Hexagon Annual Report 2019

estimate shall take an explicit adjustment for risk into account and the estimates shall be based on the balance sheet date. • A contractual service margin, which is equal to the one-day gain in the estimate of the present value of future cash flows from a group of insurance contracts. This corresponds to the profit element of the insurance contracts that will be recognized over the period of service, ie over the cover period of the insurance. • Certain changes in the estimate of the present value of future cash flows are adjusted against the contract margin, and thereby recognized in the result over the remaining period covered by the relevant contracts. • The effect of change in discount rate shall, as a choice of accounting principle, be presented either in in profit or loss or in other comprehensive income. IFRS 17 shall, as a starting point, be used retrospectively, but it has been opened for a modified retrospective application or use based on fair value at the time of transition if retrospective use is impracticable. IFRS 17 is effective for reporting periods beginning on or after 1 January 2021, with comparative figures required. Early application is permitted, provided the entity also applies IFRS 9 and IFRS 15 on or before the date it first applies IFRS 17. This standard is not applicable to the Group. The amendments will help companies determine whether an acquisition made is of a business or a group of assets. The amended definition emphasizes that the output of a business is to provide goods and services to customers, whereas the previous definition focused on returns in the form of dividends, lower costs or other economic benefits to investors and others. In addition to amending the wording of the definition, the Board has provided supplementary guidance. Amendments to IFRS 3 Definition of a Business Since the amendments apply prospectively to transactions or other events that occur on or after the date of first application 1 January 2020, the Group will not be affected by these amendments on the date of transition. The International Accounting Standards Board has issued amendments to its definition of material to make it easier for companies to make materiality judgements. The definition of material, an important accounting concept in IFRS Standards, helps companies decide whether information should be included in their financial statements. The updated definition amends IAS 1 and IAS 8. The amendments are a response to findings that some companies experienced difficulties using the old definition when judging whether information was material for inclusion in the financial statements. Amendments to IAS 1 and IAS 8 - Definition of Material The amendments clarify the definition of material and how it should be applied by including in the definition guidance that until now has featured elsewhere in IFRS Standards. In addition, the explanations accompanying the definition have been improved. Finally, the amendments ensure that the definition of material is consistent across all IFRS Standards. The amendments to the definition of material is not expected to have a significant impact on the Group’s consolidated financial statements. The amendments provide companies with temporary reliefs to certain requirements related to hedge accounting in the period of uncertainty before the replacement of an existing interest rate benchmark with an alternative nearly risk-free interest rate (an RFR). For the hedging relationships where the reliefs are applied, companies are required to disclose additional qualitative and quantitative information. However, the amendments also provide an exemption from the disclosure requirements in IAS 8.28 f related to the adjustment amounts in the current and prior period. Amendments to IFRS 9, IAS 39 and IFRS 7 due to the IBOR reform The effective date of the amendments is for annual periods beginning on or after 1 January 2020, with early application permitted. The requirements must be applied retrospectively. The Group does not intend to early adopt the amendments. In the process of applying the Group’s accounting policies in accordance with IFRS, management has made several judgements and estimates. All estimates are assessed to the most probable outcome based on the management’s best knowledge. Estimates and assumptions are regularly reassessed and are based on historical experience and other factors, including forecast events that are considered probable under current circumstances. NOTE 3 ESTIMATION UNCERTAINTY The Group prepares estimates and makes assumptions about the future. The accounting estimates based on this process are, by definition, rarely completely in line with the final outcome. Estimates and assumptions represent a risk of material changes in the reported amounts of revenues, expenses, assets, liabilities and equity over the next financial year. The Group’s most important accounting estimates are related to the following items: • Fair value of assets and liabilities acquired in a business combination • Depreciation and impairment of property, plant & equipment and intangible assets • Development cost 21 107 2019 AT A GLANCE FROM THE BOARD ROOM FINANCIAL STATEMENTS