8.6
Notes to the consolidated financial statements

For the financial year ended 31 December 2019.

8.6.1 General information

Accell Group N.V. (“Accell Group”) in Heerenveen, the Netherlands, is the holding company of a group of legal entities. An overview of the data required pursuant to articles 2:379 and 2:414 of the Dutch Civil Code is enclosed in note 6.20.3. Accell Group with its group of companies is internationally active in the design, development, production, marketing and sales of innovative and high-quality bicycles, bicycle parts and accessories.

8.6.2 Basis of preparation

A | General

These consolidated financial statements:

• have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRSs) and with Section 2:362(9) of the Dutch Civil Code;
• were authorized for issue by the Board of Management on 5 March 2020;
• have been prepared on a historical cost basis unless otherwise stated;
• are presented in euros, which is Accell Group’s functional currency;
• are rounded to the nearest thousand, unless otherwise indicated. Calculations in the tables are based on unrounded figures; as a result, rounding differences can occur.  

Accell Group has changed the presentation of the consolidated financial statements compared with 2018 to improve readability and provide more relevant information earlier on in the report. These changes have no impact on accounting policies, nor on the amounts recognized; only the presentation format and the order of the notes have changed. Prior year comparative figures have been adjusted for these changes. The changes made are:

• the order of the notes has changed to better align with key management information;
• accounting policies have been moved to the relevant note if this relates to a specific line item in the income statement or balance sheet;
• in the balance sheet, separate line items have been integrated into one line item: 
  • Goodwill and other intangible assets are now one line item;
  • Trade receivables and other receivables are now one line item;
  • Interest-bearing loans and the revolving credit facility have been changed into borrowings; and
  • Trade payables and other current liabilities are now one line item.

Restatement 2018
The 2018 consolidated income statement has been restated due to the classification of North America as a discontinued operation (see note 6.16.1). All disclosures regarding the consolidated income statement are only for continuing operations. However, the consolidated balance sheet and the disclosures to the consolidated balance sheet include both continuing operations and discontinued operations.

Furthermore a reclassification, for comparison purposes only, took place for the costs of obsolete raw materials and semi-finished goods.

 B | Use of estimates

In preparing these consolidated financial statements, Accell Group has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized prospectively.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ending 31 December 2019 is included in the following notes:

NOTE 6.10.3 | intangible assets impairment test: key assumptions underlying recoverable amounts, including the recoverability of development costs;
NOTE 6.11.1 | recognition and measurement of provisions: key assumptions about the likelihood and magnitude of an outflow of resources;
NOTE 6.11.3 | measurement of defined benefit obligations: key actuarial assumptions;
NOTE 6.14    | financial instruments - fair values;
NOTE 6.15.2 | recognition of deferred tax assets: availability of future taxable profit against which tax losses carried forward can be used;
NOTE 6.17.4 | share based payments estimates regarding the number of conditional shares that will vest (performance criteria and continuation of employment); 

C | Changes in accounting policies

The amendments and annual improvements to IFRS standards effective from 1 January 2019 did not have an impact on the Accell Group’s financial statements because they are clarifications or depend on future changes/transactions, with the exception of IFRS 16 Leases, which had a material impact.

Accell Group adopted IFRS 16 using the modified retrospective approach, which means that the prior-year figures have not been adjusted. As a lessee, Accell Group is required to recognize a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. In contrast to the presentation of operating lease expenses until 2018, depreciation charges on right-of-use assets and the interest expense from unwinding of the discount on the lease liabilities are recognized in the income statement. The ability to meet bank covenants is not impacted by the implementation of IFRS 16, because IFRS 16 is excluded in the covenants. Although IFRS 16 has no impact on the cash position, it will impact the classification within the statement of cash flows: improvement of ‘net cash flow from operating activities’ due to the cancellation of lease costs and integration of the reimbursement of the lease liability in ‘net cash flow from financing activities’.

Accell Group used the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17:

• applied the recognition exemption for low value assets (less or equal to € 5,000);
• applied the exemption to not recognize right-of-use assets and lease liabilities for lease terms shorter than 12
  months;
• applied a single discount rate to a portfolio of leases with similar characteristics;
• excluded initial direct costs from measuring the right-of-use asset at the date of initial application;
• used hindsight when determining the lease term if the contract contains options to extend or terminate the
  lease.

The following table shows the impact on the consolidated balance sheet using a weighted-average discount rate of 1.67%. Line items not affected by the change have not been included.

Impact on the financial statements

The reconciliation of operating lease commitments (off-balance sheet commitments at 31 December 2018) to lease liabilities recognized at 1 January 2019 is as follows:

Further financial impact for the period can be found in note 6.9.1.3 and note 6.10.2 of these financial statements 2019.

Mandatory upcoming changes and early adoption
Accell Group has opted for the early adoption of amendments to IFRS 9, IAS 39 and IFRS 7 due to interest rate benchmark reform that are mandatory as of 1 January 2020. The amendments relate to temporary exceptions from the application of specific hedge accounting requirements and specific disclosures regarding the use of these temporary exceptions due to uncertainties arising from interest rate benchmark reform. Due to the application of these amendments Accell Group can continue applying its current cash flow hedge accounting policies. Other upcoming amendments that are mandatory as of 1 January 2020 are not expected to have a material impact on the consolidated financial statements.

8.6.3 General accounting policies

This section describes Accell Group’s general accounting policies relating to the consolidated financial statements and notes as a whole. If an accounting policy relates specifically to a note (balance or transaction) it is presented within the relevant note. Accell Group has applied these accounting policies consistently to all periods presented in these consolidated financial statements, taking into account the mentioned accounting policy changes in note 6.6.2C.

A | Basis of consolidation

The consolidated financial statements are prepared as a consolidation of the financial statements of Accell Group N.V. and its subsidiaries. Subsidiaries are entities controlled by Accell Group. Accell Group controls an entity when it has power over the investee, is exposed or has the right to variable returns from its involvement with that entity and has the ability to affect those returns through its power over the entity. Control is generally obtained by ownership of more than 50% of the voting rights.

 The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by Accell Group.

When Accell Group loses control over a subsidiary, it derecognizes the assets and liabilities of the subsidiary, as well as any non-controlling interests and other components of equity. Any resulting gain or loss is recognized in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost. This fair value becomes the initial carrying amount for the purpose of subsequently accounting for the retained interest as an associate, joint venture or financial asset.

On consolidation, intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated. Unrealized gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of Accell Group’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

B | Foreign currency

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of group companies using the exchange rates at the transaction date.

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are not translated again at a later stage.

Foreign currency differences are generally recognized in profit or loss. However, foreign currency differences arising from the translation of qualifying cash flow hedges, to the extent the hedges are effective, are recognized in other comprehensive income (OCI).

Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into euro at exchange rates at the reporting date. The income and expenses of foreign operations are translated into euro at the exchange rates at the dates of the transactions.

Foreign currency differences are recognized in OCI and accumulated in the translation reserve, except to the extent that the translation difference is allocated to non-controlling interests.

When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If Accell Group disposes of part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When Accell Group disposes of only part of an associate or joint venture while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

If the unwinding of a monetary balance, which is either collectable from or payable to a foreign operation is neither planned nor probable in the foreseeable future, the foreign currency differences of this monetary balance is considered part of the net investment in the foreign operation. Accordingly, these currency differences are included in other comprehensive income and recorded in the translation reserve.

Hedge of a net investment in a foreign operation

Accell Group does not apply hedge accounting to foreign currency differences arising between the functional currency of the foreign operation and Accell Group’s functional currency (euro).

C | Off-setting financial instruments

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, Accell Group has a legal right to offset the amounts and intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

 D | Statement of cash flows

The statement of cash flows is prepared using the indirect method. Dividends paid are included in financing activities as well as the payment of the principal portion of lease liabilities. Dividends received are classified as investing activities. Interest paid and interest received is classified as an operating activity.
Accell Group has centralized its cash management with the execution of payments in the operations by group companies. Cash management includes cash pools, cash and bank overdrafts and these are components of the item cash and bank overdrafts in the cash flow statement.