Consolidated statement of financial position 10. Consolidated statement of profit and other comprehensive income 11. Consolidated statement of changes in capital 12. Consolidated statement of cash flows 13. Notes to the consolidated financial statements 14 - 67. The accompanying notes are an integral part of these consolidated financial statements 9. Item , which will not be reclassified to profit or loss later:. An item that can subsequently be reclassified to profit or loss:. Loss) profit of the year attributable to:. Loss) earnings per share (EPS). Bawan Company ("Bawan" or the "Company") is a Saudi joint stock company registered in the Kingdom of Saudi Arabia under commercial registration number dated Shawwal 9, 1400H (corresponding to 20 August 1980G).
ACTIVITIES (Continued)
SIGNIFICANT ACCOUNTING POLICIES
Profit or loss and any component of other comprehensive income are allocated to the owners of the Company and to the minority interests. When the relevant cash-generating unit is sold, the attributable amount of goodwill is included in the determination of the profit or loss on the sale.
SIGNIFICANT ACCOUNTING POLICIES (continued) Business combinations
Revenues are valued based on the compensation to which the Group expects to be entitled in a contract with a customer. The Group has not entered into any repayment obligations given the historically low level of returns in the past.
SIGNIFICANT ACCOUNTING POLICIES (Continued) Revenue recognition after January 1, 2018 (continued)
Foreign currency transactions are converted into Saudi Riyals at the exchange rates prevailing at the time of the transaction. Components of the equity account are translated at the exchange rates applicable on the date of origin of the related items.
SIGNIFICANT ACCOUNTING POLICIES (Continued) Foreign currency translation (continued)
An item of property, plant and equipment is no longer recognized in the balance sheet upon sale or when no future economic benefits are expected to result from the continued use of the asset. An intangible asset is derecognized upon disposal, or when no future economic benefits are expected to result from the continued use of the asset.
SIGNIFICANT ACCOUNTING POLICIES (Continued) Impairment of tangible and intangible assets
Financial assets and financial liabilities are recognized when the Group becomes a party to the contractual terms of the instruments. Transaction costs that are directly attributable to the acquisition of financial assets or financial liabilities at fair value with changes in value recognized in the profit and loss account are immediately recognized in the profit and loss account. All regular purchases or sales of financial assets are recognized on a transaction date basis and no longer included in the balance sheet.
Financial assets are classified at FVTPL when the financial asset (i) is a contingent consideration payable by an acquirer as part of a business combination to which IFRS 3 applies, (ii) is held for trading, or (iii) it is referred to as FVTPL.
SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial instruments prior to January 1, 2018 (continued)
A cumulative gain or loss recognized in other comprehensive income is allocated between the part that is still recognized and the part that is no longer recognized based on the relative fair values of those parts. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Group's own equity instruments. The difference between the carrying amount of the financial liability that has been derecognised and the consideration paid and payable is recognized in profit or loss.
Financial assets and financial liabilities are recognized in the group's statement of financial position when the group becomes a party to the instrument's contractual provisions.
SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial instruments after January 1, 2018 (continued)
Notwithstanding the above, the Group assumes that the credit risk for a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date. The debtor has a strong capacity to meet its contractual cash flow obligations in the near term, and. Adverse changes in economic and business conditions over the longer term may, but not necessarily, reduce the borrower's ability to meet its contractual cash flow obligations.
The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in credit risk and revises them as appropriate to ensure that the criteria are capable of identifying significant increase in credit risk before the amount becomes past due.
SIGNIFICANT ACCOUNTING POLICIES (continued) Financial instruments after January 1, 2018 (continued)
Debt and equity instruments are classified as either financial liabilities or equity in accordance with the content of the contractual arrangements and the definitions of a financial liability and an equity instrument. All financial liabilities are subsequently measured at amortized cost using the effective interest method or at FVTPL. Financial liabilities that are not (i) contingent consideration from an acquiring company in a business combination, (ii) held for trading or (iii) classified as FVTPL are subsequently measured at amortized cost using the effective interest method.
For financial liabilities that are denominated in a foreign currency and are measured at amortized cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortized cost of the instruments and are recognized in profit or loss.
SIGNIFICANT ACCOUNTING POLICIES (Continued) Borrowing costs
IFRS issued but not yet effective
The interpretation addresses the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12. Amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures (2011) relating to the treatment of the sale or contribution of assets from an investor to its associate or joint venture. Amendments to IAS 28 Investment in Associates and Joint Ventures relating to long-term interests in associates and joint ventures.
These amendments clarify that an entity applies IFRS 9 Financial Instruments to long-term interests in an associate or joint venture that are part of the net investment in the associate or joint venture, but to which the equity method does not apply.
APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (Continued)
Key sources of estimation uncertainty
An assessment of the useful lives and residual values of tangible fixed assets and intangible assets is made for purposes of calculating depreciation and amortization respectively. Changes to the original estimates may be required during the life of the contract and these estimates are reviewed on a regular periodic basis. Obligations for defined employee benefits are determined using an actuarial valuation which requires valuations of various inputs to be made.
Lease liabilities are determined by calculating the present value of the lease payments using an appropriate discount rate.
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued)
- Key sources of estimation uncertainty (continued) Impairment of goodwill
REVENUE
SELLING AND DISTRIBUTION EXPENSES
During the current year, other income mainly consists of the sale of scrap and material worth SR 4.44 million and the reversal of excess provisions over inventories worth SR 1.66 million. During the previous year, other income mainly included the sale of scrap and materials amounting to SR 5.21 million, a gain on the sale of a subsidiary of SR 3.23 million and a gain on the sale of tangible assets of SR 1.12 million.
FINANCE CHARGES
ZAKAT AND INCOME TAX
ZAKAT AND INCOME TAX (Continued) Income tax rate reconciliation
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT (Continued)
RIGHT-OF-USE ASSETS
GOODWILL
The earnings before interest, zakat and tax, depreciation and amortization (“EBITDA”) margin from 2014 to 2018 averaged 8%. Management considers that the assumptions used are reasonable. Substantial changes with a negative effect on Utec-Saudi have occurred in the local economic and market conditions, which led to the recognition of goodwill impairment losses of SR 169.77 million. The sensitivity analyzes below are determined on the basis of reasonably possible changes to the respective assumptions that occur at the end of the accounting period, while all other assumptions are kept constant. A positive amount represents an increase in the calculation of the value in use, while a negative amount represents a decrease in the calculation of the value in use. The management estimates that changes in the discount rate may cause the accounting value of the cash-flow generating units to exceed their recoverable amount. If the discount rate is lowered by 3.76 per cent 31 December 2017: increased by 0.70%), recovery values approximately equal to accounting values.
OTHER INTANGIBLE ASSETS
TRADE AND OTHER RECEIVABLES
TRADE AND OTHER RECEIVABLES (Continued)
The table below shows the movement in the lifetime ECL that has been recognized for trade receivables in accordance with the simplified approach set out in IFRS 9. The change in loss provision during the year was mainly due to the change in credit risks.
CONTRACT ASSETS
ISSUED CAPITAL
STATUTORY RESERVE
AMOUNTS DUE TO BANKS AND LOANS
- Loans
- Analysis of change in amounts due to banks and loans for the year ended December 31, 2018 is as follows
LEASE LIABILITIES
EMPLOYEE DEFINED BENEFIT LIABILITIES
CONTRACT LIABILITIES
RELATED PARTY INFORMATION
LEASES (GROUP AS A LESSEE)
CAPITAL COMMITMENTS AND CONTINGENCIES
- Segment revenues and results
The company's directors have chosen to organize the group around differences in the internal reporting structure. The majority of the group's operating assets and main activity markets are located in the Kingdom of Saudi Arabia. The write-downs of SR 169.77 million respectively. and SR 19.40 million. regarding goodwill and property, plant and equipment can be attributed to the electrical segment.
There have been significant changes with a negative impact on the electrical segment in the local economic and market conditions, which have led to the recognition of write-downs of goodwill and property, plant and equipment.
SUBSIDIARIES
- Composition of the group
SUBSIDIARIES (Continued)
- Details of non-wholly owned subsidiaries that have material non-controlling interests (continued) The table below shows details of non-wholly-owned subsidiaries of the Group that have material non-
- Details of non-wholly owned subsidiaries that have material non-controlling interests (continued) Both subsidiaries detailed above are incorporated and operate in Saudi Arabia
- Details of non-wholly owned subsidiaries that have material non-controlling interests (continued) December
However, based on the contractual agreements between Utec-Saudi and other investors, the group has the majority of the voting rights. Therefore, the group's directors concluded that the group has control over Utec–Algeriet and thus Utec–. Summary consolidated financial information relating to each of the Group's subsidiaries that have significant minority interests is set out below.
The Group is exposed to interest rate risk because entities in the Group borrow funds at floating interest rates.
FINANCIAL INSTRUMENTS (Continued)
Credit risk refers to the risk that a counterparty will fail to meet its contractual obligations, resulting in a financial loss to the Group. Potential concentrations of credit risk consist primarily of trade receivables, related party payables and short-term cash investments. Details of how the credit risk relating to trade receivables is managed are explained in note 18.
The Group does not hold any security to cover the credit risk associated with its financial assets.
RETIREMENT BENEFIT INFORMATION
Amounts owed to related parties are monitored and, if necessary, provisions are made for possible uncollectible amounts. The directors believe that the carrying amounts of the financial instruments shown in the consolidated statement of financial position approximate their fair values.
NET CASH INFLOW ON DISPOSAL OF SUBSIDIARY
- Consideration received
NET CASH INFLOW ON DISPOSAL OF SUBSIDIARY (Continued) 2 Analysis of assets and liabilities over which control was lost
- Gain on disposal of subsidiary
The identifiable acquired assets and liabilities taken over by Arnon amounted to SR 562.69 million respectively. and SR 417.15 million. in accordance with the last available unaudited financial statements for the year ended 31 December 2018. The initial accounting for the acquisition of Arnon is incomplete at the time the financial statements were approved for publication. The Company has made an application to the General Authority for Competition (“GAC”) to obtain a non-objection from the GAC regarding the acquisition of Arnon as required by the Competition Act and the application was pending at the time these consolidated accounts were approved for issuance.
No other events occurred after the reporting date and prior to the issue of these consolidated financial statements that require adjustment to, or disclosure in, these consolidated financial statements.
DIVIDENDS
With effect from 1 January 2019, the Group acquired 100% of the issued share capital of Arnon Plastic Industries Company Limited (“Arnon”) for a total consideration of SR 191.00 million, thereby gaining control of Arnon. Arnon is engaged in the manufacture of flexible packaging and insulation products serving the building materials and food packaging industries.
APPROVAL OF CONSOLIDATED FINANCIAL STATEMENTS These consolidated financial statements were approved on March 18, 2019G
