AAK Annual Report 2017

53 IFRS 15 Revenue from contracts with customers IFRS 15 “ 5HYHQXH IURP FRQWUDFWV ZLWK FXVWRPHUV´ JRYHUQV KRZ UHYHQXH VKRXOG EH UHFRJQL]HG ,)56 UHSODFHV ,$6 5HYHQXH and IAS 11 Construction Contracts and the associated SIC and IFRIC. The standard must be applied for the financial year starting on January 1, 2018 or later. Earlier application is permitted. The principles on which IFRS 15 is based are designed to give users of financial statements more useful information about the company’s revenue. The extended duty of disclosure means that information on revenue type, the time of settlement, uncer- tainties linked to recognition of revenue and cash flow attributable to the company’s contracts with customers must be provided. According to IFRS 15, revenue must be recognized when the customer gains control over the product or service sold and is able to use the product or service and gain benefit from it. AAK has evaluated the Group’s contracts and revenue recognition will not be affected by a transition to IFRS 15. AAK has decided to make the transition to IFRS 15 with prospective application. A project is in progress to analyze which addi- tional information may be required to meet the disclosure requirements in IFRS 15. IFRS 16 Leases In January 2016, IASB published a new leasing standard that will replace IAS 17 Leases and the associated interpretations IFRIC 4, SIC-15 and SIC-27. The standard requires that assets and liabilities attributable to all leases, with some exceptions, be recognized in the balance sheet. This recognition is based on the view that the lessee has a right to use an asset during a specific period of time and also has an obligation to pay for this right. The recognition for the lessor will be essentially unchanged. The standard is applicable for a financial year beginning January 1, 2019 or later. Premature application is permitted. The Group has not yet fully evaluated the effects of IFRS 16. A preliminary assessment is that the change in standard will not have a material impact on the Group’s financial reports. No other of the IFRS or IFRIC interpretations that have not yet entered into force are expected to have any significant impact on the Group. Consolidated financial statements Subsidiaries The consolidated financial statements cover AAK AB and all its subsidiaries. Subsidiaries are all companies over which the Group has a controlling influence. The Group controls a company when it is exposed to or is entitled to variable return from its holding in the company and is able to affect the return by exerting influence in the company. Subsidiaries are included in the con- solidated financial statements as from the date on which the controlling influence is transferred to the Group. They are excluded from the consolidated financial statements as from the date on which the controlling influence ceases. Purchase method The acquisition of subsidiaries is recognized using the purchase method of accounting. The cost of acquisition is measured as the fair value of the assets provided as consideration, liabilities incurred and shares issued by the Group. Transaction costs relating to acquisitions are expensed as they are incurred. Identifiable assets acquired and liabilities and obligations assumed in an acquisition are measured initially at fair value at the acquisition date. For each acquisition, the Group determines whether all non-controlling interests in the acquired companies are to be recognized at fair value or according to the proportional share of the acquired company’s net assets. The excess of the purchase price, any non-controlling interests and the fair value of previous shareholdings at the acquisition date over the fair value of the Group’s interest in identifiable net assets is recognized as goodwill. If this amount is less than the fair value for the acquired subsidiary’s assets, the difference is recognized directly in the statement of comprehensive income. All intra-group transactions, balances and unrealized gains on transactions are eliminated, unless the transaction provides evidence of impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Transactions with holders of non-controlling interests The Group handles transactions with holders of non-controlling interests in the same ways as transactions with the Group’s shareholders. In the event of acquisitions from holders of non-controlling interests, the company recognizes the difference between the purchase price paid and the actual acquired portion of the carrying amount of the subsidiary’s net assets in equity. Gains and losses on disposals to holders of non-controlling interests are also recognized in equity. When the Group no longer holds a controlling or significant influence, each shareholding is remeasured at fair value and the change in the carrying amount is recognized in the income statement. Fair value is used as the primary carrying amount and forms the basis for ongoing recognition of the remaining ownership interest as an associate company, joint venture or financial DVVHW $OO DPRXQWV UHODWLQJ WR GLYHVWHG XQLWV SUHYLRXVO\ UHFRJQL]HG XQGHU ³2WKHU FRPSUHKHQVLYH LQFRPH´ DUH UHFRJQL]HG DV though the Group had directly disposed of the respective assets or liabilities. This can result in amounts previously recognized in ³2WKHU FRPSUHKHQVLYH LQFRPH´ EHLQJ UHFODVVLILHG DV HDUQLQJV If the equity interest in an associate is reduced but significant influence still remains, where relevant only a proportional share RI WKH DPRXQWV SUHYLRXVO\ UHFRJQL]HG LQ ³2WKHU FRPSUHKHQVLYH LQFRPH´ LV UHFRJQL]HG DV HDUQLQJV Associated companies Associates are those companies where the Group has significant influence, but not a controlling influence over operational and financial management, usually through an ownership interest of between 20 percent and 50 percent of the voting rights. As of the date at which the significant influence is acquired, investments in associated companies are recognized in the consolidated financial statements using the equity method. The equity method means that the value of the shares in the associated companies recognized for the Group corresponds to the Group’s interest in the equity of the associates plus Group-related goodwill and any residual values of Group-related surplus or shortfall in value. The consolidated income statement reports the Group’s share of profit of associated companies, adjusted for any amortization, impairment or dissolution of acquired surplus or shortfall values, as other financial revenue. Dividends received from associated companies reduce the carrying amount of the investment. The equity method is used until significant influence ceases.