Note 3 — Summary of significant accounting policies
Basis of consolidation
The consolidated financial statements incorporate
the financial statements of the Company and entities controlled by the Company and its subsidiaries. Control is achieved when the Company:
| |
● |
has power over the investee; |
| |
|
|
| |
● |
is exposed, or has rights, to variable returns from its involvement with the investee; and |
| |
|
|
| |
● |
has the ability to use its power to affect its returns. |
The Group reassesses whether or not it controls
an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.
Consolidation of a subsidiary begins when the
Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Specifically, income and expenses
of a subsidiary acquired or disposed of during the year are included in the consolidated statements of profit or loss from the date the
Group gains control until the date when the Group ceases to control the subsidiary.
Profit or loss and each item of other comprehensive
income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is
attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having
a deficit balance.
When necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies.
All intragroup assets and liabilities, equity,
income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
Non-controlling interests in subsidiaries are
presented separately from the Group’s equity therein, which represent present ownership interests entitling their holders to a proportionate
share of net assets of the relevant subsidiaries upon liquidation.
The following table lists the constituent companies
in the Group.
| Company name |
|
Jurisdiction |
|
Incorporation Date |
|
Ownership |
| Brera Holdings PLC |
|
Ireland |
|
June 30, 2022 |
|
Group Holding Company |
| Brera Milano Srl |
|
Italy |
|
December 20, 2016 |
|
100% (via Brera Holdings PLC) |
| Fudbalski Klub Akademija Pandev |
|
Macedonia |
|
June 9, 2017 |
|
90% (via Brera Holdings PLC) |
Property, plant and equipment
Property, plant and equipment are tangible assets
that are held for use in the production or supply of goods or services, or for administrative purposes. Property, plant and equipment
are stated in the consolidated statements of financial position at cost less subsequent accumulated depreciation and subsequent accumulated
impairment losses, if any.
Costs include any costs directly attributable
to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and,
for qualifying assets, borrowing costs capitalized in accordance with the Group’s accounting policy. Depreciation of these assets,
on the same basis as other property assets, commences when the assets are ready for their intended use.
Depreciation is recognized to allocate the cost
of assets less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual
values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted
for on a prospective basis.
An item of property, plant and equipment is derecognized
upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising
on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and
the carrying amount of the asset and is recognized in profit or loss.
Depreciation is charged to allocate the cost of
assets, over their estimated useful lives, using the straight-line method, on the following bases:
| | |
Years | |
| Leasehold improvements | |
| 5 | |
| Furniture and fittings | |
| 5 | |
| Office equipment and software | |
| 5 | |
| Motor vehicles | |
| 5 | |
Impairment on property, plant and equipment and right-of-use assets
At the end of the reporting period, the Group
reviews the carrying amounts of its property, plant and equipment and right-of-use assets to determine whether there is any indication
that these assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the relevant asset is estimated
in order to determine the extent of the impairment loss (if any).
The recoverable amount of property, plant and
equipment and right-of-use assets are estimated individually. When it is not possible to estimate the recoverable amount individually,
the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
In testing a cash-generating unit for impairment,
corporate assets are allocated to the relevant cash-generating unit when a reasonable and consistent basis of allocation can be established,
or otherwise they are allocated to the smallest group of cash generating units for which a reasonable and consistent allocation basis
can be established. The recoverable amount is determined for the cash-generating unit or group of cash-generating units to which the corporate
asset belongs and is compared with the carrying amount of the relevant cash-generating unit or group of cash-generating units.
Recoverable amount is the higher of fair value
less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset
(or a cash-generating unit) for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or a cash-generating
unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or a cash-generating unit) is reduced to its
recoverable amount. For corporate assets or portion of corporate assets which cannot be allocated on a reasonable and consistent basis
to a cash-generating unit, the Group compares the carrying amount of a group of cash-generating units, including the carrying amounts
of the corporate assets or portion of corporate assets allocated to that group of cash-generating units, with the recoverable amount of
the group of cash-generating units. In allocating the impairment loss, the impairment loss is allocated first to reduce the carrying amount
of any goodwill (if applicable) and then to the other assets on a pro-rata basis based on the carrying amount of each asset in the unit
or the group of cash-generating units. The carrying amount of an asset is not reduced below the highest of its fair value less costs of
disposal (if measurable), its value in use (if determinable) and zero. The amount of the impairment loss that would otherwise have been
allocated to the asset is allocated pro rata to the other assets of the unit or the group of cash-generating units. An impairment loss
is recognized immediately in profit or loss. Where an impairment loss subsequently reverses,
the carrying amount of the asset (or cash-generating unit or a group of cash-generating units) is increased to the revised estimate of
its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined
had no impairment loss been recognized for the asset (or a cash-generating unit or a group of cash-generating units) in prior years. A
reversal of an impairment loss is recognized immediately in profit or loss.
Provisions
Provisions are recognized when the Group has a
present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that
obligation, and a reliable estimate can be made of the amount of the obligation.
Provisions for legal claims, service warranties
and one-time termination benefits for certain employees are recognized when the Group has a present legal or constructive obligation as
a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably
estimated. Provisions are not recognized for future operating losses.
Where there are a number of similar obligations,
the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision
is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of
management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The
discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money
and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
Financial instruments
Financial assets and financial liabilities are
recognized when a group entity becomes a party to the contractual provisions of the instrument. All regular way purchases or sales of
financial assets are recognized and derecognized on a trade date/settlement date basis. Regular way purchases or sales are purchases or
sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.
Financial assets and financial liabilities are
initially measured at fair value except for trade receivables arising from contracts with customers which are initially measured in accordance
with IFRS 15. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities
(other than financial assets or financial liabilities at fair value through profit or loss (“FVTPL”)) are added to or deducted
from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized immediately in profit or loss.
The effective interest method is a method of calculating
the amortized cost of a financial asset or financial liability and of allocating interest income and interest expense over the relevant
period. The effective interest rate is the rate that exactly discounts estimated future cash receipts and payments (including all fees
and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts)
through the expected life of the financial asset or financial liability, or, where appropriate, a shorter period, to the net carrying
amount on initial recognition.
Financial assets
Classification and subsequent measurement of
financial assets
Financial assets that meet the following condition
are subsequently measured at amortized cost:
| ● | the financial asset is held
within a business model whose objective is to collect contractual cash flows. |
| (i) | Amortized cost and interest income |
Interest income is recognized using the effective
interest method for financial assets measured subsequently at amortized cost and debt instruments/receivables subsequently measured at
FVTOCI. Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset.
Impairment of financial assets subject to impairment
assessment under IFRS 9
The Group performs impairment assessment under
expected credit loss (“ECL”) model on financial assets (including trade and other receivables and loan receivables) which
are subject to impairment assessment under IFRS 9. The amount of ECL is updated at each reporting date to reflect changes in credit risk
since initial recognition.
Lifetime ECL represents the ECL that will result
from all possible default events over the expected life of the relevant instrument. In contrast, 12-month ECL (“12m ECL”)
represents the portion of lifetime ECL that is expected to result from default events that are possible within 12 months after the reporting
date. Assessments are done based on the Group’s historical credit loss experience, adjusted for factors that are specific to the
debtors, general economic conditions and an assessment of both the current conditions at the reporting date as well as the forecast of
future conditions.
The Group always recognizes lifetime ECL for trade
receivables. For all other instruments, the Group measures the loss allowance equal to 12m ECL, unless there has been a significant increase
in credit risk since initial recognition, in which case the Group recognizes lifetime ECL. The assessment of whether lifetime ECL should
be recognized is based on significant increases in the likelihood or risk of a default occurring since initial recognition.
| (ii) | Significant increase in credit risk |
In assessing whether the credit risk has increased
significantly since initial recognition, the Group compares the risk of a default occurring on the financial instrument as at the reporting
date with the risk of a default occurring on the financial instrument as at the date of initial recognition. In making this assessment,
the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience
and forward-looking information that is available without undue cost or effort.
In particular, the following information is taken
into account when assessing whether credit risk has increased significantly:
| ● | an actual or expected significant
deterioration in the financial instrument’s external (if available) or internal credit rating; |
| ● | significant deterioration in
external market indicators of credit risk, e.g. a significant increase in the credit spread, the credit default swap prices for the debtor; |
| ● | existing or forecast adverse
changes in business, financial or economic conditions that are expected to cause a significant decrease in the debtor’s ability
to meet its debt obligations; |
| ● | an actual or expected significant
deterioration in the operating results of the debtor; |
| ● | an actual or expected significant
adverse change in the regulatory, economic, or technological environment of the debtor that results in a significant decrease in the
debtor’s ability to meet its debt obligations. |
Irrespective of the outcome of the above assessment,
the Group presumes that the credit risk has increased significantly since initial recognition when contractual payments are more than
120 days past due, unless the Group has reasonable and supportable information that demonstrates otherwise.
Despite the foregoing, the Group assumes that
the credit risk on a debt instrument has not increased significantly since initial recognition if the debt instrument is determined to
have low credit risk at the reporting date. A debt instrument is determined to have low credit risk if (i) it has a low risk of default,
(ii) the borrower has a strong capacity to meet its contractual cash flow obligations in the near term and (iii) adverse changes in economic
and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil 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.
In order to minimize the credit risk, management
of the Company has created a team responsible for the determination of credit limits and credit approvals for customers.
| (iii) | Definition of default |
The Group considers for internal credit risk management
purposes and based on historical experience, that an event of default to have occurred when there is information obtained from internal
or external sources that indicates the debtor is unlikely to pay its creditors, including the Group.
| (iv) | Credit-impaired financial assets |
A financial asset is credit-impaired when one
or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. These events include
evidence that there is significant financial difficulty of the debtors, or it is becoming probable that the debtor will enter bankruptcy.
The Group writes off a financial asset when there
is information indicating that the counterparty is in severe financial difficulty and there is no realistic prospect of recovery, e.g.,
when the counterparty has been placed under liquidation or has entered into bankruptcy proceedings. Financial assets written off may still
be subject to enforcement activities under the Group’s recovery procedures, taking into account legal advice where appropriate.
Any recoveries made are recognized in profit or loss.
| (vi) | Measurement and recognition of expected credit losses |
The measurement of expected credit losses is a
function of the probability of default, loss given default (i.e., the magnitude of the loss if there is a default) and the exposure at
default. The assessment of the probability of default and loss given default is based on historical data adjusted by forward-looking information
as described above. As for the exposure at default, for financial assets, this is represented by the assets’ gross carrying amount
at the reporting date.
For financial assets, the expected credit loss
is estimated as the difference between all contractual cash flows that are due to the Group in accordance with the contract and all the
cash flows that the Group expects to receive, discounted at the original effective interest rate.
If the Group has measured the loss allowance for
a financial instrument at an amount equal to lifetime ECL in the previous reporting period but determines at the current reporting date
that the conditions for lifetime ECL are no longer met, the Group measures the loss allowance at an amount equal to 12-month ECL at the
current reporting date.
The Group recognizes an impairment gain or loss
in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account.
Derecognition of financial assets
The Group derecognizes a financial asset only
when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the
risks and rewards of ownership of the asset to another party. If the Group neither transfers nor retains substantially all the risks and
rewards of ownership and continues to control the transferred asset, the Group recognizes its retained interest in the asset and an associated
liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial
asset, the Group continues to recognize the financial asset and a collateralized borrowing for the proceeds received.
On derecognition of a financial asset measured
at amortized cost, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is
recognized in profit or loss. Financial liabilities and equity
Classification as debt or equity
Financial liabilities and equity instruments issued
by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial
liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences
a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments are recorded at the proceeds
received, net of direct issue costs.
Financial liabilities
Financial liabilities including trade and other
payables, loans from shareholders and borrowings are initially measured at fair value, net of transaction costs, and are subsequently
measured at amortized cost, using the effective interest method, with interest expense recognized on an effective yield basis, except
for short-term payables when the recognition of interest would be immaterial.
Interest-bearing loans are initially recognized
at fair value, and are subsequently measured at amortized cost, using the effective interest method.
Derecognition of financial liabilities
The Group derecognizes financial liabilities when,
and only when, the Group’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the
financial liability derecognized and the consideration paid and payable is recognized in profit or loss.
Revenue from contracts with customers
Revenue is measured based on the consideration
specified in a contract with a customer and recognized as and when control of a service is transferred to a customer.
A performance obligation represents a good or
service (or a bundle of goods or services) that is distinct or a series of distinct goods or services that are substantially the same.
Control is transferred over time and revenue is
recognized over time by reference to the progress towards complete satisfaction of the relevant performance obligation if one of the following
criteria is met:
| |
● |
the customer simultaneously receives and consumes the benefits provided by the Group’s performance as the Group performs; |
| |
|
|
| |
● |
the Group’s performance creates or enhances an asset that the customer controls as the Group performs; or |
| |
|
|
| |
● |
the Group’s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date. |
Otherwise, revenue is recognized at a point in
time when the customer obtains control of the distinct good or service.
A contract asset represents the Group’s
right to consideration in exchange for goods or services that the Group has transferred to a customer that is not yet unconditional. It
is assessed for impairment in accordance with IFRS 9. In contrast, a receivable represents the Group’s unconditional right to consideration,
i.e., only the passage of time is required before payment of that consideration is due.
A contract liability represents the Group’s
obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is
due) from the customer.
A contract asset and a contract liability relating
to the same contract are accounted for and presented on a net basis. Revenues are recognized upon the application of
the following steps:
1. Identification of the contract or contracts
with a customer.
2. Identification of the performance obligations
in the contract.
3. Determination of the transaction price.
4. Allocation of the transaction price to the
performance obligations in the contract; and
5. Recognition of revenue when, or as, the performance
obligation is satisfied.
The Group enters into services agreements and
statements of work which set out the details of the work streams for each project to be provided to the customers. The work streams are
generally capable of being distinct and accounted for as separate performance obligations.
Revenue recognized from contracts with customers
is disaggregated into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by
economic factors.
| ● | In the past, the Group provided
consultancy services by providing information about its clients, products and services to their customers. The objective was to help
its clients on its market positioning, internal roles structuring and research for new partners. The service is viewed as one performance
obligation and revenue is recognized over time by using the output method when the performance obligation is satisfied and measured by
the value of the service performed to date. As the Company transitions to its current business model of multi-club sports
management, we anticipate the consultancy services to be limited in future quarters. |
Value of the service performed is determined based
on the hours incurred times a fixed rate as stipulated in the contract. Any variabilities in the transaction price are resolved before
each billing.
The Group has elected to apply the practical expedient
provided in IFRS 15, to recognize revenue in the amount to which it has the right to invoice and has not disclosed the aggregate amount
of the transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the
reporting period.
Interest income
Interest income is accrued on a time basis, by
reference to the principal outstanding and at the effective interest rate applicable.
Leases
Definition of a lease
A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
For contracts entered into or modified on or after
the date of initial application of IFRS 16 or arising from business combinations, the Group assesses whether a contract is or contains
a lease based on the definition under IFRS 16 at inception, modification date or acquisition date, as appropriate. Such contract will
not be reassessed unless the terms and conditions of the contract are subsequently changed.
The Group as a lessee
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition
exemption to leases of motor vehicles that have a lease term of 12 months or less from the commencement date and do not contain a purchase
option. It also applies the recognition exemption for lease of low-value assets. Lease payments on short-term leases and leases of low-value
assets are recognized as expense on a straight-line basis or another systematic basis over the lease term. Right-of-use assets
The cost of right-of-use asset includes:
| ● | the amount of the initial measurement
of the lease liability; |
| ● | any lease payments made at
or before the commencement date, less any lease incentives received; |
| ● | any initial direct costs incurred
by the Group; and |
| ● | an estimate of costs to be
incurred by the Group in dismantling and removing the underlying assets, restoring the site on which it is located or restoring the underlying
asset to the condition required by the terms and conditions of the lease. |
Right-of-use assets are measured at cost, less
any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities.
Right-of-use assets in which the Group is reasonably
certain to obtain ownership of the underlying leased assets at the end of the lease term are depreciated from commencement date to the
end of the useful life. Otherwise, right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful
life and the lease term.
The Group presents right-of-use assets as a separate
line item on the consolidated statements of financial position. As at June 30, 2023 the Group has EUR0 right-of-use assets.
Refundable rental deposits
Refundable rental deposits paid are accounted
under IFRS 9 and initially measured at fair value. Adjustments to fair value at initial recognition are considered as additional lease
payments and included in the cost of right-of-use assets.
Lease liabilities
At the commencement date of a lease, the Group
recognizes and measures the lease liability at the present value of lease payments that are unpaid at that date. In calculating the present
value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in
the lease is not readily determinable.
The lease payments include:
| ● | fixed payments (including in-substance
fixed payments) less any lease incentives receivable; |
| ● | variable lease payments that
depend on an index or a rate, initially measured using the index or rate as at the commencement date; |
| ● | amounts expected to be payable
by the Group under residual value guarantees; |
| ● | the exercise price of a purchase
option if the Group is reasonably certain to exercise the option; and |
| ● | payments of penalties for terminating
a lease, if the lease term reflects the Group exercising an option to terminate the lease. |
After the commencement date, lease liabilities
are adjusted by interest accretion and lease payments. The Group remeasures lease liabilities (and makes
a corresponding adjustment to the related right-of-use assets) whenever:
| ● | the lease term has changed
or there is a change in the assessment of exercise of a purchase option, in which case the related lease liability is remeasured by discounting
the revised lease payments using a revised discount rate at the date of reassessment. |
| ● | the lease payments change due
to changes in market rental rates following a market rent review/expected payment under a guaranteed residual value, in which cases the
related lease liability is remeasured by discounting the revised lease payments using the initial discount rate. |
The Group presents lease liabilities as a separate
line item on the consolidated statements of financial position.
Borrowing costs
All borrowing costs are recognized in profit or
loss in the period in which they are incurred.
Taxation
Income tax expense represents the sum of the tax
currently payable and deferred tax.
The tax currently payable is based on taxable
profit for the year. Taxable profit differs from profit/(loss) before tax because of income or expense that are taxable or deductible
in other years and items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax is recognized on temporary differences
between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in
the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax
assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be
available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized
if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a
transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognized
if the temporary difference arises from the initial recognition of goodwill.
The carrying amount of deferred tax assets is
reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will
be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are
measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realized, based on
tax rate (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and
assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period,
to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset
when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income
taxes levied to the same taxable entity by the same taxation authority.
Current and deferred tax are recognized in profit
or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the
current and deferred tax are also recognized in other comprehensive income or directly in equity respectively. Where current tax or deferred
tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.
Principles of consolidation and equity accounting
Subsidiaries
Subsidiaries are all entities (including structured
entities) over which the Group has control. The Group controls an entity where the Group is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date
that control ceases.
The acquisition method of accounting is used
to account for business combinations by the Group (see note 24). Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are
also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity
of subsidiaries are shown separately in the consolidated statement of profit or loss, statement of comprehensive income, statement of
changes in equity and balance sheet respectively.
Associates
Associates are all entities over which the Group
has significant influence but not control or joint control. This is generally the case where the Group holds between 20% and 50% of the
voting rights. Investments in associates are accounted for using the equity method of accounting (see (iv) below), after initially being
recognised at cost.
Joint arrangements
Under IFRS 11 Joint Arrangements investments in
joint arrangements are classified as either joint operations or joint ventures. The classification depends on the contractual rights and
obligations of each investor, rather than the legal structure of the joint arrangement.
Equity method
Under the equity method of accounting, the investments
are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses
of the investee in profit or loss, and the Group’s share of movements in other comprehensive income of the investee in other comprehensive
income. Dividends received or receivable from associates and joint ventures are recognized as a reduction in the carrying amount of the
investment.
Where the Group’s share of losses in an
equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Group
does not recognize further losses, unless it has incurred obligations or made payments on behalf of the other entity.
Unrealized gains on transactions between the Group
and its associates and joint ventures are eliminated to the extent of the Group’s interest in these entities. Unrealized losses
are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of equity-accounted
investees have been changed where necessary to ensure consistency with the policies adopted by the Group.
The carrying amount of equity-accounted investments
is tested for impairment in accordance with the policy described in note 3 and note 24.
Business combinations
The acquisition method of accounting is used to
account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred
for the acquisition of a subsidiary comprises the:
| ● | fair values of the assets transferred. |
| | | |
| ● | liabilities
incurred to the former owners of the acquired business. |
| | | |
| ● | equity
interests issued by the Group. |
| | | |
| ● | fair
value of any asset or liability resulting from a contingent consideration arrangement, and |
| | | |
| ● | fair
value of any pre-existing equity interest in the subsidiary. |
Identifiable
assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially
at their fair values at the acquisition date. The Group recognizes any non-controlling interest in the acquired entity on an acquisition-by-acquisition
basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable
assets. Acquisition-related
costs are expensed as incurred.
The
excess of the:
| ● | consideration
transferred, |
| | | |
| ● | amount
of any non-controlling interest in the acquired entity, and |
| | | |
| ● | acquisition-date
fair value of any previous equity interest in the acquired entity over the fair value of
the net identifiable assets acquired is recorded as goodwill. |
If those amounts are less than the fair value
of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration
is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used
is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier
under comparable terms and conditions.
Contingent consideration is classified either
as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value, with changes
in fair value recognized in profit or loss.
If the business combination is achieved in stages,
the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value
at the acquisition date. Any gains or losses arising from such remeasurement are recognised in profit or loss.
Impairment of assets
Goodwill and intangible assets that have an indefinite
useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances
indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in
use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash
inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial
assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting
period.
Cash and cash equivalents
For the purpose of presentation in the statement
of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities
in the balance sheet.
Trade receivables
Trade receivables are recognised initially at
the amount of consideration that is unconditional, unless they contain significant financing components when they are recognised at fair
value. They are subsequently measured at amortised cost using the effective interest method, less loss allowance. See note 9 for further
information about the Group’s accounting for trade receivables and note 4 for a description of the Group’s impairment policies.
Trade and other payables
These amounts represent liabilities for goods
and services provided to the Group prior to the end of the financial year which are unpaid. Trade and other payables are presented as
current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair
value and subsequently measured at amortised cost using the effective interest method.
Intangible assets: Goodwill
Goodwill is measured as described in the business
combination note. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised, but it is tested
for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at
cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating
to the entity sold. Goodwill is allocated to cash-generating units
for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are
expected to benefit from the business combination in which the goodwill arose. The units or groups of units are identified at the lowest
level at which goodwill is monitored for internal management purposes, being the operating segments.
Other Intangible Assets
Player Contracts, Broadcasting Rights, Brands,
and Customer Relationships were acquired as part of a business combination. They are recognised at their fair value at the date of acquisition
and are subsequently amortised on a straight-line basis as follows:
| Player contracts |
2 years |
| Brands |
10 years |
| Broadcasting Rights |
5 years |
| Customer relationships |
5 years |
Foreign currency translation
Functional and presentation currency
Items included in the financial statements of
each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the
functional currency”).
Transactions and balances
Foreign currency transactions are translated into
the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions, and from the translation of monetary assets and liabilities denominated in foreign currencies at year
end exchange rates, are generally recognized in profit or loss. They are deferred in equity if they relate to qualifying cash flow hedges
and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation.
Foreign exchange gains and losses that relate
to borrowings are presented in the statement of profit or loss, within finance costs. All other foreign exchange gains and losses are
presented in the statement of profit or loss on a net basis within other gains/(losses).
Non-monetary items that are measured at fair value
in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences
on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences
on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognized in profit or loss as
part of the fair value gain or loss, and translation differences on non-monetary assets such as equities classified as at fair value through
other comprehensive income are recognized in other comprehensive income.
Group companies
The results and financial position of foreign
operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation
currency are translated into the presentation currency as follows:
| ● | assets
and liabilities for each balance sheet presented are translated at the closing rate at the
date of that balance sheet. |
| | | |
| ● | income
and expenses for each statement of profit or loss and statement of comprehensive income are
translated at average exchange rates (unless this is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which case income
and expenses are translated at the dates of the transactions), and |
| | | |
| ● | all
resulting exchange differences are recognized in other comprehensive income. |
On consolidation, exchange differences arising
from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges
of such investments, are recognized in other comprehensive income. When a foreign operation is sold or any borrowings forming part of
the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on
sale. Goodwill and fair value adjustments arising on
the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.
Government grants
Grants from the government are recognized at their
fair value where there is a reasonable assurance that the grant will be received, and the Group will comply with all attached conditions.
Investments and other financial assets
Classification
The Group classifies its financial assets in the
following measurement categories:
| ● | those to be measured subsequently at fair value (either through
OCI or through profit or loss), and |
| | | |
| ● | those to be measured at amortized cost. |
The classification depends on the entity’s
business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses
will either be recorded in profit or loss or OCI. For investments in equity instruments that are not held for trading, this will depend
on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair
value through other comprehensive income (FVOCI). The Group reclassifies debt investments when and only when its business model for managing
those assets changes.
Recognition and derecognition
Regular way purchases and sales of financial assets
are recognised on trade date, being the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised
when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially
all the risks and rewards of ownership.
Measurement
At initial recognition, the Group measures a financial
asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that
are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed
in profit or loss. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows
are solely payment of principal and interest.
Debt instruments
Subsequent measurement of debt instruments depends
on the Group’s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement
categories into which the Group classifies its debt instruments:
Amortized cost: Assets that are held for collection
of contractual cash flows, where those cash flows represent solely payments of principal and interest, are measured at amortised cost.
Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising
on derecognition is recognised directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and
losses. Impairment losses are presented as separate line item in the statement of profit or loss.
FVOCI: Assets that are held for collection of
contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal
and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment
gains or losses, interest income and foreign exchange gains and losses, which are recognised in profit or loss. When the financial asset
is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised
in other gains/(losses). Interest income from these financial assets is included in finance income using the effective interest rate method.
Foreign exchange gains and losses are presented in other gains/(losses), and impairment expenses are presented as separate line item in
the statement of profit or loss. FVPL: Assets that do not meet the criteria for
amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognised
in profit or loss and presented net within other gains/(losses) in the period in which it arises.
Equity instruments
The Group subsequently measures all equity investments
at fair value. Where the Group’s management has elected to present fair value gains and losses on equity investments in OCI, there
is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends
from such investments continue to be recognized in profit or loss as other income when the Group’s right to receive payments is
established.
Changes in the fair value of financial assets
at FVPL are recognised in other gains/(losses) in the statement of profit or loss as applicable. Impairment losses (and reversal of impairment
losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
Impairment
The Group assesses on a forward-looking basis
the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied
depends on whether there has been a significant increase in credit risk.
For trade receivables, the Group applies the simplified
approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables, see
note 4 for further details.
Borrowings
Borrowings are initially recognised at fair value,
net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of
transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest
method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable
that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there
is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity
services and amortised over the period of the facility to which it relates.
Borrowings are removed from the balance sheet
when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial
liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred
or liabilities assumed, is recognised in profit or loss as other income or finance costs.
Where the terms of a financial liability are renegotiated
and the entity issues equity instruments to a creditor to extinguish all or part of the liability (debt for equity swap), a gain or loss
is recognised in profit or loss, which is measured as the difference between the carrying amount of the financial liability and the fair
value of the equity instruments issued. Borrowings are classified as current liabilities unless the Group has an unconditional right to
defer settlement of the liability for at least 12 months after the reporting period.
Changes in accounting policies
New and amended standards and interpretations.
The following new standards and amendments were
adopted by the Group for the first time in the current financial reporting period with no resulting impact to the consolidated financial
statement:
Amendments to IFRS 9, IAS 39, and IFRS 7.
Forthcoming requirements
A number of new
standards, amendments to standards and interpretations issued are not yet effective and have not been applied in preparing these
financial statements. These new standards, amendments to standards and interpretations are not expected to have a material impact on
the Group’s financial statements as the Group has no transactions that would be affected by these new standards and
amendments. The principal new standards, amendments to standards
and interpretations are as follows:
| ● | IAS 1 Presentation of Financial Statements - effective 1
January 2023 |
| | | |
| ● | IAS 8 Accounting Policies, Changes in Accounting Estimates
and Errors - effective 1 January 2023 |
| | | |
| ● | IAS 12 Income Taxes (amended) - effective 1 January 2023 |
| | | |
| ● | IA1 Presentation of Financial Statements - effective 1 January
2024 |
| | | |
| ● | IAS 16 leases - effective 1 January 2024 |
There would not have been a material impact on
the financial statements if these standards had been applied in the current year.
|