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JM appeals Finansinspektionen’s decision on consolidation of tenant-owners associations in the consolidated financial statements

Press release 5/26/2020 12:09 PM

As previously communicated, Finansinspektionen announced on 5/20/2020 its decision regarding JM’s annual report for 2017, in which the authority determines that the tenant-owners associations that JM develops shall not be considered independent from an IFRS perspective and must therefore be consolidated in JM’s consolidated financial statements. JM does not share Finansinspektionen’s assessment but rather considers it to be of principle importance for the matter to be further assessed by a court of law. JM will therefore appeal Finansinspektionen’s decision.

The decision from Finansinspektionen (the Swedish Financial Supervisory Authority), which was the outcome of the investigation into Swedish housing developers’ financial reporting of housing development that JM has previously communicated, resulted in a caution for JM and that JM shall change its accounting method in future financial statements.

IFRS is a principle-based framework, the application of which often requires judgments, and it is often possible in such complex matters as this to reach different conclusions. The tenant-owner associations’ independence is fundamental for JM’s business, and JM makes the assessment that the company’s business model and structure imply that the associations even from a financial reporting perspective are to be considered independent.

The regulatory framework in this matter has not changed for many years. JM’s opinion and assessment have been presented in JM’s financial statements and have also been accepted for a long time by the stock exchange in its previous role as supervisory authority. In addition to support from current and earlier auditors, JM also received support for its interpretation in the form of opinions from reputable experts.

JM does not share Finansinspektionen’s assessment, and even if a change in the accounting will not affect JM’s segment reporting, project governance or risk profile, JM considers it to be of principle importance for the matter to be further assessed by a court of law. JM will therefore appeal Finansinspektionen’s decision.

        JM considers segment reporting, which it continues to base on the percentage of completion method with the tenant-owners association as a customer, to most accurately reflect the economic implications of JM’s business at the same time as it correlates well with the Group’s internal governance, which is based on the Group’s cash flows, risk profile and capital allocation. Finansinspektionen’s interpretation of the consolidated financial statements does not affect the Parent Company’s financial reporting either, and revenue will continue to be reported over time (percentage of completion).

Neither does Finansinspektionen’s perception of the tenant-owners associations’ independence from a financial reporting perspective affect the associations’ actual independence. JM considers the associations’ boards of directors to be independent, and JM has never had any representation in the associations’ boards of directors. This ensures strong consumer protection and provides a safeguard for home buyers.

In the annual reports for 2018 and 2019, JM provided disclosures regarding effects on earnings, equity and the tenant-owners associations’ liabilities in the event that the tenant-owners associations would be consolidated. JM intends to continue to provide such disclosures.

JM is one of the leading developers of housing and residential areas in the Nordic region. Operations focus on new production of homes in attractive locations, with emphasis on expanding metropolitan areas and university towns in Sweden, Norway and Finland. We are also involved in project development of commercial premises and contract work, primarily in the Greater Stockholm area. JM should promote long-term sustainability work in all of its operations. Annual sales total approximately SEK 16 billion and the company has about 2,500 employees. JM is a public limited company listed on NASDAQ Stockholm, in the Large Cap segment. More information is available at