Vaisala Corporation's Unaudited Opening Statement of Financial Position as at January 1, 2018
Stock Exchange Release
April 6, 2018 at 3:00 p.m. (EEST)
Vaisala Corporation's Unaudited Opening Statement of Financial Position as at January 1, 2018
Vaisala Corporation adjusts 2018 opening statement of financial position following the adoption of Amendments to IFRS 2 Share-based Payments, IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers accounting standards.
Amendments to IFRS 2 Share-based Payments
Amendments to IFRS 2 Share-based Payment Transactions include the following changes:
- In estimating the fair value of a cash-settled share-based payment, the accounting for the effects of vesting and non-vesting conditions should follow the same approach as for equity-settled share-based payments.
- Where tax law or regulation requires an entity to withhold a specified number of equity instruments equal to the monetary value of the employee's tax obligation to meet the employee's tax liability which is then remitted to the tax authority, i.e. the share-based payment arrangement has a 'net settlement feature', such an arrangement should be classified as equity-settled in its entirety, provided that the share-based payment would have been classified as equity-settled had it not included the net settlement feature.
- A modification of a share-based payment that changes the transaction from cash-settled to equity-settled should be accounted for as follows:
- the original liability is derecognized;
- the equity-settled share-based payment is recognized at the modification date fair value of the equity instrument granted to the extent that services have been rendered up to the modification date; and
- any difference between the carrying amount of the liability at the modification date and the amount recognized in equity should be recognized in profit or loss immediately.
Following this change, Vaisala has adjusted retained earnings EUR 1.3 million, other reserves EUR 2.2 million, trade and other payables EUR -3.9 million as well as deferred tax assets EUR -0.3 million. Figures in the comparison period have not been restated retrospectively.
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments introduced new requirements for the classification and measurement of financial assets. In summary, it includes a revised guidance on the classification and measurement of financial assets, new general hedge accounting requirements and a new expected credit loss model for calculating impairment on financial assets. Furthermore, IFRS 9 requires disclosures.
Vaisala does not have significant amounts of financial instruments except customer receivables and foreign currency forwards. Vaisala does not apply hedge accounting as defined by IFRS.
Vaisala applies the simplified approach to recognize lifetime expected credit losses for its trade receivables and amounts due from customers under long-term projects as required or permitted by IFRS 9. In general, the application of the expected credit loss model of IFRS 9 results in earlier recognition of credit losses for the respective items and will increase the amount of loss allowance recognized for these items. Following this, Vaisala has made an adjustment of EUR -0.2 million in retained earnings and trade and other receivables as at January 1, 2018. IFRS 9 transition did not affect income taxes materially. Figures in the comparison periods have not been restated retrospectively.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 Revenue from contracts with customers establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. IFRS 15 superseded IAS 18 Revenue, IAS 11 Construction Contracts and the related interpretations. The core principle of IFRS 15 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers with an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Under IFRS 15, an entity recognizes revenue when (or as) a performance obligation is satisfied, i.e. when control of the good or service underlying the particular performance obligation is transferred to the customer. These principles are applied using the following five steps:
1. Identify the contract(s) with a customer
2. Identify the performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations in the contract
5. Recognize revenue
Furthermore, IFRS 15 requires extensive disclosures.
Vaisala has adopted IFRS 15 Revenue from contracts with customers as at January 1, 2018. IFRS 15 affected mainly Weather and Environment Business Area's project business, while effects on product and services businesses in Weather and Environment as well as Industrial Measurements Business Areas are limited.
Net sales of Weather and Environment Business Area's project business totaled EUR 76 million during financial year 2017 and EUR 65 million during financial year 2016. The major changes in project revenue recognition takes place in the above mentioned steps two, four and five, whereas changes are limited in step one and step three.
Vaisala's delivery projects are typically integrated projects. In integrated projects, Vaisala delivers observation solutions consisting of products, services and software to a customer. These solutions are integrated/connected to customer systems according to customer specifications. Therefore, one delivery project is typically one performance obligation under IFRS 15. In the financial year 2018, Vaisala recognizes revenue for integrated projects using percentage of completion method. Vaisala's projects typically meet the over-time revenue recognition criteria, either by creating an asset without an alternative use and Vaisala having an enforceable right to payment for performance completed to date and/or by creating an asset under customer control.
Revenue of projects, which do not meet the over-time revenue recognition criteria, is recognized at a point in time when control has been transferred to a customer. These projects are typically standard shipments or collections of several individual deliveries, which Vaisala manages as projects because of their size.
Prior to 2018, Vaisala has rarely used percentage of completion method, and only in projects with very long delivery times. Generally, Vaisala has recognized project revenue separately for hardware and field service in accordance with their pro rata selling prices. Hence, adoption of over-time revenue recognition will have an impact on timing of revenue recognition in Vaisala's project business since control over assets transfers to customers over time. Consequently, recognition of project revenue and profit will be advanced.
Product and service businesses
As in 2017, Vaisala recognizes revenue of product deliveries based on delivery terms, and revenue of services when benefits are rendered to customers in the financial year 2018 and onwards. Vaisala continues to recognize revenue of such fixed-time service contracts, which are negotiated in connection with delivery projects and commence after completion of the delivery projects, as separate performance obligations with over time revenue recognition method.
Vaisala financial reporting and transition
Under IFRS 15, January-December 2017 net sales would have been EUR 4 million lower and order book would have cumulatively been EUR 1 million lower compared to accounting principles applied in financial year 2017. This was due to earlier timing of revenue recognition. Revenue recognition method in financial year 2017 also resulted in seasonality where revenue in third and especially in fourth quarter of a year were typically high. Adopting IFRS 15 results flatter revenue between quarters as the concrete project completion takes place more evenly throughout a year.
Vaisala applies cumulative method in transition, which means that open contracts are recognized according to IFRS 15 as at January 1, 2018, but revenue or profit of completed projects were not adjusted retrospectively. Following this, Vaisala has made an adjustment of EUR 0.3 million in retained earnings as at January 1, 2018. In addition, in the statement of financial position trade and other receivables EUR 2.8 million, inventories EUR -2.6 million, trade and other payables EUR -0.2 million and income tax liabilities EUR 0.1 million were adjusted following the IFRS 15 adoption. Figures in the comparison periods have not been restated retrospectively.
Vaisala will continue current disaggregation of revenue in the financial reporting.
Vaisala Corporation's unaudited opening statement of financial position as at January 1, 2018
|Consolidated Statement of Financial Position, unaudited|
|Assets||Dec 31, 2017||IFRS 2 amendment||IFRS 9||IFRS 15||Jan 1, 2018|
|Property, plant and equipment||40.4||40.4|
|Investment in associated companies||0.9||0.9|
|Deferred tax assets||7.6||-0.3||7.3|
|Total non-current assets||70.3||-0.3||0.0||0.0||70.0|
|Trade and other receivables||83.1||-0.2||2.8||85.7|
|Income tax receivables||0.5||0.5|
|Cash and cash equivalents||91.3||91.3|
|Total current assets||203.5||0.0||-0.2||0.2||203.5|
|Shareholders' equity and liabilities||Dec 31, 2017||Jan 1, 2018|
|Cumulative translation adjustment||-0.2||-0.2|
|Total shareholders' equity||185.4||3.5||-0.2||0.3||189.0|
|Post-employment benefit obligations||2.5||2.5|
|Deferred tax liabilities||0.5||0.5|
|Provisions for other liabilities and charges||0.2||0.2|
|Other long-term liabilities||2.7||2.7|
|Total non-current liabilities||5.8||0.0||0.0||0.0||5.8|
|Income tax liabilities||1.4||0.1||1.5|
|Provisions for other liabilities and charges||1.3||1.3|
|Trade and other payables||79.9||-3.9||-0.2||75.8|
|Total current liabilities||82.5||-3.9||0.0||-0.1||78.6|
|Total shareholders' equity and liabilities||273.8||-0.3||-0.2||0.2||273.5|
Kaarina Muurinen, CFO
Tel. +358 40 577 5066, [email protected]
Vaisala is a global leader in environmental and industrial measurement. Building on over 80 years of experience, Vaisala provides observations for a better world. We are a reliable partner for customers around the world, offering a comprehensive range of innovative observation and measurement products and services. Headquartered in Finland, Vaisala employs approximately 1,600 professionals worldwide and is listed on the Nasdaq Helsinki stock exchange. www.vaisala.com www.twitter.com/VaisalaGroup