Annual
Report 2023

Klarna Bank AB (publ). Organization no. 556737-0431

2

2

Contents

K L A RN A BA N K A B (P U B L )Financial information

3

Letter from the CEO

4

Letter from the CFO

6Report from the Board of Directors

9

Corporate Governance12

Key financial and performance measures

20

Group and parent company financials

23

Notes with accounting principles

29

A N N UA L R E P O RT 2 0 2 3
A N N UA L R E P O RT 2 0 2 3

CONTENTS

3

FINANCIAL INFORMATION

Financialinformation

Financial Results - Klarna Holding

The information on this page is presented for Klarna Holding AB (publ), if not otherwise stated.
The financial statements for Klarna Bank AB are presented on p23.
Strong performance of the business over the year has delivered:

22%

SEK

23.5B

Revenue
YoY growth FY23

17%
Gross merchandise volume 1
YoY growth FY23

60%

Revenue
FY23

SEK

981B

Gross merchandise volume (GMV)
FY23

SEK

11.7B

Gross Profit
YoY growth FY23

Gross profit
FY23

95%

0.38%

Adjusted operating result improvement
YoY FY23

Consumer credit loss rate 3
FY23

2

1

Total monetary value of products and services sold through the Klarna network over a given period of time.

2

Adjusted operating results are defined as IFRS operating results, excluding restructuring costs, share-based payments, related
payroll taxes, Depreciation, amortization and impairment of intangible and tangible assets. A reconciliation of adjusted operating
result to IFRS operating result can be found on p70 of this report.

3

Consumer credit losses as a % of Gross merchandise volume (GMV).

K L A RN A BA N K A B (P U B L )

FY23

FY22

FY23 YoY

Gross merchandise volume
Transaction and service revenue
Interest income from operating activities
Total revenue

980,892
19,7983,707
23,504

837,285
15,403
3,934
19,336

17%
29%
(6)%
22%

Processing and servicing
Consumer credit losses
Funding costs
Transaction costs
Gross profit(5,700)(3,766)(2,356)(11,822)
11,682(5,165)(5,563)(1,327)(12,055)
7,281

10%
(32)%
78%
(2)%
60%

Technology and product development
Sales and marketing
Customer service and operations
General and Administrative (G&A)
Depreciation, amortization and impairments
Other income (expense), net
Operating expenses(3,045)(3,400)(2,420)(3,920)(2,392)
290(14,887)(3,415)(4,893)(2,817)(4,359)(1,639)(633)(17,755)

(11)%
(31)%
(14)%
(10)%
46%
n.m
(16)%

Operating result
Restructuring costs
Share-based payments
Depreciation and amortization
Adjusted operating result(3,204)
665
462
1,699
(378)

(10,474)
501
523
1,639
(7,811)

69%
33%
(12)%
4%
95%

Income tax
Net result for the period

665(2,539)34(10,440)

1,856%
76%

Key ratios
Revenue take rate
Consumer credit loss rate
Gross margin

2.40%(0.38)%
50%

2.31%(0.66)%
38%

4%
(42)%
12pp

Amounts in SEKMA N N UA L R E P O RT 2 0 2 3

CONTENTS

LETTER FROM THE CEO

4

LetterfromtheCEO
K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

5

LETTER FROM THE CEO

Letter from the CEO

Gross merchandise volume (SEKB)
1,000

750

500

2023 was record-breaking year for Klarna2023 was a year punctuated by many firsts,
each marking a significant milestone in ourrelentless pursuit of accelerating commerce, now
increasingly delivered through generative AI. We
not only achieved our first month and quarter of250

profitability in four years, but also did so while
maintaining a great growth trajectory across all
markets and driving a gross profit margin of 50%.
But those weren’t the only firsts in 2023. In fact, theyear was full of them:

Record improvement in operating result
This year of firsts has delivered an extraordinary
shift in our financial performance based on thesustainable foundations of our business model.
In addition to having achieved some profitability
milestones we also improved our adjusted operating
result by an incredible 95% on an adjusted basis,
while continuing to drive strong GMV growth of 17%
YoY. Our global growth is outpacing digitalcommerce 1 by almost 7 times!

our underwriting and how we are getting better andbetter at lending to people who pay us back and use
Klarna again and again. Consumer credit losses were
down 32% YoY in 2023, with consumer credit losses
as a % of GMV remaining near historic lows of 0.38%
for the year - that’s a 42% improvement compared to2022. Niclas will talk more about our performance in
the CFO section and how we are presenting a moreintuitive financial view of our business model.

As followers of Klarna you’ll know that ensuring Klarnais leading the industry when it comes to responsible
lending and sustainable, fair credit is very close to
my heart. So I’m also incredibly pleased with ourconsumer credit loss performance while continuing
to grow our volumes. This highlights the strength of

While we continue on our journey to long-term
profitability, we made a conscious decision to invest
in growth in the peak shopping season of Q4. We
will continue to invest wisely for growth and focus
on being cost-effective on our path towards annual
profitability.

First full year of
US gross profit

1

Salesforce Shopping Index

K L A RN A BA N K A B (P U B L )

2006

2007

2008

2009

2010

2011

2012

2013

Our products are gaining even more momentum
with consumers as they realize the benefits ofour flexible payments compared to interest-laden
credit cards. As a result, we booked the biggest
month ever in the history of Klarna, with overSEK 100B GMV. It’s incredible to think that in thisone month we delivered higher GMV than in theentirety of 2015. And off the back of this record
GMV, we drove revenue up by 25% YoY in Q423.

2015

2016

2017

2018

2019

2020

2021

2022

2023

Our strong partnerships with global retailers are
key to this success. In 2023 we launched with theworld’s largest hospitality merchant, Airbnb. We
are now live together in 12 markets, helping people
pay for their stays flexibly. We also launched with
iconic UK retailer Selfridges, European e-commerce
powerhouse Zalando, Walmart Canada, Deichmannand launched in new markets with Samsung, Uniqlo
and Nike among many, many others.

Klarna becomes AI-powered2023

While our mission at Klarna remains the same to accelerate commerce and provide the best
possible experience for our consumers andretailers - the introduction of AI is undoubtedly
accelerating our progress. With a wealth of AIpowered ideas in the pipeline, we’re excited about
the next few years as we continue to evolve ourvision of Klarna as a comprehensive personal
financial digital assistant.

-0.9

2014

First month with SEK 100B of GMV

1.4

US gross profit (SEKB)

2022

2005

In 2023, the era of generative AI truly arrived. I
believe this is as transformative as the advent of theinternet. We were quick to adopt generative AI - wewere one of the first brands to build a ChatGPT plugin
and the first bank to launch with ChatGPT enterprise.
Currently, more than half of all Klarnauts use AI
tools - many developed in-house by our own teams- on a day-to-day basis, significantly improving theservices we provide for our consumers and retailers.
At the same time, they are liberating themselvesfrom repetitive administrative tasks, enabling them tofocus on complex problems that only they can solvewith their unique creativity and determination.

It’s also the first year we turned the US market togross profit, and not only did we do that, we madegains quarter on quarter, delivering SEK 1.4B in grossprofit terms in FY23.
We are growing GMV an incredible 40 times fasterthan US digital commerce growth 4.

0

A more personal first, which I was very excitedabout, was to address the finance ministers of
27 EU nations and the President of the European
Central Bank for the first time about the future of
the payments industry. As much as I believe in the
power of digital transformation, sometimes nothingbeats the power of in person communication.
Which is also why it was super important to me
to bring all Klarnauts together for our first face toface Smoooth Week since 2019 in Stockholm.
Finally, I want to take the opportunity to thankour investors, without whose unwavering support
we could not continue on this amazing journey,
our Klarnauts for their commitment and drivethat powers the business, and our retailers andconsumers, for their trust, for which I am always
grateful. I am immensely proud of all the firsts in this
18th year of Klarna. I hope you all are looking forward
to what Klarna has in store for 2024 as much as I am.
Sebastian Siemiatkowski
CEO and Co-founder, Klarna

A N N UA L R E P O RT 2 0 2 3

CONTENTS

LETTER FROM THE CFO

6LetterfromtheCFO
K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

7

LETTER FROM THE CFO

Letter from the CFO

Financial Results - Klarna Holding
Amounts in SEKM

2023 has served as a definitive testament to the agilityof our business model. We executed our strategy,
fostering sustainable growth, a significant increasein gross profit margin, and substantial efficiencies.
This was achieved at the same time as implementing
generative AI across the company, which continues
to have a transformative impact on our business. As aresult, we improved our adjusted operating result by
95% YoY in FY23.
I wanted to take the opportunity to give you moreof a deep dive into our financial performance.
This is one of the main reasons we have added an
additional view of our income statement, which
you can see on the right hand page. Ultimately ouroperating result and net result remain the same.
This presentation allows me to talk in more detailabout our growth levers, from both a revenue
perspective but also provide more transparency
on our cost evolution, providing more and better
insights into how Klarna operates as a business.
You can find detailed reconciliations to our
statutory financial statements on p20.

FY23 growth

FY23

FY22

FY23 YoY

In 2023 we grew GMV almost 7 times faster thanglobal digital commerce 1 with GMV increasing
17% YoY. In the US, we are outperforming digitalcommerce by 40 times. We’re gaining increased
value from that volume, with global revenue
increasing 22% YoY, largely driven by our fee-basedtransaction and service revenue which increased
29% YoY. And we have plenty of headroom tocontinue to scale in our growth markets as
consumer adoption drives market penetration.

Gross merchandise volume
Transaction and service revenue
Interest income from operating activities
Total revenue

980,892
19,7983,707
23,504

837,285
15,403
3,934
19,336

17%
29%
(6)%
22%

Processing and servicing
Consumer credit losses
Funding costs
Transaction costs
Gross profit(5,700)(3,766)(2,356)(11,822)
11,682(5,165)(5,563)(1,327)(12,055)
7,281

10%
(32)%
78%
(2)%
60%

Unlike conventional banks, ~70% of our revenue
comes from retail partner fees linked to the volume
we help generate, rather than interest on revolving
consumer loans. To provide our consumers withfurther flexibility, we focus on providing fixed termloans that are interest bearing. 74% of these loans
issued in 2023 were 6 months or less in duration.
From our continued pink standards initiatives toremove revolving credit and unnecessary fees,
consumer interest income decreased 6% YoY.

Technology and product development
Sales and marketing
Customer service and operations
General and Administrative (G&A)
Depreciation, amortization and impairments
Other income (expense), net
Operating expenses(3,045)(3,400)(2,420)(3,920)(2,392)
290(14,887)(3,415)(4,893)(2,817)(4,359)(1,639)(633)(17,755)

(11)%
(31)%
(14)%
(10)%
46%
n.m
(16)%

Operating result
Restructuring costs
Share-based payments
Depreciation and amortization
Adjusted operating result(3,204)
665
462
1,699
(378)

(10,474)
501
523
1,639
(7,811)

69%
33%
(12)%
4%
95%

Income tax
Net result for the period

665(2,539)34(10,440)

1,856%
76%

Key ratios
Revenue take rate
Consumer credit loss rate
Gross margin

2.40%(0.38)%
50%

2.31%(0.66)%
38%

4%
(42)%
12pp

Revenue (SEKB)
23.5
19.3

17.2%
19.8
15.4

Klarna GMV

2.5%

3.9

3.7

Global ecommerce

2022

2023

Transaction and service revenue
Interest income from operating activities

1

Salesforce Shopping Index

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

8

LETTER FROM THE CFOThis year we have maintained strong control of ourdirect cost base despite inflationary and interest
rate pressures, with transaction costs as a wholedeclining 2% YoY in FY23. Within transaction costs,
processing and servicing fees increased 10% largely
due to the associated increase in volumes but witha growth rate well behind GMV as our growing scaledelivers further cost efficiencies. As we have scaled,
particularly in our growth markets, our proprietary
underwriting models have improved, delivering a
reduction in consumer credit losses of 32% YoY,
contributing to consistently low consumer credit
loss rates — just 0.38% of GMV for FY23. Because
over 81% of our balance sheet turns over in 3
months or less, we can drive improvements in credit
losses across our portfolio very quickly.
We have a unique and conservative approach toliquidity where 82% of our funding is fixed termand has a longer duration than our average loan

Gross profit (SEKB)

portfolio of 40 days. This means we can manage
short term interest rate changes over a longer
period, effectively mitigating the impact of sudden
market shifts. This has also allowed us to continue
to maintain very low funding costs, representing
just 10% of revenue and under 9% of our total costbase, despite the sharpest interest rate increases
in the last decade.
At its core Klarna’s business model, as describedabove, delivers long-term sustainable gross profit.
Klarna demonstrated this through operating
profitability for the first 14 years of its existence.
In 2018 there was a strategic shift to invest in
taking the model and the brand to key larger
growth markets, the US and the UK. As the US hasgenerated increasing gross profits for 5 consecutive
quarters, in FY23 we delivered a Group gross profit
margin of 50%, increasing 12pp YoY, while grossprofit increased 60% YoY.

Consumer credit losses (SEKB)
11.7

7.3

-3.8
-5.6

FY22

FY23

Klarna’s continued growth and scale, coupledwith our focus on cost control and the strategic
utilization of AI for enhancing productivity andefficiency, have positively impacted our operating
leverage. We reduced operating expenses by-16% YoY, including G&A by -10%, technology andproduct development costs by -11% and customer
service and operations by -14% YoY. With ourincreased scale in growth markets and higher
brand awareness, we have increased the efficiencyof every dollar spent, delivering significant growthfor both Klarna and our retail partners while
reducing sales and marketing costs by -31% YoY.
As a result, in FY23, we increased our incremental
volume generated per SEK spent on sales andmarketing by 40%.

K L A RN A BA N K A B (P U B L )

FY22

FY23

Overall our investments over the past 3 years haveallowed us to scale the business and solidify our
network across all the markets. With our key US
growth market now delivering gross profits, 98%of our GMV in 2023 is generating a gross profit,
allowing us to deliver a 50% gross margin. With
our continued investment in AI, coupled withcompounding growth, our overall operating result
has improved by 69% and by 95% on an adjusted
basis.
We are excited about the future and remaincommitted to delivering value to our shareholders
while providing exceptional service to our customers.
Niclas Neglen
Chief Financial Officer, Klarna

A N N UA L R E P O RT 2 0 2 3

CONTENTS

REPORT FROM THE BOARD OF DIRECTORS

9Report from theBoard of Directors
K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

10REPORT FROM THE BOARD OF DIRECTORS

Report from the Board of Directors
Business overview
The Board of Directors and CEO of Klarna BankAB (publ) hereby submit the report for the period
January 1 to December 31, 2023. This reportcontains the financial statements for Klarna
Bank AB (publ) and the consolidated financial

statements for the company and its subsidiaries aswell the corporate governance report. The reporthas been prepared in millions of Swedish kronor(SEK) unless otherwise stated.

Information about the business
Klarna Holding AB (publ)’s subsidiary, Klarna BankAB (publ) is an authorized bank and is under thesupervision of the Swedish Financial Supervisory
Authority (Finansinspektionen). Klarna was foundedin 2005 in Sweden and has been a fully licensed
bank since 2017, active in 45 markets. We are an AI
powered global payments network and shopping
assistant that accelerates commerce by offering
fairer, more sustainable, innovative solutions. We
are committed to providing a seamless and secure
shopping experience that helps our customers
save time, save money and worry less about theirfinances.

Klarna is on a mission to accelerate commerceby putting customers at the heart of everything
we do. We began by revolutionizing the retailbanking industry before expanding into commerce
solutions with strategic investments to solve real
problems identified through consumer insights in the
shopping journey. Our success is the result of strong
relationships with consumers, retailers, and partners
built on trust. Maintaining this trust, especially inthe finance industry, requires ethical practices
and doing what’s right. These principles are woven
into all aspects of our business, including data
privacy, corporate governance, and fair treatment of
employees.

Business results

portfolio, as opposed to consumer interest from
our Fair Financing product. Interest income
grew 17% YoY to SEK 4.8B (FY22: SEK 4.1B) ata significantly slower pace than revenue andtotal net operating income. Interest expenses
represent just 13% of total operating expenses
increasing to SEK 3.1B (FY22: SEK 1.2B) at the endof the period. The increase was driven by deposits
from the public increasing YoY to SEK 97.1B (FY22:
SEK 81.5B) as our savings accounts in Germany
and Sweden continue to attract and retain
consumers and we maintain attractive savings
rates in line with interest rate rises.

Operating expenses

Klarna continued to drive volume growth while
reducing credit losses, highlighting its agility
in operating leverage. Credit loss performance
improved 29% YoY with credit losses declining to
SEK 4.0B (FY22: SEK 5.7B for the period.

Total operating expenses before credit losses havedecreased by 7% YoY to SEK 19.6B (FY22: SEK 21.1B)
as Klarna harnessed the power of generative AI todrive productivity and efficiency gains.
Average FTEs over the year were 5,545. Headcountat the end of the year was 4,201.

Balance sheet
Outstanding loans at 31 December 2023, loans to
the public, increased 16% YoY to SEK 86.1B (FY22:
SEK 74.0B) as a result of significant GMV growthacross key markets. It’s important to note this does
not represent all loans originated in FY23. Klarna’s
balance sheet turns over c12x per year due to theshort duration of our loans thanks to products
such as Pay Now, Pay in 30 and Pay in 3 or 4. Thismeans c92% of volumes generated during 2023

Klarna Bank’s operating result for the period was
SEK -3.3B (FY22: SEK-10.2B), a 68% YoY improvement.
Net result for the period improved 74% to
SEK -2.6B (FY22: SEK -10.2B).

were repaid during the year. Outstanding loans at
31 December represent only those loans yet to be
repaid. This rapid turnover rate is a key factor in
our efficient use of capital to generate revenues,
ensuring an asset-light balance sheet, setting us
apart from more traditional banks whose longer
loan durations tie up capital for extended periods.
It also allows us to finely control credit losses andsee any changes we make to underwriting impact
our balance sheet very quickly. The CET1 ratio for
Klarna Bank AB is 16.1%.

Net operating income
In FY23 Klarna’s GMV growth outpaced global
e-commerce 6 by almost 7 times, fulfilling our
mission to accelerate commerce while helping
consumers save time and money, and worry lessabout their finances. GMV increased 17% YoY to
SEK 981B (FY22: SEK 837B) and Total Net Operating
Income increased 23% YoY to SEK 20.4B in FY23
(FY22: SEK 16.6B).

1

Our commission income - primarily the fees
retailers pay Klarna - increased 30% to SEK 17.8B(FY22: SEK 13.7B). This is due to growing consumer
adoption that boosted payment volumes processed
through the Klarna network and the continued
growth in global retail partnerships to over 550K.

Branches abroad
Klarna Bank AB (publ) operates Klarna Bank AB
Danish Branch, Klarna Bank AB French Branch,
Klarna Bank AB Irish Branch, Klarna Bank AB German
Branch, and Klarna Bank AB UK Branch. Klarna

Bank AB Sucursal em Portugal (Klarna Bank AB’s
Portuguese Branch) was closed on 29 December
2023, although Klarna remains an active participant
in the Portuguese market.

Interest income increased primarily due tointerest earned on liquid assets held with othercredit institutions such as our overnight deposit

Salesforce Shopping Index

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

11

REPORT FROM THE BOARD OF DIRECTORSInteractions with regulators
In Germany, Klarna has actively engaged with local
policymakers and Members of Parliament on the
Future Financing Act and further digitalization of theGerman financial industry.
In the US, Klarna has continued engaging with theConsumer Financial Protection Bureau to help
them understand Klarna’s business. They’ve hadparticular interest in the Buy Now, Pay Later industry.
In March the CFPB released a report outlining theirassessments of BNPL consumers based on a small
survey based on self-reported data. In the report,
the CFPB was unable to confirm that BNPL leads tooverextension or increased indebtedness. Klarna
continues to work positively with the CFPB andcontinues engaging with the bureau on an individuallevel and through our trade association, Financial
Technology Association (FTA), to help the CFPB
understand BNPL and newer, innovative credit
products.
In Sweden, Klarna has actively been advocating
for BNPL regulation and a national debt registerin preparation for the report of the inquiry on
over-indebtedness that was published in June.
The report proposed actions in line with Klarna’s
position such as a national debt register, loweredand extended interest and absolute cost caps, a cap
on arrangement fees and widened requirements for
credit assessments. Klarna welcomes the proposed
legislation and will respond to the consultation tofurther strengthen Klarna as a driver of sustainable
payments and responsible lending.
In the EU, following the publication in the EU
Official Journal in November 2023, European
institutions have finalized their revision of theEuropean Consumer Credit Directive, expected to
be transposed in all 27 EU Member States before
November 2025 and to come into force at the endof 2026. Klarna welcomes the finalization of the text
to reinforce, streamline and modernize consumer
credit rules to ensure they are future proof andbetter protect consumers across the EU and weare pleased to see that the EU political agreement
includes proposals for a proportionate regime for
BNPL. Throughout the process Klarna has actively
engaged in discussions with European stakeholders,
national governments and consumer groups toensure consumer credit rules are fit for purpose andeffectively protect European consumers.

K L A RN A BA N K A B (P U B L )Significant events
In June 2023, the EU Commission published a seriesof proposed rules looking at modernizing payments
regulation in Europe. Klarna has always believedthat consumers should have control over theirpersonal data, as it belongs to them and that there
is an opportunity to redesign a regulatory payments
environment that enables local fintechs to compete,innovate, and deliver maximum value for European
consumers. We have therefore - directly andthrough its trade associations - issued a number ofcomments and engaged with relevant stakeholders
on the Instant Payments Regulation, Payment Service
Directive 3, Payment Regulation 1 and Financial Data
Access package.
In the Netherlands, Klarna, together with other BNPL
providers and the Dutch government, is working
on self-regulating efforts to raise industry-wide
consumer protections. This is a first step ahead ofproportionate regulation for the sector expected
as part of the implementation of the European
Consumer Credit Directive (CCD) in 2026.

■ On 23 February 2023, Klarna Bank resolved toissue 7,272,875 shares to Klarna Holding following
receipt of a capital contribution.
■ On 6 March 2023, Klarna Bank resolved to issue
3,632,006 shares to Klarna Holding following
receipt of a capital contribution.

■ On 5 July 2023, Klarna Bank AB called an
outstanding SEK 300m Tier 2 bond.
■ On 12 October 2023 Klarna Bank resolved toissue 7,264,011 shares to Klarna Holding following
receipt of a capital contribution.

Future development
Klarna is on a mission to accelerate commerce. We willcontinue to expand our commerce solutions, poweredby generative AI, to better serve our global base of
consumers and retailers. We will continue to invest in

our products and services including the Klarna app,
Card, bank accounts, open banking and our marketing
services to create a strong platform for future growth
as the shopping destination of the future.

Proposed treatment of unappropriated earnings
The Board and the CEO propose to the Annual General Meeting that the non-restricted equity of
SEK 14,445,057,114 on Klarna Bank (publ)’s balance sheet at the disposal of the Annual General
Meeting to be carried forward.

Additional Tier 1 instruments

276,000,000 SEK

Other reserves(133,700,902) SEK

Retained earnings

17,292,587,164 SEK

Net result for the year

(2,989,829,148) SEK

Total

14,445,057,114 SEK

In accordance with the Annual Accounts Act
chapter 6, 11§, Klarna Bank AB (publ) does notprepare a statutory sustainability report since an
Environmental, Social and Governance report (ESG)that meets the legal reporting requirements is

prepared by the Parent Company Klarna Holding AB(publ). Klarna Holding AB (publ) publishes the ESG
report within the annual report. The ESG report isavailable at Klarna’s website: www.klarna.com

A N N UA L R E P O RT 2 0 2 3

CONTENTS

CORPORATE GOVERNANCE

12

Corporate
GovernanceK L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

13

CORPORATE GOVERNANCE

Corporate Governance
Shareholders in General Meeting

About Klarna
Klarna Bank AB (corporate registration no. 5567370431) (“Klarna”) is a Swedish public limited liability
company licensed to carry out banking activities
under the supervision of the Swedish Financial
Supervisory Authority (SFSA). Klarna is categorized
by the SFSA as a category 2 institution 1.
Klarna Bank AB provides its financial services
in other EEA countries through passporting its
license in accordance with EU directive 2013/36/
EU and by establishing local branches. Klarnaalso offers its financial services outside the EEA
through the establishment of local subsidiaries incertain jurisdictions. Klarna’s corporate governanceframework and approach apply to Klarna
Holding AB, Klarna Bank AB and all branches andsubsidiaries.
The Corporate Governance Report is produced
according to the Swedish Annual Accounts Act(SFS 1995:1554). Klarna is not obliged to nor doesit comply with the Swedish Corporate Governance
Code (SCGC).
When signing the annual accounts on February 27,
2024, the Board of Directors also approved the
Corporate Governance Report.

GovernanceGood corporate governance means ensuringthat Klarna is run sustainably, responsibly and as
efficiently as possible. Maintaining the confidence
and trust of our stakeholders is vitally important toKlarna’s continued success. This chapter describes
Klarna’s corporate governance framework andresponsibilities of the various corporate bodies.

Board

Internal Audit

Audit, Complianceand Risk Committee

Internal Framework
Risk Control

CEO+Group Management Team

Executive Credit and
Fraud Committee

Elected / appointed by

Capital and Liquidity
Committee

Compliance

Audit, Complianceand Operational Risk
Committee

Framework for corporate governanceCorporate Governance Structure

External Framework

Klarna’s corporate governance structure
distributes rights and responsibilities between theshareholders, the Board and the CEO according to
the relevant laws, rules and internal processes. We
believe well defined reporting lines and distributionof distinct responsibilities are essential to good
corporate governance. Our high ethical andprofessional standards and a sound risk culture arealso vital in ensuring good governance. The image
below provides a summary of how governance andcontrol are organized at Klarna.

In addition to general laws, rules and industry
practices, Klarna must also comply with the detailed
regulations specific to banks and payment service
providers. These include the Swedish Banking and
Financing Business Act (SFS 2004:297) and rules andrecommendations issued by the SFSA with regard to,among other things, capital and liquidity requirements
as well as rules on internal governance and control.
As Klarna has corporate bonds listed at Nasdaq
Stockholm, Klarna is also subject to the Rule Book for
Issuers of Fixed Income Instruments.

In order to ensure compliance with external
regulations Klarna operates an internal framework
which incorporates the external requirements on
corporate governance.

The categorization aims to reflect Klarna’s systematic importance and is based on its size, complexity and scope of activities.

K L A RN A BA N K A B (P U B L )Risk management andinternal control framework

Articles of Association,
Rules of Procedure of
the Board including CEO
Instruction, policies,
instructions, routines,
guidelines, Code of
Conduct and Klarna’svalues.

Reporting to / informingInternal Framework

1

Remuneration
Committee

External FrameworkLaws, regulations, good
credit market practice,prescribed practices or
ethical standards (Code of
Conduct), authorities’ rules
and recommendations.

Of primary importance are the Rules of Procedureof the Board (which include how to address conflictsof interest for Board members and instructions
for the operation of the Board’s committees), theInstructions for the CEO, the Policy for Suitability,

Training and Diversity of the Board, Management
and Key Function Holders, and the Policy for Klarna
Board Committees. These documents have been
adopted by Klarna’s Board. Additionally, Klarna’s
Code of Business Conduct provides an ethicalframework for the conduct of all members ofgoverning bodies and employees.
Klarna has a framework of approved policies andinstructions. These are important tools for the
Board and the CEO in their governing and controllingroles, as well as defining the roles, requirements
and expectations of the second and third lines ofdefense within risk ownership and all employees in
the fulfillment of their roles. These policies include,for example, the Risk Policy, Compliance Policy,
Credit Policy, Insider and Disclosure Policy, Conflictsof Interest Policy, Anti-Money Laundering andCounter Terrorist Financing Policy, Remuneration
Policy, and the Global Work Environment Policy.
These mechanisms, together with the Articles of
Association, constitute the internal framework that
regulates corporate governance at Klarna.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

14

CORPORATE GOVERNANCE

Articles of Association
The articles of association are the overall setof rules for the company which are decided by
the shareholders at the General Meeting. The
Swedish Companies Act sets certain minimum
demands on what information they should contain.
The Articles of Association are available at theSwedish Companies Registration Office and on
Klarna’s website. Amendments to the Articles ofKlarna’s qualified shareholders
Association are resolved by the General Meeting
pursuant to Swedish law and are subject to theapproval of the Swedish Financial Supervisory
Authority.

Klarna Holding shareholders >10% are as follows:

Klarna’s Articles of Association can be found athttps://www.klarna.com/international/about-us/
corporate-governance/investor-relations/

Funds advised by Sequoia

Shareholder% of votes/ownership20.37%

Heartland

10%

Klarna Bank AB is 96.73% owned by Klarna Holding AB.

Klarna’s organization
Klarna is structured into various Business Units,internally known as “Domains”. Each of theseBusiness Units is composed of multiple Groups,
which in turn are composed of Teams. The
responsibilities of each team, group and domain isclearly defined and documented.
Within each Business Unit, there is a dedicatedBusiness Unit Manager overseeing operations, The
Business Unit Managers report to a member of theGroup Management Team.
Klarna’s organization is divided into domains. Eachdomain is responsible for a subset of Klarna’s
operations and is led by a domain lead who reports
to a first line CXO. Each CXO reports to the CEO

and the CEO reports to the Board. There are also
three independent control functions outside of thedomains: Risk Control, Compliance and Internal
Audit. Risk Control and Compliance are both directly
subordinated to the CEO and the Board. Internal
Audit, which reports directly to the Board, has been
outsourced to an external party.
The Group Management Team is formed of the CEO,
Chief Product and Design Officer, Chief Operating
Officer, Chief Financial Officer, Chief Marketing
Officer, Chief Technology Officer, Chief Commercial
Officer, Chief Risk Officer, Chief Compliance Officer,
Chief Information Security Officer and Chief Credit
Risk Officer.

General meeting
The General Meeting is Klarna’s highest decisionmaking body where shareholders exercise theirvoting rights. At the General Meeting decisions
are taken regarding matters including the annual
report, the income statement and balance sheet,dividend, election of the Board of Directors andauditors, and remuneration for Board members andauditors.

Voting rights
All shareholders, registered in the Shareholders’Register and having notified their attendance
properly, have the right to participate in the General
Meeting and to vote for the full number of theirrespective shares.

K L A RN A BA N K A B (P U B L )Mandate to repurchase andconvey own shares
The annual general meeting 2023 neither decided
on authorisation to acquire nor convey own sharesin Klarna. Consequently, the Board of Directors did
not have such authorisations in 2023.

Mandate to issue shares and warrants
The annual general meeting held on June 26, 2023,
authorized the Board to issue 3,013,594 shares and3,013,594 warrants.

The Board
The Board is the highest decision-making body in
Klarna’s structure for management and control.
The Board is responsible for the company’s
strategy, organization and for the managementof the company’s operations. The Board also
holds the ultimate responsibility for ensuring that
Klarna’s corporate governance arrangements meet
expectations, and are implemented effectively
throughout the organization.
The Board members are elected by the shareholders
at the Annual General Meeting (AGM) for a one-year
term of office extending through to the next AGM.
Klarna is not required to have a nomination committee
and as such the Board has not adopted a nomination
policy. In practice, the Board members are proposedby some of the largest shareholders and appointed by
the general meeting.

■ evaluating the effectiveness of operations inrelation to the agreed strategy, framework andobjectives on a regular basis.
■ ensuring that the business is organized in such a
way that the accounting, treasury management
and financial conditions in all other respects
are controlled in a satisfactory manner and thatthe risks inherent in the business are identified,defined, measured, monitored and controlled
in accordance with external and internalframework, including the Articles of Association.
The board is also responsible for setting Klarna’s
risk appetite and policies establishing theprinciples for risk management.
■ deciding on major acquisitions and divestments
as well as other major investments,

The Board has adopted Rules of Procedure that
regulate the Board’s role and ways of working as wellas policies for the Board’s committees. The Board
has overall responsibility for the activities carriedout within Klarna and has the following duties, among
others:■ selecting, monitoring and planning the
succession of the Board members,■ deciding on the nature, direction and strategyof the business as well as the framework andobjectives of the activities.

■ deciding on appointment and dismissal of theInternal Auditor (outsourcing partner and/or
individual).

■ appointment or dismissal of the CEO, the Chief
Risk Officer, the Chief Compliance Officer andthe Chief Information Security Officer.

■ deciding on remuneration of the CEO and theGroup Management Team.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

15

CORPORATE GOVERNANCE

Board members

The Chairman● Michael Moritz, Chair of the Board● Sebastian Siemiatkowski, CEO● Sarah Smith● Mikael Walther● Lise Kaae
● Omid Kordestani● Roger W. Ferguson Jr.
● Matt Miller

Sarah Smith, Board member

Michael Moritz, Chairman of the Board

Omid Kordestani, Board member

Michael is a senior adviser and Board Member of
Sequoia Heritage and was a Partner at Sequoia
Capital between 1986 and 2023. Michael has servedon the Boards of companies such as Google, Yahoo,
PayPal, and Stripe. He has served on the Board ofKlarna since 2010.

Omid was Senior Vice President of Worldwide Sales
and Business Development at Google from 1999
to 2009. He held several other positions within
the company, including Chief Business Officer
and Senior Advisor for Google. He has also been aboard member of Spotify and Vodafone, as well as
chairman of the board of Twitter Inc. He has been
Chairman of Pearson plc since March 2022.

Sebastian Siemiatkowski, CEOAs the co-founder and CEO of Klarna, Sebastianhas spent nearly the last two decades challenging
the big banks and revolutionizing the world of
e-commerce both in Sweden and abroad. Using his
degree from the Stockholm School of Economics andyears of sales experience, Sebastian has led Klarna
to become one of the top global payments andshopping service providers in the world.

Mikael Walther, Board Member
Mikael is the managing director at Rosfelt
Enterprises AB. He previously led investmentcompany Navos Capital and has broad experience
within investment banking and other financial
companies. He has previously worked for Cevian
Capital and Goldman Sachs.

Lise Kaae, Board member
Lise most recently comes from Svenska
Handelsbanken AB where she was a Board member
from 2015 to 2020. She has also been a memberof that Board’s committee for credit, auditing, andrisk. In addition to this, Lise has been a member ofthe Danish Financial Supervisory Authority’s board(Finanstilsynet). Lise also joined the board of directorsin Pleo Financial Services A/S in November 2022.

Sarah has over 20 years of experience in banking.
She worked at Goldman Sachs from 1996 to
2021, having served as Chief Compliance Officer,
Controller and Chief Accounting Officer. She serveson the boards of Via Transportation, 98point6,
PCAP, and AON. She is also a member of the Boardof Trustees of the Financial Accounting Foundation.

Roger W. Ferguson Jr., Board member

The Chairman of the Board organizes and leads
the work of the Board. According to the Rules ofProcedure, the Chairman will maintain regularcontact with the CEO, ensuring that the Board
receives sufficient information and documentation

Chief Executive Officer
Klarna’s Chief Executive Officer (CEO) is
responsible for the day-to-day management of theGroup’s activities in accordance with the external
and internal frameworks. The CEO reports to theBoard and at each board meeting they submit
a report on the performance of the businessincluding updates on strategic priorities set by the
Board.

when the CEO’s work is evaluated. Other membersof the Group Management Team participate as
required by invitation from the Board or CEO.
As part of the Rules of procedure of the Board, theBoard has adopted an instruction for the CEO’s
work and duties which also regulates the divisionof responsibilities and the interaction between the
CEO and the Board. The CEO appoints the headsof corporate functions (CXOs). The Board appoints
the heads of the control functions and the Money
Laundering Reporting Officer (MLRO). The CEO is
Sebastian Siemiatkowski.

Roger is the Steven A. Tananbaum Distinguished
Fellow for International Economics at the Council
on Foreign Relations. He was the president and CEO
of TIAA and the former Vice Chairman of the Boardof Governors of the U.S. Federal Reserve System.
He serves on the boards of Alphabet, Corning, andInternational Flavors & Fragrances.

Klarna’s CEO is also a Board member andparticipates in all board meetings, except on
matters in which the CEO has an interest that may
be in conflict with the interests of Klarna, such as

Matt Miller, Board member

The reputation, experience and assignmentsof the Board and the CEO

Matt is a Partner at Sequoia focused on early andgrowth stage investments in technology companies
across the US and Europe. Over the last 12 years at
Sequoia, Matt serves on the boards of Confluent,
Grafana, dbt Labs, Hex, Graphcore , Yokoy and
Tecton. Matt moved from California to London in
2021 to help launch Sequoia’s European office. Prior
to Sequoia, Matt worked at Goldman Sachs andgraduated from Brigham Young University.

Board members bring a wealth of relevant
professional experience to Klarna, including
expertise in banking and finance, e-commerce,
technology, payment cards, risk management,
governance, accounting, international sales,
venture capital, entrepreneurship, and leadership.
Additionally, their diverse backgrounds provide
valuable knowledge and insight into the conditions
and requirements for conducting business in the
different markets where Klarna operates.

Suitability assessment
To ensure Klarna’s Board members and CEO havethe right skills, knowledge and experience, theBoard has adopted the Suitability, Training andDiversity Policy. This policy looks at the person’s
experience and reputation and makes sure they’re

K L A RN A BA N K A B (P U B L )to effectively assess Klarna’s current position,
financial plans, risks and risk management andfuture development, and deliberate with the CEO
on strategic issues

a good fit for the company. It also evaluates theirability to commit the time and effort needed to
do their job well. The Chief Operating Officer is
responsible for the assessment at appointment
and then subsequently at least every two years
or sooner if events observed through the ongoing
monitoring process suggest a review would be
prudent. When a new Board member or a new
CEO assumes their duties, they are also externallyassessed by the SFSA. The CEO’s performanceand qualifications will be evaluated the same way
as Board members. According to the Rules ofProcedure of the Board, the Board ensures that
the CEO fulfills his duties. The Board is responsible
for appointing and retains the authority to dismiss
the CEO of Klarna.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

16

CORPORATE GOVERNANCE

Diversity
Klarna understands that having a diverse Board
is crucial to ensure the Board can do its job welland has the knowledge and experience needed tonavigate the various social, business and cultural
conditions of the markets Klarna operates in andthe activities the company is involved in.
The Suitability, Training and Diversity Policy adopted
by the Board lays out the diversity requirements
Klarna’s Board is expected to meet. This policyemphasizes that all Board assignments should bemade based on merit and with the goal of maintaining
and enhancing the Board’s overall effectiveness.
In order to achieve this, the company looks for awide range of qualifications and competencies, andplaces a strong emphasis on diversity in terms of age,gender, geographical background, and educational
and professional experience.

Number of assignments
Klarna must evaluate the number of positions heldby the Board members and CEO to ensure that

it is reasonable and appropriate. The evaluation
takes into account the specific circumstances
and the nature, scale, and complexity of Klarna’s
business operations. The company has determinedthat all Board members’ assignments comply withregulatory requirements.
A detailed presentation of the members’
background and other assignments can be foundon www.klarna.com/international/corporategovernance/the-board/.

Training
The Board sets a training plan every year, and it is
the responsibility of the Compliance function to
implement the plan for the Board. The training plan
includes an orientation program for new Board
members and ongoing training on important topics
for individual members and the Board as a wholein matters that have been considered important by
the Board itself. This is to ensure that the Board iscontinuously informed and updated on the relevant
matters that affect the company.

Board committees
The overall responsibility of the Board cannot bedelegated. The Board has established two separate
working committees, the Remuneration Committee
and the Audit, Compliance & Risk Committee, toassist the Board in fulfilling the responsibilities
outlined above. The duties of the Board
Committees, as well as working procedures, aredefined in the Policy for Klarna Board Committees.
Each committee regularly reports on its work to theBoard. Committee members are appointed by the
Board for a period of one year at a time.

Remuneration Committee
The Remuneration Committee (RemCo) is
responsible for preparing and presenting proposals
to the Board on remuneration issues. This
duty includes proposals regarding the Group’s
Remuneration Policy and on remuneration tomembers of the Group Management Team, which
includes CXOs and heads of control functions.
Klarna’s Board has adopted a Remuneration

K L A RN A BA N K A B (P U B L )Policy which creates standardized remuneration
structures throughout the organization. This isrevised when necessary and at least annually.
The RemCo makes a competent and independent
evaluation of the Remuneration Policy and Klarna’s
remuneration system, and presents it to the Boardon at least an annual basis. The RemCo handles
matters within its responsibility on an ongoingbasis through correspondence between thecommittee members. Any formal decisions notcovered by its delegation authority are reported
to and documented by the Board at the closest
following Board meeting. Under the oversight of
RemCo, Klarna has established a Remuneration
Policy and processes, securing sound andstandardized remuneration structures throughout
the organization.

Audit, Compliance & Risk Committee

updates to the Board on matters pertaining to
its responsibilities. More information about the
number of meetings and attendance can be foundbelow.

The Audit, Compliance & Risk Committee (ACRC)
is responsible for oversight and preparation of
all matters related to audit (both internal andexternal), compliance, risk and financial reporting
and related internal control arrangements. ACRC
held 9 meetings in 2023 and provided regular

Members during 2023: Sarah Smith (Chair), Mikael
Walther and Lise Kaae.

Meetings and attendance
The table shows the number of meetings held in 2023 2 by the Board of Directors and its committees as wellas the attendance of the individual Board members:

KHAB Boardof directors

KBAB Boardof directors

Audit ,
Complianceand RiskCommittee

Remuneration
Committee

24

14

9

5

2023
Number of meetings

Independence
in relation to
the Company

Independence
in relation tosignificant
shareholders

No

Yes 3

(of which are email resolutions)

17

7

0

3

Michael Moritz

24

14

-

5

Sebastian Siemiatkowski

24

14

-

-

No

No

5

Yes

Yes
No

Sarah Smith

24

14

9

Lise Kaae

24

14

9

-

Yes

Mikael Walther

24

14

9

-

Yes

No

Omid Kordestani

24

14

-

5

Yes

Yes

Roger W. Ferguson Jr.

24

14

-

-

Yes

Yes

1

1

-

-

Yes

No

Matt Miller

Group Management TeamThe CEO works together with Klarna’s GroupManagement Team. The Group Management Teamconsists of CXOs and heads of control functions
and is responsible for matters of common concern
across corporate functions, strategic issues,
business plans, financial forecasts and reports. The
Group Management Team usually meets weekly or
when the CEO convenes a meeting.

Members during 2023: Omid Kordestani (Chair),Michael Moritz and Sarah Smith.

The Group Management Team consists of:● Sebastian Siemiatkowski, CEO● David Fock, Chief Product and Design Officer● Camilla Giesecke, Chief Operating Officer● Niclas Neglén, Chief Financial Officer● David Sandström, Chief Marketing Officer● Yaron Shaer, Chief Technology Officer● David Sykes, Chief Commercial Officer● Joachim Reuss, Chief Risk Officer● Joaquín Calderón, Chief Compliance Officer● David Currie, Chief Information Security Officer● Arvind Varadhan, Chief Credit Risk Officer

2

As of December 29, 2023.

3

The committees in the table are committees of the Klarna Bank AB Board. As the members of the ACRC (and all Klarna Bank
Board members) are also members of the Klarna Holding Board, the Klarna Holding Board has the benefit of consideration
undertaken and recommendations made by the ACRC.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

17

CORPORATE GOVERNANCE

Group management committees
The CEO has, besides the Group Management Team,
three separate committees at his disposal for the
purpose of managing operations:

Capital and Liquidity Committee, which is
responsible for assessment and decision within theinternal capital assessment process.

Executive Credit and Fraud Committee, which is
responsible for reviewing credit risk results andtrends as well as steering the company’s overall
generation of credit risk.

Audit, Compliance and Operational Risk Committee,
which is responsible for providing oversight andretaining executive responsibility for all Audit,
Compliance and Operational Risk related matters.

Risk management, risk reporting, and control functions
Risk management is central to Klarna’s operating
model and underpins all activities conducted
throughout the organization. The purpose of risk
management is to safeguard Klarna’s long-term
viability, mitigate volatility in financial performance,enhance operational resilience and performance,
and facilitate informed decision-making.
Klarna’s risk management governance model
encourages a risk-aware culture combined with
control structures which are monitored andenforced by independent control functions. Key
controls are documented and assessed on aregular basis, with assessments considering both
effectiveness of design and operation. The risk
strategy is a natural extension of the businessmodel that focuses on identification, assessment,
management and monitoring of the material risks
that Klarna is exposed to.

Risk GovernanceKlarna operates a financial services industry
standard three lines of defense model for risk
management and control. The model allocates
responsibilities of activities among teams orfunctions in three independent lines as outlined
below:

Business Line Management

Risk Control and ComplianceInternal Audit“Risk ownership”
1st line of defence“Control functions”
2nd line of defence“Risk assurance”
3rd line of defence

Owns risk and risk
management activities.

Establishes policies and framework,
provides advice, facilitates risk
assessment and independent control
including reporting of adherence torisk appetites, limits and frameworks.

Tests, validates and assess efficiency
in governance, risk management
and internal control processes andactivities.

K L A RN A BA N K A B (P U B L )The Group Management Team are responsiblefor implementing the risk strategy. They are also
accountable for the management of risks within eachof their areas of responsibility, and to promote asound and effective risk culture across their teams
and the Klarna Group as a whole.
Business Line Management, in the first line of defense,are responsible for the risks, and the management ofthese, within their respective area of responsibility.
They are responsible for ensuring that the appropriateorganization, procedures and support systems are
implemented to ensure a sufficient system of internal
controls.
The second line of defense, consisting of the functions
Risk Control and Compliance, oversees risk. These
functions set the principles and framework for risk
management, facilitate and challenge risk assessments,
perform independent control testing, and report onadherence to risk appetites, limits and frameworks.
The control functions are independent of businessline management. They attend and report to the Audit,
Compliance and Risk Committee (ACRC) and theBoard.

Board and Group Management Team Overall Responsibilities

Performs necessary controls
to secure acceptable risk exposure.

The ultimate responsibility for risk management rests
with the Board, which sets Klarna’s risk appetite
limits and policies establishing the principles for risk
management. It also oversees and promotes a soundrisk culture of risk awareness and understanding
across the organization to encourage informed
decision making. The Board is supported by the Audit,
Compliance, and Risk Committee (ACRC) in performing
its duties regarding risk management.

Internal Audit, in the third line of defense, provides
risk assurance through independent periodic reviewsof governance structures and control systems. This
includes regular evaluation of Klarna’s framework forrisk management and a yearly review of the control
functions in the second line of defense. Internal audit
reports directly to the Board of directors.

Risk Strategy and Appetite
Klarna’s risk strategy is set by the Board and outlines
the nature of risks that the business is exposed to,its willingness to take these risks and how they are
managed. It is formed through Klarna’s business plan,established by the Group Management Team andapproved by the Board; the Risk Policy, which forms

the basis of Klarna’s risk management framework; theCredit Policy which sets out Klarna’s credit strategy;
and the Internal Capital and Liquidity Adequacy
Assessment Process.
The risk appetite framework outlined in the Risk
Policy reflects Klarna’s willingness to take and limit
risk. The appetite is set by the Board and reviewed
and updated regularly, at least on an annual basis.
This annual review is an integral part of the annual
business planning process, ensuring alignment of thebusiness strategy, planned business activities andKlarna’s risk exposures.
The Board and Executive Management also issue
specific written policies and instructions for managing
risks, which are complemented by detailed routine
descriptions within the organization. The second linefunctions provide an independent assessment ofKlarna’s risk profile to the Group Management Teamand the Board on at least a quarterly basis.

Risks
Klarna categorizes the key risks it is exposed tointo six types. These categories are subsequently
further refined and managed within theorganization. These risk categories form the basisof how Klarna identifies, assesses, manages, andreports against risk.
Credit risk is defined as: the risk of loss due toa counterparty failing to meet its contractual
obligations or concentrations of exposures.
Credit is fundamental to Klarna’s mission ofproviding consumers a smooth payment experience,
better financial management and supporting
partners’ growth. It is a risk that Klarna takes toachieve its business objectives.
Klarna ensures that the consumer credit portfolio
is resilient to volatile economic conditions byoffering short duration credits and low averageorder value. Klarna limits the concentration of
non-performing loans and large single exposuresin the consumer credit portfolio. This, together
with the dispersion of millions of customers acrossmultiple countries and continents and low averageorder value, ensures that the consumer portfolio isdiversified. Klarna takes precautions to ensure thatapproved consumers have the ability to pay their
obligations.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

18

CORPORATE GOVERNANCE

Exposures and losses stemming from partners,
payment and bank counterparties are managed bylimiting single exposures based on the risk classof the counterparty as well as the aggregatedexposure and concentration to different segments.
Exposures to partners are managed using mitigation
tools to increase Klarna’s collateral, such as
payment delays, rolling reserves, insurances andwithholding payments.
Klarna uses financial guarantees to provide
protection for part of its portfolio of consumer
exposures. The guarantee can reduce theregulatory capital the bank is required to hold for
unexpected losses and the guarantee is fully fundedwith eligible collateral.
Market Risk is defined as: the risk of impacts on
earnings or capital as a result of market pricemovements.
Klarna does not actively take market risk but due to
its multi-currency business and different durationof its assets and liabilities is exposed to it. Klarna’s
exposure to interest rate risk is via a mismatch ofterms in assets and liabilities. The risk arises whereKlarna’s funding has a different duration than thecredits granted to consumers. Klarna seeks tomitigate this risk by matching assets and liabilities
to reduce the risk to economic value and earnings.
Currency risk is mitigated by entering into offsetting
currency transactions in order to minimize theimpact that changes in currency rates may have on
Klarna’s realized earnings.
Klarna does not invest in financial instruments otherthan for liquidity, interest rate and currency risk
management purposes. From time to time Klarna
makes strategic investments in other companies toaccelerate innovation and/or expand and improve
its product offering. Equity risk, the risk thatthe value of these investments may increase or
decrease, is a natural consequence of this activity.
The risk of losses arises due to the potential foradverse price changes of an investment. This
exposure is limited through Board mandates.

Liquidity Risk is defined as: the risk of being unable
to meet financial obligations as they fall due, or
unable to fund operational needs without incurring
unacceptable costs.
Klarna is dependent upon the effective managementof liquidity risk to realize the company’s strategy.
The risk of insufficient funding being available would
have implications on future growth, the company’s
ability to meet financial obligations, and in an
extreme scenario, the breach of regulatory limits.
Klarna is primarily exposed to liquidity risk due tothe potential for unexpected increased demand for
credits. There is a risk that Klarna does not have asufficient capacity to acquire additional funding ata reasonable cost in a timely manner, or does nothave sufficient levels of liquid assets to convert
to cash during such times. Klarna keeps sufficientlevels of liquidity at hand at all times, ensuringthat sufficient funds are available to support thebusiness and that regulatory requirements areadhered to.
Klarna actively manages its liquidity risk exposureand sources of liquidity by calculating, forecasting
and managing the size of the High Quality Liquid
Assets (HQLA) portfolio and the funding needs toensure that Klarna always has the ability to fulfill its
commitments as they fall due and meet regulatory
requirements. Klarna invests in financial instruments
for liquidity management purposes, and mostly
in high credit quality sovereign and municipal
government securities.
Operational Risk is defined as: the risk of
inadequate or failed processes, personnel,
products or third parties.
Operational risk is a natural consequence ofKlarna’s business model and operations. The
continued delivery of Klarna’s services to customers(partners and consumers) relies on resilience andstability in how processes, personnel, products
and third parties are managed. To manage these
inherent risks Klarna operates a robust operationalrisk management framework.
Klarna maintains an operational risk management
framework as outlined in the Operational Risk
Policy. This is supported by more detailed risk
specific approaches. On an annual basis, businesscritical products and services are identified andK L A RN A BA N K A B (P U B L )a risk assessment completed, including review
of internal controls and identification of any
additional mitigation activities required. This
includes maintaining a business continuity plan toensure continuation of services during a business
continuity event.
To sustain operational delivery, outside of business
continuity, a mandatory Incident management
process provides a structured approach forcontinuous learning and improvement throughanalysis of past incidents.
A driver of operational risk is major change. Klarna
operates a change management approval process(the NPA process) to ensure a sound understandingof the business change and capture associatedrisks. All major changes undergo a risk assessment
led by the owner of the change to identify andassess the risks associated with the change, andto implement adequate controls and/or mitigation
actions.
Klarna has no appetite for its products and services
being misused for financial crime. It does not accept
any deliberate, inadvertent or systemic breachesof applicable AML/CTF laws and regulations, or
relevant sanctions regimes, as further elaborated in
the AML & CTF Policy.
ICT and Security Risk is defined as: the riskof failures or breaches in information orcommunication systems or physical security
including system outages, software failures, data
breaches, physical security breaches or cyberattacks.
Klarna is subject to ICT and security risk as aconsequence of its business and operational
processes. This risk can occur in several ways that
can impact on one or more of the confidentiality,
integrity or availability of data and systems suchas stemming from human actions, system or
technology failures or processes not operating as
expected as well as adjusting to the continuously
evolving cyber threat landscape.
Klarna uses many automated and standardized
security measures in a layered approach to protect
systems. To manage ICT and Security risks, Klarna
maintains a specific ICT management framework.
This includes regular IT security/vulnerability
assessments and testing, ongoing systemmonitoring, software change management controls,
strict access management controls and regular ICT

and employee training, including security awarenesstraining and exercises. Key ICT and Security risk
controls are tested and measured at least annually
through an independent assurance reporting audit
as well as through the use of compliance as code.
Business Risk is defined as: the risk of suboptimal
strategy selection or ESG factors impacting theachievement of Klarna’s business objectives oraltering the long term valuation or viability of thebusiness.
Klarna’s strategy is delivered through its businessplan, which enables an informed decision making
process for assessing business risks. The businessplan defines Klarna’s objectives and the steps
needed to reach those objectives and is designed
to be resilient to changes in external economic
and competitive conditions. Klarna aims for asustainable strategy and business model andtherefore expects to achieve the business planwith minimal variation.
As a part of the business planning cycle, Klarnaassesses the up and down-side risks of the planand considers the impact of competitor and market
conditions to test the plans achievability under
different circumstances. The achievement of thebusiness plan is then reviewed monthly by the CXOs
with updates on key financial and business metrics,
including exposure against Board risk appetite
limits. Where Klarna sees opportunities or risks,
it adjusts approaches as appropriate to preserve
achievement of the plan.
ESG risks are identified through a periodic double
materiality assessment to determine the key
themes that could impact Klarna. Action plans aredeveloped to further manage the individual risks.
To deliver its sustainable, global growth strategy inan efficient way, Klarna starts small with lower risk
products that it can quickly test, iterate and scale.
Launches of new products or markets go througha structured assessment and decision making
process to ensure risks have been captured.
More information on Klarna’s approach toEnvironmental, Social and Governance, including
ESG risks is included in Klarna’s ESG report,
published on Klarna’s sustainability website https://www.klarna.com/international/sustainability/
and in the Risk Management in the Notes withAccounting Principles, Note 3.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

19

CORPORATE GOVERNANCE

Risk reporting

Internal Audit

In the Risk Policy the Board has established how
and when it shall receive information about Klarna’s
risks and risk management. The periodic, recurringrisk reporting in Klarna provides reliable, current,
complete, and timely information, reflecting thenature of different risk types as well as market
developments. The Board, the ACRC, the CEO, and
the Group Management Team, as well as otherfunctions that require such information, receive
regular reports on the status of risks and risk
management to ensure they are aware of material
risks and control weaknesses.

Klarna’s Internal Audit Function is independent of thebusiness, reporting directly to the Board. The Board
has adopted a Policy on Internal Audit.

Internal Control and Financial Reporting
Klarna maintains risk management processes andinternal controls relating to financial reportingwhich are designed to ensure accuracy of financial
records, appropriate application of accounting
policies and compliance with relevant regulations
and provide management with accurate and timely
financial reporting in order to accurately view theGroup’s performance and make informed decisions.

The responsibility of Internal Audit is to provide
reliable and objective assurance to the Board andthe CEO regarding the effectiveness of controls,
risk management, and governance processes byperforming independent periodic reviews of thegovernance structure and the system of internal
controls.
The Board has decided to outsource Klarna’s
Internal Audit Function to an external party and has
appointed Deloitte as Internal Auditor.
The Internal Audit Function reports regularly to theBoard and ACRC the results of its audits, including
identified risks and suggestions for improvements.
Internal Audit also informs the CEO, the GroupManagement Team and the relevant departments
on internal audit matters. The Board annually
establishes a plan for the internal audit work.

Insider administration
Insider administration is organized according to theapplicable EU and national level laws and regulations.
The Board has approved Group-wide policies
and instructions to provide clear instructions for
employees to ensure inside information is identified
and handled appropriately.
Insiders are identified on a case-by-case basis
whenever inside information is detected andare subsequently registered in a related insider
register and notified of their insider status. All
identified insiders are then prohibited from dealing
in the financial instrument(s) to which the inside
information relates until that information is madepublic or otherwise no longer deemed to be inside
information, and the insider register is closed.
As Klarna’s shares are not admitted to trading ona regulated market, Klarna’s obligations under the
EU Market Abuse Regulation No 596/2014 (MAR)relate only to its corporate bonds listed on Nasdaq
Stockholm. Klarna does not maintain a permanent
insider register under EU Market Abuse Regulation
No 596/2014 (MAR).
The responsibilities of Klarna’s insider administration
include evaluating whether information is inside
information or not, training of and providing
information to employees who are exposed to inside
information to make sure that they are aware of
the restrictions and obligations placed on insiders,setting up and maintaining insider registers as well
as monitoring compliance with the insider rules. The
rules are put in place to mitigate the risk of insider
dealing and other forms of market abuse, and theoverall responsibility for making sure that a highlevel of knowledge of and compliance with theserules is maintained lies with Klarna’s Governanceand Company Secretary team reporting to the Chief
Financial Officer.

External Audit
Klarna’s external auditors are formally elected at
the General Meeting on an annual basis in line with
Swedish Company law. Ernst & Young AB was reelected at the 2023 AGM as external auditor for theperiod up to the 2024 AGM.
The ACRC receives reports from the auditor, which
include details of significant internal control mattersthat they have identified, and meets with the auditor
on a regular basis.
The ACRC oversees appropriate procedures tomaintain the independence of the external auditor,
this includes Klarna’s non-audit services policy
which sets out those services that the auditor ispermitted to provide and the requirements for preapproval by ACRC in advance of provision of nonaudit services.

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

KEY FINANCIAL AND PERFORMANCE MEASURES

20

Key Financial andperformance measures

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

21

KEY FINANCIAL AND PERFORMANCE MEASURES

Reconciliation of alternative performance measures

Financial Results - Klarna Holding
FY23

FY22

FY23 YoY

Gross merchandise volume
Transaction and service revenue
Interest income from operating activities
Total revenue

980,892
19,7983,707
23,504

837,285
15,403
3,934
19,336

17%
29%
(6)%
22%

Processing and servicing
Consumer credit losses
Funding costs
Transaction costs
Gross profit(5,700)(3,766)(2,356)(11,822)
11,682(5,165)(5,563)(1,327)(12,055)
7,281

10%
(32)%
78%
(2)%
60%

Technology and product development
Sales and marketing
Customer service and operations
General and Administrative (G&A)
Depreciation, amortization and impairments
Other income (expense), net
Operating expenses(3,045)(3,400)(2,420)(3,920)(2,392)
290(14,887)(3,415)(4,893)(2,817)(4,359)(1,639)(633)(17,755)

(11)%
(31)%
(14)%
(10)%
46%
n.m
(16)%

Operating result
Restructuring costs
Share-based payments
Depreciation and amortization
Adjusted operating result(3,204)
665
462
1,699
(378)

(10,474)
501
523
1,639
(7,811)

69%
33%
(12)%
4%
95%

Income tax
Net result for the period

665(2,539)34(10,440)

1,856%
76%

Amounts in SEKM

Klarna uses certain alternative performancemeasures for financial performance. These include
revenue, gross profit, and adjusted operating results.
Klarna believes these measures are important forassessing performance as they reflect underlying

business activity and performance. This includes
growing revenue and core profitability, and managing
expenses, since these measures exclude items
that are generally not a function of the company’s
underlying operating performance.

Reconciliation of revenue to total net operating income
Amounts in SEKM
Revenue (Management view)
Commission expenses
Net result from financial transactions
Interest expenses
Interest income from liquidity assets
Total net operating income (Statutory financial accounts)

2.40%(0.38)%
50%

2.31%(0.66)%
38%

4%
(42)%
12pp

FY22

23,504(1,003)(150)(2,860)1,139
20,62919,336(724)(1,050)(1,050)192
16,703

Revenue is defined as total net operating income in accordance with IFRS excluding; commission expense,
interest expense, net result from financial transactions and interest on liquidity assets not related directly
to the core business. Interest on liquidity assets that are not directly related to the core business stems
from loans to credit institutions and other interest income (see note 5).
Klarna believes Revenue is the best indicator of how much value we are sustainably generating from ourbusiness and that this approach is in-line with our peers.

Reconciliation of total net operating income to gross profit
Amounts in SEKM

Key ratios
Revenue take rate
Consumer credit loss rate
Gross margin

FY23

Total net operating income (Statutory financial accounts)
Including
Processing and servicing
Consumer credit losses
ExcludingInterest expenses*
Commission expenses*
Net result from financial transactions*
Gross profit (Management view)

FY23

FY22

20,62916,703(5,700)(3,766)(5,165)(5,563)

(44)
(772)
296
11,682

(48)
(635)
(623)
7,281

* of which are not directly related to revenue-generating activities.
Gross profit is defined as total net operating income in accordance with IFRS, including costs related toprocessing and servicing (within statutory metric, general administrative expenses) and consumer credit
losses (within statutory metric, credit losses, net). Costs of which are not directly related to revenuegenerating activities within interest expenses, commission expenses and net result from financialtransactions are excluded.
Klarna believes gross profit is the best indicator of the core profitability of the company’s business activities
before the deduction of indirect costs.

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

22

KEY FINANCIAL AND PERFORMANCE MEASURES

Reconciliation of gross profit to operating result
Amounts in SEKM
Gross profit (Management view)Operating expenses
Operating result (Statutory financial accounts & Management view)

FY23

FY22

11,682(14,887)(3,204)

7,281(17,755)(10,474)

Operating result is defined as Gross profit after including all operating expenses which are not directly
related to revenue generating activities.

Reconciliation of IFRS operating results to adjusted operating result
Amounts in SEKM
Operating result
Restructuring costs
Share-based payments
Depreciation and amortization*
Adjusted operating result

FY23

FY22

(3,204)
665
462
1,699
(378)

(10,474)
501
523
1,639
(7,811)

Adjusted operating result is defined as IFRS operating result, excluding Restructuring costs; Sharebased payments and related payroll taxes and; Depreciation and amortization.
* During the year, Klarna conducted a comprehensive review of its assets to optimize operational
efficiency. As a result of this review, the company made a strategic decision to right-size its office
footprint and early terminate certain lease agreements, and to cease certain activities resulting in awrite down of certain intangible assets. The total one-time financial impact in 2023 as a result amounted
to SEK 693 million. These are shown in restructuring costs in the above table but appear underDepreciation, amortization and impairment of intangible and tangible assets in the income statement.

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

GROUP AND PARENT COMPANY FINANCIALS

Group and parent
company financials

K L A RN A BA N K A B (P U B L )23

A N N UA L R E P O RT 2 0 2 3

CONTENTS

24

GROUP AND PARENT COMPANY FINANCIALS

Five Year Summary, Group
Amounts in SEKm

Five Year Summary, Parent Company
2023

2022

2021

2020

2019

Amounts in SEKm

Income statement

2023

2022

2021

2020

2019

Total net operating income

12,726

11,236

10,487

8,421

6,220

Operating result(2,996)(8,891)(5,579)(1,374)(1,077)

Net result for the year

(2,990)(8,879)(6,046)(1,174)(738)

Income statement

Total net operating income

20,361

16,566

13,75410,0007,155Operating result(3,263)(10,234)(6,581)(1,629)(1,089)Net result for the year

(2,606)(10,207)(7,093)(1,376)(902)

Balance sheet

Balance sheet

Loans to credit institutions

4,500

3,783

4,990

2,614

1,907

Loans to credit institutions

1,880

991

1,965

1,723

1,192

Loans to the public

86,10873,98362,087

41,71829,655Loans to the public

80,95876,47464,36638,02528,536All other assets

46,37546,36438,44917,463

8,306

All other assets

59,20546,64938,18922,522

8,909

136,983

124,130

105,526

61,79539,868142,043

124,114104,520

62,27038,637

Liabilities to credit institutions

1,636

2,829

713

2,415

4,940

Liabilities to credit institutions

1,264

2,829

712

2,386

4,940

Deposits from the public

97,096

81,47059,67030,835

12,288Deposits from the public

96,78981,162

59,40930,682

12,252All other liabilities

23,543

27,776

26,69722,221

17,345All other liabilities

27,866

26,381

25,20722,747

16,410Total equity

Total assets

Total equity
Total liabilities and equity

14,70812,05518,446

6,324

5,295

136,983

124,130

105,526

61,79539,868

Total assets

Total liabilities and equity

Key ratios and figures1

16,124

13,742

19,192

6,455

5,035

142,043

124,114104,520

62,27038,637

Key ratios and figures1

Return on equity(24.4)%(67.1)%(53.1)%(28.0)%(23.1)%

Return on equity(20.1)%(54.0)%(43.5)%(23.9)%(20.8)%

Return on assets(2.0)%(8.9)%(8.5)%(2.7)%(2.7)%

Return on assets(2.2)%(7.8)%(7.3)%(2.3)%(2.2)%

Debt/equity ratio

8.8

6.5

5.8

7.7

6.2

Debt/equity ratio

7.9

5.9

5.5

7.8

6.4

Equity/assets ratio

10.7%

9.7%

17.5%

10.2%

13.3%

Equity/assets ratio

11.4%

11.1%

18.4%

10.4%

13.0%

Own funds (Total capital)2

12,56015,54819,855

13,5308,448

Own funds (Total capital)

14,82013,191

19,722

7,278

5,419

Capital requirement2

5,743

5,487

4,947

3,391

2,116

Capital requirement

7,217

6,405

5,572

3,830

2,304

Total capital ratio2

17.5%

22.7%

32.1%

31.9%

31.9%

Total capital ratio

16.4%

16.5%

28.3%

15.2%

18.8%

Average number offull-time equivalents3

4,972

6,002

4,789

3,238

2,248

Average number of full-time equivalents2

3,525

4,403

3,777

2,672

1,493

1

See "Definitions and Abbreviations" for definitions of how the ratios are calculated.

2

Figures refer to Klarna Holding AB (publ) group. In accordance with the capital adequacy regulations, the consolidated situation is made up ofKlarna Holding AB (publ) (Klarna Bank AB (publ)’s parent company) and its subsidiaries. All subsidiaries are fully consolidated in the Group.

3

Number of employees (headcounts) as at December 31, 2023 amounted to 4,201 (5,441).

K L A RN A BA N K A B (P U B L )1

See "Definitions and Abbreviations" for definitions of how the ratios are calculated.

2

Number of employees (headcounts) as at December 31, 2023 amounted to 1,854 (3,876).

A N N UA L R E P O RT 2 0 2 3

CONTENTS

25

GROUP AND PARENT COMPANY FINANCIALS

Income Statement, Group

Balance Sheet, Group

Amounts in SEKm

Note

2023

2022

Amounts in SEKm

Interest income

5

4,845

4,125

AssetsInterest expenses

6, 7(3,140)(1,162)

1,705

2,963

Net interest income
Commission income

817,826

13,714

Commission expenses

9(1,003)(724)

Net result from financial transactions

10

(151)

(1,026)

1,984

1,639

20,361

16,566(17,301)(19,579)

Other operating income
Total net operating income
General administrative expenses
Depreciation, amortization and impairment of intangible and tangible
assets7, 11, 127, 13

Total operating expenses before credit losses
Operating result before credit losses, net
Credit losses, net

14

Operating result
Income tax
Net result for the year

15

Additional Tier 1 capital holders
Total

Cash and balances with central banks

31 Dec 2023

31 Dec 2022

22,02816,085

Treasury bills chargeable at central banks, etc.

18

7,267

10,713Loans to credit institutions

19

4,500

3,783

Loans to the public

20

86,10873,983

Bonds and other interest-bearing securities

21

506

864

345

338

Intangible assets

23

11,063

11,644

Tangible assets

7, 24

1,228

2,044

Deferred tax assets

15

282

395

25, 26

2,798

3,216

27

858

1,065

136,983

124,130

Other shares and participations

Other assets
Prepaid expenses and accrued income(2,291)(1,504)(19,592)(21,083)769(4,517)

Liabilities(4,032)(5,717)

Liabilities to credit institutions

28

1,636

2,829

(3,263)(10,234)

Deposits from the public

29

97,096

81,470Debt securities issued

30

651

1,676

657

27

(2,606)(10,207)

Whereof attributable to:Shareholders of Klarna Bank AB (publ)

Note(2,635)(10,233)29

26(2,606)(10,207)

Total assets

5912

7, 26, 31

19,17322,125

Accrued expenses and prepaid income

32

3,586

2,648

Provisions

33

128

112

Subordinated liabilities

34

Deferred tax liabilities
Other liabilities

Total liabilities

15

-

303

122,275

112,075

EquityStatement of Comprehensive Income, Group78

69

35,24029,980Reserves

284

422

Additional Tier 1 instruments

276

276

Share capital
Other capital contributed

Amounts in SEKm
Net result for the year

2023

2022

(2,606)(10,207)

Items that may be reclassified subsequently to the income statement:
Exchange differences on translation of foreign operations

(138)

183

Other comprehensive income for the year, net of tax

(138)

183

(2,744)(10,024)(2,773)(10,050)29

26(2,744)(10,024)

Total comprehensive income for the year

Retained earnings(18,564)(8,485)

Net result for the year

(2,606)(10,207)

Total equity

14,70812,055

Total liabilities and equity

136,983

124,130

Whereof attributable to:Shareholders of Klarna Bank AB (publ)
Additional Tier 1 capital holders
Total

Loans to the public represents only the amount of outstanding loans receivable, as at 31 December, and is net ofallowance for future credit losses (see note 20 for breakdown). This balance is only partially comparable to credit losseson the income statement as the income statement reports all activity during the year from 1 January to 31 December,while the balance sheet is a snapshot of lending outstanding as at 31 December.

Unlike the balance sheet, which shows a snapshot of assets and liabilities as at 31 December, the credit losses in the income
statement reflect provisions for future losses and realized losses associated with all lending activities during the year.

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

26

GROUP AND PARENT COMPANY FINANCIALSStatement of Changes in Equity, Group

Amounts in SEKm
Balance as atJanuary 1, 2023

Share Other capital
capitalcontributed

Income Statement, Parent Company

Reserves2

Additional
Tier 1
instruments

Retainedearnings

Net result

Total equity(10,207)

12,05569

29,980422

276(8,485)

Transfer of previous year's
net result

-

-

-

-

(10,207)

10,207-

Net result for the year

-

-

-

-

-

(2,606)(2,606)

Other comprehensive
income, net of tax

-

-

(138)

-

-

-

Amounts in SEKm

Note

2023

2022

Interest income

4, 5

5,361

4,485

Interest expenses

6, 7(3,394)(1,163)

Net interest income

1,967

3,322

Dividend received

103

-

61

-

Group contribution

4

(138)

Commission income

4, 8

12,4409,129Commission expenses

9(3,373)(2,668)

Net result from financial transactions

10

(218)

(787)

Other operating income

4

1,746

2,240

12,726

11,236

Total comprehensive
income for the year

-

-

(138)

-

-

(2,606)(2,744)

New share issue

9

3,260

-

-

-

-

3,269

Shareholders' contribution

-

2,000

-

-

-

-

2,000

Restricted stock units

-

-

-

-

157

-

157

Additional Tier 1 instruments1

-

-

-

-

(29)

-

(29)

Balance as at
December 31, 2023

78

35,240284

276(18,564)(2,606)

14,708

Total net operating income

General administrative expenses

7, 11, 12(9,959)(13,644)

Depreciation, amortization and impairment of intangible and tangible assets

7, 13(1,838)(1,154)(1,001)(1,228)(12,798)(16,026)(72)(4,790)(2,817)(3,787)

(107)

(314)

(2,996)(8,891)

-

2

6

10

(2,990)(8,879)Other operating costs

Amounts in SEKm
Balance as atJanuary 1, 2022

1

2

Share Other capital
capitalcontributed
65

Reserves2

Additional
Tier 1
instruments

Retainedearnings

Net result

Total equity

239

250

(1,481)(7,093)

18,281

26,301

Total operating expenses before credit losses

Operating result before credit losses, net
Credit losses, net

Transfer of previous year's
net result

-

-

-

-

(7,093)

7,093-

Net result for the year

-

-

-

-

-

(10,207)(10,207)

Other comprehensive
income, net of tax

-

-

183

-

-

-

183

Total comprehensive
income for the year

-

-

183

-

-

(10,207)(10,024)

New share issue

4

1,679

-

-

-

-

1,683

Shareholders' contribution

-

2,000

-

-

-

-

2,000

Restricted stock units

-

-

-

-

121

-

121

Tax effect on Restricted
stock units

-

-

-

-

(6)

-

(6)

Additional Tier 1 instruments1
Redeemed Additional Tier 1
instruments

-

-

-

276

(26)

-

250

-

-

-

(250)

-

-

(250)

Balance as at
December 31, 2022

69

29,980422

276(8,485)(10,207)

12,055

Amounts in Additional Tier 1 instruments column consist of issued instruments, while amounts in Retained earnings column consist of interest
and cost of issuance of these issued instruments.
The reserves consist of exchange differences from foreign operations.

14

Impairment of financial assets
Operating result

Appropriations
Income tax
Net result for the year

15

Statement of Comprehensive Income, Parent Company
Amounts in SEKm
Net result for the year

2023

2022

(2,990)(8,879)Items that may be reclassified subsequently to the income statement:
Exchange differences on translation of foreign operations

38

(164)

Other comprehensive income for the year, net of tax

38

(164)

(2,952)(9,043)

Total comprehensive income for the year

Equity is in its entirety attributable to the shareholders of Klarna Bank AB (publ) and its Additional Tier 1 capital
holders.

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

27

GROUP AND PARENT COMPANY FINANCIALS

Balance Sheet, Parent Company
Amounts in SEKm

Statement of Changes in Equity, Parent Company
Note

31 Dec 2023

Restricted equity

31 Dec 2022

AssetsCash and balances with central banks

Non-restricted equity

Share
capitalReserve fordevelopment
costs

Share
premium
reserve

Other
reserves

Additional
Tier 1
instruments

Retainedearnings

Net result

Total equity

69

1,475

20,675

(172)

276

298

(8,879)13,742

Transfer of previous year's
net result

22,02816,085

Amounts in SEKm
Balance as atJanuary 1, 2023

Treasury bills chargeable at central banks, etc.

18

7,267

10,713Loans to credit institutions

19

1,880

991

Loans to the public

20

80,95876,474

-

-

-

-

-

(8,879)8,879-

Bonds and other interest-bearing securities

21

506

864

Net result for the year

-

-

-

-

-

-

(2,990)(2,990)Shares and participations in group companies

22

15,465

10,942

345

338

Other comprehensive
income, net of tax

Other shares and participations

-

-

-

38

-

-

-

38

-

-

-

38

-

-

(2,990)(2,952)Intangible assets

23

2,692

2,993

Total comprehensive income
for the year

Tangible assets

7, 24

1,075

1,738

New share issue

9

-

3,260

-

-

-

-

3,269

Shareholders' contribution
Reserve for development
costs

-

-

-

-

-

2,000

-

2,000

-

127

-

-

-

(127)

-

-

Restricted stock units

-

-

-

-

-

94

-

94

Additional Tier 1 instruments1

-

-

-

-

-

(29)

-

(29)

Balance as at
December 31, 2023

78

1,602

23,935(134)

276(6,643)(2,990)16,124

Deferred tax assets
Other assets
Prepaid expenses and accrued income

1525, 2627

Total assets

67

61

9,293

2,177

467

738

142,043

124,114

Liabilities
Liabilities to credit institutions

28

1,264

2,829

Deposits from the public

29

96,78981,162

Restricted equity

Non-restricted equity

Share
capitalReserve fordevelopment
costs

Share
premium
reserve

Other
reserves

Additional
Tier 1
instruments

Retainedearnings

Net result

Total equity

65

1,057

18,996

(8)

250

4,713

(6,046)

19,027

Transfer of previous year's
net result

Debt securities issued

30

651

1,137

Deferred tax liabilities

15

4

86

7, 26, 31

24,12022,601

Accrued expenses and prepaid income

32

2,973

2,148

-

-

-

-

-

(6,046)

6,046-

Provisions

33

118

106

Net result for the year

-

-

-

-

-

-

(8,879)(8,879)Subordinated liabilities

34

-

303

125,919

110,372

Other comprehensive
income, net of tax

Other liabilities

Total liabilities

Untaxed reserves

35-

Amounts in SEKm
Balance as atJanuary 1, 2022-

Equity78

69

Reserve for development costs

1,602

1,475

Other reserves

(134)

(172)

Share capital

276

276

Retained earnings

17,292

20,973

Net result for the year

(2,990)(8,879)Total equity

16,124

13,742

Additional Tier 1 instruments

142,043

124,114

-

-

(164)

-

-

-

(164)

-

-

-

(164)

-

-

(8,879)(9,043)New share issue

4

-

1,679

-

-

-

-

1,683

Shareholders' contribution
Reserve for development
costs

-

-

-

-

-

2,000

-

2,000

-

418

-

-

-

(418)

-

-

Restricted stock units

-

-

-

-

-

81

-

81

-

-

-

-

-

(6)

-

(6)

-

-

-

-

276

(26)

-

250

-

-

-

-

(250)

-

-

(250)

69

1,475

20,675

(172)

276

298

(8,879)13,742

Tax effect on Restricted
stock units
Additional Tier 1 instruments
Redeemed additional Tier 1
instruments
Balance as at
December 31, 2022
1

Total liabilities and equity-

Total comprehensive income
for the year

1

Amounts in Additional Tier 1 instruments column consist of issued instruments, while amounts in Retained earnings column consist of interest
and cost of issuance of these issued instruments.

Share capital: 231,083,215 shares (204,683,709), quota value 0.336 (0.336).

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

28

GROUP AND PARENT COMPANY FINANCIALSCash Flow Statement
Group
Amounts in SEKm

Note

Parent Company

2023

2022

2023

2022

Operating result(3,263)(10,234)(2,996)(8,891)

Income taxes paid

(115)

(214)

(62)

(73)

2,291

1,504

1,838

1,154

(8)

-

-

-

Impairment of shares in group companies

-

-

107

313

Dividend received from subsidiaries

-

-

(164)

-

Provisions excluding credit losses

6

19

-

9

(608)

148

(452)

417

Operating activities

Adjustments for items in operating activities
Depreciation, amortization and impairment

7, 13

Gain/loss from disposal of shares in group companies

Provision for credit losses

185

311

94

95

(307)

688

406

444

Change in loans to the public(12,049)(10,896)(4,020)(12,542)

Change in liabilities to credit institutions(1,172)

1,828(1,565)

2,116

Change in deposits from the public

16,727

21,234

16,717

21,229

Share-based payments
Financial items including unrealized exchange rate effects
Changes in the assets and liabilities of operating activities

Change in other assets and liabilities

4,534

5,997

(1,500)7,164

Cash flow from operating activities1

6,221

10,385

8,403

11,435Investing activities
Investments in intangible assets

23

(890)

(949)

(816)

(888)

Investments in tangible assets

24

(7)

(119)

(3)

(87)

15

-

13

-

Sales of fixed assets
Investments in subsidiaries

22

-

-

(2,650)(75)

Investments in business combinations

44-(3,515)-(3,745)

Divestment of shares in subsidiaries

8

-

-

-

Dividend received from subsidiaries

-

-

88

-

Cash flow from investing activities(874)(4,583)(3,368)(4,795)320

Financing activities
3,269

320

3,269

Issued Additional Tier 1 instruments

-

276

-

276

Redeemed Additional Tier 1 instruments

-

(250)

-

(250)
(7,664)

New share issue

Debt securities, net

30

(837)

(7,478)(498)

Subordinated liabilities, net

34

(300)

-

(300)

-

Payment of principal portion of lease contracts

7

(441)

(350)

(370)

(258)

Cash flow from financing activities

1,691(7,482)

2,101(7,576)

Cash flow for the year

7,038

(1,680)

7,136

(936)

Cash and cash equivalents at the beginning of the year

17,72418,702

16,69917,068Cash flow for the year

7,038

(1,680)

7,136

(936)

Exchange rate diff. in cash and cash equivalents

(595)

702

(598)

567

Cash and cash equivalents at the end of the year

24,167

17,72423,237

16,699Cash and balances with central banks

21,78416,08521,78416,085Loans to credit institutions2

2,383

1,639

1,453

614

Cash and cash equivalents

24,167

17,72423,237

16,699Cash and cash equivalents include the following items

Additional liquidity portfolio
Total cash and liquidity

7,774

11,577

7,774

11,577

31,941

29,30131,011

28,276

1

Cash flow from operating activities includes interest payments received and interest expenses paid, see note 40.

2

SEK 2.4bn (Group) and SEK 1.5bn (Parent) of Loans to credit institutions are classified as Cash and cash equivalents as at December 31, 2023.

As a bank, cash flows from operating activities primarily represent the net flows of money coming in and going out fromthe bank’s consumer lending and retail deposit activities. It’s not a reflection of the bank’s net operating result for the year.
In addition to the SEK 24.2bn in cash and cash equivalents held at year-end, Klarna also maintains an additional liquidity
portfolio of SEK 7.8bn.

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

NOTES WITH ACCOUNTING PRINCIPLES

29

Notes withaccounting
principles
K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

30

NOTES WITH ACCOUNTING PRINCIPLES

The Parent Company, Klarna Bank AB (publ), Corp. ID 556737-0431, maintains its registered office in Stockholm
at the address Sveavägen 46, 111 34 Stockholm, Sweden. The consolidated financial statements for 2023 consistof the Parent Company (including branches) and its subsidiaries, which together make up the Group. TheN
ote business1
Corporate
information
Group’sis described in theReport of the Board of Directors.
The
ParentCompany,
Klarna Bank
AB to(publ),Corp.
IDAB
556737-0431,
maintains
its registeredofficerefersin Stockholm
In thisreport,Parent Company
refersKlarnaBank(publ) including
its branches
and Group
to KlarnaattheABaddress
111 34 Stockholm,
Sweden. The consolidated financial statements for 2023 consistBank(publ) Sveavägen
including its46,
branches
and subsidiaries.
of the Parent Company (including branches) and its subsidiaries, which together make up the Group. The
Group’sbusiness
is described
the Report
of is
the
BoardHoldingof Directors.
The Parent
Companyof KlarnainBank
AB (publ)
KlarnaAB (publ), Corp. ID 556676-2356. Klarna Holding
AB (publ) has its registered office in Stockholm at the address Sveavägen 46, 111 34 Stockholm, Sweden.
In this report, Parent Company refers to Klarna Bank AB (publ) including its branches and Group refers to KlarnaBank
AB (publ) withincludingits branches
andActsubsidiaries.
In accordance
the Annual
Accounts
chapter 6, 11§, Klarna Bank AB (publ) does not prepare a statutory
sustainability report since an Environmental, Social and Governance report (ESG) that meets the legal reporting
The
Parent Company
of KlarnaBankAB Company(publ) is Klarna
HoldingAB(publ),
Corp.
ID 556676-2356.
KlarnaHoldingrequirements
is preparedby theParentKlarnaHoldingAB(publ).
KlarnaHolding AB (publ)
publishesAB
has itswithin
registeredofficereport.
in Stockholm
atreport
the address
Sveavägen
46, 11134 Stockholm,
Sweden.
the(publ)
ESG report
the annual
The ESG
is available
at Klarna’s
website:www.klarna.com.
The
consolidated
financialstatements
andtheAnnual6,Reportfor KlarnaBank
AB (publ)
for thefinancialyear
In accordancewith
the Annual
Accounts
Actchapter11§, Klarna
Bank AB(publ)
does notpreparea statutory
sustainability
report since
Environmental,
SocialandChief
Governancereport(ESG)
thatonmeets
the legalreporting2023
were approvedby theanBoardof Directors
and theExecutive
Officer(CEO)
February27, 2024.
Theyrequirements
ParentKlarnaHolding
AB (publ).
Klarna Holding AB (publ) publishes
willultimately isbeprepared
adopted by the
KlarnaBankCompany
AB (publ)’s
AnnualGeneralMeeting.
the ESG report within the annual report. The ESG report is available at Klarna’s website: www.klarna.com.
The
financial statements
and the Annual Report for Klarna Bank AB (publ) for the financial yearNoconsolidated
te 2
Accounting
principles

2023 were approved by the Board of Directors and the Chief Executive Officer (CEO) on February 27, 2024. They
will ultimately
by Klarna
AB (publ)’s Annual General Meeting.
1) Basis beforadopted
the preparationofBankthe reports

Group
These annual accounts have been prepared in accordance with International Financial Reporting StandardsN
otesuch2 as they
Accounting
principles(IFRS)
have been adopted
by the EU. In addition to these accounting standards, the Swedish
Financial Supervisory Authority regulations (FFFS 2008:25), the Annual Accounts Act for Credit Institutions and1) Basis for the preparation of the reports
Securities Companies (ÅRKL, 1995:1559) and the recommendation RFR 1 Supplementary Accounting Rules forGroupGroups issued by the Swedish Financial Reporting Board have also been applied.
These annual accounts have been prepared in accordance with International Financial Reporting Standards(IFRS)
as they have been adopted by the EU. In addition to these accounting standards, the Swedish
Parentsuch
Company
Financial
Supervisory
regulations(FFFS
Annual Accounts
ActAnnual
for Credit
Institutions
andThe Parent
Company’sAuthority
annual accounts
have
been2008:25),
preparedthein accordancewith theAccounts
Act for
Securities
Companies(ÅRKL,
1995:1559)
andtherecommendation
RFR
1
Supplementary
Accounting
Rules
for
Credit Institutions and Securities Companies (ÅRKL, 1995:1559). Klarna Bank AB (publ) applies legally restrictedhave alsoinbeen
applied.with IFRS with the additions andGroupsissuedby theSwedishFinancial
ReportingBoardprepared
IFRS, which
means
that
the annual
accounts
have been
accordance
exceptions ensuing from the Swedish Financial Reporting Board recommendation RFR 2, Accounting for Legal
ParentEntities,Company
and the Swedish Financial Supervisory Authority regulations and general guidelines regarding annual
The
ParentCompany’s
annual accounts
have been
preparedin accordancewith
the Annual
Accounts
Act forareaccountsforcredit institutions
and securities
companies(FFFS
2008:25). The
Group’s
accounting
principles
CreditInstitutions
Companies(ÅRKL,
1995:1559).
KlarnaBank
AB (publ) applies legally restrictedalso applicableforandthe Securities
Parent Company
unlessotherwise
described
in thisnote.
IFRS, which means that the annual accounts have been prepared in accordance with IFRS with the additions andexceptions
ensuingfrom theFinancial
ReportingBoard
RFR2, Accounting
for Legal
The preparationof reports
inSwedishaccordancewith IFRS
requiresthe recommendation
use of a number of
estimates
for accounting
Entities,andthe
SwedishFinancial
regulations
and generalannualpurposes.
The
areas
which
involve aSupervisory
high degreeAuthorityof assessment
or complexity
andguidelines
which areregardingof considerable
accounts forfor
creditinstitutions
and securities
companies(FFFS
importancethe annual
accounts
are presented
in section
25.2008:25). The Group’s accounting principles arealso applicable for the Parent Company unless otherwise described in this note.
The financial statements are prepared on the basis that it will continue to operate as a going concern.
The preparation of reports in accordance with IFRS requires the use of a number of estimates for accounting
purposes. The areas which involve a high degree of assessment or complexity and which are of considerable
importance for the annual accounts are presented in section 25.
The financial statements are prepared on the basis that it will continue to operate as a going concern.

K L A RN A BA N K A B (P U B L )2)

New and amended standards and interpretations

The Group has applied all applicable new and amended standards and interpretations from their effective date.
None of the amendments have had a significant impact on the Group.
Pillar 2 Global Anti-Base-Erosion tax reform
In December 2021, the Organisation for Economic Co-operation and Development (OECD) issued model rules fora new global minimum tax framework (referred to as "Pillar Two"). On 13 December, 2023 Swedish legislation wasenacted to adopt the rules, introducing a global minimum effective tax rate of 15% applicable for accounting
periods starting on or after 31 December, 2023. The group is in the process of assessing the full impact of thislegislation, which will apply to the Klarna group.
Klarna’s exposure to top-up tax is estimated to be limited to cases where permanent differences reduce taxable
profits below a 15% effective tax rate. This has been assessed as unlikely to give rise to a material tax cost in
2024, however, the impact of foreign exchange movements could, in certain circumstances, result in some topup taxes, most likely in Sweden.
The group has applied the exception, mandated by an amendment to IAS 12, to recognizing and disclosing
information about deferred tax assets and liabilities related to Pillar Two income taxes.
The Group has not early adopted any other standards, interpretations or amendments that have been issued
but are not yet effective. These standards, interpretations or amendments are not expected to have a material
impact to the Group in the current or future periods and on foreseeable future transactions.
3)

Basis of consolidation

The consolidated financial statements comprise of Klarna Bank AB (publ) and its subsidiaries. The companies
are consolidated as from the date when control is transferred to Klarna and consolidation comes to an end
when Klarna no longer has control. All intra-group assets, liabilities, equity, income, expenses
and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
4)

Operating segments and income by geographical area

Klarna determines operating segments based on how our Chief Operating Decision Maker (CODM) manages
the business, makes operating decisions around the allocation of resources, and evaluates Klarna’s operating
performance.
Klarna’s CODM is the CEO, who reviews the operating results on a consolidated basis. Klarna operates as one
operating segment and has one reportable segment.
The nature, amount, timing, and uncertainty of our income and cash flows and how they are affected byeconomic factors are depicted through primary geographical markets and type of income categories (retailer
income and consumer income).
5)

Foreign currency translation

Presentation currency and functional currency
The financial statements are prepared in Swedish kronor, which is the presentation currency of the Group. The
functional currency is the currency of the primary economic environment in which an entity operates. Different
entities within the Group therefore have different functional currencies. The functional currency for Klarna BankAB (publ) is Swedish kronor.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

Transactions and balance sheet items
Transactions in a foreign currency are translated into the functional currency at the exchange rate on the day of
the transaction. Monetary assets and liabilities in foreign currencies are translated into the functional currency
at the exchange rate at the end of the reporting period. All profits and losses as a result of the currencytranslation of monetary items, including the currency component in forward agreements, are reported in theincome statement as exchange rate fluctuations under the heading Net result from financial transactions.
Subsidiaries and branches
Foreign subsidiaries’ and branches’ assets and liabilities are translated at the closing day rate of exchange andincome statement items at the average exchange rate. Translation differences are reported in Other
comprehensive income.
6)

31

NOTES WITH ACCOUNTING PRINCIPLESInterest and commissions

Revenues are recognized in accordance with the effective interest method or when identified performanceobligations have been fulfilled. The Group’s revenues and expenses are reported after elimination of intragrouptransactions. The product offerings from which revenues are recognized do not differ in any significant way
between geographical markets.

Commission income from consumers_________________________________________________________________________________
Klarna provides consumers with online purchases and the possibility to choose when in time to pay. Commission
income from consumers is fixed amounts which arise from servicing different types of payment options; thisconstitutes the transaction price. The respective performance obligation is satisfied at the date when theaccount statements or paper invoices are issued. The revenue from the consumer commissions is therefore
recognized at that point in time.
Commission and fees for extending credit are considered to be an integral part of the effective interest rate andare therefore recognized in interest income.
7)

The net result from financial transactions comprises the net profit or loss on the trading or disposal of financial
instruments, value changes of financial instruments that are measured at fair value through profit or loss, net
profit or loss on currency exchange activities or other recognized changes in the value of assets or liabilities, tothe extent they can be attributed to exchange rate changes and other financial income and expenses notdirectly attributable to a financial instrument.
8)

Interest income and interest expenses
Interest on financial assets and liabilities measured at amortized cost are recognized in profit or loss using theeffective interest method. When measuring a financial asset or a financial liability at amortized cost, the interest
income or expense is allocated over the relevant period. The effective interest rate is the rate that corresponds
to the rate used for discounting contractual cash flows to the reported value of the financial asset or liability.
The contractual cash flows used in the calculation include all fees that are considered to be integral to theeffective interest rate.
Interest income calculated according to the effective interest method consists mainly of interest from loans to
the public and interest from lending to credit institutions.
Fees related to debt securities issued, deposits from the public, subordinated liabilities and liabilities to credit
institutions are recognized as interest expenses.
Commission income and commission expenses
Revenues and expenses for different types of services are reported as commission income or commission
expenses. Commission income mainly stems from retailers that have an agreement with Klarna and different
types of fees related to end-customer receivables.
Commission income from retailers
Klarna provides retailers with a combined service offering (1) a payment solution while at the same time (2)providing consumers with credit products and catering for credit risk. Since these two types of services arehighly interrelated, this service package epitomizes one identified and distinct performance obligation. This
performance obligation presents a stand-ready obligation which is satisfied over the contract period since theretailer receives the benefit of that service package over that period.
The transaction price of that performance obligation consists of both fixed and variable components. The
variable parts are constrained since they are highly dependent on consumer transactions and are therefore notincluded in the initial transaction price. The transaction price is updated to mirror the dissolving uncertainty
occurring in the performance obligation due to the variable components.
The process of completion is measured by evaluating the value to the customer of the provided service
transferred to date relative to the remaining services promised under the contract. Since the amount oftransactions and usage of the payment solution for the entire contract period is initially unknown, the process ofcompletion is measured by using time elapsed.

K L A RN A BA N K A B (P U B L )Net result from financial transactions

Credit losses, net

Impairment losses from financial assets classified into the category “measured at amortized cost” (see section“Financial assets and liabilities – classification and recognition” below) are reported as Credit losses, net.
Furthermore, Credit losses, net, from off-balance sheet exposures related to financial instruments are also
reported on this line.
Credit losses, net, for the period consist of realized credit losses, recovered amounts from debt sales andprovisions for credit losses for granted credit with a deduction for the reversal of provisions for credit losses
made previously. Realized credit losses are losses whose amount is for example determined via bankruptcy, acomposition arrangement, a statement by an enforcement authority or the sale of receivables. Provision for
credit losses is calculated either as 12 months expected credit loss or lifetime expected credit loss based on the
IFRS 9 impairment requirements, see section “Impairment of financial assets, financial guarantees andcommitments” below for more details.
9)Cash and balances with central banks

Cash comprises legal tender and bank notes in local and foreign currencies. Balances with central banks consistof deposits in accounts with central banks under government authority where the following conditions are
fulfilled:(i)

The central bank is domiciled, and(ii)

The balance is readily available at any time

10)

Financial assets and liabilities – classification and recognition

Purchases and sales of financial assets and liabilities are recognized on the trade date. Financial assets are
removed from the balance sheet when the right to receive cash flows from the instrument has expired or beentransferred together with the risks and rewards associated with ownership. Financial liabilities are derecognizedwhen they are extinguished. A financial liability is extinguished when the obligation is discharged, cancelled or
expires and this is evaluated both qualitatively and quantitatively.
Financial instruments are initially recognized at fair value including transaction costs except for financial assets
and liabilities classified as fair value through profit or loss where the transaction costs are recognized in theincome statement.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

32

NOTES WITH ACCOUNTING PRINCIPLES

Financial assets are classified into various categories based on both Klarna’s business model to manage its
financial assets and the characteristics of the cash flows of the financial assets. Financial instruments areclassified into the following categories:
Financial assets and liabilities at amortized cost

11)

Financial assets and liabilities - fair value measurement

For financial assets and liabilities measured at fair value the Group uses different methods to determine the fairvalue. All assets and liabilities for which fair value is measured or disclosed in the financial statements are
categorized within the fair value hierarchy, described as follows, based on the lowest level input that issignificant to the fair value measurement as a whole:Klarna classifies and measures its financial assets at amortized cost if both of the following conditions are met:(i)

The financial asset is held within a business model with the objective to hold financial assets inorder to collect contractual cash flows, and(ii)

The contractual terms of the financial asset give rise on specified dates to cash flows that are

Level 1
Level 1 in the fair value hierarchy consists of assets and liabilities where the inputs used in the valuation areunadjusted quoted prices from active markets for identical assets or liabilities. This category includes certain
investments in other shares and participations.

solely payments of principal and interest (SPPI) on the principal amount outstanding.
Klarna measures all financial liabilities at amortized cost, except for those that are mandatorily held at fair value
through profit and loss.
The amortized costs are determined on the basis of the effective interest that was calculated at the time ofacquisition or origination. Financial assets at amortized cost are recognized at discounted contractual cashflow
after a deduction for impairments. Where a financial asset or liability carried at amortized cost is in a qualifying
fair value hedge relationship, its carrying value is adjusted for changes in fair value attributable to the hedgedrisk.
Financial assets and liabilities at fair value through profit or loss
This category has two subcategories:(i)

Level 2 consists of assets and liabilities where the inputs that are used for valuation and are significant, arederived from directly or indirectly observable market data available over the entire period of the instrument’s
life. Such inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for
identical instruments in inactive markets and observable inputs other than quoted prices such as interest rates
and yield curves, implied volatilities, and credit spreads. This is for example the case for derivatives within otherassets and other liabilities where active markets supply the input to the valuation.
Level 3
Level 3 includes estimated values based on assumptions and assessments where one or more significant inputs
are not based on observable market information. Level 3 is used for certain items within other shares andparticipations and for certain items in debt securities in issue.

Mandatory: This category includes any financial asset that is not measured at amortized cost, thus
does not fulfill one or both of the conditions to be met for a financial asset to be measured atamortized cost.

(ii)

Level 2

Designated: This category includes any financial asset or liability that is designated on initialrecognition as one to be measured at fair value with fair value changes recognized in profit or loss.

Measurement is at fair value and realized and unrealized profits or losses as a result of changes in fair value areincluded in the income statement in the period in which they arise. The fair value of financial assets andliabilities is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Klarna uses different methods to determine the fairvalue, see section “Financial assets and liabilities – fair value measurement” below.
Klarna measures its derivatives as well as its investments in equity instruments and certain financial liabilities atfair value through profit or loss. These do not fulfill the conditions for being measured at amortized cost. In caseKlarna’s derivatives have negative values, these financial liabilities are measured at fair value through profit or
loss.
Financial assets at fair value through other comprehensive income
Klarna does not classify any financial assets at fair value through other comprehensive income since Klarna has
no business model whose objective it is to both collect contractual cash flows and to sell financial assets. Klarna
does not use the option to designate its equity instruments as measured at fair value through othercomprehensive income.
Klarna has not reclassified its financial assets subsequent to their initial recognition during the year. Financial
liabilities are never reclassified.

K L A RN A BA N K A B (P U B L )12) Impairment of financial assets, financial guarantees and commitments
Klarna is recording allowances for expected credit losses (ECL) for all loans and other financial assets notmeasured at fair value through profit or loss. Klarna calculates allowances for:(i)

Loans to the public(ii)

Loans to credit institutions(iii)

Financial guarantees and commitments

Treasury bills chargeable at central banks, bonds and other interest-bearing securities have been evaluated for
impairment. The expected credit losses have been assessed as immaterial due to the features of the assets.
This is also applicable for the majority of the loans to credit institutions which have strong credit ratings and arehighly liquid.
The ECL allowance is based on either the 12 months’ expected credit loss (12m ECL) or on the lifetime expectedcredit loss (lifetime ECL). The ECL allowance is based on the latter if there has been a significant increase incredit risk since initial recognition.
Lifetime ECL and 12m ECL are calculated on a collective basis. When calculating ECL on a collective basis, theECL components are calculated based on segmentation which is built on shared risk characteristics. The
probability of default (PD) component is segmented by geographical region, instrument type and by days sinceorigination.
The loss given default (LGD) component is dependent on geographical region, days past due, and, in some cases,
recoveries from the sale of non-performing portfolios. These PD and LGD estimates are obtained for each of thesegment permutations, which is used to calculate the ECL on a collective basis. Since collateral is not held assecurity, it is not part of the ECL calculations.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

33

NOTES WITH ACCOUNTING PRINCIPLES

Klarna groups its financial assets and off-balance sheet items within the scope of the IFRS 9 impairment
requirements into the following:Stage 1:
Klarna allocates financial assets to stage 1 at initial recognition and until there is a significant increase in credit
risk. The allowance is calculated based on 12m expected credit losses. Stage 1 also includes loans where thecredit risk has improved and that were reclassified from stage 2 and 3.
Stage 2:
When a loan has shown a significant increase in credit risk since initial recognition, Klarna allocates it to stage 2.
The allowance for these loans is calculated based on lifetime expected credit losses. Stage 2 also includes loansthat are reclassified from stage 3 because they are no longer considered credit impaired.
Stage 3:Klarna allocates loans to stage 3 that are considered “credit impaired”. Klarna determines whether a financial
asset is credit impaired based on the historical payments received from the consumer. Based on the default
definition (see definition below) a financial instrument is considered being “credit impaired” if it is 90 days pastdue or is classified as fraudulent. The allowance for these stage 3 loans is calculated based on lifetime expectedcredit losses.
Significant increase in credit risk:
Klarna assesses, at the end of each reporting period, whether the credit risk of a financial instrument has
increased significantly since initial recognition in order to determine whether 12m ECL or lifetime ECL shallapply. Klarna determines that the credit risk of a financial instrument has increased significantly where paymentof the credit product is more than 30 days past due, or where the consumer has other contracts with Klarna thatare already in stage 2 or 3.
If, at the reporting date, it is determined that there is no longer a significant increase in credit risk compared toprior periods, Klarna transfers the respective financial assets back into stage 1 and the allowance is reduced toan ECL calculated on a 12 month basis.
Definition of default:
Financial assets are defaulted when the asset has been 90 days or more past due on any payments, has entereddebt collection or is classified as fraudulent.

Measurement of ECL:
The expected credit loss (ECL) for consumer receivables is calculated as a product of the key inputs PD, LGD
and the EAD. These parameters are derived from internal statistics and other historical and forward looking
data. For quantitative information on the reported ECL amounts see note 20, Loans to the public.
Financial guarantees and commitments:
For financial guarantees and commitments the measurement of ECL follows mainly the same methodology as
for consumer receivables but further includes a credit conversion factor (CCF) in the calculation of the exposure
at default (EAD). The CCF in the IFRS 9 model is the proportion of the undrawn credit limit that is utilized leading
up to a default event. The CCF is calculated based on historically observed utilization rates.
Write-off of financial assets:
Financial assets that have no expectation of recovering either the entire outstanding amount or a proportion
thereof are written off. Hence, the gross carrying amount of the financial asset is reduced and the amount of theloss is recognized in the income statement as Credit losses, net. Financial assets are generally written off when
it is determined that the outstanding debt cannot be collected anymore as the borrower does not have assets orsources of income that could be used to repay the amounts subject to write-offs.
To determine whether the outstanding debt cannot be collected anymore, all significant counterparty
relationships are reviewed periodically. This evaluation considers current information and events related to thecounterparty, such as the counterparty experiencing significant financial difficulty or a breach of contract, forexample, default or delinquency in principal payments. Financial assets that are written off could still be subject
to enforcement activities in order to attempt to recover the receivables due. For information on the written-off
loans subject to enforcement activities, see note 20, Loans to the public.
When it is considered that there is no realistic prospect of recovery or when the loan or receivable is sold to an
external party, the financial asset and the related allowance are removed from the balance sheet.
Modifications:
In case a financial asset faces a substantial contractual modification, the previous asset is derecognized and a
new asset is recognized. If the modified financial asset fulfills the definition of “credit impaired”, therequirements for purchased or originated credit impaired assets for the recognition of the new asset are
applied. If a financial asset faces a non-substantial contractual modification the financial asset is notderecognized and it is assessed if there occurred a significant increase in credit risk since initial recognition.

Probability of Default (PD):The historical balances as well as the proportion of those balances that default over time are used as a base todetermine the PD. This approach is applied over different vintages for different countries and for days sinceorigination. Hence, this methodology provides values for 12 month and lifetime PDs for different countries anddays since origination. In cases where the maturity of the financial assets is very short, which is common for
Klarna’s products, the 12 months PD and lifetime PD have equal values.
Loss Given Default (LGD):
LGD is the magnitude of the likely loss if there is a default. The loss given default is calculated using thehistorical balances over different vintages as a base. Furthermore, the LGD component is determined based ondays past due. The recovery rate used in the LGD calculation is determined using the amount recovered fromdebt sales.
Exposure at default (EAD):
The exposure at default (EAD) represents the estimate of the exposure at a future default date, taking into
account expected changes in the exposure after the reporting date, including repayments of principal andinterest, whether scheduled by contract or otherwise. The estimated exposure is discounted using the effective
interest rate to represent the expected exposure in the event of default.

K L A RN A BA N K A B (P U B L )Simplified approach:
The simplified approach is used when calculating expected credit losses on retailer receivables. Hence, the loss
allowance for retailer receivables is always measured at an amount equal to lifetime expected credit losses. The
risk that the retailer would default is regularly analyzed and based on quantitative as well as qualitative factors.

13)

Repurchase agreements

Treasury bills and other interest-bearing securities sold under agreements to repurchase at a specified futuredate are not derecognized from the balance sheet as Klarna retains substantially all of the risks and rewards ofownership. Assets under repurchase agreements are transferred to the counterpart and the counterpart has
the right to sell or re-pledge the assets. Such securities are kept on the balance sheet and pledged as collateralwhen the securities have been transferred and cash consideration has been received. Payment received isrecognized under liabilities to credit institutions. The difference between the sale and repurchase price is
accrued over the life of the agreement using the effective interest rate.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

34

NOTES WITH ACCOUNTING PRINCIPLES

Offsetting financial transactions

Financial assets and liabilities are subject to offset and the net amount reported in the balance sheet when
there is a legal right to settle on a net basis and an intention to settle net or realize the asset and settle theliability simultaneously.

Subsequently, a corresponding adjustment to the carrying amount of the right-of-use asset is made. Lease
payments included in the measurement of the lease liability are fixed payments, variable lease payments that
depend on an index or rate, amounts expected to be payable under a residual value guarantee and the exercise
price under a purchase option, if applicable.

Financial assets and liabilities from repurchase agreements are subject to netting agreements but, sincetransferred assets continue to be recognized, the asset and the associated liability have not been offset.

Klarna presents right-of-use assets that do not meet the definition of investment property in Tangible assets andlease liabilities in Other liabilities in the balance sheet.

14)

15)

Derivative instruments and hedge accounting

Derivative instruments are reported in the balance sheet on their trade date and are measured at fair value,both initially and in subsequent periods. Derivative instruments are classified as other assets or other liabilities.
Changes in the fair value of derivative instruments are reported immediately in the income statement in the item
Net result from financial transactions.

Klarna has elected not to recognize right-of-use assets and liabilities for short-term leases and leases of lowvalue assets, mainly consisting of IT equipment and short-term rental of offices. The lease payments associatedwith these leases are recognized as an expense on a straight line basis over the lease term.

18)

Intangible assets

Goodwill
The Group undertakes hedge accounting for fair value hedges to manage the interest rate risk of liabilities.
Changes in the fair value of derivatives that are designated and qualify as fair value hedging instruments arerecorded in Net result from financial transactions, together with any changes in the fair value of the hedged
liability that are attributable to the hedged risk. Any residual mismatch between the hedging instrument and thehedged item is recognized as ineffective.
When hedging interest rate risk, any interest accrued or paid on both the hedging derivative and the hedged
item is reported in interest expense. If the hedge no longer meets the criteria for hedge accounting theadjustment to the carrying amount of a hedged item for which the effective interest method is used is amortized
to the income statement over the period for which the item was hedged. If the hedged item is sold or repaid, theunamortized fair value adjustment is recognized immediately in Net results from financial transactions.

The amount by which a purchase sum, any non-controlling interest or the fair value on the day of acquisition offormer shareholdings exceeds the fair value of identifiable acquired net assets is reported as goodwill. Goodwill
on acquisitions of subsidiaries is reported as an intangible asset. Goodwill is tested annually to identify any
impairment requirement and is recorded at acquisition cost less accumulated impairment. Impairment of
goodwill is not reversed. Goodwill is allocated among cash-generating units when testing for any impairment
requirement.
Brand names and customer related intangible assets
In business combinations, a portion of the acquisition price can be allocated to brand names and customer
related intangible assets. They are reported at acquisition cost less accumulated amortization and any
accumulated impairment. Straight line amortization is carried out over the assessed useful life (3-20 years).
Capitalized development costs and licenses

16)

Borrowing

Financial liabilities with regard to borrowing are categorized as liabilities which are initially reported at fair value,
net of transaction costs incurred and then at amortized cost and with application of the effective interest
method. This category comprises Liabilities to credit institutions, Deposits from the public, Debt securities inissue and Subordinated liabilities. Where a borrowing carried at amortized cost is in a qualifying fair value hedge
relationship, its carrying value is adjusted for changes in fair value attributable to the hedged risk.

17)

Leasing

The Group’s leases mainly consist of rental of offices, cars, and IT office equipment.
A right-of-use asset and a lease liability are recognized at the lease commencement date. The right-of-use asset
is initially measured at cost, which comprises the initial amount of the lease liability adjusted for initial costs,
incentive payments, restoration obligations and lease payments before the commencement date. The right-ofuse asset is subsequently depreciated using the straight-line method from the commencement date to the endof the lease term. For most leases, Klarna has judged that the lease term does not include additional periods
after the initial period.
The lease liability is initially measured at the present value of the remaining lease payments that are not paid atthe commencement date, discounted using the Group's Incremental borrowing rate.
The lease liability is measured at amortized cost using the effective interest method. It is remeasured when
there is any change in future lease payments arising, for example, from a change in an index, assessment or
estimations on the usage of extension, termination or purchase options or the amount expected to be payable
under a residual value guarantee.

K L A RN A BA N K A B (P U B L )Costs associated with IT systems and software which have been developed in-house or acquired and which are
expected to be of considerable value for the business during at least three years are recognized as intangible
assets. Costs for maintenance are expensed as incurred. Straight line amortization is carried out over theassessed useful life (3-5 years).
Impairment
Goodwill is tested for impairment at least annually or more frequently if events or changes in circumstancesindicate that impairment may have occurred.
Other intangible assets undergo impairment testing whenever events or changes in circumstances suggest thatthe carrying amount might not be recoverable.

19)

Tangible assets

The Group depreciates tangible assets using a straight line depreciation method by applying the following useful
lives to each tangible asset class:Equipment, tools, and fixtures and fittings

5 years

Computers and other machinery

3 years

Leasehold improvements

The shorter of lease term and useful life

An assessment of an asset’s residual value and useful life is made annually. When the residual value is less thanthe carrying amount an impairment loss is recognized in the income statement.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

20)

Income taxes

Income taxes consist of current tax and deferred tax. Income taxes are reported directly in the income
statement except when the underlying transaction is reported directly against equity or other comprehensive
income, in which case also the accompanying tax is reported in equity or other comprehensive income. The tax
rates and tax laws used to compute the amount are those that are enacted or substantively enacted at thereporting date in the countries where the Group operates and generates taxable income.
Deferred tax is reported according to the balance sheet method for all temporary differences between an
asset’s or a liability’s tax base and its carrying amount in the balance sheet. Deferred tax assets are reported for
non-utilized tax relief to the extent it is probable that the relief will be able to be set off against future taxable
surpluses. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year
when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Uncertain tax positions are measured on an ongoing basis and the method is determined by taking all known
facts and circumstances into account.
21) Share-based payments

Employment stock warrants and Restricted stock units
For employment stock warrants, the services rendered are measured with reference to the fair value of the
granted equity instruments. Restricted stock units (RSU) vest on a graded vesting scheme over a four year
period. For both schemes, the fair value is measured at grant date and expensed over the period in which theemployees become unconditionally entitled to these rights. The cost is presented under general administrative
expenses in the income statement. The employment vesting condition is a non-market based condition and isfactored into the assumption of how many equity instruments are expected to vest.
Non-employee stock warrants
Klarna has granted stock warrants to certain non-employee participants in return for performed services. The
fair value is measured as the fair value of the services received, and the corresponding increase in equity.
Where that fair value cannot be estimated reliably, Klarna measures the value, indirectly, by reference to the fairvalue of granted warrants.
The fair value of the equity instruments is calculated as per the date when the services are rendered. The timingof the increase in equity is therefore dependent on when the services are performed. Depending on thecharacteristics of the services received, the calculated IFRS 2 costs can be presented:

•
•
•

35

NOTES WITH ACCOUNTING PRINCIPLESIn General and administrative expenses in the income statement over the vesting period;
As Capitalizable costs (if the capitalization requirements of costs to obtain a contract asset in IFRS 15
are met) and amortized over the useful life of the asset; orAs a revenue reduction under Commission income in the income statement (if considered a discount toa customer)

23)

Group contribution

Group contribution is recognized in the Parent Company according to its financial nature. Group contribution
received from a subsidiary is reported according to the same principles as dividend received. For parent
companies this means that group contribution received is reported as revenue in the income statement. Group
contribution paid by a parent company to a subsidiary is to be reported as increased participation in the groupcompany. For subsidiaries that pay or receive group contribution, this is to be reported together with theaccompanying tax in equity among retained earnings.
24) Cash flow statement

The cash flow statement is reported using the indirect method. The cash flow statement is divided into
payments from operating activities, investing activities and financing activities. Operating activities stem mainly
from revenue-producing activities of the entity. Operating cash flows include cash received from customers andcash paid to suppliers and employees. Investing activities are the acquisition and disposal of long-term assets
and other investments that are not considered to be cash equivalents. Financing activities are activities thatalter the equity capital and borrowing structure of the entity.

25)

Significant accounting judgements, estimates and assumptions

The preparation of the Group’s consolidated financial statements requires management to makejudgements, estimates and assumptions that affect the reported amount of revenues, expenses, assets andliabilities, and the accompanying disclosures, as well as the disclosure of contingent liabilities. Uncertainty about
these assumptions and estimates could result in outcomes that require a material adjustment to the carrying
amount of assets or liabilities affected in future periods.
Judgements
In the process of applying the Group’s accounting principles, management has made the following judgements,
which have the most significant effect on the amounts recognized in the consolidated financial statements:
Assessment of a lease term
The Group determines the lease term as the non-cancellable term of the lease, together with any periods
covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by anoption to terminate the lease, if it is reasonably certain not to be exercised.
The Group has several lease contracts that include extension and termination options. The Group applies
judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew or
terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise
either the renewal or termination. For most leases, Klarna has judged that the lease term does not include
additional periods after the initial period.
Estimates and assumptions

Any related social security charges relating to share-based payments are recognized as an expense during thecorresponding period based on the fair value that serves as the basis for a payment of social security charges.

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting
date, that have a significant risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year, are described below:

Further information relating to share-based payment transactions is presented in note 41.

Assessment of and impairment requirements for financial assets, financial guarantees and commitments

22)

Pensions

For financial assets that are measured at amortized cost or fair value through other comprehensive income aswell as for loan commitments and financial guarantees the impairment requirements of IFRS 9 are applied.

The Group’s pension plans are defined contribution plans, which means that fees are paid to an independent
legal entity according to a fixed pension plan. These fees are reported as personnel costs in the period they
apply to. After the fees have been paid, the Group has no legal or other obligations.

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

IFRS 9 impairment estimates are driven by a number of factors, changes in which can result in different levels ofallowances, with the most significant being:

•
•
•
•

36

NOTES WITH ACCOUNTING PRINCIPLESThe Group’s criteria for assessing if there has been a significant change in credit risk;
The Group’s selection of statistical methods to use when the models are developed or revised;
The periods to consider when analyzing historical portfolio performance;
Applicable guidance and regulation from local regulatory authority for individual markets.

In making IFRS 9 impairment estimates, the Group considers that the loss rates of consumer receivables are notsignificantly affected by macroeconomic factors due to the unique design and short maturities of the credit
products. Furthermore, the underwriting process is built on point in time assessments of transactions where thecurrent state of the consumer is regularly assessed.

At each balance sheet date, the Group revises its estimates of the number of shares and awards that are
expected to vest. It recognizes the impact of the revision of original estimates, if any, in the income statement
and a corresponding adjustment to equity over the remaining vesting period.

26)

Incremental costs of obtaining a contract

Where applicable, the group recognizes incremental costs of obtaining a contract with a customer inaccordance with IFRS 15. These costs are capitalized as an asset and amortized over the useful life of that asset.
The asset is recognized under Other assets on the balance sheet. Amortization of the cost to obtain a contract
asset is recognized under General and administrative expenses in the income statement.
27) Reclassifications of comparatives

See section 12 above for impairment of financial assets, financial guarantees and commitments. Key
assessments and assumptions used in impairment calculations are subject to regular review.

(i)

Impairment requirements for goodwill and other intangible assets
Goodwill and other intangible assets are tested for impairment annually, in accordance with the accounting
principle described in note 23. This is tested by estimating the recoverable amount, in other words, the highestof the fair value less costs to sell and the value in use. If the recoverable amount is lower than the carrying
amount, the asset is written down. See note 23 for further information on the measurement of goodwill andsignificant assumptions used in the annual impairment test.
Legal provisions
Klarna operates in a regulatory and legal environment that, by nature, involves an element of litigation risk
inherent to its operations and from time to time may be party to litigation, arbitration and regulatory
investigations and proceedings arising during the ordinary course of business. When Klarna can reliably measure
the outflow of economic benefits in relation to a specific case and considers such outflows to be probable, aprovision is recorded. Given the subjectivity and uncertainty of determining the probability and amount, a
number of factors are assessed including; legal advice, the stage of the matter and historical evidence fromsimilar incidents. Judgment is required in concluding such assessments.

(ii)

During the current period, ended 31 December 2023, we refined revenue recognition policies
relating to specific items within Commission income and reclassified the 2022 presentationaccordingly:
a. Certain administrative fees earned were reclassified from interest income to Commission
income. The fees reclassified for the period ending 31 December 2022 amounted to SEK 518m.
b. Merchant fees earned in relation to promotional loans were reclassified from Commission
income to Interest income and recognized using the Effective Interest Rate (EIR) method. This
resulted in reclassification to Interest income in 2022 of SEK 221m that was previously
recorded as commission income and reduction of SEK (165)m Loans to the public as at 1
January 2022.
An amount of SEK 402m relating to cash received from customers pending allocation at 31
December 2022 has been reclassified from Other Liabilities to Deposits from the Public.

Where the probability of outflow is considered to be remote, or probable, but a reliable estimate cannot be
made, a contingent liability is disclosed.
Tax losses carried-forward
The group assesses on an ongoing basis as well as at the end of the year the possibility of recognizing deferred
tax assets related to tax losses carried-forward. Deferred tax assets attributable to tax losses carried-forward
are reported only if it is probable that they will be used towards taxable profits in the foreseeable future.
Significant management judgement is required to determine the amount of deferred tax assets that can berecognized, based upon the probability of taxable profits being available in the future and the quantum of
taxable profits that are forecast to arise. These judgements include management’s expectations of the growth ofprofit before tax in these entities, forecasted non-taxable revenues and expenses, and the timing of the reversalof taxable temporary differences.
Share-based payments
The fair value of the equity instruments is calculated as per the grant date using the Black-Scholes model. Thisrequires identification of various inputs to the model, including; expected volatility of own share price, risk freeinterest rate and expected term. The key assumptions used in the model are disclosed in note 41.
The fair value of the employee restricted stock unit program is based on an external valuation where input
parameters include investment rounds, secondary market trades and trading multiples for peers.

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

Note 337

NOTES WITH ACCOUNTING PRINCIPLES

Risk management

Group, 31 Dec 2023

Risk descriptions

Gross amounts

Stage 1

Stage 2

Stage 3

POCI

Simplified
approach

Total

The Group categorizes the key risks it is exposed to in the sections below. These risk categories form the basisof how Klarna identifies, assesses, manages and monitors risk.

Per region
Nordics1

16,774

1,435

240

-

370

18,819Credit risk

DACH2

29,803

2,216

569

-

195

32,783

United States

21,086

779

311

-

315

22,491

United Kingdom

11,043

414

187

1

118

11,763

Other

8,122

369

201

-

140

8,832

Total

86,828

5,213

1,508

1

1,138

94,688Before due

79,184

2,212

2

-

715

82,11380,830≤30 days

7,644

796

3

-

40

8,483

-

1,336

3

-

34

1,373

Definition
The risk of financial loss due to a counterparty failing to meet its contractual obligations, e.g. default, orconcentrations in exposure.
Risk Measurement and ExposureGroup
Credit risk
Loan receivables, gross

31 Dec 2023
94,688Before due and per days
past dueParent Company
31 Dec 2022
82,59031 Dec 2023

31 Dec 2022

86,031

Allowance for credit losses(3,498)(4,159)(2,909)(3,436)>30-60 days

Loan receivables, net carrying amount

91,19078,431

83,122

77,394>60-90 days

-

869

7

-

106

982

>90 days

-

-

1,493

1

243

1,737

86,828

5,213

1,508

1

1,138

94,688

Stage 1

Stage 2

Stage 3

POCI

Simplified
approach

Totalof which: Loans to credit institutions

4,500

3,783

1,880

991

of which: Loans to the public

86,10873,98380,95875,988

582

665

284

415

of which: Accrued income

Total
Group, 31 Dec 2022

Group
Credit quality of debt securities

31 Dec 2023

Parent Company
31 Dec 2022

31 Dec 2023

31 Dec 2022

Gross amounts

Treasury bills chargeable at central banks, etc., andbonds and other interest-bearing securities

Per region
17,092

742

162

-

182

18,178

AAA

5,643

8,738

5,643

8,738

DACH2

26,473

1,025

881

-

301

28,680

AA+

746

1,267

746

1,267

United States

15,824

2,121

397

-

472

18,814

AA

1,066

1,251

1,066

1,251

United Kingdom

8,471

1,693

208

1

136

10,509

Other

5,487

472

294

-

156

6,409

Total

73,347

6,053

1,942

1

1,247

82,590

Before due

68,715

2,508

152

-

920

72,295≤30 days

4,632

1,545

14

-

64

6,255

>30-60 days

-

1,193

16

-

18

1,227

>60-90 days

-

702

30

-

10

742

>90 days

-

105

1,730

1

235

2,071

73,347

6,053

1,942

1

1,247

82,590

AA-

318

321

318

321

Total

7,773

11,577

7,773

11,577

Nordics1

Before due and per days
past dueTotal

K L A RN A BA N K A B (P U B L )1

Sweden, Norway, Finland and Denmark.

2

Germany, Austria, and Switzerland.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

38

NOTES WITH ACCOUNTING PRINCIPLES

Market risk

Parent Company, 31 Dec 2023

Stage 1

Stage 2

Stage 3

POCI

Simplified
approach

Total

Nordics1

16,627

1,435

240

-

263

18,565DACH233,340

2,217

570

-

52

36,179

United States

15,333

446

208

-

12

15,999

United Kingdom

6,694

358

186

1

48

7,287

Other

7,452

334

170

-

45

8,001

Total

79,446

4,790

1,374

1

420

86,031Gross amounts
Per region

Definition
Market risk is the risk of movements in market prices impacting Klarna’s earnings or capital position.
Risk Measurement and Exposure
Currency exposure1
Group

Before due and per days
past due
Before due

72,397

2,094

2

-

302

≤30 days

7,049

767

3

-

4

7,823

>30-60 days

-

1,184

2

-

7

1,193

>60-90 days

-

745

7

-

38

790

>90 days

-

-

1,360

1

69

1,430

79,446

4,790

1,374

1

420

86,031

USD

GBP

Other

Total
exposure

Net average daily position

293

114

45

277

729

Effect of 10% change versus the foreign
currency

(29)

(11)

(5)

(28)

(73)

EUR

USD

GBP

Other

Total
exposure

Net average daily position

15

185

44

208

452

Effect of 10% change versus the foreign
currency

(2)

(19)

(4)

(20)

(45)

31 Dec 2023

EUR

USD

GBP

Other

Total
exposure

Net average daily position

194

95

60

107

456

Effect of 10% change versus the foreign
currency

(19)

(9)

(6)

(11)

(45)

EUR

USD

GBP

Other

Total
exposure

31 Dec 2022

Parent Company

Parent Company, 31 Dec 2022

Gross amounts

EUR

Group
74,795Total

31 Dec 2023

Stage 1

Stage 2

Stage 3

POCI

Simplified
approach

Total
Parent Company

Per region
Nordics1

17,110

742

162

-

113

18,12731 Dec 2022

DACH2

27,536

1,025

879

-

161

29,601

Net average daily position

55

240

23

107

425

Effect of 10% change versus the foreign
currency

(6)

(24)

(2)

(11)

(43)

United States

15,943

780

291

-

4

17,018

United Kingdom

8,421

1,693

207

1

133

10,455

Other

4,811

419

266

-

133

5,629

Total

73,821

4,659

1,805

1

544

80,8301

The amounts are presented in SEKm.

Economic value accounts for changes to discounted values of future cash flows. In accordance with regulatory
guidelines, we apply different stress tests to account for both parallel shifts and a rotation of the yield curve.
The tables below summarize the worst possible outcome based on these stress tests.

Before due and per days
past due
Before due

69,198

1,905

151

-

354

71,608≤30 days

4,623

1,008

11

-

17

5,659

Interest rate risk exposure1>30-60 days

-

1,050

13

-

10

1,073

Group

>60-90 days

-

591

28

-

4

623

>90 days

-

105

1,602

1

159

1,867

73,821

4,659

1,805

1

544

80,830

Total
1

Sweden, Norway, Finland and Denmark.

2

Germany, Austria, and Switzerland.

31 Dec 2023

SEK

EUR

USD

GBP

Other

Total
Exposure

Change in Economic Value

43

(432)

55

40

3

(291)

31 Dec 2022

SEK

EUR

USD

GBP

Other

Total
Exposure

Change in Economic Value

136

(421)

78

34

10

(163)

31 Dec 2023

SEK

EUR

USD

GBP

Other

Total
Exposure

Change in Economic Value

42

(428)

69

40

3

(274)

Group

For additional information on allowances on Loans to the public, see note 20.
Parent Company

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

39

NOTES WITH ACCOUNTING PRINCIPLESParent Company

1

31 Dec 2022

SEK

EUR

USD

GBP

Other

Total
Exposure

Change in Economic Value

137

(420)

124

34

10

(115)

Parent Company
31 Dec 2023

>3 to 6months>6 to 12months>1-5 years>5 years

Total

363

901

-

-

-

1,264

32,172

12,624

38,117

13,876-96,789Financial liabilities
Liabilities to credit institutions

The amounts are presented in SEKm.

Deposits from the public

Liquidity Risk

567

-

-

84

-

651

Other liabilities2

15,437

102

137

8,067

96

23,839Accrued expenses andprepaid income

2,109

220

568

65

-

2,962

50,648

13,84738,82222,092

96

125,505

up to 3months>3 to 6months>6 to 12months>1-5 years>5 years

Total

Liabilities to credit institutions

2,074

755

-

-

-

2,829

Deposits from the public

30,742

8,083

23,866

18,471-

81,162

Debt securities issued1

Definition
Liquidity Risk refers to the risk of Klarna being unable to meet its financial obligations, as they fall due, or unable
to fund its operational needs without incurring unacceptable costs.

Total

Risk Measurement and Exposure
Klarna complies with all liquidity regulatory requirements, including Liquidity Coverage Ratio (LCR) and Net
Stable Funding Ratio (NSFR), and monitoring and management of Klarna’s liquidity survival horizon.

Parent Company
31 Dec 2022

Funding sources

Financial liabilities

Group
31 Dec 2023

up to 3monthsup to 3months>3 to 6months>6 to 12months

>1-5
years

>5
years

Total

Financial liabilities

Debt securities issued1

22

428

236

451

-

1,137

Liabilities to credit institutions

9,621

98

173

12,157272

22,321

735

901

-

-

-

1,636

Other liabilities2

32,47012,624

38,117

13,885-97,096

Accrued expenses andprepaid income

1,670

104

248

108

-

2,130

567

-

-

84

-

651

Subordinated liabilities1

-

-

-

-

303

303

Other liabilities2

10,201

117

163

8,183

127

18,791

Accrued expenses andprepaid income

44,1299,468

24,52331,187575

109,882

2,691

227

579

66

-

3,563

46,664

13,86938,85922,218

127

121,737

Deposits from the public
Debt securities issued1

Total

1

Interest is included in the amounts for Debt securities issued and Subordinated liabilities.

2

Lease liabilities are included in the amounts for Other liabilities. For lease maturity information, see note 7, Leases.

Operational Risk

Group
31 Dec 2022

Total

Definition

up to 3months>3 to 6months>6 to 12months

>1-5
years

>5
years

Total

2,073

755

1

-

-

2,829

Risk Measurement and Exposure
Risks are assessed by impact and likelihood that together generate the risk level. Impact is evaluated through;financial, operational, regulatory, reputational, internal and strategic aspects. The risk exposure is monitored
frequently, and reported to Executive Management and the Board at least quarterly, in addition to the risk
appetite escalation process.

The risk of inadequate or failed processes, personnel, products or third parties.

Financial liabilities
Liabilities to credit institutions

31,045

8,083

23,866

18,476-

81,470

22

428

236

990

-

1,676

Other liabilities2

8,664

129

352

12,292

321

21,758

Accrued expenses andprepaid income

2,120

113

258

117

-

2,608

Deposits from the public
Debt securities issued1

Subordinated liabilities1
Total

K L A RN A BA N K A B (P U B L )

-

-

-

-

303

303

43,924

9,508

24,71331,875

624

110,644

A N N UA L R E P O RT 2 0 2 3

CONTENTS

40

NOTES WITH ACCOUNTING PRINCIPLES

Operating segments and income by geographical area

ICT and Security Risk
Definition

Note 4

The risk of failures or breaches in information or communication systems or physical security including systemoutages, software failures, data breaches, physical security breaches or cyber-attacks.

Klarna determine operating segments based on how our Chief Operating Decision Maker (CODM) manages thebusiness, makes operating decisions around the allocation of resources, and evaluates Klarna’s operating
performance.

Risk Measurement and Exposure
Risks are assessed by impact and likelihood that together generate the risk level. Impact is evaluated through:financial, operational, regulatory, reputational, internal and strategic aspects, as well as confidentiality, integrity
and availability loss. The risk exposure is monitored frequently and reported to Executive Management and theBoard at least quarterly in addition to the risk appetite escalation process.
Business Risk
Definition
The risk of suboptimal strategy selection or ESG factors impacting the achievement of Klarna’s businessobjectives or altering the long term valuation or viability of the business.

Klarna’s CODM is the CEO, who reviews the operating results on a consolidated basis. Klarna operates as one
operating segment and has one reportable segment.
The nature, amount, timing, and uncertainty of our income and cash flows and how they are affected byeconomic factors are depicted through primary geographical markets and type of income categories (retailer
income and consumer income).
Income recorded within these categories are earned from similar services for which the nature of associatedfees and the related income recognition models are substantially the same.

Risk Measurement and ExposureGroupJan - Dec 2023

Jan - Dec 20224

New Business plans are developed and reviewed yearly. Monthly achievement against the yearly plan isreviewed monthly by the executive team, via detailed updates on key financial and business metrics.

Geographical breakdown- Germany

5,736

4,974

- United States

6,034

4,842

- Sweden

2,105

2,236

- United Kingdom

2,616

2,081

4,021

3,459

20,512

17,592- Retailer income

12,1689,550- Consumer income

5,201

5,447

- Other income2

3,143

2,595

20,512

17,592- Sweden

11,432

16,202- Germany

3,292

3,544

- United States

694

1,151

- Other countries

1,235

1,418

16,65322,315- Other countries
Total net operating income less net result from financial transactions1
Income category

Total net operating income less net result from financial transactions1
Non-current assets

Total non-current assets3
1"Net result from financial transactions” is excluded from the income analysis since it is not applicable to a specific geography or income
category.

2“Other income” includes marketing income and Klarna card interchange income.

3

Non-current assets includes tangible assets, intangible assets, long term contract assets and bills and bonds of duration greater than 12
months.

4

The presentation comparatives for 2022 have been updated to reflect changes in internal financial reporting.

Total net operating income is net of Commission expense, Interest expense and Net result from financial transactions.
These items impact larger markets proportionally more and thus comparing growth in Total net operating income may notaccurately reflect underlying market growth.

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

41

NOTES WITH ACCOUNTING PRINCIPLESIn accordance with the requirements of FFFS 2008:25 the parent, Klarna Bank AB (publ) including its branches,
also discloses income by geographical area.

Note 5Interest income
Group

Parent Company
2023

2023

Parent Company
2022

2023

2022

SwedenGermany

Other1

Total

Loans to credit institutions

506

33

485

30

Interest income

1,761

1,045

2,555

5,361

Loans to the public (restated)

3,707

3,934

3,707

3,934

Commission income

1,547

4,690

6,203

12,440

Other interest income

632

158

1,169

521

180

1,079

487

1,746

Total

4,845

4,125

5,361

4,485

3,488

6,814

9,245

19,547

Other operating income
Total

Interest income is calculated using the effective interest method.
2022

SwedenGermany

Other1

Total

Interest income

1,066

1,193

2,226

4,485

Commission income

1,493

3,424

4,212

9,129

160

1,826

254

2,240

2,719

6,443

6,692

15,854

Other operating income
Total
1

2022 Interest income from Loans to the public is restated following a reclassification of SEK 297m from Interest
income to Commission income. Refer to Section 27 in Note 2.

Note 6

Interest expenses
Group"Other" is mainly attributable to; Austria, Belgium, Denmark, Finland, the Netherlands, Norway, Switzerland, the United Kingdom and the United

Parent Company

Parent Company

2023

2022

2023

2022

Interest-bearing securities and chargeable treasury
bills etc.

(202)

(156)

(202)

(156)

(140)

(83)

(124)

(82)

States.

External customer revenue split by income categories

2023

2022

Liabilities to credit institutions

Retailer

8,345

6,611

Deposits from the public(2,356)(669)(2,356)

(669)

4,822

5,056

Debt securities issued

(49)

(73)

(49)

(73)

13,167

11,667

Subordinated liabilities

(11)

(13)

(11)

(13)

Group companies

(328)

(112)

(601)

(119)

Consumer
Total

Other interest expenses
Total

(54)

(56)

(51)

(51)

(3,140)(1,162)(3,394)(1,163)

Interest expense is calculated using the effective interest method.

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

42

NOTES WITH ACCOUNTING PRINCIPLES

Note 7

Leases

Note 8Group

Depreciation of right-of-use assets

Parent Company

Commission income

Group

2023

2022

2023

2022

Commission income split by product category

2023

2022

(295)

(410)

(217)

(282)

Retailer (restated)

14,023

11,110Consumer (restated)

(292)

(406)

(214)

(279)

3,641

2,485

of which: cars

(1)

(2)

(1)

(1)

Other

162

119

of which: other

(2)

(2)

(2)

(2)

Total

17,826

13,714

(43)

(45)

(40)

(40)

(338)

(455)

(257)

(322)

(72)

(121)

(49)

(79)

Commission income split by product category

2023

2022

of which: buildingsInterest expense for lease liabilities
Total right-of-use lease cost
Expenses relating to short-term leases

Parent Company

Expenses relating to low-value assets

-

(5)

-

(5)

Retailer (restated)

9,060

6,942

Total short-term and low value leases

(72)

(126)

(49)

(84)

Consumer (restated)

Right-of-use assets and lease liabilities
1,003

1,636

872

1,381

1,002

1,632

872

1,378

of which: cars

1

2

-

1

of which: other

-

2

-

2

Carrying amount for right-of-use assetsof which: buildings

Additions to right-of-use assets during the year

102

235

101

112

Disposals during the year

(50)

(19)

(1)

(18)

Impairments during the year

(342)

(95)

(329)

(64)

Revaluations during the year

(53)

381

(65)

322

5

44

2

23

1,234

1,757

1,047

1,461

Currency translation difference during the year
Lease liabilities

During the year, Klarna conducted a comprehensive review of its leased office spaces to optimize operational
efficiency. As a result of this review, the company made a strategic decision to right-size its office footprint,
leading to an early termination of certain lease agreements. The total financial impact in impairments is
illustrated in the above table. The Group presents right-of-use assets in Tangible assets and lease liabilities in
Other liabilities in the balance sheet.

31 Dec 2023
Lease liabilities

31 Dec 2022
Lease liabilities>3 to 6months>6 to 12months

>1-5
years

>5
years

Lease liabilities

31 Dec 2022
Lease liabilities

K L A RN A BA N K A B (P U B L )

94

Total

12,4409,129Commission income for 2022 is restated following a reclassification of certain fees, see Section 27 in Note 2,
resulting in an increase in Commission income of SEK 292m (impacting lines Consumer and Retailer within thenote). This restatement applies to both Group and Parent.

Note 9Commission expenses
Group

Parent Company

2023

2022

2023

2022

Commission to partners

(771)

(635)

(3,141)(2,579)Other commissions

(232)

(89)

(232)

(89)

(1,003)(724)(3 373)(2,668)

Total

Note 10

Net result from financial transactions
Group

Parent Company

2023

2022

2023

2022

215

(20)

176

(17)

Total

Gains from financial instruments

253

172

239

188

Losses from financial instruments

(603)

(667)

(618)

(445)

Realized and unrealized losses on shares held inlisted and unlisted companies

(16)

(511)

(15)

(513)

(151)

(1,026)

(218)

(787)

90

82

130

806

126

1,234

up to 3months>3 to 6months>6 to 12months

>1-5
years

>5
years

Total

136

100

183

1,017

321

1,757

Total

As of December 31, 2023, Klarna Bank AB (publ) had entered into derivatives with the gross nominal amount of
SEK 60,960 (53,026m), see note 26.

Parent Company, Maturity
31 Dec 2023

2,093

119

Realized and unrealized movements in exchange
ratesGroup, Maturity
up to 3months

3,261

Other

up to 3months>3 to 6months>6 to 12months

>1-5
years

>5
years

Total

70

68

109

704

96

1,047

up to 3months>3 to 6months>6 to 12months

>1-5
years

>5
years

Total

81

78

145

885

272

1,461

A N N UA L R E P O RT 2 0 2 3

CONTENTS

43

NOTES WITH ACCOUNTING PRINCIPLES

Note 11

Employees and personnel costs

Group

Group
2023

2022

2023

2022

Average number offull-time equivalents

Total

whereof
women

Total

whereof
women

Total

whereof
women

Total

whereofwomen

Sweden

2,327

989

2,997

1,304

2,195

952

2,891

1,271

Germany

1,115

377

1,305

454

957

343

1,089

402

United States

476

270

601

345

-

-

1

-

United Kingdom

324

150

374

168

307

141

374

168

31 Dec 2022
whereofwomen

Number at
closing day

whereofwomen

Board members and Group CEO

8

25%

7

29%

Other members of senior management

10

10%

6

17%

Board members and senior management

Parent company

31 Dec 2023
Number at
closing day

Group 2023
Salaries and other remuneration to the board
and senior management1

Basicsalary/fee

Variable
remuneration5

Other
benefits

Pensionexpenses

Total

Michael Moritz, Chairman of the Board

-

-

-

-

-

-

-

-

-

-

Italy

189

45

183

50

-

-

-

-

Roger Ferguson

Spain

169

82

145

78

-

-

-

-

Lise Kaae

-

-

-

-

-

Netherlands

80

39

88

44

-

-

-

-

Mikael Walther

-

-

-

-

-

Canada

46

13

44

15

-

-

-

-

Omid Kordestani

-

-

-

-

-

Denmark

37

15

26

10

8

5

7

4

Sarah Smith

-

-

-

-

-

France

36

16

34

14

36

16

34

14

Matthew Miller²

-

-

-

-

-

Australia

35

22

80

48

-

-

-

-

Sebastian Siemiatkowski, CEO³

(16.0)

(5.9)

(0.9)

(0.8)

(23.6)

Poland

35

12

22

6

-

-

-

-

Other members of senior management (9)4

(82.1)(25.8)

(0.6)

(4.6)

(113.1)

Norway

31

16

38

21

-

-

-

-

Total

(98.1)(31.7)

(1.5)

(5.4)

(136.7)

Finland

25

15

28

16

-

-

-

-

Ireland

21

9

5

2

21

9

5

2

Austria

11

7

9

5

-

-

-

-

Belgium

6

2

10

4

-

-

-

-

Japan

3

-

5

-

-

-

-

-

Mexico

3

1

1

-

-

-

-

-

New Zealand

2

-

5

1

-

-

-

-

Switzerland

1

-

2

-

1

-

2

-

4,972

2,080

6,002

2,585

3,525

1,466

4,403

1,861

Total

1

Remuneration to board members other than CEO are accounted for in Klarna Bank AB (publ)’s parent company Klarna Holding AB (publ) and ispresented in the annual report for Klarna Holding AB (publ).

2

On December 29, 2023, the company appointed Matthew Miller to the Board.

3

Variable remuneration includes SEK 2.4m related to an award for 2022.

4

The number within parentheses refers to the number of positions that have received salaries and remuneration during the year, and notnecessarily to the number of individuals. During 2023 nine individuals held these roles. The increase in the number of members of senior
management follows an update to the classification of senior management roles and inclusion of four existing roles, rather than in increase insenior employees.

5

Variable remuneration includes cash-based variable remuneration and IFRS 2 expensed amounts for equity based programs.

Group 2022

The above table represents the average number of employees for the year ending 31 December 2023. The total
number of employees in Klarna Bank AB group as at December 31, 2023 amounted to 4,201 (5,441).

Salaries, other remuneration, social security andpension expenses

Group
2023

Salaries and other remuneration to the board
and senior management1

Parent Company
2022

2023

2022

Salaries and other remuneration attributable to:
Board and CEO

(24)

(13)

(24)

(13)

Basic
salary/fee

Variable
remuneration³

Other
benefits

Pensionexpenses

Total

Michael Moritz, Chairman of the Board

-

-

-

-

-

Roger Ferguson

-

-

-

-

-

Lise Kaae

-

-

-

-

-

Mikael Walther

-

-

-

-

-

Omid Kordestani

-

-

-

-

-

-

-

-

-

-

Other employees(3,807)(4,337)(2,399)(2,827)

Sarah Smith

Total salaries and other remuneration(3,831)(4,350)(2,423)(2,840)Sebastian Siemiatkowski, CEO(11.5)

(0.2)

(0.7)

(0.8)

(13.2)

Other members of senior management (5)²

(55.9)

(4.2)

(1.9)

(4.6)

(66.6)

Total(67.4)

(4.4)

(2.6)

(5.4)

(79.8)

Statutory and contractual social security expenses
of which: pension expenses
Total salaries, other remuneration, social security
and pension expenses

K L A RN A BA N K A B (P U B L )(1,159)(1,211)

(906)

(977)

(272)

(282)

(221)

(232)

(4,990)(5,561)(3,329)(3,817)

1

Remuneration to board members other than CEO are accounted for in Klarna Bank AB (publ)’s parent company Klarna Holding AB (publ) and ispresented in the annual report for Klarna Holding AB (publ).

2

The number within parentheses refers to the number of individuals that have received salaries and remuneration during the year, and notnecessarily to the number of members at a given point in time. During 2022, nine individuals held these roles.

3

Variable remuneration includes cash-based variable remuneration and IFRS 2 expensed amounts for equity based programs.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

44

NOTES WITH ACCOUNTING PRINCIPLES

Remuneration
The rules on remuneration are found in the Swedish Banking and Financing Act (2004:297) and the Swedish
Financial Supervisory Authority’s regulations (FFFS 2011:1 and FFFS 2020:30) regarding remuneration systems incredit institutions, securities companies and fund management companies licensed to conduct discretionary
portfolio management (below “the remuneration rules”).
In accordance with part eight of regulation (EU) No 575/2013, commonly referred to as the Capital Requirements
Regulation (CRR), and the regulations and general guidelines of the Swedish Financial Supervisory Authority(FFFS 2014:12) regarding the disclosure of information on capital adequacy and risk management (below“disclosure rules”), the Group shall at least annually in its annual report and on its website give information on its
Remuneration Policy and remuneration systems.
The information below follows the provisions of the disclosure rules.
Remuneration program
The Group has a remuneration structure that recognizes the importance of well-balanced but differentiatedremuneration structures, based on business and local market needs, as well as the importance of being
consistent with and promoting sound and efficient risk management not encouraging excessive risk-taking andshort-term profits or counteracting the Group’s long-term interests.
The aim with the remuneration structure is to both support the ability to attract and retain talents in every
position as well as support equal and fair treatment, but also to ensure that remuneration in the Group is alignedwith efficient risk management and compliant with existing regulations.
Remuneration Committee
The Board of Directors has established a Remuneration Committee consisting of three members appointed by
the Board. The Remuneration Committee is responsible for preparing and presenting proposals to the Board onsalaries and remuneration issues. This duty includes proposals regarding the Remuneration Policy and on
remuneration to members of the Group management team and employees who head any of the control
functions. The Remuneration Committee shall also prepare proposals for the Annual General Meeting regarding
the remuneration of the members of the Board and the auditors. Furthermore, the Remuneration Committee
shall make a competent and independent evaluation of the Remuneration Policy and the Group’s remuneration
system, together with the suitable control function(s) if necessary.
The Remuneration Committee held five formal meetings in 2023. It handled matters within its responsibility on
an ongoing basis through correspondence between the committee members with the formal decisions notcovered by its delegation authority being reported to and documented by the Board at the closest following
Board meeting.

Remuneration structure
The Group applies the following general principles on remuneration:
(i)
(ii)
(iii)

remuneration shall be set on an individual basis, based on experience, competence and performance
remuneration shall not be discriminating
remuneration shall be competitive, but not counterproductive to the Group's long term interests andcapability to generate positive results throughout a full economic cycle.

The remuneration structure within the Group comprises fixed remuneration and variable remuneration. As
stipulated in the remuneration rules, the Group ensures that the fixed and variable components areappropriately balanced by ensuring that the fixed remuneration represents a sufficiently large proportion of theemployee's total remuneration allowing the Group the possibility to pay no variable remuneration. This meansthat the Group can decide that the variable remuneration, including deferred payment, can be canceled in partor in whole under certain circumstances, as described below.
Variable remuneration shall amount to a maximum 100% of an employee’s total fixed remuneration for Identified
staff and 200% of an employee’s total fixed remuneration for other employees, unless otherwise decided by the
Board of Directors in exceptional cases.
Variable remuneration should not only take into consideration the employee’s and his/her team’s result but
preferably also the Group’s total result as well as qualitative criteria such as the employee’s compliance withinternal rules. It should be based on results that are adjusted for current and future risks. The Group shallensure that it is entitled to unilaterally decrease or withdraw all or parts of the variable remuneration if thecriteria are not met or if the Group’s financial situation deteriorates substantially.
If an Identified staff member receives variable remuneration exceeding the amount stipulated in the
remuneration rules such remuneration would be subject to deferral and retention.
Remuneration to Group management team and Identified staff
Total remuneration awarded and paid to the Group management team of 10 persons1 (6) amounts to SEK 197.1m(119.2m) and for Identified staff, 46 persons1 (46), this sum amounts to SEK 132.8m (237.2m), which aggregates to
SEK 329.9m (356.4m). Variable remuneration accounts for SEK 97.6m (49.5m) of the Group management teamfigure related to 10 (6) of its members and SEK 44.4m (173.0m) of the Identified staff figure, related to 46 (46)beneficiaries.
1

The number within parentheses refers to the number of positions that have received salaries and remuneration during the year, and notnecessarily to the number of individuals.

The tables below present both variable remuneration awarded and paid:
2023

Remuneration Policy and risk analysis
The Board has adopted a Remuneration Policy that is designed to be compatible with and promote sound andeffective risk management, avoid exaggerated risk-taking and be in line with the Group’s long-term interests. The
Remuneration Policy shall be revised when it is necessary, at least annually.
The Remuneration Policy, remuneration system and list of those staff members whose professional activities
have a material impact on the Group’s risk profile (Identified staff) are assessed annually. The assessment
includes an analysis of all key risks the Group is or might be exposed to, including the risks associated with its
Remuneration Policy and remuneration structure. In general, the Group’s remuneration system involves low risk
compared with large banks and other credit institutions with comprehensive trading and other businesses
covered by the remuneration rules. The risk cycle in the Group’s credit business is assessed to be short, whichmeans that any risks materialize within a few months.

K L A RN A BA N K A B (P U B L )Value of variable remuneration
Group
management
team

Identified
staff

Paid as one off cash payments (relating toreferral bonuses / gratuities / salescommission)(10.5)

Paid in the form of shares, share-related
instruments, financial instruments or noncash benefits
Deferred remuneration awarded
Total

Type of variable remuneration

Number of beneficiaries

Total

Group
management
team

Identified
staff

Total

(0.9)

(11.4)

6

9

15(26.7)(27.1)(53.8)

10

46

56(60.4)(16.4)(76.8)

1036

46(97.6)(44.4) (142.0)

10

46

56

During 2023, seven employees have been remunerated more than EUR 1m (three between EUR 1m and EUR 1.5m,
two between EUR 2m and EUR 2.5m, two above EUR 2.5m).

A N N UA L R E P O RT 2 0 2 3

CONTENTS

45

NOTES WITH ACCOUNTING PRINCIPLES

2022

Type of variable remuneration
Paid as one off cash payments (relating toreferral bonuses / gratuities / salescommission)

Value of variable remuneration
Group
management
team

Identified
staff

Note 12

Number of beneficiaries

Total

Group
management
team

Identified
staff

Group
Total

Parent Company

2023

2022

2023

2022

Audit engagement

(20)

(18)

(13)

(14)

Audit related services

(1)

(1)

(1)

-

(21)

(19)

(14)

(14)

EY
(2.6)

(7.2)

(9.8)

3

8

11

Paid in the form of shares, share-related
instruments, financial instruments or noncash benefits(7.4)(133.4) (140.8)

9

46

55

Deferred remuneration awarded(39.5)(30.7)(70.2)

7

34

41

New sign-on bonus paid

-

-

-

-

2

2

Severance payments paid

-

(1.7)

(1.7)

-

1

1

(173.0) (222.5)

9

46

55

Total

Fees and reimbursement of expenses for auditors(49.5)

Total

Note 13

Depreciation, amortization and impairment of intangible andtangible assets
Group

During 2022, eight employees have been remunerated more than EUR 1m (six between EUR 1m and EUR 1.5m,
one between EUR 1.5m and EUR 2m, one between EUR 2m and EUR 2.5m).

Parent Company

2023

2022

2023

2022

Intangible assets(1,255)

(812)

(959)

(652)

Tangible assets1

(432)

(537)

(332)

(382)

(1,687)(1,349)(1,291)(1,034)

Intangible assets

(231)

(48)

(194)

(48)

Tangible assets1

(373)

(107)

(353)

(72)

Total

(604)

(155)

(547)

(120)

(2,291)(1,504)(1,838)(1,154)

Amortization and depreciation

As at December 2023, total outstanding deferred remuneration1 to the Group management team of 10 persons2(6) amounts to SEK 50.5m (31.7m) and for Identified staff, 38 persons (46), this sum amounts to SEK 35.7m(139.4m), which aggregates to SEK 86.2m (171.1m).
1

There has been no risk adjustment reduction made to deferred remuneration awards during 2023 or 2022.

2

The number within parentheses refers to the number of positions that have received salaries and remuneration during the year, and notnecessarily to the number of individuals.

Total

Impairment

Total depreciation, amortization and impairment ofintangible and tangible assets
1

K L A RN A BA N K A B (P U B L )Depreciation and impairment of leased assets is included in Tangible assets. See note 7, Leases, for additional information.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

Note 1446

NOTES WITH ACCOUNTING PRINCIPLES

Credit losses, net

Note 15
Group

Loan losses divided by class2023

Parent Company
2022

2023

Group
2022

Loans to credit institutions
Increase in provisions

Income taxes

Income tax expense

Parent Company

2023

2022

2023

2022

Current tax
(80)

(32)

-

-

Tax expense for the year

(171)

(115)

(105)

(38)

Adjustment of tax attributable to previous years

20
(151)

9
(106)

20
(85)

(23)

Reversal of previous provisions

81

27

-

-

Total

1

(5)

-

-

Total

15

Deferred tax
Loans to the public
Realized loan losses, net of recoveries1
Release in provisions to cover realized loan losses
Increase in provisions
Reversal of previous provisions
Total(4,640)(5,569)(3,269)(3,370)

4,643

4,872

3,271

2,915

(15,143)(15,440)(11,011)(9,872)

11,121

10,458

8,206

6,572

(4,019)(5,679)(2,803)(3,755)

Financial guarantees and commitments
Increase in provisions
Reversal of previous provisions
Total

(95)

(99)

(91)

(99)

81

66

77

67

(14)

(33)

(14)

(32)

(4,032)(5,717)(2,817)(3,787)

Deferred tax

808

133

91

33

Total

808

133

91

33

Reported income tax

657

27

6

10

Group
Effective tax rate2022
(10,234)

2023

2022

(2,996)(8,891)

Income tax calculated in accordance with national tax
rates applicable in each country

748

2,248

617

1,832

Non-taxable revenues

25

99

21

98

Non-deductible expenses

(413)

(178)

(300)

(220)

Taxable income not booked in profit or loss

(117)

(78)

(116)

(61)

44

144

40

142

(363)

(2,204)(276)(1,796)

3

-

-

-

Income before tax

Deductible expenses not booked in profit or loss
Unrecognized taxable losses
Effect of change in tax rate

Total credit losses, net

Provisions for prepaid expenses and accrued income is included in Realized loan losses, net of recoveries for the parent company and amounts
to SEK 0m (0m).

1Losses carried forward recognized this year

710

14

-

-

Adjustments of tax attributable to previous years

20

(18)

20

15

Reported income tax

657

27

6

10

20.1%

0.3%

0.2%

0.1%

Effective tax rate

Unlike the balance sheet, which shows a snapshot of assets and liabilities as at 31 December, the credit losses in
the income statement reflect provisions for future losses and realized losses associated with all lending activities
during the year.

Parent Company

2023(3,263)Group
Deferred tax assets

Parent Company

2023

2022

2023

Losses carried forward

25

20

-

2022
-

Allowance for credit losses

203

201

66

25

Share-based payments

6

2

-

-

Other

48

172

1

36

Total

282

395

67

61

Deferred tax liabilities

2023

2022

2023

2022

Intangible assets

4

854

4

27

Other

1

58

-

59

Total

5

912

4

86

Group

Parent Company

Deferred tax assets attributable to carryforward of unused tax losses or other deductible temporary differences
are recognized only to the extent that it is probable that future taxable profits will be available against which theunused tax losses and unused tax credits can be utilized.
During 2023, deferred tax assets and liabilities have been recognized resulting in a SEK 808m (133m) profit in theincome statement. Deferred tax assets have been recognized where the recognition criteria are met, of which
SEK 710m (14m) is in respect of tax losses. The gross deferred tax assets and liabilities have been set off on thebalance sheet to the extent the requirements for netting are met.

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

47

NOTES WITH ACCOUNTING PRINCIPLESTax losses carried forward in the Group for which tax assets are not recognized in the balance sheet amount to
SEK 20,671m (22,454m) gross. Other deductible temporary differences which have not been recognized amountto SEK 504m (213m) gross. Deferred tax assets have not been recognized in respect of these temporary
differences as they have not been assessed as likely to offset taxable profits elsewhere in the Group under the
IAS 12 recognition criteria.
Tax losses carried forward for the parent, Klarna Bank AB (publ) including its branches, for which tax assets are
not recognized in the balance sheet amount to SEK 20,595m (19,377m) gross.

Note 16

Net result from categories of financial instruments
Group

Financial instruments mandatory measured at fairvalue through profit or loss

Parent Company

2023

2022

2023

2022

(664)

733

(692)

971

18,59812,084

16,053

11,643Financial liabilities measured at amortized cost

(4,082)(1,750)(4,308)(1,731)529(1,299)489(1,296)

14,381

9,768

11,542

9,587

Total

Note 17

Treasury bills chargeable at central banks, etc.
Group

Parent Company

31 Dec 2023

31 Dec 2022

31 Dec 2023

31 Dec 2022

112

214

112

214

Municipalities and other public bodies

7,155

10,4997,155

10,499

Total

7,267

10,713

7,267

10,713- in SEK

2,648

5,665

2,648

5,665

- in EUR

3,122

2,305

3,122

2,305

- in USD

1,497

2,743

1,497

2,743

Total

7,267

10,713

7,267

10,713

State and sovereigns

By currency

Financial assets measured at amortized cost

Currency exchange gains/losses

Note 18

Note 19

Loans to credit institutions
Group

Proposed treatment of unappropriated earnings

Parent Company

31 Dec 2023

31 Dec 2022

31 Dec 2023

31 Dec 2022

4,500

3,783

1,880

991

- in SEK

275

195

152

80

276,000,000 SEK- in EUR

869

821

600

400

(133,700,902) SEK- in NOK

-

54

-

15

Retained earnings

17,292,587,164 SEK- in USD

2,491

1,926

572

83

Net result for the year

(2,989,829,148) SEK- in AUD

-

213

-

17

Total

14,445,057,114 SEK- in CHF

182

-

182

-

- in GBP

273

29

250

5

- in other currencies

410

545

124

391

4,500

3,783

1,880

991

The Board and the CEO propose to the Annual General Meeting that the non-restricted equity of SEK
14,445,057,114 on Klarna Bank AB (publ)'s balance sheet at the disposal of the Annual General Meeting to be
carried forward.
Additional Tier 1 instruments
Other reserves

Loans to credit institutions

By currency

Total

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

48

NOTES WITH ACCOUNTING PRINCIPLES

Note 20Loans to the public
Group

1

Parent Company

31 Dec 2023

31 Dec 2022

31 Dec 2023

31 Dec 2022

Loans to the public1

89,602

78,137

83,867

79,910Allowance for credit losses(3,494)(4,154)(2,909)(3,436)

Total

86,10873,98380,95876,474

Parent Company Loans to the public include a loan measured at fair value through profit or loss amounting to SEK 0m (486m).

As at 1 January 2022, Loans to the public is restated SEK (165)m. Refer to Section 27 in Note 2 in Accounting
principles.
The tables below show gross carrying amounts and allowances for loans to the public measured at amortized
cost.

Group

Stage 1

Stage 2

Stage 3

POCI

Simplified
approach

Total

Gross carrying amountas at January 1, 2023

68,895

6,054

1,940

1

1,247

78,137

New assets originated orpurchased

1,456,000

1,060

251

-

32,957

1,490,268

Assets derecognized or
repaid (excl. write-offs)(1,412,595)(24,512)(2,142)-(32,903)(1,472,152)

Transfers to stage 1

6,377(6,081)

(296)

-

-

-

Transfers to stage 2(35,886)

36,044

(158)

-

-

-

Transfers to stage 3(318)(6,753)

7,071

-

-

-

Amounts written off

(87)

(604)

(5,160)-(147)(5,998)Other adjustments
Gross carrying amountas at December 31, 2023

Group

1

Group

Stage 1

Stage 2

Stage 3

POCI

Simplified
approach

Total

Gross carrying amountas at January 1, 2022

58,187

4,626

1,664

1

1,053

65,531

Additions from businesscombinations

-

-

-

-

73

73

New assets originated orpurchased

1,012,754

1,250

128

-

11,531

1,025,663

Assets derecognized or
repaid (excl. write-offs)(969,399)(23,073)(1,571)-(11,249)(1,005,292)

Transfers to stage 1

7,092(6,935)

(157)

-

-

-

Transfers to stage 2(37,831)

37,942

(111)

-

-

-

Transfers to stage 3(942)(7,165)

8,107

-

-

-

Amounts written off

(291)

(582)

(6,098)-(56)(7,027)

Other adjustments

(675)

(9)

(22)

-

(105)

(811)

Gross carrying amountas at December 31, 2022

68,895

6,054

1,940

1

1,247

78,137

Group

Stage 1

Stage 2

Stage 3

POCI

Simplified
approach

Total(1,599)

(882)

(962)

-

(166)

(3,609)Additions from businesscombinations

-

-

-

-

(9)

(9)

New assets originated orpurchased

Allowance as atJanuary 1, 20221(4,920)

(454)

(333)

-

(86)

(5,793)

Assets derecognized or
repaid (excl. write-offs)

6,520

2,816

892

-

102

10,330

(730)

613

117

-

-

-

(644)

6

1

-

(16)

(653)

Transfers to stage 1

81,742

5,214

1,507

1

1,138

89,602

Transfers to stage 2

1,451(1,538)

87

-

-

-

Transfers to stage 3

79

3,711

(3,790)---

Impact on ECL fromchange in credit risk

(2,577)(5,478)(1,893)-(131)(10,079)

Changes to models andinputs used for ECL
calculations

183

(19)

(36)

-

-

128

Amounts written off

76

214

4,550

-

31

4,871

Other adjustments

(3)

1

2

-

7

7

Allowance as at
December 31, 2022

(1,520)(1,016)(1,366)-(252)(4,154)

Stage 1

Stage 2

Stage 3

POCI

Simplified
approach

Total

Allowance as atJanuary 1, 20231(1,520)(1,016)(1,366)-(252)(4,154)

New assets originated orpurchased(5,234)

(352)

(204)

-

(192)

(5,982)

Assets derecognized or
repaid (excl. write-offs)

6,801

2,648

1,086

-

136

10,671

Transfers to stage 1

(602)

511

91

-

-

-

Transfers to stage 2

1,470(1,549)

79

-

-

-

Transfers to stage 3

70

3,514

(3,584)---

Impact on ECL fromchange in credit risk

(2,862)(4,908)(1,198)-(192)(9,160)Changes to models andinputs used for ECL
calculations

559

59

(168)

-

-

450

Amounts written off

27

130

4,345

-

142

4,644

Other adjustments

15

11

6

-

5

37

Allowance as at
December 31, 2023

(1,276)

(952)

(913)

-

(353)

(3,494)

1

The table shows month over month movements.

The table shows month over month movements.

Loans to the public of SEK 86.1bn (74.0bn) are loans still owed as at 31 December. This balance is only partially comparable
to credit losses on the income statement as the income statement reports all activity during the year from 1 January to 31
December, while the balance sheet is a snapshot of lending outstanding as at 31 December.

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

Parent Company
Gross carrying amountas at January 1, 20231

Stage 1
72,415

Stage 2
4,659

Stage 3
1,807

POCI
1

Simplified
approach542

Total
79,424

Parent Company

Stage 1

Stage 2

Stage 3

POCI

Simplified
approach

Total

Gross carrying amountas at January 1, 20221

61,483

3,276

1,459

2

722

66,942534,335

790

209

-

6,399

541,733(499,774)(16,892)(1,414)(1)(6,409)(524,490)

New assets originated orpurchased

1,153,246

855

248

-

28,552

1,182,901

New assets originated orpurchased

Assets derecognized or
repaid (excl. write-offs)(1,124,536)(18,767)(1,947)-(28,560)(1,173,810)

Assets derecognized or
repaid (excl. write-offs)

Transfers to stage 1

5,890(5,596)

(294)

-

-

-

Transfers to stage 1

6,413(6,283)

(130)

-

-

-

Transfers to stage 2(29,241)

29,393

(152)

-

-

-

Transfers to stage 2(29,269)

29,354

(85)

-

-

-

Transfers to stage 3(342)(5,214)

5,556

-

-

-

Transfers to stage 3(785)(5,222)

6,007

-

-

-

Amounts written off

(73)

(541)

(3,899)-(114)(4,627)

Amounts written off

(214)

(360)

(4,211)-(42)(4,827)

Other adjustments

(81)

2

58

-

-

(21)

Other adjustments

226

(4)

(28)

-

(128)

66

Gross carrying amountas at December 31, 2022

72,415

4,659

1,807

1

542

79,424

Total

Parent Company

Stage 1

Stage 2

Stage 3

POCI

Simplified
approach

Total

(177)

(3,436)

Allowance as atJanuary 1, 20221(1,306)

(497)

(798)

-

(140)

(2,741)(175)(4,424)

New assets originated orpurchased(3,034)

(244)

(288)

-

(71)

(3,637)

Assets derecognized or
repaid (excl. write-offs)

4,005

1,690

765

-

67

6,527

Gross carrying amountas at December 31, 2023

77,278

4,791

1,377

1

420

83,867

Parent Company

Stage 1

Stage 2

Stage 3

POCI

Simplified
approach

Allowance as atJanuary 1, 20231(1,285)(730)(1,244)-

New assets originated orpurchased(3,768)

(278)

(203)

-

Assets derecognized or
repaid (excl. write-offs)

4,912

1,861

1,011

-

98

7,882

Transfers to stage 1

(565)

476

89

-

-

-

Transfers to stage 1

(568)

473

95

-

-

-

Transfers to stage 2

1,193(1,266)

73

-

-

-

Transfers to stage 2

1,152(1,218)

66

-

-

-

Transfers to stage 3

68

2,265

(2,333)---

Transfers to stage 3

23

2,230

(2,253)---(6,548)Impact on ECL fromchange in credit risk

(1,688)(3,151)(1,646)-(64)(6,549)Changes to models andinputs used for ECL
calculations

Impact on ECL fromchange in credit risk

1

49

NOTES WITH ACCOUNTING PRINCIPLES(2,113)(3,226)(1,078)-(131)

Changes to models andinputs used for ECL
calculations

427

64

(166)

-

-

325

120

(45)

(30)

-

-

45

Amounts written off

23

79

3,059

-

110

3,271

Amounts written off

14

34

2,840

-

25

2,913

Other adjustments

10

5

2

-

4

21

Other adjustments

(3)

(2)

5

-

6

6

Allowance as at
December 31, 2023

(1,098)

(750)

(790)

-

(271)

(2,909)Allowance as at
December 31, 2022

(1,285)(730)(1,244)-(177)(3,436)

The table shows month over month movements.

1

The table shows month over month movements.

Loans with a contractual amount of SEK 2,504m (3,436m) for the Group and SEK 1,278m (1,489m) for the Parent
Company that were written off during the year are still subject to enforcement activity.

Note 21

Bonds and other interest-bearing securities
Group
31 Dec 2023

K L A RN A BA N K A B (P U B L )Parent Company
31 Dec 2022

31 Dec 2023

31 Dec 2022

Other borrowers

506

864

506

864

Total

506

864

506

864

- in SEK

506

864

506

864

A N N UA L R E P O RT 2 0 2 3

CONTENTS

50

NOTES WITH ACCOUNTING PRINCIPLES

Note 22

Shares and participations in group companies

Parent Company

31 Dec 2023

31 Dec 2022

15,465

10,942

Participations in group companies
Parent Company
Subsidiaries

31 Dec 2023

For the year ending December 31, 2023 the following subsidiary company was entitled to exemption from audit
under section 479A of the Companies Act 2006, United Kingdom:
Klarna UK Limited (registered number 08706739)

31 Dec 2022

No. of shares

Share

Book value

EquityBook value

EquityAnalyzd Technologies Ltd., Cyprus, Corp. ID
HE 2730111

1,000

100%

-

0.0

16.5

19.2

Hero Towers Limited, The United Kingdom,
Corp. ID 09570325

614,567100%

1,229.3

1,343.9

1,229.3

1,229.3

Group companies

Geographical area

2023

2022

Total net operating
incomeTotal net operating
income

1.8

9.8

-

17.2

The United Kingdom

133.9

1,310.7

The United States

2.5

5.1

Klarna Australia Holding Pty Ltd.

Australia

97.8

1.7

Klarna Australia Pty Ltd.

Australia

8.5

17.8
83.3

Accolade AB

SwedenHero Technologies Inc.

The United States

Hero Towers Ltd.
Inspirock, Inc

Klarna Australia Holding Pty Ltd., Australia,
Corp. ID 635 651 722

100,000,000

100%

1,051.5

1,121.0

48.6

68.2

Klarna Austria GmbH, Austria, Corp. ID FN
387052w

1

100%

0.3

56.1

0.3

43.9

Klarna Austria GmbH

Austria

83.4

Klarna Belgium N.V., Belgium, Corp. ID
0741.431.277

Klarna Belgium N.V.

Belgium

20.6

31.9

18,000

100%

0.2

37.7

0.7

6.4

Klarna B.V.

The Netherlands

129.7

139.8

Klarna B.V., The Netherlands, Corp. ID
50315250

Klarna Canada Limited

Canada

253.0

232.2

61,500

100%

0.7

10.4

0.2

76.3

Klarna Commercial Consulting (Shanghai) Co., Ltd.

China

6.1

9.6

Klarna Germany Holding GmbHGermany(240.5)(946.3)Klarna Glazing II LLC

The United States

34.1

22.4

Klarna Inc.1

The United States

6,228.5

8,050.4

Klarna Italy S.r.l.

Italy

236.9

221.2

Klarna Japan KK

Japan

7.5

7.8

Klarna MAS AB

Sweden

109.0

50.9

Klarna New Zealand

New Zealand

(2.1)

(0.7)

Klarna Norge AS

Norway61.4

67.4

Klarna OY

Finland

60.7

46.8

Klarna Payments, S.A. de C.V.

Mexico4.5

1.2

Klarna Poland sp. z o.o Limited

Poland45.1

31.3

Klarna Runway Holding Inc

The United States--

Klarna Securities AB

Sweden0.3

0.1

Klarna Spain S.L.

Spain

160.9

137.5

Klarna UK Limited

The United Kingdom

1.2-

Piggy LLC

The United States

18.2

67.0

PriceRunner Computer Technology Co.,Ltd

China

-

-

PriceRunner Denmark ApS

Denmark

249.8

194.6

PriceRunner GmbHGermany

0.2

0.1

PriceRunner Group AB

Sweden2.3

42.2

PriceRunner Holding AB

Sweden1.0

80.3

PriceRunner International AB

Sweden

291.5

166.2

PriceRunner Ltd

The United Kingdom

42.8

24.2

PriceRunner Sweden AB

Sweden

146.1

127.4

Klarna Canada Limited, Canada, Corp. ID
BC1268207

1

Klarna Commercial Consulting (Shanghai) Co.,
Ltd., China, Corp. ID 91310000MA1FPMBGXE
Klarna Financial Services UK Ltd, The United
Kingdom, Corp. ID 14290857

-

100%
100%

3.7

(21.8)
8.5

3.7(14.6)
8.8

1,500,001

100%

1,004.2

931.6

-

-

Klarna Germany Holding GmbH, Germany,
Corp. ID HRB 230268

25,000100%

2,762.5

1,121.6

2,762.5

1,357.9

Klarna Inc., The United States, Corp. ID 9903659942

10,000,000

100%

3,252.1

2,767.7--

14,248

100%

24.7

24.8

24.7

8.3

Klarna Italy S.r.l., Italy, Corp. ID 10232490960
Klarna Japan KK, Japan, Corp. ID 0104-011408861
Klarna MAS AB, Sweden, Corp. ID 5568649478

148,201,614
49,786

100%
100%

7.9
288.5

8.1
71.9

76.5
259.0

8.5
48.1

Klarna Norge AS, Norway, Corp. ID 995 515
164

10,000

100%

0.1

123.6

0.1

108.2

Klarna OY, Finland, Corp. ID 2247127-6

2,500

100%

0.0

108.8

-

90.0

Klarna Participations AB, Sweden, Corp. ID
596918-11583
Klarna Payments, S.A. de C.V., Mexico, Corp.
ID N-2021080794

-

0%

-

-

-

1.9

14,578,672

100%

7.0

9.1

7.0

7.8

Klarna Poland sp. z o.o. Limited, Poland, Corp.
ID 0000907691

100

100%

0.0

7.8

-

3.5

Klarna Runway Holding Inc, The United States,
Corp. ID 86-23006582

-

0%

-

-

654.6

2,754.3

Klarna Securities AB, Sweden, Corp. ID
559176-99051

Prisguiden AS

Norway36.8

45.6

50,000

100%

9.3

9.7

25.5

4.6

Sofort GmbHGermany

1,178.5

2,037.2

Klarna Spain S.L., Spain, Corp. ID B88639240

3,000

100%

0.0

12.7

-

2.6

Sofort UK Limited

The United Kingdom--

Stocard GmbHGermany

127.4

146.1

Stocard Pty Ltd

Australia

7.8

11.1

Stocard UK Limited

The United Kingdom

4.2

(0.3)

Toplooks LLC

The United States-

2.3

Klarna UK Limited, The United Kingdom, Corp.
ID 08706739
Pricerunner Group AB, Sweden, Corp. ID
559021-0851

1
251,721

Search Engine Marketing Sweden AB,
Sweden, Corp. ID 556809-59463
Stocard GmbH, Germany, Corp. ID HRB 712032

100%
100%

0.0
4,617.4

1.0
897.2

-

14.2

4,617.4

897.0

-

0%

-

-

10.3

10.3

109,369100%

1,205.2

205.1

1,205.2

93.4

Total

15,464.6

10,942.1

1

In 2023, shares were impaired of SEK 16.5m in Analyzd Technologies Ltd., SEK 68.6m in Klarna Japan KK and SEK 21.5m in Klarna Securities AB.

2

In 2023, Klarna Runway Holding was merged with Klarna Inc.

3

In 2023, Klarna Participations AB and Search Engine Marketing Sweden AB were fully disposed.

K L A RN A BA N K A B (P U B L )1
Klarna Inc received less intergroup income. Excluding these contributions total net operating income would have been SEK 4,626m (3,549m).
Klarna Inc is not fully representative of Klarna’s US results as certain activities are recognized in Klarna Bank AB (publ).

A N N UA L R E P O RT 2 0 2 3

CONTENTS

51

NOTES WITH ACCOUNTING PRINCIPLES

Note 23

Intangible assets
Goodwill

LicensesCapitalized
development
costs

1,626

70

2,672

536

4,904

Additions

-

3

813

-

816

Reclassification

-

-

(1)

1

-

Parent Company

Group
Purchase value as at January 1, 2023
Additions

Goodwill

BrandsLicensesCapitalized
development
costs

Other
intangible
assetsPurchase value as at January 1, 2023
Total

1,202

80

3,795

2,941

13,745

-

-

3

887

-

890

Currency translation difference

21

1

3

1

26

Purchase value as at December 31, 2023

1,647

74

3,487

538

5,746

Amortization as at January 1, 2023

(540)

(59)

(1,026)(238)(1,863)

Amortization for the year

(259)

(4)

(644)

(52)

(959)

-

-

(3)

-

-

(3)

Currency translation difference

16

-

-

15

(27)

4

5,743

1,202

80

4,697

2,914

14,636

-

(65)

(64)

(1,396)(427)(1,952)Currency translation difference(1,255)

Amortization as at December 31, 2023

Amortization as at January 1, 2023
Amortization for the year

-

(73)

(6)

Sales/disposals

-

-

2

-

-

2

Currency translation difference

-

-

-

(9)

24

15

Amortization as at December 31, 2023

-

(138)

(68)

(2,259)(725)(3,190)

Impairment as at January 1, 2023

-

(82)

-

(67)

-

(149)

(30)

-

(1)

(190)

(10)

(231)

-

-

-

(3)

-

(3)

Impairment as at December 31, 2023

(30)

(82)

(1)

(260)

(10)

(383)

Carrying amount as at December 31, 2023

5,713

982

11

2,178

2,179

11,063

Impairment for the year
Currency translation difference

Total

5,727

Sales/disposals
Purchase value as at December 31, 2023

Other
intangible
assets

(854)

(322)

7

-

(1)

(1)

5

(792)

(63)

(1,671)(291)(2,817)

-

-

(48)

-

(48)

(11)

-

(183)

-

(194)

-

-

5

-

5

Impairment as at December 31, 2023

(11)

-

(226)

-

(237)

Carrying amount as at December 31, 2023

844

11

1,590

247

2,692

Goodwill

LicensesCapitalized
development
costs

Other
intangible
assets

Total

463

58

1,670

478

2,669

1,127

13

1,000

37

2,177

-

(1)

-

-

(1)

Impairment as at January 1, 2023
Impairment for the year
Currency translation difference

Parent Company
Purchase value as at January 1, 2022
Additions

Goodwill

BrandsLicensesCapitalized
development
costs

3,609

109

67

2,102

724

6,611

-

-

14

928

7

949

1,923

1,085

-

747

2,144

5,899

Sales/disposals

-

-

(1)

-

-

(1)

Reclassification

(35)

-

-

-

50

15

Sales/disposals

Currency translation difference

230

8

-

18

16

272

Currency translation difference

5,727

1,202

80

3,795

2,941

13,745

Amortization as at December 31, 2022

Amortization as at January 1, 2022

-

(12)

(58)

(803)

(235)

(1,108)

Amortization for the year

-

(51)

(6)

(576)

(179)

(812)

Sales/disposals

-

-

1

-

-

1

Currency translation difference

-

(2)

(1)

(17)

(13)

(33)

Amortization as at December 31, 2022

-

(65)

(64)

(1,396)(427)(1,952)

Impairment as at January 1, 2022

-

(76)

-

(17)

-

(93)

Impairment for the year

-

-

-

(48)

-

(48)

Impairment testing of Goodwill and Intangible assets
The Group conducted its annual goodwill impairment test as of October 1, 2023. In performing this test all
goodwill was allocated to one cash-generating unit (CGU) aligned with the Group’s one operating segment. No
impairment losses were identified as a result of the test as the fair value less cost to sell (FVLCS) of the CGU
exceeded its carrying amount. In determining the FVLCS, the group applied a level 3 valuation methodology
using a last twelve months revenue multiple as a key assumption. The Group performed a sensitivity analysis andcompared the key assumption to peer company valuations. No reasonably possible changes in the key
assumptions that would result in an impairment loss were identified in our sensitivity analysis.

Group
Purchase value as at January 1, 2022
Additions
Additions from business combinations

Purchase value as at December 31, 2022

Otherintangible
assets

Total

Currency translation difference

-

(6)

-

(2)

-

(8)

Impairment as at December 31, 2022

-

(82)

-

(67)

-

(149)

5,727

1,055

16

2,332

2,514

11,644

Carrying amount as at December 31, 2022

Sales/disposals

36

-

2

21

59

Purchase value as at December 31, 2022

1,626

70

2,672

536

4,904

Amortization as at January 1, 2022

(328)

(55)

(612)

(182)

(1,177)

Amortization for the year

(183)

(5)

(413)

(51)

(652)

-

1

-

-

1

Currency translation difference

(29)

-

(1)

(5)

(35)

(540)

(59)

(1,026)(238)(1,863)

Impairment as at January 1, 2022

-

-

-

-

-

Impairment for the year

-

-

(48)

-

(48)

Impairment as at December 31, 2022

-

-

(48)

-

(48)

1,086

11

1,598

298

2,993

Carrying amount as December 31, 2022

In December 2023, the Group made a strategic decision to cease certain operations relating to prior acquisitions
resulting in an impairment to Goodwill of SEK 30m and Intangible assets of SEK 162m.

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

52

NOTES WITH ACCOUNTING PRINCIPLES

Note 24

Tangible assets

Leaseholdimprovements

Equipment

Total

128

555

683

-

3

3

(6)

(43)

(49)

-

1

1

Purchase value as at December 31, 2023

122

516

638

Depreciation as at January 1, 2023

(56)

(262)

(318)

Depreciation for the year

(22)

(93)

(115)

Parent Company

Group
Purchase value as at January 1, 2023
Additions
Sales/disposals
Currency translation difference
Purchase value as at December 31, 2023

Purchase value as at January 1, 2023

Leaseholdimprovements

Equipment

Total

Additions

159

660

819

Sales/disposals

-

7

7

(7)

(60)

(67)

-

(1)

(1)

152

606

758

Currency translation difference

Depreciation as at January 1, 2023

(73)

(326)

(399)

Sales/disposals

2

26

28

Depreciation for the year

(28)

(109)

(137)

Currency translation difference

1

1

2

3

37

40

Depreciation as at December 31, 2023

(75)

(328)

(403)

Impairment as at January 1, 2023

(4)

(4)

(8)

Impairment for the year

(15)

(9)

(24)

Impairment as at December 31, 2023

(19)

(13)

(32)

28

175

203

Leaseholdimprovements

Equipment

Total

121

457

578

2

85

87

Sales/disposals
Currency translation difference
Depreciation as at December 31, 2023

1

3

4

(97)

(395)

(492)

Impairment as at January 1, 2023

(6)

(6)

(12)

Impairment for the year

(15)

(16)

(31)

-

2

2

(21)

(20)

(41)

34

191

225

Sales/disposals
Impairment as at December 31, 2023

Carrying amount as at December 31, 20231

Carrying amount as at December 31, 20231

Parent Company
Purchase value as at January 1, 2022

Group

Leaseholdimprovements

Additions
Equipment

Total

Sales/disposals

-

(5)

(5)

(5)

5

-

Purchase value as at January 1, 2022

143

536

679

Reclassification

Additions

13

106

119

Currency translation difference

10

13

23

Additions from business combinations

-

6

6

Purchase value as at December 31, 2022

128

555

683

Sales/disposals

(4)

(14)

(18)

Reclassification

(5)

5

-

Depreciation as at January 1, 2022

(31)

(179)

(210)

Currency translation difference

12

21

33

Depreciation for the year

(21)

(79)

(100)

Purchase value as at December 31, 2022

159

660

819

Sales/disposals

-

2

2

Currency translation difference
Depreciation as at December 31, 2022

(4)

(6)

(10)

(56)

(262)

(318)

-

-

-

Depreciation as at January 1, 2022

(40)

(224)

(264)

Depreciation for the year

(29)

(98)

(127)

2

6

8

(6)

(10)

(16)

Impairment for the year

(4)

(4)

(8)

Impairment as at December 31, 2022

(4)

(4)

(8)

Carrying amount as at December 31, 20221

68

289

357

Sales/disposals
Currency translation difference
Depreciation as at December 31, 2022

(73)

(326)

(399)

-

-

-

Impairment for the year

(6)

(6)

(12)

Impairment as at December 31, 2022

(6)

(6)

(12)

Carrying amount as at December 31, 20221

80

328

408

Impairment as at January 1, 2022

1

Impairment as at January 1, 2022

1

Leases are recognized as right-of-use assets and are included in Tangible assets in the Balance sheet. On December 31, 2023, the right-of-use
assets amount to SEK 872m (1,381m), which are disclosed in note 7, Leases.

Leases are recognized as right-of-use assets and are included in Tangible assets in the Balance sheet. On December 31, 2023, the right-of-use
assets amount to SEK 1,003m (1,636m), which are disclosed in note 7, Leases.

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

53

NOTES WITH ACCOUNTING PRINCIPLESOther assets

Note 25

Derivatives designated in a hedge relationship
Group

Parent Company

31 Dec 2023

31 Dec 2022

31 Dec 2023

31 Dec 2022

Receivables from group companies

48

32

7,881

578

Current tax assets

373

359

82

67

VAT receivables

292

222

265

180

Derivatives

585

789

585

789

1,170

1,350

204

213

Contract assets
Other receivables
Total

330

464

276

350

2,798

3,216

9,293

2,177

Fair value hedges
The Group holds short and medium term deposits from the public which are subject to changes in fair value due
to fluctuations in the underlying interest rate benchmark, which is typically the most significant component of
the overall fair value change. These short and medium term deposits are the hedged item. The Group uses
interest rate swaps as the hedging instrument to reduce the impact of fair value changes in the hedged item due
to changes in the underlying interest rate benchmark.
For hedges of interest rate risk, ineffectiveness arises due to mismatches of critical terms and / or the use ofdifferent curves to discount the hedged item and instrument, for example, a mismatch between the reset
frequency of the swap and the benchmark frequency.
Group and Parent Company

For more information on derivatives, see note 26.

31 Dec 2023

Note 26

Derivatives and hedge accounting

Carrying amountGroup and Parent Company
31 Dec 2023
Fair value
Positive

Negative

NominalamountInterest rate swaps

52

(66)

22,802

Total

52

(66)

22,802Derivatives designated in a hedged relationship

Change in fair Ineffectivenessvalue used torecognized in
calculate Net result fromhedge
financial
Negative ineffectiveness
transactions

Fair value hedges:
Hedging instrument and ineffectivenessNominalamountPositive

Interest rate risk

22,802

52

(66)

(117)

3

Total

22,802

52

(66)

(117)

3

Group and Parent Company
31 Dec 2022

Fair value
Positive

Negative

NominalamountCurrency forwards

533

(202)

38,158

Total

533

(202)

38,158Derivatives not designated in a hedged relationship

Carrying amount
Change in fair Ineffectivenessvalue used torecognized in
calculate Net result fromhedge
financial
Negative ineffectiveness
transactions

Fair value hedges:
Hedging instrument and ineffectivenessNominalamountPositive

Group and Parent Company

Interest rate risk

10,147

-

(85)

(99)

(1)

31 Dec 2022

Total

10,147

-

(85)

(99)

(1)

31 Dec 2023

31 Dec 2022

22,934

10,182

Of which: the accumulated amount of fair value adjustment

14

(100)

Maturity 2023

Maturity 2022

Fair value
Derivatives designated in a hedged relationship

Positive

Negative

NominalamountInterest rate swaps

-

(85)

10,147

Fair value hedges: Designated hedged item

Total

-

(85)

10,147

Deposits from the public

Fair value
Positive

Negative

NominalamountCurrency forwards

789

(50)

42,879

Total

789

(50)

42,879Derivatives not designated in a hedged relationship

The Group enters into foreign exchange derivatives that are an economic hedge to manage currency risks andare not designated in a hedge accounting relationship. These derivatives are held at fair value with gains andlosses recognized in Net results from financial transactions.

K L A RN A BA N K A B (P U B L )Within 3
months> 3 months
and < 12months> 12 months

Interest rate risk

2,585

15,789

4,427

189

4,457

5,501

Average fixed interest rate

2.48%

3.42%

3.30%

0.50%

2.42%

2.07%

Within 3 > 3 months andmonths< 12 months> 12 months

Fair value hedges: Profileof the timing of thenominal amount of thehedge instrument

A N N UA L R E P O RT 2 0 2 3

CONTENTS

54

NOTES WITH ACCOUNTING PRINCIPLES

Note 27

Prepaid expenses and accrued income

Note 30

Group

Parent Company

Group

31 Dec 2023

31 Dec 2022

31 Dec 2023

31 Dec 2022

496

574

126

177

Accrued transaction-related income

Debt securities issued
31 Dec 2023

31 Dec 2022

31 Dec 2023

31 Dec 2022

Senior unsecured bonds

451

1,115

451

1,115

Commercial papers

200

22

200

22

-

539

-

-

651

1,676

651

1,137

Share-based payments

13

42

-

-

Prepaid licenses

177

216

174

208

Convertible promissory notes

Other accrued income

86

90

106

23

Total

Prepaid marketing

19

26

16

19

Other prepaid expenses

67

117

43

96

Accrued interest

-

-

2

215

858

1,065

467

738

Total

Note 28

Liabilities to credit institutions

For maturity analysis of financial liabilities, see note 39.

Other liabilities

Parent Company

Group

31 Dec 2023

31 Dec 2022

31 Dec 2023

31 Dec 2022

1,636

2,829

1,264

2,829

Liabilities to credit institutions

During 2023, a total of SEK 664m of notes issued under the Medium Term Notes program matured and SEK
539m convertible promissory notes were repurchased.

Note 31

Group

Parent Company

By currency

Parent Company

31 Dec 2023

31 Dec 2022

31 Dec 2023

31 Dec 2022

Accounts payable

414

184

206

108

Personnel related taxes

80

198

61

179

7,208

11,051

14,27614,158

Liabilities to group companies- in SEK

181

1,885

181

1,885

Current tax liabilities

177

87

105

36

- in GBP

901

755

901

755

Liabilities to retailers

8,479

6,904

7,444

5,912

- in EUR

170

180

170

180

Derivatives

268

135

268

135

- in USD

384

9

12

9

Lease liabilities

1,234

1,757

1,047

1,461

Total

1,636

2,829

1,264

2,829

Other liabilities
Total

For maturity analysis of financial liabilities, see note 39.

Note 29Group
31 Dec 2022

31 Dec 2023

31 Dec 2022

97,096

81,47096,78981,162

14

(100)

14

(100)

97,096

81,47096,78981,162Total

By currency- in SEK

12,08915,011

12,08915,011- in EUR

84,354

65,83584,354

65,835

653

624

346

316

97,096

81,47096,78981,162- in other currencies
Total

For maturity analysis of financial liabilities, see note 39.

713

612

24,12022,601

Parent Company

31 Dec 2023

of which: fair value adjustment for hedged risk

1,809
22,125Klarna Bank AB (publ) has received a line of credit from its parent company Klarna Holding AB (publ). The credit
liability amounted to SEK 6,733m (10,805m) as of December 31, 2023 and is included in Liabilities to groupcompanies. The line of credit is ranked pari passu with all other unsecured indebtedness.

Deposits from the public

Deposits from the public

1,313
19,173For more information on derivatives, see note 26. For maturity analysis of financial liabilities, see note 39.

Note 32

Accrued expenses and prepaid income
Group

Parent Company

31 Dec 2023

31 Dec 2022

31 Dec 2023

31 Dec 2022

Accrued personal and consultant related costs

642

696

524

578

Accrued marketing costs

489

437

327

187

Accrued outsourced and IT costs

542

352

474

309

Other accrued expenses and prepaid income

500

559

241

302

Accrued commission costs

298

175

290

173

Accrued interest costs

972

306

1,001

524

Accrued scoring and distribution costs

143

123

116

75

3,586

2,648

2,973

2,148

Total

For maturity analysis of financial liabilities, see note 39.

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

55

NOTES WITH ACCOUNTING PRINCIPLES

Note 33

Provisions

Pending legal
issues and tax
litigations

Other
provisions

Total

8

1

9

Amounts used

-

(1)

(1)

Provisions as at December 31, 2023

8

-

8

Stage 1

Stage 2

Stage 3

Total

57

39

1

97

Parent Company
Pensions andother postemployment
obligations

Pending legal
issues and tax
litigations

Other
provisions

Total

Provisions as at January 1, 2023

9

7

2

18

New provisions

6

-

-

6

Group

Provisions as at January 1, 2023

Amounts used

(2)

-

(1)

(3)

Provisions as at December 31, 2023

13

7

1

21

Provisions for financial guarantees and commitments
Provisions as at January 1, 2023
New provisions
Reversed provisions

Provisions for financial guarantees and commitments
Provisions as at January 1, 2023

Stage 3

Total

Transfers to stage 1

14

(13)

(1)

-

39

1

94

Transfers to stage 2

(1)

1

-

-

Transfers to stage 3

-

-

-

-

Impact on year end ECL from change in credit risk

26

4

1

31

Provisions as at December 31, 2023

105

6

(1)

110

Pending legal
issues and tax
litigations

Other
provisions

Total

-

-

-

14

1

62

(3)

(80)

Transfers to stage 1

14

(14)

-

-

Transfers to stage 2

(1)

1

-

-

Transfers to stage 3

-

-

-

-

Impact on year end ECL from change in credit risk

25

5

1

31

Parent Company

Provisions as at December 31, 2023

102

5

-

107

Provisions as at January 1, 2022

Pensions andother postemployment
obligations

Pending legal
issues and tax
litigations

Other
provisions

Total

New provisions

8

1

9

Provisions as at December 31, 2022

8

1

9

Stage 1

Stage 2

Stage 3

Total

48

5

12

65

Provisions for financial guarantees and commitments

Provisions as at January 1, 2022

3

1

1

5

Provisions as at January 1, 2022

New provisions

8

10

1

19

New provisions

Amounts used
Provisions as at December 31, 2022
Provisions for financial guarantees and commitments
Provisions as at January 1, 2022

77
(67)

(4)

-

(6)

7

2

18

Transfers to stage 1

13

(9)

(4)

-

Transfers to stage 2

(22)

22

-

-

Stage 1

Stage 2

Stage 3

Total

44

6

11

61

11

6

77

(23)

(13)

(65)

Transfers to stage 1

13

(9)

(4)

-

Transfers to stage 2

(22)

22

-

-

Transfers to stage 3

-

-

-

-

K L A RN A BA N K A B (P U B L )

6
(14)

9

60

Provisions as at December 31, 2022

11
(22)

(2)

(29)

Impact on year end ECL from change in credit risk

60
(31)

Reversed provisions

Reversed provisions

New provisions

59
(77)

Stage 2

(40)

Group

1
(3)

54

47

Reversed provisions

14
(39)

Stage 1(37)

New provisions

44
(35)

(12)

32

1

21

54

39

1

94

-

-

-

-

(12)

32

1

21

Other adjustments

1

-

-

1

Provisions as at December 31, 2022

57

39

1

97

Transfers to stage 3
Impact on year end ECL from change in credit risk

A N N UA L R E P O RT 2 0 2 3

CONTENTS

56

NOTES WITH ACCOUNTING PRINCIPLES

Note 34

Subordinated liabilities

Note 36Group

Pledged assets and contingent liabilities

Parent Company

Group

31 Dec 2023

31 Dec 2022

31 Dec 2023

31 Dec 2022

Subordinated note, nominal value

-

300

-

300

Pledged assets

Transaction expenses

-

-1

-

-1

Assets pledged for own liabilities

Accrued interest

-

4

-

4

Total

-

303

-

303

On July 5, 2018, Klarna Bank AB (publ) issued SEK 300m of subordinated notes due 2028. The notes have a
floating coupon rate corresponding to STIBOR 3M plus 3.5% per annum. The interest is paid on a quarterly basis.
The notes were called on the first call date of July 5, 2023. For maturity analysis of financial liabilities, see note
39.

Note 35

Parent Company

31 Dec 2023

31 Dec 2022

31 Dec 2023

31 Dec 2022

Pledged loans to the public and credit institutions

2,775

2,717

2,775

2,717

Pledged treasury bills chargeable at central banks,etc., and pledged bonds and other interest-bearing
securities

-

1,402

-

1,402

32

34

-

-

2,807

4,153

2,775

4,119

-

44

-

44

Commitments

15,424

16,43829,85528,043

Total

15,424

16,482

29,85528,087

Other pledged assets
Total

Contingent liabilities and commitments

Untaxed reserves

Contingent liabilities
Guarantees
Parent Company
31 Dec 2023

31 Dec 2022

Additional depreciation

-

-

Total

-

-

Parts of the receivables are continuously pledged as collateral for liabilities to credit institutions which provides
security for the Group's credit facility. The credit liability amounted to SEK 0m (0m) as at December 31, 2023.
Treasury bills chargeable at central banks, etc., and pledged bonds and other interest-bearing securities containsecurities pledged as collateral in repurchase agreements. Associated liabilities amounted to SEK 0m (1,405m)
as at December 31, 2023.
Commitments contain an undrawn part of consumer credit line amounting to SEK 0m (5,006m) and acommitment to refund consumers in the event of returns to a defaulted retailer amounting to SEK 14,747m(11,333m) as at December 31, 2023. Commitment to fund loans as at December 31, 2023 amounted to SEK 677m
(99m).

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

Note 37

57

NOTES WITH ACCOUNTING PRINCIPLES

Fair value of financial assets and liabilities

31 Dec 2023

The Group’s basis for establishing the fair value of financial assets and liabilities are presented below.

Group

Fair value

31 Dec 2022

Carrying
amount Difference

Fair value

Carrying
amount Difference

Liabilities

For Cash and balances with central banks the carrying amount is a reasonable approximation of the fair value.
Treasury bills chargeable at central banks, etc., Bonds and other interest-bearing securities, and repurchaseagreements within Liabilities to credit institutions are valued in terms of the active market prices.

Liabilities to credit institutions

1,636

1,636

-

2,829

2,829

-

Deposits from the public

97,36597,096269

81,10981,470

(361)

648

651

(3)

1,644

1,676

(32)

18,523

18,523-

21,623

21,623

-

268

268

-

135

135

-

3,563

3,563

-

2,608

2,608

-

-

-

-

300

303

(3)

122,003

121,737

266

110,248

110,644(396)

Debt securities issued
Other liabilities

Carrying amount for Loans to credit institutions and Loans to the public are assumed to be approximations offair value. Fair value on short-term (<1 year) loans is equivalent to their booked value since the effect of
discounting is insignificant.

Other liabilities (derivatives)
Accrued expenses and prepaid
incomeSubordinated liabilities

The fair value for Other shares and participations is based on quoted market prices where available or valuation
techniques using unobservable data (see Note 38 Classification of financial assets and liabilities for further
detail on basis).

Total

31 Dec 2023

31 Dec 2022

Carrying
amount Difference

Carrying
amount Difference

For derivatives the fair value is based upon input parameters which are observable from independent andreliable market data sources.

Parent Company

For Other assets and liabilities (excluding derivatives) and Prepaid and accrued expenses and income the fairvalue is the carrying amount of these financial instruments as they are short term in nature.

Cash and balances with central
banks

22,02822,028-16,08516,085-

Treasury bills chargeable at central
banks, etc.

7,021

7,267

(246)

10,237

10,713(476)

Loans to credit institutions

1,880

1,880

-

991

991

-

Loans to the public

The calculation of fair value of Deposits from the public is based on Level 2 input using observable market data.
Deposits from the public are grouped into maturity buckets and thereafter the net present value is calculated
based on the remaining maturity and the corresponding interest rate.
Fair value of issued Debt securities and Subordinated liabilities are determined using the quoted market price atthe balance sheet date where available (in the case of level 1) or using observable inputs (in the case of level 2).
The below fair values are calculated for disclosure purposes only.

80,95880,958-76,47476,474-

Bonds and other interest-bearing
securities

492

506

(14)

827

864

(37)

Other shares and participations

345

345

-

338

338

-

8,157

8,157

-

929

929

-

Other assets (derivatives)

585

585

-

789

789

-

Prepaid expenses and accrued
income

284

284

-

415

415

-

121,750

122,010(260)

107,085

107,598(513)

Other assets

Total

Group

Fair value

31 Dec 2022

Carrying
amount Difference

Fair value

Carrying
amount Difference

Assets31 Dec 2023
Parent Company

Cash and balances with central
banks

22,02822,028-16,08516,085-

Treasury bills chargeable at central
banks, etc.

7,021

7,267

(246)

10,237

10,713(476)

Loans to credit institutions

4,500

4,500

-

3,783

3,783

-

Debt securities issued
Other liabilities

1,264

-

2,829

2,829

-

Deposits from the public

97,05896,789269

80,801

81,162(361)

73,98373,983-

Bonds and other interest-bearing
securities

492

506

(14)

827

864

(37)

Other shares and participations

345

345

-

338

338

-

Accrued expenses and prepaid
incomeOther assets

421

421

-

497

497

-

Subordinated liabilities
Total

Other liabilities (derivatives)

585

585

-

789

789

-

582

582

-

665

665

-

122,082

122,342(260)

107,204

107,717

(513)

Total

K L A RN A BA N K A B (P U B L )Carrying
amount Difference

1,264

-

Prepaid expenses and accrued
incomeFair value

Liabilities to credit institutions

86,108Other assets (derivatives)

Fair value

31 Dec 2022

Carrying
amount Difference

Liabilities

86,108Loans to the public

Fair value

Assets

The carrying value for Liabilities to credit institutions generally approximates the fair value.

31 Dec 2023

Fair value

648

651

(3)

1,105

1,137

(32)

23,571

23,571-

22,18622,186

-

268

268

-

135

135

-

2,962

2,962

-

2,130

2,130

-

-

-

-

300

303

(3)

125,771

125,505266

109,486

109,882(396)

A N N UA L R E P O RT 2 0 2 3

CONTENTS

58

NOTES WITH ACCOUNTING PRINCIPLES

Note 38Classification of financial assets and liabilities intomeasurement categories

Group

Fair value throughprofit or loss

Amortized
cost

Non-financial
assetsTotal

Cash and balances with central banks-

16,085-16,085

Treasury bills chargeable at central banks, etc.

-

10,713-

10,713Loans to credit institutions

-

3,783

-

3,783

-

73,983-73,98331 Dec 2022
AssetsGroup
31 Dec 2023

Fair value throughprofit or loss

Amortized
cost

Non-financial
assets

Total

AssetsCash and balances with central banks-

22,028-22,028Loans to the public

Treasury bills chargeable at central banks, etc.

-

7,267

-

7,267

Bonds and other interest-bearing securities

-

864

-

864

338

-

-

338

Loans to credit institutions

-

4,500

-

4,500

Other shares and participations

Loans to the public-

86,108-

86,108Intangible assets--

11,644

11,644

Bonds and other interest-bearing securities

-

506

-

506

Tangible assets

-

-

2,044

2,044

345

-

-

345

Deferred tax assets

Other shares and participations

-

-

395

395

789

497

1,930

3,216

-

665

400

1,065

1,127

106,590

16,413

124,130

Fair value throughprofit or loss

Amortized
cost

Non-financial
liabilities

Total

Liabilities to credit institutions

-

2,829

-

2,829

Deposits from the public-

81,470-81,470Debt securities issued

539

1,137

-

1,676

Intangible assets--

11,063

11,063

Other assets

Tangible assets

-

-

1,228

1,228

Prepaid expenses and accrued income

Deferred tax assets

-

-

282

282

585

421

1,792

2,798

-

582

276

858

930

121,412

14,641

136,983

Other assets
Prepaid expenses and accrued income
Total

Total

Group
31 Dec 2022
Liabilities

Group
31 Dec 2023

Fair value throughprofit or loss

Amortized
cost

Non-financial
liabilities

Total

Liabilities
Liabilities to credit institutions

-

1,636

-

-

-

912

912

135

21,623367

22,125

Accrued expenses and prepaid income

-

2,608

40

2,648

Provisions

-

-

112

112

1,636

Deferred tax liabilities
Other liabilities

Deposits from the public-

97,096-

97,096

Debt securities issued

-

651

-

651

Deferred tax liabilities

-

-

5

5

268

18,523382

19,173

Subordinated liabilities
Total

Other liabilities
Accrued expenses and prepaid income

-

3,563

23

3,586

Provisions

-

-

128

128

Subordinated liabilities
Total

K L A RN A BA N K A B (P U B L )

-

-

-

-

268

121,469

538

122,275

-

303

-

303

674

109,970

1,431

112,075

A N N UA L R E P O RT 2 0 2 3

CONTENTS

59

NOTES WITH ACCOUNTING PRINCIPLESParent Company
31 Dec 2023

Fair value
through profit orloss

Non-financial assets
and shares andAmortized
participations incostgroup companies

Parent Company
Total

Assets31 Dec 2022

Fair value
through profit orloss

Non-financial assets
and shares andAmortized
participations incostgroup companies

Total

AssetsCash and balances with central banks-

22,028-22,028Cash and balances with central banks-

16,085-16,085

Treasury bills chargeable at central banks, etc.

-

7,267

-

7,267

Treasury bills chargeable at central banks, etc.

-

10,713-

10,713Loans to credit institutions

-

1,880

-

1,880

Loans to credit institutions

-

991

-

991

Loans to the public-

80,958-80,958Loans to the public

486

75,988-76,474

Bonds and other interest-bearing securities

-

506

-

506

Bonds and other interest-bearing securities

-

864

-

864

Shares and participations in group companies--

15,465

15,465

Shares and participations in group companies--

10,942

10,942

345

-

-

345

338

-

-

338

Intangible assets

-

-

2,692

2,692

Intangible assets

-

-

2,993

2,993

Tangible assets

-

-

1,075

1,075

Tangible assets

-

-

1,738

1,738

Deferred tax assets

-

-

67

67

Deferred tax assets

-

-

61

61

585

8,157

551

9,293

789

929

459

2,177

-

415

323

738

1,613

105,985

16,516

124,114

Fair value
through profit orloss

Amortized
cost

Non-financial
liabilities

Total

Other shares and participations

Other assets
Prepaid expenses and accrued income
Total

Parent Company
31 Dec 2023

-

284

183

467

930

121,080

20,033142,043

Fair value
through profit orloss

Amortized
cost

Non-financial
liabilities

Other shares and participations

Other assets
Prepaid expenses and accrued income
Total

Parent Company
Total

31 Dec 2022
Liabilities

Liabilities
Liabilities to credit institutions

-

1,264

-

1,264

Liabilities to credit institutions

-

2,829

-

2,829

Deposits from the public-

96,789-96,789Deposits from the public-

81,162-

81,162

Debt securities issued

-

651

-

651

Debt securities issued

-

1,137

-

1,137

Deferred tax liabilities

-

-

4

4

Deferred tax liabilities

-

-

86

86

268

23,571

281

24,120

Other liabilities

135

22,186280

22,601

Accrued expenses and prepaid income

-

2,962

11

2,973

Accrued expenses and prepaid income

-

2,130

18

2,148

Provisions

-

-

118

118

Provisions

-

-

106

106

Subordinated liabilities

-

-

-

-

Subordinated liabilities

-

303

-

303

268

125,237414

125,919

135

109,747490

110,372

Other liabilities

Total

K L A RN A BA N K A B (P U B L )Total

A N N UA L R E P O RT 2 0 2 3

CONTENTS

60

NOTES WITH ACCOUNTING PRINCIPLES

The following table shows the financial assets and liabilities measured at fair value, divided into the threevaluation levels. For description of the fair value levels, see note 2, Accounting principles, section 11. No transfers
between levels have been made during 2023.
Group
31 Dec 2023

Level 1

Level 2

Level 3

Total

Other shares and participations

81

-

264

345

Other assets (derivatives)

-

585

-

585

Total

81

585

264

930

Financial assets

Financial liabilities

Parent Company
31 Dec 2023

Level 1

Level 2Loans to the public

-

-

-

-

Other shares and participations

81

-

264

345

Other assets (derivatives)

-

585

-

585

Total

81

585

264

930

Other liabilities (derivatives)

-

268

-

268

Total

-

268

-

268

Level 1

Level 2

Level 3

Total

Loans to the public

-

-

486

486

Other shares and participations

67

-

271

338

Other assets (derivatives)

-

789

-

789

Total

67

789

757

1,613

Other liabilities (derivatives)

-

135

-

135

Total

-

135

-

135

Financial liabilities

Parent Company

-

-

-

-

Other liabilities (derivatives)

-

268

-

268

31 Dec 2022

Total

-

268

-

268

Financial assets

31 Dec 2022

Level 1

Level 2

Level 3

Total

Other shares and participations

67

-

271

338

Other assets (derivatives)

-

789

-

789

Total

67

789

271

1,127

Financial assets

Total

Financial assets

Debt securities issued

Group

Level 3Financial liabilities

Financial liabilities
Debt securities issued

-

-

539

539

Other liabilities (derivatives)

-

135

-

135

Total

-

135

539

674

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

61

NOTES WITH ACCOUNTING PRINCIPLES

Movements in Level 3

Parent Company

The following tables show a reconciliation of the opening and closing balances of Level 3 financial assets andliabilities which are recorded at fair value.
Group

Financial assets

Financial liabilities

Other shares andparticipations

Debt securities
issued2

Balance as at January 1, 2023

271

539

Gain/loss in income statement1

1

(211)

of which: unrealized gain/loss

1-of which: realized gain/loss

-

(211)

-

(331)

Impact of foreign exchange movements(8)

3

Balance as at December 31, 2023

264-

RepurchaseGroup

Balance as at January 1, 2022
Gain/loss in income statement1of which: unrealized gain/loss
Issuances

Financial assets

Financial liabilities

Other shares andparticipations

Debt securities
issued2

262

326

(24)

20

(24)

20

-

168

Impact of foreign exchange movements

33

25

Balance as at December 31, 2022

271

539

1

Fair value gains and losses recognized in the income statement are included in Net result from financial transactions.

2

The value of Debt securities issued has been established using valuation models.

During the period SEK 539m of Debt securities issued were repurchased resulting in a gain of SEK 211m which
was recognized in the income statement. The Debt securities issued were valued in prior periods using level 3
valuation models.

Financial assets
Other shares andparticipations

Loans to the public2

Balance as at January 1, 2023

271

486

Gain/loss in income statement1

1

(13)

1

(13)

of which: unrealized gain/loss

-

(475)

Impact of foreign exchange movements(8)2Balance as at December 31, 2023

264-

Conversion

Parent Company

Financial assets
Other shares andparticipations

Loans to the public2

Balance as at January 1, 2022

262

279

Gain/loss in income statement1

(24)

26

(24)

26

Issuances-156

Impact of foreign exchange movements

33

25

Balance as at December 31, 2022

271

486

of which: unrealized gain/loss

1

Fair value gains and losses recognized in the income statement are included in Net result from financial transactions.

2

The value of Loans to the public has been established using valuation models.

The Group uses a range of unobservable inputs and valuation techniques such as the current interest rate,equity markets, expected future cash flows and options models to determine the fair value of level 3 financial
instruments.
The impact of a 10% increase in the valuation of Other shares and participations would increase assets by SEK
27m (27m). The impact of a 10% decrease would decrease assets by SEK 27m (27m).
The impact of a 10% increase in valuation inputs of Debt securities issued would increase liabilities by SEK 0m(10m). The impact of a 10% decrease would decrease liabilities by SEK 0m (10m).
The impact of a 10% increase in valuation inputs of Loans to the public would increase assets by SEK 0m (9m).
The impact of a 10% decrease would decrease assets by SEK 0m (9m).

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

62

NOTES WITH ACCOUNTING PRINCIPLES

Note 39

Maturity analysis for financial assets and liabilities

Parent Company
Contractual undiscounted cash flows

Group

31 Dec 2023

31 Dec 2022

Expected to be recoveredor settled:

Expected to be recoveredor settled:

Contractual undiscounted cashflows

Within 12
monthsAfter 12months

Total

Within 12
months31 Dec 2022

After 12monthsLoans to credit institutions
Total

1

86,78887,779

669

1,406

769

-

-

2,844

22,098

8,746

32,484

18,798-82,126

-

33

685

456

-

1,174

22,767

10,18533,93819,254-

86,144

98,727

63,62918,80482,433

85

659

718

994

1,712

Liabilities to credit institutions

10,485

8,395

18,8809,151

12,75021,901

Deposits from the public
Debt securities issued

Total

Parent Company

-

-

16

374

390

100,753

22,712

123,465

78,84833,040111,888

31 Dec 2023

31 Dec 2022

Expected to be recoveredor settled:

Expected to be recoveredor settled:

Within 12
monthsAfter 12months

Total

Within 12
monthsAfter 12months

Total

Liabilities to credit institutions

1,264

-

1,264

2,843

-

2,843

Deposits from the public

84,264

14,15698,42063,327

18,79882,125

574

85

659

717

456

1,173

Other liabilities

15,6808,241

23,921

9,897

12,55722,454

Accrued expenses and prepaid
income

2,898

65

2,963

2,022

108

2,130

-

-

-

16

374

390

104,680

22,547

127,227

78,82232,293111,115

Payable on
demandMaximum 3months3-12 months

1-5 years

More than 5
years

Total

1,798

73

9

-

-

1,880

Debt securities issued

Subordinated liabilities
Total

Total liabilities

Of the Treasury bills chargeable at central banks, etc., SEK 3,549m (3,414m) have a remaining maturity of up to
one year. Of the Bonds and other interest-bearing securities, SEK 404m (360m) have a remaining maturity of up
to one year.

Note 40

Contractual undiscounted cash
flows

991

1

14,166--

10,097574

Subordinated liabilities

1

10,09884,561

2,608

18,642

Deposits from the public

118-

18,642

2,844

2,490

990

33,324

-

3,563

Total

33,3242,844

66

More than 5
years

24,724

1,636

3,497

1-5 years

25,714-

Accrued expenses and prepaid
income3-12 months

Total assets

1,636

Other liabilities

Maximum 3monthsLoans to the public

Liabilities to credit institutions

Debt securities issued

Payable on
demandInterest received and paid
Group

Parent Company

2023

2022

2023

2022

Interest payments received

4,134

4,004

4,110

4,004

Interest expenses paid

-2,096-839-2,095-839

Parent Company
Contractual undiscounted cash flows

31 Dec 2023
Loans to credit institutions
Loans to the public

44,64428,716

6,565

8,140

-

88,065

Total assets

46,442

28,789

6,574

8,140

-

89,945

363

-

901

-

-

1,264

18,593

13,78051,891

14,156-98,420

-

570

4

85

-

659

18,956

14,35052,796

14,241-

100,343

Liabilities to credit institutions
Deposits from the public
Debt securities issued
Total liabilities

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

Note 4163

NOTES WITH ACCOUNTING PRINCIPLES

Share-based payments

Details regarding the Group’s RSU program and other contingent equity instruments are outlined in the tablebelow:

Employee Restricted Stock Unit Program
Klarna’s Restricted Stock Unit Program (the “RSU Program”) was implemented in 2020. It is open to all
employees and entails a gratuitous granting of Restricted Stock Units (“RSUs”) in relation to an ownershipinterest in Klarna Bank AB (publ). Each participant is granted a set number of RSUs at the grant date, which vest
over a four-year graded vesting schedule, with 25% of the shares vesting annually. Should the participant end
their employment within the group, unvested RSUs will be forfeited.

Restricted stock units

The number of shares distributed to employees under the RSU Program is approved by the Board of Directors ofKlarna Holding AB (publ). The share-based compensation expense is based on the grant-date fair value of theawards and recognized over the vesting period, in line with the graded vesting schedule.

Group

Number of
RSUs

Number of shares

Weighted averagefair value at grant
SEK

January 1, 2023

8,544,987

63

29,824

8,646

Granted during the year

7,081,803

45

-

-

Released during the year

(2,411,162)

67(2,367)

14,789Forfeited during the year

(2,450,832)

54

-

-

December 31, 2023

10,764,796

52

27,457

6,524

On vesting, the company is, in accordance with certain countries’ tax law, required to withhold an amount tosettle the employee’s tax associated with a share-based payment and transfer that amount in cash to the tax
authority on the employee’s behalf. Such amounts are withheld from employees in accordance with applicablelaws, either through deduction of salary or withholding a number of vested shares.

Restricted stock units

Employee Stock Warrants
In certain jurisdictions the Group offers share-based payments to certain employees in the form of stock
warrants. The warrants are subject to graded vesting over a term of typically four to five years. The awards areaccounted for as equity-settled share-based payments, with the fair value determined at the grant date andexpensed over the vesting period, based on the Group’s estimate of the number of awards that will eventually
vest. One warrant entitles the recipient to purchase one ordinary share in Klarna Holding AB (publ) at the agreed
strike price.
Certain warrants have been acquired by employees in exchange for a cash payment of the fair market value at
grant date. Since pre-emption rights related to these awards transfer over a specified period they are accounted
for as equity settled share-based payments, however no associated expense is recognized.

Other equity awards

Weighted averagefair value at grant
SEK

Other equity awards

Group

Number of
RSUs

Weighted averagefair value at grant
SEK

Number of shares

Weighted averagefair value at grant
SEK

January 1, 2022

2,212,311

134

50,144

11,135Granted during the year

8,857,384

54

2,955

14,798

Released during the year

(854,828)

116(23,275)

14,789Forfeited during the year

(1,669,880)

86

-

-

8,544,987

63

29,824

8,646

December 31, 2022

Additional detail on employee and non-employee stock warrant programs is outlined in the tables below:
Stock warrants

Non-Employee Stock Warrants
Klarna has granted stock warrants to certain non-employee participants. The vesting periods associated withthese grants range from one year to five years. The warrants are accounted for as equity settled share-based
payments and recorded as an expense over the relevant service or vesting periods. The fair market value ofservices provided has been determined with reference to the fair market value of the instruments as measured
at the date when the services are provided.
Employee Restricted Shares
A restricted share award scheme in which some employees acquired restricted shares in a group entity thatretains an ownership interest in Klarna Bank AB (publ) became fully vested during the year. The restricted shareawards were accounted for as an equity settled share-based payment. The restricted shares were acquired by
employees in exchange for a cash payment at fair market value, measured at the grant date and therefore no
associated expense was recognized. At the balance sheet date the employee retained shares in a group entity
holding an ownership interest in Klarna Bank AB (publ) are reflected in minority interest.
Other Equity Awards
During 2023, 0 (2,955) equity instruments were issued in relation to business acquisitions. The instruments
granted to specific individuals of the acquired companies entitle the recipient to one ordinary share in Klarna
Holding AB (publ). There is a four year vesting period associated with these instruments, and they are accounted
for as equity-settled share-based payment compensation and recognized as a post business combination
expense. During the year, 2,367 (23,275) equity instruments were released related to employees leaving Klarna.
The future personnel costs associated with the released equity instruments were expensed in the income
statement at the last day of employment. The instruments have been measured based on the fair market valueof the underlying ordinary shares at the date of grant.

K L A RN A BA N K A B (P U B L )Number of warrants

Weighted average
exercise price SEK

January 1, 2023

1,933,083

5,206

Granted during the year

1,102,024

6,131

Exercised during the year1(65,346)

807

Group

Forfeited during the year

(417,518)

79

December 31, 2023

2,552,243

5,706

Stock warrants
Group
January 1, 2022
Granted during the year
Forfeited during the year
December 31, 2022
1

Number of warrants

Weighted average
exercise price SEK

536,519

2,385

1,432,287

6,218(35,723)

3,461

1,933,083

5,206

The weighted average share price at the date of exercise of these warrants was SEK 2,295.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

64

NOTES WITH ACCOUNTING PRINCIPLESInformation on related parties

The range of exercise prices for warrants outstanding at the end of the year is between 1 and 14,789 SEK(1 to 14,789 SEK). The weighted average remaining contractual life for warrants is 3.5 years (4.1). The number of
exercisable warrants amounts to 51,500 (11,500) as at 31 December 2023.

Note 42

Klarna uses the Black Scholes options pricing model when calculating the fair value of warrant programs. The
below table outlines the inputs used within the model:

The following are defined as related parties: all companies within the Klarna Holding AB (publ) Group,
shareholders in Klarna Holding AB (publ) with significant influence, board members of Klarna Holding AB (publ)
and Klarna Bank AB (publ), key management personnel, as well as close family members of and companies
significantly influenced by such board members or key management personnel.

Stock warrants
Group

2023

2022

Expected volatility (%)

35-37

35

Risk-free interest rate (%)

2.6-3.3

2.2 - 2.5

Expected term (years)

2.8-5.3

3.4 - 3.7

2,295

2,305

Weighted average share price (SEK)Group and Parent Company

During the year, there have been normal business transactions between companies in the Group and agreed
remuneration has been paid to the CEO, Board of Directors and other senior management personnel. The
following transactions have taken place with related parties:
2023

Expected volatility has been assessed with reference to the historic share price volatility of companies within
Klarna’s peer group.
The weighted average fair value of warrants granted during the year was 171 SEK (116 SEK).
The total expense recognized in the income statement in relation to share-based payments is 439m (461m).

Klarna Holding

Subsidiaries

-

538

(328)

(601)

Related parties - revenues and expenses
Interest income
Interest expenses
Services sold, sales

12

1,119

Services purchased-(2,677)

Group contribution received-

61,100Klarna Holding

Subsidiaries-

10,02931 Dec 2023
Related parties - assets and liabilities
Loan receivables
Other receivables

(48)

7,749

Loan liabilities

7,208

13,976

Other liabilities-

331

Klarna Holding

Subsidiaries

-

363

(113)

(120)

2022
Related parties - revenues and expenses
Interest income
Interest expenses
Services sold, sales

25

1,908

Services purchased-(5,553)

Group contribution received--

Klarna Holding

Subsidiaries-

13,04831 Dec 2022
Related parties - assets and liabilities
Loan receivables

32

792

Loan liabilities

11,051

13,755

Other liabilities-

621

Other receivables

In 2023, PriceRunner Group AB, PriceRunner Sweden AB and PriceRunner International AB gave a groupcontribution of SEK 61m to Klarna Bank AB (publ). There were no group contributions in 2022.
Intragroup services are handled in accordance with the internationally recognized arm’s length principle,
meaning that Klarna Bank AB (publ) and its subsidiaries are remunerated or pay for intragroup services in amanner corresponding to market terms.
For information about transactions with the Board of Directors, CEO, and senior management, see note 11.

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

CONTENTS

Note 43

NOTES WITH ACCOUNTING PRINCIPLESCapital adequacy and leverage ratio

Capital adequacy regulations
Capital adequacy refers to the ability of an institution’s Own Funds to cover the risk it is exposed to. Within the
EU the capital adequacy requirements are contained in the Capital Requirements Directive (CRD) and Capital
Requirements Regulation (CRR), both implemented in 2014. These regulations are based on the global capital
adequacy standards Basel II and III, and define minimum requirements for total own funds in relation to riskweighted exposure amounts (Pillar I), rules for the Internal Capital Adequacy Process and Internal Liquidity
Adequacy Assessment Process “ICLAAP” as well as the Supervisory Review and Evaluation Process “SREP”(Pillar II), and rules for disclosures on risk, capital adequacy etc. (Pillar III).
The information about capital adequacy in this document is based on the Swedish Financial Supervisory
Authority regulations (FFFS 2008:25 and FFFS 2014:12). Other disclosures required under Pillar III as well as the
Capital adequacy reports are published on Klarna’s homepage www.klarna.com
Common Equity Tier 1 capital
Klarna Holding AB (publ) reported a CET1 capital amount of SEK 11,632m as of December 31, 2023 (SEK 14,865m).
During 2023, Common Equity Tier 1 for the consolidated situation of Klarna Holding AB (publ) decreased by SEK
3,233m as a result mainly from operating losses incurred during the year (SEK 2,332m) which arose due toinvestments made in relation to peak shopping season and increased lending due to higher volumes during theperiod. Additional factors were a decrease of unrealized foreign exchange gains (SEK 180m), a reduction in the
IFRS9 transitional relief (SEK 830m), a decrease of Other reserves (SEK 384m), partially offset by an increase inshare premium (SEK 537m).
Additional Tier 1 capital
In March 2022 Klarna Bank AB (publ) issued SEK 276m Additional Tier 1 capital instruments. The instruments
have a floating coupon rate corresponding to STIBOR 3M plus 7% per annum. The securities were offered to alimited number of large Nordic investors and the first call date is March 25, 2027.
Klarna Holding AB (publ) issued, in November 2018, EUR 25m in Additional Tier 1 capital instruments which wereredeemed on the first call date on November 15, 2023.
Subordinated liabilities
On July 5, 2018, Klarna Bank AB (publ) issued SEK 300m subordinated notes due 2028 which were redeemed on
the first call date on 5 July, 2023.
On May 16, 2023, Klarna Holding AB (publ) issued SEK 500m subordinated notes due 2033. The subordinatednotes are eligible for inclusion as Tier 2 capital in accordance with current regulations. The notes have a floating
coupon rate corresponding to STIBOR 3M plus 7.5% per annum. The notes were allocated to a limited number oflarge Nordic investors and the first call date is May 16, 2028.
On August 16, 2023, Klarna Holding AB (publ) issued SEK 250m subordinated notes due 2033. The subordinatednotes are eligible for inclusion as Tier 2 capital in accordance with current regulations. The notes have a floating
coupon rate corresponding to STIBOR 3M plus 7.5% per annum. The notes were allocated to a limited number oflarge Nordic investors and the first call date is August 16, 2028.
Consolidated situation and methods for calculating minimum requirements
In accordance with capital adequacy regulations, the consolidated situation is made up of Klarna Holding AB(publ) (Klarna Bank AB (publ)'s parent company) and its subsidiaries. All subsidiaries are fully consolidated in theGroup. Klarna Bank AB (publ) is a registered bank under the supervision of the Swedish Financial Supervisory
Authority (Finansinspektionen). Klarna Bank AB (publ) uses the standardized method for calculating theminimum capital requirements for credit, as well as market risk, and the alternative standardized approach for

K L A RN A BA N K A B (P U B L )65

operational risk regarding Klarna Bank AB (publ) and its consolidated situation. The approval for calculating
minimum capital requirement for operational risk using the alternative standardized approach was granted by
the Finansinspektionen in December 2019.
Pillar II Requirements and Guidance
Pillar II requirements cover risks that are not or are insufficiently covered by Pillar I and are determined by the
Swedish Financial Supervisory Authority (SFSA) as the result of its periodic Supervisory Risk Evaluation Process(SREP). From September 29, 2023, Klarna Group’s Pillar II requirements were 0.94% of the risk exposure amount.
Pillar II Guidance is the level of capital that the SFSA assesses to be a suitable level for each bank to hold tocover, for example, risks or aspects of risks and manage future stressed situations. From September 29, 2023,
Klarna’s Pillar II Guidance amount is set to 3.5% of the risk exposure amount.
The Internal Capital Adequacy Assessment Process and Internal Liquidity Adequacy Assessment Process(Pillar II)
The objective of the Internal Capital Adequacy Assessment Process and Internal Liquidity Adequacy
Assessment Process (ICLAAP) is to ensure that Klarna clearly and correctly identifies, assesses and manages allrisk to which it is exposed. The process considers the financial resources required to cover such risk, and toensure that Klarna has access to sufficient capital and liquidity to support its business strategy over the coming
planning horizon with regards to different market conditions. The main governing document for the ICLAAP is
the ICLAAP policy. In this document, Klarna’s board defines the responsibilities, processes and rules of the
ICLAAP. The ICLAAP report is updated at least yearly.
The internally assessed capital requirement is based on the minimum capital requirement under Pillar I, thecapital requirement for risks managed under Pillar II and the combined buffer requirements. The internallyassessed capital required as per December 2023 amounts to SEK 11,513m (SEK 9,677m) for Klarna Bank AB (publ)and SEK 9,074m (SEK 8,230m) for the consolidated situation. Klarna thereby has sufficient capital to cover forrequired capital under Pillar I and Pillar II, including combined buffer requirements.
Capital Buffer Requirements
As at December 31, 2023, Klarna was subject to a Capital conservation buffer of 2.5% and to a Countercyclicalcapital buffer of 0.98% of the risk exposure amount for the consolidated situation, and 1.04% of the risk
exposure amount for Klarna Bank AB.
Capital adequacy disclosure
Capital adequacy disclosures in accordance with the requirements in Commission Implementing Regulation (EU)No 2021/637 and the Swedish Financial Supervisory Authority (Finansinspektionen) requirements FFFS 2014:12
can be found in Klarna’s Capital adequacy reports.
IFRS 9 transitional adjustments
From January 1, 2018, Klarna applied the transitional rules in accordance with article 473a of the European
Union regulation no 575/2013 in order to phase in the effect on the capital when applying IFRS 9. The capital
adequacy calculations are adjusted with one dynamic and two static amounts over a period spanning 5 years.
As of January 1, 2023, the capital adequacy calculations were modified to include the dynamic component only,
as the static component is zero from January 1, 2023 onwards.
Excess subsidiary capital deduction
In accordance with Article 85 and 87 of CRR Klarna Bank AB (publ)’s Tier 1 and Tier 2 capital can only be
included in the capital base of Klarna Holding Group with the share required to cover the minimum capitalrequirements of Klarna Bank AB (publ). As of December 31, 2023, an amount of SEK 177m Additional Tier 1 capital
instruments issued by Klarna Bank AB (publ) were included in the Own funds of Klarna Holding AB (publ)
consolidated.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

66

NOTES WITH ACCOUNTING PRINCIPLESCapital adequacy information

Consolidated situation
31 Dec 2023
31 Dec 2022

Klarna Bank AB (publ)
31 Dec 2023
31 Dec 2022

Consolidated situation
31 Dec 2023
31 Dec 2022

Klarna Bank AB (publ)
31 Dec 2023
31 Dec 2022

Total minimum capital requirements

Own funds, total risk exposure amount and total
leverage ratio exposure

5,158

4,969

6,576

Common Equity Tier 1 capital

11,632

14,865

14,544

12,613of which: institutions

95

75

51

30

Tier 1 capital

11,80915,292

14,82012,889of which: corporates

732

616

1,791

1,428

Own funds

12,56015,54814,82013,191of which: retail

3,836

3,582

3,107

3,074

Total risk exposure amount

71,794

68,597

90,21080,078of which: exposures in default

50

48

59

46

Total leverage ratio exposure

131,831

119,462

145,722

127,312of which: covered bonds

4

7

4

7

of which: equity

59

59

1,297

935

Credit risk including counterparty credit risk

Capital adequacy analysis

5,905

of which: other items

382

582

267

385

Common Equity Tier 1 capital ratio

16.2%

21.7%

16.1%

15.8%

Securitisation positions

116

90

116

90

Tier 1 capital ratio

16.4%

22.3%

16.4%

16.1%

Market risk

97

118

131

82

Total capital ratio

17.5%

22.7%

16.4%

16.5%

97

118

131

82

Leverage ratio

9.0%

12.8%

10.2%

10.1%

363

299

385

318

Combined buffer requirement incl, the requirements of
575/2013 Art, 92(1)(a)

8.0%

7.5%

8.0%

7.5%

of which: capital conservation buffer requirement

2.5%

2.5%

2.5%

2.5%

of which: countercyclical buffer requirement

1.0%

0.5%

1.0%

0.5%

Own funds disclosure

11.2%

17.2%

11.0%

11.3%

Common Equity Tier 1 capital: instruments andreserves

CET1 available after meeting the total SREP own funds
requirements (%)

Total capital requirement

Retained earnings
115,018

108,144

127,341

115,597of which: central governments or central banks

23,192

16,982

22,863

16,645of which: regional governments or local authorities

2,683

5,063

2,683

5,063

of which: public sector entitiesof which: multilateral development banksof which: international organisations

1,163
1,777
1,102

5,436
-

1,163
1,777
1,102

5,436
-

of which: institutions

5,910

4,695

3,158

1,868

of which: corporates

9,440

7,785

22,687

17,935of which: retail

63,93859,69051,78751,227of which: exposures in default

567

572

565

551

of which: covered bonds

506

864

506

864

345

338

15,81011,280of which: other items

4,395

6,719

3,240

4,728

Total exposure amount

115,018

108,144

127,341

115,597of which: equity

Credit valuation adjustments

Capital instruments and the related share premium
accounts

Exposure amounts for credit risk according to thestandardized approach
Credit risk including counterparty credit riskof which: foreign exchange risk
Operational risk

Accumulated other comprehensive income (and otherreserves)
Common Equity Tier 1 capital before regulatory
adjustments

Credit risk including counterparty credit riskof which: institutions

11

9

10

5,487

7,217

6,405

42,08941,55335,31730,048(18,559)(8,666)(17,717)(8,473)

590

1,155

1,276

935

24,12034,042

18,876

22,510Common Equity Tier 1 capital: regulatory adjustments
(1)

(2)

(1)

(1)

Intangible assets (net of related tax liability)(10,288)(9,947)(1,414)(1,877)

Losses for the current financial year

(2,332)(10,293)(3,028)(8,876)IFRS 9 transitional adjustments to CET1 Capital

496

1,343

449

1,115

Deferred tax assets rely on future profitability

(25)

(20)

-

-

Securitisation positions alternatively subject to a 1250%
risk weight

(338)

(258)

(338)

(258)

(12,488)(19,177)(4,332)(9,897)

11,632

14,865

14,544

12,613

Capital instruments and the related share premium
accounts

-

257

276

276

of which: classified as equity under applicableaccounting standards

-

257

276

276

Additional value adjustments

Total regulatory adjustments to Common Equity Tier 1(CET1) capital
Common Equity Tier 1 (CET1) capital

Risk exposure amounts according to the standardized
approach95,743

Additional Tier 1 (AT1) capital instruments
64,47962,11982,19773,816

1,182

939

632

374

of which: corporates

9,151

7,703

22,396

17,854of which: retail

47,95344,76838,84038,421of which: exposures in default

620

598

731

577

Qualifying Tier 1 capital included in consolidated AT1
capital issued by subsidiaries and held by third parties

177

170

-

-

of which: covered bonds

51

86

51

86

Total Additional Tier 1 (AT1) capital instruments

177

427

276

276

of which: equity

742

744

16,207

11,686

11,80915,292

14,82012,889

Capital instruments and the related share premium
accounts

751

-

-

302

Qualifying own funds instruments included inconsolidated T2 issued by subsidiaries and held by
third party

-

256

-

-

of which: other items

4,780

7,281

3,340

4,818

Securitisation positions

1,445

1,131

1,445

1,131

Market risk

1,217

1,478

1,637

1,023

1,217

1,478

1,637

1,023

4,535

3,742

4,813

3,981

Credit valuation adjustments

118

127

118

127

Total risk exposure amount

71,794

68,597

90,21080,078of which: foreign exchange risk
Operational risk

Tier 1 capital
Tier 2 (T2) capital instruments

Total Tier 2 (T2) capital instruments
Own funds

K L A RN A BA N K A B (P U B L )

751

256

-

302

12,56015,54814,82013,191A N N UA L R E P O RT 2 0 2 3

CONTENTS

Note 44

Business combinations

There have been no business combinations during the period.
Acquisitions in 2022
PriceRunner Group AB
On April 1, 2022, Klarna Bank AB (publ) acquired 100% of the shares in PriceRunner Group AB (PriceRunner).
PriceRunner is a price comparison platform for e-commerce, offering to help consumers find better products
and better prices by comparing prices for a particular product with many merchants. The core offering includes
product price comparison (and price history), user reviews, testing/recommendations, payment and delivery
options.
The total consideration was SEK 4,617m and was paid in cash and shares in Klarna Holding AB (publ). The
acquisition was accounted for under the acquisition method. Of the total purchase consideration, SEK 1,923m
was recorded to goodwill, SEK 3,446m to acquired intangible assets, SEK 711m to deferred tax liabilities and SEK(41)m to other net assets. The goodwill primarily refers to PriceRunner’s market position, growth throughadditional merchants and Klarna synergies.
From the date of acquisition until December 31, 2022, PriceRunner Group AB and its wholly-owned subsidiaries
contributed by SEK 437m, net, to the Group’s total operating revenues. The total effect on the Group’s net result
was SEK 72m. If the acquisition date for the combined entity had been as of the beginning of the reporting
period, the Group’s total operating revenues would have been SEK 128m higher during 2022. The Group’s net
result would have been SEK 22m higher during 2022.
Klarna Runway Holding Inc
On November 1, 2022, Klarna Bank AB (publ) acquired 100% of the shares in Klarna Runway Holding Inc from
Klarna Holding AB (publ). The acquisition is a combination of entities under common control. Klarna Runway
Holding Inc holds shares in Klarna’s US-based entities, Toplooks LLC, Piggy LLC, Inspirock Inc and Klarna Glazing
II LLC. In 2023, Klarna Runway Holding was merged with Klarna Inc.
The total consideration was SEK 515m and was settled by a contribution into Klarna Bank AB (publ) in exchange
for new shares. The acquisition was accounted for under the acquisition method. Of the total purchaseconsideration, SEK 516m has been recorded to intangible assets, SEK 72m to deferred tax liabilities and SEK 71m
refers to other net assets. No goodwill has been recognized in the acquisition.

Note 45

67

NOTES WITH ACCOUNTING PRINCIPLES

Significant events after the end of the reporting period

No significant events have occurred after the closing date.

Definitions and Abbreviations
Adjusted Operating Result*
Adjusted operating result is an alternative performancemeasure (APM).The adjusted operating result is defined as
IFRS operating result, excluding (a) Restructuring costs; (b)Share-based payments and related payroll taxes and; (c)Depreciation and amortization. Klarna believes this is a
useful financial measure to investors for evaluating its
operating result and supports period-to-period
comparisons as the items excluded are not a function of
the Group's underlying operating performance.
Capital requirement
Total assets and off-balance sheet items, risk-weighted
according to the capital adequacy rules for credit andmarket risk. The operational risks are measured andadded as risk exposure amount.
Common Equity Tier 1 capital
Common Equity Tier 1 (CET1) capital is the highest quality
regulatory capital as it absorbs losses as soon as they
happen. It includes equity excluding proposed dividend,
deferred taxes and intangible assets and certain otherregulatory adjustments defined in Regulation (EU) No
575/2013 (CRR) and EU 241/2014.
CET1 ratio
A core measure of a bank’s financial strength. This iscalculated by dividing CET1 by risk exposure amounts(REAs). The higher the ratio the more reserves a bank has.
Consumer
An individual or company using our services.
Debt/equity ratio*
Average liabilities adjusted for untaxed reserves inrelation to average equity adjusted for untaxed reserves.
The calculation of average liabilities and average equity isbased on opening and closing balances for the reporting
period.
Equity/assets ratio*
Equity adjusted for untaxed reserves as a percentage of
total assets at the end of the reporting period.
Gross Merchandise Volume
Value of products sold through Klarna platform.
Gross Profit*
Klarna believes gross profit is the best indicator of thecore profitability of the Group's business activities before
the deduction of indirect costs. Gross profit is defined as
Total net operating income in accordance with IFRS,
including costs related to processing and servicing (within
statutory metric, General administrative expenses) andconsumer credit losses (within statutory metric, Credit
losses, net). Costs of which are not directly related torevenue-generating activities within Interest expenses,
Commission expenses and Net result from financialtransactions are excluded.
Own funds (Total capital)
The sum of Tier 1 capital and Tier 2 capital.

K L A RN A BA N K A B (P U B L )Return on assets*
Net result for the last 12 months as a percentage of
average total assets. The calculation of average total
assets is based on opening and closing balances for thelast 12 months.
Return on equity*
Operating result for the last 12 months as a percentage of
average equity adjusted for untaxed reserves. The
calculation of average equity is based on opening andclosing balances for the last 12 months.
Restricted Stock Units
Klarna’s Restricted Stock Unit Program for employees,
implemented in 2020.
Revenue*
Revenue is an APM that illustrates the total income Klarna
generates from transactions, prior to deduction of
expenses. Klarna believes Revenue is the best indicator of
how much value we are sustainably generating from ourbusiness and that this approach is in-line with our peers.
Revenue is defined as IFRS Total net operating income
excluding Commission expense, Interest expense, Net
result from financial transactions and interest on liquidity
assets not related directly to the core business. Intereston liquidity assets that are not directly related to the corebusiness stems from Loans to credit institutions andInterest income (see note 5).
Risk Exposure Amount (REAs)
Risk Exposure Amount refers to the total exposure of abank, financial institution, or any other regulated entity topotential losses. It is the sum of credit risk, operationalrisk, market risk and the risk of a credit valuation
adjustment.
Tier 1 capital
The sum of Common Equity Tier 1 capital and Additional
Tier 1 capital.
Tier 2 capital
Subordinated liabilities, which are eligible for inclusion in
the total capital.
Total capital ratio
Total capital as a percentage of risk exposure amounts.
Alternative Performance Measures (APM)*
Alternative Performance Measures (APM) are financial
measures of historical or future financial position,
performance or cash flow that are not defined inapplicable regulations (IFRS) or in the EU Capital
Requirements Regulation and Directive CRR/CRD IV. APMs
are used by Klarna when relevant to assess and describe
Klarna’s financial situation and provide additional relevant
information and tools to enable analysis of Klarna’s
performance. APMs on return on equity and return on
assets provide relevant information on the performance inrelation to different investment measurements. All thesemeasures may not be directly comparable with similar key
measures presented by other companies.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

68

NOTES WITH ACCOUNTING PRINCIPLES

Board of Directors’ affirmation
The Board of Directors and CEO certify that the annual report has been prepared in accordance with generally
accepted accounting principles in Sweden and that the consolidated financial statements have been prepared inaccordance with the International Financial Reporting Standards (IFRS/IAS) referred to in the European
parliament and the councils’ regulation (EC) 1606/2002, from July 19, 2002, on the application of International
Accounting Standards. They give a true and fair view of the Parent Company’s and the Group’s financial position
and result. It is further assured that the report of the Board of Directors gives a true and fair overview of thedevelopment of the Parent Company’s and Group’s business activities, financial position and results of operations
as well as describes the material risks and uncertainties that the Parent Company and its subsidiaries are facing.
Stockholm, February 27, 2024______________________
Michael Moritz
Chairman of the Board______________________
Mikael Walther
Board member_____________________
Lise Kaae
Board member______________________
Sarah Smith
Board member______________________
Roger Ferguson
Board member______________________
Omid Kordestani
Board member______________________
Matthew Miller
Board member______________________
Sebastian Siemiatkowski
CEO and Board member

Our audit report was submitted on:
on 27 february 2024

Ernst & Young AB______________________
Jesper Nilsson
Authorized Public Accountant

K L A RN A BA N K A B (P U B L )A N N UA L R E P O RT 2 0 2 3

knowledge otherwise obtained in the audit and assess whether the information
otherwise appears to be materially misstated.

Auditor’s report – translated from Swedish signed version
To the general meeting of the shareholders of Klarna Bank AB (publ), corporate identity number 556737-0431

If we, based on the work performed concerning this information, conclude that
there is a material misstatement of this other information, we are required toreport that fact. We have nothing to report in this regard.

Opinions
We have audited the annual accounts and consolidated accounts of Klarna BankAB (publ) for the year 2023 except for the corporate governance report on pages
12-19. The annual accounts and consolidated accounts of the company areincluded on pages 9-68 in this document.

Our opinions in this report on the annual accounts and consolidated accounts
are consistent with the content of the additional report that has been submitted
to the parent company's audit committee in accordance with the Audit
Regulation (537/2014) Article 11.

In our opinion, the annual accounts have been prepared in accordance with theAnnual Accounts Act for Credit Institutions and Securities Companies andpresent fairly, in all material respects, the financial position of the parent
company as of 31 December 2023 and its financial performance and cash flow
for the year then ended in accordance with the Annual Accounts Act for Credit
Institutions and Securities Companies. The consolidated accounts have been
prepared in accordance with the Annual Accounts Act for Credit Institutions andSecurities Companies and present fairly, in all material respects, the financial
position of the group as of 31 December 2023 and their financial performanceand 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
for Credit Institutions and Securities Companies. Our opinions do not cover the
corporate governance report on pages 12-19. The statutory administration
report is consistent with the other parts of the annual accounts andconsolidated accounts.

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 standards are further described in the Auditor’s Responsibilities
section. We are independent of the parent company and the group inaccordance with professional ethics for accountants in Sweden and haveotherwise fulfilled our ethical responsibilities in accordance with theserequirements. This includes that, based on the best of our knowledge and belief,
no prohibited services referred to in the Audit Regulation (537/2014) Article 5.1
have been provided to the audited company or, where applicable, its parent
company or its controlled companies within the EU.
We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinions.

Key Audit Matter
We have fulfilled the responsibilities described in the Auditor’s responsibilities
for the audit of the financial statements section of our report, including in
relation to this matter. Accordingly, our audit included the performance ofprocedures designed to respond to our assessment of the risks of material
misstatement of the financial statements. The results of our audit procedures,
including the procedures performed to address the matters below, provide thebasis for our audit opinion on the accompanying financial statements.

As explained in note 2 and note 14, the allowance for credit losses iscalculated either as 12 months expected credit loss or lifetime expectedcredit loss. The expected credit loss (“ECL”) allowance is based on the latter
if there has been a significant increase in credit risk since initial recognition.
When calculating ECL on a collective basis, the ECL components arecalculated based on segmentation which is built on shared risk
characteristics. The probability of default (PD) component is segmented bygeographical region, instrument type and by days since origination.
The loss given default (LGD) component is dependent on geographical region,
retailer type, days past due, and, in some cases, recoveries from the sale ofnon-performing portfolios.

In preparing the annual accounts and consolidated accounts, The Board of
Directors and the Managing Director are responsible for the assessment of thecompany’s and the group’s ability to continue as a going concern. 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.

How our audit addressed this key audit matter
We have performed a walkthrough of the process for estimating the allowancefor expected credit losses as well as performed testing of IT general controls of
the systems that are relevant for the process.
We have examined management’s analysis of expected credit losses, reviewed
underlying model documentation and evaluated the outcome of management’s
model validation procedures.

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 reportthat includes our opinions. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs andgenerally accepted auditing standards in Sweden will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error andare 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.
As part of an audit in accordance with ISAs, we exercise professional judgment
and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the annual
accounts and consolidated accounts, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our
opinions. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or theoverride of internal control.

►

Conclude on the appropriateness of the Board of Directors’ and theManaging Director’s use of the going concern basis of accounting in
preparing the annual accounts and consolidated accounts. We also draw aconclusion, based on the audit evidence obtained, as to whether any
material uncertainty exists related to events or conditions that may castsignificant doubt on the company’s and the group’s ability to continue as agoing concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosuresin the annual accounts and consolidated accounts or, if such disclosures
are inadequate, to modify our opinion about the annual accounts andconsolidated accounts. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events orconditions may cause a company and a group to cease to continue as agoing concern.

►

Evaluate the overall presentation, structure and content of the annual
accounts and consolidated accounts, including the disclosures, andwhether the annual accounts and consolidated accounts represent theunderlying transactions and events in a manner that achieves fairpresentation.

►

Obtain sufficient and appropriate audit evidence regarding the financial
information of the entities or business activities within the group to
express an opinion on the consolidated accounts. We are responsible forthe direction, supervision and performance of the group audit. We remainsolely responsible for our opinions.

We must inform the Board of Directors of, among other matters, the planned
scope and timing of the audit. We must also inform of significant audit findings
during our audit, including any significant deficiencies in internal control that
we identified.
We must also provide the Board of Directors with a statement that we havecomplied with relevant ethical requirements regarding independence, and tocommunicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable,
actions taken to eliminate threats or related safeguards applied.
From the matters communicated with the Board of Directors, we determine
those matters that were of most significance in the audit of the annual accounts
and consolidated accounts, including the most important assessed risks formaterial misstatement, and is therefore the key audit matter. We describe thismatter in the auditor’s report unless law or regulation precludes disclosure
about the matter.

We have examined and assessed the assumptions and parameters used in themodels and compared actual losses to expected, including a lookback analysis.
We have further assessed the reasonableness of any manual adjustments to the
ECL.
Additionally, we have reviewed the disclosures related to the allowance for
expected credit losses for loans to the public.

Report on other legal and regulatory requirements
Opinions

This document also contains other information than the annual accounts andconsolidated accounts and is found on pages 1-8. The Board of Directors andthe Managing Director are responsible for this other information.

Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by
the Board of Directors and the Managing Director.

We have tested, on a sample basis, the underlying data used in the supporting
calculations including review of PD and LGD components and segmentation.

Given the complexity of the calculation and that it requires management tomake key judgements and assumptions, the allowance for expected credit
losses for loans to the public is a key audit matter.

Other Information than the annual accounts and consolidated accounts►

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.

►Allowance for expected credit losses for loans to the public

As described in Note 20 of the consolidated financial statements the grossloans to the public were SEK 89 602 million and SEK 83 867 million for the
consolidated accounts and parent company respectively, and thecorresponding allowance for expected credit losses was SEK 3 494 million and
SEK 2 909 million per the 31st of December 2023.

The Board of Directors and the Managing Director are responsible for the
preparation of the annual accounts and consolidated accounts and that theygive a fair presentation in accordance with the Annual Accounts Act for Credit
Institutions and Securities Companies and, concerning 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 andconsolidated accounts that are free from material misstatement, whether due
to fraud or error.

Auditor’s responsibility

We therefore recommend that the general meeting of shareholders adopts theincome statement and balance sheet for the parent company and the group.

Description

Obtain an understanding of the company’s internal control relevant to our
audit in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on theeffectiveness of the company’s internal control.

Responsibilities of the Board of Directors and the Managing Director

Report on the annual accounts and consolidated accounts

Key audit matter of the audit is the matter that, in our professional judgment,
was of most significance in our audit of the annual accounts and consolidated
accounts of the current period. This matter was addressed in the context of ouraudit of, and in forming our opinion thereon, the annual accounts andconsolidated accounts, but we do not provide a separate opinion on this matter.
For the matter below, our description of how our audit addressed the matter isprovided in that context.

►

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 andconsolidated accounts. In this procedure we also take into account our

1|3

In addition to our audit of the annual accounts and consolidated accounts, wehave also audited the administration of the Board of Directors and theManaging Director of Klarna Bank AB (publ) for the year 2023 and the proposed
appropriations of the company’s profit or loss.
We recommend to the general meeting of shareholders that the profit beappropriated 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 theparent company and the group in accordance with professional ethics for2|3accountants 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 andappropriate to provide a basis for our opinions.

Ernst & Young AB, Hamngatan 26, 111 47 Stockholm, was appointed auditor ofKlarna Bank AB (publ) by the general meeting of the shareholders on June
26, 2023 and has been the company’s auditor since May 25, 2016.

Responsibilities of the Board of Directors and the Managing Director

Stockholm February 27, 2024

The Board of Directors is responsible for the proposal for appropriations of thecompany’s profit or loss. At the proposal of a dividend, this includes anassessment 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.

Ernst & Young AB

Jesper Nilsson
Authorized Public Accountant

The Board of Directors is responsible for the company’s organization and theadministration of the company’s affairs. This includes among other things
continuous assessment of the company’s and the group’s financial situation andensuring that the company's organization is designed so that the accounting,management of assets and the company’s financial affairs otherwise arecontrolled in a reassuring manner. The Managing Director shall manage theongoing administration according to the Board of Directors’ guidelines andinstructions and among other matters take measures that are necessary to fulfill
the company’s accounting in accordance with law and handle the managementof 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 witha 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 giverise to liability to the company, or►in any other way has acted in contravention of the Companies Act, theBanking and Financing Business Act, the Annual Accounts Act for Credit
Institutions and Securities Companies or the Articles of Association.

Our objective concerning the audit of the proposed appropriations of thecompany’s profit or loss, and thereby our opinion about this, is to assess withreasonable degree of assurance whether the proposal is in accordance with theCompanies 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 liability to
the company, or that the proposed appropriations of the company’s profit orloss are not in accordance with the Companies Act.
As part of an audit in accordance with generally accepted auditing standards in
Sweden, we exercise professional judgment and maintain professional
skepticism throughout the audit. The examination of the administration and the
proposed appropriations of the company’s profit or loss is based primarily on
the audit of the accounts. Additional audit procedures performed are based on
our professional judgment with starting point in risk and materiality. This meansthat we focus the examination on such actions, areas and relationships that arematerial for the operations and where deviations and violations would haveparticular importance for the company’s situation. We examine and test
decisions undertaken, support for decisions, actions taken and othercircumstances that are relevant to our opinion concerning discharge fromliability. As a basis for our opinion on the Board of Directors’ proposed
appropriations of the company’s profit or loss we examined whether the
proposal is in accordance with the Companies Act.
The auditor’s examination of the corporate governance statement
The Board of Directors is responsible for that the corporate governancestatement on pages 12-19 has been prepared in accordance with the Annual
Accounts Act.
Our examination of the corporate governance statement is conducted inaccordance with FAR´s standard RevR 16 The auditor´s examination of thecorporate governance statement. This means that our examination of thecorporate governance statement is different and substantially less in scope thanan audit conducted in accordance with International Standards on Auditing andgenerally accepted auditing standards in Sweden. We believe that theexamination has provided us with sufficient basis for our opinions.
A corporate governance statement has been prepared. Disclosures inaccordance with chapter 6 section 6 the second paragraph points 2-6 of theAnnual Accounts Act and chapter 7 section 31 the second paragraph the samelaw are consistent with the other parts of the annual accounts and consolidated
accounts and are in accordance with the Annual Accounts Act.

3|3