In continuation with the Savola Group (Savola) announcement of its Phase 1 disclosure requirements regarding its transition plan to adopt IFRS dated August 31, 2016 and Phase II disclosure requirements dated October 26, 2016, we are pleased to announce the update as per the Phase III disclosure requirements, as follows:
Savola has finalized the accounting policies necessary for the preparation of the financial statements under IFRS. These accounting policies have been approved by the Board of Directors on November 29, 2016 and shall enable a seamless transition to IFRS by First Quarter 2017 as per the applicable regulatory requirements.
Savola has finalized the management purpose IFRS transition balance sheet (statement of financial position prepared under IFRS for management purposes) as at January 1, 2016 ( the date of transition) which forms an integral part of Savola's IFRS management accounts for the period ended March 31, 2016, being the comparative period, and the first statutory IFRS financial statements for the period ending March 31, 2017.
The significant effects of transition to IFRS are as follows:
- Total assets will increase by Saudi Riyal 562 million;
- Total liabilities will increase by Saudi Riyals 537 million;
- Total equity including the non- controlling interest will increase by Saudi Riyal 25 million;
- Equity attributable to the shareholders of Savola will decrease by Saudi Riyal 330 million; and
- Non-controlling interest will increase by Saudi Riyal 355 million.
The above changes are mainly attributable to the following:
a. Consolidation of an investee, Herfy Foods Services Company, under IFRS (classified as an associate under the pre-convergence GAAP) on account of reassessment of control in view of the consolidation requirements under IFRS 10- (Consolidated Financial Statements). This has resulted in a net increase of Saudi Riyals 823 million and Saudi Riyals 453 million in total assets and total liabilities respectively as of the date of transition.
Accordingly, the non-controlling interest as at the date of transition has increased by Saudi Riyals 370 million.
b. Straight lining of rentals under operating lease arrangements resulting in the recognition of a cumulative lease expense of Saudi Riyals 214 million in retained earnings with a corresponding impact on the related balances.
c. Recognition of an amount of Saudi Riyals 143 million as an increase in retained earnings representing unamortized balance of deferred gain on sale and lease back arrangements that is eligible for upfront recognition under IFRS.
d. Other adjustments amounting to Saudi Riyals 259 million and relating to end of service benefits, deferred costs, assets restoration cost, sales to distributors, investment in associates, property, plant & equipment and deferred tax liability has resulted in a decrease in Savola's retained earnings.
Moreover, in respect of the application of IFRS 1, Savola has elected to apply the following allowed exemptions:
a. Recycling of the foreign currency translation reserve of Saudi Riyals 1.02 billion as at the date of transition to the retained earnings. The said adjustment has had no effect on the total equity balance of Savola as of that date.
b. Application of Business combination accounting under IFRS 3 prospectively from the date of transition and accordingly certain previously recognized intangibles have been subsumed with the related goodwill recognized at the time of corresponding business combination transactions.
Further, we would like to mention that Savola is facing no hindrances with respect to the IFRS convergence and reaffirms its readiness for the preparation and presentation of the first statutory IFRS financial statements for the quarter ending March 31, 2017 within the applicable regulatory period.
The Capital Market Authority and Saudi Exchange take no responsibility for the contents of this disclosure, make no representations as to its accuracy or completeness, and expressly disclaim any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this disclosure, and the issuer accepts full responsibility for the accuracy of the information contained in it and confirms, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts or information the omission of which would make the disclosure misleading, incomplete or inaccurate.