Explanatory Notes
to the Consolidated Interim Statements of InVision AG as of 30 September 2019 (condensed/unaudited)
Effects of New IFRS
In January 2016, the IASB published the new standard IFRS 16 “Leases”, which in particular replaces the previous leasing standard IAS 17 and the related interpretations. The new standard introduces a uniform lease accounting model for lessees, under which rights of use and liabilities for all lease agreements with a term of more than twelve months are to be accounted for, unless they are immaterial. A distinction is no longer made for lessees between operating leases, in which assets and liabilities are not recognized, and finance leases.
The InVision Group applied IFRS 16 for the first time at the beginning of the 2019 fiscal year. As part of the transition, the InVision Group decided to apply the modified retrospective approach. As a result, the previous year’s figures do not have to be adjusted. Instead, the cumulative effect of the first-time application of the standard has to be recognised by adjusting retained earnings. Since the first-time application of IFRS 16 primarily relates to a new lease agreement concluded at the beginning of fiscal year 2019 for the office facilities in Leipzig, the retained earnings were not adjusted for materiality reasons.
Instead of the rental obligations for office space previously reported under other financial obligations, the application of IFRS 16 leads to an increase in non-current assets due to the recognition of rights of use. The rights of use are depreciated on a straight-line basis over the shorter of the useful life and the lease term. Financial liabilities also increase due to the recognition of corresponding lease liabilities. These liabilities are measured at the discounted value of the remaining lease payments at the lessee’s marginal borrowing rate as of September 30, 2019. The weighted average borrowing rate of the InVision Group, which was applied to the lease liabilities as of 30 September 2019, is 1.42%. Each lease payment is divided into repayment and financing expenses. Finance expenses are recognised in the income statement over the term of the lease so that there is a constant periodic interest rate on the remaining amount of the liability for each period.
Under otherwise identical conditions, the increase in the balance sheet total leads to a reduction in the equity ratio of the InVision Group.
The following tables show the main effects of the new IFRS 16 accounting standards for the classification and measurement of rights of use and for the recognition of current and non-current lease liabilities for the first three quarters of the fiscal year 2019.
Effects of the first-time application of IFRS 16 on the consolidated balance sheet
IFRS, in Euro
| Carrying amount in accordance with IAS 17 |
Application of IFRS 16 |
Carrying amount in accordance with IFRS 16 |
|
|---|---|---|---|
| Assets | 30 Sep 2019 | 30 Sep 2019 | |
| A. Short-term assets | |||
| 1. Liquid funds | 3,602,497 | 3,602,497 | |
| 2. Trade receivables | 863,407 | 863,407 | |
| 3. Income tax claims | 0 | 0 | |
| 4. Prepaid expenses and other short-term assets | 214,428 | 214,428 | |
| Total short-term assets | 4,680,332 | 4,680,332 | |
| B. Long-term assets | |||
| 1. Intangible assets | 316,217 | 1,561,727 | 1,877,944 |
| 2. Tangible assets | 9,036,108 | 9,036,108 | |
| 3. Deferred taxes | 4,914 | 4,914 | |
| 4. Other long-term assets | 17,502 | 17,502 | |
| Total long-term assets | 9,374,741 | 1,561,727 | 10,936,468 |
| Total assets | 14,055,073 | 1,561,727 | 15,616,800 |
| Carrying amount in accordance with IAS 17 |
Application of IFRS 16 |
Carrying amount in accordance with IFRS 16 |
|
|---|---|---|---|
| Equity and liabilities | 30 Sep 2019 | 30 Sep 2019 | |
| A. Short-term liabilities | |||
| 1. Financial Liabilities | 0 | 176,504 | 176,504 |
| 2. Trade payables | 194,322 | 194,322 | |
| 3. Provisions | 198,290 | 198,290 | |
| 4. Income tax liabilities | 113,516 | 113,516 | |
| 5. Short-term share of deferred income and other short-term liabilities | 1,772,984 | 1,772,984 | |
| Total short-term liabilities | 2,279,112 | 176,504 | 2,455,616 |
| B. Long-term liabilities | |||
| Financial Liabilities | 1,000,000 | 1,399,531 | 2,399,531 |
| Total long-term liabilities | 1,000,000 | 1,399,531 | 2,399,531 |
| C. Equity | |||
| 1. Subscribed capital | 2,235,000 | 2,235,000 | |
| 2. Reserves | 1,191,184 | 1,191,184 | |
| 3. Equity capital difference from currency translation | -381,853 | -381,853 | |
| 4. Group/consolidated result | 7,731,630 | -14,308 | 7,717,322 |
| Total equity | 10,775,961 | -14,308 | 10,761,653 |
| Total equity and liabilities | 14,055,073 | 1,561,727 | 15,616,800 |
With regard to the statement of comprehensive income, instead of the previous rents/operating leases, the depreciation of rights of use and the interest expenses for liabilities will in future be reported under other operating expenses under IFRS 16. This will have a positive impact on operating expenses and consequently on the operating result (EBIT) and finance expenses will increase as a result of additional interest expenses. Overall, only insignificant effects on profit before taxes, profit after taxes and earnings per share are expected.
Effects of the first-time application of IFRS 16 on the consolidated statement of comprehensive income
IFRS, in Euro
| Carrying amount in accordance with IAS 17 |
Application of IFRS 16 |
Carrying amount in accordance with IFRS 16 |
|
|---|---|---|---|
| 1 Jan - 30 Sep 2019 | 1 Jan - 30 Sep 2019 | ||
| 1. Revenues | 9,448,272 | 9,448,272 | |
| 2. Other operating income | 104,833 | 104,833 | |
| 3. Cost of materials/cost of goods and services purchased | 0 | 0 | |
| 4. Personnel expenses | -6,092,875 | -6,092,875 | |
| 5. Amortisation/depreciation of intangible and tangible assets | -426,812 | -144,288 | -571,100 |
| 6. Other operating expenses | -2,249,169 | 147,536 | -2,101,633 |
| 7. Operating result (EBIT) | 784,249 | 3,248 | 787,497 |
| 8. Financial result | -62,217 | -17,556 | -79,773 |
| 9. Currency losses/gains | -1,673 | -1,673 | |
| 10. Result before taxes (EBT) | 720,359 | -14,308 | 706,051 |
| 11. Income tax | -161,765 | -161,765 | |
| 12. Consolidated net profit | 558,594 | -14,308 | 544,286 |
| 13. Exchange rate differences from converting foreign financial statements | 37,436 | 37,436 | |
| 14. Consolidated result | 596,030 | -14,308 | 581,722 |
| Earnings per share | 0.27 | -0.01 | 0.26 |
Financial Liabilities
InVision AG has raised a bank loan of TEUR 6,000, secured by a land charge, to refinance investments and to carry out further investments. In the first three quarters of the current fiscal year, the Company called TEUR 1,000 of this amount.
Cost of Materials
Expenses for support services provided by external employees, which were previously recorded under cost of materials, will in future be reported under other operating expenses. The previous year’s figures have been adjusted accordingly: For the first three quarters of 2018, 106 TEUR was reclassified from cost of materials to other operating expenses.
Other operating expenses
For the development site in Londonderry, Northern Ireland, which was closed in the previous financial year, a provision of TEUR 100 was recognised in the first quarter of the current financial year. This provision was intended to reflect potential repayment claims for financial subsidies granted at the time. The provision was fully reversed in the third quarter of the current financial year as a final agreement was reached with the local authorities.
The provision recognised in the previous financial year for rental and restoration obligations from the prematurely termination of the lease for office spaces in Londonderry, Northern Ireland, in the amount of TEUR 114 was utilised in the amount of TEUR 52. TEUR 62 were released to income in the third quarter of the current financial year.