NWG Annual Report 2019 - EN NWG Annual Report 2019 - EN | Page 77

NWG // FINANCIAL INFORMATION //
THE GROUP
Provisions for expected credit losses on
accounts receivable
Accounts receivable are initially measured at their
transaction price and subsequently at the value at
which they are expected to be realized. 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 recei-
vable are recognized. When assessing future expected
credit losses, both historical and forward-looking
information is taken into account. Change of provision
for expected credit losses on accounts receivable is
recognized in the income statement under external
costs. See note 17 for detailed information.
Leases
The application of IFRS 16 requires the Group to
make assessments such as determining the lease term
and the interest rate used for discounting of future
cash flows which affect the measurement of the lease
liability and the right-of-use asset.
The Group determines the lease term as the
non-cancellable term of the lease, together with any
periods covered by an option to extend the lease if it
is reasonably certain to be exercised, or any periods
covered by an option to terminate the lease, if it is
reasonably certain to not be exercised. The lease
agreements contain a range of different conditions.
Extension and termination options are mainly related
to real estate leases. The Group applies judgment in
evaluating whether it is reasonably certain whether
or not to exercise the option to extend or terminate
the lease. That is, all relevant factors that create an
economic incentive to exercise either the extension or
termination are considered. The renewal periods for
real estate leases with longer non-cancellable periods
(approximately 10 to 15 years) are not included as part
of the lease term as these are not reasonably certain to
be exercised.
Assessments are also required to determine the
interest rate when discounting future lease payments.
The lease payments are discounted by using a rate
reflecting what New Wave Group would have to pay to
borrow funds to acquire a similar asset. The Group has
used its incremental borrowing rate when discounting
lease payments since the interest rate implicit in the
agreements is not known.
ANNUAL REPORT // 077