This section has been prepared in accordance with the Swedish Code of Corporate Governance, section 10.5, and is thereby limited to internal control over financial reporting.

Since the Company is listed in the United States, the requirements for establishing and maintaining internal controls over financial reporting and for management to report on its assessment of the effectiveness of internal controls over financial reporting, outlined in the Sarbanes-Oxley Act (SOX) apply. The Company has implemented detailed controls, documentation and testing procedures in accordance with the COSO framework for internal control, issued by the Committee of Sponsoring Organizations of the Treadway Commission, to ensure compliance with SOX. Management’s internal control report according to SOX will be included in Ericsson’s Annual Report on Form 20-F, which will be filed with the SEC in the United States. During 2008, the Company has continued to work with the improvement in design and execution of its financial reporting controls.

Ericsson has integrated risk management and internal control into its business processes. As defined in the COSO framework, components of internal control are a control environment, risk assessment, control activities, information and communication and monitoring.

Control environment

The Company’s internal control structure is based on the division of labor between the Board of Directors and its Committees and the President and CEO and the Company has implemented a management system that is based on:

• The Company’s organization and mode of operations, with well-defined roles and responsibilities and delegations of authority.
• Steering documents, such as policies and directives, and a Code of Business Ethics.
• Several well-defined processes for planning, operations and support.

Risks related to financial reporting include fraud and loss or embezzlement of assets, undue favorable treatment of counter-parties at the expense of the Company. Other risks of material misstatements in the financial statements can occur in relation to recognition and measurement of assets, liabilities, revenue and cost or insufficient disclosure. Identified types of risks are mitigated through segregation of duties in the Company’s business processes and through appropriate delegation of authority, requiring specific approval of material transactions. Accounting and financial reporting policies and directives cover areas of particular significance to support correct accounting, reporting and disclosure.

The Company’s business processes include financial controls regarding the approval and accounting of business transactions. The financial closing and reporting process has controls for recognition, measurement and disclosure, including the application of critical accounting policies and estimates, for individual subsidiaries and in the consolidated accounts. All legal entities, business units and market units in Ericsson have their own dedicated controller functions which participate in the planning and evaluation of each unit’s performance. Regular analysis of the financial results for their respective units cover the significant elements of assets, liabilities, revenues, costs and cash flow. Together with analysis of the consolidated financial statements performed at Group level, this important element of internal control ensures that the financial reports do not contain material errors.

For external financial reporting purposes, additional controls performed by a Disclosure Committee established by Company management ensure that all disclosure requirements are fulfilled.

The Company has implemented controls to ensure that the financial reports are prepared in accordance with its internal accounting and reporting policies and IFRS as well as with relevant listing regulations. To ensure that the Company’s CEO and CFO can assess the effectiveness of the controls in a way that is compliant with SOX. The Company also maintains detailed documentation on internal controls related to accounting and financial reporting, as well as records on the monitoring of the execution and results of such controls. A review of materiality levels related to the financial reports has resulted in the implementation of detailed process controls and documentation in almost all subsidiaries. Ericsson has also implemented overall entity-wide controls in all subsidiaries related to the control environment and compliance with the policies and directives related to financial reporting. To ensure efficient and standardized accounting and reporting processes, the Company has established several shared services centers, performing accounting and financial reporting services for subsidiaries based on a common IT platform with a common chart of account and common master data.

Information and communication

The Company’s information and communication channels support completeness and correctness of financial reporting, by making internal process instructions and policies regarding accounting and financial reporting accessible to all employees concerned and through regular updates and briefing documents regarding changes in accounting policies and reporting and disclosure requirements.

Subsidiaries and operating units make regular financial and management reports to internal steering groups and Company management, including analysis and comments on financial performance and risks. The Board of Directors receives financial reports monthly. The Audit Committee of the Board has established a “whistle blower” procedure for reporting violations in accounting, internal controls and auditing matters.

The Company’s financial performance is reviewed at each Board meeting. The committees of the Board fulfill important monitoring functions regarding remuneration, borrowing, investments, customer finance, cash management, financial reporting and internal control. The Audit Committee and the Board of Directors review all interim and annual financial reports before they are released to the market. The Audit Committee also receives regular reports from the external auditors. The Audit Committee follows up on any actions taken to improve or modify controls.

The Company’s process for financial reporting is reviewed annually by management and forms a basis for evaluating the internal management system and internal steering documents to ensure that they cover all significant areas related to financial reporting. The shared service center management continuously monitors the accounting quality through a set of performance indicators. Compliance with policies and directives is monitored through annual self-assessments and representation letters from heads and controllers in all subsidiaries as well as from business units and market units. The Company’s internal audit function, which reports to the Audit Committee, performs independent audits.