Pandora_Annual_Report_2018

PARENT COMPANY FINANCIAL STATEMENTS The accounting policies of the Parent Company have changed with the implementation of IFRS 9 Financial instruments and IFRS 15 Revenue from contracts with customers, as described in detail in note 1.2 to the consolidated financial statements. All other accounting policies are unchanged from last year and identical to the accounting policies in Pandora’s consolidated financial statements, with the following exceptions: FOREIGN CURRENCY TRANSLATION Foreign exchange adjustments of balances account- ed for as part of the total net investment in entities that have a functional currency other than DKK are recognised in profit for the year as net financials in the Parent Company financial statements. DERIVATIVE FINANCIAL INSTRUMENTS The effective portion of realised and unrealised gains and losses on all commodity hedging instru- ments is recognised as cost of goods sold, while the ineffective portion of realised and unrealised gains and losses is recognised in net financials. Derivative financial instruments are treated as eco- nomic hedging if the hedge accounting require- ments in IFRS 9 are not met. DIVIDENDS FROM SUBSIDIARIES Dividends from investments in subsidiaries are recognised in the financial year in which they are received. INVESTMENTS IN SUBSIDIARIES Investments in subsidiaries are measured at cost in the Parent Company financial statements. Im- pairment testing is carried out if there is any indi- cation of impairment, as described in Pandora's consolidated financial statements. The carrying amount is written down to the recoverable amount whenever the carrying amount exceeds the recov- erable amount. The impairment loss is recognised as a finance cost in profit for the year. If the Parent Company has a legal or constructive obligation to cover a deficit in subsidiaries, a provision for this is recognised. NOTE 1.1 Principal accounting policies NOTE 1.2 New accounting policies and disclosures NEW STANDARDS AND INTERPRETATIONS The description in note 1.2 t o the consolidated financial statements regarding new standards is- sued effective for the Annual Report for 2018 ful- ly covers the Parent Company as well, with the following exceptions: Hedge accounting of commodity contracts for the purchase of silver and gold provide an option to apply hedge accounting according to IFRS 9. It has been decided not to apply hedge accounting of commodity contracts in the Parent Company. Write-downs of loans and receivables according to IFRS 9 require the Parent Company to record expected credit losses on Group internal loans and receivables. The effect of recognising these was considered immaterial at the time of implementa- tion. At year end, this has been reassessed as the risk premium has been increased slightly and an impairment of DKK 40 million was recorded. See note 5.2. Except for the new presentation of contract assets and liabilities, the implementation of IFRS 15 has not had any impact on the Parent Company, as all performance obligations - the sale of products - take place at a point in time and no variable consider- ation has been identified that should be deferred. IFRS 16 Leases is effective for the annual reporting period beginning 1 January 2019. Main changes to the reporting in Pandora A/S is equal to that described for the Group in note 1.2. Pandora A/S will apply the simplified transition approach without restating comparative figures when adopting the standard on 1 January 2019. Leases in Pandora A/S is mainly related to the lease of the Head Quarter in Copenhagen. At the report- ing date, Pandora had non-cancellable operating lease commitments of DKK 155 million. Pandora will recognise right-of-use assets of around DKK 155 million and lease liabilities of around DKK 155 million on 1 January 2019. Overall, invested capital will increase by DKK 155 million. The im- pact from the implementation of the standard is affecting the EBITDA margin, by around 4% points increase as the classification of fixed lease expens- es will change from operating expenses in the in- come statement, to depreciation of the right-of-use asset and interest related to the liability. The im- plementation will only have a very marginal im- pact on EBIT. The measured discounted value of lease liabilities is calculated applying incremental borrowing rates, which averages around 0.5-1.0 %. P A N D O R A A N N U A L R E P O R T 2 0 1 8 C O N T E N T S P A R E N T C O M P A N Y 1 0 3