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Annual Report & Accounts 2016 - Notes to the Company Statements
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111 1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED 1.7 Going concern The accounts are prepared on a going concern basis, as there are available profits within subsidiaries which, when paid as dividends, will offset the net current liabilities reported on the balance sheet. Further, although the Company is showing net current liabilities at 31 December 2016 this will reverse upon the re-financing of long-term debt which occurred subsequent to the reporting date (see note 12). 1.8 Significant judgements In the application of the accounting policies, which are detailed in this note, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The estimates and assumptions, which have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below. 1.8.1 Available for sale assets Management apply judgement in evaluating the fair value of the available for sale assets, and any impairment to the value which is recognised in the income statement. 1.8.2 Debtors Management apply judgement in evaluating the recoverability of amounts owed by Group undertakings. To the extent that the Board believes receivables not to be recovered they have been provided for in these consolidated financial statements. 1.8.3 Share options Accounting for share option charges requires a degree of judgement over such matters as dividend yield, and expected volatility. Further details on the assumptions made by management are disclosed in note 24 of the Group financial statements. 1.8.4 Embedded derivatives The drawn-down Cerberus Loan contains embedded derivatives. The interest rate on the loan is EURIBOR, subject to a floor of 1%, plus a margin of 11.5%. Based on recent guidance issued by IFRIC, management assess this floor to be closely related to the host contract and therefore it has not been treated as an embedded derivative. In addition, the loan may be repaid early but if it is repaid in the first year, there is an additional "make-whole" premium payable. If it is repaid before the expiry date, the payment of the exit fees is brought forward but additional fees at the 12 month and 18 month date could be avoided. These options for early repayment are considered to be non-closely related to the host contract and have been recognised separately. The options have been grouped for the purposes of evaluating the embedded derivative. They have been valued based on the projected cashflows and applying a probability weighting to the potential cash saving from lower effective interest rates. 1.8.5 Carrying value of investments Determining whether investments in subsidiaries are impaired requires an assessment of impairment indicators and, if indicators exist, and estimation of their recoverable amounts. The calculation of recoverable amount requires the entity to estimate the future cashflows expected to arise from the investments and select a suitable discount rate in order to calculate present value. 2. PROFIT AND LOSS ACCOUNT The loss for the year dealt with in the accounts of the Company was €117.9m (2015: loss of €19.4m). The Company has not presented a separate profit and loss account. The loss in the year relates mainly to the exceptional costs incurred in relation to the acquisition of bwin.party. 3. INVESTMENTS 2016 €m 2015 €m INVESTMENT IN SUBSIDIARY UNDERTAKINGS At 1 January 84.0 148.5 Additions 1,519.9 - Disposals - (64.5) At 31 December 1,603.9 84.0 2016 €m 2015 €m AVAILABLE FOR SALE FINANCIAL ASSETS At 1 January 2.6 3.8 Impairment (0.7) (1.2) Disposal (1.9) - At 31 December - 2.6 Total investments 31 December 1,603.9 86.6 Acquisition of bwin.party On 1 February 2016, the Group acquired 100% of the share capital of bwin.party digital entertainment plc ("bwin.party"), an online gaming company traded on the main market of the London Stock Exchange and listed on the Official List (Premium Segment), for total consideration of €1,506.6m. Share option schemes The Company has further increased its investment of €13.1m in certain subsidiary companies as a consequence of the MIP option scheme (see note 24 of the consolidated group). Available for sale asset On 14 May 2014, the Group acquired a 15% stake in Betit Holdings Limited ("BHL") from Betit Securities Limited ("BSL"). The consideration was for €3.5m, which was attributed to both the available for sale asset (€5.2m) and the option liability (€1.7m) taken on at acquisition. The asset held for sale consideration, together with professional fees incurred at the time, amounted to a total upfront cost of €5.4m which was impaired at 31 December 2015 to €2.6m. This asset was impaired by €0.7m prior to being sold during the year.