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80 • Consolidated financial statements
PANDORA ANNUAL REPORT 2016
NOTES
SECTION 1: BASIS OF REPORTING, CONTINUED
in the Group entities at their respective functional currency
rates prevailing at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies are
translated at the functional currency spot rate of exchange
ruling at the reporting date. All adjustments are recognised
in the income statement.
Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using the
exchange rates at the dates of the initial transactions. Non-
monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the
fair value is determined.
Group companies with another functional currency than DKK
The assets and liabilities of foreign subsidiaries are
translated into DKK at the rate of exchange prevailing
at the reporting date, and their income statements are
translated at the exchange rates prevailing at the dates of
the transactions.
Exchange rate adjustments arising on translation are
recognised in other comprehensive income. On disposal of
a foreign subsidiary, the component of other comprehensive
income relating to that particular foreign operation is
recognised in the income statement.
The consolidated income statement
The consolidated income statement is presented based on
costs classified by function. Cost of sales comprises direct
and indirect expenses incurred to generate revenue for the
year, comprising raw materials, consumables, production
staff, depreciation, amortisation and impairment losses in
respect of production equipment.
Sales, distribution and marketing expenses comprise
expenses related to the distribution of goods sold and sales
campaigns, including packaging materials, brochures,
wages and salaries and other expenses related to sales and
distribution staff as well as depreciation, amortisation and
impairment losses in respect of distribution equipment.
Administrative expenses comprise expenses incurred
in the year to manage PANDORA, including expenses
related to administrative staff and depreciation, amortisation
and impairment losses in respect of assets used in the
administration.
The allocation of amortisation and impairment losses from
intangible assets is presented in note 3.1.
Implementation of new or amended standards and
interpretations
PANDORA has adopted all new or amended standards
(IFRS) and interpretations (IFRIC) as adopted by the EU and
which are effective for the financial year 1 January - 31
December 2016.
The implementation of these new or amended standards
has not had any material impact on PANDORA’s Annual
Report in 2016.
Standards issued, but not yet effective
The IASB has issued a number of new IFRS standards,
amended standards, revised standards and interpretations,
which are not effective for this Annual report, most
significantly:
IFRS 9 ‘Financial instruments’, with effective date 1
January 2018, will change the classification, measurement,
and de-recognition of financial assets, and introduces new
rules for hedge accounting. PANDORA has performed an
initial analysis of the impact which shows that the updated
classification and measurement rules will not materially
impact the annual report based on the current portfolio
of financial assets. The new hedge accounting rules are
expected to increase PANDORA’s opportunity for aligning
financial risk management and hedge accounting. The initial
assessment is that the Groups current hedge relationships
would qualify as hedges following the adoption of IFRS 9,
and PANDORA is assessing the opportunities relating to
the new hedge accounting. As part of this, PANDORA is
assessing whether to early adopt IFRS 9.
IFRS 15 ‘Revenue from contracts with customers’ with
effective date 1 January 2018 will replace the current
standards (IAS 11 and IAS 18) and interpretations. The new
standard requires revenue to be recognised based on the
transfer of control whether this is at a fixed time or over
time. This is different from the present standards based on
the transfer of risks and rewards.