REC Silicon Annual Report 2019

40 Notes to the consolidated financial statements, REC Silicon Group REC Silicon Annual Report 2019 purchase contracts. The Group recognizes revenue from the sale of goods measured at the fair value of consideration received or receivable, which includes a provision of allowances for discounts and expected returns. Goods are normally sold with standard warranties that the goods comply with the agreed-upon specifications. These standard warranties are accounted for using IAS 37 Provisions, Contingent Liabilities and Contingent Assets. REC Silicon does not have any other significant obligations for returns or refunds. 2.20 LEASES For 2018, leases were classified as finance leases when the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. Other leases were classified as operating leases. Operating leases consist primarily of agreements where the Group is entitled to the output of leased process gas facilities which cannot be separated from the underlying lease. Leases were evaluated at inception, based on the substance of the transaction. The evaluation of leases requires substantial judgment. At December 31, 2018, the Group had no finance leases. On January 1, 2019 the Group implemented IFRS 16 Leases. In accordance with this standard, the Group recognizes, measures, presents, and discloses leases using a single on-balance sheet model. Accordingly, the group recognized a lease liability and a right-of-use asset associated with the Group’s lease arrangements at December 31, 2019. The Group also separately recognized the interest expense on the lease liability and the depreciation expense on the right-of-use asset in the Statement of Income for the year ended December 31, 2019. Leases of ’low-value’ assets and short- term leases (lease terms of 12months or less) are recognized as expense in profit or loss when incurred. 2.21 GOVERNMENT GRANTS Government grants are recognized at their fair values when there is reasonable assurance that the grants will be received and that the Group will comply with attached conditions. Government grants related to assets are presented in the statement of financial position as a reduction to the carrying amount of the assets and reduce depreciation in the statement of income. Government grants relating to income are deducted from related expenses. Government grant assets are recognized for the unsettled portions of grants and are discounted if the effect of discounting is significant. Significant changes to estimates of timing of utilization or discount rates are recognized as a change in the grant asset and offset to production assets or expenses based on the classification at the inception of the grant. 2.22 STATEMENTOF CASH FLOWS The Group presents the statement of cash flows using the indirect method. Cash inflows and outflows are shown separately for investing and financing activities, while operating activities include both cash and non-cash line items. Interest received and paid are reported as a part of operating activities, except borrowing costs capitalized as part of the construction of a non-current asset that are included in investing activities, and payment of up-front and loan fees that are reported as part of financing activities. Operating activities include all cash flow effects from derivatives. Currency gains and losses are recognized in the statement of income. Amounts related to borrowing (financing activities), non- current financial assets and investments (investing activities) and unrealized gains or losses on cash and cash equivalents held at the end of the periods are reclassified in a separate line item under operating activities. Financing activities include the repayment of prepayments received from customers on which interest is calculated. The consolidated statement of cash flows presents changes in cash balances with respect to total operations (continuing and discontinued) and therefore does not reflect the performance of continuing operations during prior periods or the performance that is likely to be achieved in future periods. 2.23 ADOPTION OF NEWAND REVISED STANDARDS AND INTERPRETATIONS The Group adopted new and amended standards and interpretations issued by the IASB and approved by the EU that are relevant to its operations and effective for reporting periods beginning on or before January 1, 2019. The most relevant of these are: IFRS 16 Leases IFRS 16 was issued in January 2016, and outlines the principles for the recognition, measurement, presentation and disclosure of leases requiring lessees to account for all leases under a single on- balance sheet model similar to the accounting for finance lease under IAS 17 and established a balance sheet lease accounting model that increases transparency and comparability. The new standard which supersedes existing lease guidance, including IAS 17, IFRIC 4, and SIC-27 applies to periods beginning January 1, 2019. The group adopted IFRS 16 on the required effective date using the modified retrospective approach. As a result, the Group will not restate comparative amounts for the prior year (See note 7). IFRS 16 includes two recognition exemptions for lessees – leases of ’low-value’ assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12months or less) which is recognized as expense in profit or loss when incurred. At the commencement date of a lease, a lessee recognizes a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees are required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset. IFRS 16 requires lessees and lessors to make more extensive disclosures than under IAS 17.