New Wave Group AB Q1_2018_EN | Page 19

THE GROUP AND THE PARENT COMPANY NOTES ACCOUNTING PRINCIPLES This report is prepared in accordance with IAS 34 Interim Financial Reporting and the Annual Accounts Act. The interim report for the Parent Company has been prepared according the Annual Accounts Act as well as RFR 2 “Reporting for Legal Entities”. New accounting principles for 2018 are described in the Annual Report for 2017, "Note 1 Accounting Policies" under "New and amended IFRS introduced ". Applied accounting principles are otherwise consistent with the 2017 annual report. NEW ACCOUNTING PRINCIPLES FOR 2018 Most of New Wave Group's revenue comes from sales of goods, which is reported when the control of the goods is transferred to the customer. Variable compensation such as discounts, bonuses and returns is estimated and part of the transaction price. On 1 January 2018, IFRS 15 Revenue from contracts with customers and IFRS 9 Financial Instruments came into force. IFRS 9 "Financial Instruments" has been applied by the Group since 1 January 2018. The transition to IFRS 9 has not resulted in any differences in the Group's classification of financial assets and liabilities. The Group’s hedge accounting is consistent with the new hedge accounting rules. Revenues from commission, royalties, licenses, and membership fees for customer clubs constitute performance commitments that are met over time as the control is transferred to the customer. IFRS 15 implies additional disclosure requirements regarding revenue, which results in New Wave Group’s revenue being presented in more categories than before. Therefore, revenue is also presented allocated to our two sales channels, promo and retail, as presented in the notes. Under IFRS 9, credit losses are reported earlier than under the group’s previous model. New Wave Group applies the simplified model of expected credit losses for accounts receivable under which total expected credit losses for the remaining maturity of the receivable are reported. When assessing future expected credit losses, historical and forward-looking information is taken into account. NEW ACCOUNTING PRINCIPLES FOR 2019 IFRS 16 "Leases" will replace IAS 17 "Leases" as of 1 January 2019. The effect of implementing IFRS 16 will be an increased balance sheet total with higher tangible fixed assets and higher financial liabilities. There will also be a shift in the consolidated income statement with a positive effect on operating result and a negative impact on net financial items. The Group will continue to evaluate the full impact of IFRS 16 during the year. The transition has not resulted in any transition effect that needs to be presented. For a more detailed description of the new accounting principles, see the Annual Report 2017, "Note 1 Accounting Policies" and "New and amended IFRS introduced". IFRS 15 "Revenue from Contracts with Customers" has been applied by the Group since 1 January 2018 and has been implemented with limited retroactivity. The transition has not resulted in any transition effect that needs to be presented. RISKS AND RISK CONTROL New Wave Group’s international operations mean that it is continuously exposed to various financial risks. The financial risks are currency, borrowings and interest rate risks, as well as liquidity and credit risks. In order to minimize the impact these risks may have on earnings, the Group has established a financial policy. For a more detailed description of the Group’s risk management please refer to the Annual Report 2017, note 17, p.81–85. The Group’s policy is to have short fixed-interest agreements resulting in quick effects on the Group’s net interest as the short-term interest rate changes. The Group’s reported risks are deemed to be essentially unchanged. 19