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1. Basis of presentation, consolidation and general accounting policies
Basis of presentation
Precious Woods Group (hereinafter referred to as “Precious Woods” or “the Group”) is one of the leading companies in sustainable management of tropical forests globally. The parent company, Precious Woods Holding Ltd., has its registered office in Zug. The Group’s subsidiaries are organized and operate under the laws of Brazil, Gabon, Netherlands, British Virgin Islands and Luxembourg.
The consolidated financial statements for the Precious Woods Group have been prepared on a historical cost basis, except for leasing, biological assets and land, that have been measured at fair value, and in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
The consolidated financial statements are presented in euros, as the Group’s revenues, profits and cash flows are principally denominated in euros. All values are rounded to the nearest thousand (in thousand EUR), except when otherwise indicated. The functional currency of the parent company Precious Woods Holding Ltd. is swiss francs.
Due to rounding, numbers presented throughout this report may not add up precisely to the totals provided. All ratios and variances are calculated using the underlying amount rather than the presented rounded amount.
Change in scope of consolidation in 2020
There was one change in the scope of consolidation, implemented in 2020:
Precious Woods Tropical Gabon Industrie S.A., which performed the veneer business in Gabon for Precious Woods Group, entered into an arrangement with a partner’s business, owned 100 % by Arbor Group, France, to benefit from economies of scale. Precious Woods Tropical Gabon Industrie S.A. acquired 49 % shares and voting rights in Placage Déroule du Gabon S.A. by contribution of net assets. The deal took place on 1st October 2020. At the same time, Placage Déroule du Gabon S.A. was renamed to Compagnie des Placages de la Lowé S.A.
Significant accounting judgments, estimates and assumptions
The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. The resulting accounting estimates will, by definition, rarely equal the related actual results.
The estimates and assumptions, which may have a significant risk of causing a material impact on the consolidated financial statements, relate primarily to
- Biological assets (see Note 11),
- Leasing and right-of-use assets (see Note 21),
- Deferred income tax assets (see Note 28),
- Land titles in Brazil (see Note 10),
- Provisions (see Note 26),
- Contingencies (see Note 27) and
- Defined benefit obligations (see Note 29)
Impact of the Covid-19 pandemic
Since the start of the pandemic at the beginning of 2020, Precious Woods has experienced various difficulties. Since then, there have been delays with regulatory approvals, delivery and procurement problems and several production restrictions due to illness. This resulted in high inventory levels and additional capital needs. Sales prices dropped globally in our sector, which was the biggest economic impact on the results of the Group. Market prices started to rise again in early 2021, but the other influences and restrictions remain for the time being.
New or revised IFRS standards, amendments and interpretations
Certain IFRS and interpretations were revised or introduced. The relevant ones for the Group are,
effective on or after 1 January 2020:
- IFRS 3 Definition of a business – This amendment had no impact on the consolidated financial statements.
- Interest Benchmark Reform – These amendments to IFRS 9, IAS 39 and IFRS 7 had no impact on the consolidated financial statements.
- Definition of “material” – These amendments to IAS 1 and IAS 8 were respected in the preparation of the consolidated financial statements.
effective on or after 1 June 2020:
- IFRS 16 Covid-19-Related Rent Concessions – This amendment had no impact on the consolidated financial statements.
effective on or after 1 January 2021:
The Group does not expect any impact on its consolidated financial statements from new or revised IFRS standards and amendments effective for annual periods beginning on or after 1 January 2021.
The material general accounting policies are as follows:
The subsidiaries’ accounting records are maintained in the legal currency of the country in which they operate and which is their functional currency. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the transaction dates. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized through profit or loss. The currency translations rates are presented in Note 30.
The financial statements of the subsidiaries have been translated from their functional currencies to the presentation currency (EUR). All assets and liabilities are translated by using the rate of exchange prevailing at the reporting date. Shareholders’ equity accounts are translated at historical exchange rates. Translation differences from changes in share capital of subsidiaries are recognized directly in equity. The statement of profit or loss is translated at the average rate for the year. Translation differences are recognized as currency translation effects in other comprehensive income.
b. Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. Such assessment occurs on the basis of events or changes in circumstances, which indicate that the value of an asset may be impaired. If such indications exist, the recoverable amount will be determined for the respective asset. If the asset does not generate cash inflows that are largely independent from other assets, the recoverable amount is determined on the lowest group of assets for which cash inflows are separable. An impairment loss is recognized, if the carrying value exceeds the recoverable amount. The recoverable amount is the higher of value in use and fair value less costs of disposal. The impairment is recorded in the statement of profit or loss.
All specific accounting policies may be found adjacent to the corresponding note on the following pages.