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Annual Report & Accounts 2016 - Notes
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80 Financial statements continued GVC Holdings PLC Annual Report 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED for the year ended 31 December 2016 1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED 1.20 Equity Equity comprises the following: • Share capital represents the nominal value of equity shares. • Share premium represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue. • Retained earnings represents retained profits. • Merger reserve arose on the re-domiciliation of the Group from Luxembourg to the Isle of Man in 2010. It consists of the pre-redomiciliation reserves of the Luxembourg company plus the difference in the issued share capital (31,135,762 share at €0.01 versus 31,135,762 shares at €1.24). • Translation reserve represents exchange differences on translation of foreign subsidiaries recognised in other comprehensive income. 1.21 Finance leases Management applies judgement in considering the substance of a lease agreement and whether it transfers substantially all the risks and rewards incidental to ownership of the leased asset. Key factors considered include the length of the lease term in relation to the economic life of the asset, the present value of the minimum lease payments in relation to the asset's fair value, and whether the Group obtains ownership of the asset at the end of the lease term. The interest element of lease payments is charged to profit or loss, as finance costs over the period of the lease. 1.22 Operating leases All other leases other than finance leases are treated as operating leases. Where the Group is a lessee, payments on operating lease agreements are recognised as an expense on a straight-line basis over the lease term. Associated costs, such as maintenance and insurance, are expensed as incurred. 1.23 Assets classified as held for sale Non-current assets and disposal groups are classified as held for sale if the carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as being met only when the sale is highly probable, management is committed to a sale plan, the asset is available for immediate sale in its present condition and the sale is expected to be completed within one year from the date of classification. These assets are measured at the lower of carrying value and fair value less associated costs of sale except where the assets were previously classified as available for sale, in which case they are carried at fair value. 1.24 New and revised standards that are effective for annual periods beginning on or after 1 January 2016 1.24.1 Amendments to IFRS 11 Joint Arrangements These amendments provide guidance on the accounting for acquisitions of interests in joint operations constituting a business. The amendments require all such transactions to be accounted for using the principles on business combinations accounting in IFRS 3 "Business Combinations" and other IFRSs except where those principles conflict with IFRS 11. Acquisitions of interests in joint ventures are not impacted by this new guidance. The amendments are effective for reporting periods beginning on or after 1 January 2016. No impact arose from the adoption of these amendments to IFRS 11 on these consolidated financial statements. 1.25 Standards in issue, not yet effective At the date of authorisation of these financial statements, certain new standards, and amendments to existing standards have been published by the IASB that are not yet effective, and have not been adopted early by the Group. Information on those expected to be relevant to the Group's financial statements is provided below. Management anticipates that all relevant pronouncements will be adopted in the Group's accounting policies for the first period beginning after the effective date of the pronouncement. New standards, interpretations and amendments not either adopted or listed below are not expected to have a material impact on the Group's financial statements. 1.25.1 IFRS 9 "Financial Instruments" (2014) The IASB has released IFRS 9 "Financial Instruments" (2014), representing the completion of its project to replace IAS 39 "Financial Instruments: Recognition and Measurement". The new standard introduces extensive changes to IAS 39's guidance on the classification and measurement of financial assets and introduces a new "expected credit loss" model for the impairment of financial assets together with new guidance on the application of hedge accounting. The new standard is required to be applied for annual reporting periods beginning on or after 1 January 2018. The Group's management are currently reviewing the various classifications of financial instruments used by the Group but do not believe that any material changes to the Group's results in future periods will arise as a result of any changes of classification. The Group's treasury officials will consider the implications of this new standard when reviewing the hedging instruments it will utilise going forward. 1.25.2 IFRS 15 "Revenue from Contracts with Customers" IFRS 15 presents new requirements for the recognition of revenue, replacing IAS 18 "Revenue", IAS 11 "Construction Contracts", and several revenuerelated Interpretations. The new standard establishes a control-based revenue recognition model and provides additional guidance in many areas not covered in detail under existing IFRSs, including how to account for arrangements with multiple performance obligations, variable pricing, customer refund rights, supplier repurchase options, and other common complexities. IFRS 15 is effective for reporting periods beginning on or after 1 January 2018. The Group's management do not consider that there will be any material impact on the Group's policy of recognising revenue but will review the impact of the standard on the Group's 2017 results during that financial year. 1.25.3 IFRS 16 "Leases" IFRS 16 presents new requirements for the recognition, measurement, presentation and disclosure of leases, replacing IAS 17 "Leases". The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases of over 12 months unless the underlying asset has a low value. Lessors continue to classify leases as operating or finance leases, with minimal changes from IAS 17. The new standard applies to annual reporting periods beginning on or after 1 January 2019. The Group's management consider that the adoption of this statement will likely result in an increase in the non-current assets (representing "right-of-use" assets) and a corresponding increase in liabilities, both current and non-current on the balance sheet of the Group to the approximate value of the assets contained within its operating lease disclosure in note 19 but will fully review the impact in the 2018 financial year.