Page 73 - Loomis Annual Report 2017

Loomis Annual Report 2017
Notes – Group 69
SafePoint-solution: equipment sales of SafePoint
In some cases SafePoint units are sold to the customer. The service provided is, however, the same, with the same structure and performance obligation as the SafePoint service described above. The customer has no alternative use for the SafePoint equipment other than it being part of Loomis’ service deliv- ery. Loomis controls the software and has the key to the Safe- Point equipment. If a contract ends, the proprietary software is removed and the customer is given the key. From the perspec- tive of Loomis or the customer, the service is provided in line with the SafePoint solution as described above, which means that revenue is recognized throughout the duration of the con- tract and invoiced on a monthly basis. It means that sales of SafePoint equipment are not reported separately but instead considered part of the service delivery provided by Loomis, and revenue is therefore recognized throughout the duration
of the contract (normally ve years).
Storage services
Loomis provides storage services to its customers. Depending on local rules and business models, these services are provided as part of the CIT/CMS operations in some countries. Storage is also a separate service offered within the International segment where Loomis stores gold, art or similar items for its customers. When considering the effects of IFRS 15 and of providing a storage ser- vice, Loomis has determined that storage services provided as part of CIT/CMS operations have no distinct performance obliga- tion, unlike storage services provided within the International seg- ment. This conclusion is based on the fact that the storage ser- vice within CIT/CMS is strongly linked to the CIT/CMS services as stated in the contract. The customer cannot avoid purchasing the storage portion of the service because it is a part of the delivery of Loomis’ CIT/CMS service. In the International segment, storage is itself the service offered and is therefore by de nition a distinct performance obligation.
Financing components
Loomis does not expect to have any contracts where the period from transfer of the promised goods or service to a customer and payment by the customer exceeds one year. The Group does not therefore adjust transaction prices based on the time aspect.
IFRS 9 Financial Instruments addresses the classi cation, mea- surement and recognition of nancial assets and liabilities. The full version of IFRS 9 was published in July 2014. It replaces the parts of IAS 39 that address classi cation and measurement
of nancial instruments. IFRS 9 still has a blended measurement model but simpli es the model in some respects. The standard is to be applied for the nancial year starting on January 1, 2018. Early adoption is permitted. The standard is not expected to have a material effect on the Group’s nancial statements.
In January 2016, IASB published a new lease standard, IFRS 16, which will replace IAS 17 Leases and related interpreta- tions IFRIC 4, SIC-15 and SIC-27. The standard requires assets and liabilities relating to all leases, with exceptions for leases not exceeding a term of 12 months and leases of lower value, to
be recognized as an asset or a liability respectively in the bal- ance sheet. This model is based on the view that the lessee has the right to use an asset for a speci c period while also having an obligation to pay for that right. Accounting for lessors will in all material respects remain unchanged. The implication of the new standard for lessees is that the income statement will be affected in that lease expenses will be recognized as a depreciation com- ponent and an interest component. As a result, operating income will be improved as the interest component will be recognized as a nancial expense. The total expense according to IFRS 16 may differ from the lease expense under the existing rule.
As Loomis reports operating income as EBITA (Earnings Before Interest, Taxes, Amortization of acquisition-related intan-
gible xed assets, acquisition-related costs and revenue, and items affecting comparability), the effect on operating income will be limited compared to if operating income had included depreciation (i.e. EBITDA). The effect on the balance sheet is expected to be more substantial as both assets and liabilities will increase.
The standard is applicable for nancial years beginning on January 1, 2019 or later. Early adoption is permitted. The EU has adopted the standard. Loomis is not planning to adopt IFRS 16 early. At this time it is not possible to quantify the speci cs of effects of the introduction of IFRS 16, although the new lease standard will impact Loomis’ nancial statements as the Group has operating leases. The leases that will have the greatest impact on the nancial statements are leases for premises and for Safe- Point. Note 10 contains a description of the lease undertakings Loomis had as of the closing of the annual accounts 2017.
None of the other changes to standards or new interpreta- tion noti cations that have been adopted for application from the beginning of the 2018 nancial year or later are expected to have any signi cant effect on the consolidated nancial state- ments.
New accounting principles applied by the Group from Ja- nuary 1, 2018
Revenue from Contracts with Customers (IFRS 15)
The Group’s revenue can in all material respects be ascribed to customer contracts for Cash in Transit services (CIT), Cash Management Services (CMS) and cross-border transportation (International).
Performance obligations
Performance obligations are determined and identi ed when contracts are entered into. Loomis’ obligations to its customer are derived from the contract in which the performance obligation is described. Performance obligations are seldom combined.
Transaction price
The transaction price is the price that will be allocated to perfor- mance obligations. The transaction price is the amount of consi- deration to which Loomis’ expects to be entitled in exchange for transferring promised goods or services; this may include xed and/or variable amounts. Variable consideration may increase or decrease the price. If this is speci ed in the contract, it is to be estimated and re ected in the transaction price and continually subject for review. Loomis’ customer contracts mainly contain incentives and performance bonuses, but also discounts and penalties, which are variable consideration.
Allocation
The transaction price is allocated to each performance obliga- tion on the basis of the relative stand-alone selling price. The stand-alone selling price is established when the contract is entered into and allocated based on the value of the respective goods or services relative to the total value of the goods/servi- ces. The stand-alone selling price is the price for the goods or service when sold separately under similar circumstances to similar customers.
Revenue regognition
Revenue is recognized when the obligation is satis ed and control has been transferred, which takes place over time or
at a point in time. Revenue can be recognized over time unless Loomis’ services generate an asset with an alternative value at the same time as Loomis has a right to payment for services provided to date. Right to payment exists if Loomis is entitled to payment for services that have already been performed if the customer chooses to cancel the contract for a reason other than that Loomis has not met its obligations. Loomis’ performance obligations are primarily met over time but during a short period to be subsequently settled (for which reason assessing the level of completion is generally not a very complex process).