LEGO-Group-Annual-Report-2017.pdf

Cash flow hedge the gain or loss relating to the

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Cash flow hedge The gain or loss relating to the ineffective portion is recognised immediately in the income statement within financial items. Amounts accumulated in comprehensive income are reclassified to the income statement in the period when the hedged item affects the income statement. Other derivatives Changes to the fair value of other derivatives are recog- nised in the financial income or expenses. Income statement Recognition of sales and revenues Sales represent the fair value of the sale of goods excluding value added tax and after deduction of provisions for returned products, rebates and trade discounts relating to the sale. Provisions and accruals for rebates to customers are made in the period in which the related sales are recorded. Historical data are readily available and reliable and are used for estimating the amount of the reduction in sales. Revenues from the sale of goods are recognised when all the following specific conditions have been met and the control over the goods has been transferred to the buyer. Significant risks and rewards of ownership of the goods have been transferred to the buyer. The revenues can be measured reliably. It is probable that the economic benefits associated with the transaction will flow to the LEGO Group. Costs incurred or to be incurred in respect of the transaction can be measured reliably. These conditions are usually met by the time the products are delivered to the customers. Licence fees are recognised on an accrual basis in accord- ance with the relevant agreements. Revenues are measured at the fair value of the consideration received or receivable. Sale of goods that results in award credits under the LEGO Group’s consumer loyalty programme, is accounted for as a multiple element revenue transaction and allocated between the goods supplied and the award credits granted. Deferred Revenue Revenue attributable to gift cards and awarded credits granted is deferred and recognised as revenue when the gift cards and award credits are redeemed and the LEGO Group’s obligations have been fulfilled. Prepaid licence fee is recognised as deferred revenue until the criteria and conditions for revenue recognition in relevant agreements are met. Production costs Production costs comprise costs incurred to achieve revenue for the year. Costs comprise raw materials, consumables, direct labour costs and indirect production costs such as maintenance and depreciation, etc. Administrative expenses Administrative expenses comprise expenses for Manage- ment, administrative staff, office expenses, depreciation, etc. Sales and distribution expenses Sales and distribution expenses comprise costs in the form of salaries to sales and distribution staff, advertising and marketing expenses as well as depreciation, etc.
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