154 M. Other changes in long-term loans are
mainly due to some of the originally long-term loans now
having less than 1 year to maturity. The size of the loans has
also increased by currency fluctuations, in particular the
strengthening of the USD against SEK. A total of SEK 2,876 M
was raised in new long-term loans, while SEK 2,223 M in
originally long-term loans matured during the year.

The Group’s short-term loan financing mainly consists of

two Commercial Paper Programs for a maximum
USD 1,000 M (1,000) and SEK 5,000 M (5,000) respectively.
At year-end, SEK 455 M (1,240) of the Commercial Paper
Programs had been utilized. In addition, substantial credit
facilities are available, mainly in the form of a Multi-Currency
Revolving Credit Facility of EUR 900 M (900), which was
wholly unutilized at year-end. The interest coverage ratio,
defined as income before tax plus net interest, divided by net
interest, was 14.1 (16.7). Fixed interest terms increased
during the year, with an average term of 28 months (26) at
year-end.

Cash and cash equivalents amounted to SEK 750 M (501)

and are invested in banks with high credit ratings.

Some of the Group’s main financing agreements contain

a customary Change of Control clause. This clause means
that lenders have the right in certain circumstances to
demand the renegotiation of conditions or to terminate the
agreements should control of the company change.

Equity
The Group’s equity totaled SEK 47,224 M (41,579) at year-
end. The return on equity was 15.0 percent (19.8). The
equity ratio was 49.6 percent (48.2). The debt/equity ratio,
defined as net debt divided by equity, was 0.49 (0.54).

NET DEBT

CAPITAL EMPLOYED AND RETURN ON CAPITAL EMPLOYED

SEK M

25,000

20,000

15,000

10,000

5,000

Nettoskuldsättning
Net debt
Nettoskuldsättning/
Net debt/equity
Eget kapital

1.0

0.8

0.6

0.4

0.2

0.0

SEK M

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

Sysselsatt kapital
Capital employed
Avkastning på
Return on capital employed1
sysselsatt kapital1

1 Excluding items affecting

comparability 2013 and 2016.

CONSOLIDATED FINANCIAL STATEMENTS

ASSA ABLOY ANNUAL REPORT 2016

Consolidated financial statements

Consolidated balance sheet

SEK M

ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Investments in associates
Other financial assets
Deferred tax assets
Total non-current assets

Current assets
Inventories
Trade receivables
Current tax receivables
Other current receivables
Prepaid expenses and accrued income
Derivative financial instruments
Short-term investments
Cash and cash equivalents
Total current assets
TOTAL ASSETS

EQUITY AND LIABILITIES
Equity
Parent company's shareholders
Share capital
Other contributed capital
Reserves
Retained earnings
Equity attributable to Parent company’s shareholders
Non-controlling interest
Total equity

Non-current liabilities
Long-term loans
Deferred tax liabilities
Pension provisions
Other non-current provisions
Other non-current liabilities
Total non-current liabilities

Current liabilities
Short-term loans
Derivative financial instruments
Trade payables
Current tax liabilities
Current provisions
Other current liabilities
Accrued expenses and deferred income
Total current liabilities
TOTAL EQUITY AND LIABILITIES

Note

2015

2016

14
15
17
19
18

20
21

34
34
34

34
18
24
25

34
34

25
26
27

51,863
7,562
1,910
77
1,434
62,847

8,348
11,775
416
1,139
970
148
34
501
23,330
86,177

371
9,675
2,642
28,888
41,575
4
41,579

15,568
2,031
2,761
1,717
2,089
24,166

4,574
80
6,553
1,145
607
2,847
4,626
20,432
86,177

57,096
8,066
2,109
86
1,899
69,257

9,565
12,648
497
1,273
1,123
167
2
750
26,025
95,282

371
9,675
2,540
34,634
47,220
5
47,224

16,901
2,344
3,121
1,945
1,634
25,945

3,929
137
7,443
1,142
797
3,190
5,474
22,112
95,282

ASSA ABLOY ANNUAL REPORT 2016

CONSOLIDATED FINANCIAL STATEMENTS 61

Consolidated financial statements

Cash flow

• Operating cash flow remained strong and amounted to SEK 10,467 M (9,952).

• Net capital expenditure totaled SEK 1,478 M (1,241).

Relationship between cash flow from operating activities
and operating cash flow

SEK M

Cash flow from operating activities
Restructuring payments
Net capital expenditure
Reversal of tax paid
Operating cash flow

2015

8,572
375
–1,241
2,247
9,952

2016

8,575
442
–1,478
2,928
10,467

Investments in subsidiaries
The total purchase price of investments in subsidiaries
amounted to SEK 2,866 M (3,835), of which the cash flow
effect was SEK 2,640 M (3,171). Acquired cash and cash
equivalents totaled SEK 263 M (155).

Change in net debt
Net debt was mainly affected by the strong positive operat-
ing cash flow, the dividend to shareholders, acquisitions and
exchange rate differences.

SEK M

Net debt at 1 January
Operating cash flow
Restructuring payments
Tax paid
Acquisitions/Disposals
Dividend
Actuarial gain/loss on post-employment
benefit obligations
Exchange rate differences and others
Net debt at 31 December

2015

22,327
–9,952
375
2,247
4,161
2,407

–150
855
22,269

2016

22,269
–10,467
442
2,928
3,037
2,944

138
1,836
23,127

Operating cash flow

SEK M

Operating income (EBIT)
Restructuring costs
Depreciation and amortization
Net capital expenditure
Change in working capital
Interest paid and received
Non-cash items
Operating cash flow1

Operating cash flow/
Income before tax

1 Excluding restructuring payments.
2 Excluding restructuring costs.

2015

11,079
–
1,433
–1,241
–502
–548
–269
9,952

2016

9,657
1,597
1,580
–1,478
62
–597
–354
10,467

0.96

0.992

The Group’s operating cash flow amounted to SEK 10,467 M
(9,952), equivalent to 99 percent (96) of income before tax
excluding restructuring costs.

Net capital expenditure
Net capital expenditure on intangible assets and property,
plant and equipment totaled SEK 1,478 M (1,241), equiva-
lent to 94 percent (87) of amortization and depreciation on
intangible assets and property, plant and equipment. Net
capital expenditure was higher than the previous year mainly
because 2015 net capital expenditure included the purchase
price received for the sale of properties of SEK 176 M.

Change in working capital

SEK M

Inventories
Trade receivables
Trade payables
Other working capital
Change in working capital

2015

–147
–713
549
–189
–502

2016

–551
–61
461
213
62

The material throughput time was 95 days (90) at year-end.
Capital tied up in working capital decreased somewhat
during the year, which had an impact on cash flow of SEK 62 M
(–502) overall.

INCOME BEFORE TAX AND OPERATING CASH FLOW

CAPITAL EXPENDITURE

SEK M

12,000

10,000

8,000

6,000

4,000

2,000

Resultat före skatt1
Income before tax1
Operativt kassaflöde2
Operating cash flow2

1 Excluding items affecting

comparability 2013 and 2016.

2 Excluding restructuring payments.

Nettoinvesteringar
Net capital expenditure
Avskrivningar
Amortization and depreciation
Nettoinvesteringar
Net capital expenditure
i % av omsättningen
% of sales

SEK M

1,750

1,500

1,250

1,000

750

500

250

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

CONSOLIDATED FINANCIAL STATEMENTS

ASSA ABLOY ANNUAL REPORT 2016

Consolidated financial statements

Consolidated cash flow statement

SEK M

OPERATING ACTIVITIES
Operating income
Depreciation and amortization
Reversal of restructuring costs
Restructuring payments
Other non-cash items
Cash flow before interest and tax

Interest paid
Interest received
Tax paid on income
Cash flow before changes in working capital

Changes in working capital
Cash flow from operating activities

INVESTING ACTIVITIES
Investments in property, plant and equipment and intangible assets
Sales of property, plant and equipment and intangible assets
Investments in subsidiaries
Investments in associates
Disposals of subsidiaries
Other investments
Cash flow from investing activities

FINANCING ACTIVITES
Dividends
Long-term loans raised
Long-term loans repaid
Purchase of shares in subsidiaries from non-controlling interest
Stock purchase plans
Net cash effect of changes in other borrowings
Cash flow from financing activities
CASH FLOW

CASH AND CASH EQUIVALENTS
Cash and cash equivalents at 1 January
Cash flow
Effect of exchange rate differences
Cash and cash equivalents at 31 December

Note

2015

2016

14, 15
14, 15
30

11,079
1,433
–
–375
–269
11,869

–574
25
–2,247
9,073

–502
8,572

–1,555
314
–3,171
–1
–
0
–4,412

–2,407
2,092
–2,425
–990
–121
–484
–4,335
–175

667
–175
9
501

9,657
1,580
1,597
–442
–354
12,037

–613
16
–2,928
8,512

62
8,575

–1,575
97
–2,640
–1
55
0
–4,063

–2,944
2,876
–2,223
–40
–80
–1,859
–4,271
240

501
240
9
750

ASSA ABLOY ANNUAL REPORT 2016

CONSOLIDATED FINANCIAL STATEMENTS 63

Consolidated financial statements

Changes in consolidated equity

MSEK

Opening balance 1 January 2015
Net income
Other comprehensive income
Total comprehensive income
Dividend for 2014
Stock purchase plans
Total contributions by and distributions
to Parent company’s shareholders
Change in non-controlling interest
Total transactions with Parent company’s
shareholders
Closing balance 31 December 2015

Opening balance 1 January 2016
Net income
Other comprehensive income
Total comprehensive income
Dividend for 2015
Stock purchase plans
Total contributions by and distributions
to Parent company’s shareholders
Change in non-controlling interest
Total transactions with Parent company’s
shareholders
Closing balance 31 December 2016

Parent company’s shareholders

Share
capital

371

Other
contributed
capital

9,675

Reserves

2,498

144
144

Note

371

9,675

2,642

371

9,675

2,642

–102
–102

371

9,675

2,540

Retained
earnings

Non-
controlling
interest

23,553
7,693
117
7,810
–2,407
–82

–2,489
15

–2,474
28,888

28,888
6,651
2,077
8,729
–2,944
–39

–2,982
–

–2,982
34,634

2
0
0
0
–
–

–
1

1
4

4
1
0
1
–
–

–
–

–
5

Total

36,098
7,693
260
7,953
–2,407
–82

–2,489
17

–2,472
41,579

41,579
6,653
1,975
8,627
–2,944
–39

–2,982
–

–2,982
47,224

EQUITY PER SHARE AFTER DILUTION AND
RETURN ON EQUITY AFTER TAX

DIVIDEND

SEK

Eget kapital per aktie
efter utspädning, SEK

Equity per share after
dilution, SEK
Avkastning på eget
kapital efter skatt, %

Return on equity after tax, %

SEK

Utdelning per aktie
Dividend per share
Vinst per aktie efter
Earnings per share after tax
utspädning1
and dilution1

1 Excluding items affecting com-
parability 2013 and 2016.

CONSOLIDATED FINANCIAL STATEMENTS

ASSA ABLOY ANNUAL REPORT 2016

Securing top aviation hub in China

0.2 million passenger aircraft and half a million
cargo jets will travel to the airport annually.

SOLUTION: ASSA ABLOY China’s complete,

optimized, flexible, cost-efficient security solution
impressed the customers and the architects (China
Northeast Architectural Design and Research Insti-
tute – particularly given the current economic situ-
ation in China and the durability requirements). We
offered a mix of ANSI (US) and EN (European) stan-
dard products, The customer was equally satisfied
with our team’s responsive communication efforts.
Some 2,000 fire and steel doors and 4,000 sets of

hardware secure the terminals, with 49 2.8m-high
super-size ASSA ABLOY branded fire doors for the
huge entranceways. Products include Yale ANSI
standard locksets, door closers and exit devices,
and Doormax EN standard floor springs and door
accessories. The project will promote the use of our
high-end brands for other significant commercial
projects.

CUSTOMER: Zhengzhou Xinzheng International

Airport, owned by the Henan Airport Group, will
become China’s second-largest integrated trans-
port hub and will be serving Zhengzhou the capital
of Henan province.

CHALLENGE: The goal was to devise a compre-
hensive door-opening solution for a project that
includes the construction of two more terminals
and two more runways by 2020. The passenger flow
is expected to rise to 29 million travelers per year,

Saint-Gobain & CertainTeed’s new state-of-the-art headquarters
in North America earns LEED 2009 Platinum certification
by utilizing sustainable products

CUSTOMER: Saint-Gobain, a French company
which prides itself as “the reference in sustainable
habitat,” remains eager to partner with other inter-
national companies which have also identified
sustainability as a priority. This emphasis came into
particular focus as Saint-Gobain spent several years
planning its new headquarters for North America,
a building which would house 800 employees of
Saint-Gobain and one of its subsidiaries, CertainTeed.

CHALLENGE: The previous North American head-
quarters for Saint-Gobain was a structure suffering
from “sick building syndrome” at the same time as
the company was selling its customers on leading
edge construction materials designed to make their
buildings healthier for employees. The new facility
was also targeted for a 2015 opening as part of
Saint-Gobain’s 350th anniversary – and was
intended to reinforce the company commitment
to sustainability.

SOLUTION: ASSA ABLOY collaborated with Saint-

Gobain to provide six distinct door opening solu-
tions, each of which had obtained an Environmental
Product Declaration (EPD) for sustainability.
Because the ASSA ABLOY Group provides such a
wide range of products, it was able to combine
them to provide the project with complete and
integrated door opening solutions. Using the ASSA
ABLOY products, along with 15 other permanent
building products from multiple companies, Saint-
Gobain was able to meet and even surpass the
requirements for LEED 2009 Platinum certification.

Photo © Jeffrey Totaro, 2015

Parent company financial statements

Income statement
– Parent company

SEK M

Administrative expenses
Research and development costs
Other operating income and expenses
Operating income

Financial income
Financial expenses
Income before appropriations and tax

Appropriations – Group contributions
Tax on income
Net income

Statement of
comprehensive income
– Parent company

SEK M

Net income

Other comprehensive income
Changes in value of financial instruments
Total comprehensive income

Balance sheet
– Parent company

SEK M

ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Shares in subsidiaries
Other financial assets
Total non-current assets

Current assets
Receivables from subsidiaries
Other current receivables
Prepaid expenses and accrued income
Cash and cash equivalents
Total current assets
TOTAL ASSETS

EQUITY AND LIABILITIES
Equity
Restricted equity
Share capital
Revaluation reserve
Statutory reserve
Non-restricted equity
Share premium reserve
Retained earnings incl. net income for the year
Total equity

Non-current liabilities
Long-term loans
Other non-current liabilities
Total non-current liabilities

Current liabilities
Short-term loans
Trade payables
Current liabilities to subsidiaries
Current tax liabilities
Other current liabilities
Accrued expenses and deferred income
Total current liabilities
TOTAL EQUITY AND LIABILITIES

Note

3, 6, 8, 9
6, 8, 9
4
9, 33

10
9, 11

2015

–1,312
–729
3,392
1,351

1,691
–849
2,193

949
–416
2,725

2015

2,725

273
2,998

2016

–1,464
–872
4,023
1,687

1,697
–433
2,952

1,240
–573
3,619

2016

3,619

–
3,619

Note

2015

2016

14
15
16
19

657
5
32,855
1,621
35,138

9,371
11
28
0
9,410
44,548

371
275
8,905

787
10,215
20,553

8,153
–
8,153

1,224
77
14,141
108
4
288
15,842
44,548

408
30
33,611
1,621
35,670

10,329
44
175
0
10,548
46,218

371
275
8,905

787
10,852
21,190

8,786
108
8,894

1,404
91
14,144
170
5
319
16,134
46,218

PARENT COMPANY FINANCIAL STATEMENTS

ASSA ABLOY ANNUAL REPORT 2016

Cash flow statement
– Parent company

Note

SEK M

OPERATING ACTIVITIES
Operating income
Depreciation and amortization
Cash flow before interest and tax

Interest paid and received
Dividends received
Tax paid and received
Cash flow before changes in working capital

Changes in working capital
Cash flow from operating activities

INVESTING ACTIVITIES
Investments in property, plant and equipment and intangible assets
Investments in subsidiaries
Other investments
Cash flow from investing activities

Change in equity
– Parent company

FINANCING ACTIVITIES
Dividends
Loans raised
Loans repaid
Cash flow from financing activities
CASH FLOW

CASH AND CASH EQUIVALENTS
Cash and cash equivalents at 1 January
Cash flow
Cash and cash equivalents at 31 December

SEK M

Opening balance 1 January 2015
Net income
Hedge accounting
Total comprehensive income
Dividend for 2014
Stock purchase plans
Total transactions with Parent company’s
shareholders
Closing balance 31 December 2015

Opening balance 1 January 2016
Net income
Hedge accounting
Total comprehensive income
Dividend for 2015
Stock purchase plans
Total transactions with Parent company’s
shareholders
Closing balance 31 December 2016

Restricted equity

Non-restricted equity

Share
capital

Revalu ation
reserve

Statutory
reserve

Fair value
reserve

371

275

8,905

–273

Share
premium
reserve

787

Retained
earnings

9,979
2,725

273
273

–

–
–

2,725
–2,407
–82

–2,489
10,215

10,215
3,619

3,619
–2,944
–39

–2,982
10,852

787

371

275

8,905

371

275

8,905

371

275

8,905

2015

1,351
442
1,793

–262
1,583
–391
2,723

–2,435
288

–41
–109
–1
–151

–2,407
4,434
–2,164
–137
0

0
0
0

2016

1,687
448
2,135

–279
1,601
–541
2,916

–263
2,653

–203
–669
–1
–873

–2,944
2,637
–1,473
–1,780
0

0
0
0

Total

20,044
2,725
273
2,998
–2,407
–82

–2,489
20,553

20,553
3,619
–
3,619
–2,944
–39

–2,982
21,190

ASSA ABLOY ANNUAL REPORT 2016

PARENT COMPANY FINANCIAL STATEMENTS 67

Notes

Note 1 Significant accounting and
valuation principles

The Group
ASSA ABLOY applies International Financial Reporting
Standards (IFRS) as endorsed by the European Union (EU), the
Swedish Annual Accounts Act and the Swedish Financial
Reporting Board’s RFR 1 Supplementary Accounting Rules for
Corporate Groups. The accounting principles are based on
IFRS as endorsed by 31 December 2016 and have been applied
to all years presented, unless stated otherwise. This Note
describes the most significant accounting principles that have
been applied in the preparation of the financial statements,
which comprise the information provided on pages 39–98.

Basis of preparation
ASSA ABLOY’s consolidated financial statements have been
prepared in accordance with IFRS as endorsed by the EU. The
consolidated financial statements have been prepared in
accordance with the cost method, except for financial assets
and liabilities (including derivatives) measured at fair value
through profit or loss and available-for-sale financial assets.

Totals quoted in tables and statements may not always be
the exact sum of the indivudual items because of rounding dif-
ferences. The aim is that each line item should correspond to
its source, and rounding differences may therefore arise.

Key estimates and assessments for accounting purposes
The preparation of financial statements requires estimates
and assessments to be made for accounting purposes. The
management also makes assessments when applying the
Group’s accounting principles. Estimates and assessments
may affect the income statement and balance sheet as well
as the supplementary information provided in the financial
statements. Consequently changes in estimates and assess-
ments may lead to changes in the financial statements.

Estimates and assessments play an important part in the
measurement of items such as identifiable assets and liabili-
ties in acquisitions, in impairment testing of goodwill and
other assets, in determining actuarial assumptions for cal-
culating employee benefits, as well as in the valutation of
deferred taxes. Estimates and assessments are continually
evaluated and are based on both historical experience and
reasonable expectations about the future.

The Group considers that estimates and assessments relat-

ing to impairment testing of goodwill and other intangible
assets with indefinite useful life are of material importance to
the consolidated financial statements. The Group tests carry-
ing amounts for impairment on an annual basis. The recover-
able amounts of cash generating units are determined by
calculating their values in use. The calculations are based on
certain assumptions about the future which, for the Group, are
associated with the risk of material adjustments in carrying
amounts during the next financial year. Material assumptions
and the effects of reasonable changes in them are described in
Note 14.

The actuarial assumptions made when calculating
post-employment employee benefits also have material
importance for the consolidated financial statements. For
information on these actuarial assumptions, see Note 24.

New and revised standards applied by the Group
None of the standards and interpretations to be applied
for the first time for the financial year beginning 1 January
2016 had a significant impact on the consolidated financial
statements.

New and revised IFRS not yet effective
The following IFRS have been published but are not yet
effective, and have not been applied in the preparation of
the financial statements.
• IFRS 9 Financial Instruments
• IFRS 15 Revenue from Contract with Customers
• IFRS 16 Leases

Of the above new standards, IFRS 9 and IFRS 15 are to be
applied from the financial year beginning 1 January 2018,
while IFRS 16 takes effect on 1 January 2019. Earlier applica-
tion is allowed for all standards.

During the year a major project was initiated relating to the

implementation of IFRS 15. Although the impact of the new
standard as of the closing date has not yet been fully investi-
gated, the Group’s current assessment is that the standard will
not have a material impact on the consolidated financial state-
ments. IFRS 9 is deemed not to have any significant impact on
the consolidated financial statements either, while the Group
has not yet evaluated the effects of implementation of IFRS 16.

Consolidated financial statements
The consolidated financial statements include ASSA ABLOY AB
(the Parent company) and all companies over which the
Group has control. The Group controls an entity when the
Group is exposed to, or has the rights to, variable returns from
its involvement with the entity and has the ability to affect
those returns through its power over the entity. Companies
acquired during the year are included in the consolidated
financial statements with effect from the date when a con-
trolling interest arose. Companies divested during the year are
included in the consolidated financial statements up to the
date when a controlling interest ceased.

The consolidated financial statements have been prepared

in accordance with the purchase method, which means that
the cost of shares in subsidiaries was eliminated against their
equity at the acquisition date. In this context, equity in sub-
sidiaries is determined on the basis of the fair value of assets,
liabilities and contingent liabilities at the acquisition date.
Consequently only that part of the equity in subsidiaries that
has arisen after the acquisition date is included in consoli-
dated equity. The Group determines on an individual basis for
each acquisition whether a non- controlling interest in the
acquired company shall be recognized at fair value or at the
interest’s proportional share of the acquired company’s net
assets. Any negative difference, negative goodwill, is recog-
nized as revenue immediately after determination.

Deferred considerations are classified as financial liabilities

and revalued through profit or loss in operating income.
Significant deferred considerations are discounted to present
value. Acquisition-related transaction costs are expensed as
incurred.

Intra-Group transactions and balance sheet items, and
unrealized profits on transactions between Group companies
are eliminated in the consolidated financial statements.

Non-controlling interests
Non-controlling interests are based on the subsidiaries’
accounts with application of fair value adjustments resulting
from a completed acquisition analysis. Non-controlling inter-
ests’ share in subsidiaries’ earnings is recognized in the income
statement, in which net income is attributed to the Parent
company’s shareholders and to non-controlling interests.
Non-controlling interests’ share in subsidiaries’ equity is rec-
ognized separately in consolidated equity. Transactions with
non-controlling interests are recognized as transactions with
the Group’s shareholders in equity.

NOTES

ASSA ABLOY ANNUAL REPORT 2016

Note 1 cont.

Associates
Associates are defined as companies which are not sub-
sidiaries but in which the Group has a significant (but not a
controlling) interest. This generally refers to companies in
which the Group’s shareholding represents between 20 and
50 percent of the voting rights.

Investments in associates are accounted for in accordance

with the equity method. In the consolidated balance sheet,
shareholdings in associates are recognized at cost, and the
carrying amount is adjusted for the share of associates’ earn-
ings after the acquisition date. Dividends from associates are
recognized as a reduction in the carrying amount of the hold-
ings. The share of associates’ earnings is recognized in the
consolidated income statement in operating income as the
holdings are related to business operations.

Segment reporting
Operating segments are reported in accordance with inter-
nal reporting to the chief operating decision maker. Chief
operating decision maker is the function that is responsible
for allocation of resources and assessing performance of the
operating segments. The divisions form the operational
structure for internal control and reporting and also consti-
tute the Group’s segments for external financial reporting.
The Group’s business is divided into five divisions. Three divi-
sions are based on products sold in local markets in the
respective division: EMEA, Americas and Asia Pacific. Global
Technologies and Entrance Systems consist of products sold
worldwide.

Foreign currency translation
Functional currency corresponds to local currency in each
country where Group companies operate. Transactions in
foreign currencies are translated to functional currency by
application of the exchange rates prevailing on the transac-
tion date. Foreign exchange gains and losses arising from the
settlement of such transactions are normally recognized in
the income statement, as are those arising from translation
of monetary balance sheet items in foreign currencies at the
year-end rate. Exceptions are transactions relating to qualify-
ing cash flow hedges, which are recognized in other compre-
hensive income. Receivables and liabilities are measured at
the year-end rate.

In translating the accounts of foreign subsidiaries pre-

pared in functional currencies other than the Group’s
presentation currency, all balance sheet items except net
income are translated at the year-end rate and net income is
translated at the average rate. The income statement is
translated at the average rate for the period. Exchange differ-
ences arising from the translation of foreign subsidiaries are
recognized as translation differences in other comprehen-
sive income.

The table below shows the weighted average rate and the

closing rate for important currencies used in the Group,
relative to the Group’s presentation currency (SEK).

Average rate

Closing rate

Country

Currency

2015

2016

2015

2016

ARS
Argentina
AUD
Australia
BRL
Brazil
CAD
Canada
CHF
Switzerland
CLP
Chile
CNY
China
Colombia
COP
Czech Republic CZK
DKK
Denmark
EUR
Euro zone

0.91
6.31
2.57
6.58
8.70
0.013
1.34

0.58
6.36
2.47
6.46
8.67
0.013
1.29
0.0031 0.0028
0.35
1.27
9.44

0.34
1.25
9.35

0.65
6.09
2.16
6.04
8.43
0.012
1.29

0.57
6.58
2.80
6.75
8.91
0.014
1.31
0.0026 0.0030
0.35
1.29
9.58

0.34
1.23
9.14

Country

Currency

2015

2016

2015

2016

Average rate

Closing rate

United Kingdom GBP
HKD
Hong Kong
HUF
Hungary
ILS
Israel
INR
India
KES
Kenya
KRW
South Korea
MXN
Mexico
MYR
Malaysia
NOK
Norway
NZD
New Zealand
PLN
Poland
RON
Romania
RUB
Russia
SGD
Singapore
THB
Thailand
TRY
Turkey
USD
USA
ZAR
South Africa

12.84
1.08
0.030
2.16
0.131
0.086

11.60
1.11
0.030
2.24
0.127
0.084
0.0074 0.0074
0.46
2.06
1.02
5.97
2.16
2.10
0.13
6.19
0.24
2.84
8.58
0.59

0.53
2.17
1.04
5.89
2.23
2.10
0.14
6.12
0.25
3.11
8.41
0.66

12.39
1.08
0.029
2.15
0.126
0.082

11.19
1.17
0.031
2.37
0.134
0.089
0.0071 0.0076
0.44
2.03
1.05
6.33
2.17
2.11
0.15
6.30
0.25
2.58
9.11
0.67

0.48
1.95
0.96
5.72
2.16
2.02
0.11
5.91
0.23
2.87
8.36
0.54

Revenue
Revenue comprises the fair value of goods sold, excluding
VAT and discounts, and after eliminating intra-Group sales.
The Group’s sales revenue mainly consists of product sales.
Service related to products sold represents a limited share of
revenue. Revenue from sales of the Group’s products is rec-
ognized when all significant risks and benefits associated
with ownership have been transferred to the purchaser in
accordance with applicable terms of sale, which is normally
upon delivery. If the product requires installation at the cus-
tomer’s premises, revenue is recognized when installation
has been completed. Revenue from service contracts is
recognized on a continuous basis over the contract period.
In the case of installations over a longer period of time, the
percentage of completion method is used.

Intra-Group sales
Transactions between Group companies are carried out at
arm’s length and thus at market prices. Intra-Group sales are
eliminated from the consolidated income statement, and
profits on such transactions have been eliminated in their
entirety.

Government grants
Grants and support from governments, public authorities
and the like are recognized when there is reasonable assur-
ance that the company will comply with the conditions
attaching to the grant and that the grant will be received.
Grants relating to assets are recognized after reducing the
carrying amount of the asset by the amount of the grant.

Research and development
Research expenditure is expensed as incurred. Development
expenditure is recognized in the balance sheet to the extent
that it is expected to generate future economic benefits for
the Group and provided such benefits can be reliably
measured.

Capitalized development expenditure is amortized over
the expected useful life. Such intangible assets, which are not
yet in use, are tested annually for impairment. Expenditure
on the further development of existing products is expensed
as incurred.

ASSA ABLOY ANNUAL REPORT 2016

NOTES 69

Note 1 cont.

Notes

Borrowing costs
Borrowing costs are interest expenses and other expenses
directly related to borrowing. Borrowing costs directly
attributable to the acquisition, construction or production
of a qualifying asset (an asset that necessarily takes a sub-
stantial period of time to get ready for its intended use or
sale) are included in the cost of the asset. Other borrowing
costs are recognized as an expense in the period in which
they are incurred.

Tax on income
The income statement includes all tax that is to be paid or
received for the current year, adjustments relating to tax due
for previous years, and changes in deferred tax. These taxes
have been calculated at nominal amounts, in accordance
with the tax regulations in each country, and in accordance
with tax rates that have either been decided or have been
notified and can confidently be expected to be confirmed.
For items recognized in the income statement, associated
tax effects are also recognized in the income statement. The
tax effects of items recognized directly against equity or in
other comprehensive income are themselves recognized
against equity or in other comprehensive income. The liabil-
ity method is used in accounting for deferred tax. This means
that deferred tax is recognized on all temporary differences
between the carrying amounts of assets and liabilities and
their respective tax bases. Deferred tax assets relating to tax
losses carried forward or other future tax allowances are rec-
ognized to the extent that it is probable that the allowance
can be offset against taxable income in future taxation.
Deferred tax liabilities for temporary differences relating to
investments in subsidiaries are not recognized in the con-
solidated financial statements, since the Parent company
can control the time at which the temporary differences are
reversed, and it is not considered likely that such reversal will
occur in the foreseeable future. Deferred tax assets and
deferred tax liabilities are offset when there is a legal right to
do so and when deferred taxes relate to the same tax
authority.

Cash flow statement
The cash flow statement has been prepared according to the
indirect method. The recognized cash flow includes only
transactions involving cash payments.

Cash and cash equivalents
Cash and cash equivalents include cash and bank balances,
and short-term financial investments that mature within
three months of the acquisition date.

Goodwill and acquisition-related intangible assets
Goodwill represents the positive difference between the
acquisition cost and the fair value of the Group’s share of the
acquired company’s identifiable net assets at the acquisition
date, and is recognized at cost less accumulated impairment
losses. Goodwill is allocated to cash generating units (CGU)
and is tested annually to identify any impairment loss. Cash
generating units are subject to systematic annual impair-
ment testing using a valuation model based on discounted
future cash flows. Deferred tax assets based on local tax rates
are recognized in terms of tax-deductible goodwill (with
corresponding reduction of the goodwill value). Such
deferred tax assets are expensed as the tax deduction is
utilized. Other acquisition-related intangible assets consist
chiefly of various types of intellectual property rights, such as
brands, technology and customer relationships. Identifiable

acquisition-related intellectual property rights are initially
recognized at fair value at the acquisition date and sub-
sequently at cost less accumulated amortization and impair-
ment losses. Amortization is on a straight-line basis over the
estimated useful life. Acquisition-related intangible assets
with an indefinite useful life are tested for impairment
annually in the same way as goodwill.

Other intangible assets
An intangible asset that is not acquisition-related is recog-
nized only if it is likely that the future economic benefits
associated with the asset will flow to the Group, and if the
cost of the asset can be reliably measured. Such an asset is
initially recognized at cost and is amortized over its esti-
mated useful life, usually between three and five years. The
carrying amount is the cost less accumulated amortization
and impairment losses.

Property, plant and equipment
Property, plant and equipment are recognized at cost less
accumulated depreciation and impairment losses. Cost in-
cludes expenditure directly attributable to acquisition of the
asset. Sub sequent expenditure is capitalized if it is probable
that economic benefits associated with the asset will flow to
the Group, and if the cost can be reliably measured. Expendi-
ture on repairs and maintenance is expensed as incurred.
Depreciable amount is the cost of an asset less its estimated
residual value. Land is not depreciated. For other assets, cost
is depreciated over the estimated useful life, which for the
Group results in the following average depreciation periods:
• Buildings 25–50 years.
• Land improvements 10–25 years.
• Machinery 7–10 years.
• Equipment 3–6 years.

The residual value and useful life of assets are reviewed at
each reporting date and adjusted when necessary. Gain or
loss on the disposal of property, plant and equipment is rec-
ognized in the income statement as ‘Other operating income’
or ‘Other operating expenses’, and consists of the difference
between the selling price and the carrying amount.

Leasing
The Group’s leasing is chiefly operating leasing. The lease
payments are expensed on a straight-line basis over the term
of the lease and are recognized as operating expenses.

Impairment
Assets with an indefinite useful life are not amortized but are
tested for impairment on an annual basis. For impairment
testing purposes, assets are grouped at the lowest organiza-
tional level where there are separate identifiable cash flows,
so-called cash generating units (CGU).

For assets that are depreciated/amortized, impairment
testing is carried out when events or circumstances indicate
that the carrying amount many not be recoverable.

Impairment losses are recognized in the amount by which

the carrying amount of the asset exceeds the recoverable
amount, which is the higher of the asset’s fair value, less
selling expenses, and value in use.

Inventories
Inventories are valued in accordance with the ‘first in, first
out’ principle at the lower of cost and net realizable value at
the reporting date. Deductions are made for internal profits
arising from deliveries between Group companies. Work in

NOTES

ASSA ABLOY ANNUAL REPORT 2016

Note 1 cont.

progress and finished goods include both direct costs
incurred and a fair allocation of indirect production costs.

Trade receivables
Trade receivables are recognized initially at fair value and
subsequently measured at amortized cost using the effective
interest method. A provision is recognized when there is
objective evidence that the Group will not be able to collect
recorded amounts. The year’s change in such a provision is
recognized in the income statement as selling expenses.

Financial assets
Financial assets include cash and cash equivalents, trade
receivables, short-term investments and derivatives, and are
classified in the following categories: financial assets at fair
value through profit and loss, available-for-sale financial
assets, and loans and receivables. Management determines
the classification of financial assets at initial recognition.

Financial assets at fair value through the income statement
This category is divided into two sub-categories: financial
assets held for trading, and those classified on acquisition as
financial assets at fair value through profit and loss. A finan-
cial asset is classified in this category if acquired principally
for the purpose of selling in the short term or if classified as
such by management. Derivatives are also classified as held
for trading provided they are not defined as hedges. Assets in
this category are classified as current assets.

Available-for-sale financial assets
Available-for-sale financial assets are non-derivative assets
that have been identified as available for sale or assets that
have not been classified in any other category. They are
included in non-current assets, unless management intends
to sell the asset within 12 months of the end of the reporting
period. Changes in fair value are recognized in Other
comprehensive income.

Loans and receivables
Loans and receivables are non-derivative financial assets
with fixed or determinable payment streams, which are not
quoted in an active market. They are recognized in current
assets, except for receivables maturing more than 12
months after the reporting date, which are classified as
non-current assets.

Loans and receivables are initially recognized at fair
value and subsequently carried at amortized cost using the
effective interest method.

Financial liabilities
Financial liabilities include deferred considerations, loan
liabilities, trade payables and derivative instruments.
Recognition depends on how the liability is classified.

Financial liabilities at fair value through the income
statement
This category includes derivatives with negative fair value
that are not used for hedging, deferred considerations, and
financial liabilities held for trading. Liabilities are measured
at fair value on a continuous basis and changes in value are
recognized in the income statement as a financial item.

Loan liabilities
Loan liabilities are initially valued at fair value, net of transac-
tion costs, and subsequently at amortized cost. Amortized
cost is determined based on the effective interest rate

calculated when the loan was raised. Accordingly, surplus val-
ues and negative surplus values as well as direct issue
expenses are allocated over the term of the loan. Non-current
loan liabilities have an anticipated term of more than one year,
while current loan liabilities have a term of less than one year.

Trade payables
Trade payables are initially valued at fair value, and sub-
sequently at amortized cost using the effective interest
method.

Recognition and measurement of financial assets and
liabilities
Acquisitions and sales of financial assets are recognized on
the trade date, the date on which the Group commits to pur-
chase or sell the asset. Transaction costs are initially included
in fair value for all financial instruments, except for those rec-
ognized at fair value through profit and loss where the trans-
action cost is recognized through profit and loss. The fair
value of quoted investments is based on current bid prices.
In the absence of an active market for an investment, the
Group applies various measurement techniques to deter-
mine fair value. These include use of available information on
current arm’s length transactions, comparison with equiva-
lent assets and analysis of discounted cash flows. The Group
assesses at each reporting date whether there is any objec-
tive evidence that a financial asset or a group of financial
assets is impaired. A financial asset is derecognized from the
balance sheet when the right to receive cash flows from the
asset expires or is transferred to another party through the
transfer of all the risks and benefits associated with the asset
to the other party. A financial liability is derecognized from
the balance sheet when the obligation is fulfilled, cancelled
or expires, see above.

Derivative instruments and hedging
Derivative instruments are recognized in the balance sheet
at the transaction date and are measured at fair value, both
initially and in subsequent revaluations. The method for rec-
ognizing profit or loss depends on whether the derivative
instrument is designated as a hedging instrument, and if so,
the nature of the hedged item. For derivatives not desig-
nated as hedging instruments, changes in value are recog-
nized on a continuous basis through profit or loss under
financial items, either as income or expense.

The Group designates derivatives as follows:

i) Fair value hedge: a hedge of the fair value of an identified
liability;
ii) Cash flow hedge: a hedge of a certain risk associated with a
forecast cash flow for a certain transaction; or
iii) Net investment hedge: a hedge of a net investment in a
foreign subsidiary.

When entering into the hedge transaction, the Group docu-
ments the relationship between the hedging instrument and
hedged items, as well as its risk management strategy for the
hedge. The Group also documents its assessment, both on
inception and on a regular basis, of whether the derivative
instruments used in hedge transactions are effective in offset-
ting changes in fair value attributable to the hedged items.

The fair value of forward exchange contracts is calculated
at net present value based on prevailing forward rates on the
reporting date, while interest rate swaps are measured by
estimating future discounted cash flows.

For information on the fair value of derivative

instruments, see Note 34, ‘Financial risk management and

ASSA ABLOY ANNUAL REPORT 2016

NOTES 71

Notes

Note 1 cont.

financial instruments’. Derivatives at fair value, with a matu-
rity of more than 12 months, are classified as non-current
interest-bearing liabilities or receivables. Other derivatives
are classified as current interest-bearing liabilities and
investments respectively.

Fair value hedges
For derivatives that are designated and qualify as fair value
hedges, changes in value of both the hedged item and the
hedging instrument are recognized on a continuous basis in
the income statement (under financial items). Fair value
hedges are used to hedge interest rate risk in borrowing
linked to fixed interest terms. If the hedge would no longer
qualify for hedge accounting, the fair value adjustment of the
carrying amount is dissolved through profit or loss over the
remaining term using the effective interest method.

Cash flow hedges
For derivatives that are designated and qualify as cash flow
hedges, changes in value of the hedging instrument are rec-
ognized on a continuous basis in other comprehensive
income for the part relating to the effective portion of the
hedges. Gain or loss arising from ineffective portions of
derivatives is recognized directly in the income statement
under financial items. When a hedging instrument expires, is
sold or no longer qualifies for hedge accounting, and accu-
mulated gains or losses relating to the hedge are recognized
in equity, these gains/losses remain in equity and are taken
to income, while the forecast transaction is finally recog-
nized in the income statement. When a forecast transaction
is no longer expected to occur, the accumulated gain or loss
recognized in equity is immediately transferred to Other
comprehensive income in the income statement. When a
forecast transaction is no longer expected to occur, the
gain or loss recognized in Other comprehensive income is
recognized directly under financial items.

Net investment hedges
For derivatives that are designated and qualify as net invest-
ment hedges, the portion of value changes in fair value
designated as effective is recognized in other comprehen-
sive income. The ineffective portion of the gain or loss is rec-
ognized directly in profit or loss for the period under finan-
cial items. Accumulated gain or loss in other comprehensive
income is recognized in the income statement when the
foreign operation, or part thereof, is sold.

Provisions
A provision is recognized when the Group has a legal or con-
structive obligation resulting from a past event and it is prob-
able that an outflow of resources will be required to settle
the obligation, and that a reliable estimate of the amount
can be made. Provisions are recognized at a value equivalent
to the outflow of resources that will probably be required to
settle the obligation. The amount of a provision is dis-
counted to present value where the effect of time value is
considered material.

Assets and liabilities of a disposal group classified
as held for sale
Assets and liabilities are classified as held for sale when their
carrying amounts will principally be recovered through a
sale and when such a sale is considered highly probable. They
are recognized at the lower of carrying amount and fair value
less selling expenses.

Employee benefits
The Group operates both defined contribution and defined
benefit pension plans. Comprehensive defined benefit plans
are found chiefly in the US, the UK and Germany. Post-
employment medical benefits are also provided, mainly in
the US, and are reported in the same way as defined benefit
pension plans. Calculations relating to the Group’s defined
benefit plans are performed by independent actuaries and
are based on a number of actuarial assumptions such as dis-
count rate, future inflation and salary increases. Obligations
are valued on the reporting date at their discounted value.
For funded plans, obligations are reduced by the fair value of
the plan assets. Actuarial gains and losses resulting from
experience-based adjustments and changes in actuarial
assumptions are recognized in other comprehensive income
during the period they arise. The pension expense for defined
benefit plans is spread over the employee’s service period.
The Group’s payments relating to defined contribution pen-
sion plans are recognized as an expense in the period to
which they relate, based on the services performed by the
employee. Swedish Group companies calculate tax on pen-
sion costs on the difference between pension expense
determined in accordance with IAS 19 and pension expense
determined in accordance with the regulations applicable in
the legal entity.

Equity-based incentive programs
The Group has equity-based remuneration plans in the form
of ASSA ABLOY’s long-term incentive program presented for
the first time at the 2010 Annual General Meeting. For the
long-term incentive program, personnel costs during the
vesting period are recognized based on the shares’ fair value
on the allotment date, that is, when the company and the
employees entered into an agreement on the terms and con-
ditions for the program. The long-term incentive program
comprises two parts: a matching part where the employee
receives one share for every share the latter invests during
the term of the program, and a performance-based part
where the outcome is based on the company’s financial
results (EPS target) during the period. The program requires
that the employee continues to invest in the long-term
incentive program and that the latter remains employed in
the ASSA ABLOY Group.

Fair value is based on the share price on the allotment
date; a reduction in fair value relating to the anticipated divi-
dend has not been made as the participants are compen-
sated for this. The employees pay a price equivalent to the
share price on the investment date. The vesting terms are
not stock market based and affect the number of shares that
ASSA ABLOY will give to the employee when matching. If an
employee stops investing in the program, all remaining per-
sonnel costs are immediately recognized in the income
statement. Personnel costs for shares relating to the perfor-
mance-based program are calculated on each accounting
date based on an assessment of the probability of the perfor-
mance targets being achieved. The costs are calculated
based on the number of shares that ASSA ABLOY expects to
need to settle at the end of the vesting period. When match-
ing shares, social security contributions must be paid in
some countries to the value of the employee’s benefit.
This value is based on fair value on each accounting date and
recognized as a provision for social security contributions.

The long-term incentive programs are essentially equity

settled and an amount equivalent to the personnel cost is
recognized against retained earnings in equity. In the income
statement, the personnel cost is allocated to the respective
function.

NOTES

ASSA ABLOY ANNUAL REPORT 2016

Note 1 cont.

Earnings per share
Earnings per share before dilution is calculated by dividing
the net income attributable to the Parent company’s share-
holders by the weighted average number of outstanding
shares (less treasury shares). Earnings per share after dilution
is calculated by dividing the net income attributable to the
Parent company’s shareholders by the sum of the weighted
average number of ordinary shares and potential ordinary
shares that may give rise to a dilutive effect. The dilutive
effect of potential ordinary shares is only recognized if their
conversion to ordinary shares would lead to a reduction in
earnings per share after dilution.

Dividend
Dividend is recognized as a liability after the Annual General
Meeting has approved the dividend.

The Parent company
The Group’s Parent company, ASSA ABLOY AB, is responsible
for Group management and provides Group-wide functions.
The Parent company’s revenue consists of intra-Group
franchise and royalty revenues. The significant balance
sheet items consist of shares in subsidiaries, intra-Group
recei-vables and liabilities, and external borrowing. The
Parent company has prepared its annual accounts in accor-
dance with the Swedish Annual Accounts Act (1995:1554)
and the Swedish Financial Reporting Board’s RFR 2 Account-
ing for Legal Entities. RFR 2 requires the Parent company, in
its annual accounts, to apply all the International Financial
Reporting Standards (IFRS) endorsed by the EU in so far as
this is possible within the framework of the Annual Accounts
Act and with regard to the relationship between accounting
and taxation. The recommendation states which exceptions
from and additions to IFRS should be made.

Revenue
The Parent company’s revenue consists of intra-Group
franchise and royalty revenues. These are recognized in the
income statement as ‘Other operating income’ to make clear
that the Parent company has no product sales like other
Group companies with external operations.

Pension obligations
The Parent company’s pension obligations are accounted for
in accordance with FAR RedR 4 and are covered by taking out
insurance with an insurance company.

Dividend
Dividend revenue is recognized when the right to receive
payment is considered certain.

Research and development costs
Research and development costs are expensed as incurred.

Intangible assets
Intangible assets comprise patented technology and other
intangible assets. They are amortized over 4–5 years.

Tangible assets
Tangible assets owned by the Parent company are recog-
nized at cost less accumulated depreciation and any impair-
ment losses in the same way as for the Group. They are
depreciated over their estimated useful life, which is 5–10
years for equipment and 4 years for IT equipment.

Leasing
In the Parent company all lease agreements are classified as
rental agreements (operating leases) irrespective of whether
they are financial or operating leases.

Shares in subsidiaries
Shares in subsidiaries are recognized at cost less impairment
losses. When there is an indication that the value of shares
and interests in subsidiaries or associates has fallen, the
recoverable amount is calculated. If this is lower than the
carrying amount, an impairment loss is recognized. Impair-
ment losses are recognized in Financial expenses in the
income statement.

Financial instruments
Derivative instruments are recognized at fair value. Changes
in the value of derivatives are recognized in profit or loss.

Group contributions
The Parent company recognizes Group contributions in
accordance with RFR 2. Group contributions received and
paid are recognized under appropriations in the income
statement. The tax effect of Group contributions is recog-
nized in accordance with IAS 12 in the income statement.

Contingent liabilities
The Parent company has guarantees on behalf of its
sub sidiaries. Such an obligation is classified as a financial
guarantee in accordance with IFRS. For these guarantees,
the Parent company applies the alternative rule in RFR 2,
reporting these guarantees as a contingent liability.

ASSA ABLOY ANNUAL REPORT 2016

NOTES 73

Notes

Note 2 Sales

Customer sales by country

Group

SEK M

USA
China
Sweden
France
United Kingdom
Germany
Canada
Australia
Netherlands
Finland
Norway
South Korea
Belgium
Denmark
Spain
Mexico
Switzerland
Brazil
Italy
Poland
Austria
United Arab Emirates
India
New Zealand
Czech Republic
Saudi Arabia
South Africa
Turkey
Chile
Hong Kong
Malaysia
Singapore
Israel
Thailand
Russia
Colombia
Philippines
Japan
Ireland
Romania
Portugal
Indonesia
Estonia
Hungary
Slovakia
Croatia
Macao
Taiwan
Kenya
Qatar
Other countries
Total

2015

23,039
6,471
3,579
3,261
3,019
2,886
2,238
2,010
1,606
1,429
1,541
1,317
1,070
1,043
874
1,054
775
526
718
629
582
556
482
442
518
509
335
341
315
257
224
235
240
210
216
193
139
145
164
134
170
181
141
126
166
95
114
78
90
57
1,558
68,099

2016

25,276
5,308
3,895
3,510
2,961
2,949
2,194
1,974
1,747
1,674
1,568
1,395
1,240
1,066
997
956
829
822
762
639
596
572
521
498
425
420
384
338
328
282
274
261
258
244
242
210
199
194
181
163
159
137
136
129
121
106
93
85
80
80
1,819
71,293

Sales by continent

MSEK

Europe
North America
Central and South America
Africa
Asia
Pacific
Total

Group

2015

25,443
26,331
1,524
846
11,484
2,470
68,099

2016

26,869
28,427
2,012
923
10,573
2,490
71,293

Sales by product group

SEK M

Mechanical locks, lock systems and fittings
Entrance automation
Electromechanical and electronic locks
Security doors and hardware
Total

Group

2015

19,516
17,992
17,143
13,448
68,099

2016

20,228
19,693
18,545
12,828
71,293

Note 3 Auditors’ fees

SEK M

Audit assignment
PwC
Other

Audit-related services in
addition to audit assignment
PwC

Tax advice
PwC
Other

Other services
PwC
Other
Total

Group

Parent company

2015

2016

2015

2016

43
12

13
2

14
1
86

47
13

9
5

20
10
106

4
–

1
0

1
1
8

4
–

1
0

1
1
8

Note 4 Other operating income and expenses
Group

SEK M

Rental income
Business-related taxes
Profit on sales of non-current assets
Transaction expenses from acquisitions
Exchange rate differences
Impairment operating assets etc., in China
Revaluated Earnout
Other, net
Total

2015

7
–38
38
–80
–27
–193
284
–1
–10

2016

12
–33
29
–82
–30
–708
440
162
–210

Parent company
Other operating income in the Parent company consists
mainly of franchise and royalty revenues from subsidiaries.

Note 5 Share of earnings in associates

SEK M

Agta Record AG
Goal Co., Ltd
SARA Loading Bay Ltd
Saudi Crawford Doors Factory Ltd
Other
Total

Group

2015

2016

107
16
1
10
–
134

95
23
–2
10
1
127

The share of earnings in Agta Record AG has been estimated
on the basis of the associated company’s latest available
financial report, which is the published Interim Report for
the first half of 2016.

NOTES

ASSA ABLOY ANNUAL REPORT 2016

Note 6 Operating leases

Note 11 Financial expenses

SEK M

2015

2016

2015

2016

SEK M

2015

2016

2015

2016

Group

Parent company

Group

Parent company

Lease payments during
the year
Total

Nominal value of agreed
future lease payments:
Due for payment in:
(2016) 2017
(2017) 2018
(2018) 2019
(2019) 2020
(2020) 2021
(2021) 2022 or later
Total

891
891

895
895

12
12

14
14

714
621
446
321
218
245
2,565

822
646
481
334
236
316
2,835

16
16
17
17
18
18
103

17
17
18
18
19
19
107

Lease payments during the year consist of fees for assets that
are held as operating leases such as rented premises,
machinery, and computer equipment. The Group has no
single substantial operating leases since the lease agree-
ments are spread over a large number of subsidiaries.

Note 7 Expenses by nature
In the income statement costs are broken down by function.
Below, these same costs are broken down by nature:

SEK M

Remuneration of employees (Note 33)
Direct material costs
Depreciation and amortization
(Note 8, 14, 15)
Other purchase expenses
Total

Group

2015

18,995
25,128

1,433
11,588
57,144

2016

21,231
26,067

1,580
12,675
61,553

Note 8 Depreciation and amortization

SEK M

Intangible assets
Machinery
Equipment
Buildings
Land improvements
Total

Group

Parent company

2015

404
529
274
219
6
1,433

2016

2015

2016

483
534
322
235

7
1,580

441
–
1
–
–
442

445
–
3
–
–
448

Note 9 Exchange differences in the income statement
Parent company

Group

SEK M

2015

2016

2015

2016

Exchange differences
recognized in operating
income
Exchange differences
recognized in financial
expenses (Note 11)
Total

–27

–29

–6

–22

5
–22

26
–4

–245
–251

–33
–55

Note 10 Financial income

SEK M

2015

2016

2015

2016

Group

Parent company

Earnings from investments
in subsidiaries
Earnings from investments
in associates
Intra-Group interest income
Other financial income
External interest income and
similar items
Total

–

–
–
5

17
22

–

–
–
1

8
9

1,538

1,556

45
109
–

45
96
–

0
1,691

–
1,697

Intra-Group interest
expenses
Interest expenses, other
liabilities1
Interest expenses,
interest rate swaps
Interest expenses, foreign
exchange forwards
Exchange rate differences
on financial instruments
Fair value adjustments on
shares and interests
Other financial expenses
Total

–

–233

–251

–590

–598

–134

–120

–127

–120

–

–245

–33

–
–47
–719

–
–47
–714

–207
–29
–849

1
–30
–433

1 Of which –14 (164) is fair value adjustments on derivatives, non-hedge account-

ing, for the Group.

Note 12 Tax on income

Group

Parent company

SEK M

2015

2016

2015

Current tax
Tax attributable to prior years
Foreign Coupon Tax
Deferred tax
Total

–2,489
114
–4
–309

–2,570
119
–28
152
–2,689 –2,328

–463
37
9
–
–416

2016

–573
0
–
–
–573

Explanation for the difference between nominal Swedish tax
rate and effective tax rate based on income before tax:

Group

Parent company

Percent

2015

2016

2015

2016

Swedish rate of tax on
income
Effect of foreign tax rates
Non-taxable income/non-
deductible expenses, net
Utilized loss carry-forward not
recognized in prior period
Other
Effective tax rate in income
statement

22
8

–1

–1
–2

Note 13 Earnings per share

22
8

–1

–1
–2

22
–

–9

–
–

22
–

–8

–
–

Earnings per share before and after dilution

Group

SEK M

Earnings attributable to the Parent
company's shareholders
Net profit
Weighted average number of shares
issued (thousands)
Earnings per share (SEK per share)
of which from continuing operations
of which from discontinued operations

2015

2016

7,693
7,693

6,651
6,651

1,110,776 1,110,776
5.99
5.96
0.03

6.93
6.93
–

None of the Group’s outstanding long-term incentive programs
are expected to result in significant dilution in the future.

Earnings per share before and after dilution excluding items
affecting comparability

Group

SEK M

Earnings attributable to the Parent
company's shareholders
Items affecting comparability, after tax1
Net profit
Weighted average number of shares
issued (thousands)
Earnings per share excluding items
affecting comparability (SEK per share)
of which from continuing operations
of which from discontinued operations

2015

2016

7,693
–
7,693

6,651
1,221
7,872

1,110,776 1,110,776

6.93
6.93
–

7.09
7.06
0.03

1 Items affecting comparability consist of restructuring costs.

ASSA ABLOY ANNUAL REPORT 2016

NOTES 75

Notes

Note 14 Intangible assets

Group

Parent company

2016, SEK M

Goodwill

Brands

Opening accumulated acquisition cost
Purchases
Acquisitions of subsidiaries
Sales, disposals and adjustments
Reclassifications
Exchange rate differences
Closing accumulated acquisition cost

Opening accumulated amortization/impairment
Sales, disposals and adjustments
Reclassifications
Amortization
Exchange rate differences
Closing accumulated amortization/impairment
Carrying amount

42,838
–
2,451
–
–
2,321
47,609

–61
–
–
–
–5
–65
47,544

6,201
2
0
–
0
247
6,451

–98
–
–
0
0
–98
6,353

Other
intangible
assets

5,847
416
69
–30
90
352
6,743

–2,864
28
–5
–482
–221
–3,544
3,199

Total

54,885
419
2,520
–30
90
2,920
60,804

–3,022
28
–5
–483
–227
–3,708
57,096

Intangible
assets

3,161
196
–
–
–
–
3,357

–2,504
–
–
–445
–
–2,949
408

Group

Parent company

2015, SEK M

Goodwill

Brands

Opening accumulated acquisition cost
Purchases
Acquisitions of subsidiaries
Sales, disposals and adjustments
Reclassifications
Exchange rate differences
Closing accumulated acquisition cost

Opening accumulated amortization/impairment
Sales, disposals and adjustments
Reclassifications
Amortization
Exchange rate differences
Closing accumulated amortization/impairment
Carrying amount

39,842
–
2,485
–
–
511
42,838

–63
–
–
–
3
–61
42,777

5,497
0
518
–
92
94
6,201

–33
–
–62
–3
–1
–98
6,103

Other
intangible
assets

4,238
365
787
44
350
61
5,847

–2,424
–47
57
–402
–48
–2,864
2,983

Total

49,577
365
3,790
44
442
667
54,886

–2,520
–47
–5
–404
–46
–3,022
51,863

Intangible
assets

3,125
37
–
–
–
–
3,161

–2,063
–
–
–441
–
–2,504
657

Other intangible assets consist mainly of customer relations
and technology. The carrying amount of intangible assets
with an indefinite useful life, excluding goodwill, amounts to
SEK 6,305 M (6,060) and relates to brands.

Useful life has been defined as indefinite where the time

period, during which an asset is deemed to contribute
economic benefits, cannot be determined.

which in turn are based on financial budgets for a three-year
period approved by management. Cash flows beyond the
three-year period are extrapolated using estimated growth
rates according to the information below.
Material assumptions used to calculate values in use:
• Budgeted operating margin.
• Growth rate for extrapolating cash flows beyond the

Amortization and impairment of intangible assets are

budget period.

mainly recognized as cost of goods sold in the income
statement.

• Discount rate after tax used for estimated future cash

flows.

Impairment testing of goodwill and intangible assets
with indefinite useful life
Goodwill and intangible assets with an indefinite useful life
are allocated to the Group’s Cash Generating Units (CGUs),
which consist of the Group’s five divisions.

For each cash-generating unit, the Group annually tests
goodwill and intangible assets with an indefinite useful life
for impairment, in accordance with the accounting principle
described in Note 1. Recoverable amounts for Cash Generat-
ing Units have been determined by calculating value in use.
These calculations are based on estimated future cash flows,

Management has determined the budgeted operating
margin based on previous results and expectations of future
market development. A growth rate of 3 percent (3) has
been used for all CGUs to extrapolate cash flows beyond the
budget period. This growth rate is considered to be a con-
servative estimate. Further, an average discount rate in local
currency after tax has been used in the calculations. The
difference in value compared with using a discount rate
before tax is not deemed to be material. The discount rate
has been determined by calculating the weighted average
cost of capital (WACC) for each division.

NOTES

ASSA ABLOY ANNUAL REPORT 2016

Note 14 cont.

2016
Overall, the discount rate after tax used varied between 8.0
and 9.0 percent (EMEA 8.0 percent, Americas 8.0 percent,
Asia Pacific 9.0 percent, Global Technologies 8.0 percent and
Entrance Systems 8.0 percent).

Goodwill and intangible assets with an indefinite useful life
were allocated to the Cash Generating Units as summarized
in the following table:

2016, SEK M

Goodwill
Intangible assets with indefinite
useful life
Total

EMEA

8,348

218
8,566

Americas

Asia Pacific

Global
Technologies

11,012

809
11,821

7,920

1,862
9,782

8,784

623
9,407

Entrance
Systems

11,480

2,793
14,273

Total

47,544

6,305
53,849

2015
Overall, the discount rate after tax used varied between 9.0
and 10.0 percent (EMEA 9.0 percent, Americas 9.0 percent,
Asia Pacific 10.0 percent, Global Technologies 10.0 percent
and Entrance Systems 9.0 percent).

Goodwill and intangible assets with an indefinite useful life
were allocated to the Cash Generating Units as summarized
in the following table:

2015, SEK M

Goodwill
Intangible assets with indefinite
useful life
Total

EMEA

7,857

213
8,070

Americas

Asia Pacific

Global
Technologies

9,903

741
10,644

7,690

1,825
9,515

7,437

572
8,009

Entrance
Systems

9,891

2,708
12,599

Total

42,777

6,060
48,837

Sensitivity analysis
A sensitivity analysis has been carried out for each cash-
generating unit. The results of this analysis are summarized
below.

2016
If the estimated operating margin after the end of the
budg et period had been one percentage point lower than
the management’s estimate, the total recoverable amount
would be 6 percent lower (EMEA 6 percent, Americas 4 per-
cent, Asia Pacific 7 percent, Global Technologies 5 percent,
and Entrance Systems 7 percent).

If the estimated growth rate used to extrapolate cash flows

beyond the budget period had been one percentage point
lower than the basic assumption of 3 percent, the total recov-
erable amount would be 15 percent lower (EMEA 15 percent,
Americas 15 percent, Asia Pacific 13 percent, Global Technolo-
gies 15 percent, and Entrance Systems 15 percent).

If the estimated weighted capital cost used for the Group’s
discounted cash flows had been one percentage point higher
than the basic assumption of 8.0 to 9.0 percent, the total
recoverable amount would be 17 percent lower (EMEA 17
percent, Americas 17 percent, Asia Pacific 15 percent, Global
Technologies 17 percent, and Entrance Systems 17 percent).
These calculations are hypothetical and should not be
viewed as an indication that these factors are any more or less
likely to change. The sensitivity analysis should therefore be
interpreted with caution.

None of the hypothetical cases above would lead to an
impairment of goodwill in an individual Cash Generating Unit.

2015
If the estimated operating margin after the end of the
budg et period had been one percentage point lower than
the management’s estimate, the total recoverable amount
would be 6 percent lower (EMEA 6 percent, Americas 4 per-
cent, Asia Pacific 6 percent, Global Technologies 5 percent,
and Entrance Systems 7 percent).

If the estimated growth rate used to extrapolate cash flows

beyond the budget period had been one percentage point
lower than the basic assumption of 3 percent, the total recov-
erable amount would be 13 percent lower (EMEA 13 percent,
Americas 13 percent, Asia Pacific 11 percent, Global Technolo-
gies 11 percent, and Entrance Systems 13 percent).

If the estimated weighted capital cost used for the Group’s
discounted cash flows had been one percentage point higher
than the basic assumption of 9.0 to 10.0 percent, the total
recoverable amount would be 14 percent lower (EMEA 14
percent, Americas 14 percent, Asia Pacific 12 percent, Global
Technologies 13 percent, and Entrance Systems 14 percent).
These calculations are hypothetical and should not be
viewed as an indication that these factors are any more or less
likely to change. The sensitivity analysis should therefore be
interpreted with caution.

None of the hypothetical cases above would lead to an
impairment of goodwill in an individual Cash Generating Unit.

ASSA ABLOY ANNUAL REPORT 2016

NOTES 77

Notes

Note 15 Property, plant and equipment

2016, SEK M

Buildings

ments Machinery

Equipment

Land and
land
improve-

Construc-
tion in
progress

Total

Equipment

Group

Parent company

Opening accumulated
acquisition cost
Purchases
Acquisitions of subsidiaries
Disposals of subsidiaries
Sales and disposals
Reclassifications
Exchange rate differences
Closing accumulated
acquisition cost

Opening accumulated
depreciation and impairment
Sales and disposals
Disposals of subsidiaries
Impairment
Depreciation
Reclassifications
Exchange rate differences
Closing accumulated
depreciation and impairment
Carrying amount

5,326
90
248
–4
–63
186
360

1,106
3
17
–0
–16
40
66

8,578
188
53
–82
–36
333
732

3,168
210
33
–38
–77
104
262

636
665
5
–11
–17
–752
37

18,814
1,156
355
–135
–209
–89
1,459

6,143

1,215

9,766

3,663

564

21,351

–2,441
41
0
–17
–235
–102
–183

–2,937
3,205

–135
10
–
–
–7
0
–6

–138
1,078

–6,348
28
47
–94
–534
85
–583

–7,399
2,366

–2,327
65
22
–53
–322
21
–217

–2,811
853

–
–
–
–
–
–
–

–
564

–11,252
144
69
–165
–1,097
4
–989

–13,286
8,066

23
28
–
–
–
–
–

–18
–
–
–
–3
–
–

–21
30

2015, SEK M

Buildings

ments Machinery

Equipment

Land and
land
improve-

Construc-
tion in
progress

Total

Equipment

Group

Parent company

Opening accumulated
acquisition cost
Purchases
Acquisitions of subsidiaries
Sales and disposals
Reclassifications
Exchange rate differences
Closing accumulated
acquisition cost

Opening accumulated
depreciation and impairment
Sales and disposals
Impairment
Depreciation
Reclassifications
Exchange rate differences
Closing accumulated
depreciation and impairment
Carrying amount

5,210
43
61
–77
67
22

1,210
3
31
–119
–
–19

8,039
232
101
–133
330
9

2,833
228
35
–22
125
–31

903
684
1
–6
–970
24

18,195
1,190
229
–357
–448
5

5,326

1,106

8,578

3,168

636

18,814

–2,286
46
6
–219
3
9

–2,441
2,885

–211
83
–6
–6
–
5

–135
971

–5,877
65
–7
–529
–2
2

–6,348
2,230

–2,110
22
1
–274
4
30

–2,327
841

–
–
–
–
–
–

–
636

–10,484
216
–6
–1,029
5
46

–11,252
7,562

19
4
–
–
–
–

–17
–
–
–1
–
–

–18
5

Impairment losses for the year totaled SEK 165 M, of which SEK 151 M related to the restructuring program initiated during
the year.

NOTES

ASSA ABLOY ANNUAL REPORT 2016

Note 16 Shares in subsidiaries

Company name

ASSA Sverige AB
ASSA ABLOY Entrance Systems AB
ASSA ABLOY Kredit AB
ASSA ABLOY Försäkrings AB
ASSA ABLOY Asia Holding AB
ASSA ABLOY OY
ASSA ABLOY Norge A/S
ASSA ABLOY Danmark A/S
ASSA ABLOY Deutschland GmbH
ASSA ABLOY Nederland Holding B.V.
Pan Pan DOOR Co LTD
ASSA ABLOY France SAS
Interlock Holding AG
HID Global Switzerland S.A.
ASSA ABLOY Holding GmbH
ASSA ABLOY Ltd
HID Global Ireland Teoranta
Mul-T-Lock Ltd
ASSA ABLOY Holdings (SA) Ltd
ASSA ABLOY Inc
Fleming Door Products, Ltd
ABLOY Canada Inc.
ASSA ABLOY Door Group ,Inc.
ASSA ABLOY Australia Pacific Pty Ltd
Cerramex, S.A de C.V
ASSA ABLOY Mexico, S.A de CV
Cerraduras y Candados Phillips S.A de C.V
Cerraduras de Colombia S.A.
WHAIG Limited
ASSA ABLOY Asia Pacific Ltd
Cardo AB
ASSA ABLOY Portugal, Unipessoal, Lda (Portugal)
ASSA ABLOY Mobile Services AB
ASSA ABLOY Holding Italia S.p.A.
HID SA (Argentina)
HID Global SAS
Dynaco US Inc
CEDES Holding AG
ASSA ABLOY East Africa Ltd
Total

1 The Group’s holdings amount to 100 percent.

Note 17 Investments in associates

2016
Company name

Agta Record AG
Goal Co., Ltd
SARA Loading Bay Ltd
Talleres Agui S.A.
Saudi Crawford Doors Ltd
Other
Total

Corporate identity number,
Registered office

Number of
shares

Share of
equity, %

Carrying
amount,
SEK M

Parent company

556061-8455, Eskilstuna
556204-8511, Landskrona
556047-9148, Stockholm
516406-0740, Stockholm
556602-4500, Stockholm
1094741-7, Joensuu
979207476, Moss
CVR 10050316, Herlev
HR B 66227, Berlin
52153924, Raamsdonksveer
210800004058002, Dashiqiao
412140907, R.C.S. Versailles
CH-020.3.913.588-8, Zürich
CH-232-0730018-2, Granges
FN 273601f, A-6175, Kematen
2096505, Willenhall
364896, Galway
520036583, Yavne
1948/030356/06, Roodepoort
039347-83, Oregon
147126, Ontario
1148165260, Montreal
814406948 RC0001, Ontario
ACN 095354582, Oakleigh, Victoria
CER8805099Y6, Mexico
AAM961204CI1, Mexico
CCP910506LK2, Mexico
860009826-8, Bogota
EC21330, Bermuda
53451, Hong Kong
556026-8517, Malmö
PT500243700, Alfragide
556909-5929, Stockholm
IT01254420597, Rome
CUIT 30-61783980-2, Buenos Aires
FR21341213411, Nanterre
2979272, Illinois
CHE-101.321-677, Landquart
C.20402, Nairobi

70
1,000
400
60,000
1,000
800,000
150,000
60,500
1
180
–
15,184,271
211,000
2,500
1
1,330,000
501,000
13,787,856
100,220
100
25,846,600
1
1
48,190,000
4
50,108,549
112
2,201,670
100,100
1,000,000
27,000,000
1
50,000
650,000
2,400
1,000,000
850
300,000
13,500

100
100
100
100
100
100
100
100
100
100
661
100
981
100
100
100
100
901
100
100
100
100
100
100
0
100
0
711
100
100
100
100
100
100
21
100
100
100
100

Country of registration

Switzerland
Japan
United Kingdom
Spain
Saudi Arabia

Group

Number of
shares

Share of
equity, %

5,166,945
2,778,790
4,990
4,800
800

39
46
50
40
40

197
192
6,036
145
189
4,257
538
376
1,086
771
2,228
1,964
0
47
109
3,077
293
901
184
2,237
0
0
17
242
0
762
0
142
303
72
5,093
0
25
974
0
82
309
673
90
33,611

Carrying
amount,
SEK M

1,586
496
14
8
5
1
2,109

The share of equity in Agta Record AG has been estimated on the basis of the associated company’s latest available financial
report, which is the published Interim Report for the first half of 2016. For the period January to June, the company’s revenue
totaled SEK 1,542 M (1,391) and income after tax was SEK 78 M (65). The company’s assets totaled SEK 3,127 M (2,736) and
total liabilities amounted to SEK 1,148 M (850).

Group

2015
Company name

Agta Record AG
Goal Co., Ltd
SARA Loading Bay Ltd
Talleres Agui S.A.
Saudi Crawford Doors Ltd
Other
Total

Country of registration

Switzerland
Japan
United Kingdom
Spain
Saudi Arabia

Number of
shares

Share of
equity, %

5,166,945
2,778,790
4,990
4,800
800

39
46
50
40
40

Carrying
amount,
SEK M

1,430
452
14
8
5
1
1,910

ASSA ABLOY ANNUAL REPORT 2016

NOTES 79

Notes

Note 18 Deferred tax

SEK M

Deferred tax assets
Property, plant and equipment
and intangible assets
Pensions
Tax losses and other tax credits
Other deferred tax assets
Deferred tax assets

Deferred tax liabilities
Property, plant and equipment
and intangible assets
Other deferred tax liabilities
Deferred tax liabilities
Deferred tax assets, net

Change in deferred tax

Opening balance
Acquisitions of subsidiaries, net
Recognized in income statement
Deferred tax from actuarial gain/loss on
post-employment benefit obligations
Exchange rate differences
Closing balance

Group

2015

2016

203
514
356
361
1,434

1,566
465
2,031
–597

93
–365
–309

–33
17
–597

120
550
378
851
1,899

1,660
684
2,344
–445

–597
15
152

36
–51
–445

The Group has tax loss carryforwards of SEK 1,291 M (1,626)
for which deferred tax assets have not been recognized, as it
is uncertain whether they can be offset against taxable
income in future taxation.

Trade receivables per currency

USD
EUR
CNY
SEK
GBP
CAD
AUD
Other currencies
Total

Current year change in
provision for bad debts

Opening balance
Acquisitions and disposals
Receivables written off
Reversal of unused amounts
Provision for bad debts
Exchange rate differences
Closing balance

2015

3,644
2,669
2,060
493
509
287
305
1,808
11,775

2016

4,320
2,979
1,480
595
514
324
219
2,217
12,648

2015

2016

620
54
–89
–37
212
–2
758

758
18
–84
–80
299
49
959

Note 22 Parent company’s equity
The Parent company’s equity is split between restricted and
non-restricted equity. Restricted equity consists of share
capital, revaluation reserve, statutory reserve and the fair
value reserve. The statutory reserve contains premiums
(amounts received from share issues that exceed the nomi-
nal value of the shares) relating to shares issued up to 2005.

Non-restricted equity consists of share premium
reserves, retained earnings and net income for the year.

Note 19 Other financial assets
Group

Parent company

Note 23 Share capital, number of shares and

SEK M

2015

2016

Investments in associates
Other shares and interests
Interest-bearing non-
current receivables
Other non-current receivables
Total

–
11

30
36
77

–
11

41
34
86

2015

1,621
–

–
–
1,621

2016

1,621
–

–
–
1,621

Note 20 Inventories

SEK M

Materials and supplies
Work in progress
Finished goods
Advances paid
Total

Group

2015

2,430
1,723
3,874
320
8,348

2016

2,744
1,959
4,531
331
9,565

Impairment of inventories amounted to SEK 278 M (139).

Note 21 Trade receivables

SEK M

Trade receivables
Provision for bad debts
Total

Maturity analysis

Trade receivables not due
Trade receivables due not impaired:
< 3 months
3–12 months
> 12 months

Impaired trade receivables:
< 3 months
3–12 months
> 12 months

Total

Group

2015

12,532
–758
11,775

2016

13,608
–959
12,648

8,308

8,916

2,982
660
582
4,224

–78
–121
–558
–758
11,775

3,024
898
769
4,691

–111
–171
–677
–959
12,648

dividend per share

Number of shares (thousands)

Series A

Series B

Total

Share
capital,
SEK K

Opening balance at
1 January 2015
Stock split
Closing balance at
31 December 2015

Number of votes,
thousands
Opening balance at
1 January 2016
Closing balance at
31 December 2016

Number of votes,
thousands

19,175
38,350

351,684
703,368

370,859 370,859
741,718

57,525 1,055,052 1,112,576 370,859

575,259 1,055,052 1,630,311

57,525 1,055,052 1,112,576 370,859

575,259 1,055,052 1,630,311

All shares have a par value of around SEK 0.33 (0.33) and give
shareholders equal rights to the company’s assets and
earnings. All shares are entitled to dividends subsequently
determined. Each Series A share carries ten votes and each
Series B share one vote. All issued shares are fully paid.

The weighted average number of shares was 1,110,776
(1,110,776) during the year. None of the Group’s outstand-
ing long-term incentive programs are expected to result in
significant dilution in the future.

The total number of treasury shares as at 31 December
2016 amounted to 1,800,000. No shares have been repur-
chased during the year.

Dividend per share
The dividend paid during the financial year totaled SEK 2,944 M
(2,407), equivalent to SEK 2.65 (2.17) per share. A dividend
for 2016 of SEK 3.00 per share, a total of SEK 3,332 M, will be
proposed at the Annual General Meeting on Wednesday,
26 April 2017.

NOTES

ASSA ABLOY ANNUAL REPORT 2016

Note 24 Post-employment employee benefits
Post-employment employee benefits include pensions and
medical benefits. Pension plans are classified as either
defined benefit plans or defined contribution plans. Pension
obligations in the balance sheet mainly relate to defined
benefit plans. ASSA ABLOY has defined benefit pension plans
in a number of countries, with those in the US, the UK and
Germany being the most significant.

The defined benefit plans in the US and the UK are
secured by assets in pension funds, while the plans in
Germany are chiefly unfunded. In the US, there are also
unfunded plans for post-employment medical benefits.
The operations of pension funds are regulated by
national regulations and practice. The responsibility for
monitoring the pension plans and their assets rests mainly
with the boards of the pension funds, but can also rest more
directly with the company. The Group has an overall policy
for the limits within which asset allocation should be made.
Each pension fund adjusts its local asset allocation accord-
ing to the nature of the local pension obligation, particularly
the remaining term and the breakdown between active
members and pensioners. The Group has not changed the
processes used for managing these risks compared with
previous periods.

The investments are well diversified so that depreciation

of an individual investment should not have any material
impact on the plan assets. The majority of assets are
invested in shares as the Group considers that shares pro-
duce the best long-term return at an acceptable risk level.
The total allocation to shares should not, however, exceed
60 percent of total assets. Fixed income assets are invested
in a combination of ordinary government bonds and corpo-
rate bonds but also in inflation-indexed bonds. The average
term of these is normally somewhat shorter than the term
of the underlying liability. Bonds should not account for less
than 30 percent of assets. A small proportion of assets is
also invested in real estate and alternative investments,
mainly hedge funds.

As at 31 December 2016, shares accounted for 44 per-
cent (45) and fixed income securities for 33 percent (34) of
plan assets, while other assets accounted for 23 percent
(22). The actual return on plan assets in 2016 was SEK 544 M
(40).

Amounts recognized in the income statement

Pension costs, SEK M

2015

2016

Defined contribution pension plans
Defined benefit pension plans
Post-employment medical benefit plans
Total

of which, included in:
Operating income
Net financial items

479
164
31
674

577
96

576
168
32
777

685
92

Amounts recognized in the balance sheet

Pension provisions, SEK M

Provisions for defined benefit pension plans
Provisions for post-employment medical
benefits
Provisions for defined contribution
pension plans
Total

2015

2,163

2016

2,497

582

610

16
2,761

14
3,121

Pensions with Alecta
Commitments for old-age pensions and family pensions for
salaried employees in Sweden are secured in part through
insurance with Alecta. According to UFR 10, this is a defined
benefit plan that covers many employers. For the 2016 finan-
cial year, the company has not had access to information
making it possible to report this plan as a defined benefit
plan. Pension plans in accordance with ITP secured through
insurance with Alecta are therefore reported as defined con-
tribution plans. The year’s pension contributions that are
contracted to Alecta total SEK 31 M (27), of which SEK 11 M
(11) relates to the Parent company. Pension contributions
are expected to remain largely unchanged in 2017.

Alecta’s surplus can be distributed to policyholders and/

or the insured. As at 30 September 2016, Alecta’s surplus
expressed as the collective consolidation level amounted
preliminarily to 142 percent (153 percent as at 30 Decem-
ber 2015). The collective consolidation level consists of the
market value of Alecta’s assets as a percentage of its insur-
ance commitments calculated according to Alecta’s actuar-
ial calculation assumptions, which do not comply with IAS
19. The collective consolidation level is normally allowed to
vary between 125 and 155 percent. If the consolidation level
deviates from this range, measures in the form of an adjust-
ment of the premium level should be taken to return to the
normal range.

Specification of defined benefit pension plans, post-employment medical benefits and plan assets by country

Specification of defined
benefits, SEK M

Present value of funded
obligations

United Kingdom

Germany

USA

Other countries

Total

2015

2016

2015

2016

2015

2016

2015

2016

2015

2016

2,617

2,859

103

1,998

2,166

980

1,268

5,684

6,397

Fair value of plan assets
Net value of funded plans

–2,370
247

–2,543
317

–23
67

–23
81

–1,577
421

–1,629
538

–690
290

–870
398

–4,660
1,024

–5,063
1,333

Present value of unfunded
obligations
Present value of unfunded
medical benefits
Net value of defined benefit
pension plans

Provisions for defined
contribution pension plans
Total

–

643

680

–

496

484

1,138

1,164

–

578

606

582

610

247

317

709

761

999

1,143

790

886

2,745

3,107

–
247

–
317

–
709

–
761

–
999

–
1,143

16
806

14
900

16
2,761

14
3,121

ASSA ABLOY ANNUAL REPORT 2016

NOTES 81

Notes

Note 24 cont.

Movement in obligations

2016, SEK M

Opening balance at 1 January 2016

Acquisitions/disposals
Reclassifications

Recognized in the income statement:
Current service cost
Past service cost
Impairment/reversal of pension receivables
Interest expense/income
Total recognized in the income statement

Recognized in other comprehensive income:
Return on plan assets,
excluding amounts included above
Gain/loss from change in demographic assumptions
Gain/loss from change in financial assumptions
Experience-based gains/losses
Remeasurement of net pension obligations
Exchange rate differences
Total recognized in other comprehensive income

Contributions and payments:
Employer contributions
Employee contributions
Payments
Controls
Total payments
Closing balance at 31 December 2016

2015, SEK M

Opening balance at 1 January 2015

Acquisitions/disposals
Reclassifications

Recognized in the income statement:
Current service cost
Past service cost
Interest expense/income
Total recognized in the income statement

Contributions and payments:
Employer contributions
Employee contributions
Payments
Total payments
Closing balance at 31 December 2015

Plan assets allocation

Plan assets

Publicly traded shares
Government bonds
Corporate bonds
Inflation-linked bonds
Property
Cash and cash equivalents
Alternative investments
Other assets
Total

Post-employ-
ment medical
benefits

Defined
benefit
pension plans

582

6,823

Plan assets

–4,660

–
–

6
0
–
26
32

–
–19
–
–
–19
51
51

–
0
–37
–
–37
610

166
27

115
–4
–9
227
329

–
–26
663
–97
539
24
24

–
17
–352
–13
–347
7,560

–115
–

–
–
–
–161
–161

–383
–
–
–
–383
50
50

–66
–23
281
13
205
–5,063

Post-employ-
ment medical
benefits

Defined
benefit
pension plans

554

6,427

Plan assets

–4,103

–
–

7
–
23
31

–
–
–10
–
–10
36
26

–
0
–28
–28
582

148
347

98
–8
233
324

–
–38
–207
–16
–261
127
–134

–
12
–302
–290
6,823

–123
–301

–
–
–160
–160

121
–
–
–
121
–133
–12

–203
–17
258
39
–4,660

2015

2,077
659
689
228
314
32
93
568
4,660

Total

2,745

51
27

121
–3
–9
92
201

–383
–45
663
–97
138
125
125

–66
–5
–108
–
–179
3,107

Total

2,877

25
47

106
–8
96
194

121
–38
–217
–16
–150
30
–120

–203
–4
–72
–279
2,745

2016

2,237
630
719
297
319
40
101
720
5,063

NOTES

ASSA ABLOY ANNUAL REPORT 2016

Note 24 cont.

Key actuarial assumptions

United Kingdom

Germany

USA

Key actuarial assumptions (weighted average), %

2015

2016

2015

2016

2015

2016

Discount rate
Expected annual salary increases
Expected annual pension increases
Expected annual medical benefit increases
Expected annual inflation

3.8
n/a
1.9
n/a
2.0

2.7
n/a
2.1
n/a
2.4

2.2
2.8
1.3
n/a
1.3

1.6
2.8
1.3
n/a
1.3

4.4
n/a
2.0
6.9
3.0

4.2
n/a
2.0
6.6
3.0

+1.0 %

–16.1%
10.9%

–1.0 %

14.5%
–9.1%

Group

2015

2016

567
92
562

58
952
615
2,847

559
100
776

72
1,083
599
3,190

Sensitivity analysis of defined benefit obligations and post-employment medical benefits

The effect on defined benefit obligations and post-employment medical benefits
of a 1 percentage change in some actuarial assumptions, change in percent

Discount rate
Expected annual medical benefit increases

Note 25 Other provisions

Group

Note 26 Other current liabilities

SEK M

Opening balance at
1 January 2015
Provisions for the year
Acquisitions of subsidiaries
Reversal of non-utilized
amounts
Payments
Utilized during the year,
without cash flow impact
Exchange rate differences
Closing balance at
31 December 2015

SEK M

Opening balance at
1 January 2016
Provisions for the year
Reclassifications
Acquisitions of subsidiaries
Disposals of subsidiaries
Reversal of non-utilized
amounts
Payments
Utilized during the year,
without cash flow impact
Exchange rate differences
Closing balance at
31 December 2016

Balance sheet breakdown:

Other non-current provisions
Other current provisions
Total

Restruc-
turing
reserve

Other

Total

941
–
–

–
–375

–12
–3

2,012
262
88

–123
–458

–
–7

2,952
262
88

–123
–832

–12
–10

SEK M

VAT and excise duties
Employee withholding tax
Advances received
Social security contributions and
other taxes
Deferred considerations
Other current liabilities
Total

Note 27 Accrued expenses and deferred income

551

1,773

2,324

Group

Parent company

Group

Restruc-
turing
reserve

Other

Total

551
1,597
–
–
–17

–
–442

–151
34

1,773
103
–30
–47
–24

–214
–405

–
17

2,324
1,700
–30
–47
–41

–214
–847

–151
51

1,572

1,170

2,742

SEK M

2015

2016

2015

2016

Personnel-related
expenses
Customer-related expenses
Deferred income
Accrued interest expenses
Other
Total

2,335
678
345
108
1,161
4,626

2,585
992
439
107
1,352
5,474

200
–
–
61
27
288

226
–
–
51
42
319

Note 28 Contingent liabilities
Group

Parent company

SEK M

Guarantees
Guarantees on behalf of
subsidiaries
Total

2015

2016

2015

2016

100

102

–

–
100

–

11,249 12,048
102 11,249 12,048

Group

2015

1,717
607
2,324

2016

1,945
797
2,742

In addition to the guarantees shown in the table above, the
Group has a large number of minor bank guarantees for per-
formance of obligations in operating activities. No material
liabilities are expected as a result of these guarantees.

Group

Maturity profile – guarantees, SEK M

2015

2016

The restructuring reserve at year-end relates mainly to the
ongoing restructuring program launched during the year.
The cost of this program amounts to SEK 1,597 M and mainly
relates to payments in connection with staff cutbacks. The
breakdown of costs in the consolidated income statement is
as follows: Cost of goods sold (SEK 1,151 M), Selling expenses
(SEK 241 M), Administrative expenses (SEK 112 M) and
Research and development costs (SEK 93 M). The restructur-
ing reserve is expected to be used over the next two years.
The non-current part of the reserve totaled SEK 815 M. For
further information on the restructuring programs, see the
Report of the Board of Directors.

Other provisions mainly relate to taxes and legal obliga-

tions including future environment-related measures.

<1 year
>1<2 years
>2<5 years
>5 years
Total

31
5
42
22
100

44
7
35
17
102

Note 29 Assets pledged against liabilities to

credit institutions

Group

Parent company

SEK M

2015

2016

2015

2016

Real estate mortgages
Other mortgages
Total

18
63
81

148
113
261

–
–
–

ASSA ABLOY ANNUAL REPORT 2016

NOTES 83

Bluvision
On 30 November 2016 the Group acquired 100 per cent of
the share capital of the Bluvision, a leading US Bluetooth Low
Energy (“BLE”) provider in the enterprise Internet of Things
(IoT) market.

The company reinforces the current offering within identi-
fication technologies. The acquisition considerably enhances
the Group’s position within the enterprise IoT market and will
provide complementary growth opportunities. The company
is headquartered in Fort Lauderdale, Florida.

As at the balance sheet date the purchase price allocation

is preliminary in terms of valuation of separately acquired
intangible assets.

Other acquisitions
Other notable acquisitions during the year comprised Light-
house (USA), Trojan (United Kingdom) and Construction
Specialties (USA and Mexico).

2015
Quantum Secure
On 25 March 2015 the Group acquired 100 per cent of the
share capital of Quantum Secure, the leading provider of
solutions to help enterprises manage identities and meet
compliance requirements in highly-regulated industries.

The acquisition reinforces the strategy of being the world

leader in secure identity solutions. Quantum Secure takes
ASSA ABLOY one step further in being able to provide the
customers with an end to end identity management system.
The company is headquartered in San Jose, California.

Intangible assets in the form of brand, customer relation-
ship and technology have been disclosed. Residual goodwill
is mainly attributable to synergies and other intangible
assets that do not fulfill the criteria for separate reporting.

Other acquisitions
Other notable acquisitions during the year comprised
Prometal (United Arab Emirates), Teamware (Malaysia),
Flexim (Finland) and Papaiz and Udineze (Brazil).

Notes

Note 30 Business combinations
SEK M

Purchase prices
Cash paid for acquisitions during the year
Deferred considerations for acquisitions
during the year
Adjustment of purchase prices for
acquisitions in prior years
Total

2015

2016

2,690

2,388

1,155

568

–10
3,835

–91
2,866

Acquired assets and liabilities
at fair value
Intangible assets
Property, plant and equipment
Deferred tax assets
Other financial assets
Inventories
Current receivables and investments
Cash and cash equivalents
Non-controlling interest
Deferred tax liabilities
Pension provisions
Other non-current liabilities
Current liabilities
Total

Goodwill

Cash paid for acquisitions during the year
Cash and cash equivalents in acquired
subsidiaries
Paid deferred considerations for
acquisitions in previous years
Change in cash and cash equivalents
due to acquisitions

Net sales from acquisition date
EBIT from acquisition date
Net income from acquisition date

1,305
229
43
1
385
673
155
–3
–409
–25
–109
–895
1,350

2,485

2,690

69
355
77
6
251
291
263
–
–46
–51
–136
–665
415

2,451

2,388

–155

–263

635

515

3,171

2,640

908
51
30

1,067
104
86

The table above includes fair value adjustments of acquired
net assets from acquisitions made in previous years.

Acquisition analyses have been prepared for all acquisi-

tions in 2016. The net sales of acquired units for 2016
totaled SEK 2,373 M (2,586) and net income amounted to
SEK 186 M (85). Acquisition-related costs for 2016 totaled
SEK 82 M (80) and have been reported as other operating
expenses in the income statement.

See below for an account of some acquisitions completed

in 2016 and 2015. No single acquisition is significant in
terms of size and separate acquisition details are therefore
not provided.

2016
CEDES
On 10 February 2016 the Group acquired 100 per cent of the
share capital of the Swiss company CEDES, a leading com-
pany in sensor technology for the door and elevator industry.
The acquisition represents an important step in the strat-

egy of adding more intelligence within entrance automa-
tion. Through the combination of different technologies this
will lead to highly innovative and integrated solutions for the
customers. The company is headquartered in Landquart,
Switzerland.

Goodwill from the acquisition is mainly attributable to
synergies and other intangible assets that do not fulfill the
criteria for separate reporting.

NOTES

ASSA ABLOY ANNUAL REPORT 2016

Note 31 Profit from discontinued operations
Group

Note 32 Cash flow

MSEK

2015

2016

SEK M

Group

2015

2016

Profit from discontinued operations
Sales
Costs
Profit from discontinued operations
– before tax

Tax on income
Profit from discontinued operations
– after tax

Net income of disposal group classified as
held for sale
Profit from discontinued operations

Cashflow from discontinued operations
Cashflow from operating activities
Cashflow from investing activities
Cashflow from financing activities
Cashflow from discontinued operations

–
–

–

–
–

–
–
–
–

449
–436

–0

14
28

5
–10
35
30

In September the Group sold its car locks business (Car
Locks). The car locks business was an independent operation
within ASSA ABLOY, clearly distinguishable from the rest of
the Group. In external reports during the year the business
was classified as held for sale and reported in the Annual
Report as a discontinued operation.

Adjustments for non-cash items
Profit on sales of non-current assets
Profit on sales of subsidiaries
Change in pension provision
Share of earnings in associates
Dividend from associates
Remeasurement of earn out provisions
related to acquisitions
Other
Adjustments for non-cash items

Change in working capital
Inventories increase/decrease (–/+)
Trade receivables increase/decrease (–/+)
Trade payables increase/decrease (+/–)
Other working capital increase/
decrease (–/+)
Change in working capital

Disposals of subsidiaries
Purchase prices received, net
Cash and cash equivalents in acquired
subsidiaries
Change in consolidated cash and cash
equivalents due to divestments

–38
–
98
–134
52

–284
37
–269

–147
–713
549

–189
–502

–

–29
33
109
–127
45

–440
54
–354

–551
–61
461

213
62

–28

ASSA ABLOY ANNUAL REPORT 2016

NOTES 85

Notes

Note 33 Employees

Salaries, wages, other remuneration and social security costs

SEK M

Salaries, wages and other remuneration
Social security costs
– of which pensions
Total

Group

2015

14,805
4,190
577
18,995

2016

16,536
4,694
685
21,231

Fees to Board members in 2016 (including committee work), SEK thousand

Name and post

Lars Renström, Chairman
Carl Douglas, Vice Chairman
Ulf Ewaldsson, Member
Eva Karlsson, Member
Birgitta Klasén, Member
Eva Lindqvist, Member
Johan Molin, President and CEO
Ulrik Svensson, Member
Jan Svensson, Member
Employee representatives (4)
Total

Board

1,850
800
550
550
550
550
–
550
550
–
5,950

Remuneration
Committee

Audit
Committee

150
–
–
–
–
–
–
75
75
–
300

–
–
–
–
–
125
–
250
125
–
500

Parent company

2015

2016

192
117
29
309

204
115
33
319

Total

2,000
800
550
550
550
675
–
875
750
–
6,750

Total fees to Board members amounted to SEK 5.8 M in 2015.

Remuneration and other benefits of the Executive Team in 2016, SEK thousands

Name

Fixed salary Variable salary

benefits Other benefits

Pension costs

Johan Molin, President and CEO
Other members of the Executive Team (8)
Total remuneration and benefits

16,788
47,196
63,984

8,784
19,062
27,846

8,553
14,420
22,973

129
4,349
4,478

6,896
10,659
17,555

Stock-related

Total remuneration and other benefits of the Executive Team amounted to SEK 133 M in 2015.

Salaries and remuneration for the Board of Directors
and the Parent company’s Executive Team
Salaries and remuneration for the Board of Directors and the
Parent company’s Executive Team totaled SEK 56 M (55),
excluding pension costs and social security costs. Pension
costs amounted to SEK 10 M (9). Pension obligations for
several senior executives are secured through pledged
endowment insurances.

Long-term incentive programs1
At the 2010 Annual General Meeting, it was decided to
launch a long-term incentive program (LTI 2010) for senior
executives and other key staff in the Group. The aim of
LTI 2010 is to create the prerequisites for retaining and
recruiting competent staff for the Group, providing competi-
tive remuneration and uniting the interests of shareholders,
senior executives and key staff.

At the 2011 to 2016 Annual General Meetings, it was

decided to implement further long-term incentive
programs for senior executives and other key staff in the
Group. The new long-term incentive programs, named
LTI 2011 to LTI 2016 have been drawn up with similar terms
to LTI 2010.

For each Series B share acquired by the CEO within the
framework of LTI 2014, LTI 2015 and LTI 2016, the company
awards one matching stock option and four performance-
based stock options. For each Series B share acquired by
other members of the Executive Team, the company awards
one matching stock option and three performance-based
stock options. For other participants, the company awards
one matching stock option and one performance-based
stock option. In accordance with the terms of the incentive
programs, employees have acquired a total of 413,406
shares in ASSA ABLOY AB, of which 127,884 shares were
acquired in 2016 within the framework of LTI 2016.

Each matching stock option entitles the holder to receive
one free Series B share in the company after three years,
provided that the holder, with certain exceptions, is still
employed in the Group when the interim report for
Q1 2017, 2018 and 2019 for the respective program
(LTI 2014–LTI 2016) is published, and has retained the shares
acquired within the framework of the long-term incentive
programs. Each per form ance-based stock option entitles
the holder to receive one free Series B share in the company
three years after allotment, provided that the above con-
ditions have been fulfilled. In addition, the maximum level in
a range determined by the Board of Directors for the perfor-
mance of the com pany’s earnings per share must have been
fulfilled. The performance-based condition was 100 percent
fulfilled for LTI 2014 and LTI 2015 and 67 percent for LTI 2016.
Outstanding matching and performance-based stock
options for LTI 2016 total 363,482. The total number of out-
standing matching and performance-based stock options
for LTI 2014, LTI 2015 and LTI 2016 amounted to 1,072,307
on the reporting date of 31 December 2016.

Fair value is based on the share price on the allotment
date. The present value calculation is based on data from an
external party. Fair value is adjusted for participants who do
not retain their holding of shares for the duration of the
program. In the case of performance-based shares, the com-
pany assesses the probability of the performance targets
being met when calculating the compensation expense.
The fair value of ASSA ABLOY’s Series B share on the

allotment date for LTI 2016 of 26 May 2016 was SEK 171.24.
The fair value of ASSA ABLOY’s Series B share on the allot-
ment date for LTI 2015 of 28 May 2015 was SEK 169.50. The
equivalent value on the allotment date for LTI 2014 of
21 May 2014 was SEK 112.86.

The total cost of the Group’s long-term incentive programs
(LTI 2013–LTI 2016) excluding social security costs amounted

ASSA ABLOY ANNUAL REPORT 2016

1 Number of shares and fair values

have been recalculated for all histor-
ical periods reflecting the stock split
in 2015.

NOTES

Note 33 cont.

to SEK 42 M (39) in 2016. In April 2016 a redemption of
LTI 2013 took place and 481,558 shares (703,782) at a total
market value of SEK 80 M (121) were transferred to the
participants of the program. Parts of the redemption of
LTI 2013 were settled through endowment insurances. The
payment for the transferred shares was recognized in equity.

Other equity-based incentive programs
ASSA ABLOY has previously issued a number of convertible
debentures to employees in the Group. At year-end 2016,

there were no outstanding convertible debentures issued to
employees in the Group.

Notice and severance pay
If the CEO is given notice, the company is liable to pay the
equivalent of 24 months’ basic salary and other employment
benefits. If one of the other members of the Executive Team
is given notice, the company is liable to pay a maximum six
months’ basic salary and other employment benefits plus an
additional 12 months’ basic salary.

Average number of employees per country, broken down by gender

China
USA
Sweden
France
Brazil
Germany
United Kingdom
Mexico
Finland
Netherlands
Czech Republic
Malaysia
Romania
Canada
Norway
Australia
South Korea
Poland
Belgium
Switzerland
Spain
United Arab Emirates
Denmark
Italy
South Africa
India
Chile
Israel
New Zealand
Hungary
Colombia
Austria
Other
Total

Sweden
Total

Total

12,591
9,202
2,065
1,971
792
1,612
1,571
1,360
1,147
1,029
1,315
756
793
826
750
748
681
561
501
378
534
253
454
515
398
379
352
308
304
205
213
190
1,239
45,994

Total

180
180

Group

2015

of which
women

of which
men

5,085
2,563
495
614
205
467
515
417
368
155
540
339
304
193
145
237
231
115
106
102
124
17
117
131
168
33
96
95
102
21
49
36
336
14,520

7,506
6,639
1,570
1,357
588
1,145
1,055
943
779
875
775
417
489
633
605
511
450
446
394
276
410
236
337
383
230
346
256
214
202
184
164
154
903
31,473

Total

11,439
9,711
2,100
1,998
1,648
1,623
1,577
1,394
1,278
997
986
847
845
819
717
712
712
589
584
563
531
475
471
467
461
423
357
304
289
248
204
179
1,385
46,928

Parent company

2016

of which
women

of which
men

5,399
2,567
512
604
519
473
510
428
368
147
350
385
340
188
132
211
267
119
118
182
167
34
118
129
208
37
98
88
98
39
52
34
370
15,290

6,040
7,143
1,588
1,394
1,130
1,150
1,067
966
910
850
637
462
505
631
585
500
445
470
466
381
365
441
353
338
253
385
259
216
191
209
152
145
1,015
31,638

2015

of which
women

of which
men

47
47

133
133

2016

of which
women

of which
men

42
42

141
141

2016

of which
women

of which
men

3
1
1
4

6
8
2
14

Total

183
183

Total

9
9
3
18

Gender distribution of Board of Directors and Executive Team

Board of Directors1
Executive Team
– of which Parent company’s Executive Team
Total

1 Excluding employee representatives.

2015

of which
women

of which
men

3
1
1
4

5
8
2
13

Total

8
9
3
17

ASSA ABLOY ANNUAL REPORT 2016

NOTES 87

Notes

Note 34 Financial risk management and financial

instruments

Financial risk management
ASSA ABLOY is exposed to a variety of financial risks due to its
international business operations. Financial risk manage-
ment for ASSA ABLOY’s units has been implemented in
accordance with the Group’s financial policy. The principles
for financial risk management are described below.

Organization and activities
ASSA ABLOY’s financial policy, which is determined by the
Board of Directors, provides a framework of guidelines and
regulations for the management of financial risks and
financial activities.

ASSA ABLOY’s financial activities are coordinated
centrally and the majority of financial transactions are
conducted by the subsidiary ASSA ABLOY Financial
Services AB, which is the Group’s internal bank. External
financial trans actions are conducted by Treasury. Treasury
achieves sig nificant economies of scale when negotiating
borrowing agreements, using interest rate derivatives and
managing currency flows.

selling assets to reduce debt. The capital requirement is
assessed on the basis of factors such as the net debt/equity
ratio.

Net debt is defined as interest-bearing liabilities, includ-
ing negative market values of derivatives, plus pension pro-
visions, less cash and cash equivalents, and other interest-
bearing investments including positive market values of
derivatives. The table ‘Net debt and equity’ shows the
position as at 31 December.

Net debt and equity

SEK M

Non-current interest-bearing receivables
Short-term interest-bearing investments
incl. positive market values of derivatives
Cash and bank balances
Pension provisions
Non-current interest-bearing liabilities
Current interest-bearing liabilities incl.
negative market values of derivatives
Total
Equity
Net debt/equity ratio

Group

2015

–30

–182
–501
2,761
15,568

4,653
22,269
41,579
0.54

2016

–41

–230
–689
3,121
16,901

4,065
23,127
47,224
0.49

Capital structure
The objective of the Group’s capital structure is to safeguard
its ability to continue as a going concern, and to generate
good returns for shareholders and benefits for other stake-
holders. Maintaining an optimal capital structure enables
the Group to keep capital costs as low as possible. The Group
can adjust the capital structure based on the requirements
that arise by varying the dividend paid to shareholders,
returning capital to shareholders, issuing new shares or

Another important variable in the assessment of the Group’s
capital structure is the credit rating assigned by credit rating
agencies to the Group’s debt. It is essential to maintain a
solid credit rating in order to have access to both long-term
and short-term financing from the capital markets when
needed. ASSA ABLOY maintains both long-term and short-
term credit ratings from Standard & Poor’s and a short-term
rating from Moody’s.

Maturity profile – financial instruments1

SEK M2

Long-term bank loans
Long-term capital market loans
Short-term bank loans
Commercial papers and short-term
capital market loans
Derivatives (outflow)
Total by period

<1 year

–249
–2,213
–1,325

–1,240
–8,649
–13,675

31 December 2015

31 December 2016

>1<2
years

–464
–2,455
–

–
–26
–2,944

>2<5
years

–1,500
–6,073
–

–
–567
–8,141

>5 years

–1,130
–5,168
–

–
–29
–6,327

<1 year

–459
–2,626
–790

–455
–8,032
–12,363

>1<2
years

–452
–2,765
–

–
–569
–3,787

>2<5
years

–3,093
–4,745
–

–
–54
–7,892

>5 years

–856
–6,287
–

–
–54
–7,198

Cash and cash equivalents incl.
interest-bearing receivables
Non-current interest-bearing
receivables
Derivatives (inflow)
Deferred considerations
Trade receivables
Trade payables
Net total

Confirmed credit facilities
Credit facilities maturing < 1 year
Adjusted maturity profile1

683

–

919

–

31
8,659
–952
11,775
–6,553
–33

8,229
–685
7,510

–
48
–966
–
–
–3,862

–
–
–3,862

–
631
–684
–
–
–8,194

–8,229
–
–16,422

–
90
–39
–
–
–6,276

–
–
–6,276

41
8,013
–1,083
12,648
–7,443
732

8,620
–715
8,638

–
547
–1,023
–
–
–4,264

–
–
–4,264

–
121
–93
–
–
–7,864

–8,620
–
–16,484

–
110
–50
–
–
–7,138

–
–
–7,138

1 For maturity structure of guarantees, see Note 28.
2 The amounts in the table are undiscounted and include future known interest payments. The exact amounts are therefore not found in the balance sheet.

NOTES

ASSA ABLOY ANNUAL REPORT 2016

Note 34 cont.

External financing/net debt

Credit lines/facilities

US Private Placement Program
US Private Placement Program
US Private Placement Program
US Private Placement Program
US Private Placement Program
US Private Placement Program
Multi–Currency RCF
Bank loan EIB
Bank loan EIB
Bank loan NIB

Global MTN Program

Amount,
SEK M

1,111
228
637
456
911
683
8,620
702
1,406
526
526
17,765

Other long-term loans
Total long-term loans/facilities

1,093
34,663

1,391

455
455
9,112

5,000
692
2,108
19,186
53,849

Global MTN Program

US Private Placement Program

Global CP Program

Swedish CP Program
Other bank loans
Overdraft facility
Total short-term loans/facilities
Total loans/facilities

Cash and bank balances
Short-term interest-bearing
investments
Long-term interest-bearing
investments
Market value of derivatives
Pensions
Net debt

Maturity

Dec 2018
Aug 2019
May 2020
Aug 2022
Aug 2022
Aug 2024
Jun 2020
May 20202
Apr 20222
Dec 2019
Dec 2021
Mar 2018
Jun 2018
Sep 2018
Oct 2018
Jan 2019
Aug 2019
Sep 2019
Feb 2020
Jun 2020
Sep 2020
Nov 2020
Dec 2020
Feb 2021
Aug 2021
Oct 2021
Mar 2022
Nov 2023
Sep 2024
Feb 2025
Mar 2025
Dec 2025
Feb 2027
Apr 2030

May 2017
Sep 2017
Apr 2017
May 2017

Carrying
amount,
SEK M

Currency

Amount
2015

Amount
2016

Of which Parent
company, SEK M

USD
USD
USD
USD
USD
USD
EUR
EUR
USD
EUR
EUR
EUR
SEK
USD
EUR
USD
USD
USD
EUR
AUD
EUR
EUR
EUR
USD
USD
EUR
EUR
USD
EUR
EUR
EUR
USD
EUR
EUR

SEK
CHF
USD
USD
USD
EUR
SEK

122
25
70
50
100
75
900
92
0
55
55
50
500
10
30
10
50
20
50
0
70
35
30
50
0
15
50
25
0
50
30
0
30
70

500
100
50
50
50
68
200

122
25
70
50
100
75
900
73
154
55
55
50
500
10
30
10
50
20
50
20
70
35
30
50
10
15
50
25
100
50
30
50
30
70

500
100
50
50
50
0
0

1,111
228
637
494
911
683

702
1,406
526
526
479
500
91
287
91
456
182
479
132
669
3551
3021
455
91
144
478
2381
952
478
3261
4501
287
664
1,093
16,901

500
891
455
455
455
0
0
692
508
3,929
20,829

–689

–63

–41
–30
3,121
23,127

479
500
91
287
91
456
182
479
132
669

286
455
91
144
478

952
478
287
456
287
664
842
8,786

500
891

14
1,404
10,191

10,191

1 The loans are subject to hedge accounting.
2 The loan amortizes starting November 2016. In the table the average date of maturity of the loan has been stated.

Rating

Agency

Short-term Outlook

Long-term

Standard & Poor’s
Moody’s

A2
P2

Stable
Stable

A –
n/a

Credit
outlook

Stable

The Group’s credit rating remained unchanged during the year.

Financing risk and maturity profile
Financing risk is defined as the risk of being unable to meet pay-
ment obligations as a result of inadequate liquidity or difficul-
ties in obtaining external financing. ASSA ABLOY manages
financing risk at Group level. Treasury is responsible for external
borrowings and external investments. ASSA ABLOY strives to
have access on every occasion to both short-term and long-
term loan facilities. In accordance with financial policy, the avail-
able loan facilities, including available cash and cash equivalents,
should include a reserve (facilities available but not utilized)
equivalent to 10 percent of the Group’s total annual sales.

ASSA ABLOY ANNUAL REPORT 2016

NOTES 89

Note 34 cont.

Notes

Maturity profile
The table ‘Maturity profile’ on page 88 shows the maturities
for ASSA ABLOY’s financial instruments, including confirmed
credit facilities. The maturities are not concentrated to a
particular date in the immediate future. An important com-
ponent of liquidity planning is the Group’s Multi-Currency
Revolving Credit Facility, which matures in June 2020. This
credit facility was wholly unutilized at year-end. Moreover,
existing financial assets are also taken into account. The
table shows undiscounted cash flows relating to the Group’s
financial instruments at the reporting date, and these
amounts are therefore not found in the balance sheet.

Some of the Group’s main financing agreements contain a
customary Change of Control clause. This clause means that
lenders have the right in certain circumstances to demand
the renegotiation of conditions or to terminate the agree-
ments should control of the company change.

Currency composition
The currency composition of ASSA ABLOY’s borrowing
depends on the currency composition of the Group’s assets
and other liabilities. Currency swaps are used to achieve the
desired currency composition. See the table ‘Net debt by
currency’ below.

Interest-bearing liabilities
The Group’s long-term loan financing mainly consists of a
Private Placement Program in the US totaling USD 542 M,
of which USD 442 M (542) is long-term, a GMTN program of
SEK 9,976 M (9,111), of which SEK 8,585 M (7,886) is long-
term, loans from financial institutes as the European Invest-
ment Bank (EIB) of EUR 73 M (92) and 154 (0), and a loan
from the Nordic Investment Bank of EUR 110 M (110).
During the year, four new issues were made under the GMTN
program for a total amount of around SEK 1,635 M. In addi-
tion, a new loan was obtained from the EIB for USD 154 M.
Other changes in long-term loans are mainly due to some of
the originally long-term loans now having less than 1 year to
maturity. The size of the loans has also been affected by cur-
rency fluctuations, in particular the strengthening of the
USD against SEK. In total SEK 2,876 M was raised in new long-
term loans while SEK 2,223 M of originally long-term loans
were repaid during the year.

The Group’s short-term loan financing mainly consists of
two Commercial Paper Programs for a maximum USD 1,000 M
(1,000) and SEK 5,000 M (5,000) respectively. At year-end,
SEK 455 M (1,240) of the Commercial Paper Programs had
been utilized. In addition, substantial credit facilities are
available, mainly in the form of a Multi-Currency Revolving
Credit Facility of EUR 900 M (900). At year-end the average
time to maturity for the Group’s interest-bearing liabilities,
excluding the pension provision, was 49 months (46).

Cash and cash equivalents and other interest-bearing
receivables
Short-term interest-bearing investments totaled SEK 2 M
(34) at year-end. In addition, ASSA ABLOY has non-current
interest-bearing receivables of SEK 41 M (30) and financial
derivatives with a positive market value of SEK 167 M (148)
which, in addition to cash and cash equivalents, are included
in the definition of net financial debt. Cash and cash equiva-
lents are mainly invested in bank accounts or interest-
bearing instruments with high liquidity from issuers with
a credit rating of at least A–, according to Standard & Poor’s
or similar rating agency. The average term for cash and cash
equivalents was 1 day (1) at year-end 2016.

The Parent company’s cash and cash equivalents are held

in a sub-account to the Group account.

SEK M

2015

2016

2015

2016

Group

Parent company

Cash and bank balances
Short-term investments with
maturity less than 3 months
Cash and cash equivalents

Short-term investments with
maturity more than 3 months
Long-term interest- bearing
receivables
Positive market value of
derivatives
Total

404

689

97
501

148
713

61
750

167
960

–

–
–

–

–
–

–

–
–

–

–
–

Net debt by currency

SEK M

USD
EUR
CNY
AUD
NOK
KRW
PLN
CZK
CHF
DKK
SEK
Other
Total

31 December 2015

31 December 2016

Net debt excluding
currency swaps

Net debt including
currency swaps

Net debt excluding
currency swaps

Net debt including
currency swaps

8,036
9,993
74
1
407
369
24
21
986
31
1,731
596
22,269

11,620
5,807
1,975
557
510
369
329
314
199
197
147
244
22,269

9,907
9,728
–199
146
71
369
38
12
1,171
8
1,315
562
23,127

12,277
6,616
928
524
640
534
299
340
653
456
–493
352
23,127

Interest rate risks in interest-bearing assets
Treasury manages interest rate risk in interest-bearing assets.
Derivative instruments such as interest rate swaps and FRAs
(forward rate agreements) may be used to manage interest
rate risk. These investments are mostly short-term. The term
for the majority of these investments is three months or less.

The fixed interest term for these short-term investments was
113 days (45) at year-end 2016. A downward change in the
yield curve of one percentage point would reduce the
Group’s interest income by around SEK 1 M (1) and consoli-
dated equity by SEK 1 M (1).

NOTES

ASSA ABLOY ANNUAL REPORT 2016

Note 34 cont.

Interest rate risks in borrowing
Changes in interest rates have a direct impact on ASSA ABLOY’s
net interest expense. Treasury is responsible for identifying and
managing the Group’s interest rate exposure. Treasury analyzes
the Group’s interest rate exposure and calculates the impact
on income of changes in interest rates on a rolling 12-month
basis. The Group strives for a mix of fixed rate and variable rate
borrowings, and uses interest rate swaps to adjust the fixed
interest term. The financial policy stipulates that the average
fixed interest term should normally be 24 months. At year-end,
the average fixed interest term on gross debt, excluding pen-
sion liabilities, was around 28 months (26). An upward change
in the yield curve of one percentage point would increase the
Group’s interest expense by around SEK 102 M (97) and reduce
consolidated equity by SEK 75 M (72).

Currency risk
Currency risk affects ASSA ABLOY mainly through translation
of capital employed and net debt, translation of the income
of foreign subsidiaries, and the impact on income of flows of
goods between countries with different currencies.

Transaction exposure
Currency risk in the form of transaction exposure, or exports
and imports of goods respectively, is relatively limited in the
Group, even though it can be significant for individual busi-
ness units. The main principle is to allow currency fluctua-
tions to have an impact on the business as quickly as
possible. As a result of this strategy, current currency flows
are not normally hedged.

Transaction flows relating to major currencies
(import + and export –)

Currency exposure

Currency, SEK M

AUD
CAD
CNY
DKK
EUR
GBP
RON
SEK
USD

2015

484
531
–1,123
276
1,590
190
–299
–1,952
293

2016

522
764
–1,255
267
1,833
565
–321
–2,194
291

conditions, gearing per currency should generally aim to be
the same as for the Group as a whole to limit the impact of
fluctuations in individual currencies. Treasury uses currency
derivatives and loans to achieve appropriate financing and to
eliminate undesirable currency exposure.

The table ‘Net debt by currency’ on page 90 shows the use

of forward exchange contracts in relation to financing in
major currencies. Forward exchange contracts are used to
neutralize the exposure arising between external debt and
internal requirements.

Financial credit risk
Financial risk management exposes ASSA ABLOY to certain
counterparty risks. Such exposure may arise from the invest-
ment of surplus cash as well as from investment in debt
instruments and derivative instruments.

ASSA ABLOY’s policy is to minimize the potential credit risk
relating to surplus cash by using cash flow from subsidiaries to
repay the Group’s loans. This is primarily achieved through
cash pools put in place by Treasury. Around 91 percent (88) of
the Group’s sales were settled through cash pools in 2016.
However, the Group can in the short term invest surplus cash
in banks to match borrowing and cash flow.

Derivative instruments are allocated between banks
based on risk levels defined in the financial policy, in order to
limit counterparty risk. Treasury only enters into derivative
contracts with banks that have a good credit rating.

ISDA agreements (full netting of transactions in case of
counterparty default) have been entered into with respect
to interest rate and currency derivatives. The table on page
92 shows the impact of this netting.

Commercial credit risk
The Group’s trade receivables are distributed across a large
number of customers who are spread globally. No single cus-
tomer accounts for more than 1 percent of the Group’s sales.
The concentration of credit risk associated with accounts
receivable is considered limited, but increased slightly in
pace with increased activity in emerging markets, mainly
with respect to China. The fair value of trade receivables is
equivalent to the carrying amount. Credit risks relating to
operating activities are managed locally at company level
and monitored at division level.

Translation exposure in income
The table below shows the impact on the Group’s income
before tax of a 10 percent weakening of the Swedish krona
(SEK) in relation to the major currencies, with all other
variables constant.

Commodity risk
The Group is exposed to price risks relating to purchases of
certain commodities (primarily metals) used in production.
Forward contracts are not used to hedge commodity
purchases.

Impact on income before tax of a 10 percent weakening of SEK

Currency, SEK M

2015

2016

AUD
CHF
CNY
EUR
GBP
HKD
KRW
NOK
USD

37
22
95
139
28
55
17
14
460

36
27
18
131
19
59
20
14
528

Translation exposure in the balance sheet
The impact of translation of equity is limited by the fact that
a large part of financing is in local currency.

The capital structure in each country is optimized based
on local legislation. Whenever possible, according to local

Fair value of financial instruments
Derivative financial instruments such as forward exchange
contracts and forward rate agreements are used to the
extent necessary. The use of derivative instruments is limited
to reducing exposure to financial risks.

The positive and negative fair values in the table ‘Out-
standing derivative financial instruments’ on page 92 show
the fair values of outstanding instruments at year-end, based
on available fair values, and are the same as the carrying
amounts in the balance sheet. The nominal value is equiva-
lent to the gross value of the contracts.

For accounting purposes, financial instruments are classi-
fied into measurement categories in accordance with IAS 39.
The table ‘Financial instruments’ on page 92 provides an
overview of financial assets and liabilities, measurement
category, and carrying amount and fair value per item.

ASSA ABLOY ANNUAL REPORT 2016

NOTES 91

Notes

Note 34 cont.

Disclosures of offsetting of financial assets and liabilities

2015

Amounts
netted
in the
balance
sheet

Net
amounts
in the
balance
sheet

Amount
covered by
netting
agree-
ment but
not offset

2016

Amounts
netted
in the
balance
sheet

Net
amounts
in the
balance
sheet

Amount
covered by
netting
agree-
ment but
not offset

Net
amount

Gross
amount

–
–

148
80

38
38

110
42

167
137

–
–

167
137

76
76

91
61

SEK M

Financial assets
Financial liabilities

Gross
amount

148
80

Netted financial assets and financial liabilities only consist of derivative instruments.

Outstanding derivative financial instruments at 31 December

Instrument, SEK M

Foreign exchange forwards, funding
Interest rate swaps1
Cross currency swaps
Total

31 December 2015

31 December 2016

Positive fair
value

Negative
fair value

Nominal
value

Positive fair
value

Negative
fair value

Nominal
value

26
122
–
148

–31
–25
–24
–80

7,389
2,883
507
10,779

78
88
–
167

–78
–21
–38
–137

6,034
2,113
519
8,666

1 For interest rate swaps, only one leg is included in nominal value.

Financial instruments: carrying amounts and fair values by measurement category

2015

2016

IAS 39
category*

Carrying
amount

Fair value

Carrying
amount

Fair value

3
1
1
5
2
1
1

4
4

4
4
5
2
4
2

11
67
11,775
121
27
34
501

1,606
13,962
15,568

244
4,330
25
55
6,553
2,640

11
67
11,775
121
27
34
501

1,606
14,157
15,763

244
4,330
25
55
6,553
2,640

11
75
12,648
88
78
2
750

1,671
15,230
16,901

–
3,929
21
116
7,443
2,250

11
75
12,648
88
78
2
750

1,671
15,336
17,010

–
3,929
21
116
7,443
2,250

SEK M

Financial assets
Other shares and interests
Other financial assets
Trade receivables
Derivative instruments – hedge accounting
Derivative instruments – held for trading
Short-term investments
Cash and cash equivalents

Financial liabilities
Long-term loans – hedge accounting
Long-term loans – not hedge accounting
Long-term loans, total

Short-term loans – hedge accounting
Short-term loans – not hedge accounting
Derivative instruments – hedge accounting
Derivative instruments – held for trading
Trade payables
Deferred considerations

* Applicable IAS 39 categories:
1 = Loans and receivables.
2 = Financial instruments at fair value through profit or loss.
3 = Available-for-sale financial assets.
4 = Financial liabilities at amortized cost.
5 = Derivative hedge accounting.

The fair value of long-term borrowing is based on observable data by discounting cash flows to market rate, while the fair
value of current receivables and current liabilities is considered to correspond to the carrying amount.

Financial instruments: measured at fair value

SEK M

Financial assets
Derivative instruments

Financial liabilities
Derivative instruments
Deferred considerations¹

2015

2016

Carrying
amounts

Quoted
prices

Observ-
able data

Non-
observ-
able data

Carrying
amounts

Quoted
prices

Observ-
able data

Non-
observ-
able data

148

80
2,640

–

–
–

148

–

167

80
–

–
2,640

137
2,250

–

–
–

167

137
–

–

–
2,250

1 Deferred considerations often depend on the earnings trend of an acquired business over a certain period. Measurement of the deferred consideration is based on

the management’s best judgment. Discounting to present value takes place in the case of significant amounts.

NOTES

ASSA ABLOY ANNUAL REPORT 2016

University of East Anglia boosts security with Aperio

CUSTOMER: The University of East Anglia (UEA),

CHALLENGE: To provide an access control system

one of the UK’s leading public research and
teaching establishments.

to secure Crome Court, the on-campus student
accommodation completed in 2015. Since the
building was designed to create minimal environ-

mental impact, the solution was expected to help
fulfill that aim. Divided into flats for eight to 13
people, the building has 231 suite rooms rented
out to postgraduates.

SOLUTION: In collaboration with our security
partner Gallagher, ASSA ABLOY fulfilled the cus-
tomer’s need for a stylish and secure electronic
locking system according to the environmentally
friendly profile of the housing block. The solution
had to be affordable yet reliable, and ASSA ABLOY
was required to provide on-site training to assist
with lock installation.

UEA used Gallagher’s access control systems for

over a decade, UEA adopted their Aperio solution
for Crome Court. The system provides an online
audit trail and allow real-time monitoring. The
battery-powered energy-efficient E100 Online
escutcheons are activated only when a user’s
credentials are presented to the reader, and UEA
staff can control the doors from a web-based inter-
face or mobile phone.

Gallagher and Aperio devices may be operated
with the same data on the user’s card, which allow
easy integration and cost savings. Further doors can
be added when needed and the hope is that Aperio
will be rolled out across all residential estate at UEA.

A combination of entrance solutions at the biggest fish shop
in the Netherlands

CUSTOMER: After nearly a hundred years of being situated in the city center,
Schmidt Zeevis decided to move their shop and storage to an industrial zone,
where ASSA ABLOY Entrance Systems has installed multiple automatic entrance
solutions: automatic pedestrian doors, overhead sectional doors and docking
solutions. ASSA ABLOY managed to execute the project versus a tight schedule
to move the entire company in one day, and to be operational immediately.

and docking systems with telescopic features made it possible to drive in and
out easily with both large and heavy truck traffic, and smaller vans. The solution
incorporated both mechanical curtain dock shelters with aluminum frames
for similar trolleys, as well as inflatable dock shelters with extra sealing for
incoming of various types of trucks; hereby the climate control is maintained
optimally.

CHALLENGE: The entrance solution needed to provide not only sufficient pas-

sage but ability to preserve the cool temperature in the shop where fishes are
showcased with ice and need to be kept at the right temperature. The climate
of the expedition area was another major challenge and needed to bridge an
inside temperature of 2 degrees against a possible occurring outside tempera-
ture of above 20 degrees. It also needed to be possible to easily load and unload
various types of trucks.

SOLUTION: For their main entrance, Schmidt Zeevis selected a revolving door

inclusive automatic sliding doors to provide an entrance with separation
between the indoor and outdoor climate, as well as disabled access. The revolv-
ing door was included in the six meters façade to create an open and inviting
environment. The biggest part of the building consists of storage and process-
ing areas, where industrial sectional doors with 70 mm thick insulation panels

Comments on five years in summary

2012
Organic growth was 2 percent, despite the continued weak
market conditions globally. The share of sales on emerging
markets continued to increase to over 25 percent of total
sales. The major investments in product development in
recent years have been fruitful. This can be seen from the
share of products launched in the past three years, which
has increased considerably and currently accounts for
around 25 percent of total sales.

Operating income excluding items affecting comparabil-

ity increased by 13 percent during the year and operating
cash flow remained very strong. Earnings per share after full
dilution, excluding items affecting comparability, increased
by 13 percent, compared with 2011.

A total of 13 acquisitions were completed during the year,
which mainly strengthened the position in entrance automa-
tion for high-performance doors and docking systems. These
acquisitions increase annual sales by a total of around SEK
4,500 M and provide important products and technology.
Activities in the ongoing restructuring programs

remained at a high level during the year. More than 6,700
employees have left the Group, as a result of these activities
since the programs began in 2006.

2013
Demand remained weak in Europe but leveled off during the
year, combined with a continuing recovery in the USA and
strong sales growth in emerging markets. Continued sub-
stantial investment in innovative new products further con-
solidated market leadership, with products launched in the
past three years accounting for a record 27 percent of sales.
Operating income, excluding items affecting comparabil-
ity, increased by 6 percent compared with 2012, and cash flow
showed a positive trend. Earnings per share after full dilution,
excluding items affecting comparability, increased 6 percent.
A total of 10 acquisitions were consolidated during the year,
which mainly strengthened the position in entrance auto-
mation for overhead sectional doors and in high- security
fencing and gates for the North American market. These
acquisitions increase annual sales by a total of around
SEK 3,700 M and provide important products and technology.
A new restructuring program was launched during the

year for the purpose of continuing to increase the cost-
efficiency of all divisions. Some 30 production plants and
offices are set to close with an estimated payback period
of just over three years. At year-end 2013, more than
8,500 employees had left the Group as a result of restructur-
ing activities since the programs began in 2006.

2014
ASSA ABLOY continued to grow rapidly during the year, with
total sales growth of 17 percent. Demand was strong in the
USA, while growth in Europe was more unevenly distributed
between the different regions. Emerging markets showed a
slowdown, partly due to a credit crunch.

The Group’s continued focus on market presence and
innovation during the year took the form of a strengthened
sales force and the launch of many new products. Integration
of acquisitions made and continued efficiencies contributed
to maintaining good earning capacity.

Operating income, excluding items affecting com-
parability, increased by 17 percent compared with 2013,
and cash flow remained strong. Earnings per share after full
dilution, excluding items affecting comparability, increased
by 17 percent.

A total of 20 acquisitions were consolidated during the year,
which both strengthened the market position in key
emerging markets such as China, India and Brazil, and
complemented the customer offering in fast-growing new
segments such as biometrics.

2015
ASSA ABLOY’s good performance continued during the year
despite challenging market conditions and relatively weak
underlying growth worldwide. The Group’s growth
remained strong during the year, with total sales growth of
7 per cent excluding exchange rate effects. The global mar-
ket showed a divided picture with strong demand in the
USA and much of Asia, while growth in Europe was more
unevenly distributed. Emerging markets showed a slow-
down, particularly China.

The focus in recent years on product development, inno-
vation and sustainability yielded positive results during the
year. ASSA ABLOY has established leadership in the ongoing
industry shift from mechanical solutions to electronics, digi-
tization and mobile. Growth remained strong for electro-
mechanical products and entrance automation, whose share
of sales exceeded 50 percent. Integration of acquisitions,
efficiencies and rationalizations strengthened the Group’s
flexibility and financial strength.

Operating income increased by 20 percent compared
with 2014, and cash flow remained very strong. Earnings per
share after full dilution increased by 20 percent.

A total of 16 acquisitions were consolidated during the
year, which strengthened the market position in important
emerging markets such as Brazil, and complemented the
customer offering in key areas for the Group such as
entrance automation and secure identity solutions.

2016
Demand for door opening solutions was relatively good during
the year despite the weakened global economy. The Group’s
growth remained strong during the year, with total sales
growth of 5 percent excluding exchange rate effects. The
mature markets, primarily in Europe and the US, showed
robust growth, while the trend in the emerging markets in Asia,
Africa, the Middle East and parts of South America was more
subdued in general, affected by factors such as the low prices
for oil and other commodities. For ASSA ABLOY, the weak
demand in these markets was most pronounced in China.

A new restructuring program was launched during the
year. About fifty production plants and offices are set to close
over a three-year period, with an estimated payback period
of less than three years.

The focus in recent years on product development, inno-

vation and sustainability continued at a high level during
2016. The ongoing technology shift toward an increased
share of electromechanics with more digital and mobile
solutions is expected to benefit ASSA ABLOY in the long
term, and the proportion of sales of electromechanical
products exceeded 50 percent.

Operating income for the year, excluding items affecting
comparability, increased by 2 percent compared with 2015,
and cash flow continued to be very strong. Earnings per share
after full dilution, excluding items affecting comparability,
increased 2 percent.

A total of 13 acquisitions were consolidated during the
year, which strengthened the market position for the Group
in key areas such as entrance automation and secure identity
solutions. ASSA ABLOY’s car locks operation was sold.

COMMENTS ON FIVE YEARS IN SUMMARY

ASSA ABLOY ANNUAL REPORT 2016

Five years in summary

Amounts in SEK M unless stated otherwise

2012

2013

2014

2015

2016

Sales and income
Sales
Organic growth, %
Acquired growth, %
Operating income before depreciation/amortization (EBITDA)1
Depreciation and amortization
Operating income (EBIT)1
Income before tax (EBT)4
Net income4

Cash flow
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Cash flow
Operating cash flow3

Capital employed and financing
Capital employed4
– of which goodwill
– of which other intangible assets and property,

plant and equipment

– of which investments in associates
Assets and liabilities of disposal group classified as held for sale
Net debt4
Non-controlling interest
Shareholders' equity, excluding non-controlling interest4

Data per share, SEK5
Earnings per share before and after dilution4
Earnings per share before and after dilution and excluding items
affecting comparability1, 4
Shareholders' equity per share after dilution4
Dividend per share
Price of Series B share at year-end

Key ratios
Operating margin (EBITDA), %1
Operating margin (EBIT), %1
Profit margin (EBT), %4
Return on capital employed, %4
Return on capital employed excluding items affecting
comparability, %4
Return on shareholders' equity, %4
Equity ratio, %4
Net debt/equity ratio, times4
Interest coverage ratio, times4
Interest on convertible debentures net after tax
Total number of shares, thousands5
Number of shares outstanding, thousands5
Weighted average number of outstanding shares before and after
dilution, thousands5
Average number of employees

46,619
2
9
8,536
–1,034
7,501
6,784
5,172

5,990
–4,738
–1,564
–312
7,044

41,422
28,932

11,093
1,519
385
15,805
183
25,819

4.66

4.66
23.29
1.70
80.97

18.3
16.1
14.6
18.1

48,481
2
4
8,917
–993
7,923
6,381
4,775

6,224
–6,030
–731
–537
6,803

48,408
31,817

12,854
1,675
–
19,595
0
28,812

56,843
3
9
10,419
–1,163
9,257
8,698
6,436

6,679
–3,524
–2,908
247
8,238

58,425
39,778

14,990
1,861
–
22,327
2
36,096

68,099
4
3
12,512
–1,433
11,079
10,382
7,693

8,572
–4,412
–4,335
–175
9,952

63,848
42,777

16,649
1,910
–
22,269
4
41,575

71,293
2
3
12,833
–1,580
11,254
8,952
6,653

8,575
–4,063
–4,271
240
10,467

70,351
47,544

17,618
2,109
–
23,127
5
47,220

4.30

5.79

6.93

5.99

4.95
25.94
1.90
113.27

18.4
16.3
13.2
14.9

5.79
32.50
2.17
138.27

18.3
16.3
15.3
16.9

6.93
37.43
2.65
178.00

7.09
42.51
3.002
169.10

18.4
16.3
15.2
17.8

18.0
15.8
12.6
14.1

18.1
20.9
43.2
0.61
11.1
3.9
1,112,576
1,108,776

17.1
17.5
43.8
0.68
13.5
–
1,112,576
1,110,776

16.9
19.8
45.1
0.62
17.4
–
1,112,576
1,110,776

17.8
19.8
48.2
0.54
16.7
–
1,112,576
1,110,776

16.5
15.0
49.6
0.49
14.1
–
1,112,576
1,110,776

1,108,776
42,762

1,110,776
42,556

1,110,776
44,269

1,110,776
45,994

1,110,776
46,928

1 Excluding items affecting comparability in 2013 and 2016.
2 Dividend proposed by the Board of Directors.
3 Excluding restructuring payments.
4 2012 has been adjusted due to a change in accounting principles for defined benefit pension plans.
5 Comparatives has been recalculated for all historical periods before 2015 reflecting the stock split (3:1) in 2015.

RETURN ON CAPITAL EMPLOYED1

OPERATING MARGIN (EBIT)1

AVERAGE NUMBER OF EMPLOYEES

Number

50,000

40,000

30,000

20,000

10,000

1 Excluding items affecting

comparability 2013 and 2016.

ASSA ABLOY ANNUAL REPORT 2016

FIVE YEARS IN SUMMARY 95

Quarterly information

THE GROUP IN SUMMARY
Amounts in SEK M unless stated otherwise

Q 1
2015

Q 2
2015

Q 3
2015

Q 4
2015

Full
year
2015

Q 1
2016

Q 2
2016

Q 3
2016

Q 4
2016

Full
year
2016

Sales
Organic growth
Gross income excluding items affecting
comparability
Gross margin excluding items affecting
comparability
Operating income before depr. & amort.
(EBITDA) excluding items affecting com-
parability
Operating margin (EBITDA)
Depreciation and amortization
Operating income (EBIT) excluding items
affecting comparability
Operating margin (EBIT)
Items affecting comparability2
Operating income (EBIT)
Operating margin (EBIT)
Net financial items
Income before tax (EBT)
Profit margin (EBT)
Tax on income
Profit from discontinued operations
Net income

Net income attributable to:
Parent company shareholders
Non-controlling interests

15,252 17,082 17,465 18,301 68,099 15,891 17,894 18,025 19,484 71,293
2%

5,969

6,623

6,758

7,046 26,395

6,295

7,031

7,139

7,660 28,125

39.1%

38.8%

38.7%

38.5%

38.8%

39.6%

39.3%

39.6%

39.3%

39.5%

2,659
17.4%
–331

2,329
15.3%
–
2,329
15.3%
–145
2,184
14.3%
–568
–
1,616

3,117
18.2%
–374

2,742
16.1%
–
2,742
16.1%
–191
2,551
14.9%
–663
–
1,888

3,330
19.1%
–360

2,970
17.0%
–
2,970
17.0%
–174
2,796
16.0%
–727
–
2,069

3,406 12,512
18.4%
18.6%
–1,433
–368

3,038 11,079
16.3%
16.6%
–
–
3,038 11,079
16.3%
16.6%
–187
–697
2,851 10,382
15.2%
15.6%
–2,689
–731
–
–
7,693
2,120

2,787
17.5%
–376

2,411
15.2%
–
2,411
15.2%
–201
2,209
13.9%
–574
3
1,638

3,305
18.5%
–395

2,910
16.3%
–
2,910
16.3%
–181
2,729
15.2%
–709
7
2,026

3,425
19.0%
–406

3,020
16.8%
–
3,020
16.8%
–175
2,844
15.8%
–739
17
2,122

3,316 12,833
18.0%
17.0%
–1,580
–403

2,913 11,254
15.8%
15.0%
–1,597
–1,597
9,657
1,316
13.5%
6.8%
–705
–146
8,952
1,170
12.6%
6.0%
–2,328
–304
28
1
6,653
867

1,616
0

1,888
0

2,069
0

2,120
0

7,693
0

1,638
0

2,026
0

2,122
0

866
1

6,651
1

OPERATING CASH FLOW

Operating income (EBIT)
Restructuring costs
Depreciation and amortization
Net capital expenditure
Change in working capital
Interest paid and received
Non-cash items
Operating cash flow1
Operating cash flow / Income before tax
excluding items affecting comparability2

Q 1
2015

Q 2
2015

Q 3
2015

Q 4
2015

Full
year
2015

Q 1
2016

Q 2
2016

Q 3
2016

Q 4
2016

Full
year
2016

2,329
–
331
–344
–1,722
–71
–2
520

2,742
–
374
–327
–526
–200
–74
1,991

2,970
–
360
–344
–115
–84
28
2,816

3,038 11,079
–
1,433
–1,241
–502
–548
–269
9,952

–
368
–227
1,861
–195
–221
4,625

2,411
–
376
–342
–1,836
–94
–17
498

2,910
–
395
–394
–139
–228
–26
2,519

3,020
–
406
–331
98
–96
–266
2,830

1,316
1,597
403
–411
1,939
–179
–45

9,657
1,597
1,580
–1,478
62
–597
–354
4,620 10,467

0.24

0.78

1.01

1.62

0.96

0.23

0.92

0.99

1.67

0.99

CHANGE IN NET DEBT

Net debt at beginning of period
Operating cash flow
Restructuring payments
Tax paid
Acquisitions/disposals
Dividend
Actuarial gain/loss on post-employment
benefit obligations
Net debt of disposal group classified as held
for sale
Exchange rate differences and other
Net debt at end of period
Net debt / Equity ratio

NET DEBT

Non-current interest-bearing receivables
Current interest-bearing investments
including derivatives
Cash and cash equivalents
Pension provisions
Other non-current interest-bearing
liabilities
Current interest-bearing liabilities including
derivatives
Total

Q 1
2015

Q 2
2015

Q 3
2015

Q 4
2015

Full
year
2015

Q 1
2016

Q 2
2016

Q 3
2016

Q 4
2016

Full
year
2016

22,327 25,184 26,579 25,131 22,327 22,269 24,681 27,122 25,571 22,269
–4,620 –10,467
442
2,928
3,037
2,944

–4,625
145
948
959
–

–9,952
375
2,247
4,161
2,407

–1,991
60
371
1,536
2,407

–2,816
80
217
688
–

–2,519
50
478
556
2,944

–2,830
61
523
145
–

–498
95
1,298
1,345
–

–520
90
711
978
–

235
629
991
–

206

–274

–152

–150

221

186

105

–374

138

–
–713

–
1,392

–
1,836
25,184 26,579 25,131 22,269 22,269 24,681 27,122 25,571 23,127 23,127
0.49

–
–136

–
313

–
695

0
746

0
444

–
855

0
–49

0.64

0.54

0.63

0.70

0.58

0.64

0.57

0.54

0.49

Q 1
2015

–31

–263
–515
3,260

Q 2
2015

–29

–217
–646
2,984

Q 3
2015

–32

–265
–648
2,954

Q 4
2015

–30

–182
–501
2,761

Q 1
2016

–34

–270
–578
3,002

Q 2
2016

–36

–222
–564
3,258

Q 3
2016

–41

–168
–604
3,406

Q 4
2016

–41

–169
–750
3,121

16,497 16,495 17,453 15,568

15,668 15,805 16,205 16,901

6,235

4,653
25,184 26,579 25,131 22,269

7,992

5,669

6,893

4,065
24,681 27,122 25,571 23,127

6,773

8,881

QUARTERLY INFORMATION

ASSA ABLOY ANNUAL REPORT 2016

CAPITAL EMPLOYED AND FINANCING

Capital employed
– of which goodwill
– of which other intangible assets and

property, plant and equipment
– of which investments in associates
Assets and liabilities of disposal group
classified as held for sale
Net debt
Non-controlling interests
Equity attributable to Parent
company’s shareholders

DATA PER SHARE, SEK

Earnings per share before and after
dilution
Earnings per share before and after
dilution and excluding items affecting
comparability2
Shareholders' equity per share after
dilution

NUMBER OF SHARES

Total number of shares, millions
Weighted average number of out-
standing shares before and after
dilution, millions

Q 1
2015

Q 2
2015

Q 3
2015

Q 4
2015

64,699
43,092

64,689
41,818

65,070
42,404

63,848
42,777

Q 1
2016

Q 2
2016

Q 3
2016

Q 4
2016

67,124 69,449 70,555 70,351
43,098 44,387 45,077 47,544

16,324
1,890

16,512
1,901

16,693
1,934

16,649
1,910

–
25,184
2

–
26,579
4

–
25,131
4

–
22,269
4

16,613 17,036 17,264 17,618
2,109

1,970

2,037

2,095

126

111

–
24,681 27,122 25,571 23,127
5

–

39,513

38,105

39,935

41,575

42,551 42,449 44,981 47,220

Q 1
2015

Q 2
2015

Q 3
2015

Q 4
2015

Full
year
2015

Q 1
2016

Q 2
2016

Q 3
2016

Q 4
2016

Full
year
2016

1.45

1.70

1.86

1.91

6.93

1.47

1.82

1.91

0.78

5.99

1.45

1.70

1.86

1.91

6.93

1.47

1.82

1.91

1.88

7.09

35.57

34.31

35.95

37.43

38.31

38.22

40.50

42.51

Q 1
2015

Q 2
2015

Q 3
2015

Q 4
2015

Full
year
2015

Q 1
2016

Q 2
2016

Q 3
2016

Q 4
2016

Full
year
2016

1,112.6

1,112.6 1,112.6 1,112.6 1,112.6 1,112.6

1,110.8

1,110.8 1,110.8 1,110.8 1,110.8 1,110.8

1 Excluding restructuring payments.
2 Items affecting comparability consist of restructuring costs.

Definitions of key ratios

Organic growth
Change in sales for comparable units after adjustments for
acquisitions and exchange rate effects.

Equity ratio
Shareholders’ equity as a percentage of total assets.

Operating margin (EBITDA)
Operating income before depreciation and amortization as
a percentage of sales.

Operating margin (EBIT)
Operating income as a percentage of sales.

Profit margin (EBT)
Income before tax as a percentage of sales.

Interest coverage ratio
Income before tax plus net interest divided by net interest.

Return on shareholders’ equity
Net income excluding non-controlling interests as a
percentage of average shareholders’ equity (excluding
non-controlling interests) after any potential dilution.

Return on capital employed
Income before tax plus net interest as a percentage of average
capital employed.

Operating cash flow
See the table on operating cash flow for detailed information.

Net capital expenditure
Investments in tangible and intangible assets less disposals of
tangible and intangible assets.

Depreciation
Depreciation/amortization of intangible and tangible assets.

Earnings per share after tax and before dilution
Net income excluding non-controlling interests divided by
weighted average number of shares before dilution.

Earnings per share after tax and dilution
Net income excluding non-controlling interests divided by
weighted average number of shares after any potential
dilution.

Net debt
Interest-bearing liabilities less interest-bearing assets.

Shareholders’ equity per share after dilution
Equity excluding non-controlling interests divided by number
of shares after any potential dilution.

Capital employed
Total assets less interest-bearing assets and non-interest-bear-
ing liabilities including deferred tax liability.

ASSA ABLOY ANNUAL REPORT 2016

QUARTERLY INFORMATION 97

Proposed distribution of earnings

The following earnings are at the disposal of the Annual General Meeting:

Share premium reserve: SEK 787 M
Retained earnings brought forward: SEK 7,233 M
Net income for the year: SEK 3,619 M
TOTAL: SEK 11,639 M

The Board of Directors and the President and CEO propose that a dividend of SEK 3.00 per share, a total of SEK 3,332 M,
be distributed to shareholders and that the remainder, SEK 8,307 M, be carried forward to the new financial year.
The dividend amount is calculated on the number of outstanding shares as per 1 February 2017.

No dividend is payable on ASSA ABLOY AB’s holding of treasury shares, the exact number of which is determined
on the record date for payment of dividend. ASSA ABLOY AB held 1,800,000 treasury shares as at 1 February 2017.

Friday, 28 April 2017 has been proposed as the record date for dividends. If the Annual General Meeting approves this
proposal, dividends are expected to be distributed by Euroclear Sweden AB on Thursday, 4 May 2017.

The Board of Directors and the President and CEO declare that the consolidated accounts have been prepared in accordance
with International Financial Reporting Standards, IFRS, as adopted by the EU and give a true and fair view of the Group’s
financial position and results. The Parent company’s annual accounts have been prepared in accordance with generally
accepted accounting principles in Sweden and give a true and fair view of the Parent company’s financial
position and results.

The Report of the Board of Directors for the Group and the Parent company gives a true and fair view of the development of
the Group’s and the Parent company’s business operations, financial position and results, and describes material risks and
uncertainties to which the Parent company and the other companies in the Group are exposed.

Stockholm, 1 February 2017

Lars Renström
Chairman of the Board

Carl Douglas
Vice Chairman of the Board

Ulf Ewaldsson
Board member

Eva Lindqvist
Board member

Eva Karlsson
Board member

Johan Molin
Board member and
President and CEO

Birgitta Klasén
Board member

Jan Svensson
Board member

Bert Arleros
Board member
Employee representative

Mats Persson
Board member
Employee representative

Our audit report was issued on 1 February 2017

PricewaterhouseCoopers AB

Bo Karlsson
Authorized Public Accountant
Auditor in charge

Linda Corneliusson
Authorized Public Accountant

PROPOSED DISTRIBUTION OF EARNINGS

ASSA ABLOY ANNUAL REPORT 2016

Auditor’s report

To the general meeting of the shareholders of ASSA ABLOY AB (publ),
corporate identity number 556059-3575

Report on the annual accounts and consolidated accounts

Opinions

We have audited the annual accounts and consolidated
accounts of ASSA ABLOY AB (publ) for the year 2016, except
for the corporate governance statement on pages 46–54.
The annual accounts and consolidated accounts of the com-
pany are included on pages 39–98 in this document.

In our opinion, the annual accounts have been prepared

in accordance with the Annual Accounts Act and present
fairly, in all material respects, the financial position of the
Parent company as of 31 December 2016 and its financial
performance and cash flow for the year then ended in accor-
dance with the Annual Accounts Act. The consolidated
accounts have been prepared in accordance with the Annual

Accounts Act and present fairly, in all material respects, the
financial position of the group as of 31 December 2016 and
their financial performance and cash flow for the year then
ended in accordance with International Financial Reporting
Standards (IFRS), as adopted by the EU, and the Annual
Accounts Act. Our opinions do not cover the corporate
governance statement on pages 46–54. The statutory
administration report is consistent with the other parts of
the annual accounts and consolidated accounts.

We therefore recommend that the general meeting of
shareholders adopts the income statement and balance
sheet for the Parent company and the group.

Basis for Opinions

We conducted our audit in accordance with International
Standards on Auditing (ISA) and generally accepted auditing
standards in Sweden. Our responsibilities under those stan-
dards are further described in the Auditor’s Responsibilities
section. We are independent of the Parent company and the

group in accordance with professional ethics for accoun-
tants in Sweden and have otherwise fulfilled our ethical
responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinions.

Our audit approach

Audit scope
We designed our audit by determining materiality and
assessing the risks of material misstatement in the consoli-
dated financial statements. In particular, we considered
where management made subjective judgements; for exam-
ple, in respect of significant accounting estimates that
involved making assumptions and considering future events
that are inherently uncertain. As in all of our audits, we also
addressed the risk of management override of internal con-
trols, including among other matters consideration of
whether there was evidence of bias that represented a risk
of material misstatement due to fraud.

We tailored the scope of our audit in order to perform
sufficient work to enable us to provide an opinion on the
consolidated financial statements as a whole, taking into
account the structure of the Group, the accounting pro-
cesses and controls, and the industry in which the group
operates.

The ASSA ABLOY Group is comprised of a large number
of companies. None of these companies have, individually,
been deemed to be of major significance in the audit of the
group. For the group audit, we have selected the Parent
company and treasury company and some 70 companies
spread across the group’s five divisions, which are audited
according to a group-wide audit program. The audit pro-
gram includes the assessment of the design and operating
effectiveness of selected controls in processes significant
to the financial reporting and also includes audit proce-
dures in the form of test of details supplemented with ana-
lytical procedures applied to the group’s significant income
statement and balance sheet items. The majority of the
subsidiaries in the group are also the subject of statutory
audits according to local requirements.

During 2016, the Auditor-in-Charge and co-signing auditor
visited the audit teams in China and the US to participate, on
site, in the audit, and to take part in the meetings with repre-
sentatives from ASSA ABLOY’s local companies and ASSA
ABLOY’s head office. The operations in China and the US have
been selected as they are the countries with the largest
external sales. In addition, the Chinese operations represent
an increased risk exposure in the form of weak compliance
with regulatory requirements and deviations from ASSA
ABLOY’s internal control framework for financial reporting.
As stated in the Report of the Board of Directors, such
deviations have resulted in corrections of errors.

Materiality
The scope of our audit was influenced by our application of
materiality. An audit is designed to obtain reasonable assur-
ance whether the financial statements are free from material
misstatement. Misstatements may arise due to fraud or
error. They are considered material if individually or in aggre-
gate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the
financial statements.

Based on our professional judgement, we determined
certain quantitative thresholds for materiality, including
the overall materiality for the financial statements as a
whole. These, together with qualitative considerations,
helped us to determine the scope of our audit and the
nature, timing and extent of our audit procedures and to
evaluate the effect of misstatements, both individually and
in aggregate on the financial statements as a whole.

ASSA ABLOY ANNUAL REPORT 2016

AUDITOR’S REPORT 99

Auditor’s report

Key audit matters

Key audit matters of the audit are those matters that, in our professional judgement, were of most significance in our audit
of the annual accounts and consolidated accounts of the current period. These matters were addressed in the context of our
audit of, and in forming our opinion thereon, the annual accounts and consolidated accounts as a whole, but we do not
provide a separate opinion on these matters.

Key audit matter

How our audit addressed the Key audit matter

Goodwill and intangible assets with indefinite useful
lives
Goodwill and acquisition-related intangible assets are
described in the annual report in Note 14 and in the account-
ing principles in Note 1.

ASSA ABLOY is an acquisition-intensive company that

has an established and structured acquisition process.
During the 2016 financial year, a total of 13 acquisitions
were consolidated.

ASSA ABLOYs goodwill of SEK 47.5 billion and

intangible assets with indefinite useful lives of SEK 6.3 bil-
lion, are allocated to the group’s five cash-generating
units which are equivalent to the group’s five divisions.
In our audit, we have focused on the valuation of

goodwill and intangible assets with indefinite useful lives
as these items involve a large degree of judgement on
behalf of management in assessing future cash flows.

ASSA ABLOY’s annual test of goodwill and other intangible
assets with indefinite useful lives can be traced to observable
market data and to the company’s own business plans and fore-
casts on future development.

Through test of details we have examined whether ASSA
ABLOY’s assessment of whether there is any indication that an
asset may be impaired, is based on the company’s financial
budgets approved by management. We have also assessed the
growth rate that the company has used to forecast cash flows
beyond the first three-year period. In conjunction with this, we
have compared management’s assumptions regarding the sus-
tainable growth rate and the operating margin against actual
growth and the actual operating margin during recent years.
Our assessment of the discount rate applied in manage-
ment’s calculations reflects the specific risks found in the cash
generating units. We have reconciled the data in the calcula-
tions and checked it against external sources and have found
that the determination of the discount rate is based on estab-
lished theory. In this part of the audit, we have utilized PwC’s
valuation experts.

We have evaluated the company’s sensitivity analysis of the
valuation to changes in significant parameters, which, individu-
ally or on a collective basis, could imply the existence of an
impairment requirement.

100

AUDITOR’S REPORT

ASSA ABLOY ANNUAL REPORT 2016

Key audit matter

How our audit addressed the Key audit matter

Provisions– restructuring program
The restructuring program is described in the Report of the
Board of Directors in the annual report and in Note 25.

A restructuring program was launched during the
current financial year and total restructuring costs are
expected to amount to SEK 1,597 million.

In our audit, we have focused on the restructuring pro-

gram and determined whether the program is qualified
to be reported as a provision as the program is based on
management’s estimates of future costs.

We have examined the company’s process for identifying
projects and the estimated costs of these projects.

Our audit measures include an evaluation of whether the
restructuring program complies, in all significant aspects, with
the group’s accounting principles for reporting provisions.

Furthermore, we have challenged management’s assump-
tions that are the basis for the restructuring provision with the
aim of assessing the reasonability of the provision. Based on risk
and materiality, we have reconciled the parameters in the cal-
culations against supporting documentation. This includes,
amongst other things, the examination of minutes, agree-
ments, calculations and communication with employees.

Key audit matter

How our audit addressed the Key audit matter

Financial reporting – Chinese operations
Corrected errors in China are described in the Report of the
Board of Directors.

As seen in the annual report, weaknesses in regulatory

compliance and internal control, as well as errors in the
financial reporting of parts of the Chinese operations
within the Asia Pacific division, have been identified
during the year.

With the help of external expertise, ASSA ABLOY has

undertaken special investigations in response to the
identified errors in the financial reporting. Our audit has
had a special focus on these corrected errors. As portions
of these errors refer to revenue, we have had a special
focus on revenue recognition in China.

In order to ensure the accuracy of the adjusted errors, we have
studied the company’s investigation. We have also met with
the investigation experts contracted by the company. Further-
more, we have performed tests on a selection of revenue items,
whereby we have reconciled the revenue against the price
agreed in the contract or with the purchase order. Where pos-
sible, we have checked the delivery documents signed by third
parties. For instances where the third party had not signed the
document, we have checked the warehouse delivery note.
We have also checked the quantity on the delivery note to the
quantity recorded as sales.

In order to examine the correct cut-off of revenue, we have

reconciled, for a selection of items, the recorded sales value
against goods delivered, invoice date and reporting date.
For the period after closing date, we have obtained lists of
goods delivery notes and have traced these to the dates on
the delivery documents and related invoices.

We have contacted a selection of customers to obtain
independent confirmations of the existence of outstanding
accounts receivable. For instances where we did not receive an
answer, we have performed tests that invoices have been paid
after the balance sheet date, or tested the delivery of goods
against delivery documents.

ASSA ABLOY ANNUAL REPORT 2016

AUDITOR’S REPORT 101

Auditor’s report

Other Information than the annual accounts and consolidated accounts

This document also contains other information than the
annual accounts and consolidated accounts and is found in
the sections Report on operations and Divisions. The Board
of Directors and the Managing Director are responsible for
this other information.

Our opinion on the annual accounts and consolidated
accounts does not cover this other information and we do
not express any form of assurance conclusion regarding
this other information.

In connection with our audit of the annual accounts and

consolidated accounts, our responsibility is to read the

information identified above and consider whether the
information is materially inconsistent with the annual
accounts and consolidated accounts. In this procedure we
also take into account our knowledge otherwise obtained
in the audit and assess whether the information otherwise
appears to be materially misstated.

If we, based on the work performed concerning this
information, conclude that there is a material misstate-
ment of this other information, we are required to report
that fact. We have nothing to report in this regard.

Responsibilities of the Board of Directors and the Managing Director

The Board of Directors and the Managing Director are
responsible for the preparation of the annual accounts and
consolidated accounts and that they give a fair presentation
in accordance with the Annual Accounts Act and, concern-
ing the consolidated accounts, in accordance with IFRS as
adopted by the EU. The Board of Directors and the Managing
Director are also responsible for such internal control as they
determine is necessary to enable the preparation of annual
accounts and consolidated accounts that are free from
material misstatement, whether due to fraud or error.

In preparing the annual accounts and consolidated

accounts, The Board of Directors and the Managing

Director are responsible for the assessment of the com-
pany’s and the group’s ability to continue as a going con-
cern. They disclose, as applicable, matters related to going
concern and using the going concern basis of accounting.
The going concern basis of accounting is however not
applied if the Board of Directors and the Managing Director
intends to liquidate the company, to cease operations, or
has no realistic alternative but to do so.

The Audit Committee shall, without prejudice to the
Board of Director’s responsibilities and tasks in general,
among other things oversee the company’s financial
reporting process.

Auditor’s responsibility

Our objectives are to obtain reasonable assurance about
whether the annual accounts and consolidated accounts as
a whole are free from material misstatement, whether due
to fraud or error, and to issue an auditor’s report that
includes our opinions. Reasonable assurance is a high level
of assurance, but is not a guarantee that an audit conducted
in accordance with ISAs and generally accepted auditing
standards in Sweden will always detect a material misstate-
ment when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the

aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these
annual accounts and consolidated accounts.

A further description of our responsibility for the audit
of the annual accounts and consolidated accounts is avail-
able on Revisorsnämnden’s website: www.revisorsinspek-
tionen.se/rn/showdocument/documents/rev_dok/
revisors_ansvar.pdf. This description is part of the auditor´s
report.

Report on other legal and regulatory requirements

Opinions

In addition to our audit of the annual accounts and consoli-
dated accounts, we have also audited the administration
of the Board of Directors and the Managing Director of
ASSA ABLOY AB (publ) for the year 2016 and the proposed
appropriations of the company’s profit or loss.

We recommend to the general meeting of shareholders that
the profit be appropriated in accordance with the proposal
in the statutory administration report and that the members
of the Board of Directors and the Managing Director be
discharged from liability for the financial year.

Basis for Opinions

We conducted the audit in accordance with generally
accepted auditing standards in Sweden. Our responsibilities
under those standards are further described in the Auditor’s
Responsibilities section. We are independent of the Parent
company and the group in accordance with professional
ethics for accountants in Sweden and have otherwise ful-
filled our ethical responsibilities in accordance with these
requirements.

We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinions.

102

AUDITOR’S REPORT

ASSA ABLOY ANNUAL REPORT 2016

Responsibilities of the Board of Directors and the Managing Director

The Board of Directors is responsible for the proposal for
appropriations of the company’s profit or loss. At the pro-
posal of a dividend, this includes an assessment of whether
the dividend is justifiable considering the requirements
which the company’s and the group’s type of operations,
size and risks place on the size of the Parent company’s and
the group’s equity, consolidation requirements, liquidity
and position in general.

The Board of Directors is responsible for the company’s

organization and the administration of the company’s
affairs. This includes among other things continuous assess-

ment of the company’s and the group’s financial situation
and ensuring that the company’s organization is designed
so that the accounting, management of assets and the
company’s financial affairs otherwise are controlled in a
reassuring manner. The Managing Director shall manage
the ongoing administration according to the Board of
Directors’ guidelines and instructions and among other
matters take measures that are necessary to fulfil the com-
pany’s accounting in accordance with law and handle the
management of assets in a reassuring manner.

Auditor’s responsibility

Our objective concerning the audit of the administration,
and thereby our opinion about discharge from liability, is to
obtain audit evidence to assess with a reasonable degree of
assurance whether any member of the Board of Directors or
the Managing Director in any material respect:
• has undertaken any action or been guilty of any omission

•

which can give rise to liability to the company, or
in any other way has acted in contravention of the
Companies Act, the Annual Accounts Act or the Articles
of Association.

Our objective concerning the audit of the proposed appro-
priations of the company’s profit or loss, and thereby our
opinion about this, is to assess with reasonable degree of

assurance whether the proposal is in accordance with the
Companies Act.

Reasonable assurance is a high level of assurance, but is

not a guarantee that an audit conducted in accordance
with generally accepted auditing standards in Sweden will
always detect actions or omissions that can give rise to lia-
bility to the company, or that the proposed appropriations
of the company’s profit or loss are not in accordance with
the Companies Act.

A further description of our responsibility for the audit

of the administration is available on Revisorsnämnden’s
website: www.revisorsinspektionen.se/rn/showdocument/
documents/rev_dok/revisors_ansvar.pdf. This description is
part of the auditor’s report.

The auditor’s examination of the corporate governance statement

The Board of Directors is responsible for that the corporate
governance statement on pages 46–54 has been prepared in
accordance with the Annual Accounts Act.

ally accepted auditing standards in Sweden. We believe
that the examination has provided us with sufficient basis
for our opinions.

Our examination of the corporate governance state-
ment is conducted in accordance with FAR’s auditing stan-
dard RevU 16 The auditor’s examination of the corporate
governance statement. This means that our examination of
the corporate governance statement is different and sub-
stantially less in scope than an audit conducted in accor-
dance with International Standards on Auditing and gener-

A corporate governance statement has been prepared.
Disclosures in accordance with chapter 6 section 6 the sec-
ond paragraph points 2–6 of the Annual Accounts Act and
chapter 7 section 31 the second paragraph the same law
are consistent with the other parts of the annual accounts
and consolidated accounts and are in accordance with the
Annual Accounts Act.

Stockholm 1 February 2017

PricewaterhouseCoopers AB

Bo Karlsson
Authorised Public Accountant
Auditor in charge

Linda Corneliusson
Authorised Public Accountant

ASSA ABLOY ANNUAL REPORT 2016

AUDITOR’S REPORT 103

The ASSA ABLOY share

Share price trend
2016 was a volatile year for the Stockholm Stock Exchange,
with a sharp downturn in the first half. But thanks to a strong
end of year, OMX Stockholm closed with a gain of 5.8 per-
cent. ASSA ABLOY’s Series B share fell slightly from the 2015
closing price of SEK 178.00 to the 2016 closing price of
SEK 169.10. The highest closing price during the year of
SEK 190.10 was recorded on 9 August 2016 and the lowest
of SEK 148.40 was recorded on 11 February 2016.

At year-end, market capitalization amounted to SEK
187,832 M (197,718), calculated on both Series A and
Series B shares.

Listing and trading1
ASSA ABLOY’s Series B share has been listed on Nasdaq
Stockholm, Large Cap since 8 November 1994 under the
code ASSA-B.ST.

Total turnover of the Series B share on all markets

amounted to 1,859 million shares (1,911) in 2016, equiva-
lent to a turnover rate of 167 percent (172). Turnover of the
Series B share on Nasdaq Stockholm amounted to 564
million shares (585), equivalent to a turnover rate of
51 percent (52).

The trend of a slight decline in turnover for trading on
Nasdaq Stockholm continued in 2016. Over the past few
years, turnover on Nasdaq Stockholm has gradually declined
from 78 percent in 2012 to 67 percent in 2016. The average
turnover rate on Nasdaq Stockholm fell in 2016 to 67 per-
cent (72). The average turnover rate was unchanged at
70 percent (70) on the Large Cap list.

Since the implementation of the EU’s Markets in Financial

Instruments Directive (MiFID) in late 2007 the structure of
equity trading in Europe has totally changed. Share trading
now takes place on both regulated markets and other trad-
ing platforms, and has thus become more fragmented.
Consequently, an ever-increasing proportion of trading in
shares in Swedish companies now takes place on markets
other than Nasdaq Stockholm.

In 2016 the ASSA ABLOY share was traded on more than

ten different markets, with trading on Nasdaq Stockholm
accounting for only around 30 percent of share turnover,
compared with 65 percent in 2009. The diagram below
shows the trend and distribution of trading in ASSA ABLOY’s
Series B share on various markets over the past five years.

SHARE PRICE TREND AND TURNOVER 2007–20161

DIVIDEND PER SHARE 2007–2016

SEK

250

200

150

100

No. of shares traded, thousands

500,000

400,000

300,000

200,000

100,000

SEK

3.0

2.5

2.0

1.5

1.0

0.5

0.0

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

ASSA ABLOY B
ASSA ABLOY B, total return

OMX Stockholm

No. of shares traded, thousands (incl. after hours)
Source: Fidessa and Six Trust

SIX Return Index

2016 proposed dividend

SHARE PRICE AND TURNOVER 2016

MARKETS FOR THE SHARE1

SEK

220

200

180

160

140

120

100

No. of shares traded, thousands

300,000

250,000

200,000

150,000

100,000

50,000

ASSA ABLOY B

OMX Stockholm

No. of shares traded, thousands (incl. after hours)
Source: Fidessa och Six Trust

No. of shares traded, millions

2,500

2,000

1,500

1,000

500

BATS Chi-X
Stockholm
London
Boat

Turquoise
Others

Source: Fidessa

1 Comparatives have been recalculated for all historical periods prior to

2015 reflecting the stock split (3:1) in 2015.

104

THE ASSA ABLOY SHARE

ASSA ABLOY ANNUAL REPORT 2016

Data per share

SEK/share 1

Earnings after tax and dilution
Dividends
Dividend yield, % 4
Dividend, % 5
Share price at year-end
Highest share price
Lowest share price
Equity
Number of shares, millions 6

2007

3.00
1.20
2.8
40.5
43.25
54.67
41.67
15.58
1,142.1

2008
3.072
1.20
4.1
52.3
29.50
42.00
23.25
18.64
1,142.1

2009
3.072
1.20
2.6
47.8
45.93
47.50
23.83
18.25
1,118.8

2010

3.63
1.33
2.1
37.0
63.17
66.40
42.20
19.55
1,118.2

2011
4.102
1.50
2.6
36.6
57.53
64.97
44.50
21.85
1,113.6

2012

4.66
1.70
2.1
36.8
80.97
81.60
57.23
23.29
1,112.6

2013
4.952
1.90
1.7
38.4
113.27
114.07
79.33
25.94
1,112.6

2014

2015

5.79
2.17
1.6
37.4
138.27
139.17
105.63
32.50
1,112.6

6.93
2.65
1.5
38.2
178.00
189.00
135.00
37.43
1,112.6

2016
7.092
3.003
1.8
42.3
169.10
190.10
148.40
42.51
1,112.6

1 Adjustments made for new issues and stock split (3:1) in 2015 for all historical

periods prior to 2015.

4 Dividend as percentage of share price at year-end.
5 Dividend as percentage of earnings per share after tax and dilution, excluding

2 Excluding items affecting comparability 2008, 2009, 2011, 2013 and 2016.
3 Dividend proposed by the Board of Directors.

items affecting comparability.

6 After full dilution.

Ownership structure
The number of shareholders at the end of 2016 was 27,638
(22,232) and the ten largest shareholders accounted for
around 40 percent (38) of the share capital and 59 percent
(58) of the votes. Shareholders with more than 50,000

shares, a total of 614 shareholders, accounted for 97 percent
(97) of the share capital and 98 percent (98) of the votes.

Investors outside Sweden accounted for around 64 per-
cent (64) of the share capital and around 44 percent (44) of
the votes, and were mainly in the US and the UK.

ASSA ABLOY’s ten largest shareholders
Based on the share register at 30 December 2016.

Shareholders

Series A shares

Series B shares

Total number of shares Share capital1, %

Votes1, %

Latour
Melker Schörling AB
Capital Group Companies Inc
BlackRock, Inc.
Swedbank Robur Fonder
Fidelity
Norges Bank
Government of Singapore
Alecta Pensionsförsäkring
AMF Försäkring & Fonder
Other shareholders
Total number

41,595,729
15,930,240

57,525,969

63,900,000
26,882,608
61,102,175
53,719,714
45,090,491
36,676,468
32,476,549
27,958,806
27,145,000
24,827,571
655,270,983
1,055,050,365

105,495,729
42,812,848
61,102,175
53,719,714
45,090,491
36,676,468
32,476,549
27,958,806
27,145,000
24,827,571
655,270,983
1,112,576,334

9.5
3.9
5.5
4.8
4.1
3.3
2.9
2.5
2.4
2.2
58.8
100.0

29.5
11.4
3.8
3.3
2.8
2.3
2.0
1.7
1.7
1.5
40.1
100.0

1 Based on the number of outstanding shares and votes of 1,110,776,334 and 1,628,510,055 respectively, excluding shares held by ASSA ABLOY.
Source: Modular Finance AB and Euroclear Sweden AB.

OWNERSHIP STRUCTURE (SHARE CAPITAL)

OWNERSHIP STRUCTURE (VOTES)

Latour, 9.5%
Legend

Capital Group
Companies Inc., 5.5%

Legend

BlackRock, Inc., 4.8%

Legend

Swedbank Robur Funds, 4.1%

Legend

Melker Schörling AB, 3.9%

Legend
Fidelity, 3.3%
Legend

Norges Bank, 2.9%

Government of Singapore, 2.5%

Alecta Pensions Insurance, 2.4%

AMF Insurance & Funds, 2.2%

Other shareholders, 58.8%

Latour, 29.5%

Legend

Melker Schörling AB, 11.4%

Legend

Capital Group
Companies Inc., 3.8%

Legend

BlackRock, Inc., 3.3%

Legend

Swedbank Robur Funds, 2.8%

Legend
Fidelity, 2.3%
Legend

Norges Bank, 2.0%

Government of Singapore, 1.7%

Alecta Pensions Insurance, 1.7%

AMF Insurance & Funds, 1.5%

Other shareholders, 40.1%

Share capital and voting rights
At 31 December 2016, the share capital amounted to SEK
370,858,778 at year-end, distributed among a total of
1,112,576,334 shares, comprising 57,525,969 Series A
shares and 1,055,050,365 Series B shares. All shares have a
par value of around SEK 0.33 and give shareholders equal
rights to the company’s assets and earnings. The total num-
ber of votes amounts to 1,630,310,055. Each Series A share
carries ten votes and each Series B share one vote.

Repurchase of own shares
Since 2010, the Board of Directors has requested and
received a mandate from the Annual General Meeting to
repurchase and transfer ASSA ABLOY shares. The aim has
been, among other things, to secure the company’s under-
takings in connection with its long-term incentive programs
(LTI).

The 2016 Annual General Meeting authorized the Board

of Directors to acquire, during the period until the next
Annual General Meeting, a maximum number of Series B
shares so that after each repurchase ASSA ABLOY holds a
maximum 10 percent of the total number of shares in the

ASSA ABLOY ANNUAL REPORT 2016

THE ASSA ABLOY SHARE 105

The ASSA ABLOY share

company. ASSA ABLOY holds a total of 1,800,000
(1,800,000) Series B shares after repurchase. These shares
account for around 0.2 percent (0.2) of the share capital and
each share has a par value of around SEK 0.33. The purchase
consideration amounted to SEK 103 M.
No shares were repurchased in 2016.

The Board of Directors and the President and CEO propose
that the dividend to shareholders be raised by 13 percent to
SEK 3.00 per share (2.65) for the 2016 financial year, equiva-
lent to a dividend yield on the Series B share of 1.8 percent
(1.5).

In 2016 the total return on the ASSA ABLOY share, defined

Dividend and dividend policy
The objective of the dividend policy is that, in the long term,
the dividend should be equivalent to 33–50 percent of
income after standard tax, but always taking into account
ASSA ABLOY’s long-term financing requirements.

as market price movement plus reinvested dividends, was
–3.5 percent, compared with the reinvested SIX Return
Index, which was up 9.6 percent. Over the ten-year period
2007–2016, the total return on ASSA ABLOY’s Series B share
was 326 percent, compared with a 107 percent rise in the
SIX Return Index and a 43 percent rise in OMX Stockholm.

Changes in share capital

Year

1989
1994
1994
1994
1996
1996
1997
1998
1999
1999
1999
1999
1999
2000
2000
2000
2001
2002
2002
2010
2011
2012
2015

Transaction

Split 100:1
Bonus issue
Non-cash issue
New share issue
Conversion of Series C shares into Series A shares
New share issue
Converted debentures
Converted debentures before split
Bonus issue
Split 4:1
New share issue
Converted debentures after split and new share issues
Converted debentures
New share issue
Non-cash issue
Converted debentures
New share issue
Converted debentures
Converted debentures
Converted debentures
Converted debentures
Split 3:1

Series A
shares

Series C
shares

20,000

1,428,550
1,714,260

1,746,005
2,095,206
3,809,466
4,190,412
4,190,412
4,190,412

16,761,648
18,437,812
18,437,812
18,437,812
19,175,323
19,175,323
19,175,323
19,175,323
19,175,323
19,175,323
19,175,323
19,175,323
57,525,969

Series B
shares

Share capital, SEK*

2,000,000

50,417,555
60,501,066
60,501,066
66,541,706
66,885,571
67,179,562

268,718,248
295,564,487
295,970,830
301,598,383
313,512,880
333,277,912
334,576,089
344,576,089
346,742,711
347,001,871
349,075,055
351,683,455
1,055,050,365

2,000,000
2,000,000

53,592,110
64,310,532
64,310,532
70,732,118
71,075,983
71,369,974

285,479,896
314,002,299
314,408,642
320,036,195
332,688,203
352,453,235
353,751,412
363,751,412
365,918,034
366,177,194
368,250,378
370,858,778
370,858,778

* SEK 1 per share before split in 2015 – number of shares at the end of the period and around SEK 0.33 per share after split in 2015. Number of shares at the end of the

period 1,112,576,334 (including repurchase of own shares).

Analysts who cover ASSA ABLOY

Company

ABG Sundal Collier
Bank of America ML
Barclays
Berenberg
Carnegie
Credit Suisse
Danske Bank
Deutsche Bank
DNB
Exane BNP Paribas
Goldman Sachs
Handelsbanken
HSBC
Imperial Capital
Jefferies
J.P. Morgan
KeplerCheuvreux
Liberum Capital
Morgan Stanley
Nomura
Nordea
Oddo Securities
Pareto Securities
Redburn Partners
Royal Bank of Canada
SEB Enskilda Securities
Société Général
Swedbank
UBS

Name

Telephone

Anders Idborg
Mark Troman
Lars Brorson
Rizk Maidi
Johan Wettergren
Andre Kukhnin
Oscar Stjerngren
Andreas Koski
Johan Sjöberg
Sebastian Gruter
Daniela Costa
Peder Frölén
Michael Hagmann
Jeff Kessler
Peter Reilly
Andreas Willi
Markus Almerud
Ryan Gregory
Ben Maslen
Felix Wienen
Fredrik Agardh
Delphine Brault
David Jacobsson
James Moore
Matthew Spurr
Anders Trapp
Alasdair Leslie
Anders Roslund
Guillermo Peigneux-Lojo

+46 8 566 296 74
+44 207 996 4194
+44 203 134 1156
+44 203 207 78 06
+46 8 588 687 43
+44 207 888 0350
+46 8 568 806 06
+44 207 545 6580
+46 8 473 48 31
+44 207 039 9527
+44 207 774 8354
+46 8 701 12 51
+44 207 991 2405
+1 212 351 9701
+44 207 029 8632
+44 207 134 4569
+46 8 723 51 63
+44 203 100 2071
+44 207 425 3837
+44 207 102 5758
+46 8 534 917 20
+33 144 518 325
+46 8 402 52 72
+44 207 000 2135
+44 207 029 0787
+46 8 522 297 57
+44 207 762 4952
+46 8 585 900 93
+46 8 453 73 08

anders.idborg@abgsc.com
mark.troman@baml.com
lars.brorson@barclays.com
rizk.maidi@berenberg.com
johan.wettergren@carnegie.se
andre.kukhnin@credit-suisse.com
osst@danskebank.com
andreas.koski@db.com
johan.sjoberg@dnb.se
sebastien.gruter@exanebnpparibas.com
daniela.costa@gs.com
pefr15@handelsbanken.se
michael.hagmann@hsbcib.com
Jkessler@imperialcapital.com
peter.reilly@jefferies.com
andreas.p.willi@jpmorgan.com
malmerud@keplercheuvreux.com
Ryan.Gregory@liberum.com
benjamin.maslen@morganstanley.com
felix.wienen@nomura.com
fredrik.agardh@nordea.com
dbrault@oddo.fr
djc@paretosec.com
james.moore@redburn.com
matthew.spurr@rbccm.com
anders.trapp@seb.se
alasdair.leslie@sgcib.com
anders.roslund@swedbank.se
guillermo.peigneux-lojo@ubs.com

106

THE ASSA ABLOY SHARE

ASSA ABLOY ANNUAL REPORT 2016

Information for shareholders

Annual General Meeting
The Annual General Meeting of ASSA ABLOY AB will be
held at Moderna Museet (Museum of Modern Art),
Skeppsholmen, Stockholm at 15.30 on Wednesday,
26 April 2017. Shareholders wishing to attend the
Annual General Meeting should:
• Be recorded in the share register kept by Euroclear

Sweden AB by Thursday, 20 April 2017.

• Notify ASSA ABLOY AB of their intent to attend no later

than Thursday, 20 April 2017.

Nominee-registered shares
In addition of giving notice to attend, shareholders whose
shares are nominee-registered must be temporarily regis-
tered in their own name in the share register (so-called
voting right registration) to be able to attend the Annual
General Meeting. Such registration must be effected by
Thursday, 20 April 2017, and shareholders should contact
their bank or nominee well in advance of this date.

Notice of attendance
• Website
www.assaabloy.com
• Telephone +46 (0)8 506 485 14
• Address

ASSA ABLOY AB, Annual General Meeting
Box 7842, SE-103 98 Stockholm, Sweden

The notice of attendance should state:
• Name
• Personal or corporate identity number
• Address and daytime telephone number
• Number of shares
• Any assistants attending

If participation is by proxy, the proxy should be submitted in
connection with the notice of attendance and the proxy
must be presented in original at the latest at the Annual Gen-
eral Meeting. Proxy form is available at: www. assaabloy.com.

Nomination Committee
The Nomination Committee has the task of, on behalf of the
shareholders, preparing and submitting proposals for; elec-
tion of Chairman of the Annual General Meeting, election of
Chairman, Vice Chairman and other members of the Board
of Directors, election of auditor, determination of fees to the
auditor and the Board of Directors (including distribution of
fees among the Chairman, Vice Chairman and the other
members of the Board of Directors and remuneration for
committee work) as well as election of members of the
Nomination Committee and determination of the assign-
ment of the Nomination Committee.

Up to and including the 2017 Annual General Meeting,

the Nomination Committee comprises Carl Douglas
(Investment AB Latour), Mikael Ekdahl (Melker Schörling
AB), Liselott Ledin (Alecta), Marianne Nilsson (Swedbank
Robur fonder) and Anders Oscarsson (AMF and AMF fonder).
Carl Douglas is Chairman of the Nomination Committee.

Dividends
Friday, 28 April 2017 has been proposed as the record date
for dividends. If the Annual General Meeting approves the
proposal, dividend is expected to be distributed by Euroclear
Sweden AB on Thursday, 4 May 2017.

Further information
Hedvig Wennerholm
Telephone +46 (0)8 506 485 51
hedvig.wennerholm@assaabloy.com

Reports can be ordered from ASSA ABLOY AB
• Website www.assaabloy.com
• Telephone +46 (0)8 506 485 00
+46 (0)8 506 485 85
• Fax
ASSA ABLOY AB
• Mail
Box 70340
SE-107 23 Stockholm, Sweden

Financial reporting
First quarter: 26 April 2017
Second quarter: 19 July 2017
Third quarter: 20 October 2017
Fourth quarter and Year-end report: February 2018
Annual Report 2017: March 2018

ASSA ABLOY ANNUAL REPORT 2016

INFORMATION FOR SHAREHOLDERS 107

As the global leader in door opening solutions ASSA ABLOY is using the latest technologies to open
doors to events, education, hospitals, homes, hotels, airports and businesses all over the world.
Since its formation in 1994, ASSA ABLOY has grown successfully through a combination of organic
growth and over 200 acquisitions.

108

ASSA ABLOY ANNUAL REPORT 2016

Production: ASSA ABLOY in cooperation with Hallvarsson & Halvarsson.
Photo: Peter Hoelstad/Molly & Co, Kristian Älegård, Getty Images and ASSA ABLOY’s image bank etc.
Printing: Göteborgstryckeriet in March 2017.

ASSA ABLOY is the global
leader in door opening solutions,
dedicated to satisfying
end-user needs for security,
safety and convenience

www.assaabloy.com

ASSA ABLOY AB
Box 70340
SE-107 23 Stockholm
Sweden
Visiting address:
Klarabergsviadukten 90
Tel +46 (0)8 506 485 00
Fax +46 (0)8 506 485 85
Reg. No. 556059-3575

“Future shareholder value is based on organic
and acquired growth and a continuing
process of rationalization and synergies
across the Group.”

Johan Molin, President and CEO