WindarPhotonics AnnualReport 2018 All - Flipbook - Page 55
5. Basis of consolidation (continued)
The amounts attributed to the assets (including goodwill) and liabilities of Windar Photonics A/S therefore reflect
their book values as at 1 January 2013. Any difference between the consideration paid for the acquisition of
Windar Photonics A/S by the Company and the net book value of the assets (including attributed goodwill) and
liabilities acquired of €1.5m. has been treated as an adjustment in the merger reserve.
6. Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the future. Estimates and assumptions are
continually evaluated based on historical experience and other factors, including expectations of future events
that are believed to be reasonable under the circumstances. The Group has made no significant judgements.
In the future, actual experience may differ from these estimates and assumptions. The estimates and
assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial period are discussed below. The Group considers that these risks relate
to the next financial period and those in the future by the nature of those judgements.
(a) Useful lives of intangible assets
Intangible assets with finite useful life are amortised or depreciated over their useful lives. Useful lives are based
on the management’s estimates of the period that the assets will generate revenue, which are periodically
reviewed for continued appropriateness. Changes to estimates can result in significant variations in the carrying
value and amounts charged to the Statement of Profit or Loss and Other Comprehensive Income in specific periods.
The useful life of all development projects has been estimated at five years from the date of capitalisation.
The carrying value at the end of the period was €982,888 and a change in the estimate of useful life from 5 to 3
year would reduce this amount by €249,702 and the amortisation charged to the Statement of Profit and Loss for
the year would have increased by €83,191. More details are included in note 17.
(b) Warranty provision
The Group makes a provision of 4% on delivered products within the prior two years for potential warranty claims
based on the typical warranty period provided to customers. Management are satisfied that the current provision
is appropriate and will review the percentage used on an annual basis as more information becomes available on
the warranty position. A change in the provision for warranty by an additional 2% would increase the charge to the
Statement of Profit and Loss for the year by €3,109 and the Provision at the end of the year would have increased
by €39,211. More details including the warranty provision at the end of the period €78,422 are included in note 28.
(c) Impairment of intangible assets and investment in subsidiaries
In assessing impairment, Management estimates the recoverable amount of cash generating units based on
expected future cash flows and uses the weighted average cost of capital to discount them. At the end of each
reporting period Management reviews a four year forward looking financial projection including a terminal
value for the Group. The Management has further evaluated the terminal growth expectations and the applied
discount rate applicable to derive a Net Present Valuation (NPV) of the Group. If the NPV of the Group shows a
lower valuation than the net assets or the company cost of investment in subsidiary an impairment will be made.
Based on this evaluation including Managements estimates and assumption no impairment was made during the
reporting period. Estimation uncertainty relates to assumptions about future operating results in particular sales
volumes and the determination of a suitable discount rate.
(d) Estimation of the expected credit losses or trade receivables
In assessing the expected credit losses, in respect of the trade receivables under IFRS 9, the Group considers the
past performance of the receivable book along with future factors, that may affect the credit worthiness of the
entire trade receivables. Estimations have therefore been made within these assumptions which could affect the
carrying value of the trade receivables.
7. Financial instruments - Risk Management
The Group is exposed through its operations to the following financial risks:
• Credit risk
• Fair value or cash flow interest rate risk
• Foreign exchange risk
• Other market price risk
• Liquidity risk
Windar Photonics - Annual Report and Accounts 2018
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