80 Financial statements continued
GVC Holdings PLC Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL
for the year ended 31 December 2016
1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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
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.