Initial application of new IFRSs
The KION Group initially applies IFRS 9 ‘Financial Instruments’, IFRS 15 ‘Revenue from Contracts with Customers’ and IFRS 16 ‘Leases’ in full and retrospectively as of 1 January 2018. Only the amended rules on hedge accounting in accordance with IFRS 9 are applied prospectively. The prior-year figures have not been restated for IFRS 9, whereas for IFRS 15 and IFRS 16 the prior-year figures have been restated in accordance with the transitional provisions applicable in each case.
The disclosures relating to the financial performance and financial position of the KION Group, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of cash flows and the segment report take into account the following effects and changes in presentation resulting from the initial application of new financial reporting standards.
IFRS 9 ‘Financial Instruments’
For the majority of the KION Group’s financial instruments, the classification rules in IFRS 9 do not require any change to the respective measurement model. Financial investments held at 1 January 2018 are recognised at fair value through other comprehensive income without reclassification into profit or loss. In addition, equity investments in non-consolidated subsidiaries or companies not accounted for under the equity method are reported under Other non-current assets.
Furthermore, the initial application of IFRS 9 results in changes in the subsequent measurement of financial assets. The KION Group applies the simplified approach of IFRS 9 to all trade receivables, lease receivables and contract assets and thus recognises losses expected over the entire term. This led to a reduction in the provision recognised for counterparty risk. Overall, the initial application of IFRS 9 resulted in an increase in equity after taking deferred taxes into account of €14.6 million as at 1 January 2018.
IFRS 15 ‘Revenue from Contracts with Customers’
Following the adoption of IFRS 15, the Contract assets previously recognised in trade receivables are for the first time reported separately in the consolidated statement of financial position and amounted to €117.4 million as at 1 January 2017. Contract liabilities, which were previously reported under Other liabilities, also formed a new line item; they amounted to €376.4 million. There were no further changes to the presentation of the main components of the KION Group’s financial statements.
For the vast majority of new business contracts, service business contracts and construction contracts, there has been no change in the point in time at which or the period of time over which the revenues are recognised. Only for a small amount of projects a shift in timing of revenue recognition has been identified and led to an overall increase in equity after taking deferred taxes into account of €7.9 million as at 1 January 2017.
IFRS 16 ‘Leases’
Indirect end customer financing transactions, which were previously recognised as sales transactions, are now recognised as leases in accordance with IFRS 15 and IFRS 16. Leased assets as at 1 January 2017 increased by €714.2 million to €1,143.9 million as a result. On the other side of the statement of financial position, there was a €532.7 million rise in deferred revenue, of which €341.7 million was classified as Other non-current liabilities and €191.1 million as Other current liabilities. Furthermore, the change in the reporting of indirect end customer financing resulted in additional residual value obligations of €335.9 million being recognised under Liabilities from financial services (non-current Liabilities from financial services increased by €258.8 million and current Liabilities from financial services by €77.2 million as at 1 January 2017). Liabilities from financial services were reported as a separate line item for the first time and include liabilities from financial services used to fund the long-term leasing business, which had previously been reported under Other current financial liabilities (reclassification of €8.3 million as at 1 January 2017).
In accordance with IFRS 16, procurement leases that were previously recognised as operating leases but not shown in the statement of financial position are recognised as right-of-use assets under Other property, plant and equipment; liabilities from procurement leases are now reported under Other financial liabilities. The KION Group exercises the option not to recognise right-of-use assets and liabilities from procurement leases for low-value procurement leases and for procurement leases that have a lease term of less than twelve months. Other property, plant and equipment rose by €240.8 million to €919.1 million as at 1 January 2017. Accordingly, Other non-current financial liabilities increased by €207.0 million and Other current financial liabilities increased by €55.6 million. Overall, the first-time adoption of IFRS 16 in regard to the KION Group’s leasing arrangements led to a reduction in equity after taking deferred taxes into account of €160.8 million as at 1 January 2017.