Annual report 2018

Železiarne Podbrezová a.s. ANNUAL REPORT 2018 8 8 Impairment – IFRS9 has introduced anew, expected - loss impairmentmodelthatwillrequiremore - timelyrecognitionofexpected credit losses. The new standard requires entities to account for expected credit losses from the moment when financial instruments are first recognised and to recognise full lifetime expected losses on a more timely basis. Hedge accounting – IFRS 9 introduces a substantially - reformed model for hedge accounting, with enhanced disclosures about risk management activities. The new model represents a significant overhaul of hedge accounting that aligns the accounting treatment with risk management activities. Own credit risk – IFRS 9 removes the volatility in profit or loss caused by changes in the credit risk of liabilities which are measured at a fair value. This change to the accounting means that gains caused by the deterioration of an entity’s own credit risk on such liabilities are no longer recognised in profit or loss. - IFRS 15 “Revenue from Contracts with Customers” issued by IASB on 28 May 2014 (on 11 September 2015, IASB deferred the effective date of IFRS 15 to 1 January 2018 and on 12 April 2016 IASB issued clarifications to this standard). IFRS 15 specifies how and when an IFRS reporter must recognise revenue and requires such entities to provide users of financial statements with more informative, relevant disclosures. The standard supersedes IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of revenue - related interpretations. The application of the standard is mandatory for all IFRS reporters and applies to nearly all contracts with customers. The main exceptions are leases, financial instruments and insurance contracts. The core principle of the new standard is for companies to recognise revenue to disclose the transfer of goods or services to customers in amounts that reflect the consideration (ie payment) to which the company expects to be entitled in exchange for such goods or services. The new standard will also result in enhanced disclosures about revenue, provides guidance for transactions that were not previously addressed comprehensively (eg service revenue and contract modifications) and improves guidance for multiple - element arrangements. - Amendments to IFRS 2 “Share-based Payment” – Classification and Measurement of Share - based Payment Transactions (effective for annual periods beginning on or after 1 January 2018); - Amendments to IFRS 4 “Insurance Contracts” – Applying IFRS 9 “Financial Instruments” with IFRS 4 “Insurance Contracts” (effective for annual periods beginning on or after 1 January 2018 or when IFRS 9 “Financial Instruments” is applied for the first time); - Amendments to IAS 40 “Investment Property” – Transfers of InvestmentProperty (effective for annual periodsbeginning on or after1 January 2018); - Amendments to IFRS 1 and IAS 28 due to “Improvements to IFRSs (cycle 2014 – 2016)” resulting from the annual improvement project of IFRS (IFRS 1, IFRS 12 and IAS 28) primarily with a view to removing inconsistencies and clarifying wording (amendments to IFRS 1 and IAS 28 are to be applied for annual periods beginning on or after 1 January 2018); - IFRIC 22 “Foreign Currency Transactions and Advance Consideration” (effective for annual periods beginning on or after 1 January 2018). The adoption of these new standards, amendments to the existing standards, and the interpretation has not led to any material changes in the Company’s financial statements. The Company assessed the impact of IFRS 15 as at 1 January 2018 and identified no issues that would lead to the revision of the accounting policy for revenue recognition. New standards and amendments to the existing standards issued by IASB but not yet adopted by the EU At the date of authorisation of these financial statements, the following new standard, amendments to the existing standard, and the interpretation issued by IASB and adopted by the EU are not yet effective: - IFRS 16 “Leases” issued by IASB on 13 January 2016. Under IFRS 16, a lessee recognises a right - of - use asset and a lease liability. The right - of - use asset is treated similarly to other non - financial assets and is depreciated accordingly. The lease liability is initially measured at the present value of the lease payments payable over the lease term and discounted at the interest rate implicit in the lease if such a rate can be readily determined. If such a rate cannot be readily determined, the lessee must use their incremental borrowing rate. In accordance with IFRS 16 and its predecessor, IAS 17, lessors must classify leases by their nature as operating or finance leases. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. Otherwise, a lease is classified as an operating lease. For finance leases, a lessor recognisesfinance income over the lease term, based on a pattern reflecting a constant periodic rate of return on the net investment. A lessor recognises operating lease payments as income on a straight - line basis, or another systematic basis, if more representative of how benefit from use of the underlying asset is diminished. - Amendments to IFRS 9 “Financial Instruments” – Prepayment Features with Negative Compensation (effective for annual periods beginning on or after 1 January 2019); - IFRIC 23 “Uncertainty over Income Tax Treatments” (effective for annual periods beginning on or after 1 January 2019). - Amendments to IAS 28 “Investments in Associates and Joint Ventures” – Long - term Interests in Associates and Joint Ventures (effective for annual periods beginning on or after 1 January 2019). The Company has elected not to adopt this new standard, amendments to the existing standards and the new interpretation in advance of their effective dates. The Company performed an analysis of lease and rental contracts, under which it concluded that the application of IFRS 16 “Leases” will have no impact on the amounts recognised in the balance sheet in respect of non - current tangible assets and financial liabilities as at 1 January 2019. The Company anticipates that the adoption of other new standards, amendments to the existing standards and new interpretations will have no material impact on the financial statements of the Company in the period of initial application. New standards and amendments to the existing standards issued by IASB, but not yet adopted by the EU At present, IFRS as adopted by the EU do not significantly differ from regulations adopted by the International Accounting Standards Board (IASB) except for the following new standards and amendments to the existing standards, which were not endorsed for use in the EU as at the reporting date (the effective dates stated below are for IFRS as issued by IASB): - IFRS 17 “Insurance Contracts” (effective for annual periods beginning on or after 1 January 2021); - Amendments to IFRS 3 “Business Combinations” – Definition of a Business (effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2020 and to asset acquisitions that occur on or after the beginning of that period); - Amendments to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in Associates and Joint Ventures” – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture and further amendments (effective date deferred indefinitely until the research project on the equity method has been concluded); - Amendments to IAS 1 “Presentation of Financial Statements” and IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors” – Definition of Material (effective for annual periods beginning on or after 1 January 2020); NOTES TO THE SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (IN EURO)