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Consolidated Notes

to the Consolidated Financial Statements of InVision AG as of 31 December 2017 in accordance with IFRS and § 315e of the German Commercial Code

General Information

1. General information about the Company

InVision Aktiengesellschaft, Düsseldorf (hereinafter also referred to as “InVision AG” or the “Company”), together with its subsidiaries (hereinafter also referred to as the “InVision Group” or the “Group”), develops and markets products and services for optimising workforce management, increasing the productivity, improving the quality of work, and reducing costs, and is mainly active in Europe and the United States.

The Company’s registered offices are located at Speditionstraße 5, 40221 Düsseldorf, Germany. It is recorded in the Commercial Register of the Local Court of Düsseldorf under registration number HRB 44338. InVision AG has been listed in the prime standard segment of the Frankfurt Stock Exchange under securities identification number 585969 since 18 June 2007.

The IFRS consolidated financial statements are expected to be approved by the Supervisory Board of InVision AG on 21 March 2017 and then cleared for publication on 22 March 2018.

2. Basis of the accounting

Because it is listed on a regulated market, InVision AG prepares its consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS). The consolidated financial statements as of 31 December 2017 were prepared in accordance with the IFRS, which were promulgated by the International Accounting Standards Board (IASB), in force on the balance sheet closing date, and applicable in the European Union. The designation “IFRS” also encompasses the still valid International Accounting Standards (IAS), as well as the interpretations of the Standing Interpretations Committee (SIC) and of the International Financial Reporting Interpretations Committee (IFRIC). The requirements prescribed under § 315e of the German Commercial Code (HGB) must also be observed.

All provisions of the IFRS, IAS, IFRIC and SIC, which are valid for fiscal year ending 31 December 2017, have been applied in the consolidated financial statements.

In fiscal year 2017, the following provisions under the IAS/IFRS/IFRIC were endorsed by the EU for adoption into EU law and/or must be applied for the first time. Most of them have little or no effect on the consolidated financial statements of InVision AG.

IFRS Material effect
Amendments to IAS 12 Recognition of deferred tax assets for unrealised losses None
Amendments to IAS 7 Statement of cash flows relating to liabilities arising from financing activities None

The following amendments of the IASB were not adopted early in the existing consolidated financial statements. Where amendments affect InVision AG, the future effects on the consolidated financial statements are examined. In most of these cases, the EU has also not yet endorsed the amendments.

IFRS Material effect
Amendments to IFRS 10 Consolidated financial statements and IAS 28 Investments in associates and joint ventures (sale or contribution of assets) None
Amendments to IFRS 2 Classification and measurement of share based payment transactions None
Amendments in line with Annual improvements, Cycle 2014-2016 None
Amendments to IAS 40 Transfers of investment property None
IFRIC 22 Foreign currency transactions and advance consideration None
IFRIC 23 Uncertainty over income tax treatments None
Amendments to IFRS 4 Insurance contracts through IFRS 9 None
IFRS 17 Insurance contracts None
Amendments to IAS 28 regarding Long-term investments in associates and joint ventures None
Amendments in line with Annual improvements, Cycle 2015-2017 None
IFRS 9 Financial instruments: Recognition and measurement of financial assets incl. amendments regarding prepayment features with negative compensation None
IFRS 15 Revenue from contracts with customers None
IFRS 16 Leases None

The effects on the consolidated financial statements from the newly issued or revised standards by the IASB, which were not yet mandatory in these financial statements, are currently being examined. However, apart from any extended disclosure requirements, no material impact is expected.

3. Group of consolidated companies

The consolidated financial statements cover InVision AG as well as the following subsidiaries:

  • injixo AG, Zug (previously Cham), Switzerland
  • InVision Software, Inc., Chicago, IL, USA (previously injixo Inc., Naperville, IL, USA)
  • InVision Software Ltd., London, United Kingdom
  • InVision Software SAS, Paris, France
  • InVision Software Systems S.L., Madrid, Spain
  • InVision Software, OÜ, Tallinn, Estonia
  • InVision AG holds a direct 100% ownership interest in each of the consolidated subsidiaries.

4. Consolidation principles

The consolidated financial statements comprise the annual financial statements of InVision AG and its subsidiaries as of 31 December of each fiscal year. The annual financial statements of the subsidiaries are prepared while applying the uniform accounting and valuation methods as of the same balance sheet closing date as the annual financial statements of the parent company.

The balance sheet closing date of all subsidiaries integrated into the consolidated financial statements is 31 December of the applicable fiscal year in question.

All account balances, transactions, income, expenses, profits and losses from intra-group transactions, which are included in the book value of assets, are eliminated in full.

Subsidiaries are fully consolidated as of the date of their formation or acquisition (i.e., as of the date on which the Group acquires control over them), provided that they are not of minor importance for the Group’s net assets, financial position and results of operations. The inclusion of these subsidiaries in the consolidated accounts ends as soon as the parent company’s control no longer exists.

Newly-formed subsidiaries are consolidated using the acquisition method pursuant to IFRS 3. Under that method, acquisition costs of the business combination are apportioned to the identifiable assets, which are acquired, and to the identifiable liabilities, which are assumed, based on their fair values as of the date of acquisition. The expenses and income, which have accrued since the acquisition, are included in consolidated accounts.

Accounting and Valuation Principles

5. In general

The consolidated financial statements were prepared on the basis of historical acquisition or production costs (costs). Historical costs are based in general on the fair value of the consideration paid in exchange for the asset.

The consolidated balance sheet was structured according to short-term and long-term assets and liabilities. The consolidated statement of comprehensive income is prepared using the cost of production method.

6. Reporting currency

The consolidated financial statements are prepared in euro because the majority of the Group transactions are based on that currency. Unless otherwise indicated, all figures herein have been rounded up or down to the nearest thousand (TEUR, T€) in accordance with standard commercial practices. The figures are shown in euro (EUR, €), in thousand euro (TEUR, T€) or in million euro (MEUR, m€).

7. Currency translation

Each company within the Group stipulates its own functional currency. The items reported in the financial statements of each company are valued using that functional currency. Foreign currency transactions are initially converted into the functional currency at the currency spot rate applicable on the date of the transaction.

Monetary assets and liabilities denominated in a foreign currency will be converted into the functional currency at the exchange rate applicable on each relevant reporting date and recognised in the income statement. This treatment does not apply to any exchange rate differences arising from foreign currency transactions, if they are used to hedge a net investment of a foreign operation. These differences are recognised directly in equity capital until the net investment is sold, and recognised in the period results only after such sale. Any deferred taxes resulting from the currency differences of such foreign currency credits will also be recognised directly in equity capital. Non-monetary items, which are valued at historical costs in a foreign currency, are converted at the exchange rate applicable on the date of the transaction. Non-monetary items, which are reported at fair value in a foreign currency, are converted at the exchange rate applicable on the date the fair value was calculated.

Assets and liabilities of foreign operations are converted into euro as of the balance sheet (reporting) date. The conversion of income and expenses shall be made at the average exchange rate for the fiscal year. Any differences resulting from these currency conversions will be booked as a separate component of the equity capital account.

Any goodwill acquired with the purchase of a foreign operation and any adjustments in the book value of the assets and liabilities, which resulted from that transaction in order to accord with fair value, will be converted at the exchange rate applicable on the reporting date.

The following exchange rates were used (per EUR 1.00):

Currency Exchange rate on reporting date 2017 Exchange rate on reporting date 2016 Average annual exchange rate 2017 Average annual exchange rate 2016
USD 1.1979 1.0516 1,1299 1,1068
GBP 0.8877 0.8521 0.8764 0.8186
SEK 9.8333 9.5410 9.6325 9.4604
CHF 1.1693 1.0715 1.1116 1.0898

8. Intangible assets

Acquired intangible assets are valued at the time of their receipt according to their cost of acquisition or cost of production.

Internally produced intangible assets are recognised when they are identified and when it is likely that the group will receive a future economic benefit from the asset and the asset’s acquisition and production costs can be reliably determined. For subsequent valuations, the value of the intangible assets is recognised at the acquisition or production costs of those assets, less the accumulated amortisation and less the accumulated impairment costs (shown under the amortisation item). Intangible assets are amortised on a straight-line basis over their estimated usable life (3 to 15 years). The amortisation period and amortisation method are reviewed at the end of each fiscal year.

When producing new software and further developing existing software, the InVision Group cannot clearly and unequivocally delineate the relevant software because the knowledge and improvements gained from producing new software and from the continued development of existing software are incorporated into other InVision Group products. Since not all criteria were met by 31 December of the fiscal year, no development costs were capitalised.

9. Tangible assets

Tangible assets (land and buildings as well as computer hardware, tenant installations, furnishings and equipment) are recognised at the cost of acquisition or production less the accumulated depreciation. These assets are depreciated on a straight-line basis over the estimated useful life of the individual asset. The useful life for buildings is 9 to 33 years, for computer hardware 3 to 5 years, and for furnishings and equipment, 5 to 13 years. Tenant installations are depreciated over the term of the lease or over their useful life, if that period is shorter.

Subsequent expenditures made for a tangible asset are recognised at the costs of acquisition, if it is likely that the Group will receive a future economic benefit from it, and the costs for the asset can be reliably determined. Costs for repairs and maintenance, which do not increase the estimated useful life of the tangible asset, are recognised in the period in which they are incurred and are reported on the income statement.

10. Accounting for leases

The determination of whether a contract is or contains a lease is made on the basis of the economic content of the contract, and requires an assessment about whether the fulfilment of the contract depends on the use of a specific asset or assets and whether the contract grants a right to use the asset.

The Group acts as lessee only.

Any asset under a finance lease, according to which virtually all property-related risks and opportunities relating to the transferred asset are transferred to the Group, is recognised as an asset at the commencement of the lease term and valued at the lower of the then-current fair market value of the asset or the present cash value of the minimum lease payments to be made thereunder. These assets are subject to scheduled depreciation over the shorter of the two aforementioned time periods: i.e., the term of the lease or the economic useful life of the leased property. Lease payments are separated into their components of either financing costs and amortisation of the lease obligation in such a manner that the remaining residual book value of the lease will incur a constant rate of interest. The remaining leasing obligations as of the balance sheet closing date are itemised in the balance sheet according to their remaining terms to maturity.

Lease payments under operating leases are booked in the income statement as expenses arising over the term of the lease.

11. Borrowing costs

Borrowing costs are recognised as an expense in the period in which they are incurred, unless the borrowing costs were incurred for the purchase, construction or production of qualified assets. In that case, the borrowing costs will be added to the production costs for such assets. During the fiscal year, the InVision Group had neither acquired nor produced qualified assets.

12. Impairment of non-financial assets

Non-financial assets are tested for impairment if facts or changes in circumstances suggest that the book value of an asset might no longer be recoverable. For the impairment test, the recoverable amount of the asset or the cash-generating unit must be determined. The recoverable amount is either the fair value less the costs to sell or the value in use, whichever value is higher. The fair value less the costs to sell is defined as the price which two informed, contractually-willing and independent business partners could achieve (less the cost to sell) when selling an asset or a cash-generating unit. The value in use of an asset or a cash-generating unit is calculated by determining the present cash value of the estimated future cash flow based on the current use of the asset or unit. If the recoverable value is less than the book value, then the difference will be immediately written off and entered in the income statement.

The impairment of a particular asset (except for goodwill), which had been previously recognised to profit and loss, will be reversed, if there is evidence that the impairment no longer exists or that the amount of the impairment has declined. The recoverable amount will be recognised as income in the income statement. The recoverable amount (or the reduction in the amount of the impairment) of an asset will be recognised, however, only to the extent that it does not exceed the book value, which would have resulted had no impairment been previously recognised (including the effects from amortisation or depreciation).

13. Financial investments and other financial assets

Financial assets within the meaning of IAS39 are either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale financial assets. Financial assets will be measured at fair value the first time they are recognised.

The classification of the financial assets into the measurement categories depends on their nature and their purpose of use, and will be made upon their initial recognition. To the extent it permissible and required, reclassifications are made at the end of the fiscal year.

All standard market purchases and sales of financial assets are recognised on the trade date; in other words, on the day on which the Group has entered into the obligation to purchase or sell the asset. Standard market purchases and sales are purchases and sales of financial assets, which prescribe the delivery of assets within a period of time that is set by market rules or market conventions.

Extended loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market. These assets are measured at amortised costs using the effective interest method. Any gains or losses are recognised in the results for the period, if the loans and receivables have been derecognised or impaired or it has been done in connection with amortisation.

Financial assets are tested for impairment as of each balance sheet date. If it is likely that with respect to financial assets recognised at their amortised costs, the Company will be unable to collect all of the amounts, which are owed under loans, receivables or held-to-maturity investments pursuant to applicable contract terms and conditions, an impairment or write-down of the receivables will be recognised on the income statement. The impairment loss is defined as the difference between the asset’s book value and the present cash value of the anticipated future cash flows calculated using the effective interest method. The book value of the asset is reduced using a value adjustment account. The impairment loss will be recognised on the income statement. An impairment previously recognised as a cost will be reversed into income on the income statement, if some of the value subsequently recovered (or a reduction in the impairment amount) can be objectively attributed to the set of facts that transpired following the original impairment. Any recovered value will be recognised, however, only to the extent that it does not exceed the amount of the amortised cost which would have resulted had the impairment not occurred. The financial asset will be derecognised, if it is classified as non-recoverable.

As in the previous year, the book values of the assets and liabilities for the most part match their fair values.

14. Short-term financial assets

Short-term financial assets comprise accounts receivable and other receivables. A bad debt allowances for accounts receivable will be made if it is likely that the total amount of the original invoice cannot be collected. The amount of the bad debt allowances will be the face value of the account less the realisable amount that equals the present cash value of the anticipated cash flows.

15. Other short-term assets

Assets are recognised at their face or nominal value, but will be separately discounted in value if they are subject to identifiable risks.

16. Cash and cash equivalents

Cash and cash equivalents consist of credit balances held with financial institutions as well as securities which may be redeemed for cash on short notice. These credit balances held with financial institutions are measured at face or nominal value.

17. Taxes

The actual tax refund claims and tax debts for the current period and for earlier periods must be valued at the amount at which a refund is expected from the tax authorities or a payment must be made to the tax authorities.

Deferred taxes are recognised under the liabilities method for all temporary differences between the tax basis of the assets / liabilities and their respective book values in the IFRS financial statements.

Deferred taxes are valued according to the tax rates (and tax regulations), which are effective as of the balance sheet closing date or which have for the most part been enacted into law, and which are expected to be valid and binding on the date the deferred tax receivable is realised and/or the deferred tax liability is settled.

Deferred tax receivables, including those on losses carried forward, are recognised in an amount at which it is likely that taxable income will be available for crediting against the temporary differences.

The valuation of deferred tax assets for loss carry-forwards and for deductible temporary differences depends on the future taxable earnings of the InVision Group companies. The estimate regarding such taxable earnings is made as of the balance sheet date taking into account the respective business perspectives. For purposes of capitalising deferred taxes based on the losses carried forward, only those tax loss carry-forwards will be recognised, which are very likely to be applied.

18. Provisions

A provision is shown only if the Company has a present, statutory or de facto obligation (liability) based a past event, if it is likely that the fulfilment of the obligation will lead to an outflow of funds representing an economic benefit, and if a reliable estimate of the amount of the obligation can be made. If no provision could be created because one of the criteria mentioned was not fulfilled, then the liabilities in question will be reported as contingent liabilities.

Provisions are examined on each balance sheet closing date and adjusted to accord with the best estimate as of that date. If there is an expectation that the expenditures, which are required to satisfy a deferred liability, will be reimbursed either in whole or in part by another party, then the reimbursement will be recognised only when it is nearly certain that the Group will receive the reimbursement.

19. Liabilities

Liabilities comprise long-term liabilities to financial institutions, trade payables, tax liabilities, interest owed, liabilities owed to employees, and other liabilities. When such items are recognised for the first time, they are booked at their cost of acquisition, which corresponds to the fair value of the consideration received. All liabilities are measured in subsequent years at the adjusted cost of acquisition under the effective interest method. The liability is derecognised when it has been settled, cancelled or expired.

20. Revenue and cost recognition

The InVision Group’s revenues are generated primarily by providing the following services:

Temporary use of software-based services and content (subscriptions and single use) Projects comprising the perpetual (duration unrestricted) transfer of rights to use software products (licences) as well as related services The revenues are reported less any early payment discounts, customer bonuses and rebates. Agreements with several components (e.g. subscriptions and services) are internally allocated to their individual components, and revenues are recognised on the basis of those individual components.

Revenues are generally recognised when the sales price is determined or determinable, no significant duties exist and the collection of the receivables is likely. Income from subscriptions is recognised on a straight-line basis pro rata temporis throughout the period of time for which they were calculated. Income from projects are recognised as soon as the service is provided. Income from single use is recognised at the time of the granting of the possibility of use. Income from the perpetual transfer of rights of use is generally recognised as soon as the relevant licence key is delivered.

Costs are recognised when the good or service is used or at the time they were generated. Interest is recognised as either an expense and/or income according to the period in which it arose under the effective interest method. Rental payment costs under operating leases are likewise recognised on a straight-line basis over the entire term of the lease, irrespective of the payment arrangements made under such leases.

21. Contingent liabilities and contingent receivables

Contingent liabilities are either potential obligations, which could result in an outflow of resources but the existence of which must be confirmed through the occurrence or non-occurrence of one or more future events, or current obligations, which do not satisfy the recognition criteria of the liability. These items are listed separately in the notes, unless the possibility that resources with economic benefits will be lost is unlikely. There were no contingent liabilities in the fiscal year.

In connection with business combinations, contingent liabilities are recorded as liabilities on the balance sheet pursuant to IFRS3.37, if the fair value can be reliably calculated.

Contingent receivables are not recognised in the financial statements. They are, however, listed in the notes, if the receipt of economic benefits is likely.

22. Management discretion and the main sources of forecasting uncertainty

When preparing the consolidated financial statements, some assumptions and estimates must be made, which have an effect on the amount and reporting of the recognised assets and liabilities, the income and expenses, and the contingent liabilities for the reporting period. These assumptions relate primarily to the assessment of the carrying value of assets, the assessment of deferred tax assets, uniform group determination of the economic useful lives of tangible assets, and the recognition and measurement of provisions. The assumptions and estimates are based on premises delivered from available information at the time in question. The basis for the anticipated future business development is the circumstances present at the time the consolidated financial statements are prepared in a realistic scenario of the future development of the overall environment. If these overall conditions deviate from the assumptions made and cannot be influenced by management, then the resulting figures could deviate from the originally anticipated estimates.

Notes to the Consolidated Balance Sheet

23. Liquid funds (cash and cash equivalents)

Liquid funds contain only those payment instruments, which have a term to maturity of less than three months calculated from the date of purchase. As in the previous year, cash and cash equivalents consist solely of credit balances held with financial institutions.

24. Trade receivables

Trade receivables (net) have a term to maturity of up to one year, they are adjusted when needed and consist of the following items:

  31 Dec 2017 31 Dec 2016
Trade receivables 1,292 1,455
Bad debt allowances -23 -40
Total 1,269 1,415

25. Income tax claims

The income tax claims include refund claims of InVision Software Ltd., London, United Kingdom.

26. Prepaid expenses and other short-term assets

  31 Dec 2017 31 Dec 2016
Prepaid and deferred items 189 164
Other miscellaneous assets 7 154
Total 196 318

The deferred income mainly consists of prepayments for trade show participations and for annual insurance for the following financial year.

27. Intangible assets

Intangible assets consist primarily of software and industrial property rights acquired in exchange for consideration. These assets are valued at their historical cost of acquisition, less the scheduled amortisation. With respect to scheduled amortisation, the software acquired in exchange for consideration and the industrial property rights were amortised over their expected useful lives (3 to 15 years).

28. Tangible assets

The breakdown of tangible assets is as follows:

  31 Dec 2017 31 Dec 2016
Land and property / Buildings 7,698 7,881
Other miscellaneous assets 1,871 1,585
Total 9,569 9,466

Tangible assets are recognised at their historical costs of acquisition, less any scheduled depreciation if the assets are subject to wear and tear. Tangible assets are depreciated on a straight-line basis over their useful lives (3 to 33 years). The carrying value of the tangible assets is subject to impairment testing. None of the assets have been subject to non-scheduled depreciation.

29. Development of the long-term assets

Fiscal year 2017 01 Jan 2017 Additions Disposals Currency differences 31 Dec 2017
Concessions, industrial property rights and similar rights and assets as well as licences to such rights and assets          
Gross 1,332 1 0 -86 1,247
Value adjustment 900 45 0 -36 909
Net 432 -44 0 -50 338
Other equipment, furnishings and office equipment          
Gross 10,560 578 86 -10 11,042
Value adjustment 1,094 469 84 -6 1,473
Net 9,466 109 2 -4 9,569
Total long-term assets          
Gross 11,892 579 86 -96 12,289
Value adjustment 1,994 514 84 -42 2,382
Net 9,898 65 2 -54 9,907
Fiscal year 2016 01 Jan 2016 Additions Disposals Currency differences 31 Dec 2016
Concessions, industrial property rights and similar rights and assets as well as licences to such rights and assets          
Gross 1,309 1 0 22 1,332
Value adjustment 726 166 0 8 900
Net 583 -165 0 14 432
Other equipment, furnishings and office equipment          
Gross 9,534 1,138 96 -16 10,560
Value adjustment 725 461 83 -9 1,094
Net 8,809 677 13 -7 9,466
Total long-term assets          
Gross 10,843 1,139 96 6 11,892
Value adjustment 1,451 627 83 -1 1,994
Net 9,392 512 13 7 9,898

30. Deferred taxes

The following table sets forth the status of the deferred tax assets according to the balance sheet items:

  31 Dec 2017 31 Dec 2016
Deferred taxes based on temporary differences from licence valuations 39 59
Deferred taxes based on losses carried forward 0 95
Total 39 154

The Group’s tax losses carried forward totalled TEUR 8,466 (previous year: TEUR 9,080). Profits in the current financial year were used to offset existing losses carried forward and deferred taxes in the amount of TEUR 95 recognised in the previous year. For the above mentioned losses carried forward in the amount of TEUR 8,466 no deferred taxes were recognised. Valued at individual tax rates, deferred taxes of up to TEUR 2,016 could have been recognised.

31. Other long-term assets

Other long-term assets consist only of security deposits paid for leased office space.

32. Research and development

The expenses for research and development totalled TEUR 7,486 (previous year: TEUR 5,459) in the fiscal year.

33. Short-term Liabilities

The short-term liabilities are allocated as follows:

  2017 2016
Trade payables 170 149
Provisions 256 169
Income tax liabilities 406 922
Deferred income 779 1,400
Other liabilities 193 236
Total 1,804 2,876

The deferred income items involve previously recognised invoiced amounts for subscription services for the respective next year.

34. Income tax liabilities and provisions

Income tax liabilities and provisions developed as follows:

  01 Jan 2017 Utilisation Reversal Allocation Currency Difference 31 Dec 2017
Income tax liabilities 922 860 61 409 -4 406
Provisions for:            
- Personnel expenses 40 40 0 104 0 104
- Annual accounts costs 82 80 2 79 0 79
- Outstanding invoices 16 14 2 14 0 14
- Trade associations 13 12 1 17 0 17
- Other 18 14 0 38 0 42
Total provisions 169 160 5 252 0 256
Total 1,091 1,020 66 661 -4 662

Provisions for personnel expenses primarily relate to outstanding holiday entitlements.

  01 Jan 2016 Utilisation Reversal Allocation Currency Difference 31 Dec 2016
Income tax liabilities 21 19 2 922 0 922
Provisions for:            
- Personnel expenses 50 50 0 40 0 40
- Annual accounts costs 97 94 1 82 -2 82
- Outstanding invoices 48 45 0 16 -3 16
- Trade associations 14 12 2 13 0 13
- Other 418 36 379 18 -3 18
Total provisions 627 237 382 169 -8 169
Total 648 256 384 1,091 -8 1,091

36. Deferred income and other liabilities

Deferred income and other liabilities are short-term and are allocated as follows:

  2017 2016
Deferred income 779 1,400
Payroll tax 93 108
Value added tax 46 79
Social security charges 37 49
Other miscellaneous liabilities 16 0
Total 971 1,636

36. Long-term Liabilities

As of 31 December 2017, the bank loan in the amount of TEUR 4,000 that was raised in 2014 to finance a commercial property for own use was reduced by scheduled payments to TEUR 1,500. It is secured by mortgages. The scheduled fourth repayment installment of 2017 fiscal year in the amount of TEUR 250 was debited on 2 January 2018. In addition to this rate of TEUR 250 another amount of TEUR 1,000 of this long-term loan will be repaid in 2018 fiscal year.

37. Subscribed capital

The registered share capital of InVision AG is reported as the subscribed capital. The subscribed capital is divided into 2,235,000 no-par value shares (Stückaktie), each such share representing a notional amount of EUR 1.00 of the Company’s registered share capital. At the end of the reporting period, the Company holds no treasury shares.

The Executive Board is authorised, with the consent of the Supervisory Board, to increase the registered share capital one or more times by up to EUR 1,117,500 (Authorised Capital Account 2015) on or before 17 May 2020.

Pursuant to the shareholder resolution adopted on 18 May 2015, the registered share capital was conditionally increased by up to EUR 1,117,500 (Conditional Capital Account 2015). Pursuant to a shareholder resolution also adopted on 18 May 2015, the Company was authorised to buy-back its own shares in a quantity representing up to 10 percent of the registered share capital as it existed at the time the resolution was adopted. The authorisation will remain in effect until 17 May 2020.

38. Reserves

The reserves include net proceeds, IPO costs (while factoring in tax effects), purchase and sale of the Company’s own treasury shares and capital increases from company funds.

39. Equity capital difference based on currency conversion

The equity difference from currency conversion is a result of converting on the basis of the modified closing date method [modifizierte Stichtagsmethode]. The difference arises from conversion of the items on the income statement of those subsidiaries, which rendered their accounts in a foreign currency, at the average exchange rate and the conversion of the items of equity capital of those subsidiaries at the historical rate of the initial consolidation, on the one hand, and the exchange rate on the reporting date [Stichtagskurs] for the conversion of other assets and liabilities, on the other hand.

Notes to the Consolidated Statement of Comprehensive Income

40. Revenues

Revenues are categorised as follows:

By Business Activities 2017 2016
WFM Subscriptions 11,298 10,709
- thereof InVision WFM 8,025 7,961
- thereof injixo 3,273 2,748
The Call Center School 714 599
Other Revenues 1,151 1,118
- thereof WFM Licences 1,062 829
- thereof Project Services 89 289
Total 13,163 12,426

There is an integrated sales and marketing organisation for all products and services of the Group. Thus, a categorisation of revenues by regions was not carried out.

41. Other operating income

Other operating income is broken down as follows:

  2017 2016
Insurance compensation 0 275
Reduction of bad debt allowances 8 41
Income attributable to other periods 5 20
Income from property 3 4
Other miscellaneous income 75 68
Total 91 408

42. Cost of materials

The costs of materials incurred are project-specific goods and services supplied by independent enterprises.

43. Personnel expenses

Personnel expenses consisted of the following:

  2017 2016
Wages and salaries 6,857 5,183
Social charges and other pension provisions 1,228 922
Total 8,085 6,105
- of which for pensions (direct insurance) 65 55

The direct insurance policies are classified as a defined contribution plan.

44. Depreciation and amortisation of tangible and intangible assets

No tangible or intangible assets were subject to impairment. Thus, only scheduled amortisation and depreciation is shown under this item.

45. Other operating expenses

Other operating expenses are itemised as follows:

  2017 2016
Cloud services 816 613
Office space expenses 460 557
Travel expenses 370 202
Marketing and advertising costs 343 305
Other personnel expenses 268 180
Consulting costs 238 220
Recruitment costs 114 46
Communication expenses 113 96
Receivable write-offs and bad debt allowances 31 31
Other miscellaneous expenses 390 24
Total 3,143 2,274

46. Financial result

The financial result is divided into the following

  2017 2016
Interest and similar expenses -27 -40

Debt capital costs are recognised as an expense in the period in which they are incurred.

47. Income taxes

Income taxes are divided as follows:

  2017 2016
Income tax 322 922
Deferred tax 115 233
Total 437 1,155

Detailed information about the deferred tax assets and liabilities, which must be set aside, can be found in note 30 above. The basis, upon which the deferred taxes were set aside, is an income tax rate of 30 percent for the domestic corporation and the future local tax rate for the foreign subsidiaries. It is also assumed that on the basis of the current tax legislation, any existing tax loss carry-forwards may continue to be used indefinitely into the future. The reduction of deferred tax assets from the recognised tax losses carried forward resulted in tax expenses of TEUR 95 compared to the end of the previous fiscal year.

The actual tax rate is computed as follows:

  2017 2016
Consolidated net income before taxes 1,322 3,483
Income tax 437 1,155
Actual tax rate 33% 33%

The difference between the theoretical income tax expense (when applying the tax rate applicable to the InVision Group) and the reported income tax expense may be attributed to the following causes:

  2017 2016
Result before income tax 1,322 3,483
Theoretical income tax expense based on the tax rate of the parent company 397 1,045
Effects of losses carried forward -374 136
International tax rate differences 387 -582
Other tax effects 27 556
Total 437 1,155

The other tax effects include the charge against dividend distribution of TEUR 21 for InVision Software OÜ, Tallinn, Estonia. The previous year’s reference value also included a charge against dividend distribution of TEUR 668 for InVision Software OÜ, Tallinn, Estonia. The effects of losses carried forward in 2017 fiscal year result from the utilisation of deferred tax assets that were not capitalised in previous years. The change in the position International tax rate differences primarily results from the changed earnings situation of the subsidiary injixo AG, Zug, Switzerland.

Notes to the Consolidated Cash Flow Statement

The cash flow statement shows changes in the cash position of the InVision Group in the fiscal year due to incoming and outgoing cash payments. Under IAS7, cash flow is distinguished between cash flow from operating activities, cash flow from investing activities and cash flow from financing activities.

The net financial position, as reflected in the cash flow statement, consists of all liquid funds, which are reported on the balance sheet (i.e., cash on hand and credit balances at financial institutions) and which can be reduced to cash within three months (calculated from the date acquired) without causing any significant fluctuation in value, less any short-term financial liabilities. The cash flows from investing and financing activities are computed directly (i.e., on a cash basis). In contrast, cash flow from operating activities is derived indirectly from the results for the period. Cash flow from operating activities includes the following incoming and outgoing payments:

  2017 2016
Interest paid -27 -40
Income taxes received 7 82
Income taxes paid -880 -16

The net financial position shown in the cash flow statement represents total liquid funds as reported in the consolidated cash flow statement.

Other Information

48. Miscellaneous financial obligations

As of the balance sheet closing date, rental obligations for office space arised for the following amounts:

  < 1 year 1 to 5 years > 5 years Total
Rental obligations 359 1,414 1,012 2,785

49. Financial assets and liabilities

The financial liabilities existing in the Group are a bank loan for financing a commercial property for own use and short-term liabilities arising from accounts payable. The significant financial assets of the Group consist of cash and cash equivalents and accounts receivable. The book value of these positions, represents the maximum default risk and totals TEUR 3,479 (previous year: TEUR 5,424). Business relationships are established with creditworthy contracting parties (counter-parties) only. In order to evaluate the creditworthiness of counter-parties (above all, large customers), the Group relies on available financial information and on its own internal trading records. The Group holds trade receivables against a number of customers from a wide range of industries and regions. Credit assessments regarding the financial strength of the receivables are constantly performed. The typical terms of payment granted (with no discounts or deductions) are 30 days. With respect to all trade receivables, which were overdue by more than 45 days as of the balance sheet date and involve a default risk, bad debt allowances were created.

Neither in 2017 nor in 2016 did the Company hold any assets for trading purposes and any financial liabilities, which were recognised in the income statement at their fair value. The Group also did not execute any derivatives or hedging transactions. Reclassifications were not made either in 2017 or in 2016.

There were no significant differences between the book value of the financial assets and liabilities reported and the fair values.

50. Capital risk management

The Group manages its capital (equity capital plus debt capital less cash and cash equivalents) with the goal of using financial flexibility to achieve its growth targets while at the same time optimising its financing costs. The overall capital management strategy has remained the same as in the previous year.

Management reviews the capital structure at least once each half-year. The review covers the costs of capital, the security and collateral provided, and the open credit lines and credit opportunities.

During the reporting year, the capital structure may be shown as follows:

  31 Dec 2017 31 Dec 2016
Equity capital 10,380 10,697
- as a percentage of total capital 76% 68%
Liabilities 3,303 5,126
- as a percentage of total capital 24% 32%
Short-term liabilities 1,804 2,876
- as a percentage of total capital 13% 18%
Net gearing* 11% 10%

(*) calculated as the ratio of liabilities (less any cash and cash equivalents) to equity capital

The Group’s equity ratio target is 50 percent.

51. Finance risk management

The monitoring of finance risk is handled by management on a centralised basis. Individual financial risks are generally reviewed at least once each quarter.

The Group’s primary risks resulting from financial instruments involve liquidity and credit risks. As a rule, business transactions are executed only with creditworthy contracting parties. Moreover, the amounts of any receivables are constantly monitored in order to avoid exposing the InVision Group to any significant credit risk. The maximum default risk is limited to the book value of the asset as reported in the balance sheet.

The Group manages liquidity risks by holding adequate reserves, monitoring and maintaining credit agreements, and planning and coordinating incoming and outgoing payments.

52. Market risks

Market risks can arise from changes in exchange rates (currency risk) or interest rates (interest risk). Given the limited relevance these risks have for the Group, the Group has not heretofore hedged such risks using derivative financial instruments. These risks are managed through constant monitoring. Currency risks are largely avoided by virtue of the fact that the Group invoices primarily in euro or in the local currency. As of the balance sheet date, the receivables denominated in foreign currencies equalled TEUR 379 (previous year: TEUR 296) and the payables denominated in foreign currencies equalled TEUR 61 (previous year: TEUR 47). Had the euro appreciated by 10 percent compared to other currencies relevant to the Group as of 31 December 2017, then the pre-tax result would have been TEUR 25 (previous year: TEUR 25) lower.

There were no transactions involving goods and services between closely related enterprises and persons, neither in the reporting period or the previous year.

54. Events after the balance sheet closing date

After the close of the fiscal year, no further specific transactions occurred, which would be of material importance for the consolidated financial statements.

55. Number of employees

In 2017 fiscal year, the Company employed on average 124 employees (previous year: 93), not including the Executive Board.

56. Information on the Company’s governing bodies

The following persons were members of the Executive Board in the fiscal year:

  • Peter Bollenbeck (Chairman), Düsseldorf
  • Armand Zohari, Bochum

In the fiscal year, the Executive Board members received the following remuneration benefits:

In EUR 2017 2016
Peter Bollenbeck 207,949 207,822
of which fixed salary 180,000 180,000
of which other benefits 27,949 27,822
Armand Zohari 174,025 207,926
of which fixed salary 150,000 180,000
of which other benefits 24,025 27,926
Total remuneration Executive Board 381,974 415,748

On 1 October 2017, the remuneration of Armand Zohari was adjusted due to a change in his area of responsibility. At the balance sheet date, the Executive Board holds, either directly or indirectly, 40.0 percent of the Company’s registered share capital (31 December 2016: 56.3 percent).

The Supervisory Board consists of:

  • Dr. Thomas Hermes (Chairman), Attorney at Law and Notary, Essen
  • Matthias Schroer (Deputy Chairman), Entrepreneur, Rosenheim
  • Prof. Dr. Wilhelm Mülder, University Professor, Essen

Dr. Thomas Hermes is the supervisory board chairman of the registered housing association known as Wohnungsgenossenschaft Essen-Nord e.G., Essen, member of the supervisory board of Rot-Weiss Essen e.V., member of the respective board of trustees of Politisches Forum Ruhr e.V., Essen, and of Sankt-Clemens-Maria-Hofbauer-Stiftung, Essen. Matthias Schroer and Prof. Dr. Wilhelm Mülder do not sit on any other supervisory boards.

The remuneration benefits paid to the Supervisory Board in the fiscal year consist of the following:

In EUR 2017 2016
Dr. Thomas Hermes 12,000 12,000
of which fixed compensation 10,000 10,000
of which meeting fees and expenditures 2,000 2,000
Matthias Schroer 9,500 9,500
of which fixed compensation 7,500 7,500
of which meeting fees and expenditures 2,000 2,000
Prof. Dr. Wilhelm Mülder 7,000 7,000
of which fixed compensation 5,000 5,000
of which meeting fees and expenditures 2,000 2,000
Total compensation Supervisory Board 28,500 28,500

Otherwise in the fiscal year, the Supervisory Board members were not granted any loans or provided any advances for future payments, and no contingent liabilities were incurred for the benefit of such persons.

57. Information on the fees of the Company auditors

The fee for the Company’s annual accounts auditor, which was recognised for fiscal year 2017, consists of the following:

  2017 2016
Auditing service for the annual accounts 48 50
Tax advisory services 8 18
Total 56 68

58. Information on segment reporting

Since the internal and external business processes for all products and services are to the largest extent identical, they collectively represent a single operating segment within the meaning of IFRS8.

59. Proposal for the Appropriation of Profit

The Executive Board and the Supervisory Board propose to carry forward the net profit to new account.

60. Statement under § 161 of the German Stock Corporation Act

On 26 January 2018, the Executive Board and Supervisory Board issued a statement under § 161 of the German Stock Corporation Act regarding the extent to which it has elected to comply with the recommendations of the “Government Commission of the German Corporate Governance Code” and published this statement on the Internet at Investors.

61. Responsibility statement by the Executive Board

To the best of our knowledge and in accordance with the applicable reporting principles for financial reporting, the consolidated financial statements give a true and fair view of the Group’s assets, liabilities, financial position and results of operation, and the Group’s management report includes a fair review of the development and performance of the business, together with a description of the principal opportunities and risks related to the anticipated development of the Group for the remainder of the fiscal year.

Düsseldorf, 16 March 2018

Peter Bollenbeck
Armand Zohari