Annual Report 2018/19

Note 18 - Effects caused by the transition to IFRS 16

Starting 2019 IFRS 16 enters into force; demanding that assets and liabilities attributable to all leasing agreements, with certain exceptions, are accounted for in the balance sheet. This way of accounting is based on the view that the lessee has the right to use an asset for a certain time period and at the same time has an obligation to pay for this right. The new standard is applicable for financial years starting January 1, 2019 or later, the company will apply this standard at the start of the financial year 2019/20, starting September 1, 2019. The standard is adopted by the EU. The standard will primarily affect the Group’s accounting of operational leasing agreements, which mostly includes office rent costs. Leasing commitments will be accounted for to current value and will be reported as fixed asset with the corresponding interest-bearing debt in the balance sheet. In the profits and loss, the leasing cost will be replaced by depreciation and interest cost. The change will cause the assets and the operating result to increase which will affect some KPIs and the Group’s Cash Flow Statement.

In accordance with IFRS 16, the Group is expected to recognise right-of-use assets totalling approximately KSEK 35,000 as of 1 September 2019 and lease liabilities of KSEK 34,000 after adjustments for prepaid lease payments recognised at 31 August 2019. The Group’s initial calculations indicate that IFRS 16 will have a minimal impact on operating profit and a minimal impact on profit after financial items. A few additional disclosures will be added to the 2019/20 Annual Report.

The Group will apply the standard from the application date, 1 September 2019. The Group intends to apply the simplified transition approach and will not restate the comparative figures. All right-of-use assets will be measured at an amount corresponding to the lease liability adjusted for prepaid lease payments attributable to the lease as at 31 August 2019. The only exceptions are short-term and low-value leases. In conjunction with the transition, the following practical exemption rules have been applied: the same discount rate has been used in lease portfolios with similar characteristics, and the right-of-use period has been determined using knowledge after the fact as regards, for example, extension options and cancellation clauses.

Adjustment 1 September 2019 
Tangible non-current assets, rights of use35,000
Prepaid costs-1,000
Leasing liabilities carried interest34,000