2.1. Principles of accounting and assessment
In principle, the same balance sheet and assess- ment principles were used as in the consolidated accounts on 31 December 2014.
2.2. Revenue recognition
Sales revenues are evaluated at their fair value of the equivalent received or to be received and are reduced by expected customer returns, discounts and other similar deductions.
2.2.1. Selling goods
Sales revenues from the sale of goods are entered, if the following conditions have been met cumula- tively:
– The group has transferred the major risks and opportunities from the ownership of the goods to the purchaser.
– The group neither retains an ongoing right of disposal, such as is usually connected to own- ership, nor does it have any effective power of disposal over the sold goods.
– The amount of sales revenues can be reliably determined.
It is probable that the economic benefits from the business transaction will flow to the Group and the expenditure incurred or still to be incurred in con- nection with the sale can be reliably determined. 2.2.2. Providing Services
Revenues from service contracts are entered according to the degree to which they have been completed. In more detail, revenue recognition takes place as follows:
Revenues from licenses:
Revenue recognition takes place at the time that the productive till system or a functioning software solution is handed over to a customer.
Revenues from services (customizing) and rev- enues from adjustments outside the contractually agreed service (change request):
The revenue recognition in principle takes place at the time when the agreed service is handed over to or accepted by the customer. The Services are valued according to IAS 18.20 in conjunction with IAS 18.26 in order to guarantee revenue recogni- tion that meets the requirements of IFRS. In the case of service business, for which it was impos- sible to reliably assess the results – particularly those where the degree of completion was hard to determine – we only recorded this item in terms of expectations about the recovery of costs that were incurred (IAS 18.26). In the case of those pro- jects where the results could be reliably assessed (IAS 18.20), revenues were entered in line with the degree of completion. Both the amount of rev- enues and the amount of costs incurred in the business and also the expected total costs of the business transaction can be reliably determined. It is also probable that the economic benefits will accrue for the group.
The degree of completion is determined accord- ing to the degree of completion of the service being provided and – prior to the first measure- ment date or between two measurement dates –
according to the actual costs already incurred and the planned work to complete the overall service until the next measurement date. The amount of contract revenues is determined from the agreed job amount for performing the work by the meas- urement date or – prior to the first measurement date or between two measurement dates – in proportion to the actual work performed in terms of the total work performance planned until the reporting date as a share of the contract amount prior to the next measurement date.
Revenues from servicing work:
Revenues from servicing work are included in the accounts at the contractually agreed rates for the number of hours that have been worked and any costs that have been directly incurred on a monthly basis. If there is no direct refer- ence to specific work performed and payments are made for servicing work beyond the period of one month, revenue recognition takes place at a monthly pro rata rate.
2.3. Management Estimates and Appraisals
When drawing up the interim accounts, assump- tions and estimates have to be made to a certain degree, which have had an effect on the amount and presentation of the balance sheet assets and liabilities, revenue and expenditure. The assump- tions and estimates largely relate to an assess- ment of the intrinsic value of intangible assets, a unified definition of the economic serviceable life of property, plant and equipment, the valuation of inventories and the accounting procedures and assessment of provisions. The assumptions and estimates are based on premises, which in turn are founded on the level of awareness that is avail- able at the current time. Particularly with regard to the expected future business development, the circumstances that exist at the time when the net income for the period is prepared and a realis- tic assessment of the future development of the global and sector-based business environment form the basis of the estimates. The amounts that have been entered may deviate from the originally expected estimated values as a result of develop- ments in these general conditions, which differ from the assumptions and lie beyond the sphere of influence of management. If actual develop- ments differ from those that are expected, the
premises and, if necessary, the carrying amounts of the assets and liabilities that are affected will be adjusted accordingly. At the time when the interim accounts were drawn up, the assumptions and estimates on which they are based were not subject to any significant risks, so that from the current point of view, there is no need to make any major adjustment to the carrying amounts of assets presented on the balance sheet or liabilities during the following business year.
2.3.1. Main sources of uncertainty regarding estimates The following text indicates the most important assumptions made with regard to the future and the other major sources of uncertainty regard- ing estimates on the balance sheet date. A major risk could arise as a result of these and mean that a major adjustment to the assets and liabilities recorded here would be necessary.
Intrinsic value of intangible assets developed in-house
Management reassessed the value of intangi- ble assets developed in-house resulting from the Group’s software development work during the business year. Value adjustments have not been necessary. These intangible assets have been taken into account with a value of EUR 1,202 K on the consolidated balance sheet on 30 June 2015. The progress made in projects has continued to be very satisfactory and customer response has confirmed the previous estimates that the man- agement board made regarding expected rev- enues from the projects. However, the Manage- ment Board is continuing to check its assumptions regarding future market shares and expected profit margins for its product. These checks have created a situation where the carrying amounts of this asset has been recognized at its full rate despite the possibility of lower revenues. The situ- ation is being carefully monitored and, should the market situation demand it, adjustments will be made in subsequent business years, if this is appropriate.
Intrinsic value of goodwill
As a result of the acquisition of the operating busi- ness of Solquest GmbH by SQ IT-Services GmbH in 2009, the group has entered an intangible asset worth 6,403K euros as goodwill for the very first time. The recoverability of this goodwill was
checked on 31 December 2014 and amortisation valued at EUR 870 K was made. This created a car- rying amount of EUR 5,533 K on 31 December 2014. There were no indications that the expected and achievable influx of funds from the unit gen- erating cash and cash equivalents being assigned to this goodwill figure might fall below the carry- ing amount of the goodwill on 30 June 2015. The calculation of the use value requires an estimate of future cash flows from the unit generating the cash and cash equivalents and an estimate of a suitable discount rate for calculating the cash value.
Goodwill of EUR 244 K was entered on the balance sheet as a result of the corporate merger with AWEK as part of the final purchase price allocation on 10 December 2012 and as an accrual in the goodwill item on the consolidated balance sheet. The goodwill is fully attributed to the IT Services unit generating cash and cash equivalents. No events occurred during the reporting period which would necessitate another assessment of the intrinsic value of the goodwill prior to the regu- lar one.
As part of the acquisition of the retail division of DBS Data Business Systems Ltd., goodwill for this unit was entered for the first time; it was deter- mined by way of a provisional purchase price allo- cation in March 2015. There have been no indi- cations since then that the intrinsic value of the goodwill would need to be checked beyond the normal schedules. The first scheduled check will take place on 31 December 2015.
Intrinsic value of accounts receivable from ongoing work
The intrinsic value of the accounts receivable from ongoing work amounting to EUR 5,013 K entered on the balance sheet in line with IAS 11 in conjunc- tion with IAS 18.20 and IAS 18.26 will be checked through ongoing project monitoring. The course of the projects concerned largely matches the plan- ning work and even the opportunity arising from recognition difficulties has not created a situa- tion where an adjustment of the intrinsic value of accounts receivable from ongoing work needs to be made.
Intrinsic value of customer bases
As a result of the acquisition of the operating busi- ness of Solquest GmbH by SQ IT-Services GmbH, the group entered an intangible asset worth EUR 777 K under customer base for the very first time in 2009. The customer base will be amortised in linear fashion over the expected period of use of seven years and was entered at a value of EUR 68 K on the interim consolidated balance sheet on 30 June 2015. There was no information indicating the need to make a valuation adjustment beyond this. When GK Software AG purchased the business shares of AWEK GmbH, the Group entered an intangible asset value of EUR 458 K for the cus- tomer base. The customer base is amortised in lin- ear fashion over the expected period of use of five years and was entered with a value of EUR 340 K on the interim consolidated balance sheet on 30 June 2015.
As part of acquiring the operating business of the retail division of DBS Data Business Systems Ltd., the customer base of this unit was entered at EUR 9,759 K (9,065 K) as part of a provisional purchase price allocation on 31 March 2015. The customer base is amortised in linear fashion over a period of use of 10 years and was entered with a value of EUR 8,801 K on 30 June 2015. There were no indi- cations that it would be necessary to adjust the value beyond this.
Intrinsic value of orders on hand
Furthermore, the purchase of the business shares in AWEK GmbH by GK Software enabled the Group to enter intangible assets worth EUR 394 K as the value of orders on hand. The orders on hand are amortised in a linear fashion over the expected period of use of five years and are recognised as expenditure. The figure presented on the balance sheet date amounted to EUR 190 K (previous year: EUR 230 K).
As part of acquiring the operating business of the retail division of DBS, the Group entered intangi- ble assets amounting to EUR 1,002 K as orders in hand. The orders on hand are amortised in a lin- ear fashion over the expected period of use of two years and are presented as expenditure amount- ing to EUR 856 K on the balance sheet reporting date.
Impairment of active deferred taxes
The impairment of active deferred taxes from loss carryforward relies on the assessment that the Group companies concerned will in future once again generate profits which allow for the utilisa- tion of tax loss carryforwards. This is done by plan- ning the economic development of the individual companies in the Group.
Recognition and measurement of provisions The recognition and measurement of provisions in conjunction with pending legal disputes or other outstanding claims subject to settlement, media- tion, arbitration or government regulation are linked with estimates by Group to a considerable extent. In this way the assessment of the prob- ability that pending legal proceedings are success- ful or lead to a liability, or the quantification of the possible amount of payment obligations, is based on the assessment of the respective individual circumstances. In addition, the determination of provisions for taxes and legal risks are linked with considerable use of estimates. These estimates can change on the basis of new information. When collecting new information, the Group primarily uses the services of internal experts as well as the services of external advisers such as actuaries or legal consultants.
Other sources of uncertainty regarding estimates exist with regard to the useful serviceable life of assets, the assessment of the intrinsic value of trade accounts receivable and the valuation of stocks.