Hexagon Annual Report 2019

Lessor accounting under IFRS 16 is substantially unchanged under IAS 17. Lessors will continue to classify leases as either operating or finance leases using similar principles as in IAS 17. Therefore, IFRS 16 did not have an impact for leases where the Group is the lessor. The Group adopted IFRS 16 using the modified retrospective method of adoption with the date of initial application of 1 January 2019. Under this method, the standard is applied retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application. Comparative figures are not restated. The Group elected to use the transition practical expedient to not reassess whether a contract is, or contains, a lease at 1 January 2019. Instead the Group applied the standard only to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 at the date of initial application. As part of the initial application of IFRS 16, the Group decided to apply the relief option, which permits to adjust the right-of-use asset by the amount of any provision for onerous leases recognized in the balance sheet immediately before the date of initial application. In addition, The Group also elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option (short-term leases), and lease contracts for which the underlying asset is of low value (low-value assets). For leases that were previously classified as finance leases under IAS 17, the carrying amount of the right-of-use asset and lease liability at 1 January 2019 was determined to be the carrying amount of the lease asset and lease liability at the date of initial application of IFRS 16. (NOK 1 000) ASSETS Right-of-use assets 274 348 Property, plant & equipment -7 798 Total assets 266 550 LIABILITIES Lease liabilities IFRS 16 267 266 Other current liabilities -716 Total equity and liabilities 266 550 THE EFFECT OF ADOPTING IFRS 16 AS AT 1 JANUARY 2019 (INCREASE/DECREASE) IS AS FOLLOWS After some final adjustments, the right-of-use assets of NOK 274 348 thousand were recognized and presented separately in the statement of financial position. This includes the lease assets recognized previously under finance leases of NOK 7 798 thousand that were reclassified from Property, plant and equipment. After some final adjustments, the additional lease liabilities of NOK 267 266 thousand presented as lease liabilities were recognized. Provision for onerous contracts for a specific leasing contract on NOK 716 thousand were derecognized from other current liabilities and correspondingly adjusted towards the right-of-use asset. These opening balances have changed somewhat based on revaluated calculations of the leases. (NOK 1 000) Operating lease commitments as at 31 December 2018 326 850 - Practical expedient related to short-term leases and low-value assets -1 000 + Commitments relating to leases previously classified as finance lease 5 769 - Discounting using the incremental borrowing rate -64 353 = Lease liability as at 1 January 2019 267 266 The weighted average incremental borrowing rate applied 3.0 % THE LEASE LIABILITIES AS AT 1 JANUARY 2019 CAN BE RECONCILED TO THE OPERATING LEASE COMMITMENTS AS OF 31 DECEMBER 2018 AS FOLLOWS Standards and interpretations that are issued up to the date of issuance of the consolidated financial statements, but not yet effective, are disclosed below. The Group’s intention is to adopt the relevant new and amended standards and interpretations when they become effective, subject to EU approval before the consolidated financial statements are issued. 2.26 NEW AND AMENDED IFRS AND IFRICS WITH FUTURE EFFECTIVE DATES IFRS 17 Insurance contracts replace IFRS 4 Insurance Contracts and specify principles for recognition, measurement, presentation and disclosure of insurance contracts. The purpose of the new standard is to eliminate inconsistent practices in accounting for insurance contracts and the core of the new model are as follows: IFRS 17 Insurance contracts • An estimate of the present value of future cash flows for a group of insurance contracts. Future cash flows include future premium payments and payments of insurance settlements, claims and other payments to policyholders. The 20 106 2019 AT A GLANCE FROM THE BOARD ROOM FINANCIAL STATEMENTS