Page 78 - Loomis Annual Report 2017

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Notes – Group
Loomis Annual Report 2017
Note 2 cont.
previously been recognized, an assessment is made on every balance sheet date to determine whether past impairment losses should be reversed. In such cases, a reversal is carried out to raise the carrying amount of the impaired asset to its recover- able amount. A reversal of a past impairment loss is recognized only when the new carrying amount does not exceed what the previous carrying amount would have been (after amortization) if the impairment loss had not been recognized. Previously recog- nized impairment losses – with the exception of goodwill impair- ment losses – are reversed only if there has been a change in the assumptions based on which the recoverable amount was determined when the impairment loss was recognized. Goodwill impairment losses are not reversed.
Lease agreements (IAS 17)
Leases are classi ed as nance leases when the Group as the lessee, in all material respects, receives the economic bene ts and bears the economic risk associated with the object of the lease. Accordingly, the object is recognized as a xed asset in the consolidated balance sheet. The discounted present value of the corresponding future lease payment obligation is rec- ognized as a liability. The asset leased under the nance lease and the associated liability is recognized at the lower of the fair value of the asset and the present value of the minimum lease payments. In the consolidated statement of income the lease payments are to be apportioned between depreciation and interest on a straight-line basis over the period of use.
Operating leases where the Group is the lessee are recog- nized in the consolidated statement of income as operating expenses on a straight-line basis over the lease period.
In cases where the Group is the lessor, revenue is recognized as a sale in the period the object is leased. Depreciation is rec- ognized in operating income. The economic substance of the contract does not, as a whole or in part, cause the lease to be classi ed as a nance lease.
Accounts receivable (IAS 39)
Accounts receivable are initially reported at fair value and, thereafter, at accrued acquisition value, using the effective inter- est method, less provisions for bad debt. A bad debt for impair- ment is established when there is objective evidence that the Group will not receive the amounts due according to the original terms of the receivables. The amount of the provision is equiv- alent to the difference between the asset’s reported value and the present value of estimated future cash ows, discounted
by the original effective interest rate. Expected and determined bad debt losses are included in the line Production expenses
in the statement of income. Payments received in advance are accounted for as Other current liabilities.
Financial Instruments: Recognition and measurement (IAS 39)
A nancial instrument is a contract creating a nancial asset in one entity and a nancial liability or equity instrument in another entity. The de nition of nancial instruments, thus, includes equity instruments in another entity, but also, for example, con- tractual rights to receive cash, such as accounts receivable. The Group classi es its nancial instruments into the following categories:
1) Loan receivables and other receivables.
2) Financial assets or nancial liabilities valued at fair value
through the statement of income (including derivatives not
designated as hedge instruments).
3) Other nancial liabilities.
4) Financial assets and liabilities at fair value through other com-
prehensive income.
The classi cation is determined on the basis of the purpose for which the nancial assets were acquired. Management deter- mines the classi cation of its nancial assets upon initial recog-
nition and reevaluates this classi cation at each reporting date. Loans payable, investments and liquid funds are recognized according to the trade date accounting principle.
1) Accounting for items designated as “Loans receivable and other receivables”
Operating receivables, including Accounts receivable, are classi ed as “Loans receivable and other receivables” and are valued at accrued acquisition value. In the balance sheet, they are shown as accounts receivable or liquid funds with the exception of items due more than 12 months after balance sheet date, which are shown as nancial xed assets.
2a) Accounting for items designated as “Financial assets at fair value through statement of income”
When assets in this category are held, changes in fair value are reported in the statement of income as they arise. The revaluation of derivatives held for the purpose of minimizing operating trans- action risks is accounted for in operating pro t or loss and deriva- tives held for the purpose of minimizing transaction risks in nan- cial income and expenses are accounted for in the nancial net. A nancial asset is classi ed in this category if it is held for trad- ing, i.e. has been acquired with the main intention to be disposed of in the short term or if management has determined that it is to be classi ed in this category. The assets held by Loomis in this category are nancial current assets in the balance sheet.
2b) Accounting for items designated as “Financial liabilities at fair value through statement of income”
Any liabilities classi ed in this category are accounted for as “ nancial assets at fair value through the statement of income”. As liabilities in this category are not considered material they are accounted for as current loans payable in the balance sheet.
3) Accounting for items designated as “Other nancial liabilities”
This category includes loans payable and accounts payable. Liabilities in this category are initially valued at fair value and, thereafter, at accrued acquisition value, applying the effective interest rate method.
Loans payable are initially reported at the net amount received, less transaction expenses. If the fair value differs from that which is to be repaid on maturity date, loans payable are subsequently reported at accrued acquisition value, whereby the difference is allocated to periods as an interest expense using the effective interest rate method. Loomis applies IAS 23, Borrowing costs. According to this standard, borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset. Loomis cur- rently has no loans relating to such investments and for that rea- son, borrowing costs are reported in the statement of income. Loans payable, investments and liquid funds are reported according to the transaction date principle. Borrowing is classi- ed under current liabilities, unless the Group has an uncondi- tional right to defer payment of the debt for at least 12 months after the balance sheet date.
4) Accounting for items classi ed as “Financial assets and liabilities at fair value through other comprehensive income” When assets and liabilities in this category are held the assets/ liabilities are measured at fair value. However, revaluation is rec- ognized directly in other comprehensive income when the asset/ liability has a quoted price in an active market or its fair value can be determined in a reliable manner. If the fair value can-
not be reliably determined, the asset/liability is measured at cost. However, when there is objective evidence of impairment, an impairment loss is recognized for the asset/liability. When assets/liabilities are disposed of, the transaction is recognized, including previous revaluations, directly in other comprehen- sive income. This classi cation includes derivatives that have been identi ed as cash ow hedges, as well as currency swaps