Note 16- Financial instruments and financial risk management
NWG // FINANCIAL INFORMATION //
THE GROUP
Note 16- Financial instruments and financial risk management
Accounting policies
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial instrument recognized in the Group ´ s consolidated balance sheet includes accounts receivable, other receivables, derivatives, liquid assets, long-term and short-term interest-bearing liabilities, accounts payable, other liabilities and accrued expenses. Financial instruments are initially measured at fair value and, subsequently, at fair value or accumulated amortized cost, depending on their classification. Transactions costs are included in the assets fair value, except in cases in which the change in value is recognized in the Group ´ s consolidated income statement.
A financial asset is derecognized from the Group ´ s consolidated balance sheet when all benefits and risks associated with ownership have been transferred. A financial liability is derecognized from the Group ´ s consolidated balance sheet when the obligations of the contract have been met, or otherwise extinguished.
On the acquisition date, New Wave Group classifies financial instruments into the following categories:
Financial assets measured at amortized cost
The Group’ s financial assets measured at amortized cost are essentially accounts receivable, other receivables and liquid assets. Liquid assets comprise liquid bank deposits and available cash. Accounts receivable include invoiced as well as non-invoiced receivables( recognized when the Group’ s right to payment is assessed as unconditional). The expected maturity of accounts receivable is short, and the value is therefore recognized at nominal amount without discounting, less provision for expected and occurred credit losses. New Wave Group applies the simplified model for expected credit losses on accounts receivable, at which total expected credit losses for the remaining maturity of the receivable, which is expected to be less than one year, are recognized. Change of provision for expected credit losses on accounts receivable is recognized in the Group’ s income statement under external expenses.
Financial assets measured at fair value through profit and loss
The Group does not have any financial assets measured at fair value in the income statement in 2024 and 2023.
Financial assets measured at fair value through other comprehensive income
New Wave Group uses derivatives, essentially currency futures, to manage financial risks. Financial instruments measured at fair value through other comprehensive income consist of hedge instruments which form part of an effective cash-flow hedge. Changes in value for such instruments are recognized in other comprehensive income. Any non-effective part of cash-flow hedges is recorded immediately in the income statement. Cash-flow hedges are reclassified to the income statement in the period or periods when the hedged flows affect the Group’ s consolidated income statement. However, if a planned transaction or an assumed obligation is no longer expected to occur, the cumulative gain or loss recognized in other comprehensive income, from the period in which the hedge was applied, is immediately transferred to the Group ´ s consolidated income statement.
Financial liabilities measured at amortized cost
The Group’ s financial liabilities measured at amortized cost are essentially interest-bearing liabilities, accounts payable, other liabilities and accrued expenses. Interest-bearing liabilities consist of liabilities to credit institutes and lease liabilities. After the initial valuation, to fair value less transaction costs, the interest-bearing liabilities are measured at amortized cost by applying the effective interest method. The expected maturity of accounts payable is short and the item is therefore recognized at the nominal amount without discounting.
Financial liabilities measured at fair value through profit and loss
The Group does not have any financial liabilities measured at fair value in the income statement in 2024 and 2023.
Financial liabilities measured at fair value through other comprehensive income
New Wave Group uses derivatives, mainly currency futures. See section Financial assets measured at fair value through other comprehensive income for a description on measurement and valuation.
Key estimates and assumptions
Accounts receivable are short-term by nature and consequently the risk assessment horizon is short. When assessing future expected credit losses, both historical information as well as current and forecasted situations are taken into account. An assessment is made if the total reserve is reasonable in relation to the total outstanding accounts receivable, taking into account past credit losses.
116 // ANNUAL REPORT