Strategic Review
56 Finsbury Food Group Annual Report & Accounts 2019
Notes to the Consolidated Financial Statements
Corporate Governance
Financial Statements
1. Significant Accounting Policies
The accounting policies set out below have been applied consistently to all periods presented in these consolidated Financial Statements, except as explained in the basis of preparation, which addresses any changes in accounting policies resulting from new or revised standards.
Basis of Consolidation Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed, 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. In assessing control, the Group takes into consideration the potential voting rights. The acquisition date is the date on which control is transferred to the acquirer. The Financial Statements of subsidiaries are included in the consolidated Financial Statements from the date that control commences until the date that control ceases. The accounting policies of new subsidiaries are changed when necessary to align them with the policies adopted by the Group. Intra-group balances and transactions are eliminated in preparing the consolidated Financial Statements.
Lightbody Stretz Limited which is 50% owned by the Group has been consolidated into the Group accounts as a subsidiary with a corresponding non-controlling interest on the basis that the Group has the controlling interest. Control arises by virtue of the fact that Lightbody Group Limited, a wholly owned subsidiary of Finsbury Food Group, has a majority of voting rights arising from an agreement between Lightbody Group Limited and Philippe Stretz, the owner of the remaining 50%.
New and Upcoming Standards The following new standards, new interpretations and amendments to standards and interpretations are applicable for the first time for the financial year ended 29 June 2019.
• IFRS 9 “Financial Instruments” (effective 1 January 2018); • IFRS 15 “Revenue from Contracts with Customers” (effective 1 January 2018); • Clarifications to IFRS 15 “Revenue from Contracts with Customers” (effective 1 January 2018); • Annual improvements to IFRS Standards 2014-2016 Cycle (effective 1 January 2018); • Amendments to IFRS 2 “Classification and Measurement of Share Based Payment Transactions” (effective 1 January 2018); and • IFRIC Interpretation 22 “Foreign Currency Translation and Advance Consideration” (effective 1 January 2018).
None of the amendments to the above standards had a material impact on the Financial Statements.
IFRS 9 replaces the provisions of IAS 39 that relate to the recognition, classification and measurement of financial assets and financial liabilities, derecognition of financial instruments, impairment of financial assets and hedge accounting. In the current year, the Group has applied IFRS 9 Financial Instruments (as revised in July 2014) and the related consequential amendments to other IFRS Standards that are effective for an annual period that begins on or after 1 January 2018. The transition provisions of IFRS 9 allow an entity not to restate comparatives. The Group has not restated comparatives.
IFRS 9 introduced new requirements for:
• The classification and measurement of financial assets and financial liabilities, • Impairment of financial assets, and • General hedge accounting
Applying the new requirements has not had a material impact on the Group’s consolidated Financial Statements. The application of IFRS 9 has had no impact on the consolidated cash flows of the Group.
Applying the revised Expected Credit Losses (ECL) methodology did not result in any material change to the loss allowance recorded under IAS 39 because of the Group’s limited credit risk.
Except for the changes to impairment methodology as noted above, the remainder of the differences as a result of adoption of IFRS 9 are limited to immaterial presentational and disclosure changes.
IFRS 15 “Revenue from Contracts with Customers” was issued on 28 May 2014 and provides a unified five step model for determining the timing, measurement and recognition of revenue. The focus of the new standard is to recognise revenue as performance obligations are met rather than based on the transfer of risks and rewards. IFRS 15 includes a comprehensive set of disclosure requirements including qualitative and quantitative information about contracts with customers to understand the nature, amount, timing and uncertainty of revenue. The standard supersedes IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of revenue-related interpretations. On 12 April 2016, the IASB issued amendments to IFRS 15 which clarify how to identify a performance obligation and determine whether a company is a principal or an agent.
The Group’s revenue is predominantly derived from the single performance obligations in which the transfer of risks and rewards of ownership and the fulfilment of the Group’s performance obligation occur at the same time. As part of the adoption process, the Group assessed its performance obligations underlying the revenue recognition and assessed variable considerations including rebates. The adoption of this standard did not have a material impact on the consolidated Financial Statements of the Group.
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