LEGO-Group-Annual-Report-2017.pdf

The implementation of ifrs 9 will not affect the

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The implementation of IFRS 9 will not affect the current classification and measurement of the financial instruments in the LEGO Group, and the new standard does not fundamentally change the hedging relationships. The effect of the change from the ‘incurred loss’ model in IAS 39 to the ‘expected credit loss’ model in IFRS 9 has an immaterial impact on the Financial Statements in the LEGO Group. IFRS 15 Revenue from Contracts with Customers IFRS 15 deals with revenue recognition and establishes principles for reporting the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 Revenue. The LEGO Group’s current practice for recognising revenue has proved to comply in all material aspects with the concepts and principles encompassed by the new standard. IFRS 16 Leases The change in lease accounting requires capitalisation of operational lease contracts, which will have an impact on total assets and a corresponding impact on total liabilities. Hence this will affect the financial ratios related to the balance sheet. IFRS 16 requires the lease payment to be split between a depreciation charge included in operating costs and an interest expense on lease liabilities. Note 1. Significant accounting policies 18 Notes The LEGO Group — Annual Report 2017
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Management has performed an initial investigation of the impact on the Consolidated Financial Statements upon adoption of IFRS 16. Based on the contractual obligations at 31 December 2017, an increase in total assets and total liabilities of approximately DKK 2 billion is expected. The adoption of IFRS 16 is not expected to have a material impact on the Income Statement. Consolidation practice The Consolidated Financial Statements comprise LEGO A/S (Parent Company) and the companies in which LEGO A/S directly or indirectly holds more than 50% of the votes or otherwise exercises control (subsidiaries). LEGO A/S and these companies are referred to as the LEGO Group. Subsidiaries are fully consolidated from the date on which control is transferred to the LEGO Group. They are de- consolidated from the date on which control ceases. Associates are all entities over which the LEGO Group has significant influence but not control, and are generally represented by a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated.
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