CONSOLIDATED STATEMENT
Short term leases and leases of low-value assets:
Subsequent expenditure:
Impairment losses recognized in respect of cash-generating units are
allocated first to reduce the carrying amount of any goodwill allocat-
ed to cash-generating units (or group of units) and then to reduce the
carrying amount of the other assets in the unit (group of units) on a
pro-rata basis.
that the Group will renew any contracts for more than 3 years.
The Group has elected not to recognize the right-of-use assets and
liabilities for short-term leases of equipment and low-value assets
with an underlying value of USD 10,000 or less when they are new.
Payments on such leases are recognized as expenses as they occur.
Subsequent expenditure on capitalized intangible assets is capitalized
only when it increases the future economic benefits embodied in the
specific asset to which it relates. All other expenditures are expensed
as incurred.
Discount rates:
Otello chose to use the modified approach for the implementation of
IFRS 16, and therefore use the IBR as a discount rate on the opening
balance. Going forward, the IBR will be used for subsequent mea-
surement for new contracts, as long as the implicit interest rate is not
readily determined.
Subsequent costs:
Amortization:
Calculation of recoverable amount:
The recoverable amount of the Group’s assets is the greater of their
fair value less the cost of disposal and value in use. In assessing value
The Group recognizes, in the carrying amount of an item of property,
plant and equipment, the cost of replacing part of such an item when
that cost is incurred, if it is probable that the future economic benefits
Amortization is calculated on a straight-line basis over the estimated
useful lives of intangible assets, unless such lives are indefinite. Good-
will and intangible assets with indefinite useful lives are systematical-
in use, the estimated future cash flows are discounted to their present As a basis for the discount rate calculation, Otello has used its credit
embodied with the item will flow to the Group, and the cost of the item ly tested for impairment at each balance sheet date.
can be measured reliably. All other costs are expensed as incurred.
value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the
asset. For an asset that does not generate largely independent cash
inflows, the recoverable amount is determined for the cash-generat-
ing unit to which the asset belongs.
facility agreement. This bore an interest rate of LIBOR, 3 months plus
a margin of 2.50 % p.a. The margin has been adjusted according to the
value of a lease. Specific country-based discount rates are used.
Financial instruments
Depreciation:
Depreciation is calculated on a straight-line basis over the estimated
useful lives of each part of an item of property, plant and equipment.
The estimated useful lives are as follows:
Non-derivative financial instruments:
Interest rates are, therefore, adjusted to take into account the eco-
nomic environment in the country where the lease is entered into.
Rates are modified with a country risk premium, and with an inflation
difference compared to Norway, where the credit facility agreement is
held. The range of IBRs used is 2.8 % to 16.5 %.
Non-derivative financial instruments comprise investments in equity
and debt securities, trade and other receivables, cash and cash equiv-
alents, loans and borrowings, and trade and other payables.
Reversals of impairment:
An impairment loss in respect of goodwill is not reversed.
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Leasehold improvements
Over the term of the contract
Machinery and equipment Up to 10 years
Non-derivative financial instruments are initially measured at fair
value plus transaction costs, except for those non-derivative financial
instruments classified as at fair value through profit or loss, which are
initially measured at fair value without transaction costs. Subsequent
to initial recognition, non-derivative financial instruments are mea-
sured as described below.
With respect to other assets, an impairment loss is reversed if there
has been a change in the estimates used to determine the recover-
able amount. An impairment loss is reversed only to the extent that
the assets carrying amount do not exceed the carrying amount that
would have been determined, net of depreciation or amortization, if
no impairment loss had been recognized.
Fixtures and fittings
Right of use assets
Up to 5 years
Over the term of the contract
Dividends
Dividends on shares are recognized as a liability in the period in which
they are declared.
The residual value, if not insignificant, is reassessed annually.
Employee benefits — Defined contribution plans
Intangible assets
A defined contribution plan is a post-employment benefit plan under
which an entity pays fixed contributions into a separate entity and
will have no legal or constructive obligation to pay further amounts.
Obligations for contributions to defined contribution pension plans
are recognized as an employee benefit expense in the profit or loss in
the periods during which services are rendered by employees. Prepaid
contributions are recognized as an asset to the extent that a cash
refund or a reduction in future payments is available. Contributions to
a defined contribution plan that are due more than 12 months after
the end of the period in which the employees render the service are
discounted to their present value.
Trade and other receivables:
Leasing
Goodwill:
Trade and other receivables are recognized at the invoiced amount
less allowance for expected credit losses (see accounting policy
regarding impairment).
IFRS 16 requires lessees to recognize most leases on their balance
sheets as lease liabilities with corresponding assets for all leases with
a lease term of more than 12 months, unless the underlying asset is of
low value.
Goodwill that arises upon the acquisition of subsidiaries is included in
intangible assets. For the measurement of goodwill at initial recogni-
tion, see above.
Cash and cash equivalents:
Cash and cash equivalents comprise cash balances and call deposits.
Goodwill is recognized at cost, less any accumulated impairment
losses. Goodwill is allocated to cash-generating units (CGU) or groups
of CGUs and tested at least annually for impairment (see accounting
policy regarding impairment). A CGU is the smallest identifiable group
of assets that generates cash inflows that are largely independent
of cash inflows from other assets or groups of assets. In order to
identify whether cash flows from an asset (or a group of assets) are
independent of cash flows from other assets (or groups of assets),
management assesses various factors, including how operations are
monitored. Each CGU or group of CGUs to which goodwill has been
allocated represent the lowest level in the entity where goodwill is
monitored for internal management purposes. The group of CGUs may
not be larger than an operating segment.
Further, a lessee recognizes depreciation of the right-of-use asset
(ROU asset) and interest expense on the lease liability, instead of
recognizing the expenses in Other operating expenses.
Impairment
Financial assets:
For subsequent measurement, the Group remeasures the lease liability
in the case of certain events taking place (e.g., a change in the lease
term). Generally, the amount of the remeasurement of the lease liabil-
ity is recognized as an adjustment to the right-of-use asset.
Restructuring
Trade receivables
A provision for restructuring costs is recognized when the Group has
approved a detailed and formal restructuring plan, and the restruc-
turing either has commenced or has been publicly announced. Further,
operating losses are not provided for.
The group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss allowance
for all trade receivables and contract assets. To measure the expected
credit losses, trade receivables and contract assets have been grouped
based on shared credit risk characteristics and the days past due. The
contract assets relate to unbilled work in progress and have substan-
tially the same risk characteristics as the trade receivables for the
same types of contracts. The group has therefore concluded that the
expected loss rates for trade receivables are a reasonable approxima-
tion of the loss rates for the contract assets. Individual assessments
per customer are also carried out by financial management.
Otello is using the modified approach and, therefore, only recognizes
leases in the statement of financial position as of January 1, 2019. Prior
periods have not been restated.
Termination benefits
Termination benefits are expensed at the earlier of when the Group
can no longer withdraw the offer of those benefits or when the Group
recognizes costs for restructuring. If benefits are not expected to be
settled within 12 months of the end of the reporting period, then they
are discounted.
Leases classified as operating leases under IAS 17:
Research and development:
At the date of the initial application of IFRS 16, January 1, 2019, the
Group recognized a lease liability for leases classified as operating
leases according to IAS 17, in compliance with transition requirements.
The Group measures the lease liabilities at the present value of the
remaining lease payments, discounted using the Group's incremental
borrowing rate at January 1, 2019.
Expenses related to research activities, which are expected to lead
to scientific or technological knowledge and understanding, are
recognized as costs in the statement of comprehensive income in the
period they are incurred.
Share-based payment transactions
Loans and lease receivables
The share option program allows Group employees to acquire shares
of the Company. The fair value of options granted is recognized as an
employee expense with a corresponding increase in equity. The fair
value is measured at the grant date and spread over the period during
which the employees become unconditionally entitled to the options,
with the offsetting amount against equity. The fair value of the
options granted is measured using the Black & Scholes model, taking
into account the terms and conditions upon which the options were
granted. The amount recognized as an expense is adjusted to reflect
the actual number of share options that vest, except where forfeiture
is only due to share prices not achieving the threshold for vesting.
The cost of building new features, together with significant and per-
vasive improvements of core platforms, provided that the significant
and pervasive improvements of parts or main components of core
platforms will generate probable future economic benefits, are capi-
talized as development costs and amortized on a straight-line basis of
up to 5 years.
All of the entity’s debt investments at amortized cost are considered
to have low credit risk, and the loss allowance recognized during the
period was therefore limited to 12 months’ expected losses
At the inception of a contract, the Group assesses whether a contract
is, or contains a lease. A contract is or contains a lease if the contract
conveys the right to control the use of an identified asset for a period
of time in exchange for consideration.
Non-financial assets:
The carrying amounts of the Group’s assets are reviewed annually to
determine whether there is any indication of impairment. If any such in-
dication exists, the asset’s recoverable amount is estimated (see below).
Sublease contracts, where the Group is the lessor:
A significant portion of the work that engineering performs is related
to the implementation of the ongoing updates that are required to
maintain the platforms’ functionality. Examples of updates include
“bug fixes”, updates made to comply with changes in laws and regu-
lations, and updates made to keep pace with the latest trends. These
costs are expensed as maintenance costs.
For subleasing contracts, the group recognizes a lease receivable in
the statement of financial position, with a corresponding reduction in
the ROU asset. Short-term and low-value sublease contracts are not
capitalized.
For goodwill, assets that have an indefinite useful life and intangible
assets that are not yet available for use, the recoverable amount is
nevertheless tested annually.
Restricted Stock Unit Plans are measured at the grant date using the
current market value reduced by expected dividends paid before the
vesting date, which is then further discounted.
Contracts with renewal options:
An impairment loss is recognized whenever the carrying amount of an
asset, its cash-generating unit or a group of units exceeds its recover-
able amount. The cash-generating unit is considered to be the acquired
companies. Please see note 11 for further information. Impairment
losses are recognized in the statement of comprehensive income.
Some office leases contain renewal options exercisable by the Group.
The renewal options held are exercisable only by the Group, and not
by the lessors. The Group includes a renewal of the contracts in the
lease valuation if it is considered reasonably certain that the Group
will renew the contracts. It is not considered as reasonably certain
Other intangible assets:
Other intangible assets that are acquired by the Group, are recognized
at cost less accumulated amortization (see below) and impairment
losses (see accounting policy regarding impairment).
Provisions
A provision is recognized in the statement of financial position when
the Group has a currently existing legal or constructive obligation
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Otello Corporation ASA - Annual Report 2021
Otello Corporation ASA - Annual Report 2021 45
