New Wave Group AB Annual report 2017 EN | Page 62

THE GROUP FINANCIAL INFORMATION NOTE 1 ACCOUNTING POLICIES BASIS OF PREPARATION The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) as adopted by the European Commission. Recommendation RFR 1 Supplementary Accounting Rules for Corporate Groups of the Swedish Financial Reporting Board has also been applied, which means that certain additional disclo- sures are provided in the consolidated financial statements. The accounting policies presented in the following description have be en applied consistently for all periods presented in the conso- lidated financial statements. The policies have also been applied consistently within the Group. The consolidated financial state- ments are based primarily on historical costs, except in respect of certain financial assets and liabilities, which are recognised at fair value. The financial statements are prepared in Swedish kronor, which is the reporting currency of New Wave Group. Preparing financial statements in accordance with IFRS requires that management make certain assessments, estimates and assumptions. Critical estimates and assessments are often based on historical experience and expected future events. Those which are expected to have the biggest impact on earnings, assets and liabilities relate to how trademarks, goodwill and taxes shall be measured. Estimates, assessments and assumptions are reviewed on a regular basis. Changes are reported in the period in which the change is implemented and in future periods if these are affected. Information on areas where applied estimates and assessments contain an element of uncertainty is provided in Note 2. Fixed assets, non-current liabilities and provisions consist essen- tially of amounts that are expected to be recovered or paid later than twelve months from the balance sheet date. Current assets and current liabilities consist essentially of amounts that are expected to be recovered or paid within twelve months of the balance sheet date. NEW AND AMENDED IFRS INTRODUCED NEW ACCOUNTING PRINCIPLES FOR 2017 No new or revised IFRS, which came into force in 2017, have had a significant impact on the Group’s or parent company’s financial statements. NEW ACCOUNTING PRINCIPLES FOR 2018 AND LATER Starting from January 1, 2018, New Wave Group applies IFRS 9 Financial Instruments and IFRS 15 Revenues from agreements with customers. Below is a description of the impacts the standards will have on the financial statements for the Group or Parent Company. None of the other new or revised standards or IFRIC interpretations published on December 31 2017 have any impact on the Group's or Parent Company's financial reports. IFRS 9 FINANCIAL INSTRUMENTS IFRS 9 comprises accounting for financial assets and liabilities and replaces IAS 39 Financial Instruments, Accounting and Valuation 62 | NWG 2017 The majority of New Wave Group’s financial instruments are classified as loans and trade receivables valued at accrued acquisition value. Derivatives are classified and valued at fair value through profit and loss when hedge accounting is not applied. New hedge accounting rules do not affect New Wave Group since the hedge accounting applied is consistent with the new standard. The new rules regarding classifi- cation and valuation have no effect on New Wave Group. The impacts of IFRS 9 relate to impairment and a new model for expected credit losses. Compared with the Group's previous model, the new model means that the credit losses are reported earlier. The new model takes into account historical and forward- looking information to calculate future expected credit losses. New Wave Group estimates that the current loss reserve is suffi- cient and necessary according to both the new and old model and that no transition effects need to be presented. IFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS IFRS 15 replaces all previously published standards and interpreta- tions that handle revenue with a single revenue recognition model. The standard is implemented with limited retroactivity, which means that only contracts that have not yet been completed as of January 1, 2018 are converted at the transition to the new standard. New Wave Group's contracts with repurchase agreements are expected to be impacted by the implementation of IFRS 15, although the effects will be small. However, the iden- tified contracts have not had any effect on equity at the time of transition. IFRS 16 LEASES IFRS 16 Leases enters into force on January 1, 2019. The standard has been adopted by the EU and will be applied by New Wave Group as of January 1, 2019. IFRS 16 will not be applied with full retroactivity but the cumulative transition effect is presented as an adjustment to the opening balance of equity 2019. During the year, the Group continued to evaluate the effects of the standard that result in leased assets being reported in the balance sheet. The Group currently has operational leases for mainly rental of premises but also company cars and similar contracts. The new standard will reflect the fact that New Wave Group, as a lessee, is entitled to use an asset for a certain period of time together with an obligation to pay for that asset. The right of utilization and the leasing debt will be recognized at the present value of expected future leasing fees. The cost of leased assets shall be allocated between interest payments and depreciation of the asset. There are some exceptions to the standard to take into account. Low value assets or lease periods less than 12 months will continue to be reported as operating expenses. Also service components in leases will continue to be reported as operating expenses. The effect of implementing IFRS 16 will be an increased balance sheet total with higher tangible fixed assets and higher financial debt. There will also be a shift in the consolidated income statement, with a positive effect on the operating result compared to now. That will be a result of the fact that parts of the lease payments instead will impact the interest expenses and thus net financial income.