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PARENT COMPANY FINANCIAL STATEMENTS • 125
NOTES FOR THE
PARENT COMPANY
SUPPLEMENT TO MANAGEMENT´S REVIEW FOR THE GROUP
Gross profit
The Parent Company operates as the principal of PANDORA,
and all inventories are consequently traded from the crafting
facilities in Thailand to wholesalers and retailers through the
Parent Company. Similarly, all inventories are returned from
subsidiaries through the Parent Company for the purpose of
remelting any excess inventory.
Gross profit is therefore significantly impacted by realised
losses from re-melting activities and unrealised losses from
inventory write-downs. Fluctuations in market prices of silver
and gold also have a major impact on gross profit.
The effective portion of realised and unrealised gains and
losses on all commodity hedge contracts is recognised in cost
of sales as the Group’s commodity price risk is hedged by the
Parent Company. This can significantly impact gross profit.
The net gain in 2016 amounts to DKK 122 million (2015:
loss of DKK 304 million).
Hedging transactions
The ineffective portion of realised and unrealised gains and
losses on all commodity hedge instruments is recognised
in net financials. The net gain in 2016 amounts to DKK 21
million (2015: loss of DKK 23 million).
1.1
1.2 BASIS OF REPORTING
Parent Company financial statements
The accounting policies of the Parent Company 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 accounted for
as part of the total net investment in enterprises 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 instruments 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
economic hedging if the hedge accounting requirements in
IAS 39 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. Impairment testing
is carried out if there is any indication 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
recoverable 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.
Significant accounting estimates
In the process of preparing the Parent Company financial
statements, a number of accounting estimates and
judgements have been made that affect assets and
liabilities at the reporting date and income and expenses
for the reporting period. Management regularly reassesses
these estimates and judgements, partly on the basis of
historical experience and a number of other factors in the
given circumstances, please also refer to note 1.1 of the
consolidated financial statements.
New standards and interpretations
Reference is made to the description in note 1.1 to the
consolidated financial statements.
PANDORA has estimated the impact of IFRS 9 ‘Financial
Instruments’ with expected effective date 1 January 2018 and