Basis of preparation
2.2.1.1 1. ForFarmers N.V.
ForFarmers N.V. (the ‘Company’) is a public limited company domiciled in the Netherlands. The Company’s registered office is at Kwinkweerd 12, 7241 CW Lochem. The consolidated interim financial statements for the financial year ended 31 December 2017 comprise ForFarmers N.V. and its subsidiaries (jointly the 'Group' or 'ForFarmers') and the Group’s interest in its joint venture.
As at 31 December 2017, the capital interest in the Company is distributed as follows:
ForFarmers N.V. is an internationally operating feed company that offers Total Feed solutions for conventional and organic livestock farming. ForFarmers gives its very best “For the Future of Farming”: for the continuity of farming and for a financially secure agricultural sector.
2.2.1.2 2. Basis of accounting
Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRSs, hereafter stated as IFRS) and section 2:362 sub 9 of the Netherlands Civil Code.
The consolidated (and company) financial statements were approved for issuance by the Executive Board and Supervisory Board on 12 March 2018. The Group’s financial statements will be subject to adoption by the Annual General Meeting of Shareholders on 26 April 2018.
The consolidated financial statements are prepared in accordance with the going concern principle.
Changes in accounting policies in 2017
There were no new standard or changes in accounting policies, effective from 1 January 2017, that materially impact the Group. For standards issued but not yet effective a reference is made to Note 40.
Comparative information
When necessary prior year amounts have been adjusted to conform to the current year presentation.
Accounting policies
Details of the Group’s significant accounting policies are included in Notes 38 and 39.
2.2.1.3 3. Functional and presentation currency
These consolidated financial statements are presented in euro, which is the Company’s functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated. The subsidiaries' functional currencies are mainly the euro and Pound sterling. Most of the transactions, and resulting balance occur in the local and functional currency. The following exchange rates have been applied for the during the year:
| Rate as at 31 December | €1,00 = |
| 2015 | £0,7340 |
| 2016 | £0,8562 |
| 2017 | £0,8872 |
| Average rate | €1,00 = |
| 2016 | £0,8195 |
| 2017 | £0,8767 |
2.2.1.4 4. Use of judgements and estimates
In preparing these consolidated financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. The judgements, assumptions and estimates have been made, taking into account the opinions and advice of (external) experts. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
A. Judgements
Information about judgements made in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements is included in the following notes:
- revenue: whether the Group acts as an agent in the transaction rather than as a principal (Note 8);
- consolidation: whether the Group has de facto control over an investee (Note 32);
B. Assumption and estimation uncertainties
The estimates and assumptions considered most critical are:
- measurement of defined benefit obligations: key actuarial assumptions (Note 15);
- recognition of deferred tax assets: availability of future taxable profit against which carry forward tax losses can be used (Note 16);
- useful life of property, plant and equipment and intangible assets (Notes 17 and 18);
- impairment test: key assumptions underlying recoverable amounts (Note 18);
- valuation of trade and other receivables (Note 21); and
- recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow of resources relating to provisions (Note 29).
C. Measurement of fair values
A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.
‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.
When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorised into different Levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The Group recognises transfers between Levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
If the inputs used to measure the fair value of an asset or a liability might be categorised in different Levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same Level of the fair value hierarchy as the lowest Level input that is significant to the entire measurement.
If an asset or a liability measured at fair value has a bid price and an ask price, then the Group measures assets and long positions at a bid price and liabilities and short positions at an ask price.
The best evidence of the fair value of a financial instrument on initial recognition is normally the transaction price – i.e. the fair value of the consideration given or received. If the Group determines that the fair value on initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique for which any unobservable inputs are judged to be insignificant in relation to the measurement, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value on initial recognition and the transaction price. Subsequently, that difference is recognised in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out.
The Group has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the CFO.
The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that these valuations meet the requirements of IFRS, including the Level in the fair value hierarchy in which the valuations should be classified.
Significant valuation issues are reported to the Group’s Audit Committee.
Further information about the assumptions made in measuring fair values is included in the following notes.
Share-based payment arrangements (Note 14)
For depositary receipts granted to employees, the fair value of the depositary receipts is based on the market price of the entity’s shares as publically listed (until 24 May 2016: as listed on Captin Equity Management Services), and if necessary adjusted to take into account the terms and conditions upon which the depositary receipts were granted.
Property, plant and equipment and investment property (Notes 17 and 19)
The fair value of property, plant and equipment and investment property recognised as a result of a business combination, is the estimated amount for which property could be exchanged between a willing buyer and a willing seller in an arm’s length transaction wherein the parties have each acted knowledgeably. The fair value of items of property, plant and equipment and investment property is based on the market approach and cost approaches using quoted market prices for similar items when available and depreciated replacement costs when appropriate. Depreciated replacement cost reflects adjustments for physical deterioration as well as functional and economic obsolescence.
Intangible assets, excluding goodwill (Note 18)
The fair value of patents and trademark names acquired in a business combination is based on the discounted estimated royalty payments that are expected to be avoided as a result of the patents or trademarks being owned. The fair value of customer relationships acquired in a business combination, is determined using the multi-period excess earnings method. The fair value of other intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the assets.
Inventories (Note 22)
The fair value is determined based on the estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories.
Biological assets (Note 23)
Where there is an active market for biological assets, the quoted price in that market is the appropriate basis for determining the fair value of that asset. If an active market does not exist, one or more of the following methods are used to estimate the fair value:
- most recent transaction price (provided that there has not been a significant change in economic circumstances between the date of that transaction and the balance sheet date);
- market prices for similar assets with adjustments to reflect differences.
In measuring fair value of biological assets, management estimates are required for the determination of the fair value. These estimates and judgements relate to the average weight of an animal, mortality rates and the stage of the animal’s life.
Derivatives (Note 31)
The fair value of derivatives is determined using available market information or estimation methods. In case of estimation methods, the fair value is approximated:
- by inference from the fair value of its components or of a similar instrument, in case a reliable fair value can be demonstrated for its components or for a similar instrument; or
- using generally accepted valuation models and techniques.
Financial instruments, other than derivatives (Note 31)
The fair value at the first recognition of trade and other receivables, trade and other payables, outstanding for longer than a year, is determined on the present value of future cash flows, discounted at market interest at the balance sheet date (amortised cost), taking into account possible write-offs due to impairments or uncollectability (applicable if it regards an asset). When determining the effective interest rate, premiums or discounts, at the moment of acquisition, and transaction costs are taken into account.
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