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AQUILA PART PROD COM S.A. 

Consolidated Financial Statements

As at and for the year ended

31 December 2021

CONTENTS:      PAGE:

Independent auditor`s report     1 - 2 

Consolidated statements of financial position     3 - 4 

Consolidated statements of profit or loss and other comprehensive income     5 - 6 

Consolidated statements of changes in equity     7 - 8 

Consolidated statements of cash flows     9 - 10 

Notes to the consolidated financial statements     11 - 67 

Basis of preparation

1. Reporting entities and general information     11

2. Basis of accounting     12

3. Functional and presentation currency     12

4. Use of judgments and estimates     13

Accounting policies

5. Basis of measurement     14

6. Significant accounting policies     14

7. New standards and interpretations not yet adopted     28

Performance for the year

8. Revenue     29

9. Other income     30

10. Other operating expenses     30

11. Net finance costs     31

12. Earnings per share     31

13. Employee benefits     32

Income taxes

14. Income taxes     32

Assets

15. Inventories     34

16. Trade receivables     34

17. Other receivables     36

18. Cash and cash equivalents     36

19. Property, plant and equipment     37

20. Intangible assets and goodwill     38

21. Investment property     40

22. Loans to related parties and long term receivables from related parties      41

Equity and liabilities

23. Capital and reserves     43

24. Trade payables     45

25. Other payables     45

26. Loans and borrowings     46

27. Leases     50

Financial instruments

28. Financial instruments - Fair values and risk management     52

Other information

29. Related parties     59

30. Mergers and acquisitions with entities under common control     61

31. Contingencies     64

32. Segment reporting     64

33. Subsequent events     65

34. Covid impact     66

Signed and approved at 19 April 2022:

Signed and approved at 19 April 2022:

Signed and approved at 19 April 2022:

Signed and approved at 19 April 2022:

Signed and approved at 19 April 2022:

1. REPORTING ENTITIES AND GENERAL INFORMATION

1. General information about the Group

These financial statements are the consolidated financial statements of the group formed by AQUILA PART PROD COM SA ("the Company" or "Aquila" or "the Parent") and its subsidiaries PRINTEX S.A. and TRIGOR AVD S.R.L. (together "the Aquila Group").

The Group's entities headquarters and activities are the following:

Based on General Shareholders meeting from 8 June 2021, Aquila Part Prod Com SA increased the share capital with RON 16,975,040 through issue of 1,697,504 shares with a par value of RON 10.  Issue of shares was performed against incorporation in full of the statutory share premium determined by the merger with Seca Distribution SRL. Additionally, the Company modified the par value of the shares from RON 10 to RON 0.15 through stock split, total number of shares issued by the Company after the stock split is 133,333,600.

In November 2021, Aquila Part Prod Com SA increased the share capital with RON 10,000,020 through issue of 66,666,800 shares with a par value of RON 0.15. The issued shares were used for the initial public offer where Aquila Part Prod Com SA received RON 355,157,710 (gross amount: RON 366,667,400, broker fee: 11,509,689).

As at 31 December 2021, the shareholders of the Company, are Mr. Vasile Constantin Catalin and Mr. Dociu Alin Adrian, each holding 33.3% in each company and a series of other shareholders which hold a combined stake of 33.4%.

As at 31 December 2020, the shareholders of the Company, are Mr. Vasile Constantin Catalin and Mr. Dociu Alin Adrian, each holding 50% in each company. The number of shares of the Company is as follows:

1.     REPORTING ENTITIES AND GENERAL INFORMATION (CONTINUED)

(a)     General information about the Group

Aquila's subsidiaries are the following:

* AGRIROM S.R.L. was absorbed through merger by AQUILA PART PROD COM S.A. starting with 1 January 2021.

2. BASIS OF ACCOUNTING

The consolidated financial statements are prepared in accordance with the requirements of the Ministry of Public Finance Order no. 2844/2016, with subsequent amendments for the approval of accounting regulations conforming with International Financial Reporting Standards as adopted by EUs

The consolidated financial statements have been approved and authorized for issue by the Board of Directors on 22nd March 2022. The financial statements will be submitted for shareholders' approval in the meeting scheduled on 28th April 2022. 

Details of the Group's accounting policies are included in Note 6.

Going concern basis of accounting

The consolidated financial statements have been prepared on a going concern basis, which assumes that the Group will be able to continue its operations in the foreseeable future. 

As at 31 December 2021 the Group's financial position shows net current assets of RON 327 million, mainly as a result of short term deposits of RON 195 million related to IPO, the Group not having any short-term borrowings at this date. The Group continues to trade profitably and generate positive cash flows and management has assessed that the Group is able to meet its obligations as they fall due.

Based on the facts described above, management has assessed that the going concern assumption adopted in the preparation of the consolidated financial statements to be appropriate.

3. FUNCTIONAL AND PRESENTATION CURRENCY

These consolidated financial statements are presented in Romanian Lei (RON), which is the functional currency of all group companies. 

All financial information is presented in RON, except when otherwise indicated.

4. 
   

5. 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. Revisions to estimates are recognised prospectively.

Assumptions and estimation uncertainties 

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities in the next financial year is included in the following notes:

• Note 6 (h) (iii) and 6 (i) (iii) - useful lives of property, plant and equipment and intangible assets;

• Notes 6 (m) (i) , 22,  28 (b) - measurement of ECL allowance for trade receivables, loans to related parties and long-term receivables from related parties;

• Notes 6 (q), 27 and 31 - recognition and measurement provisions and contingent liabilities: key assumptions about the likelihood and magnitude of an outflow of resources; and

• Note 30 (a), (b) and (c) - acquisition of subsidiary: fair value of the consideration transferred.

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.

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;

• 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).

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.

Assumptions and estimation uncertainties

The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Further information about the assumptions made in measuring fair values is included in the following notes:

• Note 28 (a) - financial instruments; and

• Note 30 - acquisition of subsidiary.

6. BASIS OF MEASUREMENT

The consolidated financial statements have been prepared on the cost basis.

7. SIGNIFICANT ACCOUNTING POLICIES

The Group has consistently applied the following accounting policies to all periods presented in these consolidated financial statements.

1. Basis of consolidation 

AQUILA PART PROD COM SA and its subsidiaries PRINTEX SA and AGRIROM SRL are accounted based on consolidation requirements under IFRS-EU, including IFRS 3 Business combinations (see (i) below). 

1. Business combinations 

Acquisitions on or after 1 January 2017

For business acquisitions on or after 1 January 2017, the Group accounts for business combinations using the acquisition method when control is transferred to the Group (see accounting policy 6 (a) (ii)). The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment (see accounting policy 6 (m) (ii)). Any gain on a bargain purchase is recognised in profit or loss immediately. 

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss. 

Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.

Acquisitions prior to 1 January 2017

As part of its transition to IFRS-EU accounting policies, the Group elected not to restate the business combinations that occurred prior to 1 January 2017. In respect of acquisitions prior to 1 January 2017, the Group did not recognise any goodwill under Aquila Group's previous accounting framework, Order of the Minister of Public Finance no. 1802/2014 in Romania.

2. Non-controlling interests (NCI)

The Group measures any non-controlling interests in a company at their proportionate share of the acquiree's identifiable net assets at the date of acquisition.

Changes in the shareholders' interest in a company that do not result in a loss of control are accounted for as equity transactions. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the respective company.

3. Loss of control

When the shareholders lose control over a company included in the combination, the Group derecognises the assets and liabilities of the company, and any related NCI and other components of equity. Any resulting gain or loss is recognised in profit or loss, except for the amounts in relation to that company previously recognised in other comprehensive income, which are recognised on the same basis as would have been required if the Parent had directly disposed of the related assets or liabilities . Any interest retained in the company is measured at fair value when control is lost.

4. Transactions eliminated in the consolidation

Intra-group balances and transactions between all consolidated entities, and any unrealized income and expenses arising from intra-group transactions, are eliminated. 

6.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2. Revenue from contracts with customers

Under this standard, revenue is recognized when or as the customer acquires control over the goods or services rendered, at the amount which reflects the price at which the Group is expected to be entitled to receive in exchange of those goods or services. Revenue is measured based on the consideration to which the Group expects to be entitled in a contract with a customer and excludes amounts collected on behalf of third parties (such as VAT, excise or other taxes related to sale).

The following table provides information about the nature and timing of the satisfaction of performance obligations in contracts with customers and the related revenue recognition policies.

6.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(b)     Revenue from contracts with customers (continued)

3. Finance income and finance costs

The Group's finance income and finance costs mainly include:

• interest income;

• interest expense; and

• foreign currency gain or loss on financial assets and financial liabilities.

Interest income and expense are recognised using the effective interest method. 

6.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

4. Foreign currency 

1. Foreign currency transactions

Transactions in foreign currencies are translated to the functional currency at the exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the exchange rate at the reporting date, as communicated by the National Bank of Romania and National Bank of Moldova. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated to the functional currency at the exchange rate when the fair value was determined. Foreign currency differences are recognised in profit or loss. Non-monetary items that are measured based on historical cost in a foreign currency are not translated.

2. Foreign operations

The assets and liabilities of foreign operation, including goodwill and fair value adjustments arising on acquisition, are translated into RON at the exchange rates at the reporting date. 

The income and expenses of foreign operations are translated into RON at the exchange rates at the dates of the transactions.

Foreign currency differences are recognized in OCI and accumulated in the translation reserve. When a foreign corporation is disposed of in its entirety or partially, such that control, significantly influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal.

5. Employee benefits

1. Short-term employee benefits

Short-term employee benefits are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

2. Defined contribution plans

The Group, in the normal course of business, makes payments to the state-management pension schemes on behalf of its employees. All employees of the Group are members of the state pension plans.

The Group does not operate any other pension scheme or postretirement benefit plan and, consequently, has no obligation in respect of pensions. In addition, the Group has no obligation to provide further benefits to current and former employees. The Group does not have any defined benefit plans.

6. Income tax

Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a business combination or items recognised directly in equity or in other comprehensive income.

1. Current tax

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to tax payable or receivable in respect of previous years. 

It is measured using tax rates enacted or substantively enacted at the reporting date.

6.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(f)     Income tax (continued)

2. Deferred tax

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

• temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

• temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

• taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.

The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. 

Deferred tax assets and liabilities are offset only if certain criteria are met. Unrecognized deferred tax assets are reassessed at each reporting date and recognized to the extent that it has become probable that the future taxable profits will be available against which they can be used.

7. Inventories

Inventories consist mainly of goods for resale and consumables. 

The cost of inventories is calculated using the first-in, first-out cost formula. The cost of inventories includes all costs of purchase and other costs incurred in bringing the inventories to their present location and condition. 

Inventories are measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

8. Property, plant and equipment

1. Recognition and measurement

Property, plant and equipment are stated initially at cost, which includes purchase price and other costs directly attributable to acquisition and bringing the asset to the location and condition necessary for their intended use. 

After initial recognition, all items of property, plant and equipment are measured at cost less any accumulated depreciation and any accumulated impairment losses.

If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment.

Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss.

6.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(h)     Property, plant and equipment (continued)

2. Subsequent expenditure

Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Group.

3. Depreciation

Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated residual values using the straight-line method over their estimated useful lives, and is recognised in profit or loss. Land is not depreciated.

The estimated useful lives of property, plant and equipment are as follows:

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

4. Reclassification to investment property

When the use of a property changes from owner-occupied to investment property, the property is reclassified accordingly. 

9. Intangible assets and goodwill 

1. Recognition and measurement

Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated impairment losses. 

Brands are recognised only on business combinations.

Brands and other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortization and any accumulated impairment losses. 

2. Subsequent expenditure

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.

3. Amortization

Amortization is calculated to write off the cost of intangible assets using the straight-line method over their estimated useful lives, and is recognised in profit or loss. 

Brands are amortized over 5-6 years according the management assessment of the period over which they are expected to generate cash inflows. The estimated useful lives of software are 3-5 years.

Amortization methods, useful lives are reviewed at each reporting date and adjusted if appropriate.

6.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

10. Investment property

Investment property is initially measured at cost and subsequently at cost less any accumulated depreciation and any accumulated impairment losses. 

The Group is using linear depreciation method, buildings within investment property are amortised over 20-40 years. Land is not depreciated.

Any gain or loss on disposal of investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss.

Rental income from investment property is recognised as other income on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease. 

11. Financial instruments

5. Recognition and initial measurement

Trade receivables and loans are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instrument.

A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

6. Classification and subsequent measurement 

Financial assets

On initial recognition, the Group classifies a financial asset as measured at amortised cost or FVTPL or  FVTOCI.

Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

• it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

• its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets that meet the following conditions are measured subsequently at fair value through other comprehensive income (FVTOCI):

• the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets; and

• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

By default, all other financial assets are measured subsequently at fair value through profit or loss (FVTPL).

As at 31 December 2021 and 31 December 2020 the Group does not have any financial assets classified under this category.

6.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(k)     Financial instruments (continued)

(ii)     Classification and subsequent measurement (continued)

Financial assets measured at amortized cost

These assets are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses via loss allowance account. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss . Any gain or loss on derecognition is recognised in profit or loss.

Financial liabilities - Classification, subsequent measurement and gains and losses

Financial liabilities are classified as measured at amortised cost or FVTPL. 

A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. As at 31 December 2021 and 31 December 2020 the Group does not have any financial assets classified under this category.

Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss, all being classified at amortized cost

Financial liabilities of the Group include bank borrowings, bank overdrafts and trade payables.

7. Derecognition

Financial assets

The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire based on the initial agreements concluded or based on restructuring agreements, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

The Group enters into transactions whereby it transfers assets recognised in its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognised.

When the Group exchanges with the existing counterparty one debt instrument into another one with the substantially different terms, such exchange is accounted for as an extinguishment of the original financial asset and the recognition of a new financial asset. Similarly, the Group accounts for substantial modification of terms of an existing asset or part of it as an extinguishment of the original financial asset and the recognition of a new financial asset. It is assumed that the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective rate is at least 10 per cent different from the discounted present value of the remaining cash flows of the original financial asset. If the modification is not substantial, the difference between: (1) the carrying amount of the financial asset before the modification; and (2) the present value of the cash flows after modification is recognised in profit or loss as the modification gain or loss within other gains and losses.

Financial liabilities

The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value.

On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss.

6.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(k)     Financial instruments (continued)

(iii)     Derecognition (continued)

Financial liabilities (continued)

The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss. When the Group exchanges with the existing lender one debt instrument into another one with the substantially different terms, such exchange is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. 

Similarly, the Group accounts for substantial modification of terms of an existing liability or part of it as an extinguishment of the original financial liability and the recognition of a new liability. It is assumed that the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective rate is at least 10 per cent different from the discounted present value of the remaining cash flows of the original financial liability. If the modification is not substantial, the difference between: (1) the carrying amount of the liability before the modification; and (2) the present value of the cash flows after modification is recognised in profit or loss as the modification gain or loss within other gains and losses.

8. Offsetting

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.

12. Share capital

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares, net of any tax effects, are recognised as a deduction from equity. The Group recognizes changes in share capital in accordance with the applicable legislation and after approval of the General Meeting of Shareholders and registration according to the applicable legal obligations.

Until 31 December 2003 the economy of Romania was considered hyperinflationary. Consequently, share capital and legal reserves setup before 31 December 2003 were adjusted for the effects of hyperinflation until that date in accordance with IAS 29.

13. Impairment

9. Non-derivative financial assets

The Company recognizes a loss allowance for expected credit losses ("ECLs") on financial assets measured at amortised cost.

The expected credit losses on these financial assets are estimated using a provision matrix based on the Group's historical credit loss experience as allowed by the simplified approach in IFRS 9.

The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

The Group considers a financial asset to be in default when: 

• the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realising security (if any is held); or

• the financial asset is more than 90 days past due.

Measurement of ECLs

IFRS 9 does not prescribe a single method to measure ECLs. The method used by the company to measure ECLs is based on a provision matrix considering historical loss rates. IFRS 9 allows entities to use practical expedients when estimating ECLs for trade receivables.

6.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(m)     Impairment (continued)

(i)     Non-derivative financial assets (continued)

Presentation of allowance for ECL in the statement of financial position

Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.

POCI assets

Purchase dor Originated Credit Impaired financial assets (POCI) are financial assets that are credit impaired on initial recognition. POCI assets are recorded at fair value at original recognition and interest income is subsequently recognized based on a credit-adjusted effective interest rate (EIR). The credit-adjusted EIR is the interest rate that, at initial recognition, discounts the estimated future cash flows (including credit losses) to the amortised cost of the POCI financial asset. The ECL allowance is only recognised or released to the extent that there is a subsequent change in the expected credit losses. The Group recognises the cumulative changes in lifetime ECL since initial recognition, based on a probability-weighting of multiple scenarios, discounted by the credit-adjusted EIR.

10. Non-financial assets

At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. Goodwill is tested annually for impairment.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, 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 CGU.

An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.

Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

14. Dividends

Dividends are recognized as a deduction from equity in the period in which their distribution is approved and recognised as a liability to the extent it is unpaid at the reporting date. Dividends are disclosed in the notes to the financial statements when their distribution is proposed after the reporting date and before the date of the issuance of the financial statements.

6.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

15. Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.

16. Contingent assets and liabilities

A contingent liability is:

1. a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group; or 

2. a present obligation that arises from past events but is not recognized because:

1. it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

2. the amount of the obligation cannot be measured with sufficient reliability.

Contingent liabilities are not recognized in the Group's financial statements, but disclosed unless the possibility of an outflow of resources embodying economic benefits is remote.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group.

A contingent asset is not recognized in the Group's financial statements but disclosed when an inflow of economic benefits is probable.

17. Leases

At inception of a contract, the Group assesses whether a contract is, or contains, 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. To assess whether a contract conveys the right to control the use of an identified asset, the Group uses the definition of a lease in IFRS 16. 

11. As a lessee

At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, for the leases of property the Group has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.

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, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

6.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(q)     Leases (continued)

(i)     As a lessee (continued)

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. 

Lease payments included in the measurement of the lease liability comprise the following:

• fixed payments, including in-substance fixed payments;

• 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 under a residual value guarantee; and

• the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.

The lease liability is measured at amortised cost using the effective interest method. The group is using publicly available information to estimate the Incremental Borrowing Rate, the rate used for discounting the future cashflows. The Management considers most relevant the statistics information as published on the website of National Bank of Romania (BNR) in regard to medium to long term loans granted by Commercial Banks from Romania in the currency of the lease contracts. It is remeasured when there is a change in future lease payments arising from a change in a floating interest rate, if there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment. As part of the remeasurement process, the Group revises the discount rate when the remeasurement is determined by a change of the lease term or a change in the assessment of an option to purchase the underlying asset or a change of lease payments due to changes in a floating interest rate. 

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The Group presents right-of-use assets that do not meet the definition of investment property in 'Property, plant and equipment' in the statement of financial position.

Short-term leases and leases of low-value assets

The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets (below RON 25,000 equivalent of EUR 5,000) and short-term leases, including IT equipment. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

12. As a lessor

At inception or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative standalone prices.

When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.

To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

If an arrangement contains lease and non-lease components, then the Group applies IFRS 15 to allocate the consideration in the contract.

6.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

18. Business combinations and legal mergers

Business combinations are accounted for using the acquisition method when control is transferred to the acquirer. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. 

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss. 

Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.

In case of a legal merger following a business combination, where the parent is the surviving entity, the separate financial statements of the parent are a continuation of the Group consolidated financial statements. Hence, the values recognised in the consolidated financial statements become the cost of these assets for the parent. The acquired assets (including investments in subsidiaries, associates, or joint ventures held by the merged subsidiary) and assumed liabilities are recognised at the carrying amounts in the consolidated financial statements as of the date of the legal merger. This includes any associated goodwill, intangible assets, or other adjustments arising from measurement at fair value upon acquisition that were recognised when the subsidiary was originally acquired, less the subsequent related amortisation, depreciation, impairment losses,  as applicable. 

The difference between the amounts assigned to the assets and liabilities in the parent's separate financial statements after the legal merger and the carrying amount of the investment in the merged subsidiary before the legal merger is recognised directly in equity, through retained earnings.

19. Related parties 

A related party is a person or entity that is related to the Group that is preparing its financial statements (referred to as "reporting entity"):

1. A person or close member of that person's family is related to the reporting if that person: 

   • 1. has control or joint control over the reporting entity;

     2. has significant influence over the reporting entity; or

     3. is a member of the key management personnel of the reporting entity or of a parent of the reporting entity;

2. An entity is related to a reporting entity if any of the following conditions apply: 

   • 1. the entity and reporting entity are members of the same group (which means that each parent, subsidiary or fellow is related to the others);

     2. one entity is an associate or joint venture of the other entity (or associate or joint venture of a member of the group of the other entity is a member);

     3. both entities are joint ventures of the same third party;

     4. one entity is a joint venture of a third party and the other entity is an associate of the third party;

     5. the entity is a post-employment defined benefit plan for the benefit of the employees of either the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity;

     6. the entity is controlled or jointly controlled by a person identified in (a);

     7. a person identified in (a) i) has significant influence over the entity or is member of the key management personnel of the entity (or of a parent of the entity);

     8. the entity, or any member of a group of which it is a part, provides key management personnel services to the reporting entity or to the parent of the reporting entity.

6.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

20. Subsequent events 

Events occurring after the reporting date, which provide additional information about conditions prevailing at the reporting date (adjusting events) are reflected in the financial statements. Events occurring after the reporting date that provide information on events that occurred after the reporting date (non-adjusting events), when material, are disclosed in the notes to the financial statements. When the going concern assumption is no longer appropriate at or after the reporting period, the financial statements are not prepared on a going concern basis.

21. Operating profit

Operating profit is the result generated from the continuing principal revenue-producing activities of the Group as well as other income and expenses related to operating activities. Operating profit excludes net finance costs and income taxes.

22. Fair value measurement

'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.

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 (see Note 4).

When one is available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. 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.

If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

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. 

23. IPO Costs

The costs of an IPO that involves both issuing new shares and a stock market listing are accounted for as follows:

• • • • Incremental costs that are directly attributable to issuing new shares are deducted from equity (net of any income tax benefit) in line with, IAS 32.37

      • Costs that relate to the stock market listing, or are otherwise not incremental and directly attributable to issuing new shares, are recorded as an expense in the statement of comprehensive income

      • Costs that relate to both share issuance and listing are allocated between those functions on a rational and consistent basis in line with IAS 32.38. In the absence of a more specific basis for apportionment, an allocation of common costs based on the proportion of new shares issued to the total number of (new and existing) shares represent an acceptable approach.

The Company has performed this analysis and has booked, in Equity, incremental costs directly attributable to issuing new shares, gross of tax, of RON 13,057,088. The current income tax associated to these costs amounts to RON 2,089,134. From a tax perspective, these costs are entirely deductible the year they are incurred. 

8. 
   

9. NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

The Group expects that the adoption of the financial reporting standards below in force at or after 1 January 2022 will not have a material impact on the Group's financial statements.

1. Standards and Interpretations endorsed by the EU

• Amendments to IFRS 16 Leases COVID-19-Related Rent Concessions beyond 30 June 2021 - effective for annual periods beginning on or after 1 April 2021

• Amendment to IAS 16 Property, Plant and Equipment Property, Plant and Equipment - Proceeds before Intended Use - effective for annual periods beginning on or after 1 January 2022

• Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets Onerous Contracts - Cost of Fulfilling a Contract - effective for annual periods beginning on or after 1 January 2022 

• Annual Improvements to IFRS Standards 2018-2020 ( Amendment to IFRS 9 Financial Instruments and Amendment to Illustrative Examples accompanying IFRS 16 Leases) - effective for annual periods beginning on or after 1 January 2022

2. Standards and interpretations that have not yet been endorsed by the EU

• Amendments to IAS 12 Income Taxes Deferred Tax related to Assets and Liabilities arising from a Single Transaction - effective for annual periods beginning on or after 1 January 2023

• Amendments to IFRS 10 and IAS 28 Sale or contribution of assets between an investor and its associate or joint venture - effective date deferred indefinitely.  

• Amendments to IAS 1 Presentation of Financial Statements Classification of Liabilities as Current or Non-current - effective for annual periods beginning on or after 1 January 2023

• Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgments - effective for annual periods beginning on or after 1 January 2023

• Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors  - effective for annual periods beginning on or after 1 January 2023

10. REVENUE

Disaggregation of revenue from contracts with customers

Disaggregation of revenue per country

Timing of revenue recognition

The Group has applied the practical expedient from IFRS 15:121 since the contracts are concluded on one year basis.

11. 
    

12. OTHER INCOME

* Other income as a result of lower payments due to purchase form entities that employ people with handicap.

* Income from subsidies is resulted from the scrapping premium received as per the Car Park Renewal Stimulation Program.

13. OTHER OPERATING EXPENSES

14. NET FINANCE COSTS

Interest income includes interest related to related parties loans receivables.

15. EARNINGS PER SHARE

The calculation of basic and diluted earnings per share has been based on the following profit   attributable to ordinary shareholders and weighted-average number of ordinary shares outstanding:

Profit attributable to ordinary shareholders

Weighted-average number of ordinary shares (in number of shares)

16.  EMPLOYEE BENEFITS

Employee benefits payables and accruals at year-end are as follows:

In Romania, all employers and employees, as well as other persons, are contributors to the state social security systems. The social security system covers pensions, allocations for children, temporary inability to work, risks of works and professional diseases and other social assistance services, unemployment benefits and incentives for employers creating new workplaces. 

Employee benefit expenses are as follows:

Management remuneration is disclosed in Note 29.

17.  INCOME TAXES

In determining the amount of current and deferred tax, the Group takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of judgments about future events. The Group considers that the accounting records for taxes due are adequate for all open tax years, based on assessment made by management taking into account various factors, including the interpretation of tax legislation and previous experience. New information may become available that causes the Group to change its judgment regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made.

9. Amounts recognised in profit or loss

14.      INCOME TAXES (CONTINUED)

2. Reconciliation of effective tax rate

* Other fiscal adjustments: relates to the fiscal impact of IFRS transition (unfavorable), recognition in equity of IPO costs (favorable) and IFRS 16 adjustments related to instalments for operating leasing contracts concluded before December 2020 (favorable)

Printex SA pays income tax as a microenterprise, as such, according to the provisions of the Fiscal Code and those of the declaration of income, the applicable tax rate for the income generated by microenterprises is 3% of turnover. 

The income tax rate applicable for Trigor AVD S.R.L. subsidiary in the Republic of Moldova is 12%.

3. Movement in deferred tax balances

14      Income taxes (continued)

(iii)     Movement in deferred tax balances (continued)

18. INVENTORIES

Cost of inventories recognized as an expense in the statement of profit or loss in 2021 is RON 1,443,194,521 (2020: RON 1,256,325,046).

19.  TRADE RECEIVABLES

Short term trade receivables from related parties are presented in Note 29.

16.     TRADE RECEIVABLES (CONTINUED)

The Group's exposure to credit risk is influenced by the individual characteristics of each customer. 

The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor's current financial position

The following table details the risk profile of trade receivables based on the Group's provision matrix. As the Group's historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is not further distinguished between the Group's different customer segments.

16.     TRADE RECEIVABLES (CONTINUED)

The movement in the loss allowance for trade receivables is as follows:

20. OTHER RECEIVABLES

21. CASH AND CASH EQUIVALENTS

18(a)      Cash and cash equivalents

18(b)      Short term investments

Balance presented of RON 195,000,000 relates to part of the amounts received from the IPO which were placed in short term deposits (6 month).

22. 
    

23. PROPERTY, PLANT AND EQUIPMENT 

The movements in property, plant and equipment in 2021 and 2020 were as follows:

Property, plant and equipment includes right-of-use assets with a net carrying value of RON 33,968,731 as at 31 December 2021 (31 December 2020: RON 37,105,367) related to leased equipment and of RON 42,776,905 as at 31 December 2021 (31 December 2020: RON 65,681,080) related to leased properties that do not meet the definition of investment property (see Note 29).

24.  Intangible assets and goodwill

20.      INTANGIBLE ASSETS AND GOODWILL (CONTINUED)

Following the acquisition of AGRIROM SRL by AQUILA PART PROD COM SA, the Group mainly recognised goodwill of RON 5,011,706 and brands of RON 2,698,926 (Agrirom's brands for food products: Gradena, Yachtis, LaMasa and Frisco). 

As at 31 December 2021 and as at 31 December 2020, the Group performed an impairment analysis for the goodwill, which allocated to the CGU formed by the distribution and trade with food, beverages and tobacco performed by AGRIROM SRL. The WACC used is of 11,4%, growth rate of 2.5%. Even with 1% change in these there is no impairment.

Based on the analysis, the goodwill is not impaired as at 31 December 2021 and as at 31 December 2020.

The recoverable amount of the goodwill is determined based on a value in use calculation for uses cash flow projections based on financial budgets covering a five-year period and a pre-tax discount rate of 11.4% per cent per annum.

The key assumptions used by management in setting the financial budgets for the initial five-year period were as follows:

Forecast sales growth rates

Forecast sales growth rates are based on past experience adjusted for current decreasing trend in refrigerated product sales in the next 2 years followed by a slower increasing trend with an average of 5%.

Operating profits

Operating profits are forecast based on historical experience of operating margins, adjusted for the impact of current trends of reduction followed by a slower increase trend in coming years.

Cash conversion

Cash conversion is the ratio of operating cash flow to operating profit. Management forecasts cash conversion rates based on historical experience.

Cash flows beyond that five-year period have been extrapolated using a steady 2.5% per cent per annum growth rate. 

Changes by 1% of the assumptions used such as WACC, growth in perpetuity does not lead to impairment.

Brands have been recognised at fair value at the acquisition date.

25. Investment property