Axactor Annual Report 2016

IFRS 15, Revenue from Contracts with Customers The standard comes into force on 1st January 2018 and replaces existing standards and interpretations on reve- nues. The standard has been endorsed by EU.The standard introduces a new revenue recognition model for contracts with customers and shall be applied to all contracts with customers with the exception of insurance contracts, financial instruments and leasing contracts in that separate standards exist in these areas. The new standard also entails new start- ing points for when revenue shall be recognized and requires new evaluations by the company management that differ from those currently applied. The principal areas in which existing regulations differ from the new ones are: ·· Control-based model for determining when revenue shall be recognized (transfer of risks and benefits is only retained to indicate that control may have been transferred). ·· The valuation of the revenue shall be based on what the vendor expects to receive, rather than on fair value. ·· New rules governing the way in which a contract’s goods and services shall be distinguished in the financial reporting. ·· Revised criteria governing how revenue shall be recognized over time. ·· Expenditure for the acquisition and fulfilment of contracts. ·· Significantly augmented disclosure requirements. The implementation of the standard is not assumed to have material impact on the Group. IFRS 16 Leasing In January 2016 IASB introduced a new leasing standard that will replace IAS 17, leasing agreements and the associated interpretations IFRIC 4, SIC-15 and SIC-27. The standard demands that essentially all assets and liabilities related to a leasing agreement get recognized in the balance sheet with a few exceptions. The new standard is based on the view that the lessee has a right to use an asset during a specified time period and at the same time an obligation to pay for it. The accounting consequences for the lessor will in all material respects be unchanged. The standard is applicable for annual reporting periods beginning on or after January 1, 2019. It is voluntary to apply the standard before this date. The EU has not yet endorsed this standard. IFRS 16 was issued in January 2016 and applies to annual reporting periods beginning on or after 1 January 2019. The standards and interpretations presented are those that may, in the opinion of the Group, have an effect on the profit and potentially effecting the solidity in the future. The Group intends to implement these standards when they become applicable. No other of the standards or interpretations from IASB or pronouncements from IFRIC that have not yet come in to force are expected to have any material impact on the group. Note 3 Financial risk management objectives and policies Axactor defines risk as all factors which could have a negative impact on the ability of the Group to achieve its business objectives. All economic activities is associated with risk. In order to manage risk in a balanced way, it must first be identified and assessed. Axactor conducts risk management at both a Group and company level, where risks are evaluated in a systematic manner. The following summary is by no means comprehensive, but offers examples of risk factors which are considered especially important for Axactor’s future development. Economic fluctuations The credit management sector is affected negatively by a weakened economy. However, Axactor’s assessment is that, historically, it has been less affected by economic fluctua- tions than many sectors. Risks associated with changes in economic conditions are managed through on-going dialogue with each country management team and through regular checks on developments in each country. Market risks Axactor’s financing and financial risks are managed within the Group in accordance with the treasury policy established by the Board of Directors. The treasury policy contains rules for managing financial activities, delegating responsibility, measuring identifying and reporting financial risks and limit- ing these risks. Internal and external financial operations are concentrated to the Group’s central finance function in Oslo, which ensures economies in scale when pricing financial transactions. Because the finance function can take advan- tage of temporary surplus deficits in the Group’s various countries of operation, the Group’s total interest expense can be reduced. In each country, investments, revenues and most operating expenses are denominated in local currencies, and thus fluctuations have a relatively minor effect on operating earnings. Revenues and expenses in national currency are thereby hedged in natural way, which limits transaction exposure. When the balance sheets of foreign subsidiaries are recal- culated in SEK, a translation exposure arises that affects consolidated shareholders’ equity. This translation exposure is limited by raising loans in foreign currencies. Regulatory risks With regard to risks associated with changes in regulations in Europe, Axactor continuously monitors the EU’s regulatory efforts to be able to indicate potentially negative effects for European credit management companies and to work for favourable regulatory changes. Axactor AB | Annual report 2016 36