Bahri Annual Report- 2018

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Annual Report 2018

Notes to the consolidated financial statements – continued For the year ended 31 December 2018

Notes to the consolidated financial statements – continued For the year ended 31 December 2018 Change in Significant accounting judgments, estimates and assumptions Principles of IFRS 15 are applied by identifying each specified distinct goods or services promised to the customer in the contract and evaluating whether the entity under the consideration obtains control of the specified good or service before it is transferred to the customer. This assessment requires significant judgement based on specific facts and circumstances. Further, based on management’s judgement, the Group applies output method (i.e. based on number of days elapsed as compared to total number of days in each voyage for a contract) to measure the progress of revenue. In certain revenue arrangements, the Group is entitled to certain kind of variable benefits or obliged to pay for certain obligations (variable or conditional in nature). While determining the transaction price, the management applies judgement in estimating the variable consideration and in constraining the same. B. IFRS 9 Financial Instruments IFRS 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This standard replaces IAS 39 Financial Instruments: Recognition and Measurement. i- Classification and measurement of financial assets and financial liabilities IFRS 9 largely retains the existing requirements in IAS 39 for the classification and measurement of financial liabilities. However, it eliminates the previous IAS 39 categories for financial assets of held to maturity, loans and receivables and available for sale. The adoption of IFRS 9 has not had a significant effect on the Group’s accounting policies related to financial liabilities and derivative financial instruments. The impact of IFRS 9 on the classification and measurement of financial assets is set out below. Under IFRS 9, on initial recognition, a financial asset is classified as measured at: amortised cost; FVOCI – debt investment; FVOCI – equity investment; or FVTPL. The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. Derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never separated. Instead, the hybrid financial instrument as a whole is assessed for classification. A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL: • it is held within a business model whose objective is to hold assets to collect contractual cash flows; and • its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL: • it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and • its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis. All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial

4. SIGNIFICANT ACCOUNTING POLICIES

4.1. Changes in significant accounting policies

The Group has adopted IFRS 15 Revenue from Contracts with Customers (see A below) and IFRS 9 Financial Instruments (see B below) from 1 January 2018. Other new standards are effective from 1 January 2018, but they do not have a material effect on the Group’s consolidated financial statements. Except as described below, the accounting policies applied in these consolidated financial statements are the same as those applied in the Group’s consolidated financial statements for the year ended 31 December 2017. The effect of applying these standards is illustrated in point (A) and (B) below. A. IFRS 15 Revenue from Contracts with Customers IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaced IAS 18 Revenue, and related interpretations. The details of the new significant accounting policies and the nature of the changes to previous accounting policies in relation to the Group’s various services are set out below. Under IFRS 15, revenue is recognised when a customer obtains control of the services. Determining the timing of the transfer of control – at a point in time or over time – requires judgement. IFRS 15 did not have a significant impact on the consolidated financial statements.

Nature, timing of satisfaction of performance obligations, significant payment terms In case of time charter arrangement, the Group measures its progress towards complete satisfaction of the performance obligation using a time-based measure. Further, because the Group bills a fixed amount for each day of service provided, the Group has a right to invoice the customer in the amount that corresponds directly with the value of the Group’s performance completed to date in accordance with paragraph B16 of IFRS 15. In case of voyage charter arrangement, the Group measures the progress based on number of days elapsed as compared to total number of days expected in a voyage for each contract. Further, the duration of contract executed for each voyage is generally less than year. The Group applies the practical expedient in paragraph 121 (a) of IFRS 15 and does not disclose the information about remaining performance obligations that have original expected durations of one year or less. Logistics revenue excluding liner primarily comprises order fulfilment and transportation services. Under IFRS 15, logistics revenue should be recognised at the point in time when the services are rendered to the customer.

Previous accounting policy

Type of service

Revenue from chartering and other attributable activities are recorded when services are rendered over the duration of the related contractual services.

Charter arrangement

Revenue is recognized using the percent- age-of-completion method as per IAS 18. This percentage of completion / transport progress is determined based on length of estimated voyage. Under the above method, voyages are calculated on a discharge-to-discharge basis. No revenue is recognized if there are significant uncertainties regarding recovery of the consideration due and associated costs. Revenues are recognized when earned over the agreed-upon year of the contract, voyage and services. The Group recognised the logistics revenue at the fair value of consideration received or receivable for goods and services and was recognised upon completion of the services.

Voyage charter

Logistics revenue

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