83 / 143
NOTES
Consolidated financial statements • 81
In order to determine when and how much revenue can be
recognised a five-step process shall be applied:
• identify the contracts with customers
• identify the separate performance obligations
• determine the transaction price of the contract
• allocate the transaction price to each of the
separate performance obligations, and
• recognise the revenue as each performance
obligation is satisfied.
PANDORA has performed an initial assessment of its
current contracts and products and found that these
changes will not materially impact the recognition and
measurement of revenue. The timing of recognising revenue
might change slightly in the future and some revenue might
be recognised over a slightly extended period of time.
Bundled products that are distinct shall be recognised
separately just as discounts and rebates on the contract
price must be allocated to the separate elements.
IFRS 15 further requires provisions for return rights to
be presented gross in the balance sheet, thus presenting
inventory and obligation separately.
IFRS 16 ’Leases’ was released in January 2016 with
effective date 1 January 2019. It will result in almost
all leases being recognised in the balance sheet, as the
distinction between operating and finance leases is
removed. Under the new standard, a lease asset (the right to
use the leased item) and a financial liability to pay rentals
are recognised. There are only few exceptions which are
related to short-term and low-value leases.
PANDORA has not yet determined to what extent
lease commitments will result in the recognition of an
asset and a liability for future payments and how this will
affect PANDORA’s profit and classification of cash flows.
The assessment of the expected length of the leases as well
as the composition of the contracts between fixed and
variable payments will impact the future values. EBITDA as
the primary performance measure in PANDORA, will be
impacted by the reclassification of rent to depreciation and
interest expenses. Free cash flow will be impacted positively
as the classification of the leasing payments change from
operational cash flow to cash flow from financing. In 2016
around one third of the leasing costs recognised were
variable and will continue to be presented as rent costs
included in EBITDA. At the reporting date, PANDORA
had non-cancellable operating lease commitments of
DKK 2,893 million, see note 3.2. It is expected, that
most leases will also qualify for leases under IFRS 16 and
only insignificant commitments may be covered by the
exception for short-term and low-value leases.
All other new or amended standards and interpretations
not yet effective are not expected to have any material
impact on PANDORA’s Annual Report.
Significant accounting estimates
In preparing the consolidated financial statements,
Management makes various accounting estimates and
assumptions that form the basis of the presentation,
recognition and measurement of PANDORA’s assets and
liabilities.
Determining the carrying amounts of some assets and
liabilities requires estimates and assumptions concerning
future events. Estimates and assumptions are based on
historical experience and other factors, which Management
assesses to be reasonable, but which by their nature involve
uncertainty and unpredictability. These assumptions may
have to be revised, and unexpected events or circumstances
may occur.
PANDORA is subject to risks and uncertainties that
may lead to actual results differing from these estimates,
both positively and negatively. Specific risks for PANDORA
are discussed in the relevant sections of the Management’s
review and in the notes.
Management regards estimates related to tax and
provisions related to sales return and warranty as key
estimates.
Taxation
note
2.5
Revenue and sales returns
note
2.1, 3.5
SECTION 1: BASIS OF REPORTING, CONTINUED