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Annual Report & Accounts 2016 - Notes to the Company Statements
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110 GVC Holdings PLC Annual Report 2016 NOTES TO THE COMPANY FINANCIAL STATEMENTS for the year ended 31 December 2016 1. SIGNIFICANT ACCOUNTING POLICIES These financial statements were prepared in accordance with Financial Reporting Standard 101 "Reduced Disclosure Framework". A summary of the significant accounting policies are set out below, these policies have been applied consistently to the years presented, unless otherwise stated. 1.1 Basis of preparation The financial information has been prepared on the historical cost basis with the exception of those assets and liabilities which are carried at fair value, and in accordance with applicable Isle of Man law and United Kingdom accounting standards. As permitted under FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation to share-based payments, business combinations, financial instruments, fair values, presentation of a cashflow statement and certain related party transactions. Where required, equivalent disclosures are given in the consolidated financial statements. 1.2 Investments Investments in subsidiary undertakings are stated at cost less amounts written off. 1.3 Foreign currency translation The Company maintains its accounting records in euro and the balance sheet is expressed in this currency. Income and charges are translated at the exchange rates ruling at the transaction date. Fixed assets are valued using historical exchange rates. Other current assets and liabilities expressed in foreign currencies are translated into euros at the rates of exchange in effect at the balance sheet date. Realised exchange gains and losses and unrealised exchange losses are recognised in the profit and loss account. 1.4 Fixed assets Investments in subsidiaries are shown as fixed assets in the Company balance sheet, and are valued at cost less any provision for impairment in value. 1.5 Share-based payments The Group has share based payment schemes which allow certain employees and contractors to acquire shares of the Company. The Group has accounted for these under IFRS 2 Share-based payments. As the related services are received by subsidiary entities, the Company accounts for these as a capital contribution made to relevant subsidiaries. Share option schemes The fair value of options granted under the LTIP and MIP schemes will be recognised as an share based payment expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted are measured using either a binomial or Monte Carlo valuation model. This valuation method takes into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest and market conditions if applicable. Cash cancelled options On occasion, at the Remuneration Committee's discretion, vested share options may be settled in cash, as opposed to issuing new shares. Payments made to repurchase or cancel vested awards are accounted for with the fair value of the options cancelled, measured at the date of cancellation being taken to retained earnings. Also on cancellation an accelerated charge would be recognised immediately. Employers social security costs Employers social security costs due on the cash cancellation of options and the employee gain on exercised options will be paid by the Company and shown within share-based payments. 1.6 Financial instruments Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss. 1.6.1 Non-derivative financial instruments Non-derivative financial instruments comprise debtors, loans and borrowings, and trade and other creditors. Non-derivative financial instruments are recognised initially at fair value, plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition, non-derivative financial instruments are measured at amortised cost using the effective interest method. Provisions for impairment are made against financial assets if considered appropriate and any impairment is recognised in profit or loss. 1.6.2 Available for Sale Financial Assets (AFS) AFS financial assets are non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any of the other categories of financial assets. AFS financial assets are measured at fair value. Gains and losses are recognised in the statement of total recognised gains and losses, except for interest and dividend income, impairment losses and foreign exchange differences on monetary assets, which are recognised in profit or loss. When the asset is disposed of or is determined to be impaired, the cumulative gain or loss recognised in the statement of total recognised gains and losses is reclassified to profit or loss. Interest calculated using the effective interest method and dividends are recognised in profit or loss within finance income. For AFS equity investments impairment reversals are not recognised in profit loss and any subsequent increase in fair value is recognised in the statement of total recognised gains and losses. 1.6.3 Derivative financial instruments Derivative financial instruments are accounted for at fair value through profit and loss (FVTPL). The options associated with the Company's investment in BHL were considered derivative financial instruments and carried at their fair value and re-measured at each reporting date. Any movements in fair value are taken to the profit and loss account. 1.6.4 Impairment of financial assets Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cashflows of the investment have been affected. Objective evidence of impairment could include: • significant financial difficulty of the issuer or counterparty; or • breach of contract, such as a default or delinquency in interest or principal payments; or • it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or • the disappearance of an active market for that financial asset because of financial difficulties. Company financial statements continued