JOTUN GROUP
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Standards issued but not yet effective
The standard that is issued, but not yet effective, for the annual
reporting period ending 31 December 2018 is disclosed below.
IFRS 16 Leases
In January 2016, the IASB published the final version of IFRS
16 Leases. The standard sets out principles for the recognition,
measurement, presentation and disclosure of leases, and
requires lessees to account for almost all leases under a single
on-balance sheet model similar to the accounting for financial
leases under IAS 17. The standard includes two recognition
exemptions: leases of low-value assets and short-term leases.
Jotun Group will adopt IFRS 16 on 1 January 2019.
Upon commencement of a lease, Jotun is required to recognise
a liability to make future payments (i.e. the lease liability) and
an asset representing the right to use the underlying asset
during the lease term (i.e. the right-of-use asset). In subsequent
periods, Jotun is required to separately recognise an interest
expense on the lease liability and depreciation expense on the
right-of-use asset.
Jotun Group will adopt IFRS 16 using a simplified transition
approach with no restatement of comparative amounts for the
year prior to first adoption. The lease liability will be measured
at an amount equal to the present value of future minimum
payments. The right-of-use asset will be measured at the
amount of the lease liability on adoption (adjusted for any
prepaid or accrued lease expenses). There will be no effect on
equity in the opening balance on 1 January 2019.
Events after the balance sheet date
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Jotun Group will elect to apply the standard to contracts that
were previously identified as leases applying IAS 17 and IFRIC 4.
Jotun Group will also elect to use the exemptions proposed by
the standard on lease contracts for which the lease terms end
within 12 months of the date of initial application, and lease
contracts for which the underlying asset is of low value.
The Group has reviewed all leasing arrangements over the last
year considering the new lease accounting rules in IFRS 16. The
standard will affect the accounting for the Group’s operating
leases. For lease commitments in the scope of IFRS 16, Jotun
expects to recognise right-of-use assets of approximately
NOK 617 million on 1 January 2019 and lease liabilities of
approximately NOK 483 million. Lease liabilities are adjusted for
prepayments and accrued lease payments recognised as of 31
December 2018. The Group’s equity ratio will be reduced by
approximately 1.5 per cent due to a net increase in total assets,
while equity remains unchanged.
Based on lease contracts as of 1 January 2019, the Group
expects net profit after tax to decrease by approximately NOK
15 million for 2019 as a result of adopting the new rules. EBITA
and financial cost will increase.
Operating cash flows will increase, and financing cash flows
decrease, by approximately NOK 165 million as repayment of
the principal portion of the lease liabilities will be classified as
cash flows from financing activities.
No events have taken place after the balance sheet date
that would have affected the financial statements or any
assessments carried out.