5. Effects of new accounting standards

Revised and new IASB/IFRIC standards and interpretations that were mandatory for the first time in the financial year under review.

Standard

Content and significance

Amendments to 40 Transfers of Property

The IASB published amendments to IAS 40 Investment Property in December 2016. The amendments clarify transfers of investment property to or from the portfolio in the case of a change of use. They are expected to be applicable for financial years beginning on or after 1 January 2018. Earlier adoption is permitted, provided they are first enacted in EU legislation. First-time application had no impact on the consolidated financial statements.

Amendments to 2 Classification and Measurement of Share-based Payment Transactions

The IASB published amendments to IFRS 2 Share-based Payment in June 2016. The amendments relate to the inclusion of vesting conditions in the measurement of cash-settled share-based payment transactions and amendments relating to the classification of share-based payments that provide for net settlement for taxes to be withheld. The standard also deals with the accounting treatment of the amendments. The amendments were adopted into EU law with Commission Regulation (EU) 2018/289 on 26 February 2018. These amendments apply to financial years beginning on or after 1 January 2018. Application had no impact on the consolidated financial statements.

IFRS 9 Financial Instruments

9 Financial Instruments was finalised by the IASB in July 2014. This standard aims to simplify the requirements for reporting financial instruments in the balance sheet. IFRS 9 amends the reporting standards for the classification and measurement of financial assets, impairments of financial assets and the reporting of hedging relationships. The amendments were enacted in EU law with Commission Regulation (EU) 2016/2067 dated 22 November 2016. The amendments apply to financial years beginning on or after 1 January 2018. In accordance with the transition guidance of IFRS 9, HHLA declined to adjust the prior-year figures and recognised the transition effects on a cumulative basis in reserves as of 1 January 2018.

The main financial assets reported by the Group include cash, cash equivalents, trade receivables and receivables from related parties (public-sector companies). Cash and cash equivalents are generally only invested with counterparties with very good credit ratings. The actual default risk associated with these is very low, see Note 47. The new impairment model does not have any material impact on the financial assets.

The effects arising from first-time application of IFRS 9 are shown at the end of this table.

IFRS 15 Revenue from Contracts with Customers

The IASB adopted the standard IFRS 15 Revenue from Contracts with Customers in May 2014. This stipulates the amount and timing of reporting and what information must be disclosed. It replaces the existing guidelines on revenue recognition, including IAS 18 Revenue, 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes. The EU enacted this standard in its legislation with Commission Regulation (EU) 2016/1905 dated 22 September 2016. Adoption is mandatory for financial years beginning on or after 1 January 2018. There are no effects on the opening balance sheet values as of 1 January 2018 as a result of first-time application of IFRS 15. Comparative figures from the prior-year period have not been restated. With its first-time application, revenue from customer-specific ancillary transport services is no longer recognised with the corresponding expenses in the income statement, a change from the prior-year period. This approach resulted in a reduction of € 1,348 thousand in revenue and cost of materials in the 2018 financial year. Without the offsetting described in the reporting year, revenue would amount to € 1,292,484 thousand (previous year: € 1,251,806 thousand) and cost of materials would amount to € 368,451 thousand (previous year: € 370,491 thousand). Furthermore, there were no differences between the revenue recognised pursuant to IFRS 15 and the revenue recognised pursuant to IAS 18 and IAS 11.

HHLA has no contract assets. The contractual liabilities identified play a subordinate role and are not shown separately.

Overall, the effects on the Group’s earnings, net assets and financial position are immaterial.

Amendments to IFRS 15 Clarifications

The final amendments to IFRS 15 were published by the IASB in April 2016. For the most part, the amendments to this standard are clarifications and additional simplifications for the transition to IFRS 15. The amendments were enacted in EU law with Commission Regulation (EU) 2017/1987 dated 31 October 2017. The effective date is 1 January 2018.

IFRIC 22 Foreign Currency Transactions and Advance Consideration

In December 2016, the IASB published its interpretation IFRIC 22 clarifying at what point in time the exchange rate should be established for translating foreign currency transactions containing incoming or outgoing payments on account. IFRIC 22 is applicable as of 1 January 2018. Early adoption is permitted. The impact on HHLA’s consolidated financial statements is immaterial.

Improvements to IFRS 2014–2016 Cycle

The 2014–2016 annual round of improvements to IFRS was published by the IASB in December 2016. Three standards are affected in total. The amendment to IAS 28 Investments in Associates and Joint Ventures clarifies that a different valuation option can be used for each interest in a joint venture or an associated company.

Temporary provisions were deleted from IFRS 1 First-time Adoption of International Financial Reporting Standards. The amendments to IFRS 12 Investment Entities clarify that the regulations contained in the standard also apply to interests covered by IFRS 5. The amendments were enacted in EU law with Commission Regulation (EU) 2018/182 dated 7 February 2018. The effective date for IFRS 1 and IAS 28 is 1 January 2018. The amendments had no effect on the present consolidated financial statements.

The following table shows the reconciliation of financial assets from IAS 39 to IFRS 9:

Reconciliation of carrying amounts from IAS 39 to IFRS 9

in € thousand

 

Carrying amounts according to IAS 39 as at 31.12.2017

 

Reclassifications

 

Valuation effects

 

Carrying amounts according to IFRS 9 as at 01.01.2018

Financial assets measured at cost

 

 

 

 

 

 

 

 

Financial assets

 

11,834

 

 

 

 

 

11,834

Trade receivables

 

149,115

 

 

 

- 291

 

148,824

Receivables from related parties

 

81,527

 

 

 

 

 

81,527

Other financial receivables

 

1,974

 

 

 

 

 

1,974

Cash, cash equivalents and short-term deposits

 

201,514

 

 

 

 

 

201,514

Total

 

445,964

 

0

 

- 291

 

445,673

Financial assets available for sale

 

 

 

 

 

 

 

 

Financial assets (securities)

 

6,227

 

- 6,227

 

 

 

0

Financial assets

 

3,518

 

- 3,518

 

 

 

0

Other financial receivables

 

677

 

- 677

 

 

 

0

Total

 

10,422

 

- 10,422

 

0

 

0

Financial assets at fair value through other comprehensive income

 

 

 

 

 

 

 

 

Financial assets (securities)

 

0

 

6,227

 

 

 

6,227

Financial assets

 

0

 

2,901

 

302

 

3,203

Total

 

0

 

9,128

 

302

 

9,430

Financial assets at fair value through profit or loss

 

 

 

 

 

 

 

 

Financial assets

 

0

 

617

 

 

 

617

Other financial receivables

 

0

 

677

 

 

 

677

Total

 

0

 

1,294

 

0

 

1,294

Initial application effects of IFRS 9 on Group equity

in € thousand

 

Retained consolidated earnings of the parent company

 

Non-controlling interests

Equity in accordance with IAS 39 as of 31 December 2017

 

469,672

 

30,790

Increase in valuation allowances on trade receivables

 

- 273

 

- 18

Reclassification of financial assets from “available for sale” to “through other comprehensive income”

 

257

 

45

Deferred taxes on initial effects

 

84

 

7

Equity in accordance with IFRS 9 as of 1 January 2018

 

469,740

 

30,823

The following balance sheet table shows the impacts of the amended IFRS 9 financial reporting standard on the opening balance sheet values, as well as the measurement categories pursuant to IAS 39 and IFRS 9:

Valuation categories and reconciliation of the carrying amounts from IAS 39 to IFRS 9

in € thousand

 

Valuation categories according to IAS 39

 

Valuation categories according to IFRS 9

 

Carrying amount according to IAS 39 for 31.12.2017

 

Adjustment effects

 

Carrying amount according to IFRS 9 as of 01.01.2018

Financial assets

 

Available for sale

 

Fair value (through other comprehensive income)

 

9,128

 

302

 

9,430

Financial assets

 

Available for sale

 

Fair value (profit or loss)

 

617

 

 

 

617

Financial assets

 

Loans and receivables

 

At cost

 

11,834

 

 

 

11,834

Trade receivables

 

Loans and receivables

 

At cost

 

149,115

 

- 291

 

148,824

Receivables from related parties

 

Loans and receivables

 

At cost

 

81,527

 

 

 

81,527

Other financial receivables

 

Available for sale

 

Fair value (profit or loss)

 

677

 

 

 

677

Other financial receivables

 

Loans and receivables

 

At cost

 

1,974

 

 

 

1,974

Cash, cash equivalents and short-term deposits

 

Loans and receivables

 

At cost

 

201,514

 

 

 

201,514

Deferred taxes (assets)

 

 

 

 

 

87,093

 

91

 

87,184

Equity

 

 

 

 

 

602,359

 

102

 

602,461

thereof retained consolidated earnings of the parent company

 

 

 

 

 

469,672

 

68

 

469,740

thereof non-controlling interests

 

 

 

 

 

30,790

 

34

 

30,823

Amendments to standards that can be applied on a voluntary basis for the financial year under review which were not adopted by HHLA:

Standard

Content and significance

Amendments to IAS 28 Long-term Interests in Associates and Joint Ventures

The aim of the amendments, which were published in October 2017, is to clarify that an entity must apply IFRS 9 Financial Instruments to all long-term interests in an associate or joint venture, irrespective of the accounting method. The EU enacted this clarification in its legislation with Commission Regulation (EU) 2019/237 dated 8 February 2019. The amendments take effect for reporting periods that begin on or after 1 January 2019. Early adoption is permitted.

IFRS 16 Leases

The IASB published IFRS 16 Leases in January 2016. This standard supersedes the previously valid IAS 17 Leases and introduces significant accounting changes for lessees. In general, all leases are now to be recognised as rights of use for accounting purposes. Under IFRS 16, lessors will continue to classify leases as operating or finance in line with IAS 17. The new rules aim to help improve the transparency of financial reporting and break down existing information imbalances. The EU enacted this standard in its legislation with Commission Regulation (EU) 2017/1986 dated 31 October 2017. The effective date is 1 January 2019.

The HHLA Group will apply the standard for the financial year beginning on 1 January 2019 using the modified retrospective approach. With this method, the comparative prior-year figures are not adjusted; changeover effects must therefore be recognised as adjustments to revenue reserves as of 1 January 2019. As part of the modified retrospective approach, an incremental borrowing rate as of 1 January 2019 has been used to calculate the lease liability.

In respect of many of the contracts, HHLA will recognise the usage rights for leased assets in the amount of the corresponding lease liabilities at first-time application, meaning that no equity effects will arise at this time. Due to their material importance, usage rights for rental agreements for space at the Port of Hamburg, which were previously recognised as operating leases, will be recognised at their carrying amounts, as though IFRS 16 had applied since the start of the lease. This results in significant changeover effects as of 1 January 2019, which are shown as adjustments to revenue reserves.

As a lessee, HHLA takes the opportunity not to recognise usage rights and lease liabilities for short-term leases or leases where the underlying asset is of low value. For these leases, lease payments are recorded as expenses instead.

The new lease standard was implemented via a Group-wide project.

Balance sheet total and equity ratio

The increase in the balance sheet total triggered by the new rules of IFRS 16 will be largely prompted by capitalising the right of use. On the liabilities side, this is countered by the adjustments to revenue reserves and the recognition of the leasing liability. On the basis of the contracts currently concluded and what is still a provisional valuation, the HHLA Group expects the balance sheet total to increase by approx. € 0.6 billion as of 1 January 2019.

Given this increased balance sheet total and taking into account the changeover effects in equity, the current status of contracts will lead to a reduction in the in the upper single-digit range as of 1 January 2019.

Income statement

Until now, expenses from operating leases had always been recognised under other operating expenses on the income statement. In future, however, depreciation and amortisation on the right of use and interest expenses will be shown for the lease liability.

In the 2019 financial year, this change in terms of recognition will result in an increase in in the mid-single-digit percent range as compared with the 2018 financial year.

Cash flow statement

In the cash flow statement, there will be a shift between cash flow from operating activities and cash flow from financing activities. While EBIT and thus will increase, the capital outflows from financing activities will also rise because higher redemptions of lease liabilities will have to be accounted for.

Amendments to IFRS 9 Prepayment Features with Negative Compensation

The IASB published these amendments to IFRS 9 in October 2017. They are designed to facilitate measurement at amortised cost/at fair value through other comprehensive income even for financial assets that do not meet the SPPI criterion. These relate to financial assets with prepayment features that involve one party receiving or paying appropriate compensation in the event of termination (appropriate negative fee). The EU enacted this standard in its legislation with Commission Regulation (EU) 2018/498 dated 22 March 2018. The amendments are to apply to financial years beginning on or after 1 January 2019. Early adoption is permitted.

IFRIC 23 Accounting for Uncertainties in Income Taxes

The interpretation published in June 2017 clarifies the accounting treatment of uncertainties relating to income tax treatment under IAS 12. The interpretation is to be applied to taxable profit (tax loss), unused tax losses, unused tax credits and tax rates. The EU enacted this standard in its legislation with Commission Regulation (EU) 2018/1595 dated 23 October 2018. The provisions will come into force for financial years starting on 1 January 2019. Early adoption is permitted.

Standards and interpretations that have been passed by the IASB but not yet adopted by the EU and are not applied by HHLA.

Standard

Content and significance

Amendments to IAS 1 and IAS 8 Definition of Materiality

In October 2018, the IASB published amendments with regard to the definition of the materiality of information in financial statements in IAS 1 Presentation of Financial Statements and in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. With these changes, a consistent and precisely defined understanding of the materiality of information in financial statements has been created and supplemented with examples. The amendments are to be observed as of 1 January 2020. Early adoption is permitted.

Amendments to IAS 19 Plan Amendment, Curtailment or Settlement

In accordance with IAS 19, pension obligations are to be measured based on updated assumptions in the event of a plan amendment, curtailment or settlement. This amendment clarifies that, after such an event, the past service cost and net interest for the remainder of the period must be taken into account based on updated assumptions.

The amendments are to be applied with effect from 1 January 2019. Early adoption is permitted.

Amendments to IFRS 3 Definition of a Business

In October 2018, the IASB published an amendment to IFRS 3 Business Combinations with regard to the definition of a business. With this amendment, the IASB clarifies that a business consists of a group of activities and assets that covers at least one resource input and a substantial process that, together, result in output. Furthermore, with regard to performance (output), the definition is narrowed to focus on goods and services provided to customers and excludes the reference to cost reductions. The new provisions also include an optional “concentration test”, which aims to facilitate the identification of a business. The amendment is applicable to business combinations where the date of acquisition is either on or after 1 January 2020. Early adoption is permitted.

Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

The IASB approved amendments to IFRS 10 consolidated financial statements and IAS 28 Investments in Associates and Joint Ventures in September 2014. These clarify how unrealised gains from transactions between an investor and a joint venture or an associate should be reported. The EFRAG announced in February 2015 that the process of endorsing these amendments had been suspended for the time being because inconsistencies had been identified between the amended standard and the existing IAS 28. The effective date – previously 1 January 2016 – has been postponed indefinitely until the inconsistencies have been resolved.

Amendments to References to the Conceptual Framework in IFRS standards

In March 2018, the IASB published its revised conceptual framework for financial reporting. The revised version contains extensive amendments to the earlier conceptual framework. The standards affected by the amendments are IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8, IAS 34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22 and SIC-32. Amendments to the references within the IFRS listed above are particularly affected by the endorsement process, which has an editorial character. The endorsement is not expected to have any effect on the consolidated financial statements.

Improvements to IFRS 2015–2017 Cycle

These clarifications were published in December 2017 and apply to four standards.

Based on the amendments to IFRS 3 Business Combinations, the principles governing successive business combinations are to be applied when an entity obtains control over a business operation in which it previously held an interest as part of a joint operation.

Based on the amendments to IFRS 11 Joint Arrangements, a company does not remeasure its previously held interest in a joint operation when it obtains joint control of the business.

The amendments to IAS 12 Income Taxes deal with the income tax consequences of dividend payments.

The amendments to IAS 23 Borrowing Costs clarify that, in connection with the calculation of the capitalisation rate, the cost associated with debt taken out specifically in connection with the acquisition of the qualifying assets is not to be included until the asset is completed if a company has generally borrowed funds to purchase qualifying assets.

The amendments are to be applied with effect from 1 January 2019. Early adoption is permitted.

Standards and interpretations that have no relevance for HHLA’s consolidated financial statements.

Standard

Content and significance

Amendments to IFRS 4

Insurance Contracts

IFRS 17

Insurance Contracts

IAS

International Accounting Standards.

Investments

Payments for investments in property, plant and equipment, investment property and intangible assets.

IFRS

International Financial Reporting Standards.

IFRS

International Financial Reporting Standards.

Revenue

Revenue from sales or lettings and from services rendered, less sales deductions and VAT.

Investments

Payments for investments in property, plant and equipment, investment property and intangible assets.

Revenue

Revenue from sales or lettings and from services rendered, less sales deductions and VAT.

IAS

International Accounting Standards.

Equity ratio

Equity / balance sheet total.

EBIT

Earnings before interest and taxes.

Operating Cash Flow

According to literature on IFRS key figures: EBIT – taxes + depreciation and amortisation – write-backs +/– changes in non-current provisions (excl. interest portion) +/– gain/loss on the disposal of property, plant and equipment + changes in working capital.