Page 82 - Restamax Plc Annual Report 2017

2 ACCOUNTING PRINCIPLES REQUIRING THE MANAGEMENT’S CONSID-

ERATION AND KEY FACTORS OF UNCERTAINTY RELATED TO ESTIMATES

Use of estimates tax assets and liabilities, and when the deferred tax assets
and liabilities are related to taxes on income collected by the
Consolidation under the IFRS standards requires the use of same recipient, either from the same taxpayer or different
specific estimates and assumptions that affect the figures taxpayers, when the aim is to realise the asset and liability
reported. The estimates and assumptions included in the in their net amounts.
financial statements are based on the management’s best
possible opinion on the closing date. These estimates and Provisions and contingent liabilities
assumptions affect the assets and liabilities on the balance
sheet, the presentation of contingent assets and liabili- A provision is recorded when the Group has a judicial and
ties in the notes, and the income and expenses from the constructive obligation for payment on the basis of a past
financial period. The estimates are based on earlier experi- event, the realisation of the obligation is probable and the
ence, market information and several other assumptions size of the obligation can be reliably estimated.
that may be considered reasonable, but the actual figures
may differ from these values due to different assump- Provisions are measured at the present value required to
tions or conditions. The management must employ its cover the obligation. The discount factor used for calcu-
judgment when following the accounting principles, and lating the present value is selected in a manner where it
it must prepare estimates concerning income tax, goodwill is representative of the market opinion of the value of
impairment tests, reservations and contingent liabili- money over time and the risks related to the obligation.
ties, for example. These policies and estimates require If a part of the liability can be received as reimbursement
the management to make subjective and complicated, from a third party, the reimbursement will be registered as
judgment-based estimates, such as those concerning the a separate asset item when the reimbursement has been
effects of factors that are uncertain by nature. practically ensured. The provision amounts are estimated
on each closing date, and their amounts are adjusted to
Income taxes correspond to the best possible estimate at the moment
of inspection. Changes in the provisions are entered in the
The tax costs in the income statement are based on the income statement under the same item as the one where
taxable income from the financial period and deferred tax. the provision was originally recorded.
Taxes are recorded through profit or loss, except in cases
where they are directly related to items registered as equity A provision will be recorded for a contract that generates
or other items in the total comprehensive income. In these a loss when the necessary expenditures required to fulfil
cases, their tax effects are also recorded as equity in these the obligations outweigh the benefits received from the
items. Tax based on the taxable income from the financial contract.
period is calculated using the taxable income and the appli-
cable tax rate in each country. The taxes are adjusted by any A contingent liability is a possible liability arising from past
taxes related to previous financial periods. events whose existence will only be confirmed when an
uncertain event outside the Group’s control is realised. A
Deferred tax is calculated for any temporary differences present obligation that is not likely to cause a payment obli-
between carrying amounts and tax bases. The largest gation, or whose size cannot be reliably determined, is also
temporary differences are generated by the differences considered to be a contingent liability. Contingent liabilities
between the carrying amounts and tax bases of property, are presented in the notes to the financial statements.
plant and equipment, fair value adjustments of assets and
liabilities during business combinations, and unused tax Estimated goodwill impairment
losses. Deferred taxes have been calculated using the tax
rates that have been enacted or substantively enacted on Impairment testing compares the book value of a group
the date of the closing of the books. of units including goodwill and generating cash flow to its
recoverable amount per year, and determines its possible
Deferred tax assets are recorded up to the probable amount impairment. The recoverable amount from the group of
of future taxable income against which the temporary units generating cash flow is based on utility value calcula-
difference can be utilised. The prerequisites for recording tions. The discount rate takes industry-specific factors into
deferred tax assets are estimated in this respect on each account.
closing date.
In the testing, the recoverable amount is estimated using
However, deferred tax liabilities are not recorded when the budgets, forecasts and terminal periods, and the sensitivity
asset item or liability in question is one that would be origi- of the calculations is analysed in terms of changes to the
nally entered into bookkeeping, there is no combination of discount rate, profitability and residual values. Changes
business activities involved, and the entry of such an asset to these estimates or the structure or number of the units
item or liability does not affect the result of the bookkeeping or unit groups may cause impairment of the fair values
or the taxable income at the time when the business trans- of commodities or goodwill. The estimates concern the
action takes place. expected selling prices of the products, the expected price
development of the product costs, and the discount rate.
Deferred tax assets and liabilities are offset when the
Group has a legally enforceable right to offset the current
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