Note 2 - Summary of the parent company’s significant accounting policies

The most significant accounting policies applied in preparing this annual report are described below. Unless otherwise specified, these policies have been applied consistently for all years presented.

This is MAG Interactive AB’s (the parent company’s) set of accounts prepared in accordance with RFR 2 Accounting for Legal Entities and the Swedish Annual Accounts Act. In cases where the parent company applies other accounting policies than the Group’s accounting policies, which are described in Note 2 in the consolidated accounts, this is specified below.

The annual accounts have been prepared in accordance with the acquisition value method.

The preparation of financial statements in accordance with RFR 2 requires the use of a number of important estimates for accounting purposes. Management is also required to make certain judgements when applying the parent company’s accounting policies. The areas that involve a high degree of judgement, that are complex or areas in which assumptions and estimates are of significant importance for the annual report are described in Note 4 of the consolidated accounts.

The parent company is exposed to a number of different financial risks in its activities: market risk (currency risk, interest rate risk), credit risk and liquidity risk. The parent company’s general risk management policy focuses on the unpredictability of the financial markets and attempts to minimise potential unfavourable effects on the Group’s financial results. For more information about financial risks, please refer to Note 3 of the consolidated accounts.

The parent company applies different accounting policies than the Group in the cases specified below:

Formats

The income statement and balance sheet follow the format of the Swedish Annual Accounts Act. The statement of changes in equity follows the Group’s format, but must contain the components specified in the Swedish Annual Accounts Act. It also means there is a difference in designations compared with the consolidated accounts, primarily in respect of financial income and expenses and equity.

Participations in subsidiaries

Participations in subsidiaries are recorded at the cost of acquisition after a deduction for any impairments. The cost of acquisition includes acquisition-related expenses. When there is an indication that participations in subsidiaries have decreased in value, a calculation of the recoverable value is performed. If this is lower than the carrying amount, an impairment is performed. Impairments are recorded in the item “Profit/loss from participations in Group companies”.

Capitalised development expenses

Development expenses that are directly attributable to the development and testing of identifiable and unique games for platforms that are controlled by the Group are recorded as intangible assets in the Group when the criteria for capitalisation in IAS 38 are met. No development expenses are capitalised in the parent company.

Financial instruments

IAS 39 is not applied in the parent company and financial instruments are valued at the cost of acquisition. In subsequent periods, financial assets that are acquired with the intention of being held in the short term will be recorded in accordance with the lowest value principle at the lower of the cost of acquisition and the market value.