JOTUN A/S
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Standard 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 accounting for financial
leases under IAS 17. The standard includes two recognition
exemptions: leases of low-value assets and short-term leases.
Jotun A/S 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. 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 A/S 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 net 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). As such, there will be no effect on equity in the
opening balance as of 1 January 2019.
Events after the balance sheet date
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Jotun A/S will elect to apply the standard to contracts that were
previously identified as leases applying IAS 17 and IFRIC 4. Jotun
A/S will also elect to use 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.
Jotun A/S 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 company’s operating
leases. For lease commitments in the scope of IFRS 16, Jotun
A/S expects to recognise right-of-use assets of NOK 66 million
on 1 January 2019 and lease liabilities of NOK 66 million. Equity
ratio will be reduced by less than 0,5 per cent due to a net
increase in total assets, while equity remains unchanged.
Based on lease contracts as of 1 January 2019, the company
expects net profit after tax to decrease by approximately
1 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 17 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.