Note 2

The consolidated financial statements for the 2019 financial periods have been prepared in compliance with the International Financial Reporting Standards (IFRS), adhering to the IAS and IFRS standards and SIC and IFRIC interpretations valid on 31 December 2019 for application in the EU. “International financial reporting standards” refers to the standards approved for application in the Finnish Accounting Act and the provisions laid down pursuant to the Act in accordance with the procedures laid down in Regulation (EC) No 1606/2002 of the European Parliament and of the Council on the application of international accounting standards, as well as the interpretations of these standards. The notes to the consolidated financial statements also conform to the Finnish accounting and company legislation supplementing the IFRS standards.

As of the start of the financial period, the Group has adopted a new standard, IFRS 16 Leases. The standard replaces IAS 17 Leases and the related interpretations. According to IFRS 16, a lessee recognizes a use right asset relating to the asset on the balance sheet, as well as a lease liability describing its future lease payment liability. There are two forms of exemption for recognition onto the balance sheet for short-term leases and for lease agreements of minor value.

In the adoption of IFRS 16, iLOQ Group has applied the simplified accumulated impact method according to which comparative data has not been adjusted. The most significant use right assets of the Group are the Espoo and Oulu office premises and vehicles. According to the exemption allowed by the Standard, minor assets have not been recognized on the balance sheet. Furthermore, immediate expenditure at the initial phase of the agreement has not been recognised under use right assets at the moment of transfer on 1 January 2019. One pre-defined discount rate has been applied to lease agreements of a fairly similar type.

Reconciliation of lease liabilities on 31 December 2018 and lease agreement liabilities recognized on 1 January 2019 is presented in the table below:

The impact of a change in lease liabilities to the current value

In addition to the impact on the balance sheet, IFRS 16 has also changed the nature of expenses recognized in the profit and loss account, because instead of lease expenses, depreciation and interest paid on lease liabilities are recognized in the profit and loss account.  As regards the financial period 2019, the lease agreements in force have increased depreciation by approximately EUR 0.93 million and financial expenses by approximately EUR 0,05 million. Correspondingly, lease expenses decreased by approximately EUR 0.97 million.

The consolidated financial statements for the 2019 financial periods combine the figures for the parent company with the figures for the subsidiaries (jointly referred to as the “Group”). The Group consists of the parent company and seven subsidiaries.