Hexagon Annual Report 2019

When the terms of an equity-settled award are modified, the minimum expense recognized is the grant date fair value of the unmodified award, provided the original vesting terms of the award are met. An additional expense, measured as at the date of modification, is recognized for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee. Where an award is cancelled by the entity or by the counterparty, any remaining element of the fair value of the award is expensed immediately through profit or loss. Government grants, including the Norwegian Skattefunn tax incentive scheme, are recognized when there is reasonable assurance that the Group will comply with the conditions attaching to them, and that the grants will be received. Grants are recognized as deductions against the cost that they are intended to compensate. Investment grants are capitalized and recognized systematically over the asset’s useful life. Investment grants are recognized either as deferred income or as a deduction of the asset’s carrying amount. The Group currently has grants with the United States Department of Energy which is recognized as grant income. 2.20 GOVERNMENT GRANTS The tax expense consists of the tax payable and changes to deferred tax. Deferred tax/tax assets are calculated on all differences between the book value and tax value of assets and liabilities, with the exception of: 2.21 INCOME TAXES • temporary differences linked to goodwill that are not tax deductible • temporary differences related to investments in subsidiaries, associates or joint ventures when the Group controls when the temporary differences are to be reversed and this is not expected to take place in the foreseeable future. Deferred tax assets are recognized when it is probable that the Group will have a sufficient profit for tax purposes in subsequent periods to utilize the tax asset. The Group recognize previously unrecognized deferred tax assets to the extent it has become probable that the Group can utilize the deferred tax asset. Similarly, the Group will reduce a deferred tax asset to the extent that the Group no longer regards it as probable that it can utilize the deferred tax asset. Deferred tax and deferred tax assets are measured on the basis of the expected future tax rates applicable to the companies in the Group where temporary differences have arisen. Deferred tax assets and liabilities are recognized at nominal value and are classified as non-current assets and non-current liabilities in the balance sheet. Deferred tax is presented as a gross amount for the geographical countries in which the Group operates. Deferred tax is recognized directly in other comprehensive income if the tax items relate to items recognized in other comprehensive income. Deferred tax is recognized directly in equity if the tax items relate to items recognized directly in equity. For management purposes, the Group is organized into different business areas according to product/service range. The Group’s segment reporting format is business areas. Financial information relating to segments and geographical areas is presented in note 4. In segment reporting, internal gains on sales between segments are eliminated. 2.22 SEGMENTS Contingent liabilities are not recognized in the annual accounts. Significant contingent liabilities are disclosed, with the exception of contingent liabilities that are remote to be incurred. 2.23 CONTINGENT LIABILITIES AND CONTINGENT ASSETS Contingent assets are not recognized in the annual accounts but are disclosed if there is a certain probability that a benefit will be added to the Group. New information on the Group’s financial position on the end of the reporting period which becomes known after the reporting period is recorded in the annual accounts. Events after the reporting period that do not affect the Group’s financial position on the end of the reporting period but which will affect the Group’s financial position in the future are disclosed if significant. 2.24 EVENTS AFTER THE BALANCE SHEET DATE The Group applied IFRS 16 for the first time. The nature and effect of the changes as a result of adoption of this new accounting standard is described below. 2.25 NEW ACCOUNTING STANDARDS Several other amendments and interpretations apply for the first time in 2019, but do not have an impact on the consolidated financial statements of the Group. IFRS 16 supersedes IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to recognize most leases on the balance sheet. IFRS 16 Leases 19 105 2019 AT A GLANCE FROM THE BOARD ROOM FINANCIAL STATEMENTS