The condensed consolidated interim financial statements of Total Produce plc as at, and for the six months ended 30 June 2019, have been prepared in accordance with IAS 34 Interim Financial Reporting,as adopted by the EU. The accounting policies and methods of computation adopted in the preparation of the financial information are consistent with those set out in the Group's consolidated financial statements for the year ended 31 December 2018, with the exception of those disclosed below, which were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.
The interim financial information for both the six months ended 30 June 2019 and the comparative six months ended 30 June 2018 is unaudited. The financial information for the year ended 31 December 2018 represents an abbreviated version of the Group's statutory financial statements for that year. Those statutory financial statements contained an unqualified audit report and have been filed with the Registrar of Companies.
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended 31 December 2018.
Changes in significant accounting policy and disclosures
Except as described below, the accounting policies applied in these interim financial statements are the same as those applied in the Group's consolidated financial statements as at 31 December 2018.
The changes in accounting policy will be reflected in the Group's consolidated financial statements as at 31 December 2019.
The Group has initially adopted IFRS 16 Leaseswith effect from 1 January 2019
A number of new standards are also effective from 1 January 2019 but they have not had a material impact on the Group's consolidated financial statements.
IFRS 16 Leases
The Group has initially adopted IFRS 16 Leaseswith effect from 1 January 2019.
IFRS 16 introduces a single lessee accounting model to be adopted and accordingly the majority of all lease agreements will now result in the recognition of a right-of-use asset and a lease liability on the balance sheet. This will increase the Group's recognised assets and liabilities. The income statement charge in relation to all leases will now comprise a depreciation element relating to the right-of-use asset and also a financing charge relating to the lease liability. Lessor accounting remains similar to previous accounting policies.
The Group has applied IFRS 16 using the modified retrospective approach on transition, under which the cumulative effect of initial application is recognised in equity as an adjustment to the opening balance of retained earnings, non-controlling interest and currency translation reserve at 1 January 2019. The comparative information for prior periods has not been re-stated. It is presented as previously reported under IAS 17 and related interpretations.
The details of the changes in accounting policies are disclosed below:
Definition of a lease
Under IFRS 16 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. On transition to IFRS 16, the Group used the practical expedient to grandfather the assessment of which contracts were leases and therefore applied IFRS 16 on transition only to those contracts that had previously been identified as leases.
Changes as a lessee
As a lessee, the Group previously classified leases as operating or finance leases based on whether the lease transferred substantially all of the risks and rewards of ownership. Under IFRS 16, the Group recognises right-of-use-assets and lease liabilities for most leases on its balance sheet. However, the Group has elected not to recognise right-of-use assets and lease liabilities for some short-term leases and leases of low-value assets. The Group recognises the lease payments for these leases as an expense on a straight-line basis over the lease term.
Accounting policies applied in respect of leases
The Group recognises a right-of-use asset and a lease liability at the lease commencement date.
The right-of-use asset is initially measured at cost and subsequently at cost less accumulated depreciation and impairments and adjusted for certain remeasurements of the lease liability. The cost of the right-of-use asset includes the lease liability recognised, any initial direct costs, restoration costs and payments made on or before the lease commencement date less any lease incentives received. The right-of-use asset is depreciated on a straight line basis over the lower of the lease term and the useful life of the asset. Where the lease contains a purchase option and the lessee is reasonably certain to exercise the purchase option the asset is depreciated over the useful life of the asset. Right-of-use assets are subject to impairment testing.
The lease liability is initially measured as the present value of the lease payments to be made over the term of the lease, discounted using the rate implicit in the lease or, where this is not available, the Group's incremental borrowing rate. Lease payments include fixed and variable lease payments and amounts expected to be paid under residual value guarantees. Lease payments also include the exercise price of a purchase option where the Group is reasonably certain that they will exercise the option and also any termination costs associated with a lease where the lease term reflects the termination of the lease.
The lease liability is subsequently increased by the interest cost of the lease liability and decreased by lease payments made. The lease liability is remeasured when there is a change in future lease payments as a result of a change in an index or rate, a change in the amount expected to be paid under a residual value guarantee, or a change in the assessment of whether a purchase or termination option is reasonably expected to be exercised or not exercised. The Group has availed of the practical expedient not to separate lease components from any associated non-lease components for leases of plant and equipment and motor vehicles.
The Group has applied judgement in determining the lease term for leases where they are the lessee and the lease contract contains renewal and/or termination options. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term which in turn impacts the right-of-use asset and lease liability to be recognised.
At transition, for leases previously classified as operating leases under IAS 17, lease liabilities were measured as the present value of the remaining lease payments, discounted at the incremental borrowing rate at 1 January 2019. Right-of-use assets were measured at either:
§ their carrying amount if IFRS 16 had been applied since the commencement date, discounted using the incremental borrowing rate at 1 January 2019. The Group applied this approach for certain property leases; or
§ an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments. The Group applied this approach to all other leases.
The Group used the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17:
§ Applied the exemption not to recognise right-of-use assets and lease liabilities for leases with less than 12 months of a lease term.
§ Excluded initial direct costs from measuring the right-of-use asset at the date of initial application.
§ Used hindsight when determining the lease term if the contract contained options to extend or terminate the lease.
At transition, for leases previously classified as finance leases under IAS 17, the carrying amount of the right-of use asset and lease liability at 1 January 2019 were determined at the carrying amount of the lease asset and lease liability under IAS 17 immediately before that date.