New Wave Group AB Annual report 2017 EN | Page 64

THE GROUP

FINANCIAL INFORMATION

REVENUE

Revenue consists of sales of products or services in the normal course of business and is stated at the fair value of what has been received or will be received after deducting value-added tax , discounts and service returns . Revenue is recognized when it is deemed likely that payment will be received and the revenue can be measure reliably , i . e . when the significant risks and rewards of ownership has been transferred to the buyer . Contracts and customer purchase orders are generally used to determine the existence of such an arrangement . Shipping documents and customer acceptances are used , when applicable , to verify delivery and thus the transfer of the significant risks and rewards which for instance depends on the shipping conditions . Collectibility is assessed based primarily on the creditworthiness of the customer as determined by credit limit control and approval procedures , as well as the customer ’ s payment history . Commission , royalty and license income is accounted for in accordance with the economic significance of the agreement concerned .

INTANGIBLE FIXED ASSETS

An intangible asset is an identifiable , non monetary asset without physical substance . Intangible assets which can be identified and measured separately from goodwill upon acquisition consist , for instance , of customer- , contract- and / or technology-related assets . Typical marketing- and customer-related assets comprise trademarks and customer relationships . Contracts and customer relationships derive from expected customer loyalty and the cash flows that are expected to arise during the remaining useful life of each asset .

Expenditures related to internally developed intangible assets , excluding goodwill , which emerge during the development phase are capitalized only when in management ’ s judgement it is probable that they will result in future economic benefits for the Group and the expenditures during the development phase can be reliably measured . The cost of an internally generated asset includes direct manufacturing expenditures and a portion of indirect expenses attributable to the actual asset . Intangible assets are amortized on a straight-line basis over their expected useful lives . Amortization begins when the asset is available for use . Product development mainly comprises design and development of new collections as well as development of new product variants within the framework of the existing product range . Such development generally does not meet the criteria for recognition in the balance sheet . All other expenditures during the research phase as well as development expenditures not meeting the capitalization criteria are charged to the income statement when incurred .

Intangible assets are stated at cost and amortised over their useful lives . An intangible asset with an indefinite useful life is not amortised but tested for impairment annually or more frequently . New Wave Group recognises goodwill and trademarks , which are both classified as intangible assets with indefinite useful lives .

TANGIBLE FIXED ASSETS

Property , plant and equipment are valued at cost after adjusting for depreciation and any impairment . Property , plant and equipment are depreciated on a straight-line basis over their expected useful lives . In determining the depreciable amount for an individual item of property , plant and equipment account is taken of any residual value of the asset . To the extent that an asset consists of components which differ materially in respect of their useful lives , these are written off separately ( component depreciation ). The cost of an item of property , plant and equipment that has been manufactured is included in direct manufacturing expenses and attributable indirect expenses . Depreciation begins when the asset becomes available for use . Land is not depreciated .

An item of property , plant and equipment is removed from the balance sheet upon sale or if the asset is not expected to generate any future economic benefits either by being used or being sold . Capital gains and losses are calculated as the difference between the consideration received and the asset ’ s carrying amount . The capital gain or loss is recognised in the income statement in the year in which the asset is removed from the balance sheet . The assets ’ residual values , useful lives and methods of depreciation are reviewed at the end of each financial year and adjusted prospectively , if required .

Normal expenditure on maintenance and repairs is expensed as incurred , but expenditure on significant renewal and improvement works is recognised in the balance sheet and depreciated over the remaining useful life of the underlying asset . The following useful lives are applied in New Wave Group .

IMPAIRMENT LOSSES

If there are internal or external indications of a decline in the value of an asset , the asset is to be tested for impairment . For assets with indefinite useful lives , goodwill and trademarks , such tests are performed at least once a year , whether there are any indications of impairment or not . An asset or group of assets ( cash-generating units ) should be written down if the recoverable amount is lower than the carrying amount . The recoverable amount is the higher of value in use and net realisable value . Impairment losses are recognised in the income statement . If an individual asset cannot be tested separately , as it is not possible to identify the fair value less selling expenses for the asset , the asset is allocated to a group of assets known as a cash-generating unit for which it is possible to identify separate future cash flows . To the extent that the underlying factors behind an impairment loss change in coming periods , the impairment loss will be reversed , except in the case of goodwill . Information on the specific assumptions which need to be made to calculate value in use is provided in Note 8 Intangible fixed assets .

64 | NWG 2017