Change in accounting policy due to Agenda Decision from IFRS Interpretations Committee
With reference to Note 2 in the 2021 Annual Report.
On April 20, the IFRS Interpretations Committee concluded an Agenda Decision which provides guidance as to how a software reseller might apply the principal/agent criteria in IFRS 15 “Revenue from Contracts with Customers” to the resale of standard software to a customer.
The decision has implications for whether revenue from the resale of standard software is recognized on a gross or net basis under IFRS 15. The guidance can also be applied to the resale of standard vendor services such as extended warranties.
In its historic accounts, Atea has determined that it acts as a principal in the resale of standard software and vendor services and has recognized revenue from these products and services on a gross basis (with gross invoiced sales reported as revenue, and costs of the resold products reported as cost of sales).
Under the new guidance from the IFRS interpretations committee, Atea has determined that it acts as an agent in the resale of standard software and vendor services under the principal/agent criteria in IFRS 15 “Revenue from Contracts with Customers”. For this reason, Atea will implement a change to its accounting policy and recognize revenue from these products and services on a net basis (with gross invoiced sales, less costs of the resold products reported as revenue).
The decision to change its accounting policy to conform with the Agenda Decision of the IFRS Interpretations Committee requires a restatement of prior years’ accounts under IAS 8. The impact of the change in accounting policy on the 2021 audited financial statements is as follows:
- Revenue is reduced by NOK 12.8 billion
- Cost of sales is reduced by NOK 12.8 billion
- Gross profit is unchanged
- Operating profit (EBIT) is unchanged
- Operating margin (EBIT %) increases from 2.5% to 3.7%
- Net profit after tax is unchanged
- Balance sheet is unchanged
- Cash flow statement is unchanged
Atea will continue to report gross invoiced sales in its 2022 financial reports as an Alternative Performance Measure.