ABC DATA S.A. FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 WITH AUDITOR S OPINION

Transcription

1 ABC DATA S.A. FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 WITH AUDITOR S OPINION

2 Statement of comprehensive income... 4 Balance sheet... 5 Cash flow statement... 6 Statement of changes in equity... 7 Accounting principles (policies) and other notes General information Identification of the consolidated financial statements Composition of the Management Board Approval of the financial statements Company s investments Material values based on professional judgment and estimates Professional judgement and uncertain estimations Basis for the preparation of the financial statements Statement of compliance Functional and presentation currency Changes in the accounting principles New standards and interpretations already published, but not yet effective Key accounting principles Translation of items denominated in foreign currencies Property, plant and equipment Intangible assets Lease Impairment of Non-financial Non-current Assets Shares in subsidiaries Financial assets Impairment of financial assets Derivative financial instruments and hedges Inventories Trade and other receivables Cash and cash equivalents Interest-bearing bank credit facilities, loans and debt securities Trade and other liabilities Provisions Retirement bonuses Share-based payments Revenue Expenses Taxes Net earnings per share Operating segments Revenue and expenses Other operating revenue Other operating expenses Financial revenue Financial expenses Costs by type Amortization/depreciation expenses charged to profit or loss

3 12.7.Employee benefits Income tax Tax expense Reconciliation of the effective tax rate Deferred income tax Earnings per share Dividends paid and proposed Property, plant and equipment Lease Operating lease liabilities Company as the Lessee Intangible assets Investments in subsidiaries Other assets Financial assets measured at fair value through profit or loss Other financial assets Employee benefits Employee stock ownership plans Retirement and other post-employment benefits Inventories Trade and other receivables Cash and cash equivalents Share Capital and Supplementary/Reserve Capitals Share capital Supplementary capital Treasury shares Other reserve capitals Undistributed profit/uncovered loss and dividend limitations Interest-bearing bank loans and credit facilities Provisions Changes in provisions Provision on warranty repairs and returns Onerous contracts Trade and other liabilities and accruals Short-term trade and other liabilities Terms and conditions of settlement of the financial liabilities: Prepayments and accruals Liabilities due to employee benefits Other financial liabilities Contingent liabilities Litigation Tax settlements Waste electric and electronic appliances Information on related parties The Group s top level parent Terms of related party transactions Loan granted to a member of the Management Board Other transactions with members of the Management Board

4 30.5. Remuneration of Company s management Information on the fee of the statutory auditor or entity authorized to audit financial statements Financial risk management objectives and principles Interest rate risk Currency risk Commodity price risk Credit risk Liquidity risk Financial instruments Fair value of individual types of financial instruments Revenue, expenses, profit and loss recognized in profit or loss by classes of financial instruments Hedging Capital management Employment structure Events after the end of the reporting period

5 STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 December 2014 Note 31 December December 2013 Revenues Cost of sales ( ) ( ) Gross profit on sales Other operating income Selling expenses 12.5 ( ) ( ) Administrative expenses 12.5 (26 671) (25 572) Other operating expenses 12.2 (2 804) (846) Gross profit on operations Financial income Financial expenses 12.4 (13 219) (11 989) Net financial expenses (9 872) Profit before tax Income tax 13 (9 678) (3 638) Net profit (loss) for the period Net change in fair value of cash flow hedges 33.3 (7 435) 183 Income tax on other comprehensive income (35) Total other comprehensive income (6 022) 148 TOTAL COMPREHENSIVE INCOME FOR THE PERIOD Profit (loss) per share in PLN: basic profit for the reporting period 14 0,35 0,32 diluted profit for the reporting period 14 0,35 0,32 Ilona Weiss Juliusz Niemotko Krystyna Cybulska President of the Management Board Vice-President of the Management Board Chief Accountant Warsaw, 19 March 2015 to the consolidated financial statements presented on pages 8 to 52 constitute an integral part of these financial statements. 4

6 BALANCE SHEET as at 31 December Note ASSETS Non-current assets Property, plant and equipment Intangible assets Investments in subsidiaries Deferred tax assets Current assets Inventories Short-term financial assets Trade and other receivables Cash and cash equivalents TOTAL ASSETS EQUITY AND LIABILITIES Equity Share capital Share premium Treasury shares 25.3 (5 419) (3 190) Other reserve capital 25.4 (4 259) Retained profit Long-term liabilities Provisions for employee benefits Provisions Short-term liabilities Current portion of interest-bearing borrowings and debt instruments Liabilities due to employee benefits Other financial liabilities Income tax liabilities Trade and other liabilities Provisions Total liabilities TOTAL EQUITY AND LIABILITIES Ilona Weiss Juliusz Niemotko Krystyna Cybulska President of the Management Board Warsaw, 19 March 2015 Vice-President of the Management Board Chief Accountant to the consolidated financial statements presented on pages 8 to 52 constitute an integral part of these financial statements. 5

7 CASH FLOW STATEMENT for the year ended 31 December 2014 Ilona Weiss Juliusz Niemotko Krystyna Cybulska 31 December December 2013 Note Cash flow from operating activities Gross profit Adjusted by: Amortization / Depreciation Cost of share-based payments 21 (1) 2 (Profit)/loss on investing activities 170 (203) (Increase)/ decrease in receivables (Increase)/ decrease in inventories (4 901) (21 898) Increase/ (decrease) in liabilities, except for borrowings (21 144) Financial income 12.3 (17 666) (2 117) Financial expenses Increase/(decrease) in liabilities to employees Change in provisions 27 (188) 551 Income tax paid (6 259) (9 088) Other (6 135) (367) Net cash flow from operating activities Cash flow from investing activities Sales of property, plant and equipment and intangible assets 16, Acquisition of property, plant and equipment and intangible assets 16,18 (3 695) (3 442) Acquisition of a subsidiary 19 (14 615) (1 929) Sale of an investment in subsidiary Dividends recived from subsidiary Interest received Other Net cash flow from investing activities (362) (2 892) Cash flow from financing activities Receipts from shares issue Purchase of treasury shares 25.3 (5 419) - Receipts from borrowings Repaid bank and other borrowings (8 304) (30 000) Change in overdrafts 26 (60 234) Dividend paid 15 (44 594) (29 729) Interest paid (11 951) (12 293) Net cash flow from financing activities ( ) (17 076) Net increase/(decrease) in cash and cash equivalents (1 283) (922) Opening balance of cash Closing balance of cash President of the Management Board Vice-President of the Management Board Chief Accountant Warsaw, 19 March 2015 to the consolidated financial statements presented on pages 8 to 52 constitute an integral part of these financial statements. 6

8 STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2014 Note Share capital Share premium Treasury shares Other reserve capital ABC Data S.A. Retained profit Net profit Total equity 12 months 2014 As at 1 January (3 190) Net profit for the period Other net comprehensive income for the period (6 022) - - (6 022) Comprehensive income for the period (6 022) Purchase of treasury shares (5 419) (5 419) Conversion of warrants into shares (12) Payment with own shares Share-based payments (1) - - (1) Dividend paid (44 594) - (44 594) As at 31 December (5 419) (4 259) Note Share capital Share premium Treasury shares Other reserve capital Retained profit Net profit Total equity 12 months 2013 As at 1 January (3 190) Net profit for the period Other net comprehensive income for the period Comprehensive income for the period Conversion of warrants into shares (44) Share-based payments Dividend paid (29 729) - (29 729) As at 31 December (3 190) Ilona Weiss Juliusz Niemotko Krystyna Cybulska President of the Management Board Warsaw, 19 March 2015 Vice-President of the Management Board Chief Accountant to the consolidated financial statements presented on pages 8 to 52 constitute an integral part of these financial statements. 7

9 ACCOUNTING PRINCIPLES (POLICIES) AND OTHER NOTES 1. General information The financial statements of ABC DATA S.A. cover the financial year ended 31 December 2014 and include comparative data for the financial year ended 31 December ABC DATA S.A. ("Company", "entity") was incorporated by a notarized deed of 25 July 2007 under a business name of ABC Data Holding S.A. The Company s registered office is located in Warsaw, ul. Daniszewska 14. It is registered in the Register of Entrepreneurs of the National Court Register kept by the District Court, XIII Business Division of the National Court Register, under number KRS The statistical (REGON) number assigned to it is Its duration is unlimited. The Company s core business includes: wholesale of computers, peripherals and software; wholesale of electronic and telecommunication equipment; manufacture of computers and peripherals; software-related activities; data processing, hosting and similar activities; repair and maintenance of computers and peripherals; other IT and computer services; IT equipment administration; other non-school forms of education. MCI Management S.A. is the top level parent of ABC Data S.A. Capital Group and it controls the Group through its subsidiary: MCI Venture Projects Spółka z ograniczoną odpowiedzialnością IV S.K.A. 2. Identification of the consolidated financial statements The Company prepared the consolidated financial statements for the year ended 31 December 2014, which were approved for publication on 19 March Composition of the Management Board As at 31 December 2014 the composition of the Company s Management Board was as follows: Norbert Biedrzycki President of the Management Board Ilona Weiss Vice-President of the Management Board Composition of the Management Board as at the date of the financial statements: Ilona Weiss President of the Management Board Juliusz Niemotko Vice-President of the Management Board On 7 October 2014 Norbert Biedrzycki resigned the office of the President effective 31 December The Supervisory Board decided to appoint Ilona Weiss, the former Vice-President of the Management Board, President as of 1 January 2015 and to appoint Juliusz Niemotko Vice-President of the Board (Current Report 115/2014). 8

10 As at 31 December 2013 the Management Board of the Company was composed of: Norbert Biedrzycki Ilona Weiss Dobrosław Wereszko President of the Management Board Vice-President of the Management Board Member of the Management Board On 24 April 2014, Dobrosław Wereszko resigned the office (Current Report 17/2014). 4. Approval of the financial statements The financial statements were approved for publication by the Management Board on 19 March Company s investments The Company holds investments in the following subsidiaries: Entity ABC Data s.r.o ABC Data s.r.o UAB "ABC Data Lietuva" ABC Data Marketing Sp. z o.o. ABC Data Hungary Kft ABC Data Distributie SRL ABC Data Germany GmbH Interest in the share capital Registered office Core business Prague (Czech Republic) Bratislava (Slovakia) Vilnius (Lithuania) Warsaw Budapest (Hungary) Bucharest (Romania) Munich (Germany) isource Warsaw Wholesale of computers, peripherals and software Wholesale of computers, peripherals and software Wholesale of computers, peripherals and software Wholesale of computers, peripherals and software Wholesale of computers, peripherals and software Wholesale of computers, peripherals and software Wholesale of computers, peripherals and software Wholesale of computers, peripherals and software s at 31 December 2014 and 31 December 2013, the share in the total number of votes held by the Company in subsidiaries was equal to the interest in their capitals. 6. Material values based on professional judgment and estimates 6.1. Professional judgment and uncertain estimations 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 99% 99% 100% 100% 100% n/d The following issues of the accounting principles (policy) were largely influenced by the accounting estimates and the professional judgment of the management: assessment of indications of asset impairment, estimation of future cash flows underlying impairment testing and provisioning. Presented below are the main assumptions concerning the future and other key uncertainties as at the end of the reporting period posing the risk of material adjustment of the carrying amount of assets and liabilities in the next financial year. 9

11 Impairment of assets Inventories ABC Data S.A. The company estimates an inventory write-down to net realizable value based on the analysis of the margin on goods sold in a month immediately following the balance sheet date and the markup of selling expenses. Writedown on slow-moving goods is also recognized (note 22). Receivables Impairment loss is recognized for uninsured overdue receivables, receivables from debtors in liquidation or bankruptcy and based on individual assessment of bad debt risk related to a given amount receivable (Note 23). Goodwill The Company has tested its goodwill for impairment. It required estimation of the value in use of the cash generating unit. The estimation of the value in use consists in determination of future cash flows generated by the cash generating unit and requires determination of a discount rate for the calculation of the current value of the cash flows (Note 18). Deferred tax asset The Company recognizes the deferred tax asset based on the assumption that it will generate tax profit sufficient to apply the asset. If the tax performance was to considerably deteriorate in the future, the above assumption might prove groundless (Note 13.3). Provisions Provisions for bonuses The Company recognizes provisions for sales-based cash bonuses for buyers. The amount of provisions results from the assessment whether conditions for bonus payment, specified in agreements and arrangements have been met. In particular, bonus amounts are estimated depending in relation to achieving or exceeding certain sales levels if a settlement period has not ended yet. Provisions for employee benefits The Company recognizes a provision for annual bonuses for employees and management board members, paid vacation and retirement benefits. Provisions for bonuses are recognized collectively for each employee group. Bonuses that depend on financial performance of the Company are calculated including the budget performance in a given period. Provision for annual leave is calculated based on the number of outstanding days off and individual remuneration and includes social insurance charges. Provision for retirement benefits is calculated by an actuary based on a model including the age structure of the staff, years in service, probability of retiring without changing the employer, remuneration level and time value of money (Notes 21.2 and 28.3). Other provisions The Company recognizes provisions for guarantee service costs (Note 27.2), open purchase orders (Note 27.3), expenses not invoiced by suppliers until the end of the reporting period and disputable amounts subject to litigation, including reprographic fees (Note 29). Fair value of financial instruments The fair value of financial instruments for which no active market exists is determined using appropriate measurement methods. Selecting appropriate methods and assumptions the Company applies professional judgment. The manner of determining the fair value of each financial instrument type is presented in Notes 28.4 and 33. Amortization / depreciation rates Amortization/depreciation rates are based on the expected useful life of property, plant and equipment and intangible assets. Every year the Company verifies the adopted useful lives based on the current estimates (Notes 10.2 and 10.3). 7. Basis for the preparation of the financial statements These financial statements have been prepared in accordance with the historical cost principle, except for financial instruments. 10

12 These financial statements have been presented in Polish zlotys (PLN) and all figures are in PLN thousand, unless stated otherwise. The financial statements have been drawn up under the going concern assumption. As at the date of approval of these financial statements, there were no circumstances that would indicate a threat to the Company s ability to continue as a going concern Statement of compliance These financial statements have been prepared in line with International Financial Reporting Standards ( IFRS ) and IFRS endorsed by the European Union. As at the date of approval of these financial statements for publication, considering the IFRS implementation process taking place in the EU and the activities undertaken by the Company, as regards the accounting principles applied by the Company, IFRS which came into force do not differ from those endorsed by the EU. IFRS consist of standards and interpretations approved by the International Accounting Standards Board ( IASB ) and the International Financial Reporting Interpretations Committee ( IFRIC ) Functional and presentation currency Polish zloty (PLN) was used as the functional and reporting currency for the financial statements prepared by the Company. 8. Changes in the accounting principles The accounting principles (policy) adopted for the preparation of these financial statements are consistent with those applied when preparing the financial statements of the Company for the year ended 31 December Standards and interpretations applied for the first time in 2014 The following amendments to the existing standards issued by the International Accounting Standards Board and adopted by the EU are effective as of 2014: IFRS 10 Consolidated Financial Statements, endorsed by the EU on 11 December 2012 (applicable to annual periods beginning on or after 1 January 2014); IFRS 11 Joint Arrangements, endorsed by the EU on 11 December 2012 (applicable to annual periods beginning on or after 1 January 2014); IFRS 12 Disclosure of Interests in Other Entities, endorsed by the EU on 11 December 2012 (applicable to annual periods beginning on or after 1 January 2014); IAS 27 (2011) Separate Financial Statements, endorsed by the EU on 11 December 2012 (applicable to annual periods beginning on or after 1 January 2014); IAS 28 (2011) Investments in Associates and Joint Ventures, endorsed by the EU on 11 December 2012 (applicable to annual periods beginning on or after 1 January 2014); Revised IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities Transition Guidance, endorsed by the EU on 4 April 2013 (applicable to annual periods beginning on or after 1 January 2014); Revised IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 27 Separate Financial Statements investment vehicles, endorsed by the EU on 20 November 2013 (applicable to annual periods beginning on or after 1 January 2014); Revised IAS 32 "Financial Instruments: Presentation Offsetting Financial Assets and Financial Liabilities, endorsed by the EU on 13 December 2012 (applicable to annual periods beginning on or after 1 January 2014); Revised IAS 36 Impairment of Assets Disclosure of Recoverable Amount of Non-Financial Assets, endorsed by the EU on 19 December 2013 (applicable to annual periods beginning on or after 1 January 2014); Amendments to IAS 39 Financial instruments: recognition and measurement novation of derivatives and continued hedge accounting, approved by the EU on 19 December 2013 (applicable to annual periods starting on or after 1 January 2014). 11

13 The aforementioned standards, interpretations and revised standards have not exerted a significant effect on the entity s accounting policy. 9. New standards and interpretations already published, but not yet effective Standards and interpretations published and approved by the EU, but not yet effective During approval of these financial statements the Company did not apply the following standards, amendments to standards and interpretations that had been published and approved for use in the EU, but which had not yet come into force: Amendments to various standards Amendments to IFRS ( ) - resulting from the annual quality improvement of IFRS (IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24 and IAS 38) primarily with a view to removing inconsistencies and clarifying wording, endorsed by the EU on 17 December 2014 (applicable to annual periods starting on or after 1 February 2015); Amendments to various standards Amendments to IFRS ( ) - resulting from the annual quality improvement of IFRS (IFRS 1, IFRS 3, IFRS 13 and IAS 40) primarily with a view to removing inconsistencies and clarifying wording, endorsed by the EU on 18 December 2014 (applicable to annual periods starting on or after 1 January 2015); Revised IAS 19 Employee Benefits Defined Benefit Plans: Employee Contributions, endorsed by the EU on 17 December 2014 (applicable to annual periods beginning on or after 1 February 2015); IFRIC 21 Levies endorsed by the EU on 13 June 2014 (applicable to annual periods beginning on or after 17 June 2014). The Management Board does not believe that the introduction of the above standards and interpretations could have a material impact on the accounting principles (policy) adopted by the Company. 10. Key accounting principles Translation of items denominated in foreign currencies Foreign currency transactions are translated into the Polish zloty by reference to the exchange rate effective as at the date of the transaction. As at the end of the reporting period, monetary assets and liabilities denominated in currencies other than the Polish zloty are translated into PLN by reference to the average exchange rate effective as at the end of the reporting period and determined for the currency by the National Bank of Poland. Exchange differences are recognized as operating revenue (expenses) or capitalized under assets, if so required by the accounting principles (policy). Nonmonetary assets and liabilities recognized at historical cost in a foreign currency are recognized at the historical exchange rate effective as at the date of the transaction. Non-monetary assets and liabilities recognized at fair value in a foreign currency are translated at the exchange rate applicable as at the date of fair value measurement. For currencies qualified to hedge accounting, forex differences on measurement, in the portion designated as effective hedge of future cash flows, are recognized in equity, and charged to sales revenue once the hedged transactions have been completed. Forex differences not designated as fully effective hedges are classified to other operating revenue or expenses of the reporting period. Exchange rates applied for the purpose of balance sheet measurement: Exchange rate as at EUR 4,2623 4,1472 USD 3,5072 3,0120 CZK 0,1537 0,1513 LTL 1,2344 1,2011 RON 0,9510 0, HUF 1,3538 1,

14 10.2. Property, plant and equipment ABC Data S.A. Property, plant and equipment is recognized at cost, less depreciation charges and impairment losses. The initial amount of fixed assets includes their cost increased by all costs directly related to their purchase and adaptation for use. The cost includes also cost of replacement of parts of machines and equipment when incurred, if the recognition criteria are met. Costs incurred after the date of commissioning, such as costs of maintenance and repair, are charged to profit or loss when incurred. Upon acquisition, fixed assets are divided into components of material value which may be assigned separate useful lives. Depreciation is calculated according to the straight line method over the estimated useful life of an asset: Type Period Machines and equipment 3-10 Years Other fixed assets 3-7 Years Vehicles 5-10 Years The residual value, useful life and depreciation method of assets are reviewed on an annual basis and adjusted, if necessary, effective as of the review date. Property, plant and equipment may be derecognized from the balance sheet upon disposal or if no economic benefits are expected from further use of the asset. Any gains or losses (calculated as a difference between possible net inflows from sales and the carrying amount of the item) resulting from derecognition of the asset from the balance sheet are charged to profit or loss for the period of the derecognition. Investments in progress are related to fixed assets under construction or assembly and are recognized at cost less impairment losses, if any. Investments in progress are not depreciated until their construction is completed and until they are commissioned Intangible assets Intangible assets acquired in a separate transaction or produced (if they meet the recognition criteria for the cost of research and development) are initially recognized at cost. The cost of intangible assets acquired in a business combination is equal to their fair value as at the date of the combination. Following the initial recognition, intangible assets are recognized at cost less amortization and impairment loss. Expenditures on internally generated intangible assets, except for capitalized R&D expenditures, are not capitalized but recognized in expenses of the period in which they were incurred. The Company is determining whether the useful life of intangible assets is limited or unlimited. Intangible assets with a limited useful life are amortized over their useful life and tested for impairment each time when there is any indication that the assets may be impaired. The period and method of amortization for intangible assets with limited useful life are verified at the end of each financial year. Changes in the expected useful life or the manner of consuming economic benefits arising from the given asset are recognized through a change in the amortization period or method, respectively, and treated as estimated value changes. Amortization charges on intangible assets with a limited useful life is charged to profit or loss under the category which corresponds to the given asset. Intangible assets with unlimited useful life or those which are not used, are annually tested for impairment, individually or on the level of a cash-generating unit. Useful lives are reviewed on an annual basis and adjusted as of the review date, if necessary. R&D expenses R&D expenses are charged to profit or loss when they are incurred. Expenditures on development carried out in a given project are carried forward to the following period, if they are considered recoverable in future. Following initial recognition of expenditures on research and development, a historical cost basis is applied. It requires that assets be recognized at cost less accumulated amortization and impairment losses. Capitalized expenditures are amortized over the expected period of obtaining revenue from the sale of the project. 13

15 Principles adopted to intangible assets owned by the Company: Databases, Internet Computer software domains Development works Goodwill Useful lives 2 - years 4-5 years 5-10 years nieokreślony Amortization method straight-line straight-line straight-line unamortized Internally manufactured or acquired Impairment test Gains or losses resulting from derecognition of intangible assets are measured as a difference between net inflows from sales and the carrying amount of the asset and are charged to profit or loss at the time of the derecognition Lease Company as a lessee Finance leases transferring basically the entire risks and benefits of holding the lease object to the Company are recognized in the balance sheet as at the lease commencement date at the lower of the following two amounts: fair value of a leased asset or current value of minimum lease payments. Lease payments are split between financial expenses and decrease in the balance of lease liabilities in order to obtain a fixed interest rate on the outstanding liability. Financial expenses are charged to profit or loss, unless the capitalization requirements are met. Fixed assets used based on finance leases are depreciated over the shorter of the following two periods: estimated useful life or lease term. Leases whereby the lessor retains substantially all the risk and rewards of ownership of an asset are classified as operating leases. Operating lease payments and subsequent lease rent are charged to operating expenses in profit or loss using the straight line method over the lease term. Contingent lease fees are charged to expenses in the period when they become due Impairment of Non-financial Non-current Assets Acquired Acquired Manufactured Acquired Annual assessment of indication of impairment Annual assessment of indication of impairment Annual assessment of indication of impairment Annual impairment test As at the end of each reporting period the Company assesses whether there is any indication that non-financial non-current assets may be impaired. If there is any indication that they may be impaired or if an annual impairment test is necessary, the Company estimates the recoverable amount of a given asset or a cash-generating unit which the asset belongs to. The recoverable amount of an asset or a cash-generating unit corresponds to the fair value less costs to sell of the asset or cash-generating unit, or its value in use, whichever is higher. The recoverable amount is determined for individual assets, unless a given asset does not generate cash inflows which are largely independent of those generated by other assets or group of assets. If the carrying amount of an asset is higher that its recoverable amount, the asset has been impaired and is written down to a relevant recoverable amount. At the time of estimation of the value in use, projected cash flows are discounted to their present value using the discount rate before the effects of tax, reflecting the current market valuation of the time value of money and the risk characteristic of a given asset. Impairment losses of assets used in the continuing operations are charged to expenses which correspond to the function of the asset which has been impaired. As at the end of each reporting period the Company assesses whether there is any indication that an impairment loss recognized for a given asset in the prior periods is redundant or whether it should be lowered. If there is such indication, the Company estimates the recoverable amount of the asset. Prior impairment loss is reversed only when the estimations used to determine the recoverable amount of the asset have changed since the last impairment loss. If so, the carrying amount of the asset is increased to its recoverable amount. The increased amount cannot exceed the carrying amount of the asset which would have been determined (including amortization), had the Company not recognized an impairment loss on the asset. The reversal of an impairment loss of the asset is immediately recognized as revenue. Upon reversal of an impairment loss, in subsequent periods the amortization charges on a given asset are adjusted so that during the remaining part of the useful life of the asset its verified carrying amount reduced by the residual amount can be systematically written down. 14

16 10.6. Shares in subsidiaries Shares in subsidiaries are recognized at historical cost including impairment Financial assets Financial assets are divided into the following classes: Financial assets held to maturity; Financial assets measured at fair value through profit or loss; Loans and receivables; Financial assets available for sale. ABC Data S.A. Financial assets held to maturity are financial assets quoted in an active market which are not derivatives, with determined or determinable payments and defined maturity, which the Company intends to and is able to hold to maturity, other than: measured at fair value through profit or loss on initial recognition; available for sale; qualifying as loans and receivables. Financial assets held to maturity are measured at depreciated cost using the effective interest method. Financial assets held to maturity are classified as long-term assets, if their maturity exceeds 12 months of the end of the reporting period. A financial asset measured at fair value through profit or loss has to meet one of the following criteria: a) Be classified as held for trading. A financial asset is held for trading, if: It has been acquired for the purpose of selling in the short term; It is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; It is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument); b) Was classified to the category on initial recognition in line with IAS 39. Financial assets measured at fair value through profit or loss are measured at fair value including their market value as at the end of the reporting period without transaction costs. Changes in the value of financial instruments are recognized in the statement of comprehensive income as financial revenue (advantageous net fair value changes) or expenses (adverse net fair value changes). For contracts with one or more embedded derivatives, the entire contract may be classified as financial asset measured at fair value through profit or loss. This does not apply to embedded derivatives which have no material impact on the cash flows from contracts or when it is obvious without an analysis or after a brief analysis that should a similar hybrid instrument first be examined, the separation of an embedded derivative would be prohibited. At initial recognition, financial assets may be designated as measured at fair value through profit or loss, if the following criteria are met: (i) such classification eliminates or significantly reduces a measurement or recognition inconsistency (accounting mismatch); or (ii) assets belong to a group of financial assets managed and evaluated based on the fair value in line with the documented risk management strategy; or (iii) financial assets include embedded derivatives that should be recognized separately. As at 31 December 2014 this category of assets did not occur (as at 31 December 2013, forward contracts were recognized). Loans and receivables are financial assets not classified as derivatives, with determined or determinable payments, not listed in an active market. They are classified as current assets, if their maturity does not exceed 12 months of the end of the reporting period. Originated loans and receivables with maturity above 12 months of the end of the reporting period are classified as non-current assets. Financial assets available for sale are those not classified as derivatives, designed as available for sale, or not classified as any of the three former classes. Financial assets available for sale are recognized at fair value, increased by transaction costs which may be directly attributed to the acquisition or issue of a financial asset. If there are no listings available in an active market and there is no possibility to reliably determine their fair value by alternative methods, financial assets available for sale are measured at cost less impairment loss. Positive and negative differences between the fair value of assets available for sale (if there is a market price determined in an active regulated market or if the fair value may be determined in a different reliable manner) and the cost, less 15

17 deferred tax, are charged to other comprehensive income. Depletion of assets available for sale resulting from impairment is charged to financial expenses. Acquisition and disposal of financial assets are recognized as at the transaction date. On initial recognition, a financial asset is measured at fair value, for assets not classified as measured at fair value through profit or loss, increased by transactions costs directly attributable to the acquisition. A financial instrument is derecognized from the balance sheet when the Company has lost control of contractual rights contained in the instrument; usually, this happens when an instrument is sold or when all cash flows assigned to the instrument are transferred to an independent third party Impairment of financial assets As at the end of each reporting period, the Company assesses whether there is any objective indication that financial assets or a group of financial assets may be impaired Assets measured at amortized cost If there is any objective indication that a loss has been incurred due to impairment of loans and receivables measured at amortized cost, the impairment loss is equal to the difference between the carrying amount of financial assets and the present value of estimated future cash flows (excluding future losses due to bad debts which have not yet been incurred), discounted using the initial (i.e. determined on initial recognition) effective interest rate. The carrying amount of an asset is lowered by valuation allowances. The loss is charged to profit or loss. The Company first assesses whether there is any objective indication of impairment of individual financial assets which individually are material as well as those which individually are not material. If the analysis shows that there is no objective indication that an individually evaluated financial asset may be impaired, irrespective of whether it is material or not, the Company includes the asset in the group of financial assets with a similar credit risk and jointly determines their impairment. Assets which are individually tested for impairment and for which an impairment loss has been recognized or it has been determined that the previous one will not change, are not included in the general test of assets for impairment. If the impairment loss decreased in the subsequent period and the decrease can be objectively related to an event taking place after the loss, the prior loss is reversed. Subsequent reversal of an impairment loss is charged to profit or loss to the extent in which as at the date of reversal, the carrying amount of the asset does not exceed its amortized cost Financial assets carried at cost If there is objective indication of impairment of an unquoted equity instrument which is not recognized at fair value as its fair value cannot be reliably determined, or of a derivative which is related to and has to be settled by delivery of such unquoted equity instrument, the impairment loss is determined as a difference between the carrying amount of a financial asset and present value of estimated future cash flows discounted using the current market yield for similar assets Available-for-sale financial assets If there is any objective indication that a financial asset available for sale may be impaired, the difference between the cost of the asset (less any repayment of principal and amortization) and the present fair value, less any impairment losses previously charged to profit or loss, is derecognized from the equity and reclassified to profit or loss. Reversed impairment loss on equity instruments classified as available for sale cannot be charged to profit or loss. If, in the subsequent period the fair value of a debt instrument available for sale increases and the increase can be objectively linked to an event after the impairment loss was charged to profit or loss, the amount of the reversed impairment loss is charged to profit or loss Derivative financial instruments and hedges Derivatives used for hedging risks related to fluctuations in exchange rates are mainly currency forwards. Such derivative financial instruments are measured at fair value. Derivatives are disclosed as assets if their value is positive or as liabilities if their value if negative. Gains and losses on the changes in the fair value of derivatives which do not qualify for hedge accounting are charged to net profit or loss for the financial year. 16

18 The fair value of forwards is determined by reference to the current forward rates applied to contracts with similar maturity. In hedge accounting the following classification is applied: Fair value hedge, hedging the exposure to changes in the fair value of an item of assets or liabilities; or Cash flow hedge, hedging the exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or liability or a forecast transaction; or Hedges of a net investment in a foreign operation. Currency risk hedges of a firm commitment are settled as a cash flow hedge. At the inception of the hedge the Company formally documents the hedging relationship, the risk management objective and strategy for undertaking the hedge. That documentation should include identification of the hedging instrument, hedged item or transaction, nature of the risk hedged and an assessment of the hedging instrument s effectiveness in offsetting the exposure to changes in the fair value of the hedged item or cash flows attributable to the risk hedged. The hedge is expected to be highly effective in offsetting changes in the fair value or cash flows. The hedge s effectiveness is assessed on an on-going basis to determine if the hedge has been highly effective in all reporting periods for which it had been established Cash flow hedges Cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction and could affect profit or loss. A portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognized in other comprehensive income and the ineffective portion is recognized in profit or loss. If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial liability, the associated gains or losses that were recognized directly in other comprehensive income and accumulated in equity are reclassified into profit or loss in the same period or periods when the asset acquired or liability assumed affects profit or loss. If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or a non-financial liability, or a forecast transaction for a non-financial asset or non-financial liability becomes a firm commitment for which fair value hedge accounting is applied, then the Company reclassifies the associated gains and losses that were recognized other comprehensive income from equity to profit or loss in the same period or periods when the asset acquired or liability assumed affects profit or loss. Gains and losses on the changes in the fair value of derivatives, which do not qualify for hedge accounting are charged directly to profit or loss for the financial year. The Company no longer applies hedge accounting if the hedging instrument expires, is sold, terminated or exercised or it no longer meets the criteria of hedge accounting allowing for the application of special hedge accounting principles. In such a case, the total gain on loss on a hedging instrument, which was initially recognized in other comprehensive income and accumulated in equity, is still recognized in equity until the forecast transaction occurs. If the forecast transaction is no longer expected to occur, the total net gain or loss recognized in equity is charged to net profit or loss for the current period Recognition in the cash flow statement Balance sheet changes in derivatives and changes in the balance of other revaluation reserves related to hedge accounting are presented in operating cash flows as "Other" Inventories Inventories are measured at the lower of: cost and the net realizable value. The costs of an inventories item includes all costs of purchase, processing and other expenses incurred in bringing the inventories to their present location and condition both with respect to the current and prior year are recognized in the following manner: Materials at cost based on the weighted average method Goods at cost based on the weighted average method 17

19 Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale Trade and other receivables Trade receivables are recognized at the amounts initially disclosed in the invoices, considering the allowance for doubtful debts. The allowance is estimated when the recovery of the full amount receivable becomes improbable. If the impact of time value of money is material, the amount receivable is determined through discounting of projected future cash flows to their current value with the gross discount rate reflecting current time value of money in the market. If the discounting method has been applied, the increase in the amount receivable due to passage of time is recognized as financial revenue. Other receivables include in particular advance payments related to future purchases of property, plant and equipment, intangible assets and inventories. Advance payments are presented in line with the assets they refer to, as current or non-current assets, respectively. As non-cash assets, advance payments are not discounted. Liabilities to the state budget are presented as other non-financial assets, except for corporate income tax liabilities which are a separate item in the balance sheet Cash and cash equivalents Cash and short-term deposits recognized in the balance sheet include cash at bank and in hand and short-term deposits with initial maturity up to three months. The balance of cash and cash equivalents recognized in the cash flow statement consists of the above cash and cash equivalent items Interest-bearing bank credit facilities, loans and debt securities At initial recognition, all bank credit facilities, loans and debt securities are recognized at the fair value less costs related to obtaining a credit facility or a loan. Following the initial recognition interest-bearing loans, credit facilities and debt securities are measured at amortized cost using the effective interest method. When determining the amortized cost, loan or credit facility obtaining costs as well as discounts or premiums awarded in relation to the liability are included. Revenue and expenses are charged to profit or loss at the time of derecognition of the liability from the balance sheet as well as under the profit/loss from the settlement using the effective interest method Trade and other liabilities Short-term trade liabilities are recognized at the amount payable. Financial liabilities measured at fair value through profit or loss include financial liabilities held for trading and those initially classified as measured at fair value through profit or loss. Financial liabilities are classified as held for trading, if they have been acquired for the purpose of resale in near future. Derivatives, including separated embedded instruments, are also classified as held for trading, unless they are classified as effective hedging instruments. At initial recognition, financial liabilities may be classified as measured at fair value through profit or loss, if the following criteria are met: (i) such classification eliminates or significantly reduces inconsistency in treatment, when both measurement and the principles of recognizing gains or losses are subject to separate regulations; (ii) or when these liabilities belong to a group of financial liabilities managed and evaluated in accordance with their fair value in line with a documented risk management strategy; (iii) or when financial liabilities include embedded derivatives that should be recognized separately. As at 31 December 2014 FX forwards and futures were disclosed in this asset category (as at 31 December 2013: zero). Financial liabilities measured at fair value through profit or loss are measured at fair value including their market value as at the end of the reporting period without transaction costs. Changes in the fair value of these instruments are charged to profit or loss as financial expense or revenue. Financial liabilities not classified as financial instruments measured at fair value through profit or loss are measured at depreciated costs with application of the effective interest rate method. The Company excludes a liability from its balance sheet upon its expiration, i.e. when the obligation defined in the agreement has been fulfilled, cancelled or has expired. The existing debt instrument being replaced by one with basically different terms performed by the same entities is recognized as expiration of the initial financial 18