Gofore Plc: Transition to IFRS Reporting

Gofore Group has applied the exemptions of IFRS 1 First-time Adaption of International Financial Reporting Standards relating to Business Combinations, Foreign Currency Translations and Share-based Payments. These are described more in detail below.

The alphabets in topics (A-F) refer to the columns in the calculation tables.

The Group has adopted IFRS 16 standard by using the modified retrospective approach by recognising the cumulative effect of initially applying the standard in the opening balance sheet as at 1 January 2019. The right-of-use asset and the lease liability are calculated by discounting the future lease payments. The lease liabilities have been measured at the present value of the remaining lease payments as of 1 January 2019 and right-of-use assets have been recognized at an amount equal to the lease liability on 1 January 2019.

In applying IFRS 16, the lease expenses presented in FAS are replaced with the depreciation of the right-of-use asset. In addition, the interest costs of the lease liabilities are recognised as finance costs in the Statement of Profit and Loss.

The standard contains practical expedients, under which low-value leases and short-term leases (lease-term under 12 months) can be exempted from recognition. Gofore Group applies both expedients.

The effect of leases has been presented in column B, “Leases” in the Statement of Profit and Loss and Statement of Financial Position.

Gofore has restated the business combinations from the transition date 1.1.2019 onwards, to comply with the requirements of IFRS. There are two acquisitions, Silver Planet Oy and Mangodesign (officially named mangodesign Finke-Anlauff & Anlauff GbR), that have been made by Gofore during the reporting period of this release. These acquisitions have been recorded in accordance with IFRS 3.

Gofore has measured the cost of the acquisitions at the fair value of the considerations paid, allocated that cost to the acquired identifiable assets and liabilities on the basis of their fair values and the rest of the cost has been recorded as goodwill. For the acquisitions of Silverplanet and Mangodesign, Gofore has identified customer relationships and non-compete agreements as key intangible assets and allocated the cost accordingly to these identified intangible assets. These identified intangible assets are amortized within their underlying useful life between 5-6 years.

Under FAS, transaction costs are included in the acquisition cost of the acquired company, while these items are expensed when incurred under IFRS. Accordingly, when preparing the PPAs for the business combinations in the conversion period, the transaction costs have been expensed for IFRS purposes.

The adjustments for business combinations recalculated in accordance with IFRS 3, have been presented in the column C, “Business combinations” in the Statement of Profit and Loss and in the Statement of Financial Position.

The adjustment for reversal of goodwill amotizations has been presented in adjustment column D, “Reversal of Goodwill amortizations”.

Gofore has only equity settled share-based payment programs in the reporting period and the expenses for these share based payment programs, have been recognised over the vesting period in IFRS. The adjustment has been recoded in other personell expenses and within share-based payments and retained earnings in equity.

The effect of share-based payments has been presented in column E, “Share-based Payments” in the Statement of Profit and Loss and Statement of Financial Position.

The effect of ECL has been presented in column F, “Other Adjustments” in Statement of Profit and Loss and Statement of Financial Position.

In the transition to IFRS Gofore Group made an irrevocably decicion to classify its financial securities, which include shares in funds, at fair value through profit and loss. The effect of change in fair value of financial securities has been presented in column F, Other Adjustments in Statement of Profit and Loss and Statement of Financial Position.

Investments in other shares are measured at fair value through Statement of Other Comprehensive Income (OCI).

In FAS these have been presented at acquisition cost.

The most significant impacts on deferred taxes are resulting from the business combinations presented in accordance with IFRS 3, from which deferred tax liabilities have been recorded in the conversion period.

The deferred tax impacts of all IFRS adjustments have been presented in connection with each separate IFRS adjustment in the Statement of Profit and Loss and the Statement of Financial Position.

Starting from the transition date 1.1.2019, the currency translation difference is presented through Statement of Other Comprehensive Income (OCI) in accordance with IFRS.

The effect of the adjustment has been presented in column F, “Other Adjustments” in the Statement of Other Comprehensive Income and Statement of Financial Position.

The effect of the adjustment has been presented in column F, “Other Adjustments” in the Statement of Financial Position.

The leasehold improvements have been reclassified from intangible assets in FAS to property, plant and equipment in accordance with IFRS.

The timing of invoicing may differ from the timing of revenue recognition. When revenue is recognised prior to invoicing from a client, Gofore recognises a contract asset. In accordance with IFRS 15, contract assets are presented as a separate item in the Statement of Financial Position. In FAS these items have been presented as trade receivables and other current assets. Thus, the sales, which is recognised as revenue but not yet invoiced from the client, is reclassified from trade receivables and other current assets to contract assets.

Based on the nature of a savings account in Hypo Bank, presented within Other current assets in FAS, the Group has reclassified it to cash and cash equivalents as at 1 January 2019.

The effect of the reclassifications have been presented in column A, “Reclassifications” in the Statement of Financial Position.