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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Kimberly Ent. | LSE:KBE | London | Ordinary Share | NL0000051043 | ORD EUR0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.0155 | 0.001 | 0.03 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMKBE
RNS Number : 7468Y
Kimberly Enterprises N.V.
07 March 2017
Kimberly Enterprises N.V.
("Kimberly" or the "Company")
Results for the year ended 31 December 2016
Kimberly Enterprises N.V. ("Kimberly" or "the Company"), the AIM listed Eastern European property developer (KBE.L), announces its consolidated audited results for the year ended 31 December 2016.
The audited annual accounts for the year ended 31 December 2016 will shortly be available on the Company's website: www.kimberly-enterprises.com.
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.
Financial summary:
Year ended (figures in EUR'000) 31-Dec-16 31-Dec-15 ------------------------------------- ---------- --------- Net liabilities (23,165) (41,779) NAV/share (EUR) (0.26) (0.48) Revenue 5,605 1,756 Change in fair value of investment property - (734) Write down of inventory (430) (118) Cost of sales excluding write down of inventory (5,532) (1,817) Gross loss (357) (913) Other income from lease termination 23,510 - Other income 3,834 442 Operating profit (loss) 26,026 (1,245) Net foreign exchange losses (1,581) (2,836) Financial income 576 253 Financial costs (4,439) (8,523) Net finance costs (5,444) (11,106) Share of profit of equity-accounted investments, net of tax 310 1,741 Profit (loss) before tax 20,894 (10,610) Profit (loss) for the year 21,173 (10,403) Profit (loss) per share (EUR) 0.232 (0.114)
Financial Position
Total revenue for the year ended 31 December 2016 was EUR5.6 million compared to EUR1.8 million in 2015. The increase in 2016 is due to the revenue generated from the sale of housing units in the Veleslavin project, Prague, Czech Republic. The revenues in 2015 represent income from part of the year, i.e., from August 2015, the date the Company obtained control of ENMAN (the parent company of Veleslavin).
Total gross loss for 2016 was EUR0.4 million (2015: EUR0.9 million gross loss). The decrease in the loss was due to a negative investment property revaluation of EUR0.7 million for 2015 compared to nil in 2016.
The write-down of inventory relates to the plots and housing unit project located in Romania and the Czech Republic.
General and administrative expenses increased to EUR1.0 million (2015: EUR0.8 million). The change is mainly caused as a result an income which was recognised in 2015 following settlement agreements with former employees and service providers for past open debts.
Other income from ceasing to consolidate certain subsidiaries increased to EUR3.8 million (2015: EUR0.4 million), mainly due to the income generated from sale of the wholly owned subsidiary Arces International B.V.
Following the lease termination in Serbia, the Company's subsidiary Marina Dorcol d.o.o ("MD") is no longer bound to make any further payments on the lease liabilities on one hand and has no rights over the leased land on the other hand, and consequently the management of the Group derecognised of the lease liability and related asset in the reporting period. As a consequence, non cash income of EUR23.5 million was recognised during 2016 under "other income".
Net financing costs decreased to EUR5.4 million (2015: EUR11.1 million). This reflects a decrease in the finance costs due to the finance lease in Serbia of EUR3.0 million (2015: EUR7.1 million) and an decease in foreign exchange losses to EUR1.6 million (2015: EUR2.8 million).
The share of profit of equity-accounted investments decreased to a profit of EUR0.3 million in 2016 compared to a profit of EUR1.7 million in 2015. This decrease is mainly due to the sales of plot in ENMAN which were executed during 2015 and the reversal of a previously recorded write down in Canada following the sale in 2016.
As a result of the above, the profit after tax for the year was EUR21.2 million compare to loss of EUR10.4 million in 2015.
General
In order to manage its financial situation, in previous periods, the Company approached Engel Resources and Development Ltd. ("ERD"), the parent company of the Company's immediate parent company, Engel General Developers Ltd. ("EGD"), to provide financial assistance to fund the Company's immediate liabilities.
As of 31 December 2016, the outstanding debt owed to ERD was EUR25.7 million (2015: EUR25.1 million) and is due by 30 April 2017, see note 13. During the reporting period, ERD did not provide any additional bridge loans to the Company.
In order to finance the Company's immediate liabilities and to stabilise its financial position, management has acted to realise several assets during the recent reporting periods, see notes 9.a.iv, 29.b, 29.c and 29.d.
ERD support is still required in the form extending the repayment date of its loans beyond 30 April 2017.
At 31 December 2016, the Group has current liabilities totalling EUR28.0 million, which exceeds its current assets amounting to EUR4.2 million, and a negative equity which amounts to EUR23.2 million.
The financial statements are prepared based on a going concern basis. However, the Directors believe that the above mentioned condition (i.e. the need to extend the repayment date of the loans granted by ERD) indicates the existence of material uncertainty which cast significant doubt on the Group's ability to continue as a going concern.
Should the going concern assumption not be appropriate, adjustments would have to be made to reflect a situation where the assets may need to be realised other than in the normal course of business and at amounts which could differ significantly from the amounts stated in the consolidated financial statements.
Serbia
GDP growth in 2016 was 2.5 per cent and the rate of inflation was 1.1 per cent.
On 3 June 2016, MD received from the Mayor of Belgrade a notice of termination of the lease agreement MD has in respect of the Marina Dorcol Project in Belgrade, Serbia.
On 22 July 2016, the Municipality sent MD a unilateral termination of the lease agreement over the Marina Dorcol Project in Belgrade, Serbia ("termination letter").
On 29 September 2016, MD notified the Municipality that it accepted the termination letter and wished to negotiate with the Municipality in order to determine the amount and timing of the compensation due to MD as a result of the above termination.
Based on the agreement with the municipality, management believes that the final result of the termination will be the restitution of the amounts paid by MD less the amount of compensation to the Municipality for usage of such land for the period of duration of lease and for compensation of damages which occurred to the Municipality, if any. The Company and MD are currently in the process of negotiation with the Municipality about the amount and timing of the restitution.
Management expects that following the termination it will have a net cash inflow from the above restitution, however, the net cash flow and the timing to conclude the settlement with the Municipality cannot be predicted at this stage with certainty. Based on MD's advisers, the range of the restitution can be in the amount of RSD 337.5 million (approximately EUR2.7 million) to RSD 487.3 million (approximately EUR4.0 million).
As management has no certainty of the amount that MD will be able to collect from the Municipality, management did not record receivables at the Company's consolidated financial statements generated from the above mentioned restitution of the lease agreement.
As MD is no longer bound to make any further payments on the lease liabilities on one hand and has no rights over the leased land on the other hand, the management of the Group derecognised of the lease liability and related asset in the reporting period.
As a consequence, non cash income of EUR23.5 million was recognised in profit and loss under "other income" in the consolidated financial statements.
Czech Republic
GDP in 2016 was 2.5 per cent and the rate of inflation was 0.5 per cent.
On 16 December 2015, Arces signed a conditional agreement to sell its shares and receivables in the wholly owned subsidiary Palace Engel Vokovice s.r.o ("Vokovice s.r.o").
On 14 March 2016 the sale was completed. As the book value of the plot of land held by Vokovice s.r.o as of 31 December 2015 was based on its net realisable value which was taken as the transaction price in the conditional agreement, the transaction did not generate any material result in the profit or loss of the consolidated financial statements.
The Company recorded revenue from the sale of housing units in the Veleslavin project, Prague, Czech Republic.
In 2016 the Company recorded revenue from disposing of 31 Veleslaven units (in 2015 for the period since acquiring the control over ENMAN, to 31 December 2015: 11 units).
Canada
GDP growth in 2016 was 1.2 per cent and the rate of inflation 1.6 per cent.
On 13 January 2016, Montreal Residential Holdings Master Limited Partnership ("MLP") completed the sale of two plots of land held for residential development purposes in Canada for a total cash consideration of CAD 20.2 million (EUR13.1 million).
MLP recognised a profit before income tax in the amount of EUR2.8 million (the Company's share was EUR0.6 million and it was recognised under the "share of profit of equity-accounted investments, net of tax").
During the reporting period the Company and its jont venture partner, Silverpeak Real Estate Partners, agreed to distribute funds generated from the above sales to the partners.
The 20% share of ECG trust in the distribution was CAD 3.5 million (EUR2.4 million). The trustee agreed to distribute to the Company an amount of CAD 1.7 million (EUR1.2 million) and that the rest would be held back until the final tax clearance from the Canadian tax authorities will be received. These amounts held back are being presented under "Prepayments and other assets" in the consolidated statement of financial position.
The net proceeds which have been received to date from the above distribution have been used for the repayment of the loan granted by Real Property Investment (Guernsey) Ltd., see note 30.c.3.
Based on prior agreements with ERD, all the net future proceeds generated from the Company's assets in Canada will be used to repay the outstanding debts of the Company due to ERD.
The Netherlands
On 15 July 2016, the Company sold its investment in the wholly owned subsidiary, Arces International B.V. ("Arces") to a third party for an immaterial amount.
As a consequence the Company no longer controls Arces, therefore ceased consolidating Arces in its consolidated financial statements. The Company recognised income of EUR3.7 million under "other income" in profit or loss on the sale of its investment in Arces.
The income was mainly due to a recognised liability of Arces for a finance exposure with respect to interest-bearing bank loans that financed the project in Gyor, Hungary. The bank claims that the loan was additionally guaranteed by Arces. Arces has disputed the validity of this guarantee with the bank; however, no official legal claim has been filed by any of the parties.
The Company did not provide any guarantees for Arces and its subsidiaries' liabilities.
For further information, please contact:
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Premium
Kimberly Enterprises N.V.
Assaf Vardimon +31 20 778 4141
Cairn Financial Advisers LLP
(Nomad)
Sandy Jamieson, James Caithie +44 207 213 0880
Consolidated statement of financial
position 31 December 31 December
2016 2015
Note Thousands Euro
----- --------------------------
ASSETS
Cash and cash equivalents 4 510 652
Restricted bank deposit 5 - 728
Trade receivables 19.b 554 185
Prepayments and other assets 6 1,331 12
Inventories of housing units
and land 7 1,776 8,259
Current tax assets 35 6
------------ ------------
Current assets 4,206 9,842
------------ ------------
Inventories of land 7 698 9,307
Investment property 8 - 17,450
Property and equipment 1 2
Deferred tax assets 25 - 58
Loans and amounts to equity-accounted
investment 9 43 2,044
Non-current assets 742 28,861
------------ ------------
Total assets 4,948 38,703
============ ============
LIABILITIES
Interest-bearing bank loans 11 - 2,175
Current portion of finance
lease liability 12 - 35,621
Loans and amounts due to related
parties, joint venture and
other 13 26,265 25,576
Trade payables 211 294
Other payables 14 1,355 6,370
Provisions 15 146 492
Current tax liabilities - 268
Current liabilities 27,977 70,796
------------ ------------
Interest-bearing bank loans 11 - 1,408
Finance lease liability 12 - 7,858
Deferred tax liabilities 25 136 420
------------ ------------
Non-current liabilities 136 9,686
------------ ------------
Total liabilities 28,113 80,482
------------ ------------
EQUITY
Share capital 16 878 878
Share premium 16 39,298 39,298
Reserves 330 2,688
Accumulated losses (62,933) (83,258)
Equity attributable to owners
of the Company (22,427) (40,394)
Non-controlling interests 18 (738) (1,385)
------------ ------------
Total equity (23,165) (41,779)
Total liabilities and equity 4,948 38,703
============ ============
Consolidated statement of profit For the year ended
or loss 31 December
---------------------
2016 2015
Note Thousands Euro
----- ---------------------
Revenue 19 5,605 1,756
Change in fair value of investment
property 8 - (734)
Write down of inventory 20 (430) (118)
Cost of sales excluding write
down of inventory 21 (5,532) (1,817)
--------- ----------
Gross loss (357) (913)
Selling, general and administrative
expenses 22 (959) (774)
Other income due to lease termination 29.a 23,510 -
Other income, net 23 3,834 442
Operating profit (loss) 26,028 (1,245)
Net foreign exchange losses (1,581) (2,836)
Finance income 576 253
Finance costs (4,439) (8,523)
---------
Net finance costs 24 (5,444) (11,106)
--------- ----------
Share of profit of equity-accounted
investments, net of tax 9 310 1,741
--------- ----------
Profit (loss) before tax 20,894 (10,610)
Income tax benefit 25 279 207
Profit (loss) 21,173 (10,403)
========= ==========
Profit (loss) attributable
to:
Owners of the Company 20,325 (10,002)
Non-controlling interests 18 848 (401)
Profit (loss) 21,173 (10,403)
========= ==========
Earnings (losses) per share
Basic earnings (losses) per
share (Euro) 26 0.232 (0.114)
Diluted earnings (losses) per
share (Euro) 26 0.232 (0.114)
Consolidated statement of comprehensive income
For the year ended
31 December
---------------------
2016 2015
--------- ----------
Note Thousands Euro
----- ---------------------
Profit (loss) 21,173 (10,403)
Other comprehensive income
(loss)
Items that are or may be reclassified
subsequently to profit or loss
Foreign operations - foreign
currency translation differences (2,559) (242)
--------- ----------
Other comprehensive income
(loss), net of tax (2,559) (242)
--------- ----------
Total comprehensive profit
(loss) 18,614 (10,645)
========= ==========
Total comprehensive profit
(loss) attributable to:
Owners of the Company 17,967 (10,255)
Non-controlling interests 18 647 (390)
--------- ----------
Total comprehensive profit
(loss) 18,614 (10,645)
========= ==========
Consolidated statement
of changes in equity Attributable to owners of the Company
-----------------------------------------------------------
Share Share Translation Accumulated Non-controlling Total
capital premium reserve losses Total interests equity
--------- --------- ------------ ------------ --------- ---------------- ---------
Thousands Euro
----------------------------------------------------------------------------------------
Balance at 1 January
2015 878 39,298 2,941 (73,256) (30,139) (1,007) (31,146)
Loss - - - (10,002) (10,002) (401) (10,403)
Other comprehensive
income
(loss) - - (253) - (253) 11 (242)
Disposal of
subsidiaries
with non-controlling
interests - - - - - 12 12
--------- --------- ------------ ------------ --------- ---------------- ---------
Balance at 31 December
2015 878 39,298 2,688 (83,258) (40,394) (1,385) (41,779)
========= ========= ============ ============ ========= ================ =========
Balance at 1 January
2016 878 39,298 2,688 (83,258) (40,394) (1,385) (41,779)
Profit - - - 20,325 20,325 848 21,173
Other comprehensive
loss - - (2,358) - (2,358) (201) (2,559)
Balance at 31 December
2016 878 39,298 330 (62,933) (22,427) (738) (23,165)
========= ========= ============ ============ ========= ================ =========
Consolidated statement of cash For the year ended
flows 31 December
---------------------
2016 2015
Note Thousands Euro
----- ---------------------
Cash flows from operating activities
Profit (loss) 21,173 (10,403)
Adjustments for:
- Depreciation 1 1
- Net finance costs 24 5,444 11,106
- Income tax benefit 25 (279) (207)
- Share of profit of equity-accounted
investments, net of tax 9 (310) (1,741)
- Other income due to lease
termination 29.a (23,510) -
- Other income, net 23 (3,834) (442)
- Change in fair value of investment
property 8 - 734
- Write down of inventory 20 430 118
---------- ---------
(885) (834)
Change in:
- Inventories of housing units 7 5,420 1,115
- Trade receivables (369) (185)
- Provisions 15 (36) -
- Prepayments and other assets 6 (119) 238
- Trade payables (75) (323)
- Other payables 14 (1,421) (24)
---------- ---------
Cash generated from (used in)
operating activities 2,515 (13)
Interest paid (70) (232)
Interest received - 1,863
Income taxes paid (304) (221)
Net cash from operating activities 2,141 1,397
---------- ---------
Cash flows from investing
activities
Proceeds from sale of investment 29.c 812 -
Acquisition of control in
previous equity-accounted
investments - 663
Disposal of subsidiary 29.d (28) -
Long term loans and amounts
granted to related parties (2) (23)
Short term loans and amounts
repaid by related parties 1,259 3,470
Change in restricted bank
deposit 5 729 (212)
-------- --------
Net cash from investing activities 2,770 3,898
-------- --------
Cash flows from financing
activities
Repayment of interest-bearing
bank loans 11 (2,960) (1,088)
Loans and amounts received
from related parties and 13,
other 31.c.3 2,164 317
Loans and amounts repaid
to related parties and other 13 (4,167) (3,894)
Payment of finance lease
liability 12 (90) -
-------- --------
Net cash used in financing
activities (5,053) (4,665)
-------- --------
Net increase (decrease) in
cash and cash equivalents (142) 630
Cash and cash equivalents
at 1 January 652 15
Effect of movements in exchange
rates on cash held - 7
-------- --------
Cash and cash equivalents
at 31 December 4 510 652
======== ========
Notes to the consolidated financial statements
NOTE 1 - REPORTING ENTITY
Kimberly Enterprises N.V. (the "Company") is domiciled in the Netherlands. The Company's registered office is at Laurierstraat 71, 1016 PJ Amsterdam, Netherlands.
These consolidated financial statements comprise the Company, its subsidiaries and the Group's interests in joint venture (together referred to as the "Group").
The Group is primarily involved in holding and selling real estate assets in Eastern Europe.
The Company is listed on the Alternative Investment Market ("AIM") of the London Stock Exchange, United Kingdom since 15 December 2005.
Copies of these consolidated financial statements of the Group are available on the Company's website (www.kimberly-enterprises.com) and upon request from the Company's registered office.
NOTE 2 - BASIS OF ACCOUNTING
a. Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU ("EU IFRS"). They were authorised for issue by Company's board of directors on 28 February 2017.
Details of the Group's accounting policies are included under note 3.
These consolidated financial statements are not intended for statutory filing purposes. The Company is required to file financial statements prepared in accordance with the Dutch Civil Code.
At the date of preparing these financial statements the Company had not yet filed consolidated financial statements for the year ended on 31 December 2016 in accordance with the Dutch Civil Code; however the management expects to file the report on the determined schedule.
b. Going concern basis of accounting
In order to manage its financial situation, in previous periods, the Company approached Engel Resources and Development Ltd. ("ERD"), the parent company of the Company's immediate parent company, Engel General Developers Ltd. ("EGD"), to provide financial assistance to fund the Company's immediate liabilities.
As of 31 December 2016, the outstanding debt toward ERD is EUR 25,724 thousands (2015: EUR 25,081 thousands) and is due by 30 April 2017, see note 13. During the reporting period, ERD did not provide any additional bridge loans to the Company.
In order to finance the Company's immediate liabilities and to stabilise its financial position, management has acted to realise several assets during the recent reporting periods, see notes 9.a.iv, 29.b, 29.c and 29.d.
ERD support is still required in the form extending the repayment date of its loans beyond 30 April 2017.
At 31 December 2016, the Group has current liabilities totalling EUR 27,977 thousands, which exceeds its current assets amounting to EUR 4,206 thousands and a negative equity which amounts to EUR 23,165 thousands.
The financial statements are prepared based on a going concern basis. However, management believes that the above mentioned condition (i.e. the need to extend the repayment date of the loans granted by ERD) indicate the existence of material uncertainty which cast significant doubt on the Group's ability to continue as a going concern.
Should the going concern assumption not be appropriate, adjustments would have to be made to reflect a situation where the assets may need to be realised other than in the normal course of business and at amounts which could differ significantly from the amounts stated in the consolidated financial statements.
c. Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for the following item, which is measured on an alternative basis on each reporting date.
-- Investment property - measured at fair value. d. Functional and presentation currency
These consolidated financial statements are presented in Euro (EUR), which is the Company's functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated.
e. Use of judgments and estimates
In preparing these consolidated financial statements, management has made judgments, estimates and assumptions that affect the application of the Group's accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.
Information about judgments made in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements are presented as follows:
1. Going concern basis of accounting
The consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will continue as a going concern in the foreseeable future, for at least twelve months.
However, market conditions the Company face, as discussed in details in note 2.b, indicate the existence of material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern.
2. Tax expenses
The Group is subject to taxes in numerous jurisdictions. Significant judgment is required in determining the provision for income taxes and the recoverability of deferred tax assets. Where estimates are revised or the final tax outcome of these matters is different from the amounts that were previously recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made (see note 25).
3. Inventory
Inventories are measured at the lower of cost and net realisable value. Estimates of net realisable values for the excess amounts are made at each reporting period (see note 7 for the net realisable value sensitivity analysis).
The determination of net realisable values of inventories is subject to considerable estimation uncertainty: the risk that inventory net realisable value will not be appropriately evaluated exists, since factors not known to the valuer or to the Company might affect the net realisable value of the inventory (see note 7).
Management is responsible for determining the net realisable value of the Group's inventories. In determining net realisable value of the vast majority of inventories, management utilises the services of an independent third party recognised as a specialist in valuation of properties. The independent valuation service utilises market prices of same or similar properties whenever such prices are available. Where necessary, the independent third party valuation service uses models employing techniques such as discounted cash flow analyses. The assumptions used in these models typically include assumptions for rental levels, residential units sale prices, cost to complete the project, developers profit on costs, financing costs and capitalisation yields, utilising observable market data, where available. On an annual basis, the Company reviews the valuation methodologies used for each property. At 31 December 2016, the only plot held by the Group, was valued by independent third party valuation services who estimated the plot with EUR 698, thousands, see note 7.
Accumulated write-downs from cost, at 31 December 2016, amounted to EUR 1,171 thousands and represent 32% of gross inventory balance.
4. Consolidation of companies with troubled debts
Although the Company's subsidiary ENMAN B.V. ("ENMAN") owns the voting power rights of Engel-Lylia s.r.l ("Lylia") and Engel Crizantema s.r.l ("Crizantema"), ENMAN does not have control over these entities since 1 January 2013. The management re-assessed the control over the entities, and it still believes that the Company had no control over these investees as at 31 December 2016.
Management evaluated the rights obtained by the lending bank in terms of how pervasive they are in the context of the Lylia and Crizantema and whether they are mitigated by other factors. Since Lylia and Crizantema are in breach of the loan agreements, the relevant activity of the entities is to maximise the sales proceeds from selling the asset and by doing so to maximise the recovery of the interest-bearing bank loans.
In the case of Crizantema the lender bank succeeded to sell the asset but the loan liability has not been extinguished as the bank did not waive the remaining loan amount. The bank has a pledge over the shares of the Crizantema. Assuming that the bank has a currently exercisable right to take or sell the shares without the Company's consent and without the need for the involvement of an administrator which the bank does not control, the bank has power over the company. Assuming that an administrator is needed to be involved in the legal procedure to take or sell the shares and the bank does not control the procedure and the administrator, the bank does not have power over the entity, but the administrator's rights are sufficient to prevent the parent company having control.
On 29 June 2016, a receiver was appointed by a court in Romania on the shares of Engel Tulip s.r.l ("Tulip"). Tulip was the entity which held (before it was sold by the bank) the pledged plot to the lender bank and is being held by Crizantema.
In the case of Lylia the lender bank has initiated several auctions in order to sell the asset without any success.
The Group, ENMAN and the investees do not have the resources to repay the loans or to finance the development of the plot, and they are currently not in advanced negotiation with the banks to modify the terms of the loan, while the market is not expected to recover in the foreseeable future. These factors also indicate that the bank's rights are substantive.
Based on the factors above and the appointment of receiver Engel Tulip s.r.l., management believes that the bank's rights are very significant to the entities' activities and can affect significantly the economic circumstances of the entities, which lead management to conclude that the parent company still has no control over Lylia and Crizantema, and therefore they should not be consolidated in the financial statements.
5. Lease termination
Following the termination of lease agreement in Serbia (see note 29.a) management, based on its legal advisors, concluded that it is no longer bound to make any further payments on the lease liabilities and has no rights over the leased land and therefore derecognised the lease liability and related asset in the reporting period. Since these assets and liabilities represented substantially all the assets and liabilities of MD, this was considered in substance as the liquidation of MD and the related translation adjustment was reclassified to profit or loss.
f. Operating cycle
The Group is involved in projects some of which may take 5-6 years to complete. The cost of inventory and loans which finance residential development projects are presented as current assets and liabilities, unless they are not expected to be realised within the normal operating cycle in which case they are classified as non-current.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES
The Group has consistently applied the following accounting policies to all the periods presented in these consolidated financial statements.
a. Basis of consolidation 1. Business combinations
The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.
Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, the contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.
If share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree's employees (acquiree's awards), then all or a portion of the amount of the acquirer's replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based measure of the replacement awards compared with the market-based measure of the acquiree's awards and the extent to which the replacement awards relate to pre-combination service.
2. Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.
3. Non-controlling interests
Non-controlling interests are measured at their proportionate share of the acquiree's identifiable net assets at the date of acquisition.
Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.
4. Loss of control
When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related non-controlling interests and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.
5. Interest in equity-accounted investments
The Group's interests in equity-accounted investments comprise interests in associates and joint ventures.
Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.
Interests in associates and joint ventures are accounted for using the equity method. They are recognised initially at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group's share of the profit or loss and other comprehensive income of equity-accounted investments, until the date on which significant influence or joint control ceases.
6. Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. Unrealised gains arising from transactions with equity-accounted investments are eliminated against the investment to the extent of the Group's interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
b. Foreign currency 1. Foreign currency transactions
Transactions in currencies other than the company's functional and presentation currency (EUR) are translated to the respective functional currencies of Group companies at exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign currency differences are generally recognised in profit or loss.
However, foreign currency differences arising from the translation of the following items are recognised in other comprehensive income:
-- available-for-sale equity investments (except on impairment, in which case foreign currency differences that have been recognised in other comprehensive income are reclassified to profit or loss);
-- a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; and
-- qualifying cash flow hedges to the extent that the hedges are effective. 2. Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into Euro at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into Euro at the exchange rates at the dates of the transactions.
Foreign currency differences are recognised in other comprehensive income and accumulated in the translation reserve, except to the extent that the translation difference is allocated to non-controlling interests.
When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Group disposes of part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of an associate or joint venture while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.
The functional currencies of the Group entities are: Czech Koruna ("CZK"), Polish Zloty ("PLN"), Canadian Dollar ("CAD"), Romanian Leu ("RON"), New Israeli Shekel ("ILS"), Serbian Dinar ("RSD") and Euro ("EUR").
c. Revenue 1. Sale of housing units and land
Revenue from the sale of housing units and plots of land is recognised when the risks and rewards of ownership have been transferred to the buyer provided that the Group has no further substantial acts to complete under the contract.
Contract expenses are recognised as incurred unless they create an asset related to future contract activity. An expected loss on a contract is recognised immediately in profit or loss.
2. Investment property and rental income
Rental income from investment property is recognised as revenue on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease.
3. Other revenue
Other revenues, including project management fees, are recognised in the accounting period in which the services are rendered, by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided, and are measured at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, net of VAT and other sales related taxes.
No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due, associated costs or continuing management involvement with the assets.
d. Employee benefits
Short-term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
e. Finance income and finance costs
The Group's finance income and finance costs include:
-- interest income; -- interest expense;
-- changes in the local retail price index in Belgrade, Serbia on finance lease and changes in the customer price index in Israel on loans received from related parties;
-- the foreign currency gain or loss on financial assets and financial liabilities; -- impairment losses recognised on financial assets (other than trade receivables).
Interest income or expense is recognised using the effective interest method.
Borrowing costs are capitalised if they are directly attributable to the acquisition or construction of a qualifying asset. Capitalisation of borrowing costs commences when the activities to prepare the asset are in progress and expenditures and borrowing costs are being incurred. Capitalisation of borrowing costs may continue until the assets are substantially ready for their intended use. If the resulting carrying amount exceeds the qualifying assets' recoverable amount, an impairment loss is recognised. The capitalisation rate is arrived at by reference to the actual rate payable on borrowings for development purposes or, with regard to that part of the development cost financed out of general funds, to the average rate.
Borrowing costs that are not directly attributable to the acquisition or construction of a qualifying asset are recognised in profit or loss using the effective interest method.
f. Income tax
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.
1. Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to tax payable or receivable in respect of previous years. It is measured using tax rates enacted or substantively enacted at the reporting date.
Current tax assets and liabilities are offset only if certain criteria are met.
2. Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
-- temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;
-- temporary differences related to the investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
-- taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves.
Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. For this purpose, the carrying amount of investment property measured at fair value is presumed to be recovered through sale, and the Group has not rebutted this presumption.
Deferred tax assets and liabilities are offset only if certain criteria are met.
g. Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories includes direct materials, direct labour costs, subcontracting costs and those direct overheads which have been incurred in bringing the inventories to their present condition.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
Borrowing costs are capitalised if they are directly attributable to the acquisition or construction of a qualifying asset.
The Group is involved in projects some of which may take several years to complete. The cost of inventory and loans which finance residential development projects are presented as current assets and liabilities, unless they are not expected to be realised within the operating cycle of 5-6 years and then they are classified as non-current.
h. Property and equipment 1. Recognition and measurement
Items of property and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses.
If significant parts of an item of property and equipment have different useful lives, then they are accounted for as separate items (major components) of property and equipment.
Any gain or loss on disposal of an item of property and equipment is recognised in profit or loss.
2. Depreciation
Depreciation is calculated to write off the cost of items of property and equipment less their estimated residual values using the straight-line method over their estimated useful lives, and is generally recognised in profit or loss. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated.
The estimated useful lives of property and equipment are as follows:
-- Furniture, office equipment and other assets 3-15 years
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
i. Investment property
Investment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment property is measured at cost on initial recognition and subsequently at fair value with any change therein recognised in profit or loss.
Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use and capitalised borrowing costs.
Any gain or loss on disposal of investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss.
j. Financial instruments
The Group classifies non-derivative financial assets into the following categories: loans and receivables and available-for-sale financial assets.
The Group classifies non-derivative financial liabilities into other financial liabilities category.
1. Non-derivative financial assets and financial liabilities - recognition and de-recognition
The Group initially recognises loans and receivables issued on the date when they are originated. All other financial assets and financial liabilities are initially recognised on the trade date when the entity becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred, or it neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control over the transferred asset. Any interest in such derecognised financial assets that is created or retained by the Group is recognised as a separate asset or liability.
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
2. Non-derivative financial assets - measurement
The Group classifies non-derivative financial assets into the following categories: cash and cash equivalents, cash in escrow, restricted bank deposit, loans and receivables.
Cash and cash equivalents
In the statement of cash flows, cash and cash equivalents includes bank overdrafts that are repayable on demand and form an integral part of the Group's cash management.
Loans and receivables
These assets are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method.
3. Non-derivative financial liabilities - measurement
Non-derivative financial liabilities are initially recognised at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest method.
k. Share capital
Ordinary shares
Incremental costs directly attributable to the issue of ordinary shares, net of any tax effects, are recognised as a deduction from equity. Income tax relating to transaction costs of an equity transaction is accounted for in accordance with IAS 12.
l. Impairment 1. Non- derivative financial assets
Financial assets not classified as at fair value through profit or loss, including an interest in an equity-accounted investment, are assessed at each reporting date to determine whether there is objective evidence of impairment.
Objective evidence that financial assets are impaired includes:
-- default or delinquency by a debtor;
-- restructuring of an amount due to the Group on terms that the Group would not consider otherwise;
-- indications that a debtor or issuer will enter bankruptcy; -- adverse changes in the payment status of borrowers or issuers; -- the disappearance of an active market for a security; or
-- observable data indicating that there is measurable decrease in expected cash flows from a group of financial assets.
For an investment in an equity security, objective evidence of impairment includes a significant or prolonged decline in its fair value below its cost. The Group considers a decline of 20% to be significant and a period of nine months to be prolonged.
Financial assets measured at amortised cost
The Group considers evidence of impairment for these assets at both an individual asset and a collective level. All individually significant assets are individually assessed for impairment. Those found not to be impaired are then collectively assessed for any impairment that has been incurred but not yet individually identified. Assets that are not individually significant are collectively assessed for impairment. Collective assessment is carried out by grouping together assets with similar risk characteristics.
In assessing collective impairment, the Group uses historical information on the timing of recoveries and the amount of loss incurred, and makes an adjustment if current economic and credit conditions are such that the actual losses are likely to be greater or lesser than suggested by historical trends.
An impairment loss is calculated as the difference between an asset's carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account. When the Group considers that there are no realistic prospects of recovery of the asset, the relevant amounts are written off. If the amount of impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, then the previously recognised impairment loss is reversed through profit or loss.
Equity-accounted investments
An impairment loss in respect of an equity-accounted investment is measured by comparing the recoverable amount of the investment with its carrying amount. An impairment loss is recognised in profit or loss, and is reversed if there has been a favourable change in the estimates used to determine the recoverable amount.
2. Non-financial assets
At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than investment property, inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated.
For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash generating units ("CGU").
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.
Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill (if exists) allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.
An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
m. Provisions
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.
Warranties
Provision for warranty costs is recognised at the date of sale of housing units, at the Company's best estimate of the expenditure required to settle the Group's liability.
n. Leases 1. Determining whether an arrangement contains a lease
At inception of an arrangement, the Group determines whether the arrangement is or contains a lease.
At inception or on reassessment of an arrangement that contains a lease, the Group separates payments and other consideration required by the arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Group concludes for a finance lease that it is impracticable to separate the payments reliably, then an asset and a liability are recognised at an amount equal to the fair value of the underlying asset; subsequently, the liability is reduced as payments are made and an imputed finance cost on the liability is recognised using the Group's incremental borrowing rate.
2. Leased assets
Assets held by the Group under leases that transfer to the Group substantially all of the risks and rewards of ownership are classified as finance leases. The leased assets are measured initially at an amount equal to the lower of their fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the assets are accounted for in accordance with the accounting policy applicable to that asset.
3. Lease payments
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.
Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
NOTE 4 - CASH AND CASH EQUIVALENTS
31 December
-----------------
2016 2015
-------- -------
Thousands Euro
-----------------
Bank balances 509 651
Petty cash 1 1
-------- -------
Total 510 652
======== =======
NOTE 5 - RESTRICTED BANK DEPOSIT
31 December
------------------
2016 2015
--------- -------
Thousands Euro
------------------
In Czech Crown - 728
Total - 728
========= =======
The Group pledged all restricted bank deposit to secure the credit facility granted by a bank in the Czech Republic.
The deposit carried no interest.
During 2016, the bank loan was fully repaid following which the pledge over the deposit was removed, see note 11.
NOTE 6 - PREPAYMENTS AND OTHER ASSETS
31 December
-----------------
2016 2015
--------- ------
Thousands Euro
-----------------
Advances to suppliers - -
VAT recoverable 203 6
Funds held in trust (a) 1,128 6
--------- ------
Total 1,331 12
========= ======
(a) On 31 December 2016, an amount of EUR 1,124 thousands represent the cash held by the Company's lawyer in Canada until the final tax clearance from the Canadian tax authorities will be received, see note 9.a.iv.1.
NOTE 7 - INVENTORIES OF HOUSING UNITS AND LANDS
a. Reconciliation of carrying amount
31 December
-----------------
2016 2015
-------- -------
Thousands Euro
-----------------
Inventories of lands designated
for sale 1,642 10,959
Inventories of housing units 2,003 7,445
-------- -------
3,645 18,404
Write-down of inventory (1,171) (838)
-------- -------
Total 2,474 17,566
======== =======
Non-current 698 9,307
Current 1,776 8,259
-------- -------
Total 2,474 17,566
======== =======
At 31 December 2016, inventory of housing units and lands comprises housing units and commercial areas in a project in Prague, Czech Republic (totalling EUR 1,776 thousands) and a plot designed for residential purposes in Romania (totalling EUR 698 thousands).
As the management does not predict the plot in Romania will be sold within the normal operating cycle it is classified as non-current inventory.
In 2016, inventories of EUR 5,459 thousands (2015: EUR 1,611 thousands) were recognised as an expenses during the year and included in "costs of sales", see note 21.
In 2016, inventories were written down to net realisable value in the amount of EUR 430 thousands (2015: EUR 118 thousands). This amount was recognised as an expenses in profit or loss, see note 20.
Refer to note 7.b.1 that describes the method used by the Company to determine the net realisable value of the plots.
On 29 September 2016, following the termination of the lease agreement in Serbia the management, based on its legal advisors, concluded that it is no longer bound to make any further payments on the lease liabilities and has no rights over the leased land and therefore derecognised the related land in the reporting period in the amount of EUR 8,293 thousands, see note 29.a.
At 31 December 2016 the inventories of housing units include capitalisation of borrowing costs in the amount of EUR 43 thousands (2015: EUR 129 thousands).
b. Measurement of net realisable value 1. General
The net realisable value of the inventory of housing units is based on the Group's best estimate of the expected selling price and costs of completion less selling expenses, in considering this management relied on recent transactions and current market conditions. In determining the expected selling price of the plot the Group used the services of external, independent valuation expert, having appropriate, recognised professional qualifications and recent experience in the location and category of the inventories being valued, see note 2.e.3
At 31 December 2016 the inventories of land balance consists of one plot located in Romania which is presented, at 31 December 2016, at net realisable value in the total net amount of EUR 698 thousands (2015: EUR 902 thousands).
2. Valuation technique and significant unobservable inputs
The following information shows the valuation technique used in measuring the net realisable value of the plot of land in Romania, as well as the significant unobservable inputs used.
-- Valuation technique
In estimating the property value in Romania the valuer used the comparison approach, and estimated the value of the plot compare to three similar plots.
-- Significant unobservable inputs - The valuer used "asking prices" with the adjustment of 15%.
- The compared plots were in the range from sqm 5,000 to sqm 10,000. Due to the differences in the size of the compared plots to the valued plot, the valuer used an adjustment of (-10%) and (-15%), the subject plot size is 77,500 sqm.
- The valuer compared plots in different locations and used adjustment up to (-5%). - The valuer compared plots with different accesses available level and used adjustment of (-5%)
- The valuer compared plots with different market conditions and used an adjustment of (-5%) and (-10%)
-- Inter-relationship between key unobservable inputs and measurement of net realisable value
The estimated net realisable value would increase (decrease) if:
- The valuer used higher adjustment on the used "asking prices".
- The valuer used lower (higher) adjustment on the compared plot size in the case of smaller plots than the subject property.
- The valuer used lower (higher) adjustment range which relates to superior/inferior location.
- The valuer used lower (higher) adjustment range which relates to superior/inferior accesses available to the plot.
- The valuer used lower (higher) adjustment range which relates to market conditions, e.g: the period the compared plot is being offered for sale in the market.
NOTE 8 - INVESTMENT PROPERTY
a. Reconciliation of carrying amount
2016 2015
--------- -------
Thousands Euro
------------------
Balance at 1 January 17,450 18,280
Lease termination (a) (17,218) -
Change in fair value - (734)
Effect of movement in exchange
rate (b) (232) (96)
Balance at 31 December - 17,450
========= =======
(a) See note 29.a.
(b) The functional currency of the subsidiary which holds the investment property ("Marina Dorcol D.o.o") is Serbian Dinar ("RSD").
Until 29 September 2016, the Group leased one property under a finance lease from the municipality of Belgrade, Serbia. The Group classified the asset as investment property since management's intention was to hold the property for long term, for capital appreciation or to earn future rentals or both.
On 29 September 2016, following the termination of lease agreement in Serbia the management, based on its legal advisors, concluded that it is no longer bound to make any further payments on the lease liabilities and has no rights over the leased land and therefore derecognised the related investment property in the reporting period in the amount of EUR 17,218 thousands, see note 29.a.
In 2009 and 2011 the Group pledged the shares of Marina Dorcol d.o.o ("MD") which held the investment property to secure credit facilities granted to the Group by the parent company, see note 30.c.1.ii.
b. Amounts recognised in profit or loss
For the year ended
31 December
----------------------
2016 2015
---------- ----------
Thousands Euro
----------------------
Change in fair value of
investment property - (734)
NOTE 9 - LOANS AND AMOUNTS TO EQUITY-ACCOUNTED INVESTMENT
At 31 December 2016 the Company holds interest in one joint venture, Montreal Residential Holdings Master Limited Partnership ("MLP").
MLP is not a publicly listed entity and consequently does not have published price quotation.
Until August 2015 the Company also held interests in the following joint ventures:
a. Arces International B.V. ("Arces").
b. ENMAN B.V. ("ENMAN").
On 31 July 2015 the Company reached an agreement with its previous joint venture partner and as a result acquired control in Arces and ENMAN (a process which was completed during August 2015) and began to consolidate both companies in its consolidated financial statements, see note 29.
The following trading transactions and balances with equity-accounted investments are included in the consolidated financial statements:
31 December
------------------------------
(a) 2016 (b) 2015
-------------- --------------
Thousands Euro
------------------------------
Statement of financial position
Loans granted to joint venture 573 2,938
Accumulated share of loss
of equity-accounted
investments which relates
to loans granted by the
Company and considered as
a part of the net
investment (c) (530) (894)
Total (presented under loans
and amounts to related
parties and equity-accounted
investment) 43 2,044
============== ==============
For the year ended
31 December
------------------------------
(a) 2016 (b) 2015
-------------- --------------
Statement of profit or loss Thousands Euro
------------------------------
Share of profit of equity-accounted
investments
which relates to loans granted
by the Company and
are part of the net investment 310 567
Share of profit of equity-accounted
investments, net of
tax - 678
Change in Group's share
in previously recognised
losses due to repayment
of the loan that was part
of
the net investment - 496
-------------- --------------
Total (presented under share
of profit of
equity-accounted investments,
net of tax) 310 1,741
============== ==============
Finance income - 251
-------------- --------------
Total (presented under finance
income) - 251
============== ==============
(a) The statement of financial position includes balances and transactions only with MLP.
(b) The statement of financial position includes balances with MLP.
The statement of profit or loss includes transactions with Arces and ENMAN which occurred before the Company obtained control over these entities and transactions with MLP.
(c) Total amount of EUR 530 thousands (2015: EUR 894 thousands) was recognised as a loss with respect to equity-accounted investments relating to loans granted by the Company which management considers as being part of the net investment.
a. Montreal Residential Holdings Master Limited Partnership
Montreal Residential Holdings Master Limited Partnership - a holding partnership domiciled in Canada.
The Company owns ECG Trust Canada Holding Trust ("ECG") (95% interest) which holds 20% interest in future distributions of MLP. The Company owns 50% of the voting rights in MLP.
The remaining 80% in future distributions is owned by Lehman Brothers Real Estate Partners II ("Lehman Brothers") represented by Silverpeak Real Estate Partners ("Silverpeak").
During 2015, MLP sold one parcel of land in Montreal, Quebec, Canada.
During 2016, MLP sold two parcels of land in Montreal, Quebec, Canada, see note 9.a.iv.1.
Set out below is a list of material subsidiaries of MLP at 31 December 2016:
a. Trianon Sur Le Golf Quebec LP - 99.99% in the partnership rights - owned a land in Montreal, Canada, which was sold during 2015.
b. Le Quartier Quebec LP - 99.99% in the partnership rights - owned a land in Montreal, Canada, which was sold during the reporting period, see note 9.a.iv.1.
c. Le Chagall Quebec LP - 99.99% in the partnership rights - owned a land in Montreal, Canada, which was sold during the reporting period, see note 9.a.iv.1.
d. Le Quartier Parisien Inc. - 99.99% in the share capital - beneficial title holder company, Canada
e. Trianon Sur Le Golf Inc. - 99.99% in the share capital - beneficial title holder company, Canada.
f. Le Chagall Condominiums Inc. - 99.99% in the share capital - beneficial title holder company, Canada.
The following trading transactions and balances with MLP are included in the consolidated financial statements of the Group:
31 December
---------------------
2016 2015
---------- ---------
Thousands Euro
---------------------
Statement of financial position
Loans granted to joint venture
(iii) 573 2,938
Accumulated share of loss
of equity-accounted
investments which relates
to loans granted by the
Company and considered as
a part of the net
investment (i) (530) (894)
----------
Total (presented under loans
and amounts to related
parties) 43 2,044
========== =========
For the year ended
31 December
---------------------
2016 2015
---------- ---------
Thousands Euro
---------------------
Statement of profit or loss
Share of profit of equity-accounted
investments
which relates to loans granted
by the Company and
are part of the net investment
(i) 310 636
Share of profit of equity-accounted
investments,
net of tax (ii) - -
Total (presented under share
of profit of
equity-accounted investments,
net of tax) 310 636
========== =========
The following table shows the summarised consolidated financial information of MLP as included in its own consolidated financial statements (figures in the table represent 100% of the joint venture's consolidated financial statements). The table also reconciles the summarised financial statement to the carrying amount of the Group's interest in MLP.
31 December 31 December
2016 2015
------------ ------------
Thousands Euro
--------------------------
Percentage ownership interest 20% 20%
-------------------------------------- ------------ ------------
Current assets
(including no cash and cash
equivalent at 31 December
2016 and at 31 December
2015) 1,376 10,369
-------------------------------------- ------------ ------------
Non-current assets - -
-------------------------------------- ------------ ------------
Current liabilities
(including loans and amounts
due to related parties in
the amount of EUR 3,007
thousands at 31 December
2016 and EUR 14,740 thousands
at 31 December 2015) (4,027) (14,841)
-------------------------------------- ------------ ------------
Non-current liabilities - -
-------------------------------------- ------------ ------------
Net liabilities (100%) (2,651) (4,472)
Group's share of the net
liabilities (20%) (ii) - -
Net investment (i) 43 2,044
-------------------------------------- ------------ ------------
Loans granted by the Company,
net of impairment (i,ii) 43 2,044
-------------------------------------- ------------ ------------
Revenue 13,095 2,230
Cost of sales excluding
reverse of write down of
inventory (10,257) (1,888)
Reverse of write down of
inventory - 3,225
Selling, general and administrative
expenses (78) (387)
Net foreign exchange income 4 -
Income tax expense (848) -
Profit (100%) 1,916 3,180
Other comprehensive income:
Foreign operations - foreign
currency translation differences (95) 335
------------ ------------
Total comprehensive income
(100%) 1,821 3,515
Profit allocated to loans
granted by the Company and
being part of the net investment
(20%) (i) 383 636
Impairment loss on loans
granted by the Company (73) -
Group's share of profit
of equity-accounted investments,
net of tax 310 636
============ ============
Group's share of total comprehensive
income (loss) (19) 67
Comments in respect to the investment in MLP:
i. In previous periods the joint venture accumulated losses and thus the Company recognised a loss related to the loan given to MLP that was part of the net investment and presented the loss as share of profit of equity-accounted investment in the consolidated statement of profit or loss.
ii. The Company did not provide any guarantees for the joint venture and has not incurred legal and constructive obligation on behalf of the joint venture; therefore losses are accounted for to the extent that the Company's interest is reduced to zero.
iii. Loans granted by the Company to joint venture - -- Are denominated in CAD currency. -- Bear no interest.
-- Have not set a repayment date. Repayment is expected from the proceeds of the sale of the related projects financed by the loans.
-- During 2016, a total amount of EUR 1,242 thousands was repaid by MLP to the Company (2015: EUR 351 thousands).
iv. Significant events during current reporting period:
1. On 13 January 2016, MLP completed the sale of two plots of land held for residential development purposes in Canada for a total cash consideration of CAD 20,227 thousands (EUR 13,095 thousands).
MLP recognised a profit before income tax in the amount of EUR 2,815 thousands (the Company's share was EUR 563 thousands and it was recognised under the "share of profit of equity-accounted investments, net of tax").
During the reporting period the Company and Silverpeak agreed to distribute funds generated from the above sales to the partners.
The 20% share of ECG trust in the distribution was CAD 3,500 thousands (EUR 2,434 thousands). The trustee agreed to distribute to the Company an amount of CAD 1,716 thousands (EUR 1,193 thousands) and that the rest would be held back until the final tax clearance from the Canadian tax authorities will be received. These amounts held back are being presented under "Prepayments and other assets" in the consolidated statement of financial position.
The net proceeds which were received till today from the above distribution have been used for the repayment of the loan granted by Real Property Investment (Guernsey) Ltd., see note 30.c.3.
Based on prior agreements with ERD, all the net future proceeds generated from the Company's assets in Canada will be used to repay the outstanding debts of the Company due to ERD.
b. Arces International B.V.
Arces International B.V. ("Arces") - a holding company domiciled in The Netherlands. Until August 2015, the Company and HCEPP II Luxembourg Master S.à r.l ("Heitman") each held 50% of Arces' issued share capital.
Arces was incorporated with the purpose of investment in real estate development project companies in Eastern Europe. Arces had investments mainly in the Czech Republic.
In August 2015 the Company acquired full control in Arces and began to consolidate the company in its condensed consolidated financial statements.
On 15 July 2016, the Company sold its investment in Arces, see note 29.d.
The following transactions with Arces are included in the consolidated financial statements of the Group:
For the
year ended
31 December
2015 (a)
-------------
Thousands
Euro
-------------
Statement of profit or loss
Share of loss of equity-accounted investments
which relates to loans granted by
the Company and are part of the net
investment (69)
Change in Group's share in previously
recognised losses due to repayment
of the loan that was part of the net
investment 496
-------------
Total (presented under share of profit
of equity-accounted investments,
net of tax) 427
=============
Finance income (b) 143
-------------
Total (presented under finance income) 143
=============
(a) Transactions with Arces which occurred until the date the Company obtained control over the entity.
(b) Interest income on loans granted by the Company to Arces which bears interest of 15% per annum.
The following table summarises the financial information of Arces as included in its own consolidated financial statements (figures in the table represent 100% of the consolidated figures of Arces). The table also reconciles the summarised financial information to the carrying amount of the Group's interest in Arces.
31 December
2015 (a)
------------
Thousands
Euro
------------
Percentage ownership interest 50%
----------------------------------------------- ------------
Revenue 1,757
Cost of sales (1,618)
Selling, general and administrative
expenses (135)
Net foreign exchange income 64
Finance costs (175)
Income tax expense (17)
-----------------------------------------------
Loss (100%) (124)
Other comprehensive income:
Foreign operations - foreign currency
translation differences 8
------------
Total comprehensive loss (100%) (116)
Loss relating to loans granted by the
Company and being part of the net investment (69)
Change in Group's share in previously
recognised losses due to repayment
of the loan that was part of the net
investment 496
Group's share of profit of equity-accounted
investments, net of tax 427
============
Group's share of total comprehensive
income 4
(a) Transactions with Arces which occurred until the date the Company obtained control over the entity.
c. ENMAN B.V.
ENMAN B.V. ("ENMAN") - a holding company domiciled in The Netherlands. Until August 2015, the Company and HEPP III Luxembourg Master S.à r.l. ("Heitman") each held 50% of ENMAN's issued share capital.
ENMAN was incorporated with the purpose of investment in real estate development project companies in Eastern Europe. ENMAN has investments mainly in the Czech Republic.
In July 2010 the Company signed an amendment to its joint venture agreement with Heitman according to which the Company's share in profit distributions from ENMAN is 25% and the Company's share in profit distributions from "Troja" project in the Czech Republic is 50%.
In August 2015 the Company acquired full control in ENMAN and began to consolidate the company in its condensed consolidated financial statements.
The following transactions with ENMAN are included in the consolidated financial statements of the Group:
For the
year ended
31 December
2015 (a)
-------------
Thousands
Euro
-------------
Statement of profit or loss
Share of profit of equity-accounted
investments which relates to loans
granted
by the Company and are part of the
net investment -
Share of profit of equity-accounted
investments, net of tax 678
-------------
Total (presented under share of profit
of equity-accounted investments, net
of tax) 678
=============
Finance income (b) 108
-------------
Total (presented under finance income) 108
=============
The following table shows the summarised consolidated financial information of ENMAN as included in its own consolidated financial statements (figures in the table represent 100% of the consolidated figures of ENMAN). The table also reconciles the summarised financial information to the carrying amount of the Group's interest in ENMAN.
31 December
2015 (a)
Thousands
Euro
------------
Percentage ownership interest 25%/50%
--------------------------------------------- ------------
Revenue 12,359
Cost of sales (11,535)
Selling, general and administrative
expenses (164)
Net foreign exchange income 1,302
Finance costs (333)
Income tax expense (68)
--------------------------------------------- ------------
Profit (100%) 1,561
Other comprehensive loss:
Foreign operations - foreign currency
translation differences (1,165)
------------
Total comprehensive income (100%) 396
Profit relating to loans granted by
the Company and being part of the net
investment -
Group's share of profit 678
Group's share of profit of equity-accounted
investments, net of tax 678
============
Group's share of total comprehensive
loss (291)
(a) Transactions with ENMAN occurred till August 2015 (date the Company obtained control over the entity).
(b) Interest income on loans granted by the Company to ENMAN which bears interest of 8% per annum.
NOTE 10 - LIST OF SUBSIDIARIES
Set out below is a list of subsidiaries of the Company as of 31 December 2016:
1. ENMAN B.V. - a wholly owned subsidiary - holding company, the Netherlands. See note 9.c as per the acquisition of the partner's share during 2015.
2. Engel Management s.r.o - a wholly owned subsidiary - management company, Czech Republic. 3. Engel Management S.p. Z.o.o - a wholly owned subsidiary - management company, Poland. 4. Marina Dorcol D.o.o - 95% interest subsidiary - see note 29.a.
5. Engel-Rose s.r.l - a wholly owned subsidiary - holds a plot for residential project in Bucharest, Romania.
6. EURO-BUL Ltd. - a wholly owned subsidiary - administration services company, Israel. 7. 6212964 Canada Inc. - 95% interest subsidiary - holding company, Canada. 8. 9152-8372 Quebec Inc. - a wholly owned subsidiary - management company, Canada - inactive. 9. Palace Engel Wilanow 1 S.p. Z.o.o - a wholly owned subsidiary of ENMAN, Poland - inactive.
10. Palace Engel Veleslavin a.s - wholly owned subsidiary of ENMAN - built the first stage of a residential project. During 2015 the entity (together with Palace Engel Villa s.r.o, which was liquidated during the reporting period) sold the plot designed for the second stage of the project in Prague, Czech Republic - see note 9.c.i.1.
NOTE 11 - INTEREST-BEARING BANK LOANS
The terms and conditions of outstanding loans are as follows:
31 December
------------------
Year
Nominal of 2016 2015
-------- --------
interest
Currency rate maturity Thousands Euro
------------- ----------- ---------- ------------------
Current liabilities
Secured 3m Libor
loan Euro + 3.68% 2016 - 281
Secured 3m Libor
loan Euro + 3.4% 2016 - 1,048
Secured 3m Pribor
loan CZK + 4 % 2016 - 846
-------- --------
- 2,175
----------------------------------------------------------- --------
Non-current liabilities
Secured 3m Libor
loan Euro + 3.5% 2019 - 574
Secured 3m Libor
loan Euro + 3.68% 2017-19 - 834
-------- --------
- 1,408
------------------------------- --------
Total interest-bearing
bank loans - 3,583
=================== ========
The loan denominated in CZK currency was taken in respect of the Veleslavin project in Prague, Czech Republic. During 2016, the loan was fully repaid.
The loans denominated in EUR currency, were taken by a wholly controlled entity EURO-BUL Ltd. ("Eurobul") and were secured by guarantees provided by ERD, the indirect parent company of the Company (see note 30.c.1.i).
On 14 March 2016 and 16 March 2016, Eurobul Ltd. repaid two outstanding bank loans in full, granted by Bank Leumi Le-Israel Ltd. ("the lender bank"), totalling EUR 2,179 thousands.
According to the terms of the agreement with the lender bank, in the case of full repayment of the two loans, the lender bank will waive the third bank loan in full, totalling EUR 576 thousands.
The lender bank waived the loan on 16 March 2016 and the Company recognised finance income totalling EUR 576 thousands in the consolidated statements of comprehensive income
NOTE 12 - FINANCE LEASE LIABILITY
31 December
------------------
2016 2015
-------- --------
Thousands Euro
------------------
Current liabilities
Current portion of finance
lease liability - 2,334
Over-due amounts due to
a municipality - 33,287
-------- --------
- 35,621
---------------------------------------- --------
Non-current liabilities
Finance lease liability - 7,858
-------- --------
- 7,858
---------------------------------------- --------
Total finance lease liability - 43,479
======== ========
As at 31 December 2015 the over-due amounts represented overdue instalments to the municipality in Serbia according to the finance lease agreement.
The balance consisted: overdue monthly rent instalments, an amount which is under disagreement with the municipality, overdue instalments according to the finance lease agreement and penalty interest. The classification between current and non-current lease liability follows the contractual due dates.
On 29 September 2016 the lease agreement in Serbia was terminated; see note 29.a. and consequently, the lease liability has been derecognized in full.
NOTE 13 - LOANS AND AMOUNTS DUE TO RELATED PARTIES, JOINT VENTURE AND OTHER
The terms and conditions of outstanding loans are as follows:
31 December
-----------------
2016 2015
---------- -------- -------
Nominal
interest
Currency rate Thousands Euro
---------- ---------- -----------------
Engel Resources
and Development
Ltd. (a) ILS 6%-6.5% 25,724 25,081
GBES Ltd. (b) Euro 6% 255 244
Subsidiaries
held by current
and previous
jointly controlled
entities (c) Euro 0% 286 251
-------- -------
Total 26,265 25,576
======== =======
(a) The loans were received from Engel Resources and Development Ltd. ("ERD") and are due by 30 April 2017.
The interest conditions are as follows:
-- The amount of EUR 23,252 thousands (2015: EUR 22,871 thousands) bears interest of 6% per annum and linked to changes in the customer price index in Israel.
-- The amount of EUR 2,472 thousands (2015: EUR 2,210 thousands) bears interest of 6.5% per annum.
The loans are secured by the following guarantees (see note 30.c):
-- Pledge over the shares of Marina Dorcol D.o.o in the total value of EUR 23.7 million. -- The future proceeds from the Group's assets in Canada.
(b) The loans received from GBES Ltd. ("GBES") were due on 31 December 2014 and are overdue as of the date of the consolidated financial statements.
(c) No repayment dates have been set with regard to the loans and advances granted by the subsidiaries held by currently and previously held jointly controlled entities.
For more details about related parties transactions, see note 30.
NOTE 14 - OTHER PAYABLES
31 December
-----------------
2016 2015
-------- -------
Thousands Euro
-----------------
Advances from customers 3 802
VAT payable - 69
Expected future costs in
relation with inventories 223 255
Retentions from constructors - 406
Accruals 139 309
Payroll and related expenses 82 77
Provision for liquidated
companies (a) 908 4,452
Total 1,355 6,370
======== =======
(a) See notes 28.b and 29.d.
NOTE 15 - PROVISIONS
2016 2015
-------- -------
Thousands Euro
-----------------
Balance at 1 January 492 319
Provisions reversed during
the year (22) -
Provisions used during the
year (14) -
Classifications from other
payables - 36
Acquisition of control in
previous equity-accounted
investments - 307
De-recognition of subsidiary
(b) (307) (176)
Effect of movements in exchange
rates (3) 6
-------- -------
Balance at 31 December 146 492
======== =======
(a) The Group estimated provisions in respect of its legal claims, based on the management's estimations following consulting its legal advisors.
(b) See note 29.d.
NOTE 16 - CAPITAL AND RESERVES
a. Share capital and share premium
2015 and
2016
----------
Thousands
Euro
----------
Issued and fully paid:
In issue at 1 January (87,777,778
ordinary shares) 878
Changes during the year -
----------
In issue at 31 December (87,777,778
ordinary shares) 878
==========
Authorised:
120,000,000 ordinary shares of par
value EUR 0.01 1,200
==========
All ordinary shares rank equally with regard to the Company's residual assets.
b. Ordinary shares
Holders of these shares are entitled to dividends as declared from time to time and are entitled to one vote per share at general meetings of the Company.
On 15 December 2005, the Company initially offered its shares in the AIM stock exchange market in London ("the IPO"). The proceeds from the IPO were 30,000,000 British Pounds and 27,777,778 shares were issued and EUR 39,298 thousands was recognised as share premium.
c. Translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations to Euro. See also note 2.e.5 regarding the termination lease agreement in Serbia and the effect on the related translation adjustment.
d. Dividends
Dividends are declarable based on the retained earnings presented in the Company's financial statements prepared in accordance with The Dutch Civil Code and not from the retained earnings presented in these consolidated financial statements.
Management do not expect to declare dividends at the upcoming periods.
NOTE 17 - CAPITAL MANAGEMENT
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stockholders and to maintain an optimal capital structure to reduce the cost of capital.
Due to the current financial position of the Group, the aim of the management is to enable the Group to continue and to operate as a going concern. Currently no specific target of return on capital was determined. There were no changes in the Group's approach to capital management during the year.
There are no externally imposed capital requirements on the Company.
31 December
--------------------
2016 2015
--------- ---------
Thousands Euro
--------------------
Total liabilities 28,113 80,482
Less: cash and cash equivalents (510) (652)
Less: restricted bank deposit - (728)
Adjusted net debt 27,603 79,102
Total equity (23,165) (41,779)
--------- ---------
Adjusted net debt to equity
ratio (1.19) (1.89)
========= =========
NOTE 18 - NON-CONTROLLING INTRESTS
The following table summarises the information relating to the Group's subsidiary that has material non-controlling interests ("NCI"), before any intra-group eliminations.
The tables represent 100% of the financial figures of the subsidiary.
31 December 2016
Marina Other individually
Dorcol immaterial
D.o.o subsidiaries Total
--------- ------------------- ------
Thousands Euro
NCI percentage 5%
---------------------------- ---------
Current assets 1
Non-current assets -
Current liabilities
(a) (20,250)
Non-current liabilities -
---------
Net liabilities (20,249)
Net liabilities attributed
to NCI (738) - (738)
=========
Revenue -
Profit 16,748
Other comprehensive
income (b) (4,019)
---------
Total comprehensive
income 12,729
Profit attributed
to NCI 848 848
=========
Other comprehensive
income attributed
to NCI (201) - (201)
=========
(a) Mainly loans granted by the Company to Marina Dorcol D.o.o which being eliminated at the consolidation.
(b) Mainly release of translation adjustment reserve (see note 2.e.5).
31 December 2015
Marina Other individually
Dorcol immaterial
D.o.o subsidiaries Total
--------- ------------------- --------
Thousands Euro
NCI percentage 5%
---------------------------- ---------
Current assets 1,173
Non-current assets 24,907
Current liabilities (55,758)
Non-current liabilities (7,858)
---------
Net liabilities (37,536)
Net liabilities attributed
to NCI (1,373) (12) (1,385)
=========
Revenue -
Loss (8,014)
Other comprehensive
income 214
---------
Total comprehensive
loss (7,800)
Loss attributed to
NCI (401) - (401)
=========
Other comprehensive
income attributed
to NCI 11 - 11
=========
NOTE 19 - REVENUE
For the year ended
31 December
---------------------
2016 2015
---------- ---------
Thousands Euro
---------------------
Sale of housing units (a)
(b) 5,605 1,630
Project management fees - 126
Total 5,605 1,756
========== =========
(a) The revenue from the sale of housing units represents the revenue generated from the sale of housing units in the Veleslavin project, Prague, Czech Republic.
During 2016 the Company recorded revenue from handing over of 31 units (in 2015 for the period since acquiring the control over ENMAN, to 31 December 2015: 11 units).
(b) Revenue from sales of housing units includes two units (2015: 1 unit) which were not fully paid although management believes that risks and rewards from the sale have been transferred to the buyers at the reporting date.
The amount EUR 554 thousands (2015: EUR 185 thousands) own to the Company by the buyers are being presented under "trade receivables" in the consolidated statement of financial position.
The above amounts were fully covered by the buyers after the reporting period.
NOTE 20 - WRITE-DOWN OF INVENTORY
For the year ended
31 December
---------------------
2016 2015
---------- ---------
Thousands Euro
---------------------
Plot of land in Romania
(a) 203 13
Plot of land in Czech Republic
(b) - 105
Housing units in Czech Republic
(c) 227 -
---------- ---------
Total 430 118
========== =========
(a) Write down of inventory to its net realisable value was performed based on an independent valuer's report.
(b) Write down of inventory to its net realisable value was performed based on the value reflected in agreement to sell the entity which holds the plot which was signed with third party. See note 29.c, as per the sale of the land during the reporting period.
(c) During 2016 the Group recognised a write-down of inventory related to the project Veleslavin, Czech Republic to its net realisable value.
Refer to note 2.e.3 regarding critical accounting estimations and judgments and note 7.b.1 as per the way the Company determines the net realisable value of the plots.
NOTE 21 - COST OF SALES EXCLUDING WRITE-DOWN OF INVENTORY
For the year ended
31 December
---------------------
2016 2015
---------- ---------
Thousands Euro
---------------------
Cost of sold housing units
(a) 5,459 1,611
Payroll and related expenses - 142
Maintenance 37 123
Taxes on lands 36 69
Write off expired retention
from previous constructor - (136)
Other - 8
Total 5,532 1,817
========== =========
(a) The cost of sold housing units represents the cost generated from the sale of housing units in the Veleslavin project, Prague, Czech Republic.
NOTE 22 - SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
For the year ended
31 December
---------------------
2016 2015
---------- ---------
Thousands Euro
---------------------
Payroll and related expenses 345 359
Professional services 531 296
Depreciation - 1
Travel and accommodation 14 36
Reversed provision for legal
claim (a) (22) -
Maintenance 56 34
Taxes 30 44
Selling expenses and other 5 4
---------- ---------
Total 959 774
========== =========
(a) See note 15.
NOTE 23 - OTHER INCOME, NET
For the year ended
31 December
---------------------
2016 2015
----------- --------
Thousands Euro
---------------------
Income due to de-recognition
of subsidiaries (a) 3,836 454
Loss due to de-recognition
of subsidiaries (2) (12)
----------- --------
Total 3,834 442
=========== ========
(a) See notes 29.b and 29.d for main balances.
NOTE 24 - NET FINANCE COSTS
For the year ended
31 December
---------------------
2016 2015
--------- ----------
Thousands Euro
---------------------
Interest on loans and amounts
to related parties - (253)
Income from wavering of
bank loan (a) (576) -
--------- ----------
Finance income (576) (253)
--------- ----------
Interest on interest-bearing
bank loans 35 144
Interest on loans from related
parties 1,405 1,291
Impairment loss on loans
given to subsidiaries held
by joint venture entities
(b) - 3
Adjustment of finance lease
for inflation (c) 397 478
Interest on finance lease
(d) 2,602 4,298
Loss of discount on finance
lease (e) - 2,309
--------- ----------
Finance costs 4,439 8,523
--------- ----------
Net foreign exchange losses
(f) 1,581 2,836
--------- ----------
Net finance costs recognised
in profit or loss 5,444 11,106
========= ==========
(a) See note 11.
(b) Relates to loans given directly to project entities and being not part of the net investment due to different terms and priorities of repayments.
(c) The increases of the local retail price index in Belgrade, Serbia in the period till the termination of the lease in 2016 and in 2015 were 1.2% and 1.7%, respectively.
(d) The overdue amounts carried an average penalty interest of 1.4% per month (average of 12.21% for the period till date of the termination of the lease agreement on 29 September 2016). The penalty sums to an amount of EUR 2,307 thousands (2015: EUR 3,435 thousands).
(e) According to the revised lease agreement which was signed on 30 August 2010, the lease instalments which were due after the signature date of the agreement were postponed to the years 2014-2016 and carried a discount of 30% in case the Company would pay them on time (similar terms to the original agreement which was signed in 2006).
Since the Group did not pay the instalments which were due, the Company recognised a loss of discount in the amount of EUR 2,309 thousands in 2015.
(f) The net foreign exchange losses includes a loss in the amount of EUR 1,252 thousands (2015: EUR 2,726 thousands) due to the weakening of the EUR vs. the ILS on the loans granted to the Company by ERD, see note 30.d.(b).
NOTE 25 - INCOME TAXES
a. Amounts recognised in profit or loss
For the year ended
31 December
---------------------
2016 2015
---------- ---------
Thousands Euro
---------------------
Current year 79 145
Changes in estimations related
to prior years (132) -
Deferred tax benefit (226) (352)
---------- ---------
Income tax benefit (279) (207)
========== =========
Tax expense excludes the Group's share of the tax expense of the Group's previous equity-accounted investments of EUR 848 thousands (2015: income tax benefit of EUR 85 thousands), which has been included in "share of profit of equity-accounted investments, net of tax".
Changes in estimations related to prior years relates to Veleslavin project in Prague, Czech Republic.
The Group believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and prior experience.
b. Reconciliation of effective tax rate
For the year ended 31 December
-------------------------------------
2016 2015
------------------ -----------------
Thousands Thousands
% Euro % Euro
------ ---------- ----- ----------
Profit (loss) before
income tax 20,894 (10,610)
------ ---------- ----- ----------
Tax using the Company's
domestic tax rate 25% 5,224 25% (2,653)
Effect of tax rates
in foreign jurisdictions -8% (1,718) -8% 820
Tax effect of:
Share of profit of equity-accounted
investments reported
net of tax 0% (78) 4% (435)
Current-year losses
for which no deferred
tax asset is recognised 1% 187 -22% 2,383
Recognition of previously
unrecognised
deferred tax assets
on tax losses utilised
in
the current period -17% (3,558) 1% (139)
De-recognition of previously
recognised
deferred tax liabilities - - 2% (170)
Changes in estimations
related to prior years -1% (132) - -
Other differences, net -1% (204) 0% (13)
Income tax benefit -1% (279) 2% (207)
====== ========== ===== ==========
c. Movement in deferred tax balances
The following are the deferred tax assets and liabilities recognised by the Group before off-sets, and the movements thereon, during the current and prior reporting periods (positive balances are deferred tax assets and negative balances are deferred taxes liabilities):
Acquisition
Net balance Effect of control Net balance
at 1 Recognised of movement in previous at 31
January in profit in exchange equity-accounted December
2015 or loss rate investments 2015
------------ ----------- ------------- ------------------ ------------
Thousands Euro
Inventory 2,132 (916) (6) (754) 456
Investment
property (2,742) 110 14 - (2,618)
Finance lease
liability 588 1,063 (10) - 1,641
Account receivables - (40) - 5 (35)
Other payables - 135 2 35 172
Provisions
and other
payables 22 - - - 22
------------ ----------- ------------- ------------------ ------------
Total - 352 - (714) (362)
============ =========== ============= ================== ============
Effect
Net balance Recognised of movement Net balance
at 1 January in profit in exchange at 31 December
2016 or loss rate 2016
-------------- ----------- ------------- ----------------
Thousands Euro
Inventory 456 (596) (37) (177)
Investment
property (2,618) 2,570 48 -
Finance lease
liability 1,641 (1,631) (10) -
Account receivables (35) (70) - (105)
Other payables 172 (47) (1) 124
Provisions
and other
payables 22 - - 22
-------------- ----------- ------------- ----------------
Total (362) 226 - (136)
============== =========== ============= ================
The following table sets out the Group's deferred tax assets and liabilities, net of off-sets:
31 December
-----------------
2016 2015
-------- -------
Thousands Euro
-----------------
Deferred tax assets (non-current
assets) - 58
Deferred tax liabilities
(non-current liabilities) (136) (420)
Net deferred tax liabilities (136) (362)
======== =======
d. Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of tax losses carry forward amounting to EUR 37,973 thousands at 31 December 2016 (2015: EUR 36,735 thousands), because it is not probable that future taxable profit will be available against which the Group can use the benefits therefrom.
As per the limitation of the accumulated tax losses per each country, see clause e below.
e. Main tax laws
The main tax laws to which the Group companies are subject in their countries of residence are as follows:
1. The Netherlands
Companies resident in the Netherlands are subject to corporate income tax at the general rate of 25% (2015: 25%). The first EUR 200,000 of profits is taxed at a rate of 20%. Tax losses may be carried back for one year and carried forward for nine years. As part of the measures to combat the consequences of the economic crisis, taxpayers can elect for an extension of the loss carry back period to three years (instead of one year). The election is only available for losses suffered in the taxable years 2009, 2010 and 2011. If a taxpayer makes use of the election, two additional limitations apply: (i) the loss carry forward period for the taxable years 2009, 2010 and/or 2011 will be limited to a maximum of six years (instead of nine years); and (ii) the maximum amount of loss that can be carried back to the second and third year preceding the taxable year will be limited to EUR 10 million per year. The amount of loss that can be carried back to the year directly proceeding the taxable year for which the election is made will remain unrestricted. As of the taxable year 2012, the election for extended loss carry back is not available anymore and the regular loss carry back and carry forward limitations apply.
Under the participation exemption rules, income (including dividends and capital gains) derived by Netherlands companies in respect of qualifying investments in the nominal paid up share capital of resident or non-resident investee companies, is exempt from Netherlands corporate income tax provided the conditions as set under these rules have been satisfied. Such conditions require, among others, a minimum percentage ownership interest in the investee company and require the investee company to satisfy at least one of the following tests:
-- Motive Test, the investee company is not held as passive investment;
-- Tax Test, the investee company is taxed locally at an effective rate of at least 10% (calculated based on Dutch tax accounting standards);
-- Asset Test, the investee company owns (directly and indirectly) less than 50% low taxed passive assets.
2. Czech Republic
The corporation tax rate in the Czech Republic is 19 % in 2016 (2015: 19%). Capital gain could be tax exempted under certain circumstances. Tax losses can be carried forward up to five years to offset future taxable income, under certain circumstance (e.g. no significant change in the business, ownership). Dividends paid out of net income are subject to a withholding tax of 15%/35%, subject to the relevant double taxation treaty or EU regulations.
3. Israel
The standard rate of company tax in Israel in 2016 is 25% (2015: 26.5%). Companies with a beneficial or approved or preferred enterprise are taxed at a reduced tax rate that varies depending on the circumstances. Capital gains are subject to the standard corporate tax rate. Dividends from foreign sources are subject to a 25% tax with a credit for foreign withholding tax, and in certain circumstances, at the standard corporate tax rate on the "grossed up dividend" with a credit granted on all foreign taxes paid by the direct and second tier subsidiary on the dividend and the income from which it is distributed.
4. Poland
The corporation tax in Poland (including capital gains) is 19% in 2016 (2015: 19%).Tax losses can be carried forward for five years and only 50% of a the current year profit could be cover by past losses. Dividends paid out of net income are subject to a withholding tax of 19%, subject to the relevant double taxation treaty or EU regulations.
5. Canada
The federal corporate tax rate of the subsidiaries incorporated in Canada (including capital gains) is 15% in 2016 (2015: 15%). The combined corporate and provincial tax rate is 26.5% (2015: 26.5%). Non-capital tax losses can be carried back three years and carried forward up to 20 years for losses arising in 2006 and later, 10 years for losses arising in taxation years ending after 22 March 2004 and before 2006, 7 years for losses arising in taxation years ending before 23 March 2004. Capital tax losses can be carried back three years and carried forward indefinitely against other capital gains. Dividends paid out of net income are subject to a withholding tax of 25%, subject to the relevant double taxation treaty.
6. Romania
The corporation tax in Romania (including capital gains) is 16% in 2016 (2015: 16%). Dividends paid out of net income are subject to a withholding tax of 16%, subject to the relevant double taxation treaty or EU regulations. Tax losses can be carried forward and deducted from taxable profits in the following 7-year period (the carry forward period for losses recorded up to 31 December 2008 is 5 years), on a first-in-first-out basis.
7. Serbia
Corporate income tax is levied at a rate of 15% in 2016 (2015: 15%). Capital gains are taxable at the rate of 15%. Losses may be carried forward for 5 years (capital loss could be carried forward separately); losses generated in the period 2003-2009 may be carried forward for 10 years. No carry-back of losses is permitted. Dividends paid outside the country are subject to a withholding tax of 20% subject to the relevant double taxation treaty.
NOTE 26 - EARNINIGS PER SHARE
Basic and diluted earnings per share
The calculation of basic and diluted earnings per share has been based on the following profit (loss) attributable to ordinary shareholders and weighted-average number of ordinary shares outstanding.
a. Profit (loss) attributable to ordinary shareholders (basic and diluted)
For the year ended
31 December
---------------------
2016 2015
--------- ----------
Thousands Euro
---------------------
Profit (loss) attributable
to ordinary shareholders 20,325 (10,002)
========= ==========
b. Weighted-average number of ordinary shares (basic and diluted)
31 December
------------
2015 and
2016
------------
Thousands
shares
Issued ordinary shares at 1 January 87,778
Changes during the year -
------------
Weighted-average number of ordinary
shares at 31 December 87,778
============
There are no dilutive factors.
NOTE 27 - FINANCIAL INSTRUMENTS - FAIR VALUE AND RISK MANAGEMENT
a. Financial risk management
The Group has exposure to the following risks arising from financial instruments:
-- Credit risk; -- Liquidity risk; and -- Market risk. i. Risk management framework
The Company's board of directors has overall responsibility for the establishment and oversight of the Group's risk management framework. The board of directors is responsible for developing and monitoring the Group's risk management policies.
The Group's risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group's activities. The Group, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.
The Group Audit Committee oversees how management monitors compliance with the Group's risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.
ii. Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group's receivables from customers.
The carrying amount of financial assets represents the maximum credit exposure.
The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk associated with the industry and country in which customers operate.
The Group's exposure to credit risk is minimised by the requirement for customers to pay most of the amount due on purchased housing units and/or sold plots prior to their handover.
The Group limits its exposure to credit risk arising from bank deposits by transacting only with reputable bank counterparties that have a credit rating higher than that of the Group. Additionally, the Group reduces its exposure to credit risk by depositing its financial funds in different and independent bank institutions.
iii. Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group's approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.
In order to handle the liquidity risk of the Company, the management realised several assets during the reporting periods in Czech Republic and Canada. In addition the Company is acting to minimise its operational costs.
See note 2.b which includes the Group's going concern analysis and describes the financial difficulties and liquidity risks.
Exposure to liquidity risk
The following are the remaining contractual maturities of the financial liabilities at the reporting date. The amounts are gross and undiscounted, and include estimated interest payments and exclude the impact of netting agreements.
31 December 2016
Contractual cash flows
------------------------------------------------------------
Less More
Carrying than 1-2 2-5 than
amount Total 1 year years years 5 years
--------- --------- --------- ------- ------- ---------
Thousands Euro
Loans and amounts
due to related
parties, joint
venture and other 26,265 (28,337) (28,337) - - -
Trade payables 211 (211) (211) - - -
Other payables 1,355 (1,355) (1,355) - - -
--------- --------- --------- ------- ------- ---------
Total financial
liabilities 27,831 (29,903) (29,903) - - -
========= ========= ========= ======= ======= =========
31 December 2015
Contractual cash flows
--------------------------------------------------------------
Less More
Carrying than 1-2 2-5 than
amount Total 1 year years years 5 years
--------- ---------- --------- ------- -------- ---------
Thousands Euro
--------------------------------------------------------------
Interest-bearing
bank loans 3,583 (3,541) (2,199) (303) (1,039) -
Loans and amounts
due to related
parties, joint
venture and other 25,576 (26,079) (26,079) - - -
Trade payables 294 (294) (294) - - -
Other payables 6,370 (6,370) (6,370) - - -
Finance lease
liability 43,479 (81,394) (35,720) (517) (1,551) (43,606)
--------- ---------- --------- ------- -------- ---------
Total financial
liabilities 79,302 (117,678) (70,662) (820) (2,590) (43,606)
========= ========== ========= ======= ======== =========
The interest payments on variable interest rate loans and finance lease liability in the table above reflect market forward interest rates at the reporting date and these amounts may change as market interest rates change. It is not expected that the cash flows included in the maturity analysis for 31 December 2016 could occur significantly earlier, or at significantly different amounts.
iv. Market risk
Market risk is the risk that changes in market prices - such as foreign exchange rates, interest rates and equity prices - will affect the Group's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
-- Currency and inflation risk
The Group presents its consolidated financial statements in Euro. However, the Group's holds entities which are based locally in a number of different countries including Romania, the Czech Republic, Serbia, Canada and Israel, and therefore the Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of the Group entities, primarily the Euro. The Group's financial results could, therefore, be adversely affected by fluctuations in the exchange rates between the Euro and the local currencies. The Group mitigates its foreign exchange risk by financing development projects through financial liabilities that are denominated in the currency of the country the project is located in and in which revenues from the projects will be generated.
The Group is exposed to changes in the customer price index in Israel and to the change in the exchange rates of the New Israeli Shekel on the loans granted by ERD, see note 13 and clause a.iv under this note.
The Group was also exposed to changes in the local retail price index in Belgrade on the finance lease payments of the property in Belgrade, Serbia; see note 12, clause a.iv under this note and note 29.a.
The Group does not currently engage in hedging or use any other financial arrangement to minimise currency exchange and inflation risks or the translation risk related to foreign operations.
Exposure to currency and inflation risks
The summary quantitative data about the Group's exposure to currency risk as reported to the management of the Group is as follows:
Functional currency - net exposure
--------------------------------------------------------------
New
Serbian Polish Czech Romanian Israeli Canadian
Dinar Zloty Koruna Leu Shekel Dollar
--------- -------- -------- --------- --------- ---------
Thousands Euro
--------------------------------------------------------------
31 December
2016 (19,757) (1,910) (1,610) (3,176) (25,788) 193
31 December
2015 (19,839) (3,720) (4,764) (4,269) (25,136) (858)
Additionally the Company has exposure to changes in the customer price index in Israel on loans and amounts due to related parties that amounted to EUR 23,252 thousands at 31 December 2016 (2015: EUR 22,871 thousands).
The following significant exchange rates have been applied:
Average rate Year-end spot rate
------------------ ---------------------
2016 2015 2016 2015
-------- -------- ---------- ---------
CAD / EUR 0.682 0.706 0.706 0.665
CZK / EUR 27.033 27.284 27.020 27.025
PLN / EUR 4.363 4.184 4.424 4.262
RON / EUR 4.491 4.445 4.541 4.525
RSD / EUR 123.101 120.850 123.472 121.626
ILS / EUR 4.250 4.312 4.044 4.247
Sensitivity analysis
A reasonably possible strengthening (weakening) of the Euro against the below currencies and possible changes of the customer price and the local retail price indexes in Israel and Serbia at 31 December would have affected the measurement of financial instruments denominated in a foreign currency and affected profit or loss and equity by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases.
31 December 2016 31 December 2015
--------------------------- ---------------------------
Effect Effect
on profit on profit
for the for the
Strengthening year and Strengthening year and
change equity change equity
-------------- ----------- -------------- -----------
Thousands Thousands
% Euro % Euro
-------------- ----------- -------------- -----------
Euro vs. RSD 3% (504) 4% (675)
Euro vs. PLN 7% (108) 6% (181)
Euro vs. CZK 1% (13) 3% (116)
Euro vs. RON 3% (80) 3% (108)
Euro vs. ILS 6% (1,137) 11% (2,032)
Euro vs. CAD 10% 16 13% (95)
Customer price index - Israel -0.3% 51 -0.9% 151 Local retail price index - Serbia - - 1.7% (628)
At 31 December 2016, a weakening of the Euro and/or a change of the customer price and local retail price index to the opposite direction in Israel would have had the equal, but opposite effect on the profit for the year and equity to the amount shown above on the basis that all other variables remain constant.
-- Interest rate risk
The Group's interest rate risk arises mainly from short-term borrowings. Borrowings issued at variable rates expose the Group to cash flows interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group does not currently engage in hedging or use any other financial arrangement to minimise the exposure to these risks.
Exposure to interest rate risk
The interest rate profile of the Group's interest-bearing financial instruments as reported to the management of the Group is as follows:
Carrying amounts at
31 December
----------------------
2016 2015
---------- ----------
Thousands Euro
----------------------
Fixed-rate instruments
Financial assets
Cash and cash equivalents 510 652
Restricted bank deposit - 728
Prepayments and other assets 1,124 -
Loans and amounts to equity-accounted
investment 573 2,938
2,207 4,318
========== ==========
Financial liabilities
Loans and amounts due to
related parties, joint
venture and other 2,727 2,454
Finance lease liability - 43,479
---------- ----------
2,727 45,933
Variable-rate instruments
Financial liabilities
Interest-bearing bank loans - 3,583
Loans and amounts due to
related parties, joint
venture and other 23,538 23,122
---------- ----------
23,538 26,705
========== ==========
Sensitivity analysis for variable-rate instruments
Cash flow sensitivity analysis for variable-rate instruments
A reasonable possible change of 3 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency exchange rates, remain constant.
There is no impact on the Group's equity, except of the profit or loss.
31 December 2016 31 December 2015
---------------------------- ----------------------------
Increase Effect Increase Effect
(decrease) on equity (decrease) on equity
in basis and profit in basis and profit
points or loss points or loss
Variable-rate
interest of RON - - 58 (1)
Variable-rate
interest of Euro - - (45) 9
Variable-rate
interest of ILS 3 (5) 14 (24)
Fair value sensitivity analysis for fixed-rate instruments
The Group does not account for any fixed-rate financial assets or financial liabilities at fair value through profit or loss, and the Group does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model. Therefore, a change in interest rates at the reporting date would not affect profit or loss.
b. Fair values versus carrying amounts
The following table shows the carrying amounts and the fair values of financial assets and financial liabilities.
31 December 31 December
2016 2015
------------------ ------------------
Carrying Fair Carrying Fair
amount value amount value
--------- ------- --------- -------
Thousands Euro
--------------------------------------
Financial assets
Cash and cash equivalents 510 510 652 652
Restricted bank deposit - - 728 728
Prepayments and other
assets 1,124 1,124 - -
Trade receivables 554 554 185 185
Fixed rate on loans and
amounts to equity-accounted
investment 573 574 2,938 2,942
Total financial assets 2,761 2,762 4,503 4,507
========= ======= ========= =======
Financial liabilities
Floating rate interest-bearing
bank loans - - 3,583 3,541
Trade payables 211 211 294 294
Fixed rate loans and amounts
due to related
parties and joint venture 2,727 2,679 2,454 2,472
Floating rate loans and
amounts due to related
parties and joint venture 23,538 23,299 23,122 23,333
Finance lease liability - - 43,479 42,716
Total financial liabilities 26,476 26,189 72,932 72,356
========= ======= ========= =======
The fair value of loans and amounts to related parties has been calculated using an estimated market interest rate of 0.5% (2015: 0.5%) taking into consideration the specific loans conditions (securities provided, currency, etc.).
The fair value of loans and amounts due to related parties and joint venture has been calculated using an estimated market interest rate of 4.95% (2015: 6.95%) taking into consideration the specific loans conditions (securities provided, currency, etc.).
The fair value of short term receivables and payables expected to be settled within 12 months was deemed to be equal to their carrying amounts.
NOTE 28 - CONTINGENT LIABILITIES AND COMMITMENTS
a. Warranties and guarantees
In case of the Group entities which are engaged in the construction and sale of residential housing units, the entities provide and/or will provide their customers with performance and quality guarantees in accordance with the Czech, Polish, Romanian or Serbian civil codes. The entities require from the sub-contractors building the housing units, performance and quality guarantees in the form of bank guarantees and of funds held in retention. At the end of the reporting period given guarantees do not represent a significant amount and are covered by contractor guarantee.
b. Guarantees on loans granted to previous jointly controlled entities
The loans granted to the previous jointly controlled entities have been provided to individual entities and each loan has been granted in respect of a specific project. In each case, the security for the loan is a first ranking lien on the assets of the project company. The first ranking liens include: liens on rights for the land and the projects for which the loans were received and liens on rights, pursuant to the agreements to which the Company is a party to. Further, loans that these companies have received from their shareholders and/or every existing or future right of the holders of the rights in those companies are subordinated to the loans received from the banks. In addition, in most cases payments to the shareholders from the entities (including dividend payments but excluding amounts in respect of project management) are not allowed, until the interest-bearing bank loan has been repaid.
The Group has not provided any securities in respect of the interest-bearing bank loans granted to its subsidiaries and previous joint ventures, except the following case:
-- ENMAN B.V. ("ENMAN"), the company's subsidiary, provided guarantees for interest payments and cost overruns, to the bank which financed the Ingatlan project in Budapest, Hungary.
In 2013, a receiver was appointed by a court in Hungary and the entity which holds the Ingatlan project entered into bankruptcy process, and consequently, it is not consolidated into these consolidated financial statements. The amount of the unpaid loan at the date of deconsolidation was EUR 6,099 thousands, part of the related interest and cost overrun was not paid before the bankruptcy (liquidation) process.
A liability was recognised in these consolidated financial statements according to management's best estimation.
NOTE 29 - SIGNIFICANT EVENTS DURING THE REPORTING PERIODS
a. Termination of lease agreement in Serbia
On 30 March 2006 and 18 February 2008 Marina Dorcol d.o.o ("MD") (a 95% owned subsidiary of the Company) signed several lease agreements with the Directorate for City Building Land, controlled by the Municipality of Belgrade ("the Municipality").
Since January 2011, MD has been in breach of the obligation to make the lease payments, following which the Company recognised during the reporting period, an expense of EUR 2,580 thousands as a result of the lease interest and inflation on the unpaid overdue lease contracted payments.
Following the breach the Municipality initiated several claims during recent and previous periods to collect those debts.
On 3 June 2016, MD received from the Mayor of Belgrade a notice of termination of the lease agreement MD has in respect of the Marina Dorcol Project in Belgrade, Serbia.
On 22 July 2016, the Municipality sent MD a unilateral termination of the lease agreement over the Marina Dorcol Project in Belgrade, Serbia ("termination letter").
On 29 September 2016, MD notified the Municipality that it accepted the termination letter and wished to negotiate with the Municipality in order to determine the amount and timing of the compensation due to MD as a result of the above termination.
Based on the agreement with the municipality, management believes that the final result of the termination will be the restitution of the amounts paid by MD less the amount of compensation to the Municipality for usage of such land for the period of duration of lease and for compensation of damages which occurred to the Municipality, if any. The Company and MD are currently in the process of negotiation with the Municipality about the amount and timing of the restitution.
Management expects that following the termination it will have a net cash inflow from the above restitution, however, the net cash flow and the timing to conclude the settlement with the Municipality cannot be predicted at this stage with certainty. Based on MD's advisers, the range of the restitution can be in the amount of RSD 337,507 thousands (approximately EUR 2,737 thousands) to RSD 487,316 thousands (approximately EUR 3,952 thousands).
As management has no certainty of the amount that MD will be able to collect from the Municipality, management did not record receivables at the Company's consolidated financial statements generated from the above mentioned restitution of the lease agreement.
As MD is no longer bound to make any further payments on the lease liabilities on one hand and has no rights over the leased land on the other hand, the management of the Group derecognised of the lease liability and related asset in the reporting period.
As a consequence, income of EUR 23,510 thousands was recognised in profit and loss under "other income" in the consolidated financial statements.
The following table summarises the derecognised amounts of assets and liabilities including the related translation adjustment at the date of accepting the termination letter:
Thousands
Euro
----------
Inventories of housing units and
land 8,293
Investment property 17,218
Finance lease liability (45,806)
Release of related translation adjustments (3,215)
----------
Total identifiable net liabilities
disposed (23,510)
Expected restitution amounts, net
(*) -
----------
Total income on de-recognition,
net 23,510
==========
(*) As of the reporting period the amount cannot be predicted with certainty.
b. On 26 January 2016, the Company sold its investment in its wholly owned subsidiary, Davero Invest s.r.l ("Davero").
As a consequence the Company no longer controls Davero, therefore ceased consolidating Davero in its consolidated financial statements. The Company recognised income of EUR 115 thousands under "other income" in the consolidated statement of profit or loss on the sale of its investment in Davero.
The following table summarises the derecognised amounts of assets and liabilities disposed at the date of the sale.
Thousands
Euro
----------
Loans and amounts due to related
parties (115)
----------
Total identifiable net liabilities
disposed (115)
Income on de-recognition 115
Cash and cash equivalents disposed
of -
Net cash inflow (outflow) -
==========
c. On 16 December 2015, Arces signed a conditional agreement to sell its shares and receivables in the wholly owned subsidiary Palace Engel Vokovice s.r.o ("Vokovice s.r.o").
On 14 March 2016 the sale was completed. As the plot of land held by Vokovice s.r.o was measured as of 31 December 2015 based on its net realisable value which was determined based on the transaction price in the conditional agreement the transaction did not generate any material result in the profit or loss of the consolidated financial statements.
The proceeds have been used for the repayment of the loan granted by Real Property Investment (Guernsey) Ltd., see note 30.c.3.
d. On 15 July 2016, the Company sold its investment in the wholly owned subsidiary, Arces International B.V. ("Arces") to a third party for an immaterial amount.
As a consequence the Company no longer controls Arces, therefore ceased consolidating Arces in its consolidated financial statements. The Company recognised income of EUR 3,711 thousands under "other income" in profit or loss on the sale of its investment in Arces.
The income was mainly due to a recognised liability of Arces' for a finance exposure with respect to interest-bearing bank loans that financed the project in Gyor, Hungary. The bank claims that the loan was additionally guaranteed by Arces. Arces has disputed the validity of this guarantee with the bank; however, no official legal claim has been filed by any of the parties.
The Company did not provide any guarantees for Arces' and its subsidiaries' liabilities.
The following table summarises the derecognised amounts of assets and liabilities disposed at the date of the sale.
Thousands
Euro
----------
Cash and cash equivalents 28
Loans and amounts to related parties 142
Trade payables (9)
Other payables (3,580)
Provisions (307)
Total identifiable net liabilities
disposed (3,726)
Sale expenses 15
----------
Income on de-recognition, net 3,711
Cash and cash equivalents disposed
of (28)
Net cash outflow (28)
==========
NOTE 30 - RELATED PARTIES
a. Parent and ultimate controlling party
The main shareholder of the Company is Engel General Developers Ltd. (incorporated in Israel) ("EGD") which owns, at 31 December 2016, 68.35% of the Company's issued share capital. Engel Resources and Development Ltd. (incorporated in Israel) ("ERD") holds 100% of the share capital of EGD.
During the reporting period, the transfer of 2,871,460 ordinary shares ("Shares") in ERD held by advocates Yuri Nechushtan and Eyal Neiger as receivers to GBES Ltd. ("GBES") has been completed.
The ownership of the Shares was to be split between GBES and the Gabay Group, an Israeli real estate group (the "Gabay Group"). As an interim measure, during the first quarter of 2016, the Shares were transferred to GBES that held 1,133,372 ordinary shares in ERD in trust for the Gabay Group. As a result, GBES held 2,871,460 ordinary shares in ERD (representing 53.0% of the voting rights of ERD) and the Gabay Group held 536,555 ordinary shares in ERD (representing 9.9% of the voting rights of ERD).
During the second quarter of 2016, the ownership of 1,133,372 ordinary shares in ERD previously held in trust by GBES was transferred to a company that is 100% owned by Mr Eli Gabay.
As a result, GBES holds 1,738,088 ordinary shares in ERD (representing 32.1% of the voting right of ERD) and Gabay Group (through two different entities) holds a total of 1,669,927 ordinary shares in ERD (representing 30.9% of the voting right of ERD), including the 536,555 ordinary shares in ERD held by Gabay Group prior to the splitting of the Shares.
Accordingly, GBES currently holds a 21.9% economic interest in the Company and the Gabay Group currently holds a 21.1% economic interest in the Company.
In addition, Real Property Investment (Guernsey) Ltd. ("RPIGL") holds 6.4% of the voting rights and issued share capital of the Company. The shares of RPIGL and GBES are held by a discretionary settlement, of which certain members of the Morris family are potential beneficiaries, and which therefore currently has a combined economic interest in 28.3% of the Company.
In 2014, ERD has reached an agreement with its bondholders to restructure the terms of its bonds. As part of the agreement, EGD granted to the bondholders security over the 60 million shares in the Company held by EGD (represent 68.35% of the issued share capital of the Company). In addition, ERD has pledged to the bondholders all future loan repayments such as made by the Company and Eurobul to ERD and assigned the pledges over the shares held by the Company in Marina Dorcol D.o.o. The pledges over these shares were granted to ERD as part of the loan agreement between Eurobul, the Company and ERD.
b. Transactions with key management personnel 1. Directors
At 31 December 2016, the Company has 2 directors (2015: 2 directors).
In January 2017 one additional director was appointed (Mr. Sagee Kadosh).
The annual salary cost and expenses return of the directors is as follows:
For the year
ended 31 December
---------------------
2016 2015
---------- ---------
Name Position Thousands Euro
--------------------- ------------------ ---------------------
Non-executive
Terry Roydon director 24 28
Marius van Eibergen Non-executive
Santhagens (a) director 28 28
Ayelet Naim-Levanon Former executive
(b) director - -
Former executive
Oded Shamir (c) director - -
Former executive
Dov Luxenburg (d) director - -
Total 52 56
========== =========
(a) The cost above includes VAT payable.
(b) Appointed in February 2016 and resigned from her position in September 2016.
(c) Resigned from his position in September 2015.
(d) Resigned from his position in October 2015.
Excluding the amounts above there are no additional employee benefits, requirements to provide post-employment benefits, termination benefits or any other benefits in relation to the Company's directors.
2. Resignation of the Company's CEO
During the reporting period, Mr. Liron Or who acted as Chief Executive Officer of the Company resigned from his position in the Company. In accordance with the terms of the agreement, Mr Or's role at the Company ceased on 31 March 2016.
As part of the termination agreement with Mr Or, the Board of the Company agreed to grant Mr. Or a discount of EUR 50 thousands for purchasing one residential unit in the Veleslavin project in Prague, Czech Republic. During the second quarter of 2016, Mr. Or completed the purchase of the unit.
The annual cost of the CEO during 2016 is EUR 59 thousands (2015: EUR 223 thousands) which includes salary cost, bonus for selling assets, termination agreement cost and expenses return.
c. Related party transactions 1. Securities provided/received by parent company and related parties
i. Interest-bearing bank loans granted to a wholly controlled entity Eurobul Ltd. ("Eurobul") were secured by guarantees provided by ERD.
During the first quarter of 2016 the Group fully repaid the bank loans, and as a result ERD removed the guarantees it provided to the lender bank, see also note 11.
ii. The Company has pledged the shares of Marina Dorcol D.o.o in the amount of EUR 23.7 million to ERD (amount which was determined prior to the cancellation of the lease agreement, see note 29.a and have not change following the cancelation).
iii. The Company has pledge the future proceeds from the Group's assets in Canada.
2. Support due to the Company's financial situation
At 31 December 2016, the outstanding debt due to ERD is EUR 25,724 thousands and is due by 30 April 2017, see note 13.
During 2016, ERD did not provide any additional bridge loans to the Company (2015: EUR 304 thousands).
During 2016, the Company repaid part of the loans granted by ERD to the amount of EUR 2,000 thousands (2015: EUR 4,000 thousands).
After the reporting period the Company repaid part of the loan granted by ERD to the amount of EUR 500 thousands.
During the first quarter of 2016, ERD provided the Company a support letter according to which ERD will support the Company in its ongoing operations till 31 December 2016, with an accumulated amount up to EUR 450 thousands, as of the signature date of the financial statements; the support letter has not been renewed.
On 14 May 2015, the Company, ERD and Eurobul signed a new amendment to the agreements which were signed on 30 July 2009 with the following below main clauses:
-- The Company agreed to repay ERD a total amount of EUR 4,000 thousands from the recent distributions generated from Arces and ENMAN, the amount was fully paid on 15 May 2015.
-- The Company agreed to set a repayment framework of an additional EUR 1,300 thousands which will be repaid from future proceeds which the Company will be entitled to. During the years 2015-2016, the Company paid all the funds according to this clause.
-- All future repayments are subject to keeping the necessary funds in the Company and Eurobul which will allow the companies to meet their obligations to employees and service providers as they fall due.
-- The parties agree that all the net future proceeds generated from the Company's assets in Canada will be used to repay the outstanding debts of the Company and Eurobul to ERD. As of the date of the accounts the Company did not pay ERD any funds according to this clause, the timing of payment is being coordinated and discussed with ERD.
3. Transactions with one of the ultimate shareholders
On 10 March 2016, the Company and its wholly owned subsidiary, Eurobul Ltd. ("Eurobul") signed a loan agreement totalling EUR 2,164 thousands with Real Property Investment (Guernsey) Ltd. ("RPIGL").
According to the contract with RPIGL, the loan could only be used for the full repayment of the bank loans granted by Bank Leumi Le-Israel Ltd. to Eurobul, see note 11.
In order to secure the repayment of the loan the Company committed to use all funds generated from the following cash distributions:
a. The net distribution generated from the sale of wholly owned subsidiary Palace Engel Vokovice s.r.o. (see note 29.c).
During the reporting period, the Company paid RPIGL the funds according to this clause in the total amount of EUR 750 thousands.
b. The net distribution generated from the sale of the two plots in Canada (see note 9.a.iv.2).
During the reporting period, the Company paid RPIGL the funds according to this clause in the total amount of EUR 1,164 thousands.
Based on prior agreements with ERD, all the remaining net proceeds from the sale of the two plots in Canada will be used to repay the outstanding debts of the Company to ERD.
c. 2/3 of the proceeds generated from the sale of any assets of the Company and Eurobul will be paid to RPIGL as soon as funds are available.
During the reporting period, the Company paid RPIGL the funds according to this clause in the total amount of EUR 250 thousands.
The loan was denominated in EUR and carried no interest.
RPIGL holds 6.44% of the voting rights and issued share capital of the Company. RPIGL is a related party of GBES Ltd. as they are controlled by the same shareholder.
d. Trading transactions
Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.
The following trading transactions and balances with related parties are included in the consolidated financial statements:
For the year ended
31 December
---------------------
2016 2015
---------- ---------
Thousands Euro
---------------------
Statement of profit or loss
Revenue (a) - 126
Interest expense on loans
granted by Engel Resources
and Development Ltd. (1,394) (1,280)
Interest expense on loans
granted by GBES Ltd. (11) (11)
Net foreign exchange loss
on loans from Engel Resources
and Development Ltd. (b) (1,252) (2,726)
Interest due on loans and
amounts to related parties - 253
---------- ---------
Total (2,657) (3,638)
========== =========
31 December
--------------------
2016 2015
---------
Thousands Euro
--------------------
Statement of financial position
Loans and amounts to related
parties 43 2,044
Due to Engel Resources and
Development Ltd. (25,724) (25,081)
Due to GBES Ltd. (255) (244)
Due to subsidiaries held
by current and previous
jointly controlled entities (286) (251)
Total (26,222) (23,532)
========= =========
(a) The revenue in 2015 comprises management fee charges to the previously held joint ventures' subsidiaries incurred before the Company obtained control of the entities. The related cost in 2015 was EUR 161 thousands and it is presented under cost of sales (see notes 19 and 21).
(b) The Group recognised a loss in the amount of EUR 1,252 thousands (2015: EUR 2,726 thousands) under net foreign exchange loss in the profit or loss of the consolidated financial statements, due to the weakening of the EUR vs. the ILS (-4.8%) during the reporting period. (2015: -10.1% weakening of the EUR).
NOTE 31 - OPERATING SEGMENTS
a. Basis of segmentation
The Group's CODM (the chief operating decision maker) considers the whole operation as one operating segment while trying to ensure sufficient liquidity to meet the liabilities when due. The liquidity issues the Group is currently facing require a general decision making process which is different from a company or group of companies operating in a liquid position.
b. Geographical information
The geographic information analyses the Group's revenue and non-current assets by the Company's country of domicile and other countries. In presenting the geographic information, segment revenue has been based on the geographic location of customers and segment assets were based on the geographic location of the assets.
31 December 2016 31 December 2015
----------------------- -----------------------
Non- current Non- current
Revenue Assets Revenue Assets
-------- ------------- -------- -------------
Thousands Euro
------------------------------------------------
Czech Republic 5,605 - 1,713 1
Poland - - 43 -
Serbia - - - 25,855
Romania - 698 - 902
Israel - 1 - 1
-------- ------------- -------- -------------
Total 5,605 699 1,756 26,759
======== ============= ======== =============
Non-current assets exclude financial instruments and deferred tax assets.
NOTE 32 - NEW IFRS PRONOUNCEMENTS
A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2016; however, the Group has not applied the following new or amended standards in preparing these consolidated financial statements.
a. IFRS 9 Financial Instruments (2014)
(Effective for annual periods beginning on or after 1 January 2018; to be applied retrospectively with some exemptions. The restatement of prior periods is not required, and is permitted only if information is available without the use of hindsight. Early application is permitted).
This Standard replaces IAS 39, Financial Instruments: Recognition and Measurement, except that the IAS 39 exception for a fair value hedge of an interest rate exposure of a portfolio of financial assets or financial liabilities continues to apply, and entities have an accounting policy choice between applying the hedge accounting requirements of IFRS 9 or continuing to apply the existing hedge accounting requirements in IAS 39 for all hedge accounting.
Although the permissible measurement bases for financial assets - amortised cost, fair value through other comprehensive income (FVOCI) and fair value through profit and loss (FVTPL) - are similar to IAS 39, the criteria for classification into the appropriate measurement category are significantly different.
A financial asset is measured at amortised cost if the following two conditions are met:
-- the assets is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and,
-- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding.
In addition, for a non-trading equity instrument, a company may elect to irrevocably present subsequent changes in fair value (including foreign exchange gains and losses) in OCI. These are not reclassified to profit or loss under any circumstances.
For debt instruments measured at FVOCI, interest revenue, expected credit losses and foreign exchange gains and losses are recognised in profit or loss in the same manner as for amortised cost assets. Other gains and losses are recognised in OCI and are reclassified to profit or loss on derecognition.
The impairment model in IFRS 9 replaces the 'incurred loss' model in IAS 39 with an 'expected credit loss' model, which means that a loss event will no longer need to occur before an impairment allowance is recognised.
The Group does not expect IFRS 9 (2014) to have material impact on the consolidated financial statements. The classification and measurement of the financial instruments are not expected to change under IFRS 9 because of the nature of the Group's operations and the types of financial instruments that it holds. The Group believes that impairment losses are not likely to change for assets in the scope of expected credit loss impairment model. The Group has not yet finalised the impairment methodologies that it will apply under IFRS 9.
b. IFRS 15 Revenue from contracts with customers
(Effective for annual periods beginning on or after 1 January 2018. Earlier application is permitted).
Clarifications to IFRS 15 Revenue from Contracts with Customers is not yet endorsed by the EU but IFRS 15 Revenue from Contracts with Customers including Effective Date of IFRS 15 have been endorsed by the EU.
The new Standard provides a framework that replaces existing revenue recognition guidance in IFRS. Entities will adopt a five-step model to determine when to recognise revenue, and at what amount. The new model specifies that revenue should be recognised when (or as) an entity transfers control of goods or services to a customer at the amount to which the entity expects to be entitled. Depending on whether certain criteria are met, revenue is recognised:
-- over time, in a manner that depicts the entity's performance; or -- at a point in time, when control of the goods or services is transferred to the customer.
IFRS 15 also establishes the principles that an entity shall apply to provide qualitative and quantitative disclosures which provide useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer.
Management has not yet fully completed its initial assessment of the potential impact of IFRS 15 on the Group's consolidated financial statements, and has not yet prepared an analysis of the expected quantitative impact of the new standard. The Group currently plans to apply the full retrospective approach when it initially applies IFRS 15, to improve comparability across years.
c. IFRS 16 Leases
(Effective for annual periods beginning on or after 1 January 2019. Earlier application is permitted if the entity also applies IFRS 15). This pronouncement is not yet endorsed by the EU.
IFRS 16 supersedes IAS 17 Leases and related interpretations. The Standard eliminates the current dual accounting model for lessees and instead requires companies to bring most leases on-balance sheet under a single model, eliminating the distinction between operating and finance leases.
Under IFRS 16, a contract is, or contains, a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. For such contracts, the new model requires a lessee to recognise a right-of-use asset and a lease liability. The right-of-use asset is depreciated and the liability accrues interest. This will result in a front-loaded pattern of expense for most leases, even when the lessee pays constant annual rentals.
The new Standard introduces a number of limited scope exceptions for lessees which include:
-- leases with a lease term of 12 months or less and containing no purchase options, and
-- leases where the underlying asset has a low value ('small-ticket' leases).
Lessor accounting shall remain largely unaffected by the introduction of the new Standard and the distinction between operating and finance leases will be retained.
The Group does not expect that the new Standard, when initially applied, will have material impact on the financial statements because the Group is not party to a contractual arrangement that would be in the scope of IFRS 16.
d. Amendments to IFRS 2: Classification and Measurement of Share-based Payment Transactions
(Effective for annual periods beginning on or after 1 January 2018; to be applied prospectively. Early application is permitted). This pronouncement is not yet endorsed by the EU.
The amendments clarify share-based payment accounting on the following areas:
-- the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments;
-- share-based payment transactions with a net settlement feature for withholding tax obligations; and
-- a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity settled.
The Group expects that the amendments, when initially applied, will not have a material impact on the presentation of the financial statements of the Group because the Group does not enter into share-based payment transactions.
e. Amendments to IAS 7 Disclosure Initiative
(Effective for annual periods beginning on or after 1 January 2017, to be applied prospectively. Early application is permitted). This pronouncement is not yet endorsed by the EU.
The amendments require new disclosures that help users to evaluate changes in liabilities arising from financing activities, including changes from cash flows and non-cash changes (such as the effect of foreign exchange gains or losses, changes arising for obtaining or losing control of subsidiaries, changes in fair value).
The Group has not yet prepared an analysis of the impact this might have on its consolidated financial statement.
f. Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses
(Effective for annual periods beginning on or after 1 January 2017; to be applied prospectively. Early application is permitted). This pronouncement is not yet endorsed by the EU.
The amendments clarify how and when to account for deferred tax assets in certain situations and clarify how future taxable income should be determined for the purposes of assessing the recognition of deferred tax assets.
The Group expects that the amendments, when initially applied, will not have a material impact on the presentation of the consolidated financial statements of the Group because it already measures future taxable profit in a manner consistent with the Amendments
g. Amendments to IAS 40 Transfers of Investment Property
(Effective for annual periods beginning on or after 1 January 2018; to be applied prospectively). This pronouncement is not yet endorsed by the EU.
The amendments reinforce the principle for transfers into, or out of, investment property in IAS 40 Investment Property to specify that such a transfer should only be made when there has been a change in use of the property. Based on the amendments a transfer is made when and only when there is an actual change in use - i.e. an asset meets or ceases to meet the definition of investment property and there is evidence of the change in use. A change in management intention alone does not support a transfer.
The Group does not expect that the amendments will have a material impact on the financial statements because the Group does not have any investment properties.
h. IFRIC 22 Foreign Currency Transactions and Advance Consideration
(Effective for annual periods beginning on or after 1 January 2018). This pronouncement is not yet endorsed by the EU.
The Interpretation clarifies how to determine the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration in a foreign currency. In such circumstances, the date of the transaction is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration.
The Entity does not expect that the Interpretation, when initially applied, will have material impact on the financial statements as the Entity uses the exchange rate on the transaction date for the initial recognition of the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration.
The Group does not expect that the Interpretation, when initially applied, will have material impact on the financial statements as the Group uses the exchange rate on the transaction date for the initial recognition of the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration.
***
This information is provided by RNS
The company news service from the London Stock Exchange
END
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March 07, 2017 06:33 ET (11:33 GMT)
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