Page 74 - Loomis Annual Report 2017

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Notes – Group
Loomis Annual Report 2017
Note 2 cont.
Contract modi cations
An amendment to an existing contract is a modi cation. A contract modi cation can change the scope of the contract, the contract price or both. A contract modi cation exists when the contracting parties approve the modi cation. A determination will normally be required of whether changes in existing rights and obligations should be reported as a new contract or as a contract modi cation. Traditionally, Loomis’ contracts have not been modi ed during their effective period, and new contracts are negotiated separately from earlier contracts.
Contract costs
In the process of securing customer contracts, costs may arise before services began to be performed. This may include in- cremental costs to secure a contract. If a contract term is more than 12 months, costs for obtaining a contract under certain conditions shall be capitalized as an asset and depreciated during the contract term. If a contract term is less than 12 months Loomis does not capitalize the costs.
Financial instruments (IFRS 9)
Financial instruments reported in the balance sheet include, on the assets side, liquid funds, loan receivables, accounts recei- vable, nancial investments and derivatives. On the liabilities side are accounts payable, loans payable and derivatives.
Recognition and derecognition from the balance sheet
A nancial asset or nancial liability is recognized in the balance sheet when the entity becomes party to the contractual provi- sions of the instrument. Trade accounts receivable are recog- nized in the balance sheet when an invoice has been sent. A liability is recognized when the counterparty has performed services and there is a contractual obligation to pay, even if the invoice has not yet been received. Accounts payable are recog- nized when an invoice has been received. Financial assets are derecognized from the balance sheet when the right to receive cash ows from the instrument has expired or has been transfer- red and the entity has essentially transferred all risks and rewards associated with ownership. The same applies to a portion of
a nancial asset. A nancial liability is derecognized from the balance sheet when the contractual obligation is ful lled or oth- erwise extinguished. The same applies to a portion of a nancial liability. A nancial asset and a nancial liability are offset and reported net in the balance sheet only where there is a legal right to offset the amounts and there is an intention to either settle the items on a net basis or where the asset will be realized and the liability settled simultaneously. Acquisitions and divestments of nancial assets are recognized on the transaction date, which is the date when the transaction takes place except where the entity acquires or divests listed securities, in which case the settlement date applies for recognition.
Classi cation and measurement
The classi cation of nancial instruments is based on the entity’s business model for managing nancial instruments and on the contractual cash ows that are characteristic for a nan- cial asset. There are three types of nancial assets:
• Equity instruments – can be measured at fair value through
pro t of loss or fair value through other comprehensive income. Equity instruments that are measured at fair value through other comprehensive income are not reclassi ed for change in fair value to pro t or loss when the instrument is derecognized from the balance sheet.
• Derivatives – measured at fair value through pro t or loss.
• Debt instruments – de ned as all other nancial instruments
that are not shares or derivatives
Debt instruments can be measured at fair value through pro t or loss, fair value through other comprehensive income or as amortized cost. Debt instruments held for trading are classi ed
at fair value through pro t or loss. Debt instruments, where the entity’s purpose may be both to sell the nancial asset and receive contractual cash ows consisting solely of interest and principal are classi ed in fair value through pro t or loss. Debt instruments are measured at amortized cost when the entity’s business model is to hold the asset and receive contractual cash ows consisting solely of principal and interest.
Financial investments
Financial investments are either nancial xed assets or short- term investments depending on the intention is for the invest- ment. If the maturity or expected period for the holding is longer than one year, they are classi ed as nancial xed assets and less than one year, short-term investments. All investments in equity instruments and contracts for these instruments must be measured at fair value. Under certain circumstances, however, the acquisition cost may provide an appropriate estimate of the fair value. This may be the case if there is insuf cient informa- tion available for fair value measurement, or if there is a broad range of possible fair value measurement amounts and if acquisition cost is the best means of estimating fair value within this range.
Other long-term receivables
Other long-term receivables for Loomis consist of various recei- vables. The objective is to hold the assets and receive the main amount at which they are measured at amortized cost.
Current receivables and liquid funds
Loomis’ current receivables consist primarily of accounts re- ceivable. The receivables arise when Loomis provides services or goods directly to customers and where there is no inten-
tion to trade in the receivables. Liquid funds comprise cash
and immediately available deposits at banks and equivalent institutions, plus short-term liquid investments with a maturity from the acquisition date of less than three months and which are subject to only an insigni cant risk of uctuations in value. Short-term liquid investments are investments that can be avai- lable immediately and that do not require a buyer in order to be realized. Liquid funds are held for the sole purpose of obtaining the contractual cash ow. The business model for both accounts receivable and liquid funds involves contractual cash ows (hold to collect) which are measured at amortized cost.
Derivatives
Derivatives are recognized initially at fair value, with the result that transaction costs are charged to pro t or loss. After initial recognition, derivative instruments are measured at fair value and changes in value are recognized, where the criteria for hedge accounting have not been met, through pro t or loss in operating income.
Financial liabilities
Loomis’ nancial liabilities consist of liabilities to credit institu- tions, liabilities under nancial leases, other long-term liabilities and accounts payable, and are measured at amortized cost.
Expected credit losses on contract assets
A forward-looking model is used to recognize expected credit losses on contract assets, for example, accounts receivable and receivables generated under contracts in effect. The model is supplemented by separate assessment of individual contract assets in speci c cases. Loomis has chosen the standard’s simp- li ed method of allocating reserves for credit losses over the entire life of the asset. The likelihood of a customer’s future inability to pay Loomis’ invoices is assessed, taking into account an expecta- tion of a change in the economic environment of the customer.
Hedge accounting
Hedge accounting is applied to investments in foreign opera-