24
JOTUN GROUP
• Its intention to complete and its ability to use or sell the asset
• How the asset will generate future economic benefits
• The availability of resources to complete the asset
• The ability to measure reliably the expenditure during development
Following initial recognition of the development expenditure as an
asset, the asset is carried at cost less any accumulated amortisation and
accumulated impairment losses. Amortisation of the asset begins when
development is complete and the asset is available for use.
The economic life of an intangible asset is either definite or indefinite.
Intangible assets with a definite economic life are amortised over their
economic life and tested for impairment if there are any indications of
impairment. The amortisation method and period are assessed at least
once a year. Changes to the amortisation method and/or period are
accounted for as a change in estimate. Intangible assets with indefinite
useful lives are not amortised, but tested for impairment annually.
Amortisation is calculated based on the useful life of the asset.
11. LEASES
OPERATING LEASES
Leases for which most of the risk and return associated with the ownership
of the asset have not been transferred to the Jotun Group are classified as
operating leases. Lease payments are classified as operating expenses and
recognised in the consolidated income statement in a straight line during
the contract period.
FINANCIAL LEASES
Leases are classified as finance leases whenever the terms of the lease
transfer substantially all the risks and rewards of ownership to the Jotun
Group. Assets held under financial leases are recognised as assets and
depreciated over the shorter of useful life or the lease term.
12. FINANCIAL INSTRUMENTS
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The fair value of financial instruments that are traded in active markets at
each reporting date is determined by reference to quoted market prices
or dealer price quotations (bid price for long positions and ask price for
short positions), without any deduction for transaction costs. For financial
instruments not traded in an active market, the fair value is determined
using appropriate valuation techniques. Such techniques may include
using recent arm’s length market transactions; reference to the current fair
value of another instrument that is substantially the same; a discounted
cash flow analysis or other valuation models. An analysis of fair values of
financial instruments and further details as to how they are measured are
provided in note 11 and 12.
FINANCIAL ASSETS:
INITIAL RECOGNITION AND MEASUREMENT
Financial assets within the scope of IAS 39 are classified as financial assets
at fair value through profit or loss, loans and receivables, or as derivatives
designated as hedging instruments in an effective hedge, as appropriate.
The Group determines the classification of its financial assets at initial
recognition. All financial assets are recognised initially at fair value plus, in
the case of assets not at fair value through profit
or loss, directly attributable transaction costs.
The Group’s financial assets include cash and short-term deposits, trade
and other receivables, loans and other receivables, quoted and unquoted
financial instruments and derivative financial instruments.
SUBSEQUENT MEASUREMENT
The subsequent measurement of financial assets depends on their
classification as follows:
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Financial assets at fair value through profit or loss include financial assets
held for trading and financial assets designated upon initial recognition
at fair value through profit or loss. Financial assets are classified as held
for trading if they are acquired for the purpose of selling or repurchasing
in the near term. This category includes derivative financial instruments
entered into by the Group that are not designated as hedging instruments
in hedge relationships as defined by IAS 39. Financial assets at fair value
through profit and loss are carried in the statement of financial position
at fair value with changes in fair value recognised as finance income or
finance costs in net financial items in the consolidated income statement.
LOANS AND RECEIVABLES
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. After
initial measurement, such financial assets are subsequently measured
at amortised cost using the effective interest rate method (EIR), less
impairment. Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs that are an integral
part of the EIR. The EIR amortisation is included in finance income in the
income statement. Losses arising from impairment are recognised in the
income statement as finance costs.
DERECOGNITION
A financial asset, part of a financial asset or part of a group of similar
financial assets, is derecognised when:
• The rights to receive cash flows from the asset have expired
• The Group has transferred its rights to receive cash flows from the
asset or has assumed an obligation to pay the received cash flows
in full without material delay to a third party under a ‘pass-through’
arrangement; and either (a) the Group has transferred substantially
all the risks and rewards of the asset, or (b) the Group has neither
transferred nor retained substantially all the risks and rewards of the
asset, but has transferred control of the asset.
IMPAIRMENT OF FINANCIAL ASSETS
The Group assesses at each reporting date whether there is any objective
evidence that a financial asset, or group of financial assets, is impaired. A
financial asset, or group of financial assets, is deemed to be impaired if,
and only if, there is objective evidence of one or more loss events having
occurred after the initial recognition of the asset. A loss event is an event
that impacts the future cash flows of a financial asset, or group of financial
assets, and that can be reliably estimated. Evidence of a loss event and
impairment may include indications that a debtor, or a group of debtors,
is experiencing significant financial difficulties, default or delinquency
of principal or interest payments, a probability of bankruptcy or other
financial restructuring, and observable data that indicates that there is a
measurable decrease in estimated future cash flows, such as changes in
arrears or economic conditions that correlate with defaults.
FINANCIAL ASSETS CARRIED AT AMORTISED COST
For financial assets carried at amortised cost, the Group first assesses
whether objective evidence of impairment exists individually for financial
assets that are individually significant, or collectively for financial assets
that are not individually significant. If the Group determines that no
objective evidence of impairment exists for an individually assessed
financial asset, whether significant or not, it includes the asset in a group
of financial assets with similar credit risk characteristics and collectively
assesses them for impairment. Assets that are individually assessed for
impairment and for which an impairment loss is, or continues to be,
recognised are not included in a collective assessment of impairment.
If there is objective evidence that an impairment loss has been incurred,
the amount of the loss is measured as the difference between the assets
carrying amount and the present value of estimated future cash flows
(excluding future expected credit losses that have not yet been incurred).
The present value of the estimated future cash flows is discounted at
the financial asset’s original effective interest rate. If a loan has a variable
interest rate, the discount rate for measuring any impairment loss is the
current effective interest rate.
The carrying amount of the asset is reduced through the use of an
allowance account and the amount of the loss is recognised in the income
statement.
FINANCIAL LIABILITIES:
INITIAL RECOGNITION AND MEASUREMENT
Financial liabilities within the scope of IAS 39 are classified as financial
liabilities at fair value through profit or loss, loans and borrowings, or
as derivatives designated as hedging instruments in an effective hedge,
as appropriate. The Group determines the classification of its financial
liabilities at initial recognition. All financial liabilities are recognised initially
at fair value and, in the case of loans and borrowings, carried at amortised
cost. This includes directly attributable transaction costs. The Group’s
financial liabilities include trade and other payables, bank overdrafts, loans
and borrowings, financial guarantee contracts, and derivative financial
instruments.
SUBSEQUENT MEASUREMENT
The measurement of financial liabilities depends on their classification as
follows:
FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
Financial liabilities at fair value through profit or loss include financial
liabilities held for trading and financial liabilities designated upon initial
recognition as at fair value through profit or loss. Financial liabilities are
classified as held for trading if they are acquired for the purpose of selling