APM EF GROUP: APPENDIX C EF INTERNAL INFORMATION

EF FINANCIAL REPORTING
ACCOUNTING POLICIES
EF GROUP ACCOUNTING POLICY

INDEX:

1. GENERAL INFORMATION ....................................................................................... 2

2. SUMMARY ........................................................................................................... 3
3. BASIS OF CONSOLIDATION ................................................................................... 5
4. RELATED PARTIES ................................................................................................ 5
5. FOREIGN CURRENCIES ......................................................................................... 5
6. BUSINESS COMBINATIONS ................................................................................... 6
7. GOODWILL .......................................................................................................... 7
8. INTANGIBLE ASSETS ............................................................................................ 7
8.a) Intangible assets acquired externally. ................................................................... 7
8.b) Intangible assets generated internally. ................................................................. 8
9. PROPERTY, PLANT AND EQUIPMENT .......................................................................8
10. PARTICIPATIONS ............................................................................................... 10
11. INVENTORIES .................................................................................................... 10
12. FINANCIAL INSTRUMENTS................................................................................... 10
13. PROVISIONS ..................................................................................................... 11
14. REVENUE RECOGNITION ..................................................................................... 12
15. COST OF MATERIALS AND PURCHASED SERVICES ................................................. 13
16. EMPLOYEE EXPENSES ......................................................................................... 13
17. RETIREMENT BENEFIT COSTS .............................................................................. 13
18. OTHER OPERATING EXPENSES ............................................................................. 13
19. TAXATION ......................................................................................................... 13

EF Corporate Control T Sjöberg 1 (14) Rev A 7/16/2014

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APM EF GROUP: APPENDIX C EF INTERNAL INFORMATION
EF FINANCIAL REPORTING
ACCOUNTING POLICIES
EF GROUP ACCOUNTING POLICY

1. GENERAL INFORMATION

The EF Group of companies (EF or EF Group) is a privately held group of companies

engaged in several programs. The programs are divided into the below business areas.

Language Programs with Travel

Programs where EF offers the opportunity to learn a language and a culture in a country
where the language is spoken. The students are from all over the world and main
destinations are e.g. UK, USA, Malta, Germany and France. EF provides travel,
accommodation, language instruction and other activities.

Language Programs without Travel

Programs where EF provides customers with various types of local language instruction in
their home countries. Travel is not a key component in the services offered (local
language schools and online language instruction).

Au Pair Childcare and Host Family Programs

Programs where EF offers the opportunity to learn a language and a culture while
spending a year in a foreign country (High School Year and Au Pair). EF provides travel,
accommodation and activities, but does not offer any language instruction.

Educational and Leisure Tours

Programs where EF offers cultural and educational tours. These programs include travel,
accommodation and other activities, but no language instruction. The customers are
mainly from USA and Canada with destinations predominantly in Europe.

Academic Degrees
Programs where EF provides customers all over the world the opportunity to acquire
internationally recognized academic degrees. Programs offered for upper secondary
education are A-levels and International Baccalaureate, as well as Bachelor and Master of
Business Administration at university level.

Other
Other includes various supporting activities such as e.g. insurances, real estate,
management and financing.

The activities are performed in various legal groups, all together forming the EF Group.
The consolidated financial statements of the EF Group, its various groups (Group), its
various parent companies (Parent Company), and their subsidiaries (Subsidiaries) shall
be prepared in accordance with the EF Group Accounting Policy.

The financial year of the EF Group is October 1 to September 30. All companies’ part of
the EF Group shall also have such financial year if not required otherwise by local
regulations. Companies whereas such regulations exists, a separate reporting shall be
made for the consolidation purposes.

Questions pertaining to EF Group Accounting Policy should be addressed to EF Education

First, Attention: EF Corporate Control, Haldenstrasse 4, CH-6006 Lucerne, Switzerland.

EF Corporate Control T Sjöberg 2 (14) Rev A 7/16/2014

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EF FINANCIAL REPORTING
ACCOUNTING POLICIES
EF GROUP ACCOUNTING POLICY

2. SUMMARY

Related parties
Parent Company and Companies controlled by the Parent Company (its subsidiaries), is
all together called Group Companies. Related parties include all entities other than Group
Companies which directly or indirectly is under the control of the ultimate shareholder.

Foreign currencies
Transactions in foreign currencies in local books are recorded at the EF rates of exchange
ruling on the dates of the transactions. For each week exchange rates are announced on
EF intranet.
Monetary assets and liabilities denominated in foreign currencies are translated into the
accounting currency at the EF exchange rate in effect of the balance sheet date.

Goodwill
Goodwill is initially recognized as an asset at cost less any subsequent accumulated
depreciation. The depreciation is calculated on a straight-line basis and should not exceed
10 years.

Intangible assets
The cost of acquired intangible assets is their purchase cost together and costs of
acquisition. The depreciation is calculated on a straight-line basis and shall not exceed:
Trademarks, patents 10 years
Computer software 5 years
Others licenses 5 years

Property, plant and equipment

Land and buildings are stated at cost less any subsequent accumulated depreciation and
subsequent accumulated impairment losses. Fixtures and equipment are stated at cost
less accumulated depreciation and any accumulated impairment losses.

In order to be activated, the value of the expense shall exceed USD 1,000 and have a life
span longer than one year. Individual items below USD 1,000 can be activated if they are
part of a project which itself exceeds the threshold. All other expenses shall be cost
accounted for. The depreciation period of property, plant and equipment shall be:
Land not depreciated
Buildings 50 years
Additions to buildings 20 years
Leases and leasehold improvements lease period
Vehicles 5 years
Computers 3 years
Other fixtures and equipment < 5 years

If local regulatory requirements differ from the above such may be applied only if the
impact not is material.

Inventories
Stocks are valued at the lower of costs and net realizable value. Cost is determined on a
FIFO basis (first in first out).

EF Corporate Control T Sjöberg 3 (14) Rev A 7/16/2014

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EF FINANCIAL REPORTING
ACCOUNTING POLICIES
EF GROUP ACCOUNTING POLICY

Trade receivables
The balances of accounts receivable are stated at nominal value; a provision is made
where deemed necessary. The reserve for trade receivables shall be:
< One year based on historical data
> One year fully reserved

Revenue recognition
Revenue is recognized as follows:
For programs including travel: at departure or start date
For online programs: at start date
For local language learning: when services are rendered
For academic programs: at start date
For sales of goods: at the date of delivery or when the title has passed
For royalties: on invoice date

EF Corporate Control T Sjöberg 4 (14) Rev A 7/16/2014

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EF FINANCIAL REPORTING
ACCOUNTING POLICIES
EF GROUP ACCOUNTING POLICY

3. BASIS OF CONSOLIDATION

The consolidated financial statements shall incorporate the financial statements of the
Parent Company and entities controlled by the Parent Company (its subsidiaries) on a
“line-by-line” basis. Control is achieved where the Parent Company has the power to
govern the financial and operating policies of an entity so as to obtain benefits from its
activities.

The results of the subsidiaries acquired or disposed of during the year are included in the
consolidated income statement from the effective date of acquisition or up to the effective
date of disposal, as appropriate, unless specifically mentioned as a note to the financial
statements.

Where necessary, adjustments are made to the financial statements of subsidiaries to

bring their accounting policies into line with those used by other members of the Group.

All intra-group transactions, balances income and expenses are eliminated in the
consolidation.

Minority interests in the net assets of consolidated subsidiaries are defined separately
from the Group’s equity therein. Minority interests consist of the amount of those
interests at the date of the original business combination and minority’s share of changes
in equity since the date of the combination. Losses applicable to the minority in excess of
the minority’s interest in the subsidiary’s equity are allocated against the interests of the
Group except to the extent that the minority has a binding obligation and is able to make
an additional investment to cover the losses.

4. RELATED PARTIES

Parent Company and Companies controlled by the Parent Company (its subsidiaries), is
all together called Group Companies.

Related parties include all other than Group Companies, which directly or indirectly are
under the control of the ultimate shareholder and which are not included in the
consolidated financial statements as well as management personnel of consolidated
subsidiaries (Related Parties). The control is the power to govern the financial and
operating policies of an entity so as to obtain benefits from its activities

5. FOREIGN CURRENCIES

The individual financial statements of each group entity are presented in the currency of
the primary economic environment in which the entity operates (its functional currency).
For the purpose of the consolidated financial statements, the results and financial position
of each entity are expressed in USD, which is the functional currency of the Parent
Company, and the presentation currency for the consolidated financial statements.

Transactions in foreign currencies are converted into the functional currency at the
weekly EF rate of exchange ruling at the date of the transaction.
In preparing the financial statements of the individual entities monetary items
denominated in foreign currencies are retranslated into functional currency at the EF

EF Corporate Control T Sjöberg 5 (14) Rev A 7/16/2014

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EF FINANCIAL REPORTING
ACCOUNTING POLICIES
EF GROUP ACCOUNTING POLICY

rates prevailing on the balance sheet date. Monetary items are money held and assets
and liabilities to be received or paid in fixed or determinable amounts of money.
Non-monetary items carried at fair value that are denominated in foreign currencies are
retranslated at the rates prevailing on the date when the fair value was determined. Non-
monetary items that are measured in terms of historical cost in a foreign currency are not
retranslated.

Exchange differences arising on the settlement of monetary items, and on the

retranslation of monetary items, are included in profit or loss for the period. Exchange
differences arising on the retranslation of non-monetary items carried at fair value are
included in profit or loss for the period except for differences arising on the retranslation
of non-monetary items in respect of which gains and losses are recognized directly in
equity. For such non-monetary items, any exchange component of that gain or loss is
also recognized directly in equity.

For the purpose of presenting consolidated financial statements, the assets and liabilities
of the Group’s foreign operations (including comparatives) are expressed in USD using
exchange rates prevailing on the balance sheet date. Income and expense items
(including comparatives) are translated at the average exchange rates for the period,
unless exchange rates fluctuated significantly during that period, in which case the
exchange rates at the dates of the transactions are used. Exchange differences arising, if
any, are classified as equity and transferred to the Group’s translation reserve. Such
translation differences are recognized in profit or loss in the period in which the foreign
operation is disposed of.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are
treated as assets and liabilities of the foreign operation and translated at the closing rate.

6. BUSINESS COMBINATIONS

The acquisition of new companies/activities is accounted for using the purchase method.
The cost of the acquisition is measured at the aggregate of the fair values, at the date of
exchange, of assets given, liabilities incurred or assumed, and equity instruments issued
by the acquirer in exchange for control of the acquired company, plus any costs directly
attributable to the business combination.
The acquired company’s identifiable assets, liabilities and contingent liabilities that meet
the conditions for recognition under EF Group Accounting Policy are recognized at their
fair values at the acquisition date.

Goodwill arising on acquisition is recognized as an asset and initially measured at cost,

being the excess of the cost of the business combination over the Group’s interest in the
net fair value of the identifiable assets, liabilities and contingent liabilities recognized. If,
after reassessment, the Group’s interest in the net fair value of the acquired company’s
identifiable assets, liabilities and contingent liabilities exceeds the cost of the business
combination, the excess is recognized immediately in profit or loss.

The interest of minority shareholders in the acquired company is initially measured at the
minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities
recognized.

EF Corporate Control T Sjöberg 6 (14) Rev A 7/16/2014

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ACCOUNTING POLICIES
EF GROUP ACCOUNTING POLICY

7. GOODWILL

Goodwill arising on the acquisition of a subsidiary or a jointly controlled entity and

represents the excess of the cost of acquisition over the Group’s interest in the net fair
value of the identifiable assets, liabilities and contingent liabilities of the subsidiary or
jointly controlled entity recognized at the date of acquisition. Goodwill is initially
recognized as an asset at cost and is subsequently measured at cost less any
accumulated depreciation. Depreciation should not exceed 10 years.

For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-
generating units expected to benefit from the synergies of the combination. Cash-
generating units to which goodwill has been allocated are tested for impairment annually.
If the recoverable amount of the cash-generating unit is less than the carrying amount of
the unit, the impairment loss is allocated first to reduce the carrying amount of any
goodwill allocated to the unit and then to the other assets of the unit pro-rata on the
basis of the carrying amount of each asset in the unit. An impairment loss recognized for
goodwill is not reversed in a subsequent period.
On disposal of a subsidiary or a jointly controlled entity, the attributable amount of
goodwill is included in the determination of the profit or loss on disposal.

8. INTANGIBLE ASSETS

An intangible asset is an identifiable non-monetary asset without physical substance held

for use in the production or supply of goods or services, for rental to others, or for
administrative purpose.

An entity should recognize an intangible asset if:

It is probable that the asset will generate future economics benefits
The asset is identifiable
The cost of an asset can be measured reliably

Intangible assets are depreciated by the straight-line method over the useful life of the
asset. The depreciation period for intangible assets should not exceed:

Trademarks 10 years
Patents 10 years
Computer software 5 years
Other licenses 5 years

Expenditure on an intangible asset should be recognized as an expense when it is

incurred.

8.a) Intangible assets acquired externally.

Acquired intangible asset should be measured at cost. The cost of an intangible asset
comprises its purchase price, including any import duties and non-refundable purchase
taxes, and any directly attributable expenditure on preparing the asset for its intended
use. Any trade discounts are deducted in arriving at the cost.

EF Corporate Control T Sjöberg 7 (14) Rev A 7/16/2014

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EF FINANCIAL REPORTING
ACCOUNTING POLICIES
EF GROUP ACCOUNTING POLICY

8.b) Intangible assets generated internally.

Internally generated intangible asset should be measured at cost. The cost of internally
generated intangible asset incurred from the date when the intangible asset first meets
the recognition criteria and comprises all expenditure that can be directly attributed or
allocated on a reasonable and consistent basis, to creating, producing and preparing the
asset for its intended use.

Research and development costs

Expenditure on research (or on the research phase of an internal project) should be
recognized as an expense when it is incurred. Research is original and planned
investigation undertaken with the prospect of gaining new scientific or technical
knowledge and understanding.

Development costs
An intangible asset arising from development (or from the development phase of an
internal project) should be recognized only if the entity can demonstrate that:
- There is a technical feasibility of completing the asset
- It is intended to complete the asset
- It is possible to measure the expenditure attributable to the intangible asset during its
development activity
- There will be ability to use or sell the intangible asset

Availability of resources to complete, use and obtain the benefits can be demonstrated by
e.g. a business plan showing the technical, financial and other resources needed and the
enterprise ability to secure those resources. Cost attributable to the asset can be reported
from financial systems, if it is possible to report separately cost combined with generating
an intangible asset such as salaries, employment related costs, expenditure on materials
etc.

Internally generated brands, mastheads, publishing titles, customer lists and items
similar in substance should not be recognized as intangible asset.

9. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are recognized as tangible assets if:

- It is held for use in production or supply goods or services, or for rental to the others,
or for administrative purpose
- The expecting useful life exceeds 1 year
- The cost of the asset is higher than USD 1,000

Group of similar items where individual cost is lower than USD 1,000 should be
recognized as a one asset, if the lump sum has a material impact on the value of an
asset. Such asset should be then subject to depreciation as an asset of an initial value
equal to cumulated value of all grouped items.

Useful life is the period over which an asset is expected to be available for use by an
entity.

Initially, property, plant and equipment are carried at the cost of acquisition or
construction. Cost of acquisition consist of purchase price, duties and other non-
refundable taxes paid and other expenses directly attributable to bringing the asset to

EF Corporate Control T Sjöberg 8 (14) Rev A 7/16/2014

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EF FINANCIAL REPORTING
ACCOUNTING POLICIES
EF GROUP ACCOUNTING POLICY

working condition. Cost of construction is calculated on the basis of the directly

attributable. Borrowing cost must be excluded from the initial value of an asset.

Subsequent to initial recognition property, plant and equipments is carried at:

Land and buildings

Land and buildings held for use in the production or supply of goods or services, or for
administrative purposes, are stated in the balance sheet at cost less any subsequent
accumulated depreciation and subsequent accumulated impairment losses. If local
management deems it necessary to perform a revaluation of a property, such revaluation
needs to be approved by Corporate Control.

Properties in the course of construction for production, rental or administrative purposes,

or for purposes not yet determined, are carried at cost, less any recognized impairment
loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalized
in accordance with the Group’s accounting policy. Depreciation of these assets, on the
same basis as other property assets, commences when the assets are ready for their
intended use.

Fixture and fittings

Fixtures, furniture, office equipment and vehicles are stated at cost less accumulated
depreciation and any accumulated impairment losses.

Financial lease
Assets held under finance leases are depreciated over their expected useful lives on the
same basis as owned assets or, where shorter, the term of the relevant lease.

Expenses for the repair of property are charged as a cost, unless they result in extending
the useful life of an asset or increase its productivity.

Depreciation is charged so as to write off the cost or valuation of assets over their
estimated useful lives, using the straight-line method.

Depreciation should be calculated monthly. The Depreciation start date should be the first
day of the month following the month the asset has been recorded.

The gain or loss arising on the disposal or retirement of an item of property, plant and
equipment is determined as the difference between the sales proceeds and the carrying
amount of the asset and is recognized in profit or loss.

The following depreciation periods, based on the estimated useful life of the respective
assets, shall be applied:
Land not depreciated
Buildings 50 years
Addition to buildings 20 years
Leases and leasehold improvements lease period
Vehicles 5 years
Computers 3 years
Other fixtures and equipment < 5 years

EF Corporate Control T Sjöberg 9 (14) Rev A 7/16/2014

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If local regulatory requirements differ from the above such may be applied only if the
impact is immaterial.

10. PARTICIPATIONS

The carrying value of investments in participations is the lower of historical and market
value.

11. INVENTORIES

Inventories comprise goods held for sale or materials or supplies to be consumed in the
production process or in the rendering of services.
Inventories are stated at the lower of cost and net realizable value. Net realizable value is
the estimated selling price less the estimated costs of completion and the estimated cost
necessary to make the sale.

The cost comprise all cost of purchase and other cost incurred in bringing the inventories
to their present location and condition, such as import duties, transport etc. Trade
discounts should be deducted from the cost attributed to inventories. Costs directly
attributed to acquisition should be distributed proportionally to volume of goods
purchased. Immaterial costs (when appropriation is not feasible) should be posted as cost
rather than capitalized.
Writing inventory down to net realizable value should be done on a group basis unless
possible to evaluate item separately.

Cost is calculated using first-in, first-out method.

Cost of sold inventory must be recognized as an expense in the period which the revenue
is recognized. Write-downs or losses of inventory must be recognized as an expense
when the write-down or loss occurs.

12. FINANCIAL INSTRUMENTS

Financial assets and financial liabilities are recognized on the Group’s balance sheet when
the Group becomes a party to the contractual provisions of the instrument.

Trade receivables
Trade receivables are stated at nominal value, less write downs for amounts unlikely to
be recovered.

The reserve for trade receivables shall be:

< One year based on historical data
> One year fully reserved

Investments
Investments are recognized and derecognized on a trade date basis where the purchase
or sale of an investment is under a contract whose terms require delivery of the
investment within the timeframe established by the market concerned, and are initially
measured at fair value, plus directly attributable transaction costs.

EF Corporate Control T Sjöberg 10 (14) Rev A 7/16/2014

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At subsequent reporting dates, debt securities that the Group has the expressed intention
and ability to hold to maturity (held-to-maturity debt securities) are measured at
amortized cost using the effective interest rate method, less any impairment loss
recognized to reflect irrecoverable amounts. An impairment loss is recognized in profit or
loss when there is objective evidence that the asset is impaired, and is measured as the
difference between the investment’s carrying amount and the present value of estimated
future cash flows discounted at the effective interest rate computed at initial recognition.
Impairment losses are reversed in subsequent periods when an increase in the
investment’s recoverable amount can be related objectively to an event occurring after
the impairment was recognized, subject to the restriction that the carrying amount of the
investment at the date the impairment is reversed shall not exceed what the amortized
cost would have been had the impairment not been recognized.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits and other short-
term highly liquid investments that are readily convertible to a known amount of cash
and are subject to an insignificant risk of changes in value.

Financial liabilities and equity

Financial liabilities and equity instruments issued by the Group are classified according to
the substance of the contractual arrangements entered into and the definitions of a
financial liability and an equity instrument. An equity instrument is any contract that
evidences a residual interest in the assets of the Group after deducting all of its liabilities.

Bank borrowings
Interest-bearing bank loans and overdrafts are measured at nominal value.

Trade payables
Trade payables are stated at their nominal value.

13. PROVISIONS

Provisions are recognized when the Group has a present obligation as a result of a past
event, and it is probable that the Group will be required to settle that obligation.
Provisions are measured at the directors’ best estimate of the expenditure required to
settle the obligation at the balance sheet date.

EF Corporate Control T Sjöberg 11 (14) Rev A 7/16/2014

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14. REVENUE RECOGNITION

Revenue from sales of products and services is recognized if the revenue can be reliably
measured, it is probable that the economic benefits of the transaction will flow to the
Entity and all related costs can be reliably measured and assessed.

Revenue is measured at the fair value of the consideration received or receivable and
represents amounts receivable for goods and services provided in the normal course of
business, net of discounts and sales related taxes.

General Revenue Recognition Principle

For most programs, revenue is recognized at departure- or start date of the program,
course or tour sold. At this stage the fee is fixed and determinable, collection has been
reasonably assured and according to cancellation rules the fees collected are non-
refundable (risk transferred to the customer).

Provisions are made for the related expenses incurred after the balance sheet cut-off
date.

Up-front payments received from students are reported as deferred income and
recognized as revenue over the related tuition period.

Products applying the general rule of revenue recognition are:

• Programs including travel
• Language Programs provided online
• Au Pair Childcare
• Host Family Programs
• Educational- and Leisure Tours
• Academic Degrees and related Preparation Programs

Exception applied to Language Programs without a travel component

Revenue generated from customers attending local language learning courses rendered
locally is recognized when the service is rendered, on a monthly basis in accordance with
the monthly production report.

Royalty revenue
Royalty revenues comprises of: initial fees, fees for rights granted by the agreement
(trademark etc.), technical support and prolongation fees.
Royalty fees are non-recoupable.

Initial and prolongation fees from franchisee operations, fees charged for the use of
continuing rights granted by the agreement and fees for technical support are recognized
as revenue in full on invoice date.

Royalty revenues for rights granted and technical support are calculated at least quarterly
as a per cent of franchisees gross income reported by the franchisees.

Real estate
Real Estate revenue is recognized on an accrual basis in accordance with the substance of
the agreement.

EF Corporate Control T Sjöberg 12 (14) Rev A 7/16/2014

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Sales of goods
Revenue from sales of goods is recognized at the date of delivery to the customer or
when the rights to goods are transferred to the customer. Advance payments received
from the customers are deferred and recorded as an income when the related goods has
been delivered (title to goods has passed to the buyer).

Financial income
Interest income is accrued on a time basis, by reference to the principal outstanding and
at the effective interest rate applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial asset to that asset’s net
carrying amount.

Dividend income from investments is recognized when the shareholders’ rights to receive
payment have been established

15. COST OF MATERIALS AND PURCHASED SERVICES

Cost of materials and purchased services consist of teacher-, student transportation-,

tuition-, accommodation expenses, as well as service costs. Provision is made for the
related expenses to be incurred after balance sheet date.

16. EMPLOYEE EXPENSES

Employee expenses include all expenses for employees of the Company, including e.g.
salaries, social fees and pensions and other related expenses. Expenses are attributed to
the period to which they relate.

17. RETIREMENT BENEFIT COSTS

Payments to defined contribution retirement plans are charged as an expense as they fall
due. Payments made to state-managed retirement benefit schemes are dealt with as
payments to defined contribution plans where the Group’s obligations under the plans are
equivalent to those arising in a defined contribution retirement benefit plan.

The Entities shall not have any defined benefit retirement plans if it is not required by
local law and regulation.

18. OTHER OPERATING EXPENSES

The operating expenses are generally taken into account in the period to which they
relate. Other operating expenses include travel cost.
Expenses for marketing activities are activated and cost accounted for in the period to
which the marketing campaign relates to.

19. TAXATION

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs
from profit as reported in the income statement because it excludes items of income or
expense that are taxable or deductible in other years and it further excludes items that

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are never taxable or deductible. The Group’s liability for current tax is calculated using
tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognized on differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax base used in the
computation of taxable profit, and are accounted for using the balance sheet liability
method. Deferred tax liabilities are generally recognized for all taxable temporary
differences and deferred tax assets are recognized to the extent that it is probable that
taxable profits will be available against which deductible temporary differences can be
utilized.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and
reduced to the extent that it is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when
the liability is settled or the asset realized. Deferred tax is charged or credited to profit or
loss, except when it relates to items charged or credited directly to equity, in which case
the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to
set off current tax assets against current tax liabilities and when they relate to income
taxes levied by the same taxation authority and the Group intends to settle its current tax
assets and liabilities on a net basis.

EF Corporate Control T Sjöberg 14 (14) Rev A 7/16/2014

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