02 | summary of significant accounting policies
2.1. Basis of preparation of the financial statements
The consolidated financial statements for 2015 have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted within the European Union.
The euro (€) is the functional currency of most group companies. The presentation currency of the group in the financial statements is therefore the euro. Amounts are shown in thousands of euros unless otherwise indicated. The consolidated financial statements are based on historical cost unless otherwise stated.
The accounting policies have been applied consistently by the group companies during the periods presented in these consolidated financial statements.
No events occurred that resulted in an amendment of the comparative figures.
Announced intended public offer by Recruit Holdings Co., Ltd.
The intended public offer announced by Recruit Holdings Co., Ltd. on 22 December 2015 is expected to be launched in the course of 2016. The intended public offer has impact on the recognition, valuation and notes pertaining to various line items in these financial statements which have been prepared in accordance with IFRS. The main consequences are:
• Goodwill (note 11): for the impairment test performed at the end of 2015 the carrying amount of the cash-generating units was compared to the recoverable amount. In accordance with IAS 36 and the applied accounting principles, the recoverable amount is the higher of the fair value and the value in use. Assumption for the impairment test performed at the end of 2015 was the fair value derived from the intended public offer less costs of disposal.
• Share-based remuneration (note 24): existing entitlements relating to the variable long-term remuneration of key management and other senior management will be settled in cash instead of shares once the intended public offer is declared unconditional. As a consequence the variable long-term remuneration has been accounted as a cash settlement plan in accordance with IFRS 2 with an adjusted vesting period. As regards the SAR plan, settlement of the outstanding SARs will take place at the moment that the public offer is declared unconditional at the share price immediately preceding the announcement of the intended public offer. The result is a change in both the valuation and the moment of unconditional allocation.
The aforementioned has resulted in an additional charge of € 1,925 in the income statement for 2015.
• Consultancy fees: USG People was assisted by external advisors during the process that led to the intended public offer. This has resulted in the recognition of additional consultancy fees of € 1,020 in the income statement for 2015.
• Income tax expense (note 9): under tax legislation in Germany the settlement of the tax losses would most likely no longer be permitted as a result of the intended public offer being declared unconditional, unless certain conditions are met. In accordance with IAS 12 the respective losses are valued at an amount of € 16.6 million at the end of 2015.
• Contingent liabilities (note 27): with regard to the intended public offer by Recruit Holdings Co., Ltd., in the event of irregular termination of the merger protocol the party that is to blame for the termination will pay a termination fee of € 10.5 million.
• Contingent liabilities (note 27): the group was assisted by external advisors during the process that led to the intended public offer by Recruit Holdings Co., Ltd. These advisors are entitled to compensation only if the public offer is declared unconditional. This fee is expected to amount to € 10.5 million and is recognised as a contingent liability in view of the fact that the offer being declared unconditional among others depends on shareholders tendering their shares.
• The merger protocol as agreed with Recruit Holdings Co., Ltd. on 22 December 2015 stipulates that USG People will not declare or distribute any dividend (or interim dividend), nor any payment in kind. Therefore the Executive Board will not propose to distribute a dividend for 2015.
Estimates and assumptions
Preparing the financial statements in accordance with IFRS means that management is required to make assessments and estimates when applying the accounting policies. Estimates and judgements are constantly assessed and are based on historical experience and other factors, including expectations of future events which, under the given circumstances, are considered to be reasonable. Estimates and assumptions that which could lead to material adjustments in the carrying value of assets and liabilities in the future are disclosed in these financial statements as Income tax expense (note 9), Goodwill (note 11), Pension-related liabilities (note 20), Provisions (note 21) and Contingent assets and liabilities (note 27).
Standards, amendments and interpretations effective from the 2015 financial year
Changes to standards effective from 2015 and the possible impact on the earnings, equity and notes of USG People are stated below.
IFRIC 21 ‘Levies’. This interpretation of IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’ sets out criteria for the moment at which a government levy should be recognised as a liability on the balance sheet. The government levy is considered to be a liability at the moment that the obligating event that gives rise to the liability takes place and not the moment that the economic benefit ensuing from this liability is gained. IFRIC 21 applies within the European Union for financial years commencing after 17 June 2014. The group has applied this standard with effect from the financial year commencing on 1 January 2015.
The aforementioned interpretation does not have a material impact on the amount and composition of group equity and earnings, nor on the disclosures.
Standards, amendments and interpretations not effective in the 2015 financial year but applicable to the group
IFRS 9 ‘Financial Instruments’. The standard defines the conditions for the classification and valuation of financial assets initially set out in IAS 39 ‘Financial Instruments: Recognition and Measurement’. Application is mandatory for financial years commencing on or after 1 January 2018. This amendment is not expected to have a material impact on the amount and composition of group equity and earnings. The group will apply this standard with effect from the financial year commencing on 1 January 2018.
IFRS 15 ‘Revenue from Contracts with Customers’. This standard defines the accounting policy for the recognition of revenue and provisions as regards the timing of the recognition of revenue. Application is mandatory for financial years commencing on or after 1 January 2018. This amendment is not expected to have a material impact on the amount and composition of group equity and earnings. The group will apply this standard with effect from the financial year commencing on 1 January 2018.
IFRS 16 'Leases'. This standard sets out the principles for the recognition, measurement, presentation and disclosure of leases. Operational lease contracts must be recognised in the balance sheet based on this standard through the measurement of the right of use, on the one hand, and the lease obligation, on the other. Application is mandatory for financial years commencing on or after 1 January 2019. The group is assessing the impact of this change on the amount and composition of group equity and earnings, which is assumed to be material. The group will apply this standard with effect from the financial year commencing on 1 January 2019.
Other amendments of standards and interpretations which are not yet in effect are not expected to have a material impact on the amount and composition of group equity and earnings, nor on the notes.
2.2. Consolidation of subsidiaries
Subsidiaries are fully consolidated from the date on which the group is exposed or entitled to changing proceeds ensuing from its involvement in the entity and whereby the group has the possibility to influence that proceeds by virtue of its control in the entity. Deconsolidation occurs from the moment this is no longer the case.
The acquisition method applies to the initial recognition of subsidiaries by the group. The consideration transferred for the acquired company is based on the fair value of the assets transferred, the equity instruments issued and liabilities incurred or assumed at the transaction date, including contingent considerations. Contingent considerations (such as earn-outs and future expansion of interest in subsidiaries through options or deferred acquisition) are owed if pre-determined conditions laid down in a contract have been met. Subsidiaries are recognised at fair value (level 3). The probability of a contingent consideration being paid is considered in the measurement on the transaction date and is reconsidered at each balance sheet date. Changes in the value of contingent considerations are recognised in the income statement as well as the transaction-related costs.
In the event of a gradual acquisition the interest of the acquired company which was already in the group’s ownership prior to the time of acquisition is recognised at fair value. Changes in the value are recognised as finance costs or finance income in the income statement.
Identifiable assets, liabilities and contingent liabilities assumed in a business combination are initially recognised in the financial statements at their fair value on the date of acquisition. The group recognises any non-controlling interest in the acquired entity at fair value or at the proportional interest of the non-controlling interest in the acquired net assets.
Goodwill is recognised as the positive difference between the consideration transferred and the fair value of the identifiable assets, liabilities and contingent liabilities at the date of acquisition. If the consideration transferred is lower than the fair value, the difference is recognised in the income statement.
Transactions with minority shareholders, whereby decision-making control does not cease to exist, are recognised as transactions with group shareholders. In the event of purchases of interests held by minority shareholders, the difference between the amount paid and the acquired share of the net asset value (recognised as non-controlling interests under shareholders’ equity) is added or charged to shareholders’ equity.
Transactions, balance sheet items and unrealised results on transactions between group companies are eliminated. Where necessary, the accounting policies of subsidiaries are brought into line with those applied by the group.
2.3. Operating segments
Operating segments are reported in accordance with internally reported information to the chief operating decision-maker. The Executive Board is regarded as the chief operating decision-maker responsible for the allocation of funds to and the assessment of the operating segments.
The group is structured into countries and further analysed on a segment basis. The Executive Board bases its decisions on this. Disclosure on the operating segments is in keeping with this grouping, with a number of countries and segments being combined due to their size.
2.4. Foreign currency
Line items in the financial statements of the various group companies are measured in the currency of the primary economic environment in which each entity operates (the functional currency).
2.4.2. Foreign currency transactions and translation
Transactions in foreign currency are translated into the functional currency at the exchange rate applicable at the date of the transactions. Currency translation differences resulting from the settlement of these transactions and the translation of the monetary assets and liabilities denominated in foreign currency at the balance sheet date are recognised as net finance costs in the income statement.
2.4.3. Group companies
The results and financial positions of group companies with a functional currency other than the euro are calculated as follows:
- assets and liabilities, including goodwill and fair-value adjustments arising on consolidation, are translated into euros at the exchange rates applicable at the balance sheet date. Currency translation differences are recognized in other comprehensive income;
- income and expenses are translated into euros at rates approximate to the exchange rates applicable at the date of the transaction.
In the event of the complete or partial divestment of foreign group companies with a currency other than the euro, currency translation differences are recognised in the income statement as net income from divestments.
2.5. Property, plant and equipment
Property, plant and equipment are carried at historical cost less depreciation, determined on the basis of estimated useful life and impairment losses. Historical cost consists of all expenses directly attributable to the acquisition of the asset.
Depreciation expenses are charged to the income statement using the straight-line method based on the estimated useful life of an asset according to the component method. There is no depreciation on land.
The estimated useful life of property, plant and equipment varies according to category, as shown below:
Furnishings and conversions
5 - 10
Computer and peripherals
3 - 5
Other fixed assets
The residual value, method of depreciation and depreciation period are reviewed annually at the balance sheet date and adjusted if necessary by a change in the estimate for the financial year and subsequent periods.
Goodwill arises from the acquisition of subsidiaries and is calculated as the difference between the consideration transferred and the fair value at acquisition date of the identifiable assets, liabilities and contingent liabilities acquired. For the purpose of impairment testing, goodwill is allocated to those groups of cash-generating units expected to benefit from the acquisition.
Goodwill is not amortised. Please refer to 2.8 ‘Impairment of non-financial assets’ for further information.
If an entity is divested, the carrying amount of its goodwill is recognised in income. If the divestment concerns part of a cash-generating unit, the amount of goodwill written off and recognised in income is determined on the basis of the relative value of the part divested compared to the value of the entire cash-generating unit.
2.7. Other intangible assets
2.7.1. Intangible assets obtained through acquisitions
Intangible assets obtained through acquisitions consist of trademarks, customer relationships and software. These are initially recognised at fair value and subsequently at cost. Intangible assets have a finite useful life and are carried at cost less amortisation and impairments. Amortisation is charged to the income statement using the straight-line method based on the following estimated useful life:
5 - 10
4 - 8
5 - 10
Software licences are capitalised on the basis of the costs incurred to acquire the software and make it ready for use. Software developed in-house is capitalised insofar as its cost price arises from the development and test phase of a project and insofar as it can be demonstrated that:
- the project is technically feasible and suitable for use;
- it is the intention to complete the project and use the software;
- the software will generate proven economic benefits in the future;
- technical, financial and other means are in place to complete and use the software, and
- it is possible to determine the expenses attributable to the software developed in a reliable manner.
Expenses directly attributable to the software developed in-house consist of personnel expenses and an appropriate allocation of general expenses. Finance costs are also allocated to software developed in-house insofar as the development phase is longer than one year, using an interest rate equal to the average interest rate paid by the group in the financial year.
Software has a finite useful life and is carried at cost less amortisation and impairment. Amortisation is charged to the income statement using the straight-line method based on the estimated useful life. Due to a number of technical adjustments the projected useful life of the financial information system in the Netherlands has been extended by five years. Consequently the depreciation charge for 2015 has decreased by € 750.
2.8. Impairment of non-financial assets
Assets that have an indefinite useful life, such as goodwill, are not subject to amortisation but to annual impairment testing or more often if events or circumstances may necessitate an impairment. Assets subject to depreciation are assessed at such time as events or changes may necessitate an impairment.
An impairment loss is the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of an asset’s value in use and its fair value less selling expenses. The value in use is determined by calculating the present value of estimated future cash flows using a pre-tax discount rate which reflects both the current market assessment of the time value of money and the specific risk connected with the asset. The basis of the impairment test performed at the end of 2015 was the fair value derived from the intended public offer less the associated costs of disposal.
For the purpose of impairment testing on goodwill, assets of cash-generating units are grouped at the lowest level within the group at which goodwill is monitored for internal purposes. Non-financial assets other than goodwill that have been subject to impairment are assessed at each reporting date for possible reversal of the impairment charge.
2.9. Financial fixed assets
2.9.1. Loans and receivables
Loans and receivables are financial assets (not being derivative financial instruments) that are not quoted in an active market and have fixed or determinable repayment terms. They are initially recognised at fair value based on the date of payment and subsequently at amortised cost. Loans and receivables are recognised as current assets, except if the maturity date is more than 12 months after the balance sheet date, in which case they are classified as non-current assets. Current loans and receivables consist of trade and other receivables (note 2.10.) and cash and cash equivalents (note 2.12.). Loans and receivables are no longer recognised as soon as the group has transferred the risks and rewards relating to the loans and receivables to a third party or if the right to receive repayments has ceased to exist.
2.9.2. Guarantee deposits
Guarantee deposits (mainly rental guarantees and guarantees connected with the running of a temporary staffing business) are initially recognised at fair value based on the date of payment and subsequently at amortised cost using the effective interest method.
Associates are interests which expose or entitle the group to variable proceeds as a result of the group’s involvement in these entities and which enable the group to exercise influence over those proceeds as a result of its interest in these entities, not being subsidiaries. In general the interest held is 20% to 50% of the voting rights. Associates are recognised using the equity method. They are initially recognised at cost in the financial statements. Changes in valuation as a result of attributable results from the associates are recognised in the income statement.
Investments in associates are subject to impairment testing at such time that events or changes in circumstances indicate a possible impairment. The group calculates the difference between the recoverable amount and the carrying amount of the associates and recognises any impairment in the income statement.
2.10. Trade and other receivables
Trade and other receivables are initially recognised at fair value based on the payment date and subsequently at amortised cost using the effective interest method (often nominal value) less impairment for doubtful receivables. Reasons for recognising a provision for doubtful receivables include the bankruptcy of a debtor, major financial problems on the part of the debtor or the passing of more than 365 days after the payment due date. The amount of the provision is the difference between the carrying amount of the receivable and the present value of expected future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced by the amount of the provision for doubtful receivables and the associated expenses are included in selling expenses in the income statement. If a trade receivable or other receivable is uncollectible, it is charged to the provision for doubtful receivables. Reversal of any amounts previously written off goes towards reducing the amount of selling expenses in the income statement.
Trade receivables are not recognised in the balance sheet if they are sold to a factoring company and the contractual rights to and the cash flows from these receivables have been transferred. The criterion applicable in this context is the substantial transfer of risks and rewards. Factoring fees are recognised as selling expenses.
2.11. Derivative financial instruments
Derivative financial instruments are initially recognised in the financial statements at fair value on the date the contract is concluded and are subsequently recognised at fair value at each reporting date. Changes in the fair value of derivative financial instruments are recognised directly in the income statement, unless hedge accounting is applied.
In the event the group applies hedge accounting, its effectiveness is documented when hedging. The effectiveness of the hedge is subsequently determined at regular intervals, either by comparing the critical features of the hedging instrument with the hedged position, or by comparing the fair value change of the hedging instrument and the hedged position.
The group applies hedge accounting to interest rate derivatives entered into to hedge future cash flows from interest on its non-current borrowings.
When applying hedge accounting the effective portion of the revaluation of the hedging instrument is directly recognised in comprehensive income. At such time as the results of the hedged position are recognised as net finance costs in the income statement, the associated result is transferred from equity to the same item in the income statement.
The fair value of the derivative financial instrument is classified as a fixed asset or a non-current liability if the derivative financial instrument has a remaining maturity of more than 12 months, or as a current asset or liability if the remaining maturity is less than 12 months.
To be able to recognise the ineffective part of the revaluation in the correct period in the income statement the group at each balance sheet date recognises the lowest absolute amount of either of the following two valuations changes in equity:
- the cumulative revaluation of the hedging instrument since the hedge relationship was indicated; and
- the cumulative change in the value of future hedged cash flows insofar as it can be attributed to the hedged risk.
The hedge accounting is terminated when:
- the hedging instrument is sold, ended or exercised. The cumulative result on the hedging instrument that was recognised directly in equity when it was still deemed to be an effective hedge continues to be recognised in equity until the initially hedged future transaction takes place; or
- the hedge relationship no longer complies with the criteria for hedge accounting. If the hedged future transaction has yet to take place, the associated cumulative result on the hedging instrument is recognised in equity. If the transaction will no longer take place the cumulative result recognised in equity is recognised in the income statement.
2.12. Cash and cash equivalents
Cash and cash equivalents, including cash in hand, bank balances and readily available deposits are recognised at nominal value. Bank overdrafts are classified as borrowings under current liabilities.
2.13. Share capital
Share capital is defined as equity attributable to equity holders of the company. Costs directly connected to the issuance of new shares are deducted from the proceeds recognised in equity. If the group purchases USG People N.V. shares, the amount paid including any associated costs (after income tax) is charged to equity attributable to equity holders of the company until such time as the shares are cancelled or reissued. The amount received on the issue of shares previously purchased, less any associated costs (after income tax), is added to the equity attributable to equity holders of the company.
Dividend is recognised as a liability for the period in which the distribution is approved by the shareholders.
2.15. Non-current borrowings
Borrowings are initially recognised in the financial statements at fair value, net of transaction costs incurred, and are subsequently recognised at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowing using the effective interest method.
Borrowings are classified as current liabilities unless the group has the intention and an unconditional right to postpone settlement of the liability for at least 12 months after the balance sheet date.
When entering into a lease contract it is assessed whether the lease classifies as a financial or operating lease.
Lease contracts whereby the risks and rewards associated with ownership lie wholly or primarily with the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement for the duration of the lease using the straight-line method. Lease contracts whereby the risks and rewards associated with ownership actually lie with the group are classified as financial leases. The group did not have any financial lease contracts in 2015.
2.17. Income tax expense
Income-based tax on the income for the financial year comprises current and deferred income taxes for the period under review. Income-based tax is recognised in the income statement except where it relates to items booked in comprehensive income or directly in equity. In the latter case, the associated tax is also recognised in comprehensive income or equity.
Current income tax consists of income-based tax on the taxable income, calculated on the basis of tax rates and legislation that has been enacted or substantially enacted at the balance sheet date. Management periodically monitors the positions taken when filing tax returns, taking into account various legal interpretations. If necessary, liabilities are recognised based on expected payments.
Deferred income tax is recognised for temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the amounts used for taxation purposes. Deferred tax liabilities are not carried when initially recognising goodwill. Deferred income tax is calculated using tax rates and legislation that has been enacted or substantially enacted at the balance sheet date and are expected to apply when the deferred income tax asset concerned is realised or the deferred tax liability is settled.
Deferred tax assets are recognised insofar as it is probable that future taxable profit will be available to offset the temporary differences and available tax losses.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to do so and if the taxes are levied by the same authority.
2.18. Pension-related liabilities
2.18.1. Defined contribution pension schemes
A defined contribution scheme is a pension scheme whereby the group makes fixed contributions to a pension insurer or pension fund.
Liabilities regarding contributions to pension and pension-related schemes based on defined contributions are recognised as expenses in the income statement in the period to which they pertain. The group has no obligations other than the payment of premiums.
2.18.2. Defined benefit pension schemes
A defined benefit scheme is a pension scheme whereby the employee receives an amount in pension benefits on retirement, usually dependent on factors such as age, years of service and remuneration.
The group’s net liability in regard to granted pension rights is determined separately for each scheme, on the basis of the present value of the liability under the defined benefit pension scheme at balance sheet date, less the fair value of the plan assets (defined as the present value of the related liability as described in IAS 19.115). The discount rate is the return at balance sheet date on solid corporate or government bonds with a maturity similar to the term of the group’s liabilities. The calculations are performed by certified actuaries using the projected unit credit method.
Actuarial gains and losses arising from changes in actuarial assumptions are added or charged to comprehensive income. In the event of changes in the pension scheme, unrecognised pension costs for years of service completed are recognised directly in the income statement.
In 2015 the most important Dutch pension scheme ended and was therefore adjusted. The participants will migrate to the defined contribution scheme. The commitments and plan assets of this pension scheme are no longer included.
2.19. Share-based remuneration
The fair value of shares granted conditionally (settled in shares) under the group’s share plans, including the group-paid wage tax relating to these shares (settled in cash), is recognised as an expense in the income statement. Performance conditions such as revenue and profitability and expected staff turnover are included in the estimate of the ultimate total number of shares to be granted. The estimate of the ultimate total number of shares to be granted is revised at balance sheet date on the basis of the performance conditions. The actual performance conditions and staff turnover are determined at the end of the performance period and on the date that the granting becomes unconditional. Any effect of this revision and final determination is recognised in the income statement. The expenses are recognised on a time-weighted basis over the period to which the performance pertains. In the event of cancellation, either at the initiative of the staff member or of the employer, unrealised expenses pertaining to the period between the cancellation and the end of the performance period are recognised at once as an expense in the income statement.
The expenses based on the fair value of the shares to be distributed, as determined on the day of granting, is recognised directly in equity. The expenses relating to the tax commitments for participants in the share plan payable by the group are recognised at fair value, as determined on the reporting date and at the time of settlement. These expenses are recognised on a time-weighted basis over the period to which the performance pertains and the financial liability is recognised under the provisions in the financial statements.
In addition to the aforementioned share plan, the group has issued Stock Appreciation Rights (SARs).
The fair value of the granted SARs (settled in cash) is recognised as an expense in the income statement during the performance period. This amount is determined by the fair value of the (conditionally) granted SARs. The USG People N.V. share price is a market-related condition which partly determines the fair value. Expected staff turnover is included in the estimate of the ultimate amount to be paid. This estimate is revised at balance sheet date. Actual staff turnover is determined on the date on which granting becomes unconditional. The effect of this revision and final determination is recognised in the income statement. Expenses are recognised on a time-weighted basis over the conditional period of the SARs. A provision is maintained for this purpose.
The intended public offer announced by Recruit Holdings Co., Ltd. will have an impact on the timing as well as the manner of settlement of both the share plans and SAR scheme. This has an effect on the recognition and timing of unconditional allocation, both of which are recognised in accordance with IFRS 2.
A provision is recognised on the balance sheet where the group has a legally enforceable or constructive obligation relating to an event in the past and where it is probable that settlement of that obligation will involve an outflow of funds and that the amount can be estimated reliably. Where the effect of this is material, provisions are determined by calculating the present value of estimated future cash flows using a pre-tax discount rate which reflects the current market assessment of the time value of money and, if necessary, specific risks connected with the commitment. Future losses are not accounted for.
2.20.2. Restructuring provisions
Provisions are made for restructuring if the group has finalised a detailed restructuring plan and the restructuring has been either started or announced publicly. The restructuring provision does not include costs relating to future operations.
2.20.3. Personnel-related provisions
The group recognises provisions for future benefit payments to employees. Where applicable, these provisions take into account any future wage increases and staff turnover. The provisions include long-service awards and continuation of wage payment during extended periods of sickness.
2.21. Trade and other payables
Trade and other payables are initially recognised at fair value and subsequently at amortised cost using the effective interest method.
Income is recognised insofar as it is probable that the economic benefits will flow to the group and insofar as the income can be measured reliably. The group’s income is derived from the provision of services to third parties after deduction of value added tax and discounts granted. These services mainly concern:
- Temporary employment and secondment services: provision of temporary staff whereby hours worked at agreed rates during the reporting period are recognised as revenue;
- Recruitment and selection services: recruitment and selection of employees for third parties whereby revenue is booked once the service has been completed as agreed;
- Call centre services: handling of telephone operations for third parties. The revenue consists of units (call units or conversations) relating to the reporting period and at an agreed rate;
- Reintegration services: supporting of reintegration services for third parties based on an hourly rate, for hours worked during the reporting period;
- HR, IT and engineering projects: fees based on a set price are recognised as revenue based on the number of hours worked during the reporting period compared to the estimated total number of hours needed for the project, and
- Outplacement: provision of coaching to jobseekers. Revenue is determined on the basis of the amount of time to be declared during the reporting period for each person being coached compared to the estimated total amount of time to be spent on each person being coached.
If the group is the principal in a contract and the risks and rewards lie with the group, the transactions are recognised gross in the income statement. Revenue is recognised net if the group acts as an agent, e.g. as an intermediary.
No revenue is recognised if there is major uncertainty as to whether the funds owing can be collected at the moment that the services are provided.
2.23. Selling, general and administrative expenses
The division of costs is based on the functional division. Selling expenses are the selling and marketing costs allocated to the branches. General and administrative expenses are administrative support costs.
2.24. Net finance costs
Finance costs comprise interest due on funds drawn, calculated using the effective interest method, negative adjustments to the value of non-current receivables, downward adjustments to the fair value and realised value of non-current derivative financial instruments and interest recognised with respect to accrued interest on contingent considerations relating to acquisitions and other liabilities.
Finance income comprises interest received on outstanding monies, positive adjustments to the value of non-current receivables and upward adjustments to the fair value and realised value of derivative financial instruments.
2.25. Earnings per share
Earnings per share are calculated as the net income attributable to shareholders divided by the weighted average number of outstanding shares for the relevant period. Diluted earnings per share are calculated as net income divided by the weighted average number of outstanding shares including shares granted but not yet distributed under share plans. Dividend distributed in shares, whereby there is no option for a cash settlement, is recognised as allocation of bonus shares. Earnings per share are adjusted accordingly in the comparative figures.
2.26. Basis of preparation for the statement of cash flows
The statement of cash flows is compiled using the indirect method. The statement of cash flows distinguishes between cash flows from operating, investing and financing activities. Cash flows in foreign currencies are translated at the rate at the transaction date. Receipts and expenditure before income tax are recognised as cash flows from operating activities. Interest paid and received is included under cash flow from financing activities. Cash flows arising from the acquisition or divestment of subsidiaries and associates are recognised as cash flows from investing activities, taking into account any cash and cash equivalents in these interests. Dividends paid are recognised as cash flows from financing activities.
Cash and cash equivalents in the statement of cash flows equals cash and cash equivalents on the balance sheet minus bank overdrafts.