DOCUMENT AND ENTITY INFORMATION |
12 Months Ended |
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Dec. 31, 2019
shares
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Document And Entity Information | |
Entity Registrant Name | Scully Royalty Ltd. |
Entity Central Index Key | 0000016859 |
Trading Symbol | srl |
Entity Current Reporting Status | Yes |
Entity Filer Category | Non-accelerated Filer |
Current Fiscal Year End Date | --12-31 |
Entity Voluntary Filers | No |
Entity Well-known Seasoned Issuer | No |
Entity Interactive Data Current | Yes |
Entity Common Stock, Shares Outstanding | 12,554,801 |
Document Type | 20-F |
Document Registration Statement | false |
Document Annual Report | true |
Document Transition Report | false |
Document Shell Company Report | false |
Document Period End Date | Dec. 31, 2019 |
Amendment Flag | false |
Document Fiscal Year Focus | 2019 |
Document Fiscal Period Focus | FY |
Entity Emerging Growth Company | false |
Entity Shell Company | false |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - CAD ($) $ in Thousands |
Capital Stock and additional paid-in capital |
Treasury Stock |
Share-based Compensation |
Contingently Issuable Shares |
Accumulated (Deficit) Retained Earnings |
Available-for-sale Securities |
Securities at Fair Value Through Other Comprehensive Income |
Defined Benefit Obligations |
Currency Translation Adjustment |
Share-holders' Equity |
Non-controlling Interests |
Total |
---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance at Dec. 31, 2016 | $ 419,916 | $ (61,085) | $ 13,790 | $ 1,627 | $ (88,920) | $ (29) | $ (307) | $ 42,528 | $ 327,520 | $ 1,910 | $ 329,430 | |
Balance (in shares) at Dec. 31, 2016 | 17,315,673 | (4,687,218) | ||||||||||
Repurchase and cancellation of shares and cancellation of shares and equity instruments | $ (2,856) | (1,627) | 3,165 | (1,318) | (1,318) | |||||||
Repurchase and cancellation of shares and cancellation of shares and equity instruments (in shares) | (90,000) | |||||||||||
Plan of arrangement - purchase of fractional shares | $ (41) | (41) | (41) | |||||||||
Plan of arrangement - purchase of fractional shares (in shares) | (3,654) | |||||||||||
Plan of arrangement - cash distributions | $ (2) | (2) | (2) | |||||||||
Plan of arrangement - offsetting deficit | (87,850) | 87,850 | ||||||||||
Plan of arrangement - share capital restructuring | $ (17,019) | $ 58,442 | (41,423) | |||||||||
Plan of arrangement - share capital restructuring (in shares) | (4,621,571) | 4,621,571 | ||||||||||
Shares issued to non-controlling interests | 1,177 | 1,177 | ||||||||||
Net (loss) income | (47,855) | (47,855) | 790 | (47,065) | ||||||||
Dividends paid | (1,601) | (1,601) | ||||||||||
Share based compensation | 2,876 | 2,876 | 2,876 | |||||||||
Loss on disposition of shares in a subsidiary | 88 | 88 | 88 | |||||||||
Net fair value (loss) gain | 490 | 490 | 490 | |||||||||
Net (loss) gain on remeasurements | 219 | 219 | 219 | |||||||||
Net exchange differences | (4,197) | (4,197) | (107) | (4,304) | ||||||||
Balance at Dec. 31, 2017 | $ 312,148 | $ (2,643) | 16,666 | (87,183) | 461 | 38,331 | 277,780 | 2,169 | 279,949 | |||
Balance (in shares) at Dec. 31, 2017 | 12,600,448 | (65,647) | ||||||||||
Balance at Dec. 31, 2016 | $ 419,916 | $ (61,085) | 13,790 | $ 1,627 | (88,920) | (29) | $ (307) | 42,528 | 327,520 | 1,910 | 329,430 | |
Balance (in shares) at Dec. 31, 2016 | 17,315,673 | (4,687,218) | ||||||||||
Balance at Dec. 31, 2018 | $ 312,148 | $ (2,643) | 16,735 | 19,333 | $ (141) | 40,944 | 386,376 | 8,030 | 394,406 | |||
Balance (in shares) at Dec. 31, 2018 | 12,600,448 | (65,647) | ||||||||||
Balance at Dec. 31, 2017 | $ 312,148 | $ (2,643) | 16,666 | (87,183) | 461 | 38,331 | 277,780 | 2,169 | 279,949 | |||
Balance (in shares) at Dec. 31, 2017 | 12,600,448 | (65,647) | ||||||||||
Change in accounting policy (see Note 2B(i)) | 524 | $ (461) | (63) | |||||||||
Net (loss) income | 112,276 | 112,276 | (65) | 112,211 | ||||||||
Dividends paid | (805) | (805) | ||||||||||
Return of capital | (52) | (52) | ||||||||||
Share based compensation | 69 | 69 | 69 | |||||||||
Loss on disposition of shares in a subsidiary | (6,284) | (157) | (6,441) | 6,441 | ||||||||
Net fair value loss | (78) | (78) | (78) | |||||||||
Net exchange differences | 2,770 | 2,770 | 342 | 3,112 | ||||||||
Balance at Dec. 31, 2018 | $ 312,148 | $ (2,643) | 16,735 | 19,333 | (141) | 40,944 | 386,376 | 8,030 | 394,406 | |||
Balance (in shares) at Dec. 31, 2018 | 12,600,448 | (65,647) | ||||||||||
Shares issued to non-controlling interests | 229 | 229 | 510 | 739 | ||||||||
Net (loss) income | (18,553) | (18,553) | 150 | (18,403) | ||||||||
Exercise of stock options | $ 339 | (108) | 231 | 231 | ||||||||
Exercise of stock options (in shares) | 20,000 | |||||||||||
Net fair value loss | (4) | (4) | (4) | |||||||||
Net exchange differences | (14,667) | (14,667) | (288) | (14,955) | ||||||||
Balance at Dec. 31, 2019 | $ 312,487 | $ (2,643) | $ 16,627 | $ 1,009 | $ (145) | $ 26,277 | $ 353,612 | $ 8,402 | $ 362,014 | |||
Balance (in shares) at Dec. 31, 2019 | 12,620,448 | (65,647) |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - Components of Common Shares - CAD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2019 |
Dec. 31, 2017 |
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Components of Common Shares | |||
Capital stock, at par value and fully paid | $ 16 | $ 16 | $ 16 |
Additional paid-in capital | 312,132 | 312,471 | 312,132 |
Capital Stock and additional paid-in capital, total | $ 312,148 | $ 312,487 | $ 312,148 |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - Components of Contributed Surplus - CAD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2019 |
Dec. 31, 2017 |
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Components of Contributed Surplus | |||
Share-based compensation | $ 16,735 | $ 16,627 | $ 16,666 |
Nature of Business |
12 Months Ended |
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Dec. 31, 2019 | |
Nature of Business | |
Nature of Business | Note 1. Nature of Business Scully Royalty Ltd. (“Scully” or the “Company”) is incorporated under the laws of the Cayman Islands. Scully and the entities it controls are collectively known as the “Group” in these consolidated financial statements. The Group is a merchant bank that provides financial services and has an interest in the Scully iron ore mine in Newfoundland & Labrador, Canada. In addition, the Group owns other merchant banking assets and seeks to invest in businesses or assets whose intrinsic value is not properly reflected. The Group’s investing activities are generally not passive. The Group actively seeks investments where its financial expertise and management can add or unlock value. |
Basis of Presentation and Summary of Significant Accounting Policies |
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Basis of Presentation and Summary of Significant Accounting Policies | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation and Summary of Significant Accounting Policies | Note 2. Basis of Presentation and Summary of Significant Accounting Policies A. Basis of Presentation Basis of Accounting These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (the “IASB”). Scully complies with all the requirements of IFRS. The principal accounting policies applied in the preparation of the consolidated financial statements are set out below. These policies have been consistently applied with the exception of the adoption of IFRS 9, Financial Instruments (“IFRS 9”), IFRS 15, Revenue from Contracts with Customers (“IFRS 15”) and the amendments to IFRS 2, Share-Based Payment from January 1, 2018, and IFRS 16, Leases, the amendments to IAS 23, Borrowing Costs, and IFRIC 23, Uncertainty over Income Tax Treatment from January 1, 2019. See Note 2B. These consolidated financial statements were prepared using going concern, accrual (except for cash flow information) and historical cost (except for investment property and certain financial assets and financial liabilities which are measured at fair value and certain inventories that are measured at fair value less costs to sell) bases. The presentation currency of these consolidated financial statements is the Canadian dollar ($), rounded to the nearest thousand (except per share amounts). Certain amounts have been reclassified so as to conform with the presentation in the current year (see Notes 19 and 27). Restatement
During the fiscal year ended December 31, 2019, the Group re-assessed the presentation of its consolidated statement of operations and concluded that it was necessary to restate its previously issued financial statements for the fiscal year ended December 31, 2017 for the correction of an error in presentation relating to reclassifications of foreign exchange translation gains. In accordance with IFRS 10, Consolidated Financial Statements, amounts reclassified to profit and loss that had previously been recognised in other comprehensive income in relation to disposed subsidiaries are required to be recognised in “gain or loss on dispositions of subsidiaries” and therefore these amounts which historically have been included in “exchange differences on foreign currency transactions, net (gain) loss” are required to be represented within the gain or loss on disposal, which is included in “costs of sales and services”. Below is a reconciliation to the historically reported amounts for the year ended December 31, 2017:
Such restatement also affected the cash flows from operating activities in the cash flow statement. Below is a reconciliation of the historically reported amounts for the year ended December 31, 2017:
The restatement of the items included within the statement of operations and cash flows from operating activities has had no effect on the financial position, net loss or total cash flows used in operating activities of the Group for any period presented.
Amounts related to the year ended December 31, 2018 of $672 have also been reclassified for consistency with comparative information.
Certain amounts have also been reclassified so as to conform with the presentation in the current year (see Notes 15, 19 and 27).
Principles of Consolidation These consolidated financial statements include the accounts of Scully and entities it controls. The Company controls an investee if and only if it has all the following: (a) power over the investee; (b) exposure, or rights, to variable returns from its involvement with the investee; and (c) the ability to use its power over the investee to affect the amount of its returns. When the Group holds, directly or indirectly, more than 50% of the voting power of an investee, it is presumed that the Group controls the investee, unless it can be clearly demonstrated that this is not the case. Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. All intercompany balances and transactions, including unrealized profits arising from intragroup transactions, have been eliminated in full. Unrealized losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. On the acquisition date, a non-controlling interest is measured at either its fair value or its proportionate share in the recognized amounts of the subsidiary’s identifiable net assets, on a transaction-by-transaction basis. Subsequently, the non-controlling interest increases or decreases for its share of changes in equity since the acquisition date. After initial consolidation of a subsidiary, when the proportion of equity held by non-controlling interests changes, the Group, as long as it continues to control the subsidiary, adjusts the carrying amounts of the controlling and non-controlling interests to reflect the changes in their relative interests in the subsidiary. The Group recognizes directly in equity any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received and attributes such difference to the owners of Scully. When the Group loses control of a subsidiary it: (a) derecognizes (i) the assets (including any goodwill) and liabilities of the subsidiary at their carrying amounts at the date when control is lost and (ii) the carrying amount of any non-controlling interests in the former subsidiary at the date when control is lost (including any components of other comprehensive income attributable to them); (b) recognizes (i) the fair value of the consideration received, if any, from the transaction, event or circumstances that resulted in the loss of control, (ii) if the transaction, event or circumstances that resulted in the loss of control involves a distribution of shares of the subsidiary to owners in their capacity as owners, that distribution and (iii) any investment retained in the former subsidiary at its fair value at the date when control is lost; (c) reclassifies to profit or loss, or transfers directly to retained earnings if required by IFRS, the amounts recognized in other comprehensive income in relation to the subsidiary; and (d) recognizes any resulting difference as a gain or loss under costs of sales and services in profit or loss attributable to the owners of Scully. The financial statements of Scully and its subsidiaries used in the preparation of the consolidated financial statements are prepared as of the same date, using uniform accounting policies for like transactions and other events in similar circumstances. Foreign Currency Translation The presentation currency of the Group’s consolidated financial statements is the Canadian dollar. Scully conducts its business throughout the world through its foreign operations. Foreign operations are entities that are subsidiaries or branches, the activities of which are based or conducted in countries or currencies other than those of Scully. Functional currency is the currency of the primary economic environment in which an entity operates and is normally the currency in which the entity primarily generates and expends cash. Foreign currency is a currency other than the functional currency of the entity. The functional currencies of the Company and its subsidiaries and branches primarily comprise the Canadian dollar, Euro (“EUR” or “€”) and United States dollar (“US$”). Reporting foreign currency transactions in the functional currency A foreign currency transaction is a transaction that is denominated or requires settlement in a foreign currency. A foreign currency transaction is recorded, on initial recognition in an entity’s functional currency, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. At the end of each reporting period: (a) foreign currency monetary items are translated using the closing rate; (b) non-monetary items denominated in a foreign currency that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction; and (c) foreign currency non-monetary items that are measured at fair value are translated using the exchange rates at the date when the fair value was determined. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous periods are recognized in profit or loss in the period in which they arise, except for exchange differences arising on a monetary item that forms part of a reporting entity’s net investment in a foreign operation which are initially recorded in other comprehensive income in the consolidated financial statements and reclassified from equity to profit or loss on disposal of the net investment. When a gain or loss on a non-monetary item is recognized in other comprehensive income, any exchange component of that gain or loss is recognized in other comprehensive income. Conversely, when a gain or loss on a non-monetary item is recognized in profit or loss, any exchange component of that gain or loss is recognized in profit or loss. Use of a presentation currency other than the functional currency When an entity presents its financial statements in a currency that differs from its functional currency, the results and financial position of the entity are translated into the presentation currency using the following procedures: (a) assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of the statement of financial position; (b) income and expenses for each statement of operations presented are translated at exchange rates at the dates of the transactions or, for practical reasons, the average exchange rates for the periods when they approximate the exchange rates at the dates of the transactions; (c) individual items within equity are translated at either the historical exchange rates when practical or at the closing exchange rates at the date of the statement of financial position; and (d) all resulting exchange differences are recognized in other comprehensive income. The following table sets out exchange rates for the translation of the Euro and United States dollar, which represented the major trading currencies of the Group, into the Canadian dollar:
Fair Value Measurement Certain assets and liabilities of the Group are measured at fair value (see Note 2B). 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. A fair value measurement is for a particular asset or liability. Therefore, when measuring fair value, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place either: (a) in the principal market for the asset or liability; or (b) in the absence of a principal market, in the most advantageous market for the asset or liability. The Group measures the fair value of an asset or a liability using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. IFRS 13, Fair Value Measurement (“IFRS 13”), establishes a fair value hierarchy that categorizes the inputs to valuation techniques used to measure fair value into three levels: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability. Non-current Assets Held for Sale A non-current asset (or disposal group) is classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. For this to be the case, the asset (or disposal group) must be available for immediate sale in its present condition subject only to terms that are usual and customary for the sale of such asset (or disposal group), the appropriate level of management must be committed to a plan to sell the asset (or disposal group) and an active program to locate a buyer and complete the plan must have been initiated. Further, the asset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair value and the sale is highly probable to complete within one year from the date of classification, except as permitted under certain events and circumstances. If the aforesaid criteria are no longer met, the Group ceases to classify the asset (or disposal group) as held for sale. Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their carrying amounts and fair values less costs to sell. The Group does not depreciate or amortize a non-current asset while it is classified as held for sale. Use of Estimates and Assumptions and Measurement Uncertainty The timely preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management’s best estimates are based on the facts and circumstances available at the time estimates are made, historical experience, general economic conditions and trends and management’s assessment of probable future outcomes of these matters. Actual results could differ from these estimates and such differences could be material. For critical judgments in applying accounting policies and major sources of estimation uncertainty. See Notes 2C and 2D. B. Significant Accounting Policies (i) Financial Instruments IFRS 9 The Group adopted IFRS 9 with a date of initial application of January 1, 2018. Financial assets and financial liabilities are recognized on the consolidated statement of financial position when the Group becomes a party to the financial instrument contract. A financial asset is derecognized either when the Group has transferred the financial asset and substantially all the risks and rewards of ownership of the financial asset or when the contractual rights to the cash flows expire. A financial liability is derecognized when the obligation specified in the contract is discharged, cancelled or expired. The Group classifies its financial assets into the following measurement categories: (a) subsequently measured at fair value (either through other comprehensive income (“FVTOCI”) or through profit or loss (“FVTPL”) and (b) subsequently measured at amortized cost. The classification of financial assets depends on the Group’s business model for managing the financial assets and the terms of the contractual cash flows. The Group classifies its financial liabilities as subsequently measured at amortized cost, except for financial liabilities at FVTPL. Change in the fair value of a loan payable measured at FVTPL is included in costs of sales and services. Initial Adoption of IFRS 9 IFRS 9 does not require restatement of comparative periods. Accordingly, the Group has reflected the retrospective impact of the adoption of IFRS 9 due to the change in accounting policy for investments in equity securities as an adjustment to opening deficit as at January 1, 2018. Under IFRS 9, the Group’s investments in equity securities, which were previously classified as available for sale or at cost under IAS 39, Financial Instruments: Recognition and Measurement (“IAS 39”), are measured at FVTPL. The retrospective adjustment, which represented the fair value gain adjustment on investments in equity securities as of January 1, 2018, was $524 and debited to other comprehensive income. Upon the initial adoption of IFRS 9 on January 1, 2018, the financial assets which were previously classified at fair value through profit or loss, held-to-maturity, loans and receivables and available-for-sale have been transferred to, financial assets measured at FVTPL, FVTOCI or amortized cost. IAS 39 (Accounting Policies Applicable Prior to January 1, 2018) All financial assets and financial liabilities were classified by characteristic and/or management intent. Except for certain financial instruments which were excluded from the scope, all financial assets were classified into one of four categories: (a) at fair value through profit or loss; (b) held-to-maturity; (c) loans and receivables; and (d) available-for-sale, and all financial liabilities were classified into one of two categories: (a) at fair value through profit or loss; and (b) at amortized cost. A financial asset or financial liability at fair value through profit or loss was a financial asset or financial liability that met either of the following conditions: (a) it was classified as held for trading if it was (i) acquired or incurred principally for the purpose of selling or repurchasing it in the near term, (ii) part of a portfolio of identified financial instruments that were managed together and for which there was evidence of a recent actual pattern of short-term profit taking, or (iii) a derivative, except for a derivative that was a designated and effective hedging instrument; or (b) it was designated by the Group upon initial recognition as at fair value through profit or loss when certain conditions were met. Available-for-sale financial assets were those non-derivative financial assets that were designated as available for sale, or that were not classified as loans and receivables, held-to-maturity investments, or at fair value through profit or loss. Non-derivative financial liabilities were classified as financial liabilities measured at amortized cost. After initial recognition, the Group measured financial assets, including derivatives that were assets, at their fair values, without any deduction for transaction costs it might incur on sale or other disposal, except for the following financial assets: (a) held-to-maturity investments which were measured at amortized cost using the effective interest method; (b) loans and receivables which were measured at amortized cost using the effective interest method; and (c) investments in equity instruments that did not have a quoted market price in an active market and whose fair value could not be reliably measured and derivatives that were linked to and had to be settled by delivery of such unquoted equity instruments which were measured at cost. All financial assets except those measured at fair value through profit or loss were subject to review for impairment. Common to Both IFRS 9 and IAS 39 Regular way purchases and sales of financial assets are accounted for at the settlement date. When a financial asset or financial liability is recognized initially, the Group measures it at its fair value plus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. Transaction costs related to the acquisition or issue of a financial asset or financial liability at fair value through profit or loss are expensed as incurred. The subsequent measurement of a financial instrument and the recognition of associated gains and losses are determined by the financial instrument classification. A gain or loss on a financial asset or financial liability classified as at fair value through profit or loss is recognized in profit or loss for the period in which it arises. A gain or loss on an asset measured at FVTOCI or classified as available for sale is recognized in other comprehensive income, except for impairment losses, until the financial asset is derecognized, at which time the cumulative gain or loss previously recognized in accumulated other comprehensive income is recognized in profit or loss for the period. For financial assets and financial liabilities carried at amortized cost, a gain or loss is recognized in profit or loss when the financial asset or financial liability is derecognized or impaired and through the amortization process. Net gains or net losses on financial instruments at fair value through profit or loss do not include interest or dividend income. Whenever quoted market prices are available, bid prices are used for the measurement of fair value of financial assets while ask prices are used for financial liabilities. When the market for a financial instrument is not active, the Group establishes fair value by using a valuation technique. Valuation techniques include using recent arm’s length market transactions between knowledgeable, willing parties, if available; reference to the current fair value of another financial instrument that is substantially the same; discounted cash flow analysis; option pricing models; and other valuation techniques commonly used by market participants to price the financial instrument. (ii) Cash and Cash Equivalents Cash and cash equivalents include cash on hand and cash at banks. They have maturities of three months or less from the date of acquisition and are generally interest-bearing. Restricted cash refers to money that is held for a specific purpose and therefore not available to the Group for immediate or general business use. Restricted cash is accounted for as a separate item from cash and cash equivalents on the Group’s consolidated statements of financial position. (iii) Securities IFRS 9 Investments in equity securities are measured at FVTPL. Debt securities which are held within a business model whose objective is to collect the contractual cash flows and sell the debt securities, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are measured at FVTOCI. IAS 39 (Accounting Policies Applicable Prior to January 1, 2018) Securities were classified as at fair value through profit or loss (i.e. held for trading) or short-term or long-term available-for-sale securities. Publicly-traded securities (debt and equity) which were acquired principally for the purpose of selling in the near term were classified as held for trading. Available-for-sale securities consisted of publicly-traded securities and unlisted equity securities which were not held for trading and not held to maturity. Long-term available-for-sale securities were purchased with the intention to hold until market conditions render alternative investments more attractive. Short-term available-for-sale securities were held with the intention of management to sell within the current operating cycle but did not meet the definition of trading securities. When a decline in the fair value of an available-for-sale security had been recognized in other comprehensive income and there was objective evidence that the asset is impaired, the cumulative loss that had been recognized in other comprehensive income was reclassified from equity to profit or loss as a reclassification adjustment even though the security had not been derecognized. A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost is an objective evidence of impairment. The Group considered a decline in excess of 25 percent generally as significant and a decline in a quoted market price that persisted for 15 months as prolonged. Impairment losses recognized in profit or loss for an investment in an equity instrument classified as available for sale would not be reversed through profit or loss. Gains and losses on sales of securities are calculated on the average cost basis. (iv) Securities and Financial Liabilities – Derivatives A derivative is a financial instrument or other contract with all three of the following characteristics: (a) its value changes in response to the change in a specified interest rate, financial instrument price, product price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable; (b) it requires no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors; and (c) it is settled at a future date. A derivative financial instrument is either exchange-traded or negotiated. A derivative financial instrument is included in the consolidated statement of financial position as a security (i.e. financial asset) or a financial liability and measured at FVTPL. The recognition and measurement of a derivative financial instrument under both IFRS 9 and IAS 39 does not apply to a contract that is entered into and continues to be held for the purpose of the receipt or delivery of a non-financial item in accordance with the Group’s expected purchase, sale or usage requirements, unless the Group, as allowed under IFRS 9, designates the contract as measured at FVTPL if it eliminates or significantly reduces a measurement inconsistency. Where the Group has both the legal right and intent to settle derivative assets and liabilities simultaneously with the counterparty, the net fair value of the derivative financial instruments is reported as an asset or liability, as appropriate. Changes in the fair values of derivative financial instruments that do not qualify for hedge accounting are recognized in profit or loss as they arise. (v) Financial Liabilities The Group measures financial liabilities at either amortized cost or FVTPL. Financial liabilities are measured at amortized cost, unless either it is held for trading and hence required to be measured at FVTPL or the group elects to measure the financial liability at FVTPL. (vi) Receivables Receivables are measured at amortized cost under both IFRS 9 and IAS 39. Receivables are net of an allowance for credit losses, if any. The Group performs ongoing credit evaluations of its customers and recognizes a loss allowance for expected credit losses. Receivables are considered past due on an individual basis based on the terms of the contracts. (vii) Allowance for Credit Losses IFRS 9 The Group recognizes and measures a loss allowance for expected credit losses on a financial asset which is measured at amortized cost or at FVTOCI, including a lease receivable, a contract asset or a loan commitment and a financial guarantee contract. The impairment methodology applied depends on whether there has been a significant increase in credit risk since initial recognition. To assess whether there is a significant increase in credit risk, the Group compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition based on all information available, and reasonable and supportive forward-looking information. When there is significant increase in credit risk or for credit-impaired financial assets, the loss allowance equals the lifetime expected credit losses which is defined as the expected credit losses that result from all possible default events over the expected life of a financial instrument. If, at the reporting date, the credit risk on a financial asset has not increased significantly since initial recognition, the Group measures the loss allowance for the financial instrument at an amount equal to the 12‑month expected credit losses which is defined as the portion of lifetime expected credit losses that represent the expected credit losses that result from default events on the financial instrument that are possible within the 12 months after the reporting date. As required by IFRS 9, the Group always measures the loss allowance at an amount equal to lifetime expected credit losses for trade receivables and contract assets that result from transactions that are within the scope of IFRS 15. IAS 39 (Accounting Policies Applicable Prior to January 1, 2018) The Group applied credit risk assessment and valuation methods to its trade and other receivables. Credit losses arose primarily from receivables but might also relate to other credit instruments issued by or on behalf of the Group, such as guarantees and letters of credit. Specific provisions were established on an individual receivable basis. Common to Both IFRS 9 and IAS 39 The Group’s allowance for credit losses is maintained at an amount considered adequate to absorb expected or estimated credit-related losses. Such allowance reflects management’s best estimate of the losses in the Group’s financial assets and judgments about economic conditions. Estimates and judgments could change in the near term, and could result in a significant change to a recognized allowance. An allowance for credit losses is increased by provisions, which are recognized in profit or loss and reduced by write-offs net of any recoveries. Write-offs are generally recorded after all reasonable restructuring or collection activities have taken place and there is no realistic prospect of recovery. (viii) Inventories Inventories principally consist of raw materials, work-in-progress, and finished goods. Inventories, other than commodities products, are recorded at the lower of cost and net realizable value. Cost, where appropriate, includes an allocation of manufacturing overheads incurred in bringing inventories to their present location and condition and is assigned by using the first-in, first-out or weighted average cost formula, depending on the class of inventories. Net realizable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. The amount of any write-down of inventories to net realizable value and all losses of inventories are recognized as an expense in the period the write-down or loss occurs. The reversal of a write-down of inventories arising from an increase in net realizable value is recognized as a reduction in the amount of costs of sales and services in the period in which the reversal occurs. Commodity products acquired by the Group as a broker-trader in the Group’s merchant banking activities with the purpose of selling in the near future and generating a profit from fluctuations in price or broker-traders’ margin are measured at fair value less costs to sell. Fair values of the Group’s inventories are determined by reference to their contractual selling prices or quoted prices in marketplaces in the absence of a contract (Level 1 fair value hierarchy), in accordance with guidance on fair value in IFRS 13. (ix) Real Estate Held for Sale Real estate held for sale is real estate intended for sale in the ordinary course of business or in the process of construction or development for such sale. The Group's real estate held for sale forms part of the security package for the €25,000 in principal amount of bonds (see Note 16) issued by Merkanti Holding plc in the year ended December 31, 2019, and to the extent that any sales of these properties, in whole or in part, cause the security to fall below a certain ratio, proceeds of said sale, up to an amount of the collateral shortfall, are required to be placed as cash collateral with the bondholder trustee until maturity. Real estate held for sale is measured at the lower of cost (on a specific item basis) and net realizable value. Net realizable value is estimated by reference to sale proceeds of similar properties sold in the ordinary course of business less all estimated selling expenses around the reporting date, or by management estimates based on prevailing market conditions. The amount of any write-down of properties to net realizable value is recognized as an expense in the period the write-down occurs. The reversal of a write-down arising from an increase in net realizable value is recognized in the period in which the reversal occurs. All of the Group’s real estate is located in Europe. (x) Investment Property Investment property is property that is held for generating rental income or for capital appreciation or both, rather than for: (a) use in the production or supply of goods or services or for administrative purposes; or (b) sale in the ordinary course of business. The Group’s investment property comprises freehold land and buildings. Investment property is initially recognized at cost including related transaction costs. After initial recognition, investment property is measured at fair value, with changes in fair value recognized in profit or loss in the period in which they arise. The Group determines fair value without any deduction for transaction costs it may incur on sale or other disposal. Fair value of the Group’s investment property is based on valuations prepared annually by external evaluators in accordance with guidance issued by the International Valuation Standard Committee and reviewed by the Group, or these valuations are updated by management when there are no significant changes in the inputs to the valuation prepared by external evaluators in the preceding year, in accordance with guidance on fair value in IFRS 13. (xi) Property, Plant and Equipment Property, plant and equipment are carried at cost, net of accumulated depreciation and, if any, accumulated impairment losses. The initial cost of an item of property, plant and equipment comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, the initial estimate of any decommissioning obligation, if any, and, for qualifying assets, borrowing costs. The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset. Where an item of property, plant and equipment or part of the item that was separately depreciated is replaced and it is probable that future economic benefits associated with the replacement item will flow to the Group, the cost of the replacement item is capitalized and the carrying amount of the replaced asset is derecognized. All other replacement expenditures are recognized in profit or loss when incurred. Inspection costs associated with major maintenance programs are capitalized and amortized over the period to the next inspection. All other maintenance costs are expensed as incurred. When a right-of-use asset is acquired under a lease contract, the asset is measured at cost at the commencement date. The cost of the right-of-use asset comprises: (a) the amount of the initial measurement of the lease liability; (b) any lease payments made at or before the commencement date, less any lease incentives received; (c) any initial direct costs incurred by the Group; and (d) an estimate of costs to be incurred by the Group in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories. After the commencement date, the Group measures the right-of-use asset applying a cost model whereby the Group measures the right-of-use asset at cost less any accumulated depreciation and any accumulated impairment losses and adjusts it for any remeasurement of the lease liabilities reflecting any reassessment, lease modifications or revised in-substance fixed lease payments. See Significant Accounting Policy (xiv) below. The Group elected to apply IFRS 16 retrospectively, with the cumulative effect of the initial application of the new standard recognized at the date of initial application, being January 1, 2019. For further discussion, see Note 2B(xiv) below. The difference between the carrying amount of property, plant and equipment applying IAS 17 at the end of 2018 immediately preceding the date of initial application and the carrying amount in the consolidated statement of financial position at the date of initial application is reconciled as follows:
The depreciable amounts of the Group’s property, plant, and equipment (i.e. the costs of the assets less their residual values) are depreciated according to the following estimated useful lives and methods:
Depreciation expense is included in costs of sales and services or selling, general and administrative expense, whichever is appropriate. The residual value and the useful life of an asset are reviewed at least at each financial year-end and, if expectations differ from previous estimates, the changes, if any, are accounted for as a change in an accounting estimate in accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors. The depreciation method applied to an asset is reviewed at least at each financial year-end and, if there has been a significant change in the expected pattern of consumption of the future economic benefits embodied in the asset, the method is changed to reflect the changed pattern. The carrying amount of an item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in profit or loss in the period in which the item is derecognized. (xii) Interests in Resource Properties The Group’s interests in resource properties are mainly comprised of an interest in the Scully iron ore mine, and to a lesser extent exploration and evaluation assets (comprising hydrocarbon probable reserves and hydrocarbon undeveloped lands), hydrocarbon development and production assets. (a) Exploration and evaluation assets Exploration and evaluation costs, including the costs of acquiring undeveloped land and drilling costs are initially capitalized until the drilling of the well is complete and the results have been evaluated in order to determine the technical feasibility and commercial viability of the asset. Technical feasibility and commercial viability are considered to be determinable when proved and/or probable reserves are determined to exist. When proved and/or probable reserves are found, the drilling costs and the costs of associated hydrocarbon undeveloped lands are reclassified to hydrocarbon development and production assets or from hydrocarbon undeveloped lands to hydrocarbon probable reserves. The cost of hydrocarbon undeveloped land that expires or any impairment recognized during a period is charged to profit or loss. Pre-licence costs are recognized in profit or loss as incurred. (b) Hydrocarbon development and production assets and an interest in an iron ore mine The Group’s interests in resource properties are mainly comprised of an interest in the Scully iron ore mine, and to a lesser extent, hydrocarbon development and production assets. (1) Recognition and measurement Interests in resource properties are initially measured at cost and subsequently carried at cost less accumulated depletion and, if any, accumulated impairment losses. The cost of an interest in resource property includes the initial purchase price and directly attributable expenditures to find, develop, construct and complete the asset. This cost includes reclassifications from exploration and evaluation assets, installation or completion of infrastructure facilities such as platforms, pipelines and the drilling of development wells, including unsuccessful development or delineation wells. Any costs directly attributable to bringing the asset to the location and condition necessary to operate as intended by management and result in an identifiable future benefit are also capitalized. These costs include an estimate of decommissioning obligations and, for qualifying assets, capitalized borrowing costs. (2) Subsequent costs Costs incurred subsequent to the determination of technical feasibility and commercial viability and the costs of replacing parts of property are capitalized only when they increase the future economic benefits embodied in the specific asset to which they relate. Such capitalized costs generally represent costs incurred in developing proved reserves and bringing in, or enhancing production from, such reserves and are accumulated on a field or geotechnical area basis. All other expenditures are recognized in profit or loss as incurred. The costs of periodic servicing of the properties are recognized in costs of sales and services as incurred. The carrying amount of any replaced or sold component is derecognized. (3) Depletion The carrying amount of an interest in a resource property is depleted using the unit of production method by reference to the ratio of production in the period to the related reserves. For interests in hydrocarbon development and production assets, depletion is calculated based on proved producing reserves, taking into account estimated future development costs necessary to bring those reserves into production and the estimated salvage values of the assets at the end of their estimated useful lives. Future development costs are estimated taking into account the level of development required to continue to produce the reserves. Reserves for hydrocarbon development and production assets are estimated annually by independent qualified reserve evaluators and represent the estimated quantities of natural gas, natural gas liquids and crude oil which geological, geophysical and engineering data demonstrate with a specified degree of certainty to be recoverable in future years from known reservoirs and which are considered commercially producible. For depletion purposes, relative volumes of petroleum and natural gas production and reserves are converted at the energy equivalent conversion rate of six thousand cubic feet of natural gas to one barrel of crude oil. For the interest in an iron ore mine, depletion is calculated based on proved and probable reserves. The estimate of the reserves of iron ore is reviewed whenever significant new information about the reserve is available, or at least at each financial year-end. (xiii) Impairment of Non-financial Assets The Group reviews the carrying amounts of its non-financial assets at each reporting date to determine whether there is any indication of impairment. If any such indication exists, an asset’s recoverable amount is estimated. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. Where an individual asset does not generate separately identifiable cash flows, an impairment test is performed at the cash-generating unit (“CGU”) level. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Where the carrying amount of an asset (or CGU) exceeds its recoverable amount, the asset (or CGU) is considered impaired and written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, an appropriate valuation model is used. These calculations are corroborated by external valuation metrics or other available fair value indicators wherever possible. An assessment is made at the end of each reporting period whether there is an indication that previously recognized impairment losses no longer exist or have decreased. If such indication exists, an estimate of the asset’s (or CGU’s) recoverable amount is reviewed. A previously recognized impairment loss is reversed to the extent that the events or circumstances that triggered the original impairment have changed. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, depletion and amortization, had no impairment loss been recognized for the asset in prior periods. A reversal of an impairment loss for a CGU is allocated to the assets of the CGU pro-rata with the carrying amounts of those assets. Hydrocarbon probable reserves are tested for impairment when they are reclassified to hydrocarbon development and production assets or when indicators exist that suggest the carrying amount may exceed the recoverable amount. For purposes of impairment testing, hydrocarbon probable reserves are grouped with related producing resource properties as a CGU with common geography and geological characteristics. Undeveloped lands are evaluated for indicators separately from hydrocarbon development and production assets and hydrocarbon probable reserves. Impairment is assessed by comparing the carrying amount of undeveloped lands to values determined by an independent land evaluator based on recent market transactions. Management also takes into account future plans for those properties, the remaining terms of the leases and any other factors that may be indicators of potential impairment. (xiv) Leases The Group adopted IFRS 16 with a date of initial application of January 1, 2019. At the commencement date of a lease contract under which the Group is the lessee, the Group recognizes a right-of-use asset and a lease liability which is measured at the present value of the lease payments that are not paid at that date, discounted using the interest rate implicit in the lease (or if the rate cannot be readily determined, the Group company's incremental borrowing rate). After the commencement date, the Group (a) measures the lease liability by (i) increasing the carrying amount to reflect interest on the lease liability; (ii) reducing the carrying amount to reflect the lease payments made; and (iii) remeasuring the carrying amount to reflect any reassessment or lease modifications or to reflect revised in-substance fixed lease payments; and (b) recognizes in profit or loss, unless the costs are included in the carrying amount of another asset, both (i) interest on the lease liability and (ii) variable lease payments not included in the measurement of the lease liability in the period in which the event or condition that triggers those payment occurs. The Group elects not to apply IFRS 16 to short-term leases and leases for which the underlying asset is of low value and, as such, recognizes the lease payments associated with those leases as an expense on a straight-line basis. The right-of-use assets are included in property, plant and equipment (see Note 2B (xi)) and the lease liabilities are included in account payables and accrued expense under current liabilities and/or other long-term liabilities. Initial Adoption of IFRS 16 The Group elected to apply IFRS 16 retrospectively, with the cumulative effect of the initial application of the new standard recognized at the date of initial application, subject to permitted and elected practical expedients. Pursuant to the transitional requirements, the Group chose to measure that right-of-use asset at an amount equal to the lease liability immediately before the date of initial application and elected not to recognize a lease liability or right-of-use asset for which the lease term ended within 12 months of the date of initial application. As a result, the Group recognized an adjustment of $2,911, $843 and $2,068 to property, plant and equipment, account payables and accrued expenses and other long-term liabilities, respectively, on January 1, 2019. The Group's weighted average incremental borrowing rate applied to lease liabilities recognized in the consolidated statement of financial position was 4.01% at the date of initial application. The difference between operating lease commitments disclosed applying IAS 17 at the end of 2018 immediately preceding the date of initial application and lease liabilities recognized in the consolidated statement of financial position at the date of initial application is reconciled as follows.
* Represents undiscounted lease commitments IAS 17 (Accounting Policies Applicable Prior to January 1, 2019) Under IAS 17, a lease was classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership of the leased asset. Operating lease payments were expensed in profit or loss over the term of the lease on a straight-line basis. Common to Both IFRS 16 and IAS 17 Under both IFRS 16 and IAS 17, lease income from operating leases is recognized in income on a straight-line basis over the term of the lease. (xv) Provisions, Financial Guarantee Contracts and Contingencies Provisions are recognized when the Group has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at management’s best estimate of the expenditure required to settle the obligation at the reporting date. Where appropriate, the future cash flow estimates are adjusted to reflect risks specific to the liability. If the effect of the time value of money is material, 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. Where discounting is used, the increase in the provision due to the passage of time is recorded as accretion and included in finance costs. A financial guarantee contract is initially recognized at fair value. If the guarantee is issued to an unrelated party on a commercial basis, the initial fair value is likely to equal the premium received. If no premium is received, the fair value must be determined using a method that quantifies the economic benefit of the guarantee to the holder. At the end of each subsequent reporting period, financial guarantees are measured at the higher of: (i) the amount of the loss allowance, and (ii) the amount initially recognized less cumulative amortization, where appropriate. Contingent liabilities are possible obligations whose existence will only be confirmed by future events not wholly within the control of the Group. Contingent liabilities, other than those assumed in connection with business combinations which are measured at fair value at the acquisition date, are not recognized in the consolidated financial statements but are disclosed unless the possibility of an outflow of economic resources is considered remote. Legal costs in connection with a loss contingency are recognized in profit or loss when incurred. The Group does not recognize a contingent or reimbursement asset unless it is virtually certain that the contingent or reimbursement asset will be received. (xvi) Decommissioning Obligations The Group provides for decommissioning, restoration and similar liabilities (collectively, decommissioning obligations) on its resource properties, facilities, production platforms, pipelines and other facilities based on estimates established by current legislation and industry practices. The decommissioning obligation is initially measured at fair value and capitalized to interests in resource properties or property, plant and equipment as an asset retirement cost. The liability is estimated by discounting expected future cash flows required to settle the liability using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The estimated future asset retirement costs are adjusted for risks such as project, physical, regulatory and timing. The estimates are reviewed periodically. Changes in the provision as a result of changes in the estimated future costs or discount rates are added to or deducted from the asset retirement cost in the period of the change. The liability accretes for the effect of time value of money until it is settled. The capitalized asset retirement cost is amortized through depreciation, depletion and amortization over the estimated useful life of the related asset. Actual asset retirement expenditures are recorded against the obligation when incurred. Any difference between the accrued liability and the actual expenditures incurred is recorded as a gain or loss in the settlement period. (xvii) Own Equity Instruments The Group’s holdings of its own equity instruments, including common stock and preferred stock, are presented as “treasury stock” and deducted from shareholders’ equity at cost and in the determination of the number of equity shares outstanding. No gain or loss is recognized in profit or loss on the purchase, sale, re-issue or cancellation of the Group’s own equity instruments. (xviii) Revenue Recognition IFRS 15 Effective January 1, 2018, the Group adopted IFRS 15. Pursuant to IFRS 15, the Group recognizes revenue, excluding interest and dividend income and other such income from financial instruments recognized in accordance with IFRS 9, upon transfer of promised goods or services to customers in amounts that reflect the consideration to which the Group expects to be entitled in exchange for those goods or services based on the following five step approach: Step 1: Identify the contracts with customers; Step 2: Identify the performance obligations in the contract; Step 3: Determine the transaction price; Step 4: Allocate the transaction price to the performance obligations in the contract; and Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. The Group typically satisfies its performance obligations upon shipment of the goods, or upon delivery as the services are rendered or upon completion of services depending on whether the performance obligations are satisfied over time or at a point in time. The Group primarily acts as principal in contracts with its customers. The Group does not have material obligations for returns, refunds and other similar obligations, nor warranties and related obligations. For performance obligations that the Group satisfies over time, the Group typically uses time-based measures of progress because the Group is providing a series of distinct services that are substantially the same and have the same pattern of transfer. For performance obligations that the Group satisfies at a point in time, the Group typically uses shipment or delivery of goods and/or services in evaluating when a customer obtains control of promised goods or services. A significant financing component exists and is accounted for if the timing of payments agreed to by the parties to the contract provides the customer or the Group with a significant benefit of financing the transfer of goods and services to the customer. As a practical expedient, the Group does not adjust the promised amount of consideration for the effects of a significant financing component if the Group expects, at contract inception, that the period between when the Group transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. The incremental costs of obtaining contracts with customers and the costs incurred in fulfilling contracts with customers that are directly associated with the contract are recognized as an asset (hereinafter, “assets arising from contract costs”) if those costs are expected to be recoverable, which are included in other long-term assets in the consolidated statements of financial position. The incremental costs of obtaining contracts are those costs that the Group incurs to obtain a contract with a customer that they would not have incurred if the contract had not been obtained. As a practical expedient, the Group recognizes the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less. Assets arising from contract costs are amortized using the straight-line method over their estimated contract periods. The Group exercises judgments in determining the amount of the costs incurred to obtain or fulfill a contract with a customer, which includes, but is not limited to (a) the likelihood of obtaining the contract, (b) the estimate of the profitability of the contract, and (c) the credit risk of the customer. An impairment loss will be recognized in profit or loss to the extent that the carrying amount of the asset exceeds (a) the remaining amount of consideration that the entity expects to receive in exchange for the goods or services to which the asset relates, less (b) the costs that relate directly to providing those goods or services and that have not been recognized as expenses. Initial Adoption of IFRS 15 Pursuant to the transition arrangement permitted under IFRS 15, the Group applied IFRS 15 retrospectively with the cumulative effect of initially applying IFRS 15 recognized at the date of initial application. There were no revisions on the accounts in the consolidated statement of financial position on January 1, 2018 upon the adoption of IFRS 15. Moreover, there were no financial statement line items affected in the year ended December 31, 2018 by the application of IFRS 15 as compared to the presentation under IAS 18, Revenue ("IAS 18") and related interpretations. IAS 18, Revenue (Accounting Policies Applicable Prior to January 1, 2018) The Group accounted for revenues under IAS 18 and other related international accounting standards and interpretations for the recognition and measurement of revenue until December 31, 2017. Revenue included proceeds from sales of merchant banking products and services, real estate properties, medical instruments and supplies, rental income on investment property, interest and dividend income and net gains on securities. In an agency relationship, revenue was the amount of commission earned. Revenue from the sale of goods was recognized when: (a) the Group had transferred to the buyer the significant risks and rewards of ownership of the goods (which generally coincided with the time when the goods were delivered to the buyer and title had passed); (b) the Group retained neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; (c) the amount of revenue could be measured reliably; (d) it was probable that the economic benefits associated with the transaction would flow to the Group; and (e) the costs incurred or to be incurred in respect of the transaction could be measured reliably. Revenue from the rendering of services was recognized when: (a) the amount of revenue could be measured reliably; (b) it was probable that the economic benefits associated with the transaction would flow to the Group; (c) the stage of completion of the transaction at the reporting date could be measured reliably; and (d) the costs incurred for the transaction and the costs to complete the transaction could be measured reliably. Revenue was measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, customs duties and sales taxes. When the Group charged shipping and handling fees to customers, such fees were included in sales revenue. Where the Group acted as an agent on behalf of a third party to procure or market goods, any associated fee income was recognized and no purchase or sale was recorded. Interest, royalty and dividend income were recognized when it was probable that economic benefits will flow to the Group and the amount of income could be measured reliably. (xix) Costs of Sales and Services Costs of sales and services include the costs of goods (merchant banking products and services, real estate properties, medical instruments and supplies) sold. The costs of goods sold include both the direct cost of materials and indirect costs, freight charges, purchasing and receiving costs, inspection costs, distribution costs and a provision for warranty when applicable. Costs of sales and services also include write-downs of inventories, net loss on securities, credit losses on financial assets, gains or losses on dispositions of subsidiaries, and fair value gain and loss on investment property, commodity inventories and derivative contracts. The reversal of write-downs of inventories and credit losses reduces the costs of sales and services. (xx) Employee Benefits Wages, salaries, bonuses, social security contributions, paid annual leave and sick leave are accrued in the period in which the associated services are rendered by employees of the Group. The employee benefits are included in costs of sales and services or selling, general and administrative expenses, as applicable. (xxi) Share-Based Compensation The cost of equity-settled transactions with employees is measured by reference to the fair value of the equity instruments on the date at which the equity instruments are granted and is recognized as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award. Fair value is determined by using an appropriate valuation model. At each reporting date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management’s best estimate of the achievement or otherwise of non-market conditions and the number of equity instruments that will ultimately vest. The movement in cumulative expense since the previous reporting date is recognized in profit or loss, with a corresponding amount in equity. When the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognized over the original vesting period. In addition, an expense is recognized over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognized if this difference is negative. When an equity-settled award is cancelled other than by forfeiture when the vesting conditions are not satisfied, it is treated as if it had vested on the date of cancellation and any cost not yet recognized in profit or loss for the award is expensed immediately. Share-based compensation expenses are included in selling, general and administrative expenses. When stock options are exercised, the exercise price proceeds together with the amount initially recorded in contributed surplus are credited to capital stock. (xxii) Finance Costs Finance costs comprise interest expense on borrowings, accretion of the discount on provisions, decommissioning obligations and other liabilities and charges and fees relating to factoring transactions. Capital stock and debt are recorded at the amount of proceeds received, net of direct issue costs (transaction costs). The transaction costs attributable to debt issued are amortized over the debt term using the effective interest method. (xxiii) Income Taxes Income tax expense (recovery) comprises current income tax expense (recovery) and deferred income tax expense (recovery) and includes all domestic and foreign taxes which are based on taxable profits. The current income tax provision is based on the taxable profits for the period. Taxable profit differs from income before income taxes as reported in the consolidated statements of operations because it excludes items of income or expense that are taxable or deductible in other periods and items that are never taxable or deductible. The Group’s liability for current income tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date. Deferred income tax is provided, using the liability method, on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts in the consolidated statement of financial position. Deferred income tax liabilities are recognized for all taxable temporary differences: - except where the deferred income tax liability arises on goodwill that is not tax deductible or the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. - in respect of taxable temporary differences associated with investments in subsidiaries and branches, except where the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred income tax assets are recognized for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilized: - except where the deferred income tax asset arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. - in respect of deductible temporary differences associated with investments in subsidiaries and branches, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future. On the reporting date, management reviews the Group’s deferred income tax assets to determine whether it is probable that the benefits associated with these assets will be realized. The Group also reassesses unrecognized deferred income tax assets. The review and assessment involve evaluating both positive and negative evidence. The Group recognizes a previously unrecognized deferred income tax asset to the extent that it has become probable that future taxable profit will allow the deferred income tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. Tax relating to items recognized in other comprehensive income or equity is recognized in other comprehensive income or equity and not in profit or loss. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to set off current income tax assets against current income tax liabilities, and when they relate to income tax levied by the same taxation authority and the Group intends to settle its current income tax assets and liabilities on a net basis. Withholding taxes (which include withholding taxes payable by a subsidiary on distributions to the Group) are treated as income taxes when they have the characteristics of an income tax. This is considered to be the case when they are imposed under government authority and the amount payable is calculated by reference to revenue derived. The Group includes interest charges and penalties on current income tax liabilities as a component of interest expense. (xxiv) Earnings Per Share Basic earnings per share is determined by dividing net income attributable to ordinary equity holders of Scully by the weighted average number of common shares outstanding during the period, net of treasury stock. Diluted earnings per share is determined using the same method as basic earnings per share, except that the weighted average number of common shares outstanding includes the effect of dilutive potential ordinary shares. For the purpose of calculating diluted earnings per share, the Group assumes the exercise of its dilutive options with the assumed proceeds from these instruments regarded as having been received from the issue of common shares at the average market price of common shares during the period. The difference between the number of common shares issued and the number of common shares that would have been issued at the average market price of common shares during the period is treated as an issue of common shares for no consideration and added to the weighted average number of common shares outstanding. The amount of the dilution is the average market price of common shares during the period minus the issue price and the issue price includes the fair value of services to be supplied to the Group in the future under the share-based payment arrangement. Potential ordinary shares are treated as dilutive when, and only when, their conversion to ordinary shares would decrease earnings per share or increase loss per share from continuing operations. When share-based payments are granted during the period, the shares issuable are weighted to reflect the portion of the period during which the payments are outstanding. The shares issuable are also weighted to reflect forfeitures occurring during the period. When stock options are exercised during the period, shares issuable are weighted to reflect the portion of the period prior to the exercise date and actual shares issued are included in the weighted average number of shares outstanding from the exercise date. (xxv) Business Combinations The Group accounts for each business combination by applying the acquisition method. Pursuant to the acquisition method, the Group, when a business combination occurs and it is identified as the acquirer, determines the acquisition date (on which the Group legally transfers the consideration, acquires the assets and assumes the liabilities of the acquiree), recognizes and measures the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree, and recognizes and measures goodwill or a gain from a bargain purchase (i.e. negative goodwill). The identifiable assets acquired and the liabilities assumed are measured at their acquisition-date fair values. A non-controlling interest is measured at either its fair value or its proportionate share in the recognized amounts of the subsidiary’s identifiable net assets, on a transaction-by-transaction basis. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, the liabilities incurred by the Group to former owners of the acquiree and the equity interests issued by the Group. In a business combination achieved in stages, the Group remeasures its previously held equity interest in the acquiree at its acquisition-date fair value and recognizes the resulting gain or loss, if any, in profit or loss. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports in its financial statements provisional amounts for the items for which the accounting is incomplete. During the measurement period, the Group retrospectively adjusts the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts recognized as of that date. During the measurement period, the Group also recognizes additional assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date and, if known, would have resulted in the recognition of those assets and liabilities as of that date. The measurement period ends as soon as the Group receives the information it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable. However, the measurement period does not exceed one year from the acquisition date. Acquisition-related costs are costs the Group incurs to effect a business combination. Those costs include finder’s fees; advisory, legal, accounting, valuation and other professional or consulting fees; general administrative costs, including the costs of maintaining an internal acquisitions department; and costs of registering and issuing debt and equity securities. The Group accounts for acquisition-related costs as expenses in the periods in which the costs are incurred and the services are received, except for the costs to issue debt or equity securities (see Significant Accounting Policy Item (xxii) above). C. Critical Judgments in Applying Accounting Policies In the process of applying the Group’s accounting policies, management makes various judgments, apart from those involving estimations under Note 2D below, that can significantly affect the amounts it recognizes in the consolidated financial statements. The following are the critical judgments that management has made in the process of applying the Group’s accounting policies and that have the most significant effects on the amounts recognized in the consolidated financial statements: (i) Identification of Cash-generating Units The Group’s assets are aggregated into CGUs, for the purpose of assessing and calculating impairment of non-financial assets, based on their ability to generate largely independent cash flows. The determination of CGUs requires judgment in defining the smallest identifiable group of assets that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets. CGUs have been determined based on similar geological structure, shared infrastructure, geographical proximity, product type and similar exposure to market risks. In the event facts and circumstances surrounding factors used to determine the Group’s CGUs change, the Group will re-determine the groupings of CGUs. (ii) Impairment and Reversals of Impairment on Non-Financial Assets The carrying amounts of the Group’s non-financial assets, other than deferred tax assets, are reviewed at the end of each reporting period to determine whether there is an indication of impairment or reversal of previously recorded impairment. If such indication exists, the recoverable amount is estimated. Determining whether there are any indications of impairment or impairment reversals requires significant judgment of external factors, such as an extended change in prices or margins for hydrocarbon commodities or refined products, a significant change in an asset’s market value, a significant revision of estimated volumes, revision of future development costs, a change in the entity’s market capitalization or significant changes in the technological, market, economic or legal environment that would have an impact on the Company’s CGUs. Given that the calculations for recoverable amounts require the use of estimates and assumptions, including forecasts of commodity prices, marketing supply and demand, product margins and in the case of the Group's iron ore interest, power plant and hydrocarbon properties, expected production volumes, it is possible that the assumptions may change, which may impact the estimated life of the CGU and may require a material adjustment to the carrying value of goodwill and non-financial assets. Impairment losses recognized in prior years are assessed at the end of each reporting period for indications that the impairment has decreased or no longer exists. An impairment loss is reversed only to the extent that the carrying amount of the asset or CGU does not exceed the carrying amount that would have been determined, net of depletion, depreciation and amortization, if no impairment loss had been recognized. (iii) Valuation of Investment Property Investment properties are included in the consolidated statement of financial position at their market value, unless their fair value cannot be reliably determined at that time. The market value of investment properties is assessed annually by an independent qualified valuer, who is an authorized expert for the valuation of developed and undeveloped land in Germany, after taking into consideration the net income with inputs on realized basic rents, operating costs and damages and defects. The assumptions adopted in the property valuations are based on the market conditions existing at the end of the reporting period, with reference to current market sales prices and the appropriate capitalization rate. Changes in any of these inputs or incorrect assumptions related to any of these items could materially impact these valuations. (iv) Assets Held for Sale and Discontinued Operations The Group applies judgment to determine whether an asset (or disposal group) is available for immediate sale in its present condition and that its sale is highly probable and therefore should be classified as held for sale at the balance sheet date. In order to assess whether it is highly probable that the sale can be completed within one year, or the extension period in certain circumstances, management reviews the business and economic factors, both macro and micro, which include the industry trends and capital markets, and the progress towards a sale transaction. It is also open to all forms of sales, including exchanges of non-current assets for other non-current assets when the exchange will have commercial substance in accordance with IAS 16, Property, Plant and Equipment. A discontinued operation is a component of an entity (which comprises operations and cash flows that can be clearly distinguished, operationally and, for financial reporting purposes, from the rest of the entity) that either has been disposed of or is classified as held for sale. The discontinued operation must represent a separate major line of business or a separate major geographical area of operations of the Group and the Group applies judgment to determine whether the thresholds are met. Generally, management determines whether a component is a discontinued operation or not based on the contribution of the component to the Group's net income (loss), net assets, or gross assets. Management does not view revenue as a major factor in determining whether a component is a discontinued operation or not because the revenue factor does not contribute any real economic benefits to the Group. While a component of the entity has distinguished financial data, judgments must be exercised on the presentation of inter-company transactions between components that are presented as discontinued operations and those that are presented as continuing operations. Furthermore, the allocation of income tax expense (recovery) also involves the exercise of judgments as the tax position of continuing operations may have an impact on the tax position of discontinued operations, or vice versa. In 2019, the Group disposed of its interests in two product lines in Europe which management considered not to be discontinued operations because (i) they did not form separate segments or cash generating units, (ii) they did not have financial results which could be clearly identified from the rest of the Group, (iii) each of them was not a separate major geographical area, and (iv) the dispositions were not part of a single coordinated plan to dispose of them. Management, when exercising its judgments in terms of their respective contribution to the Group's net loss, total assets and net assets, concluded that these disposed components were not separate major lines of business or geographical area of operations. Based on the Group's consolidated financial statements as of June 30, 2019 (the latest publicly available financial results prior to their dispositions), the net income or loss of these disposed units represented 2% and 7%, of the combined reported loss of all entities that reported a loss and each of them represented 1% of consolidated total assets and less than 1% of consolidated net assets of the Group. The combined revenue (third parties only), loss before taxes, income tax expense and net loss, respectively, was $81,766, ($63), ($575) and ($638) during the year of 2019 to the dates of their dispositions, which were included in the Group's continuing operations for the year ended December 31, 2019. The net gain on dispositions of these entities was $207. (v) Purchase Price Allocations There was a business combination in 2017. For every business combination, the Group measured the identifiable assets acquired and the liabilities assumed at their acquisition-date fair values. The determination of fair value required the Group to make assumptions, estimates and judgments regarding future events, including the profit forecast of the new subsidiary in the future. The allocation process is inherently subjective and impacts the amounts assigned to individual identifiable assets and liabilities, including the fair value of long-lived assets, the recognition and measurement of any unrecorded intangible assets and/or contingencies and the final determination of the amount of goodwill or bargain purchase. The inputs to the exercise of judgments include legal, contractual, business and economic factors. As a result, the purchase price allocation impacts the Group’s reported assets and liabilities and future net earnings due to the impact on future depreciation, depletion and amortization and impairment tests. (vi) Credit Losses and Impairment of Receivables On January 1, 2018, the Group adopted IFRS 9. As a result, the Group applies credit risk assessment and valuation methods to its trade and other receivables under IFRS 9 which establishes a single forward-looking expected loss impairment model to replace the incurred impairment model under IAS 39. The Group measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on the financial instrument has increased significantly since initial recognition. The objective of the impairment requirements is to recognize lifetime expected credit losses for all financial instruments for which there have been significant increases in credit risk since initial recognition — whether assessed on an individual or collective basis — considering all reasonable and supportable information, including that which is forward-looking. At each reporting date, management assesses whether the credit risk on a financial instrument has increased significantly since initial recognition. When making the assessment, management uses the change in the risk of a default occurring over the expected life of the financial instrument instead of the change in the amount of expected credit losses. To make that assessment, management compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and consider reasonable and supportable information, that is available without undue cost or effort, that is indicative of significant increases in credit risk since initial recognition. Allowance for credit losses is maintained at an amount considered adequate to absorb the expected credit losses. Such allowance for credit losses reflects management’s best estimate of changes in the credit risk on the Group’s financial instruments and judgments about economic conditions. The assessment of allowance for credit losses is a complex process, particularly on a looking-forward basis; which involves a significant degree of judgment and a high level of estimation uncertainty. The input factors include the assessment of the credit risk of the Group’s financial instruments, legal rights and obligations under all the contracts and the expected future cash flows from the financial instruments, which include inventories, mortgages and other credit enhancement instruments. The major source of estimation uncertainty relates to the likelihood of the various scenarios under which different amounts are expected to be recovered through the security in place on the financial assets. The expected future cash flows are projected under different scenarios and weighted by probability, which involves the exercise of significant judgment. Estimates and judgments could change in the near-term and could result in a significant change to a recognized allowance. D. Major Sources of Estimation Uncertainty The timely preparation of the consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The major assumptions about the future and other major sources of estimation uncertainty at the end of the reporting period that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. These items require management’s most difficult, subjective or complex estimates. Actual results may differ materially from these estimates. (i) Interests in Resource Properties and Reserve Estimates The Group had interests in resource properties mainly comprised of an interest in the Scully iron ore mine, and to a lesser extent, hydrocarbon properties, with an aggregate carrying amount of $270,070 as at December 31, 2019. Estimation of reported recoverable quantities of proved and probable reserves include judgmental assumptions regarding production profile, prices of products produced, exchange rates, remediation costs, timing and amount of future development costs and production, transportation and marketing costs for future cash flows. It also requires interpretation of geological and geophysical models and anticipated recoveries. The economical, geological and technical factors used to estimate reserves may change from period to period. Changes in reported reserves can impact the carrying amounts of the Group’s interests in resource properties and/or related property, plant and equipment, the recognition of impairment losses and reversal of impairment losses, the calculation of depletion and depreciation, the provision for decommissioning obligations and the recognition of deferred income tax assets or liabilities due to changes in expected future cash flows. The recoverable quantities of reserves and estimated cash flows from the Group’s hydrocarbon interests are independently evaluated by reserve engineers at least annually. During the year ended December 31, 2019, the Group did not recognize any impairment in respect of its interest in resource properties. The Group’s hydrocarbon reserves represent the estimated quantities of petroleum, natural gas and natural gas liquids which geological, geophysical and engineering data demonstrate with a specified degree of certainty to be economically recoverable in future years from known reservoirs and which are considered commercially producible. Such reserves may be considered commercially producible if management has the intention of developing and producing them and such intention is based upon: (a) a reasonable assessment of the future economics of such production; (b) a reasonable expectation that there is a market for all or substantially all the expected hydrocarbon production; and (c) evidence that the necessary production, transmission and transportation facilities are available or can be made available. Reserves may only be considered proven and probable if producibility is supported by either production or conclusive formation tests. Included in interests in resource properties as at December 31, 2019, were exploration and evaluation assets with an aggregate carrying amount of $17,007. Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount and upon reclassification to hydrocarbon development and production assets. If such indicators exist, impairment, if any, is determined by comparing the carrying amounts to the recoverable amounts. The measurement of the recoverable amount involves a number of assumptions, including the timing, likelihood and amount of commercial production, further resource assessment plans and future revenue and costs expected from the asset, if any. (ii) Impairment of Other Non-Financial Assets The Group had property, plant and equipment aggregating $55,413 as at December 31, 2019, consisting mainly of a power plant and a natural gas processing facility. Impairment of the Group’s non-financial assets is evaluated at the CGU level. In testing for impairment, the recoverable amounts of the Company’s CGUs are determined as the higher of their values in use and fair values less costs of disposal. In the absence of quoted market prices, the recoverable amount is based on estimates of future production rates, future product selling prices and costs, discount rates and other relevant assumptions. Increases in future costs and/or decreases in estimates of future production rates and product selling prices may result in a write-down of the Group’s property, plant and equipment. (iii) Taxation The Group is subject to tax in a number of jurisdictions and judgment is required in determining the worldwide provision for income taxes. Deferred income taxes are recognized for temporary differences using the liability method, with deferred income tax liabilities generally being provided for in full (except for taxable temporary differences associated with investments in subsidiaries and branches where the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future) and deferred income tax assets being recognized to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilized. The Group recognized deferred income tax assets of $14,295 as at December 31, 2019. In assessing the realizability of deferred income tax assets, management considers whether it is probable that some portion or all of the deferred income tax assets will be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income in Malta and Canada during the periods in which temporary differences become deductible or before tax loss and tax credit carry-forwards expire. Management considers the future reversals of existing taxable temporary differences, projected future taxable income, taxable income in prior years and tax planning strategies in making this assessment. Unrecognized deferred income tax assets are reassessed at the end of each reporting period. The Group does not recognize the full deferred tax liability on taxable temporary differences associated with investments in subsidiaries and branches where the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. The Group may change its investment decision in its normal course of business, thus resulting in additional income tax liabilities. The operations and organization structures of the Group are complex, and related tax interpretations, regulations and legislation are continually changing. The Group companies’ income tax filings are subject to audit by taxation authorities in numerous jurisdictions. There are audits in progress and items under review, some of which may increase the Group’s income tax liabilities. In addition, the companies have filed appeals and have disputed certain issues. While the results of these items cannot be ascertained at this time, the Group believes that the Group has an adequate provision for income taxes based on available information. (iv) Contingencies Pursuant to IAS 37, Provisions, Contingent Liabilities and Contingent Assets, the Group does not recognize a contingent liability. By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The assessment of contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events. If it becomes probable that an outflow of future economic benefits will be required for an item previously accounted for as a contingent liability, an accrual or a provision is recognized in the consolidated financial statements in the period in which the change in probability occurs. See Note 24 for further disclosures on contingencies. (v) Pandemic COVID-19 The COVID-19 pandemic in 2020 leads the world into a new era of uncertainties. The pandemic is dynamic and expanding and its ultimate scope, duration and effects are currently uncertain. The impact of the pandemic and the global response thereto has, among other things, significantly disrupted global economic activity, negatively impacted gross domestic product and caused significant volatility in financial markets; although, since May 2020, the pandemic seems to be under control in some regions of the world and some countries and jurisdictions are planning to ease up their lockdown measures.
While various countries have implemented stimulus packages and other fiscal measures to attempt to reduce the impact of the pandemic on their economies, the impact of the pandemic on global economic activity and markets both in the short and longer term is uncertain at this time. The magnitude and duration of the disruption and resulting decline in business activity resulting from the COVID-19 pandemic is currently uncertain. While the Group expects that there will likely be some negative impact on its results of operations, cash flows and financial position from the pandemic beyond the near-term, the extent to which the COVID-19 pandemic impacts the Group’s business, operations and financial results will depend on numerous evolving factors that management may not be able to accurately predict, including: the duration and scope of the pandemic; governmental, business and individuals' actions that have been and continue to be taken in response to the pandemic; the impact of the pandemic on economic activity and actions taken in response thereto; the effect on the Group’s customers, including the borrowers and customers of the Bank (as defined herein); its impacts on suppliers; and the impact of the pandemic on counterparties and their ability to carry out their obligations to the Group.
The Group's results of operations, cash flows and financial position will likely be adversely affected by the pandemic beyond near-term. However management does not believe the pandemic will have significant impact on the going concern of the Group in the foreseeable future, which is considered to be 12 months from the date of approval of these financial statements, as the Group currently has sufficient cash, good working capital position and steady cash inflows from operations. Management has performed stress tests on their forecasts with various assumptions and the results showed that the Group would be able to withstand any significant impact on operations within the aforesaid timeframe.
Although disruption and effects of the COVID-19 pandemic may be temporary, given the dynamic nature of these circumstances and the worldwide nature of the Company’s business and operations, the duration of any business disruption and the related financial impact to us cannot be reasonably estimated at this time but could materially affect the Group’s business results of operations and financial condition. Ultimately, the severity of the impact of the pandemic on the Group's business and going concern basis will depend on a number of factors, including, the duration and severity of the pandemic and the impact and new developments concerning the global severity of, and actions to be taken to contain the outbreak.
Management took into consideration all of these various factors and risks when concluding on the Company’s ability to continue as a going concern and the appropriateness of this presentation when preparing these consolidated financial statements.
E. Accounting Changes Future Accounting Changes In October 2018, IASB issued amendments to its definition of material to make it easier for companies to make materiality judgements. The updated definition amends IAS 1, Presentation of Financial Statements, and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors. The amendments clarify the definition of material and how it should be applied and ensure that the definition of material is consistent across all IFRS Standards. The changes are effective from January 1, 2020, although earlier application is permitted. Management is assessing its impacts on the Group’s financial statement presentation.
In October 2018, the IASB amended IFRS 3, Business Combinations, seeking to clarify whether an acquisition transaction results in the acquisition of an asset or the acquisition of a business. The amendments are effective for acquisition transactions on or after January 1, 2020, although earlier application is permitted. The amended standard has a narrower definition of a business, which could result in the recognition of fewer business combinations than under the current standard; the implication of this is that amounts which may have been recognized as goodwill in a business combination under the current standard may now be recognized as allocations to net identifiable assets acquired under the amended standard (with an associated effect in an entity's results of operations that would differ from the effect of goodwill having been recognized). Management is currently assessing the impacts and transition provisions of the amended standard and will apply the standard prospectively from January 1, 2020. |
Capital Disclosure on the Group's Objectives, Policies and Processes for Managing Its Capital Structure |
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Capital Disclosure on the Group's Objectives, Policies and Processes for Managing Its Capital Structure | Note 3. Capital Disclosure on the Group’s Objectives, Policies and Processes for Managing Its Capital Structure The Group’s objectives when managing capital are to: (a) safeguard the entity’s ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders; (b) provide an adequate return to shareholders by pricing products and services commensurately with the level of risk; and (c) maintain a flexible capital structure which optimizes the cost of capital at acceptable risk. The Group allocates capital in proportion to risk. The Group manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or issue new debt. Consistent with others in its industry, the Group monitors its capital on the basis of the debt-to-adjusted capital ratio and long-term debt-to-equity ratio. The debt-to-adjusted capital ratio is calculated as net debt divided by adjusted capital. Net debt is calculated as total debt less cash and cash equivalents. Adjusted capital comprises all components of shareholders’ equity. The long-term debt-to-equity ratio is calculated as long-term debt divided by shareholders’ equity.
The above tables do not include a non-interest bearing long-term loan payable of $4,769 as at December 31, 2019 (2018: $3,981) which does not have a fixed repayment date; and (ii) long-term lease liabilities of $832 as at December 31, 2019 (2018: $nil). . |
Acquisitions of Consolidated Entities |
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Acquisitions of Consolidated Entities | |
Acquisitions of Consolidated Entities | Note 4. Acquisitions of Consolidated Entities During 2019, the Group’s strategy, which was unchanged from 2018, was to maintain the debt-to-adjusted capital ratio and the long-term debt-to-equity ratio at a manageable level. The ratios changed in 2019 as a result of issuance of bond payables. Years 2019 and 2018 There was no business combination during the years ended December 31, 2019 and 2018. Year 2017 Effective October 1, 2017, the Group completed the acquisition of a metal processing company based in Europe. Pursuant to the transaction, the Group acquired the company which equalled the fair values of the identifiable assets acquired and the liabilities assumed on the closing date. Goodwill of $502 was recognized upon the acquisition of the metal processing company. The amount of acquisition-related costs was nominal, which was included in selling, general and administrative expenses in profit or loss. This acquisition was not considered a material business combination and did not have material impact on the Group’s financial position. The metal processing company was sold during the year ended December 31, 2019. |
Assets Classified as Held for Sale |
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Assets Classified as Held for Sale | Note 5. Assets Classified as Held for Sale In March 2019, the Group commenced to liquidate a subsidiary on a voluntary basis (see Note 29). The liquidation process of the subsidiary was completed by December 31, 2019 and included in the consolidated statement of cash flows for the year ended December 31, 2019 after the commencement of its voluntary liquidation. On December 31, 2016, the Group reclassified the assets and liabilities of a commodities trading subsidiary as held for sale, which had net assets held for sale of $15,770. The sale was completed in 2017 and included in the consolidated statement of cash flows for the year ended December 31, 2017. |
Business Segment Information |
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Business Segment Information | Note 6. Business Segment Information The Group is primarily in the merchant banking business, which includes its iron ore royalty, financial services and other resource interests and other proprietary investments. In addition, the Group owns other merchant banking assets and seeks to invest in businesses or assets whose intrinsic value is not properly reflected. The Group's investing activities are generally not passive. The Group actively seeks investments where its financial expertise and management can add or unlock value. In 2019, the Group revised its reporting structure, which resulted in three separate and independently managed operating subgroups underneath its corporate umbrella. In reporting to management, the Group’s operating results are currently categorized into the following operating segments: Iron Ore Royalty, Industrial Equity, Merkanti Holding, and All Other segments which include corporate activities. Corresponding information for the comparative years have been restated to conform with the current year's presentation. Basis of Presentation In reporting segments, certain of the Group’s business lines have been aggregated where they have similar economic characteristics and are similar in each of the following areas: (a) the nature of the products and services; (b) the methods of distribution; and (c) the types or classes of customers/clients for the products and services. The Group’s Iron Ore Royalty segment includes an interest in the Scully iron ore mine in Wabush, Newfoundland & Labrador, Canada. The Group's Industrial Equity segment includes multiple projects in resources and services around the globe. It seeks opportunities to benefit from long-term industrial and services assets, including natural gas, with a focus on East Asia. The Group’s Merkanti Holding segment has a subsidiary with its bonds listed on the Malta Stock Exchange and comprises regulated specialty trade finance and regulated merchant banking businesses with a focus on Europe and South America. In addition, Merkanti Holding plc owns two industrial real estate parks. The All Other segment includes the Group’s corporate and operating segments whose quantitative amounts do not exceed 10% of any of the Group’s: (a) reported revenue; (b) net income; or (c) total assets. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies in Note 2B. The chief operating decision maker evaluates performance on the basis of income or loss from operations before income taxes and does not consider acquisition accounting adjustments in assessing the performance of the Group’s reporting segments. The segment information presented below is prepared according to the following methodologies: (a) revenue and expenses directly associated with each segment are included in determining pre-tax earnings; (b) intersegment sales and transfers are accounted for as if the sales or transfers were to third parties at current market prices; (c) certain selling, general and administrative expenses paid by corporate, particularly incentive compensation and share-based compensation, are not allocated to reporting segments; (d) all intercompany investments, receivables and payables are eliminated in the determination of each segment’s assets and liabilities; (e) deferred income tax assets and liabilities are not allocated; and (f) gains or losses on dispositions of subsidiaries, write-offs of intercompany accounts, reclassification of realized cumulative translation adjustments from equity to profit or loss on disposals of subsidiaries, changes in intercompany account balances and cash used (received) in acquisition (disposition) of a subsidiary are allocated to corporate and included within the Group's All Other segment. Segment Operating Results
Geographic Information Due to the highly integrated nature of international products and services, merchant banking activities and markets, and a significant portion of the Group’s activities requiring cross-border coordination in order to serve the Group’s customers and clients, the methodology for allocating the Group’s profitability to geographic regions is dependent on estimates and management judgment. Geographic results are generally determined as follows:
Due to the nature of cross-border business, the Group presents its geographic information by geographic regions, instead of by countries. The following table presents revenue from external customers by geographic region of such customers, locations of operations or the reporting units, whichever is appropriate:
Except for the geographic concentrations as indicated in the above table and a customer in the Industrial Equity segment located in Slovakia representing approximately 13% and 16%, respectively, of the Group’s revenue for the years ended December 31, 2019 and 2018, there were no other revenue concentrations during the years ended December 31, 2019, 2018 and 2017. The following table presents non-current assets other than financial instruments, deferred income tax assets and other non-current assets by geographic area based upon the location of the assets.
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Securities |
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Securities | Note 7. Securities
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Trade Receivables |
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Trade Receivables | Note 8. Trade Receivables
All trade receivables comprise accounts from contracts with customers and primarily arise from merchant banking activities. As at December 31, 2019, the Group recognized a loss allowance of $46 (2018: $311) against its trade receivables. The movement in the loss allowance during the year ended December 31, 2019 and 2018 was as follows:
In accordance with IFRS 9, management reviews the expected credit losses for the following twelve months based upon, among other things, the credit-worthiness of the exposure, collateral and other risk mitigation instruments, and the nature of the underlying business transaction. There have been no financial instruments acquired whose credit risk has increased substantially since initial recognition. During 2017, management of the Group continued to monitor and assess the collectability of the receivables related to a former insolvent customer. As a result of such reviews, the Group reversed and credited an allowance of $1,541 to profit or loss in the third quarter. During the fourth quarter, the Group deconsolidated subsidiaries which had trade receivables due from this former customer group (see Note 29). Furthermore, the Group increased the valuation allowance by $224 based on its revision of expected future cash flows. As such, the Group had net trade receivables of $21,375 due from this former customer group as at December 31, 2017. During 2018, management recognized a further credit loss of $21,812 and subsequently wrote off the remaining receivable balance from this former customer group as management determined the amount to be uncollectible. The maximum amount of credit risk, without taking into account any collateral or other credit enhancements, is equal to the carrying value of our receivables. The Group intends to pursue, where commercially reasonable, the recovery of receivables which have been impaired historically.
For further discussions on credit risk, see Note 27. |
Other Receivables |
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Other Receivables | Note 9. Other Receivables
* In 2019, the Group had various amounts owing from an affiliate owned by our Chairman equal to $828 (see Note 26). ** The loan, which was due from a former subsidiary, was written off in 2019.
Other receivables primarily arise in the normal course of business and are expected to be collected within one year from the reporting date. The movement of contract assets under contracts with customers for the years ended December 31, 2019 and 2018 was as follows:
For further discussions on credit risk, see Note 27. |
Inventories |
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Inventories | Note 10. Inventories
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Investment Property |
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Investment Property | Note 11. Investment Property All of the Group’s investment property is located in Europe.
The amounts recognized in profit or loss in relation to investment property during the years ended December 31, 2019, 2018 and 2017 are as follows:
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Property, Plant and Equipment |
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Property, Plant and Equipment | Note 12. Property, Plant and Equipment The following changes in property, plant and equipment were recorded during the year ended December 31, 2019:
* right-of-use assets.
As at December 31, 2019, the net book value of right-of-use assets was $1,188.
The following changes in property, plant and equipment were recorded during the year ended December 31, 2018:
As of December 31, 2019, the Group owned a power plant which had a carrying amount of $29,931. Pursuant to an assessment study of which the future cash flows were discounted at 8%, management concluded that there was no impairment loss on December 31, 2019. Numerous variables were utilized for this assessment, including inflation expectations, performance of contracts, discount rates, and maintenance costs. Any change in these assumptions and variables could have an impact on the valuation of the asset. If the discount rate had been 100 basis point higher, there would have been no change to the Group’s net loss for the year ended December 31, 2019. During the year ended December 31, 2018, the Group deconsolidated a subsidiary which owned a power plant (see Note 29). During the year ended December 31, 2019, 2018 and 2017 respectively, no expenditures were recognized in the carrying amounts of items of property, plant and equipment in the course of their construction. |
Interests in Resource Properties |
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Interests in Resource Properties | Note 13. Interests in Resource Properties The Group’s interests in resource properties as at December 31, 2019 and 2018 comprised the following:
The movements in the interest in an iron ore mine and hydrocarbon development and production assets included in non-current assets during the year ended December 31, 2019 were as follows:
The movements in the interest in an iron ore mine and hydrocarbon development and production assets included in non-current assets during the year ended December 31, 2018 were as follows:
The movements in exploration and evaluation assets presented as hydrocarbon probable reserves and undeveloped lands during the years ended December 31, 2019 and 2018 were as follows:
Interest in an iron ore mine The Group derives revenue from a mining sub-lease of the lands upon which the Scully iron ore mine is situated in Newfoundland and Labrador, Canada. The sub-lease commenced in 1956 and expires in 2055. The iron ore deposit is currently sub-leased to a third-party entity under certain lease agreements which will also expire in 2055. Pursuant and subject to the terms of the lease agreements, the Group collects royalty payments directly from a third-party operator based on a pre-determined formula, with a minimum payment of $3,250 per year which is deferred to contract liabilities under contracts with customers until earned as defined in the underlying lease agreements. In 2017, a third party (the new operator) acquired the mine out of proceedings under the Companies’ Creditors Arrangement Act (Canada). In 2018, the new operator announced that it had completed the financing for the mining operations on the iron ore mine and planned to recommence the operations in the summer of 2019. As a result of these new developments, management re-assessed whether there was any indication that previously recognized impairments for the asset might no longer exist or might have decreased. Pursuant to the re-assessment study of which the future cash flows were discounted at 8.3% per annum, management concluded that the previously recognized impairment loss of $188,203 should be reversed in the year ended December 31, 2018. Management performed another assessment on December 31, 2019 and concluded that there was no impairment. Hydrocarbon properties The Group owns hydrocarbon properties in western Canada. The majority of such operations are located in the Deep Basin fairway of the Western Canada Sedimentary Basin. The Group’s hydrocarbon development and production assets include producing natural gas wells, non-producing natural gas wells, producing oil wells and non-producing oil wells, but do not include a land position that includes net working interests in undeveloped acreage and properties containing probable reserves only, both of which are included in exploration and evaluation assets. The recoverable amounts of the Group’s hydrocarbon CGUs are determined whenever facts and circumstances provide impairment indicators. CGUs are mainly determined based upon the geographical region of the Group’s producing properties. An impairment is recognized if the carrying value of a CGU exceeds the recoverable amount for that CGU. The Group determines the recoverable amount by using the greater of fair value less cost to sell and the value-in-use. Value-in-use is generally the future cash flows expected to be derived from production of proven and probable reserves estimated by the Company's third party reserve evaluators. These third party reserve engineers take many data points and forecasts into consideration when estimating the value-in-use of the CGU, including best estimates of future natural gas prices, production based on current estimates of recoverable reserves and resources, exploration potential, future operating costs, non-expansionary capital expenditures and inflation. On December 31, 2017, the Group performed an impairment assessment on its hydrocarbon properties utilizing a post-tax discount rate of 11% and recognized a net non-cash reversal of impairment losses of $15,585, of which $13,264 were allocated to development and production assets and $2,951 to probable reserves and an impairment loss of $630 was allocated to undeveloped lands. On December 31, 2018, the Group performed an impairment assessment on its hydrocarbon properties utilizing a post-tax discount rate of 9.25% and no impairments or reversals of impairments were recognized. On December 31, 2019, the Group changed its valuation methodology for these assets to value-in-use from fair value less costs to sell and performed an impairment assessment on its hydrocarbon properties utilizing a pre-tax discount rate of 10.0% and no impairments or reversals of impairments were recognized. The Group changed to use the pre-tax discount rate in 2019 so as to conform with general practices in the industry. Numerous variables were utilized for this assessment, including price forecasts, production assumptions, inflation expectations, maintenance, decommissioning obligations and capital expenditure estimates, among others. Any change in these assumptions and variables could have an impact on the valuation of the asset. If the discount rate had been 100 basis points higher, the Group’s net loss would have been $388 higher in the year ended December 31, 2019. |
Deferred Income Tax Assets and Liabilities |
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Deferred Income Tax Assets and Liabilities | Note 14. Deferred Income Tax Assets and Liabilities The tax effect of temporary differences and tax loss carry-forwards that give rise to significant components of the Group’s deferred income tax assets and liabilities are as follows:
As at December 31, 2019, the Group had estimated accumulated non-capital losses, which expire in the following countries and regions as follows. Management is of the opinion that not all of these non-capital losses are probable to be utilized in the future.
The utilization of the deferred tax assets is dependent on future taxable profits in excess of the profits arising from the reversal of existing taxable temporary differences and the Group companies have suffered losses in either the current or preceding period(s) in the tax jurisdictions to which the deferred tax assets relate. The Group companies’ income tax, value-added tax and payroll tax filings are also subject to audit by taxation authorities in numerous jurisdictions. There are audits in progress and items under review, some of which may increase the Group’s income tax, value-added tax and payroll tax liability. If it is probable that management’s estimate of the future resolution of these matters changes, the Group will recognize the effects of the changes in its consolidated financial statements in the appropriate period relative to when such changes occur. |
Account Payables and Accrued Expenses |
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Account Payables and Accrued Expenses | Note 15. Account Payables and Accrued Expenses
Trade payables arise from the Group’s day-to-day activities. The Group’s expenses for services and other operational expenses are included in account payables. Generally, these payables and accrual accounts do not bear interest and have a maturity of less than one year. On June 30, 2019, the Group recorded credit losses of $3,134 as related to losses on certain corporate guarantees. The provision amount changed to $3,070 as of December 31, 2019 due to the fluctuation of exchange rates. In February 2018, the calling of a guarantee resulted in a provision for credit loss of $1,502 as at December 31, 2017. During the year ended December 31, 2018, the credit loss resulting from the calling of the guarantee was reduced by $833. The provision for the guarantee was no longer outstanding as at December 31, 2018. Contract liabilities under contracts with customers
The movements of contract liabilities under contracts with customers for the years ended December 31, 2019 and 2018 were as follows:
* Reclassification from contract liabilities to trade and accounts payable.
The Group expects to recognize the contract liabilities as revenue upon satisfaction of performance obligations in the following years:
* Reclassification from contract liabilities to trade and accounts payable.
Lease liabilities
Future lease payments included in the measurement of the lease liabilities as at December 31, 2019 are as follows:
As at December 31, 2019, the principal amounts of the lease liabilities were presented on the statement of financial position as follows:
As at December 31, 2019, the lease liabilities, which principally comprised office premises (see Note 12), have varying terms and are subject to the customary practices in the local regions. The Group expects to pay for these future lease payments from the operations. Management does not expect material exposure arising from variable lease payments, extension options and termination options, residual value guarantees and leases not yet commenced to which the Group is committed.
The Group recognized the following associated with its lease liabilities for the year ended December 31, 2019:
Minimum lease payments recognized as expenses were $2,303 (including contingent rents of $423) and $3,120 (including contingent rents of $115) for the year ended December 31, 2018 and 2017, respectively. |
Bond Payables |
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Bond Payables | Note 16. Bond Payables In August 2019, a subsidiary completed a public issue of bonds with an aggregate nominal amount of $36,511 (€25,000), less commissions and issuance costs totaling $1,078 (€738). The bonds are redeemable in August 2026, interest payable in August each year at a nominal interest rate of 4.00% (or an effective interest rate at 4.41%) and secured by the Group's investment property and real estate held for sale under the German Law Mortgages and Pledges. To the extent that any sales of these properties, in whole or in part, cause the security to fall below a certain ratio, proceeds of said sale, up to an amount of the collateral shortfall, are required to be placed as cash collateral with the bond holder trustee until maturity. As at December 31, 2019, the carrying amount of the bond payables was $35,418 (nominal amount of $36,458 or €25,000). For the movement of bond payables in the year ended December 31, 2019, see Note 25. As at December 31, 2019, the contractual maturities of the bond payables are as follows:
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Decommissioning Obligations | Note 17. Decommissioning Obligations
Decommissioning obligations represent the present value of estimated remediation and reclamation costs associated with hydrocarbon properties and property, plant and equipment. As at December 31, 2019 and 2018, management revised its estimates of the expected decommissioning obligations related to its hydrocarbon production and processing assets. The Group discounted the decommissioning obligations using an average discount rate of 1.61% (2018: 1.98%), which is the risk-free rate in Canada for blended government securities. The Group’s decommissioning obligations are unsecured and will be funded from future cash flows from operations. |
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Shareholders' Equity | Note 18. Shareholders’ Equity Capital Stock The authorized share capital of Scully is US$450,000 divided into 300,000,000 common shares of US$0.001 par value each and 150,000,000 preference shares divided into US$0.001 par value each. Holders of common shares may receive dividends declared by the Company in accordance with the Company’s memorandum and articles of association, subject to any preferential dividend rights of any other classes or series of preference shares issued and outstanding. Holders of common shares are entitled to one vote per share at any general or special meeting of shareholders. The holders of common shares have the right on the winding up or dissolution of the Company to participate in the surplus assets of the Company in accordance with the provisions of the memorandum and articles of association of the Company, subject to the rights of any issued and outstanding preference shares. All of the Company’s issued capital stock is fully paid. Treasury Stock
All of the Company’s treasury stock is held by wholly-owned subsidiaries. |
Consolidated Statements of Operations |
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Consolidated Statements of Operations | Note 19.Consolidated Statements of Operations Revenue The Group’s revenue comprised:
The revenue of $101,013 from merchant banking products and services for the year ended December 31, 2019 comprised metals of $77,527, natural gas of $7,712, royalty revenue of $5,687, power and electricity of $4,075, fees of $3,547 and food products of $2,465. Revenue from merchant banking products are generally recognized from contracts with customers. The revenue of $124,059 from merchant banking products and services for the year ended December 31, 2018 comprised metals of $107,540, natural gas of $10,371, change in royalty revenue estimate of ($2,437), power and electricity of $4,254 and fees of $4,331. Revenue from merchant banking products are generally recognized from contracts with customers. The revenue of $249,581 from merchant banking products and services for the year ended December 31, 2017 comprised metals of $143,572, plastics of $98, steel products of $23,898, minerals, chemicals and alloys of $57,768, natural gas of $8,931, royalties of $8,868, power and electricity of $4,215 and fees of $2,231. The Group’s revenue includes the revenue of the metals processing acquisition from October 1, 2017. The metals processing was disposed of in September 2019. Another metal processing line which comprised two subsidiaries was disposed of in October 2019. See Note 2C(iv). Effective January 31, 2017, the Group completed the sale of a non-core commodities trading subsidiary which focused on Latin America. Effective October 1, 2017, the Group disposed of certain subsidiaries, including certain commodities trading subsidiaries in Europe. In September 2018, the Group disposed of certain European subsidiaries which did not have significant business activities. During the year ended December 31, 2018, the Group reclassified certain revenue related to its iron ore royalty interest to contract liabilities. This was accounted for as a change in accounting estimates under IAS 8 and, as a result, during the year ended December 31, 2018, the Group reversed $2,437 which was previously recognized as revenue in the year ended December 31, 2017 and classified the amount to contract liabilities. During the year ended December 31, 2019, those prepayments were applied to reduce the cash inflows from the royalty earned in 2019. During the year ended December 31, 2017, the Group recognized $5,619 for the underpayment of resource property royalties from prior years, which was included in revenue from merchant banking products and services. Expenses The Group’s costs of sales and services comprised:
Credit losses, which were included in costs of sales and services in the years ended December 31, 2018 and 2017, were reclassified and shown separately on the current year’s consolidated statements of operations.
The Group's net gain on dispositions of subsidiaries comprised:
The Group included the following items in costs of sales and services:
The Group’s credit losses comprised:
The credit losses included losses of $6,087 on receivable due from a former consolidated entity in the year ended December 31, 2019 (2018: $9,957 and 2017: $8,585). The credit losses also included losses of $3,200 relating to the consideration from the sale of a subsidiary, which is no longer expected to be received, and $3,134 on certain corporate guarantees (see Notes 15 and 26) in the year ended December 31, 2019. The Group recognized credit losses from the write-offs of royalty income receivables of $nil, $3,875 and $1,425 in the year ended December 31, 2019, 2018 and 2017, respectively. The credit losses were recognized on the financial assets that were credit-impaired at the reporting date. The Group’s selling, general and administrative expenses comprised:
Additional information on the nature of costs and expenses
* Employee benefits expenses do not include the directors’ fees. For directors’ fees, see Note 26. During the year ended December 31, 2018, certain of the Group’s subsidiaries entered into a court-approved settlement agreement related to proceedings respecting the insolvent estate of certain of our former hydrocarbon subsidiaries. As a result of the settlement, the Group incurred a non-cash charge of $5,600, which was the carrying value of assets which the Group contributed under the settlement. |
Share-Based Compensation |
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Share-Based Compensation | Note 20. Share-Based Compensation The 2017 Equity Incentive Plan, referred to as the “2017 Plan”, was adopted by the Company on July 14, 2017. Pursuant to the terms of the 2017 Plan, the board of directors, the Compensation Committee or such other committee as is appointed by the board of directors to administer the Incentive Plan, may grant stock options, restricted stock rights, restricted stock, performance share awards, performance share units and stock appreciation rights under the 2017 Plan, establish the terms and conditions for those awards, construe and interpret the 2017 Plan and establish the rules for the 2017 Plan’s administration. Such awards may be granted to employees, non-employee directors, officers or consultants or any affiliate or any person to whom an offer of employment with the Group or any affiliate is extended. Such committee has the authority to determine which employees, non-employee directors, officers, consultants and prospective employees should receive such awards. Subject to adjustment for changes in capitalization, the total number of Common Shares subject to all awards under the 2017 Plan is 575,403 Common Shares. Pursuant to a plan of arrangement which was completed in 2017, 40,000 options were issued under the 2017 Plan in exchange for options issued and outstanding under a previous equity incentive plan. On December 1, 2017, the Company issued 535,000 options to directors, officers, employees and consultants with an exercise price of US$8.76 per Common Share and an expiry date of December 1, 2027. On May 12, 2018, a Group executive surrendered for cancellation 20,000 options to purchase the Company’s common shares. On the same date, the Company granted to a different employee options to purchase 20,000 of the Company’s common shares at an exercise price of US$8.76 per share. The options vested immediately and expire on December 1, 2027. In July 2019, stock options to purchase 20,000 of the Company's common shares at US$8.76 per share were exercised. The closing price of the Company's common share was US$14.76 per share on the date of the exercise. The following table is a summary of the changes in stock options granted under the plans:
The following table summarizes information about stock options outstanding and exercisable as at December 31, 2019:
The following table summarizes the share-based compensation expenses recognized by the Group:
The weighted average assumptions and inputs used in calculating the fair value of the stock options granted on May 12, 2018 and December 1, 2017, respectively, using the Black-Scholes-Merton formula are as follows:
The expected volatility was determined based on the historical price movement over the expected option life, with adjustments for underlying businesses. The stock option holders are not entitled to dividends or dividend equivalents until the options are exercised. The aggregate fair value of options granted was $nil, $69 and $2,876, respectively, which was recognized as share-based compensation expense in the Group’s consolidated statement of operations, for the years ended December 31, 2019, 2018 and 2017. |
Income Taxes |
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Income Taxes | Note 21. Income Taxes (Loss) income before income taxes comprised:
The components of income tax expense comprised:
A reconciliation of (loss) income before income taxes to the provision for income taxes in the consolidated statements of operations is as follows:
The income tax recovery and expense were computed using the domestic rate in each individual jurisdiction. Scully has a zero tax rate under its tax jurisdiction. In addition, the aggregate current and deferred income tax relating to items that are charged directly to other comprehensive income or loss was an expense of $nil for the years ended December 31, 2019, 2018 and 2017. |
(Loss) Earnings Per Share |
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(Loss) Earnings Per Share | Note 22. (Loss) Earnings Per Share (Loss) earnings per share data for the years ended December 31, 2019, 2018 and 2017 are summarized as follows:
In 2019, 2018 and 2017, the Group’s potential ordinary shares include stock options outstanding. As at December 31, 2019, 2018 and 2017, there were 426,000, 450,000 and 575,000 stock options, respectively, outstanding that could potentially dilute basic earnings per share in the future, but were not included in the calculation of diluted earnings per share because they were antidilutive for the year ended December 31, 2019, 2018 and 2017. |
Dividends Paid |
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Dividends Paid | |
Dividends Paid | Note 23. Dividends Paid The Company did not declare nor pay dividends during the years ended December 31, 2019, 2018 and 2017.
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Commitments and Contingencies |
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Commitments and Contingencies | |
Commitments and Contingencies | Note 24. Commitments and Contingencies Litigation The Group is subject to routine litigation incidental to its business and is named from time to time as a defendant and is a plaintiff from time to time in various legal actions arising in connection with its activities, certain of which may include large claims for punitive damages. Further, due to the size, complexity and nature of the Group’s operations, various legal and tax matters are outstanding from time to time, including periodic audit by various tax authorities. One of the Group’s subsidiaries is disputing certain assessments by the relevant tax authorities related to expatriate staff payroll tax, and the Group has appealed these matters locally. Management believes that it is more likely than not that it will be successful in this appeal, however the timing is unknown. The total amount of the assessments is $2,996 of which $899 has been paid in dispute. The amount that has been paid has been written off due to management’s expectations of probability of recovery. The Company and certain subsidiaries have been named as defendants in a legal action relating to an alleged guarantee of the former parent of the Group in the amount of approximately $63,874 (€43,800). The Group believes that such claim is without merit and intends to vigorously defend such claim. Currently, based upon the information available to management, management does not believe that there will be a material adverse effect on the Group's financial condition or results of operations as a result of this action. However, due to the inherent uncertainty of litigation, the Company cannot provide certainty as to the outcome. Currently, based upon information available, management does not believe any such matters would have a material adverse effect upon the Group's financial condition or results of operations as at December 31, 2019. However, due to the inherent uncertainty of litigation, there cannot be certainty as to the eventual outcome of any case. If management's current assessments are incorrect or if management is unable to resolve any of these matters favourably, there may be a material adverse impact on the Group's financial performance, cash flows or results of operations. Rights to Subscribe to Shares in Subsidiaries During 2017, two subsidiaries of the Group entered into agreements with third party employee incentive corporations whereby the latter were granted the rights to buy up to 10% of the share capital of the subsidiaries on a diluted basis at a price to be no less or more than the then existing net tangible asset value. The rights expire in 10 years. Upon the occurrence of a change in control event as defined in the agreements, certain rights to purchase shares in the entities with pre-determined prices were issued subsequent to December 31, 2019, exercisable until 2026. |
Consolidated Statements of Cash Flows - Supplemental Disclosure |
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Consolidated Statements of Cash Flows - Supplemental Disclosure | Note 25. Consolidated Statements of Cash Flows – Supplemental Disclosure Interest paid and received, dividends received and income taxes paid are classified as operating activities. Dividends paid are classified as financing activities. Income taxes paid include the payments of advance tax prepayments and are net of tax cash refunds. There are no circumstances in which cash and cash equivalents held by an entity are not available for use by the Group other than amounts presented as restricted cash. See "Currency Risk" in Note 27. Consolidated cash flows statement – reconciliation of liabilities arising from financing activities
Non-cash transactions Non-cash transactions during the year ended December 31, 2019: (1) a subsidiary of the Group settled liabilities of $1,128 by delivering shares of one of its subsidiaries; and (2) the acquisition of a noncontrolling interest in the aforementioned subsidiary by an offset of a receivable of $390. Non-cash transactions during the year ended December 31, 2018: (1) a non-cash settlement loss of $5,600 which represented the carrying amounts of assets that the Group contributed under a court-approved settlement agreement (see Note 19); and (2) the deconsolidation of a subsidiary resulting in recognition of a long-term non-interest bearing loan payable of $3,645 (see Note 29). Non-cash transactions during the year ended December 31, 2017: (1) sale of the shares of a non-core Latin America focused commodities trading subsidiary to a company controlled by the former President of the Company (see Note 26); (2) dispositions of subsidiaries (see Note 29); (3) offsetting of a payable of $12,264 due to a former subsidiary against a receivable due from the same entity; (4) redemption of preferred shares of $52,299 in a subsidiary held by the former subsidiary in an exchange of trade receivables with a fair value of $52,299; and (5) offsetting of long-term deposit liabilities of $545 against finance lease receivables. |
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Related Party Transactions | Note 26. Related Party Transactions In the normal course of operations, the Group enters into transactions with related parties, which include affiliates in which the Group has a significant equity interest (10% or more) or has the ability to influence their operating and financing policies through significant shareholding, representation on the board of directors, corporate charter and/or bylaws. The related parties also include, among other things, the Company's directors, Chairman, President, Chief Executive Officer and Chief Financial Officer. This section does not include disclosure, if any, respecting open market transactions, whereby a related party acts as an investor of the Company’s securities or the bonds of Merkanti Holding plc.: The Group had the following transactions with its related parties
From time to time the Group has entered into arrangements with a company owned by the Group's Chairman to assist the Group to comply with various local regulations and requirements, including the newly introduced economic substance legislation for offshore jurisdictions, as well as fiscal efficiency. These arrangements are utilized to aid in the divestment of financially or otherwise distressed or insolvent assets or businesses that are determined to be unsuitable for the Group's ongoing operations. These arrangements are implemented at cost and no economic benefit is received by, or accrued, by the Group's Chairman or the company controlled by him. Pursuant to this arrangement, as at December 31, 2019, the Group held: (i) an indemnification asset of $6,362 (see Note 9) relating to a secured indemnity provided by such company to a subsidiary of the Group to comply with local regulations and requirements, in an amount equal to the amount advanced to it, for certain short-term intercompany balances involving certain of the Group’s subsidiaries and another subsidiary that was put into dissolution by the Group in 2019; and (ii) a loan to such company of $828 (see Note 9), bearing interest at 6.3%, which was made in the year ended December 31, 2019 in order to facilitate the acquisition of securities for the Group's benefit. In addition, pursuant to this arrangement, during the year ended December 31, 2019, the Group: (i) reimbursed such company $811 (as set forth in the table above) at cost for expenses, primarily consisting of employee benefits and lease and office expenses; and (ii) sold a non-core metals processing business to a company controlled by its Chairman for nominal consideration (€ 1.00), which represented the arm's length transaction price. This metals processing business operated out of a leased property with leased equipment. Over the past fifteen years, the landlord of the land and equipment refused to incur any capital expenditures or to make any necessary improvement to the facility. Without these necessary capital upgrades and improvements, the subsidiary’s maintenance costs increased and productivity decreased such that it could no longer be operated on a profitable or sustainable basis. After reporting a net loss in the year ended December 31, 2018, it continued to report losses in the year ended December 31, 2019, which resulted in the subsidiary having negative net equity on a consolidated basis. As a result, the transaction did not result in the transfer of any net economic benefit to the company controlled by the Group's Chairman and the sale for nominal consideration resulted in the recognition of a non-cash accounting gain of $906 in the year ended December 31, 2019. Subsequent to the sale, this former subsidiary entered into an insolvency administration process in Germany. The Group recognized credit losses of $3,134 on corporate guarantees issued to certain trading partners of this former subsidiary prior to its disposition. As set forth in the table above, the Group had royalty expenses of $210 in the year ended December 31, 2019 that were paid to a company in which it holds a minority interest and that is a subsidiary of the operator of the underlying mine. During the year ended December 31, 2019, the Group's Chairman was a subscriber in the issuance of public bonds by Merkanti Holding plc in the amount of $462 (€316), being approximately 1.25% of the total offering and total bonds outstanding as at December 31, 2019. In January 2017, in connection with its previously announced strategy to re-allocate capital and resources and exit certain products and geographies, the Group sold the shares of a non-core Latin America focused commodities trading subsidiary to a company controlled by a former officer who resigned as the president and chief executive officer of the former holding company in March 2017 and as the director in May 2018. Under the transaction, the Group received total consideration of $14,413, including 90,000 common shares of the former holding company and the release of any further obligations to issue shares in connection with a prior share purchase agreement between the parties. See Note 29. Key management personnel The Group’s key management personnel comprise the members of its Board of Directors, President, Chief Executive Officer and Chief Financial Officer. The remuneration of key management personnel of the Group was as follows:
* Included the net pay and expenses.
The share-based compensation for the year ended December 31, 2017 comprised $323 and $390, respectively, on the stock options granted to directors and other key management personnel (see Note 20). |
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Financial Instruments | Note 27. Financial Instruments The fair values of the Group’s financial instruments as at December 31, 2019 and 2018, other than those with carrying amounts that approximate their fair values due to their short-term nature, are summarized as follows:
Fair value of a financial instrument represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions regardless of whether that price is directly observable or estimated using a valuation technique. The price for a transaction which takes place under duress or the seller is forced to accept the price in the transaction might not represent the fair value of an asset or a liability. The best evidence of fair value is published price quotations in an active market. When the market for a financial asset or financial liability is not active, the Group establishes fair value by using a valuation technique. The valuation technique used maximizes the use of inputs observed in active markets, and minimizes the use of inputs generated by the Group. Internally generated inputs take into account factors that market participants would consider when pricing the financial instruments, such as liquidity and credit risks. Use of judgment is significantly involved in estimating fair value of financial instruments in inactive markets and actual results could materially differ from the estimates. To value longer-term transactions and transactions in less active markets for which pricing information is not generally available, unobservable inputs may be used. The fair values of financial assets measured at FVTPL and FVTOCI are based on quoted market prices (Level 1 fair value hierarchy) or a valuation method with observable inputs (Level 2 fair value hierarchy). For investments in certain specialized investment funds which are measured at FVTPL, their fair values are based on a valuation model with inputs that are unobservable (Level 3 fair value hierarchy). The carrying amounts of cash and cash equivalents, short-term receivables and account payables and accrued expenses, due to their short-term nature and normal trade credit terms, approximate their fair values. The fair values of derivative financial instruments are based on quoted market prices when possible; and if not available, estimates from third-party brokers. These broker estimates are corroborated with multiple sources and/or other observable market data utilizing assumptions that market participants would use when pricing the asset or liability, including assumptions about risk and market liquidity (Level 2 fair value hierarchy). Inputs may be readily observable or market-corroborated. The fair values of the bond payables are based on the quoted market price from the Malta Stock Exchange at which the bonds are traded (Level 1 fair value hierarchy). The fair value of the loan payable is estimated using an appropriate valuation method. Inputs to the valuation technique are unobservable (Level 3 fair value hierarchy). The following tables present the Group’s financial instruments measured at fair value on the consolidated statements of financial position classified by level of the fair value hierarchy as at December 31, 2019 and 2018, respectively:
As at December 31, 2019 and 2018, the Group held an investment in a privately held company which was measured at FVTPL. The fair value was determined using discounted cash flows at prevailing market rates of interest for similar instruments with observable inputs (Level 2 fair value hierarchy). As at December 31, 2019 and 2018, a subsidiary of the Group has a loan payable with a former subsidiary which is non-interest bearing, is without recourse to the Group and has no fixed repayment date. The loan payable was measured at FVTPL at its initial recognition, as permitted under IFRS, on a fair value basis in accordance with a documented investment strategy. The undiscounted contractual amount due out of surplus cash of the subsidiary is $54,641 (US$42,070) and is expected to be repaid in greater than 14 years. As at December 31, 2019, the difference between the carrying amount of the loan payable and the amount the Group would be contractually required to pay at maturity was $49,872. The fair value is determined using a discount rate for similar instruments with unobservable inputs (Level 3 fair value hierarchy), which included the sale price, demand for products, production and labour costs in the future periods. The actual repayment may be significantly different from both the carrying amount and the amount due at maturity. Sensitivity to changes in the discount rate is included under “Interest Rate Risk” in this Note 27.
Generally, management of the Group believes that current financial assets and financial liabilities, due to their short-term nature, do not pose significant financial risks. The Group uses various financial instruments to manage its exposure to various financial risks. The policies for controlling the risks associated with financial instruments include, but are not limited to, standardized company procedures and policies on matters such as hedging of risk exposure, avoidance of undue concentration of risk and requirements for collateral (including letters of credit and bank guarantees) to mitigate credit risk. The Group has risk managers and other personnel to perform checking functions and risk assessments so as to ensure that the Group’s procedures and policies are complied with. Many of the Group’s strategies, including the use of derivative instruments and the types of derivative instruments selected by the Group, are based on historical trading patterns and correlations and the Group’s management’s expectations of future events. However, these strategies may not be fully effective in all market environments or against all types of risks. Unexpected market developments may affect the Group’s risk management strategies during the period, and unanticipated developments could impact the Group’s risk management strategies in the future. If any of the variety of instruments and strategies the Group utilizes is not effective, the Group may incur losses. The Group does not trade in financial instruments, including derivative financial instruments, for speculative purposes. The nature of the risks that the Group’s financial instruments are subject to as at December 31, 2019 is set out in the following table:
A sensitivity analysis for each type of market risk to which the Group is exposed on its financial instruments at the end of the reporting period is provided, showing how profit or loss and equity would have been affected by changes in the relevant risk variable that were reasonably possible at that date. These ranges of parameters are estimated by management, which are based on the facts and circumstances available at the time estimates are made, and an assumption of stable socio-economic and geopolitical states. No unusual nor exceptional events, for example, natural disasters or human-made crises and calamities, are taken into consideration when the sensitivity analysis is prepared. Actual occurrence could differ from these assumptions and such differences could be material. Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Financial instruments which potentially subject the Group to credit risk consist of cash and cash equivalents and restricted cash, derivative financial instruments, receivables and committed transactions (including loan commitments and financial guarantee contracts). The Group has deposited cash and cash equivalents and entered into derivative financial instrument contracts with reputable financial institutions with high credit ratings and management believes the risk of loss from these counterparties to be remote. Most of the Group’s credit exposure is with counterparties in the merchant banking businesses and are subject to normal industry credit risk. The Group has receivables from various entities and credit risk from trade receivables is mitigated since they are credit insured, covered by letters of credit, bank guarantees and/or other credit enhancements. The Group routinely monitors credit risk exposure, including sector, geographic and corporate concentrations of credit and set and regularly review counterparties’ credit limits based on rating agency credit ratings and/or internal assessments of the customers and industry analysis. The Group also uses factoring and credit insurances to manage credit risk. Management believes that these measures minimize the Group’s overall credit risk; however, there can be no assurance that these processes will protect the Group against all losses from non-performance. The Group measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses or 12‑month expected credit losses (see Note 2B(vii)). At each reporting date, the Group assesses whether the credit risk on a financial instrument has increased significantly since initial recognition. When making the assessment, the Group uses the change in the risk of a default occurring over the expected life of the financial instrument instead of the change in the amount of expected credit losses. To make that assessment, the Group compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and considers reasonable and supportable information, that is available without undue cost or effort, that is indicative of significant increases in credit risk since initial recognition. The Group assumes that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date. Under IFRS 9, there is a rebuttable presumption that the credit risk on a financial asset has increased significantly since initial recognition when contractual payments are more than 30 days past due; although, this rebuttable presumption is not an absolute indicator that lifetime expected credit losses should be recognized, but is presumed to be the latest point at which lifetime expected credit losses should be recognized even when using forward-looking information (including macroeconomic factors on a portfolio level). The credit risk on a financial instrument is considered low if the financial instrument has a low risk of default, the borrower has a strong capacity to meet its contractual cash flow obligations in the near term and adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations. Financial instruments are not considered to have low credit risk when they are regarded as having a low risk of loss simply because of the value of collateral and the financial instrument without that collateral would not be considered low credit risk. Financial instruments are also not considered to have low credit risk simply because they have a lower risk of default than the Group’s other financial instruments or relative to the credit risk of the jurisdiction within which the Group operates. To determine whether a financial instrument has low credit risk, the Group may use its internal credit risk ratings or other methodologies that are consistent with a globally understood definition of low credit risk and that consider the risks and the type of financial instruments that are being assessed. Generally, an external rating of “investment grade” is an example of a financial instrument that may be considered as having low credit risk. Financial instruments are considered to have low credit risk from a market participant perspective taking into account all of the terms and conditions of the financial instrument. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired include observable data about the following events: (a) significant financial difficulty of the issuer or the borrower; (b) a breach of contract, such as a default or past due event; (c) the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider; (d) it is becoming probable that the borrower will enter bankruptcy or other financial reorganization; (e) the disappearance of an active market for that financial asset because of financial difficulties; or (f) the purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses. It may not be possible to identify a single discrete event; instead, the combined effect of several events may have caused financial assets to become credit-impaired. The Group adopts the presumption in IFRS 9 as its accounting policy that default does not occur later than when a financial asset is 90 days past due, unless it has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate. The definition of default used for these purposes is applied consistently to all financial instruments unless information becomes available that demonstrates that another default definition is more appropriate for a particular financial instrument. The average contractual credit period for trade receivables is 30‑60 days and up to 180 days for certain sales. The maximum credit risk exposure as at December 31, 2019 is as follows:
In February 2016, certain guarantees related to a customer filing for insolvency were called and the Group met its obligations under these amounts. Since these guarantees were no longer contingent, but instead were probable, they were recognized as provisions of $40,677 as at December 31, 2015, which were paid during the year ended December 31, 2016. During the year ended December 31, 2016, the Group received proceeds of $39,149 from risk mitigation assets related to these guarantees, of which $35,121 was credited to profit or loss through a recovery of credit loss and the remainder was credited to trade receivables. During 2017, a net reversal of credit loss of $1,317 was credited to profit or loss. During 2018, the Group wrote off the remaining receivable balance and recognized a credit loss of $21,812 (see Note 8). In February 2018, the calling of a guarantee resulted in a provision for credit loss of $1,502 as at December 31, 2017 (see Note 15). During the year ended December 31, 2018, the credit loss resulting from the calling of the guarantee was reduced by $833 and was no longer outstanding as at December 31, 2018. During the year ended December 31, 2019, the Group recognized a provision of $3,134 for credit losses on guarantees in its consolidated statement of operations. See sub-heading of “Concentration risk” in this note on credit risk concentration. Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Group requires liquidity specifically to fund capital requirements, satisfy financial obligations as they become due, and to operate its merchant banking business. The Group puts in place an actively managed production and capital expenditure budgeting process for major capital programs. The Group’s approach to managing liquidity is to ensure, as far as possible, that it always has sufficient liquidity to meet its liabilities when they fall due, under normal and stress conditions, without incurring unacceptable losses. The Group maintains an adequate level of liquidity, with a portion of its assets held in cash and cash equivalents. The Group also maintains adequate banking facilities, including refinancing arrangements. It is the Group’s policy to invest cash in bank deposits for a period of less than three months. The Group may also invest in cash deposits with an original maturity date of more than three months so as to earn higher interest income. Generally, trade payables are due within 90 days and other payables and accrued expenses are due within one year. As at December 31, 2019, the Group had long-term bond payables with interest payable annually and repayment of principal due in 2026. The timing of future payments is based on the Group’s historical payment patterns and management’s interpretation of contractual arrangements. The actual cash outflows might occur significantly earlier than indicated in the payment projection or be amounts significantly different from those indicated in the payment projection. Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group operates internationally and is exposed to risks from changes in foreign currency exchange rates, particularly the Euro, Canadian dollar and U.S. dollar. Currency risk arises principally from future trading transactions, and recognized assets and liabilities. In order to reduce the Group’s exposure to foreign currency risk on material contracts (including intercompany loans) denominated in foreign currencies (other than the functional currencies of the Group companies), the Group may use foreign currency forward contracts and options to protect its financial positions. As at December 31, 2019 and 2018, the Group did not have any foreign currency derivative financial instruments (foreign currency forward contracts and options) outstanding. The Group holds cash balances in renminbi (“RMB”) in the People’s Republic of China (“PRC”). The PRC imposes controls on the convertibility of RMB, the official currency of the PRC, into foreign currencies. The value of RMB is subject to changes in the central government policies and to international economic and political developments affecting supply and demand in the PRC foreign exchange trading system market. In the PRC, certain foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (the “PBOC”). The Group does not have any material exposure to highly inflationary foreign currencies. Sensitivity analysis: At December 31, 2019, if the U.S. dollar had weakened 10% against the Group companies’ functional currencies with all other variables held constant, net loss for the year ended December 31, 2019 would have been $653 lower. Conversely, if the U.S. dollar had strengthened 10% against the Group companies’ functional currencies with all other variables held constant, net loss for the year ended December 31, 2019 would have been $619 higher. The reason for such change is mainly due to certain U.S. dollar denominated financial instrument liabilities (net of assets) owed by entities whose functional currencies were not the U.S. dollar. There would have been no material impact arising from financial instruments on other comprehensive income in either case. At December 31, 2019, if the Euro had weakened 10% against the Group companies’ functional currencies with all other variables held constant, net loss for the year ended December 31, 2019 would have been $7,554 lower. Conversely, if the Euro had strengthened 10% against the Group companies’ functional currencies with all other variables held constant, net loss for the year ended December 31, 2019 would have been $7,554 higher. The reason for such change is mainly due to certain Euro denominated financial instrument liabilities (net of assets) owed by entities whose functional currencies were not the Euro. There would have been no impact arising from financial instruments on other comprehensive income in either case. At December 31, 2019, if the Canadian dollar had weakened 10% against the Group companies’ functional currencies with all other variables held constant, net loss for the year ended December 31, 2019 would have been $35 lower. Conversely, if the Canadian dollar had strengthened 10% against the Group companies’ functional currencies with all other variables held constant, net loss for the year ended December 31, 2019 would have been $35 higher. The reason for such change is mainly due to certain Canadian dollar denominated financial instrument liabilities (net of assets) owed by entities whose functional currencies were not the Canadian dollar. There would have been no impact arising from financial instruments on other comprehensive income in either case. Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Short-term financial assets and financial liabilities are generally not exposed to significant interest rate risk because of their short-term nature. As at December 31, 2019, the Group had long-term bond payables measured at amortized cost which bear a fixed interest rate. Sensitivity analysis: At December 31, 2019, if benchmark interest rates (such as EURIBOR, LIBOR or prime rates) at that date had been 100 basis points (1.00%) per annum lower with all other variables held constant, net loss for the year ended December 31, 2019 would have been $551 higher. Conversely, if the benchmark interest rate had been 100 basis points per annum higher with all other variables held constant, net loss for the year ended December 31, 2019 would have been $469 lower. The reason for such change is mainly due to the loan payable measured at FVTPL. There would have been no impact arising from financial instruments on the Group’s other comprehensive income in either case. Other price risk Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer or by factors affecting all similar financial instruments traded in the market. The Group’s other price risk includes equity price risk whereby the Group’s investments in equities of other entities that are classified as held for trading are subject to market price fluctuations. Sensitivity analysis: At December 31, 2019, if equity prices in general had weakened 10% with all other variables held constant, net loss for the year ended December 31, 2019 would have been $466 higher. Conversely, if equity prices in general had strengthened 10% with all other variables held constant, net loss for the year ended December 31, 2019 would have been $466 lower. There would have been no impact on other comprehensive income in either case. In addition, the Group buys and sells futures contracts on the London Metal Exchange and enters into financial derivative contracts (e.g. futures and swaps) with banks, customers and brokers. Management uses the financial derivative contracts to manage the price fluctuations for its own account or for customers. As at December 31, 2019, the Group did not have any outstanding derivative financial instruments. As at December 31, 2018, the Group had outstanding derivative financial instruments with an aggregate notional amount of $9,720, primarily to hedge against the long position in inventories and the usage of energy, which resulted in a net unrealized fair value gain of $172. As these future contracts are to hedge against the Group’s physical inventory position, any change in the fair value of the future contracts will offset the change in the fair value, though in opposite direction, of the physical inventories. As a result, the sensitivity analysis of the price risk arising from the future contracts on the Group is not applicable. Concentration risk Management determines the concentration risk threshold amount as any single financial asset (or liability) exceeding 10% of total financial assets (or liabilities) in the Group’s consolidated statement of financial position. In the PRC, foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the PBOC. Remittances in currencies other than RMB by the Group in the PRC must be processed through the PBOC or other PRC foreign exchange regulatory bodies and require certain supporting documentation in order to effect the remittance. If such foreign exchange control system prevents the Group from obtaining sufficient foreign currencies to satisfy its currency demands, the Group may not be able to pay dividends in foreign currencies and the Group’s ability to fund its business activities that are conducted in foreign currencies could be adversely affected. Except as disclosed in the preceding paragraph, at December 31, 2019, there were no customer, company or entity holding financial assets or liabilities exceeding the threshold amounts. Additional disclosure In addition to information disclosed elsewhere in these consolidated financial statements, the Group had significant items of income, expense, and gains and losses resulting from financial assets and financial liabilities which were included in profit or loss for the years ended December 31, 2019, 2018 and 2017 as follows:
* Correction of error. |
Fair Value Disclosure for Non-financial Assets |
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Fair Value Disclosure for Non-financial Assets | Note 28. Fair Value Disclosure for Non-financial Assets The fair values of the Group’s financial instrument assets and liabilities which are measured at fair value on the consolidated statements of financial position are discussed in Note 27. The following tables present non-financial assets which are measured at or based on fair value in the consolidated statements of financial position, classified by level of the fair value hierarchy: Assets measured at fair value on a recurring basis as at December 31, 2019:
Assets measured at fair value on a recurring basis as at December 31, 2018:
Commodity inventories are measured at fair value less costs to sell. The fair values are determined by reference to their contractual selling prices or quoted prices in marketplaces in the absence of a contract (level 1 fair value hierarchy). An average of past sale prices is used when there are no observable market prices or current contracts but there have been recent past sales of such goods and there are no indications that the market prices have been materially impacted (level 2 fair value hierarchy). The Group did not carry any commodity inventories as at December 31, 2019. The fair values of investment property are measured using an income approach which includes the following inputs: land value, realized basic rents, operating costs, discount rates and damages and defects (level 3 fair value hierarchy). The valuation approach was consistent for both 2019 and 2018. Both the 2019 and 2018 valuations were performed by an independent external valuator who is an authorized expert for the valuation of developed and undeveloped land in Germany and holds recognized and relevant professional qualifications and has recent experience in the location and category of the investment property being valued. |
Scully and its Significant Subsidiaries |
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||
Scully and its Significant Subsidiaries | |||||||||||||||||||||||||||||||||||||||||||||||||
Scully and its Significant Subsidiaries | Note 29. Scully and its Significant Subsidiaries Scully, through an affiliate, has an office at Unit 803, Dina House, Ruttonjee Centre, 11 Duddell Street, Hong Kong SAR, China. A subsidiary is an entity that is controlled by Scully. The following table shows the Company’s direct and indirect significant subsidiaries as at December 31, 2019. The table excludes subsidiaries which only hold intercompany assets and liabilities and do not have an active business as well as subsidiaries whose results and net assets did not materially impact the consolidated results and net assets of the Group.
* The Group's proportional voting interests are identical to its proportional beneficial interests, except that it holds a 99.72% proportional beneficial interest in each of Merkanti (A) International Ltd. and Merkanti (D) International Ltd.
As at December 31, 2019, the Group controlled entities in which the Group held more than 50% of the voting rights and did not control any entities in which the Group held 50% or less of the voting rights. The Group’s proportional voting interests in the subsidiaries are identical to its proportional beneficial interests. As at December 31, 2019, none of the non-controlling interests are material to the Group. As at December 31, 2019, there were no significant restrictions (statutory, contractual and regulatory restrictions, including protective rights of non-controlling interests) on Scully’s ability to access or use the assets and settle the liabilities of the Group except for amounts presented as restricted cash. See "Currency Risk" in Note 27. During the year ended December 31, 2019, the Group put a subsidiary into a voluntary dissolution (see Note 5), sold the shares of certain manufacturing/processing subsidiaries and abandoned certain inactive subsidiaries, resulting in a net gain of $2,243 (see Note 19) which was included in the consolidated statement of operations. In addition, the Group issued shares in a subsidiary to a third party, resulting in a gain of $229 which was credited to retained earnings directly. During the year ended December 31, 2018, the Group completed merchant banking transactions which resulted in (i) recognition of a pre-tax gain of $25,740; (ii) recognition of deferred tax expense of $7,204; (iii) reclassification of cumulative translation loss of $672 from accumulated other comprehensive income to profit or loss; (iv) recognition of a long-term liability of $3,645; (v) recognition of non-controlling interests of $6,441 in another subsidiary and (vi) a debit adjustment of $6,284 to deficit under equity. The Group also disposed of several other subsidiaries. In aggregate, the Group recognized a net gains of $25,099 (see Note 19) on the deconsolidation of subsidiaries during the year ended December 31, 2018. During the year ended December 31, 2017, two subsidiaries, pursuant to the terms of respective option deeds (see Note 24), issued shares to the non-controlling interests. These share issuances were accounted for as equity transactions and were credited to non-controlling interests directly. As of December 31, 2018, such rights had been exercised in respect of less than 0.5% of the ownership of each such subsidiary. During the year ended December 31, 2017, the Group sold the shares of a non-core Latin America focused commodities trading subsidiary, resulting in a gain of $57 (see Note 26). The Group also disposed of several other subsidiaries. In aggregate, the Group recognized a net gain of $1,087 (see Note 19) on the deconsolidation of subsidiaries during the year ended December 31, 2017. |
Subsequent Events |
12 Months Ended |
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Dec. 31, 2019 | |
Subsequent Events | |
Subsequent Events | Note 30. Subsequent Events In December 2019, the COVID-19 outbreak occurred in Asia, which subsequently, in the first quarter of 2020, spread globally. In March 2020, the World Health Organization declared the spread of the COVID-19 virus a pandemic. While various countries have implemented stimulus packages and other fiscal measures to attempt to reduce the impact of the pandemic on their economies, the impact of the pandemic on global economic activity and markets both in the short and longer term is uncertain at this time. The magnitude and duration of the disruption and resulting decline in business activity resulting from the COVID-19 pandemic is currently uncertain. While the Group expects that there will likely be some negative impact on its results of operations, cash flows and financial position from the pandemic beyond the near-term, the extent to which the COVID-19 pandemic impacts the Group's business, operations and financial results will depend on numerous evolving factors that management may not be able to accurately predict, including: the duration and scope of the pandemic; governmental, business and individuals' actions that have been and continue to be taken in response to the pandemic; the impact of the pandemic on economic activity and actions taken in response thereto; the effect on the Group's customers; its impacts on suppliers; and the impact of the pandemic on counterparties and their ability to carry out their obligations to the Group. The Group has not yet experienced a significant impact to its business, results of operations, or financial position to-date as a result of the COVID-19 pandemic. However, the pandemic is dynamic and expanding and its ultimate scope, duration and effects are currently uncertain. Because of the uncertainties surrounding these factors and the long-term impact of the pandemic on global economies and markets, the extent of the financial impact of the pandemic cannot be reasonably estimated at this time. |
Approval of Consolidated Financial Statements |
12 Months Ended |
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Dec. 31, 2019 | |
Approval of Consolidated Financial Statements | |
Approval of Consolidated Financial Statements | Note 31. Approval of Consolidated Financial Statements These consolidated financial statements were approved by the Board of Directors and authorized for issue on May 11, 2020. |
Basis of Presentation and Summary of Significant Accounting Policies (Policies) |
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Basis of Accounting | Basis of Accounting These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (the “IASB”). Scully complies with all the requirements of IFRS. The principal accounting policies applied in the preparation of the consolidated financial statements are set out below. These policies have been consistently applied with the exception of the adoption of IFRS 9, Financial Instruments (“IFRS 9”), IFRS 15, Revenue from Contracts with Customers (“IFRS 15”) and the amendments to IFRS 2, Share-Based Payment from January 1, 2018, and IFRS 16, Leases, the amendments to IAS 23, Borrowing Costs, and IFRIC 23, Uncertainty over Income Tax Treatment from January 1, 2019. See Note 2B. These consolidated financial statements were prepared using going concern, accrual (except for cash flow information) and historical cost (except for investment property and certain financial assets and financial liabilities which are measured at fair value and certain inventories that are measured at fair value less costs to sell) bases. The presentation currency of these consolidated financial statements is the Canadian dollar ($), rounded to the nearest thousand (except per share amounts). Certain amounts have been reclassified so as to conform with the presentation in the current year (see Notes 19 and 27). |
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Restatement | Restatement
During the fiscal year ended December 31, 2019, the Group re-assessed the presentation of its consolidated statement of operations and concluded that it was necessary to restate its previously issued financial statements for the fiscal year ended December 31, 2017 for the correction of an error in presentation relating to reclassifications of foreign exchange translation gains. In accordance with IFRS 10, Consolidated Financial Statements, amounts reclassified to profit and loss that had previously been recognised in other comprehensive income in relation to disposed subsidiaries are required to be recognised in “gain or loss on dispositions of subsidiaries” and therefore these amounts which historically have been included in “exchange differences on foreign currency transactions, net (gain) loss” are required to be represented within the gain or loss on disposal, which is included in “costs of sales and services”. Below is a reconciliation to the historically reported amounts for the year ended December 31, 2017:
Such restatement also affected the cash flows from operating activities in the cash flow statement. Below is a reconciliation of the historically reported amounts for the year ended December 31, 2017:
The restatement of the items included within the statement of operations and cash flows from operating activities has had no effect on the financial position, net loss or total cash flows used in operating activities of the Group for any period presented.
Amounts related to the year ended December 31, 2018 of $672 have also been reclassified for consistency with comparative information.
Certain amounts have also been reclassified so as to conform with the presentation in the current year (see Notes 15, 19 and 27). |
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Principles of Consolidation | Principles of Consolidation These consolidated financial statements include the accounts of Scully and entities it controls. The Company controls an investee if and only if it has all the following: (a) power over the investee; (b) exposure, or rights, to variable returns from its involvement with the investee; and (c) the ability to use its power over the investee to affect the amount of its returns. When the Group holds, directly or indirectly, more than 50% of the voting power of an investee, it is presumed that the Group controls the investee, unless it can be clearly demonstrated that this is not the case. Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. All intercompany balances and transactions, including unrealized profits arising from intragroup transactions, have been eliminated in full. Unrealized losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. On the acquisition date, a non-controlling interest is measured at either its fair value or its proportionate share in the recognized amounts of the subsidiary’s identifiable net assets, on a transaction-by-transaction basis. Subsequently, the non-controlling interest increases or decreases for its share of changes in equity since the acquisition date. After initial consolidation of a subsidiary, when the proportion of equity held by non-controlling interests changes, the Group, as long as it continues to control the subsidiary, adjusts the carrying amounts of the controlling and non-controlling interests to reflect the changes in their relative interests in the subsidiary. The Group recognizes directly in equity any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received and attributes such difference to the owners of Scully. When the Group loses control of a subsidiary it: (a) derecognizes (i) the assets (including any goodwill) and liabilities of the subsidiary at their carrying amounts at the date when control is lost and (ii) the carrying amount of any non-controlling interests in the former subsidiary at the date when control is lost (including any components of other comprehensive income attributable to them); (b) recognizes (i) the fair value of the consideration received, if any, from the transaction, event or circumstances that resulted in the loss of control, (ii) if the transaction, event or circumstances that resulted in the loss of control involves a distribution of shares of the subsidiary to owners in their capacity as owners, that distribution and (iii) any investment retained in the former subsidiary at its fair value at the date when control is lost; (c) reclassifies to profit or loss, or transfers directly to retained earnings if required by IFRS, the amounts recognized in other comprehensive income in relation to the subsidiary; and (d) recognizes any resulting difference as a gain or loss under costs of sales and services in profit or loss attributable to the owners of Scully. The financial statements of Scully and its subsidiaries used in the preparation of the consolidated financial statements are prepared as of the same date, using uniform accounting policies for like transactions and other events in similar circumstances. |
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Foreign Currency Translation | Foreign Currency Translation The presentation currency of the Group’s consolidated financial statements is the Canadian dollar. Scully conducts its business throughout the world through its foreign operations. Foreign operations are entities that are subsidiaries or branches, the activities of which are based or conducted in countries or currencies other than those of Scully. Functional currency is the currency of the primary economic environment in which an entity operates and is normally the currency in which the entity primarily generates and expends cash. Foreign currency is a currency other than the functional currency of the entity. The functional currencies of the Company and its subsidiaries and branches primarily comprise the Canadian dollar, Euro (“EUR” or “€”) and United States dollar (“US$”). Reporting foreign currency transactions in the functional currency A foreign currency transaction is a transaction that is denominated or requires settlement in a foreign currency. A foreign currency transaction is recorded, on initial recognition in an entity’s functional currency, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. At the end of each reporting period: (a) foreign currency monetary items are translated using the closing rate; (b) non-monetary items denominated in a foreign currency that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction; and (c) foreign currency non-monetary items that are measured at fair value are translated using the exchange rates at the date when the fair value was determined. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous periods are recognized in profit or loss in the period in which they arise, except for exchange differences arising on a monetary item that forms part of a reporting entity’s net investment in a foreign operation which are initially recorded in other comprehensive income in the consolidated financial statements and reclassified from equity to profit or loss on disposal of the net investment. When a gain or loss on a non-monetary item is recognized in other comprehensive income, any exchange component of that gain or loss is recognized in other comprehensive income. Conversely, when a gain or loss on a non-monetary item is recognized in profit or loss, any exchange component of that gain or loss is recognized in profit or loss. Use of a presentation currency other than the functional currency When an entity presents its financial statements in a currency that differs from its functional currency, the results and financial position of the entity are translated into the presentation currency using the following procedures: (a) assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of the statement of financial position; (b) income and expenses for each statement of operations presented are translated at exchange rates at the dates of the transactions or, for practical reasons, the average exchange rates for the periods when they approximate the exchange rates at the dates of the transactions; (c) individual items within equity are translated at either the historical exchange rates when practical or at the closing exchange rates at the date of the statement of financial position; and (d) all resulting exchange differences are recognized in other comprehensive income. The following table sets out exchange rates for the translation of the Euro and United States dollar, which represented the major trading currencies of the Group, into the Canadian dollar:
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Fair Value Measurement | Fair Value Measurement Certain assets and liabilities of the Group are measured at fair value (see Note 2B). 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. A fair value measurement is for a particular asset or liability. Therefore, when measuring fair value, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place either: (a) in the principal market for the asset or liability; or (b) in the absence of a principal market, in the most advantageous market for the asset or liability. The Group measures the fair value of an asset or a liability using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. IFRS 13, Fair Value Measurement (“IFRS 13”), establishes a fair value hierarchy that categorizes the inputs to valuation techniques used to measure fair value into three levels: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability. |
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Non-current Assets Held for Sale | Non-current Assets Held for Sale A non-current asset (or disposal group) is classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. For this to be the case, the asset (or disposal group) must be available for immediate sale in its present condition subject only to terms that are usual and customary for the sale of such asset (or disposal group), the appropriate level of management must be committed to a plan to sell the asset (or disposal group) and an active program to locate a buyer and complete the plan must have been initiated. Further, the asset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair value and the sale is highly probable to complete within one year from the date of classification, except as permitted under certain events and circumstances. If the aforesaid criteria are no longer met, the Group ceases to classify the asset (or disposal group) as held for sale. Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their carrying amounts and fair values less costs to sell. The Group does not depreciate or amortize a non-current asset while it is classified as held for sale. |
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Use of Estimates and Assumptions and Measurement Uncertainty | Use of Estimates and Assumptions and Measurement Uncertainty The timely preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management’s best estimates are based on the facts and circumstances available at the time estimates are made, historical experience, general economic conditions and trends and management’s assessment of probable future outcomes of these matters. Actual results could differ from these estimates and such differences could be material. For critical judgments in applying accounting policies and major sources of estimation uncertainty. See Notes 2C and 2D. |
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Financial Instruments | (i) Financial Instruments IFRS 9 The Group adopted IFRS 9 with a date of initial application of January 1, 2018. Financial assets and financial liabilities are recognized on the consolidated statement of financial position when the Group becomes a party to the financial instrument contract. A financial asset is derecognized either when the Group has transferred the financial asset and substantially all the risks and rewards of ownership of the financial asset or when the contractual rights to the cash flows expire. A financial liability is derecognized when the obligation specified in the contract is discharged, cancelled or expired. The Group classifies its financial assets into the following measurement categories: (a) subsequently measured at fair value (either through other comprehensive income (“FVTOCI”) or through profit or loss (“FVTPL”) and (b) subsequently measured at amortized cost. The classification of financial assets depends on the Group’s business model for managing the financial assets and the terms of the contractual cash flows. The Group classifies its financial liabilities as subsequently measured at amortized cost, except for financial liabilities at FVTPL. Change in the fair value of a loan payable measured at FVTPL is included in costs of sales and services. Initial Adoption of IFRS 9 IFRS 9 does not require restatement of comparative periods. Accordingly, the Group has reflected the retrospective impact of the adoption of IFRS 9 due to the change in accounting policy for investments in equity securities as an adjustment to opening deficit as at January 1, 2018. Under IFRS 9, the Group’s investments in equity securities, which were previously classified as available for sale or at cost under IAS 39, Financial Instruments: Recognition and Measurement (“IAS 39”), are measured at FVTPL. The retrospective adjustment, which represented the fair value gain adjustment on investments in equity securities as of January 1, 2018, was $524 and debited to other comprehensive income. Upon the initial adoption of IFRS 9 on January 1, 2018, the financial assets which were previously classified at fair value through profit or loss, held-to-maturity, loans and receivables and available-for-sale have been transferred to, financial assets measured at FVTPL, FVTOCI or amortized cost. IAS 39 (Accounting Policies Applicable Prior to January 1, 2018) All financial assets and financial liabilities were classified by characteristic and/or management intent. Except for certain financial instruments which were excluded from the scope, all financial assets were classified into one of four categories: (a) at fair value through profit or loss; (b) held-to-maturity; (c) loans and receivables; and (d) available-for-sale, and all financial liabilities were classified into one of two categories: (a) at fair value through profit or loss; and (b) at amortized cost. A financial asset or financial liability at fair value through profit or loss was a financial asset or financial liability that met either of the following conditions: (a) it was classified as held for trading if it was (i) acquired or incurred principally for the purpose of selling or repurchasing it in the near term, (ii) part of a portfolio of identified financial instruments that were managed together and for which there was evidence of a recent actual pattern of short-term profit taking, or (iii) a derivative, except for a derivative that was a designated and effective hedging instrument; or (b) it was designated by the Group upon initial recognition as at fair value through profit or loss when certain conditions were met. Available-for-sale financial assets were those non-derivative financial assets that were designated as available for sale, or that were not classified as loans and receivables, held-to-maturity investments, or at fair value through profit or loss. Non-derivative financial liabilities were classified as financial liabilities measured at amortized cost. After initial recognition, the Group measured financial assets, including derivatives that were assets, at their fair values, without any deduction for transaction costs it might incur on sale or other disposal, except for the following financial assets: (a) held-to-maturity investments which were measured at amortized cost using the effective interest method; (b) loans and receivables which were measured at amortized cost using the effective interest method; and (c) investments in equity instruments that did not have a quoted market price in an active market and whose fair value could not be reliably measured and derivatives that were linked to and had to be settled by delivery of such unquoted equity instruments which were measured at cost. All financial assets except those measured at fair value through profit or loss were subject to review for impairment. Common to Both IFRS 9 and IAS 39 Regular way purchases and sales of financial assets are accounted for at the settlement date. When a financial asset or financial liability is recognized initially, the Group measures it at its fair value plus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. Transaction costs related to the acquisition or issue of a financial asset or financial liability at fair value through profit or loss are expensed as incurred. The subsequent measurement of a financial instrument and the recognition of associated gains and losses are determined by the financial instrument classification. A gain or loss on a financial asset or financial liability classified as at fair value through profit or loss is recognized in profit or loss for the period in which it arises. A gain or loss on an asset measured at FVTOCI or classified as available for sale is recognized in other comprehensive income, except for impairment losses, until the financial asset is derecognized, at which time the cumulative gain or loss previously recognized in accumulated other comprehensive income is recognized in profit or loss for the period. For financial assets and financial liabilities carried at amortized cost, a gain or loss is recognized in profit or loss when the financial asset or financial liability is derecognized or impaired and through the amortization process. Net gains or net losses on financial instruments at fair value through profit or loss do not include interest or dividend income. Whenever quoted market prices are available, bid prices are used for the measurement of fair value of financial assets while ask prices are used for financial liabilities. When the market for a financial instrument is not active, the Group establishes fair value by using a valuation technique. Valuation techniques include using recent arm’s length market transactions between knowledgeable, willing parties, if available; reference to the current fair value of another financial instrument that is substantially the same; discounted cash flow analysis; option pricing models; and other valuation techniques commonly used by market participants to price the financial instrument. |
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Cash and Cash Equivalents | (ii) Cash and Cash Equivalents Cash and cash equivalents include cash on hand and cash at banks. They have maturities of three months or less from the date of acquisition and are generally interest-bearing. Restricted cash refers to money that is held for a specific purpose and therefore not available to the Group for immediate or general business use. Restricted cash is accounted for as a separate item from cash and cash equivalents on the Group’s consolidated statements of financial position. |
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Securities | (iii) Securities IFRS 9 Investments in equity securities are measured at FVTPL. Debt securities which are held within a business model whose objective is to collect the contractual cash flows and sell the debt securities, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are measured at FVTOCI. IAS 39 (Accounting Policies Applicable Prior to January 1, 2018) Securities were classified as at fair value through profit or loss (i.e. held for trading) or short-term or long-term available-for-sale securities. Publicly-traded securities (debt and equity) which were acquired principally for the purpose of selling in the near term were classified as held for trading. Available-for-sale securities consisted of publicly-traded securities and unlisted equity securities which were not held for trading and not held to maturity. Long-term available-for-sale securities were purchased with the intention to hold until market conditions render alternative investments more attractive. Short-term available-for-sale securities were held with the intention of management to sell within the current operating cycle but did not meet the definition of trading securities. When a decline in the fair value of an available-for-sale security had been recognized in other comprehensive income and there was objective evidence that the asset is impaired, the cumulative loss that had been recognized in other comprehensive income was reclassified from equity to profit or loss as a reclassification adjustment even though the security had not been derecognized. A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost is an objective evidence of impairment. The Group considered a decline in excess of 25 percent generally as significant and a decline in a quoted market price that persisted for 15 months as prolonged. Impairment losses recognized in profit or loss for an investment in an equity instrument classified as available for sale would not be reversed through profit or loss. Gains and losses on sales of securities are calculated on the average cost basis. |
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Securities and Financial Liabilities - Derivatives | (iv) Securities and Financial Liabilities – Derivatives A derivative is a financial instrument or other contract with all three of the following characteristics: (a) its value changes in response to the change in a specified interest rate, financial instrument price, product price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable; (b) it requires no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors; and (c) it is settled at a future date. A derivative financial instrument is either exchange-traded or negotiated. A derivative financial instrument is included in the consolidated statement of financial position as a security (i.e. financial asset) or a financial liability and measured at FVTPL. The recognition and measurement of a derivative financial instrument under both IFRS 9 and IAS 39 does not apply to a contract that is entered into and continues to be held for the purpose of the receipt or delivery of a non-financial item in accordance with the Group’s expected purchase, sale or usage requirements, unless the Group, as allowed under IFRS 9, designates the contract as measured at FVTPL if it eliminates or significantly reduces a measurement inconsistency. Where the Group has both the legal right and intent to settle derivative assets and liabilities simultaneously with the counterparty, the net fair value of the derivative financial instruments is reported as an asset or liability, as appropriate. Changes in the fair values of derivative financial instruments that do not qualify for hedge accounting are recognized in profit or loss as they arise. |
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Financial Liabilities | (v) Financial Liabilities The Group measures financial liabilities at either amortized cost or FVTPL. Financial liabilities are measured at amortized cost, unless either it is held for trading and hence required to be measured at FVTPL or the group elects to measure the financial liability at FVTPL. |
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Receivables | (vi) Receivables Receivables are measured at amortized cost under both IFRS 9 and IAS 39. Receivables are net of an allowance for credit losses, if any. The Group performs ongoing credit evaluations of its customers and recognizes a loss allowance for expected credit losses. Receivables are considered past due on an individual basis based on the terms of the contracts. |
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Allowance for Credit Losses | (vii) Allowance for Credit Losses IFRS 9 The Group recognizes and measures a loss allowance for expected credit losses on a financial asset which is measured at amortized cost or at FVTOCI, including a lease receivable, a contract asset or a loan commitment and a financial guarantee contract. The impairment methodology applied depends on whether there has been a significant increase in credit risk since initial recognition. To assess whether there is a significant increase in credit risk, the Group compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition based on all information available, and reasonable and supportive forward-looking information. When there is significant increase in credit risk or for credit-impaired financial assets, the loss allowance equals the lifetime expected credit losses which is defined as the expected credit losses that result from all possible default events over the expected life of a financial instrument. If, at the reporting date, the credit risk on a financial asset has not increased significantly since initial recognition, the Group measures the loss allowance for the financial instrument at an amount equal to the 12‑month expected credit losses which is defined as the portion of lifetime expected credit losses that represent the expected credit losses that result from default events on the financial instrument that are possible within the 12 months after the reporting date. As required by IFRS 9, the Group always measures the loss allowance at an amount equal to lifetime expected credit losses for trade receivables and contract assets that result from transactions that are within the scope of IFRS 15. IAS 39 (Accounting Policies Applicable Prior to January 1, 2018) The Group applied credit risk assessment and valuation methods to its trade and other receivables. Credit losses arose primarily from receivables but might also relate to other credit instruments issued by or on behalf of the Group, such as guarantees and letters of credit. Specific provisions were established on an individual receivable basis. Common to Both IFRS 9 and IAS 39 The Group’s allowance for credit losses is maintained at an amount considered adequate to absorb expected or estimated credit-related losses. Such allowance reflects management’s best estimate of the losses in the Group’s financial assets and judgments about economic conditions. Estimates and judgments could change in the near term, and could result in a significant change to a recognized allowance. An allowance for credit losses is increased by provisions, which are recognized in profit or loss and reduced by write-offs net of any recoveries. Write-offs are generally recorded after all reasonable restructuring or collection activities have taken place and there is no realistic prospect of recovery. |
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Inventories | (viii) Inventories Inventories principally consist of raw materials, work-in-progress, and finished goods. Inventories, other than commodities products, are recorded at the lower of cost and net realizable value. Cost, where appropriate, includes an allocation of manufacturing overheads incurred in bringing inventories to their present location and condition and is assigned by using the first-in, first-out or weighted average cost formula, depending on the class of inventories. Net realizable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. The amount of any write-down of inventories to net realizable value and all losses of inventories are recognized as an expense in the period the write-down or loss occurs. The reversal of a write-down of inventories arising from an increase in net realizable value is recognized as a reduction in the amount of costs of sales and services in the period in which the reversal occurs. Commodity products acquired by the Group as a broker-trader in the Group’s merchant banking activities with the purpose of selling in the near future and generating a profit from fluctuations in price or broker-traders’ margin are measured at fair value less costs to sell. Fair values of the Group’s inventories are determined by reference to their contractual selling prices or quoted prices in marketplaces in the absence of a contract (Level 1 fair value hierarchy), in accordance with guidance on fair value in IFRS 13. |
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Real Estate Held for Sale | (ix) Real Estate Held for Sale Real estate held for sale is real estate intended for sale in the ordinary course of business or in the process of construction or development for such sale. The Group's real estate held for sale forms part of the security package for the €25,000 in principal amount of bonds (see Note 16) issued by Merkanti Holding plc in the year ended December 31, 2019, and to the extent that any sales of these properties, in whole or in part, cause the security to fall below a certain ratio, proceeds of said sale, up to an amount of the collateral shortfall, are required to be placed as cash collateral with the bondholder trustee until maturity. Real estate held for sale is measured at the lower of cost (on a specific item basis) and net realizable value. Net realizable value is estimated by reference to sale proceeds of similar properties sold in the ordinary course of business less all estimated selling expenses around the reporting date, or by management estimates based on prevailing market conditions. The amount of any write-down of properties to net realizable value is recognized as an expense in the period the write-down occurs. The reversal of a write-down arising from an increase in net realizable value is recognized in the period in which the reversal occurs. All of the Group’s real estate is located in Europe. |
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Investment Property | (x) Investment Property Investment property is property that is held for generating rental income or for capital appreciation or both, rather than for: (a) use in the production or supply of goods or services or for administrative purposes; or (b) sale in the ordinary course of business. The Group’s investment property comprises freehold land and buildings. Investment property is initially recognized at cost including related transaction costs. After initial recognition, investment property is measured at fair value, with changes in fair value recognized in profit or loss in the period in which they arise. The Group determines fair value without any deduction for transaction costs it may incur on sale or other disposal. Fair value of the Group’s investment property is based on valuations prepared annually by external evaluators in accordance with guidance issued by the International Valuation Standard Committee and reviewed by the Group, or these valuations are updated by management when there are no significant changes in the inputs to the valuation prepared by external evaluators in the preceding year, in accordance with guidance on fair value in IFRS 13. |
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Property, Plant and Equipment | (xi) Property, Plant and Equipment Property, plant and equipment are carried at cost, net of accumulated depreciation and, if any, accumulated impairment losses. The initial cost of an item of property, plant and equipment comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, the initial estimate of any decommissioning obligation, if any, and, for qualifying assets, borrowing costs. The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset. Where an item of property, plant and equipment or part of the item that was separately depreciated is replaced and it is probable that future economic benefits associated with the replacement item will flow to the Group, the cost of the replacement item is capitalized and the carrying amount of the replaced asset is derecognized. All other replacement expenditures are recognized in profit or loss when incurred. Inspection costs associated with major maintenance programs are capitalized and amortized over the period to the next inspection. All other maintenance costs are expensed as incurred. When a right-of-use asset is acquired under a lease contract, the asset is measured at cost at the commencement date. The cost of the right-of-use asset comprises: (a) the amount of the initial measurement of the lease liability; (b) any lease payments made at or before the commencement date, less any lease incentives received; (c) any initial direct costs incurred by the Group; and (d) an estimate of costs to be incurred by the Group in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories. After the commencement date, the Group measures the right-of-use asset applying a cost model whereby the Group measures the right-of-use asset at cost less any accumulated depreciation and any accumulated impairment losses and adjusts it for any remeasurement of the lease liabilities reflecting any reassessment, lease modifications or revised in-substance fixed lease payments. See Significant Accounting Policy (xiv) below. The Group elected to apply IFRS 16 retrospectively, with the cumulative effect of the initial application of the new standard recognized at the date of initial application, being January 1, 2019. For further discussion, see Note 2B(xiv) below. The difference between the carrying amount of property, plant and equipment applying IAS 17 at the end of 2018 immediately preceding the date of initial application and the carrying amount in the consolidated statement of financial position at the date of initial application is reconciled as follows:
The depreciable amounts of the Group’s property, plant, and equipment (i.e. the costs of the assets less their residual values) are depreciated according to the following estimated useful lives and methods:
Depreciation expense is included in costs of sales and services or selling, general and administrative expense, whichever is appropriate. The residual value and the useful life of an asset are reviewed at least at each financial year-end and, if expectations differ from previous estimates, the changes, if any, are accounted for as a change in an accounting estimate in accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors. The depreciation method applied to an asset is reviewed at least at each financial year-end and, if there has been a significant change in the expected pattern of consumption of the future economic benefits embodied in the asset, the method is changed to reflect the changed pattern. The carrying amount of an item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in profit or loss in the period in which the item is derecognized. |
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Interests in Resource Properties | (xii) Interests in Resource Properties The Group’s interests in resource properties are mainly comprised of an interest in the Scully iron ore mine, and to a lesser extent exploration and evaluation assets (comprising hydrocarbon probable reserves and hydrocarbon undeveloped lands), hydrocarbon development and production assets. (a) Exploration and evaluation assets Exploration and evaluation costs, including the costs of acquiring undeveloped land and drilling costs are initially capitalized until the drilling of the well is complete and the results have been evaluated in order to determine the technical feasibility and commercial viability of the asset. Technical feasibility and commercial viability are considered to be determinable when proved and/or probable reserves are determined to exist. When proved and/or probable reserves are found, the drilling costs and the costs of associated hydrocarbon undeveloped lands are reclassified to hydrocarbon development and production assets or from hydrocarbon undeveloped lands to hydrocarbon probable reserves. The cost of hydrocarbon undeveloped land that expires or any impairment recognized during a period is charged to profit or loss. Pre-licence costs are recognized in profit or loss as incurred. (b) Hydrocarbon development and production assets and an interest in an iron ore mine The Group’s interests in resource properties are mainly comprised of an interest in the Scully iron ore mine, and to a lesser extent, hydrocarbon development and production assets. (1) Recognition and measurement Interests in resource properties are initially measured at cost and subsequently carried at cost less accumulated depletion and, if any, accumulated impairment losses. The cost of an interest in resource property includes the initial purchase price and directly attributable expenditures to find, develop, construct and complete the asset. This cost includes reclassifications from exploration and evaluation assets, installation or completion of infrastructure facilities such as platforms, pipelines and the drilling of development wells, including unsuccessful development or delineation wells. Any costs directly attributable to bringing the asset to the location and condition necessary to operate as intended by management and result in an identifiable future benefit are also capitalized. These costs include an estimate of decommissioning obligations and, for qualifying assets, capitalized borrowing costs. (2) Subsequent costs Costs incurred subsequent to the determination of technical feasibility and commercial viability and the costs of replacing parts of property are capitalized only when they increase the future economic benefits embodied in the specific asset to which they relate. Such capitalized costs generally represent costs incurred in developing proved reserves and bringing in, or enhancing production from, such reserves and are accumulated on a field or geotechnical area basis. All other expenditures are recognized in profit or loss as incurred. The costs of periodic servicing of the properties are recognized in costs of sales and services as incurred. The carrying amount of any replaced or sold component is derecognized. (3) Depletion The carrying amount of an interest in a resource property is depleted using the unit of production method by reference to the ratio of production in the period to the related reserves. For interests in hydrocarbon development and production assets, depletion is calculated based on proved producing reserves, taking into account estimated future development costs necessary to bring those reserves into production and the estimated salvage values of the assets at the end of their estimated useful lives. Future development costs are estimated taking into account the level of development required to continue to produce the reserves. Reserves for hydrocarbon development and production assets are estimated annually by independent qualified reserve evaluators and represent the estimated quantities of natural gas, natural gas liquids and crude oil which geological, geophysical and engineering data demonstrate with a specified degree of certainty to be recoverable in future years from known reservoirs and which are considered commercially producible. For depletion purposes, relative volumes of petroleum and natural gas production and reserves are converted at the energy equivalent conversion rate of six thousand cubic feet of natural gas to one barrel of crude oil. For the interest in an iron ore mine, depletion is calculated based on proved and probable reserves. The estimate of the reserves of iron ore is reviewed whenever significant new information about the reserve is available, or at least at each financial year-end. |
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Impairment of Non-financial Assets | (xiii) Impairment of Non-financial Assets The Group reviews the carrying amounts of its non-financial assets at each reporting date to determine whether there is any indication of impairment. If any such indication exists, an asset’s recoverable amount is estimated. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. Where an individual asset does not generate separately identifiable cash flows, an impairment test is performed at the cash-generating unit (“CGU”) level. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Where the carrying amount of an asset (or CGU) exceeds its recoverable amount, the asset (or CGU) is considered impaired and written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, an appropriate valuation model is used. These calculations are corroborated by external valuation metrics or other available fair value indicators wherever possible. An assessment is made at the end of each reporting period whether there is an indication that previously recognized impairment losses no longer exist or have decreased. If such indication exists, an estimate of the asset’s (or CGU’s) recoverable amount is reviewed. A previously recognized impairment loss is reversed to the extent that the events or circumstances that triggered the original impairment have changed. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, depletion and amortization, had no impairment loss been recognized for the asset in prior periods. A reversal of an impairment loss for a CGU is allocated to the assets of the CGU pro-rata with the carrying amounts of those assets. Hydrocarbon probable reserves are tested for impairment when they are reclassified to hydrocarbon development and production assets or when indicators exist that suggest the carrying amount may exceed the recoverable amount. For purposes of impairment testing, hydrocarbon probable reserves are grouped with related producing resource properties as a CGU with common geography and geological characteristics. Undeveloped lands are evaluated for indicators separately from hydrocarbon development and production assets and hydrocarbon probable reserves. Impairment is assessed by comparing the carrying amount of undeveloped lands to values determined by an independent land evaluator based on recent market transactions. Management also takes into account future plans for those properties, the remaining terms of the leases and any other factors that may be indicators of potential impairment. |
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Leases | (xiv) Leases The Group adopted IFRS 16 with a date of initial application of January 1, 2019. At the commencement date of a lease contract under which the Group is the lessee, the Group recognizes a right-of-use asset and a lease liability which is measured at the present value of the lease payments that are not paid at that date, discounted using the interest rate implicit in the lease (or if the rate cannot be readily determined, the Group company's incremental borrowing rate). After the commencement date, the Group (a) measures the lease liability by (i) increasing the carrying amount to reflect interest on the lease liability; (ii) reducing the carrying amount to reflect the lease payments made; and (iii) remeasuring the carrying amount to reflect any reassessment or lease modifications or to reflect revised in-substance fixed lease payments; and (b) recognizes in profit or loss, unless the costs are included in the carrying amount of another asset, both (i) interest on the lease liability and (ii) variable lease payments not included in the measurement of the lease liability in the period in which the event or condition that triggers those payment occurs. The Group elects not to apply IFRS 16 to short-term leases and leases for which the underlying asset is of low value and, as such, recognizes the lease payments associated with those leases as an expense on a straight-line basis. The right-of-use assets are included in property, plant and equipment (see Note 2B (xi)) and the lease liabilities are included in account payables and accrued expense under current liabilities and/or other long-term liabilities. Initial Adoption of IFRS 16 The Group elected to apply IFRS 16 retrospectively, with the cumulative effect of the initial application of the new standard recognized at the date of initial application, subject to permitted and elected practical expedients. Pursuant to the transitional requirements, the Group chose to measure that right-of-use asset at an amount equal to the lease liability immediately before the date of initial application and elected not to recognize a lease liability or right-of-use asset for which the lease term ended within 12 months of the date of initial application. As a result, the Group recognized an adjustment of $2,911, $843 and $2,068 to property, plant and equipment, account payables and accrued expenses and other long-term liabilities, respectively, on January 1, 2019. The Group's weighted average incremental borrowing rate applied to lease liabilities recognized in the consolidated statement of financial position was 4.01% at the date of initial application. The difference between operating lease commitments disclosed applying IAS 17 at the end of 2018 immediately preceding the date of initial application and lease liabilities recognized in the consolidated statement of financial position at the date of initial application is reconciled as follows.
* Represents undiscounted lease commitments IAS 17 (Accounting Policies Applicable Prior to January 1, 2019) Under IAS 17, a lease was classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership of the leased asset. Operating lease payments were expensed in profit or loss over the term of the lease on a straight-line basis. Common to Both IFRS 16 and IAS 17 Under both IFRS 16 and IAS 17, lease income from operating leases is recognized in income on a straight-line basis over the term of the lease. |
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Provision, Financial Guarantee Contracts and Contingencies | (xv) Provisions, Financial Guarantee Contracts and Contingencies Provisions are recognized when the Group has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at management’s best estimate of the expenditure required to settle the obligation at the reporting date. Where appropriate, the future cash flow estimates are adjusted to reflect risks specific to the liability. If the effect of the time value of money is material, 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. Where discounting is used, the increase in the provision due to the passage of time is recorded as accretion and included in finance costs. A financial guarantee contract is initially recognized at fair value. If the guarantee is issued to an unrelated party on a commercial basis, the initial fair value is likely to equal the premium received. If no premium is received, the fair value must be determined using a method that quantifies the economic benefit of the guarantee to the holder. At the end of each subsequent reporting period, financial guarantees are measured at the higher of: (i) the amount of the loss allowance, and (ii) the amount initially recognized less cumulative amortization, where appropriate. Contingent liabilities are possible obligations whose existence will only be confirmed by future events not wholly within the control of the Group. Contingent liabilities, other than those assumed in connection with business combinations which are measured at fair value at the acquisition date, are not recognized in the consolidated financial statements but are disclosed unless the possibility of an outflow of economic resources is considered remote. Legal costs in connection with a loss contingency are recognized in profit or loss when incurred. The Group does not recognize a contingent or reimbursement asset unless it is virtually certain that the contingent or reimbursement asset will be received. |
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Decommissioning Obligations | (xvi) Decommissioning Obligations The Group provides for decommissioning, restoration and similar liabilities (collectively, decommissioning obligations) on its resource properties, facilities, production platforms, pipelines and other facilities based on estimates established by current legislation and industry practices. The decommissioning obligation is initially measured at fair value and capitalized to interests in resource properties or property, plant and equipment as an asset retirement cost. The liability is estimated by discounting expected future cash flows required to settle the liability using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The estimated future asset retirement costs are adjusted for risks such as project, physical, regulatory and timing. The estimates are reviewed periodically. Changes in the provision as a result of changes in the estimated future costs or discount rates are added to or deducted from the asset retirement cost in the period of the change. The liability accretes for the effect of time value of money until it is settled. The capitalized asset retirement cost is amortized through depreciation, depletion and amortization over the estimated useful life of the related asset. Actual asset retirement expenditures are recorded against the obligation when incurred. Any difference between the accrued liability and the actual expenditures incurred is recorded as a gain or loss in the settlement period. |
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Own Equity Instruments | (xvii) Own Equity Instruments The Group’s holdings of its own equity instruments, including common stock and preferred stock, are presented as “treasury stock” and deducted from shareholders’ equity at cost and in the determination of the number of equity shares outstanding. No gain or loss is recognized in profit or loss on the purchase, sale, re-issue or cancellation of the Group’s own equity instruments. |
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Revenue Recognition | (xviii) Revenue Recognition IFRS 15 Effective January 1, 2018, the Group adopted IFRS 15. Pursuant to IFRS 15, the Group recognizes revenue, excluding interest and dividend income and other such income from financial instruments recognized in accordance with IFRS 9, upon transfer of promised goods or services to customers in amounts that reflect the consideration to which the Group expects to be entitled in exchange for those goods or services based on the following five step approach: Step 1: Identify the contracts with customers; Step 2: Identify the performance obligations in the contract; Step 3: Determine the transaction price; Step 4: Allocate the transaction price to the performance obligations in the contract; and Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. The Group typically satisfies its performance obligations upon shipment of the goods, or upon delivery as the services are rendered or upon completion of services depending on whether the performance obligations are satisfied over time or at a point in time. The Group primarily acts as principal in contracts with its customers. The Group does not have material obligations for returns, refunds and other similar obligations, nor warranties and related obligations. For performance obligations that the Group satisfies over time, the Group typically uses time-based measures of progress because the Group is providing a series of distinct services that are substantially the same and have the same pattern of transfer. For performance obligations that the Group satisfies at a point in time, the Group typically uses shipment or delivery of goods and/or services in evaluating when a customer obtains control of promised goods or services. A significant financing component exists and is accounted for if the timing of payments agreed to by the parties to the contract provides the customer or the Group with a significant benefit of financing the transfer of goods and services to the customer. As a practical expedient, the Group does not adjust the promised amount of consideration for the effects of a significant financing component if the Group expects, at contract inception, that the period between when the Group transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. The incremental costs of obtaining contracts with customers and the costs incurred in fulfilling contracts with customers that are directly associated with the contract are recognized as an asset (hereinafter, “assets arising from contract costs”) if those costs are expected to be recoverable, which are included in other long-term assets in the consolidated statements of financial position. The incremental costs of obtaining contracts are those costs that the Group incurs to obtain a contract with a customer that they would not have incurred if the contract had not been obtained. As a practical expedient, the Group recognizes the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less. Assets arising from contract costs are amortized using the straight-line method over their estimated contract periods. The Group exercises judgments in determining the amount of the costs incurred to obtain or fulfill a contract with a customer, which includes, but is not limited to (a) the likelihood of obtaining the contract, (b) the estimate of the profitability of the contract, and (c) the credit risk of the customer. An impairment loss will be recognized in profit or loss to the extent that the carrying amount of the asset exceeds (a) the remaining amount of consideration that the entity expects to receive in exchange for the goods or services to which the asset relates, less (b) the costs that relate directly to providing those goods or services and that have not been recognized as expenses. Initial Adoption of IFRS 15 Pursuant to the transition arrangement permitted under IFRS 15, the Group applied IFRS 15 retrospectively with the cumulative effect of initially applying IFRS 15 recognized at the date of initial application. There were no revisions on the accounts in the consolidated statement of financial position on January 1, 2018 upon the adoption of IFRS 15. Moreover, there were no financial statement line items affected in the year ended December 31, 2018 by the application of IFRS 15 as compared to the presentation under IAS 18, Revenue ("IAS 18") and related interpretations. IAS 18, Revenue (Accounting Policies Applicable Prior to January 1, 2018) The Group accounted for revenues under IAS 18 and other related international accounting standards and interpretations for the recognition and measurement of revenue until December 31, 2017. Revenue included proceeds from sales of merchant banking products and services, real estate properties, medical instruments and supplies, rental income on investment property, interest and dividend income and net gains on securities. In an agency relationship, revenue was the amount of commission earned. Revenue from the sale of goods was recognized when: (a) the Group had transferred to the buyer the significant risks and rewards of ownership of the goods (which generally coincided with the time when the goods were delivered to the buyer and title had passed); (b) the Group retained neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; (c) the amount of revenue could be measured reliably; (d) it was probable that the economic benefits associated with the transaction would flow to the Group; and (e) the costs incurred or to be incurred in respect of the transaction could be measured reliably. Revenue from the rendering of services was recognized when: (a) the amount of revenue could be measured reliably; (b) it was probable that the economic benefits associated with the transaction would flow to the Group; (c) the stage of completion of the transaction at the reporting date could be measured reliably; and (d) the costs incurred for the transaction and the costs to complete the transaction could be measured reliably. Revenue was measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, customs duties and sales taxes. When the Group charged shipping and handling fees to customers, such fees were included in sales revenue. Where the Group acted as an agent on behalf of a third party to procure or market goods, any associated fee income was recognized and no purchase or sale was recorded. Interest, royalty and dividend income were recognized when it was probable that economic benefits will flow to the Group and the amount of income could be measured reliably. |
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Costs of Sales and Services | (xix) Costs of Sales and Services Costs of sales and services include the costs of goods (merchant banking products and services, real estate properties, medical instruments and supplies) sold. The costs of goods sold include both the direct cost of materials and indirect costs, freight charges, purchasing and receiving costs, inspection costs, distribution costs and a provision for warranty when applicable. Costs of sales and services also include write-downs of inventories, net loss on securities, credit losses on financial assets, gains or losses on dispositions of subsidiaries, and fair value gain and loss on investment property, commodity inventories and derivative contracts. The reversal of write-downs of inventories and credit losses reduces the costs of sales and services. |
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Employee Benefits | (xx) Employee Benefits Wages, salaries, bonuses, social security contributions, paid annual leave and sick leave are accrued in the period in which the associated services are rendered by employees of the Group. The employee benefits are included in costs of sales and services or selling, general and administrative expenses, as applicable. |
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Share-Based Compensation | Share-Based Compensation The cost of equity-settled transactions with employees is measured by reference to the fair value of the equity instruments on the date at which the equity instruments are granted and is recognized as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award. Fair value is determined by using an appropriate valuation model. At each reporting date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management’s best estimate of the achievement or otherwise of non-market conditions and the number of equity instruments that will ultimately vest. The movement in cumulative expense since the previous reporting date is recognized in profit or loss, with a corresponding amount in equity. When the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognized over the original vesting period. In addition, an expense is recognized over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognized if this difference is negative. When an equity-settled award is cancelled other than by forfeiture when the vesting conditions are not satisfied, it is treated as if it had vested on the date of cancellation and any cost not yet recognized in profit or loss for the award is expensed immediately. Share-based compensation expenses are included in selling, general and administrative expenses. When stock options are exercised, the exercise price proceeds together with the amount initially recorded in contributed surplus are credited to capital stock. |
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Finance Costs | (xxii) Finance Costs Finance costs comprise interest expense on borrowings, accretion of the discount on provisions, decommissioning obligations and other liabilities and charges and fees relating to factoring transactions. Capital stock and debt are recorded at the amount of proceeds received, net of direct issue costs (transaction costs). The transaction costs attributable to debt issued are amortized over the debt term using the effective interest method. |
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Income Taxes | (xxiii) Income Taxes Income tax expense (recovery) comprises current income tax expense (recovery) and deferred income tax expense (recovery) and includes all domestic and foreign taxes which are based on taxable profits. The current income tax provision is based on the taxable profits for the period. Taxable profit differs from income before income taxes as reported in the consolidated statements of operations because it excludes items of income or expense that are taxable or deductible in other periods and items that are never taxable or deductible. The Group’s liability for current income tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date. Deferred income tax is provided, using the liability method, on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts in the consolidated statement of financial position. Deferred income tax liabilities are recognized for all taxable temporary differences: - except where the deferred income tax liability arises on goodwill that is not tax deductible or the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. - in respect of taxable temporary differences associated with investments in subsidiaries and branches, except where the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred income tax assets are recognized for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilized: - except where the deferred income tax asset arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. - in respect of deductible temporary differences associated with investments in subsidiaries and branches, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future. On the reporting date, management reviews the Group’s deferred income tax assets to determine whether it is probable that the benefits associated with these assets will be realized. The Group also reassesses unrecognized deferred income tax assets. The review and assessment involve evaluating both positive and negative evidence. The Group recognizes a previously unrecognized deferred income tax asset to the extent that it has become probable that future taxable profit will allow the deferred income tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. Tax relating to items recognized in other comprehensive income or equity is recognized in other comprehensive income or equity and not in profit or loss. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to set off current income tax assets against current income tax liabilities, and when they relate to income tax levied by the same taxation authority and the Group intends to settle its current income tax assets and liabilities on a net basis. Withholding taxes (which include withholding taxes payable by a subsidiary on distributions to the Group) are treated as income taxes when they have the characteristics of an income tax. This is considered to be the case when they are imposed under government authority and the amount payable is calculated by reference to revenue derived. The Group includes interest charges and penalties on current income tax liabilities as a component of interest expense. |
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Earnings Per Share | (xxiv) Earnings Per Share Basic earnings per share is determined by dividing net income attributable to ordinary equity holders of Scully by the weighted average number of common shares outstanding during the period, net of treasury stock. Diluted earnings per share is determined using the same method as basic earnings per share, except that the weighted average number of common shares outstanding includes the effect of dilutive potential ordinary shares. For the purpose of calculating diluted earnings per share, the Group assumes the exercise of its dilutive options with the assumed proceeds from these instruments regarded as having been received from the issue of common shares at the average market price of common shares during the period. The difference between the number of common shares issued and the number of common shares that would have been issued at the average market price of common shares during the period is treated as an issue of common shares for no consideration and added to the weighted average number of common shares outstanding. The amount of the dilution is the average market price of common shares during the period minus the issue price and the issue price includes the fair value of services to be supplied to the Group in the future under the share-based payment arrangement. Potential ordinary shares are treated as dilutive when, and only when, their conversion to ordinary shares would decrease earnings per share or increase loss per share from continuing operations. When share-based payments are granted during the period, the shares issuable are weighted to reflect the portion of the period during which the payments are outstanding. The shares issuable are also weighted to reflect forfeitures occurring during the period. When stock options are exercised during the period, shares issuable are weighted to reflect the portion of the period prior to the exercise date and actual shares issued are included in the weighted average number of shares outstanding from the exercise date. |
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Business Combinations | (xxv) Business Combinations The Group accounts for each business combination by applying the acquisition method. Pursuant to the acquisition method, the Group, when a business combination occurs and it is identified as the acquirer, determines the acquisition date (on which the Group legally transfers the consideration, acquires the assets and assumes the liabilities of the acquiree), recognizes and measures the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree, and recognizes and measures goodwill or a gain from a bargain purchase (i.e. negative goodwill). The identifiable assets acquired and the liabilities assumed are measured at their acquisition-date fair values. A non-controlling interest is measured at either its fair value or its proportionate share in the recognized amounts of the subsidiary’s identifiable net assets, on a transaction-by-transaction basis. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, the liabilities incurred by the Group to former owners of the acquiree and the equity interests issued by the Group. In a business combination achieved in stages, the Group remeasures its previously held equity interest in the acquiree at its acquisition-date fair value and recognizes the resulting gain or loss, if any, in profit or loss. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports in its financial statements provisional amounts for the items for which the accounting is incomplete. During the measurement period, the Group retrospectively adjusts the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts recognized as of that date. During the measurement period, the Group also recognizes additional assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date and, if known, would have resulted in the recognition of those assets and liabilities as of that date. The measurement period ends as soon as the Group receives the information it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable. However, the measurement period does not exceed one year from the acquisition date. Acquisition-related costs are costs the Group incurs to effect a business combination. Those costs include finder’s fees; advisory, legal, accounting, valuation and other professional or consulting fees; general administrative costs, including the costs of maintaining an internal acquisitions department; and costs of registering and issuing debt and equity securities. The Group accounts for acquisition-related costs as expenses in the periods in which the costs are incurred and the services are received, except for the costs to issue debt or equity securities (see Significant Accounting Policy Item (xxii) above). |
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Critical Judgments in Applying Accounting Policies | C. Critical Judgments in Applying Accounting Policies In the process of applying the Group’s accounting policies, management makes various judgments, apart from those involving estimations under Note 2D below, that can significantly affect the amounts it recognizes in the consolidated financial statements. The following are the critical judgments that management has made in the process of applying the Group’s accounting policies and that have the most significant effects on the amounts recognized in the consolidated financial statements: (i) Identification of Cash-generating Units The Group’s assets are aggregated into CGUs, for the purpose of assessing and calculating impairment of non-financial assets, based on their ability to generate largely independent cash flows. The determination of CGUs requires judgment in defining the smallest identifiable group of assets that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets. CGUs have been determined based on similar geological structure, shared infrastructure, geographical proximity, product type and similar exposure to market risks. In the event facts and circumstances surrounding factors used to determine the Group’s CGUs change, the Group will re-determine the groupings of CGUs. (ii) Impairment and Reversals of Impairment on Non-Financial Assets The carrying amounts of the Group’s non-financial assets, other than deferred tax assets, are reviewed at the end of each reporting period to determine whether there is an indication of impairment or reversal of previously recorded impairment. If such indication exists, the recoverable amount is estimated. Determining whether there are any indications of impairment or impairment reversals requires significant judgment of external factors, such as an extended change in prices or margins for hydrocarbon commodities or refined products, a significant change in an asset’s market value, a significant revision of estimated volumes, revision of future development costs, a change in the entity’s market capitalization or significant changes in the technological, market, economic or legal environment that would have an impact on the Company’s CGUs. Given that the calculations for recoverable amounts require the use of estimates and assumptions, including forecasts of commodity prices, marketing supply and demand, product margins and in the case of the Group's iron ore interest, power plant and hydrocarbon properties, expected production volumes, it is possible that the assumptions may change, which may impact the estimated life of the CGU and may require a material adjustment to the carrying value of goodwill and non-financial assets. Impairment losses recognized in prior years are assessed at the end of each reporting period for indications that the impairment has decreased or no longer exists. An impairment loss is reversed only to the extent that the carrying amount of the asset or CGU does not exceed the carrying amount that would have been determined, net of depletion, depreciation and amortization, if no impairment loss had been recognized. (iii) Valuation of Investment Property Investment properties are included in the consolidated statement of financial position at their market value, unless their fair value cannot be reliably determined at that time. The market value of investment properties is assessed annually by an independent qualified valuer, who is an authorized expert for the valuation of developed and undeveloped land in Germany, after taking into consideration the net income with inputs on realized basic rents, operating costs and damages and defects. The assumptions adopted in the property valuations are based on the market conditions existing at the end of the reporting period, with reference to current market sales prices and the appropriate capitalization rate. Changes in any of these inputs or incorrect assumptions related to any of these items could materially impact these valuations. (iv) Assets Held for Sale and Discontinued Operations The Group applies judgment to determine whether an asset (or disposal group) is available for immediate sale in its present condition and that its sale is highly probable and therefore should be classified as held for sale at the balance sheet date. In order to assess whether it is highly probable that the sale can be completed within one year, or the extension period in certain circumstances, management reviews the business and economic factors, both macro and micro, which include the industry trends and capital markets, and the progress towards a sale transaction. It is also open to all forms of sales, including exchanges of non-current assets for other non-current assets when the exchange will have commercial substance in accordance with IAS 16, Property, Plant and Equipment. A discontinued operation is a component of an entity (which comprises operations and cash flows that can be clearly distinguished, operationally and, for financial reporting purposes, from the rest of the entity) that either has been disposed of or is classified as held for sale. The discontinued operation must represent a separate major line of business or a separate major geographical area of operations of the Group and the Group applies judgment to determine whether the thresholds are met. Generally, management determines whether a component is a discontinued operation or not based on the contribution of the component to the Group's net income (loss), net assets, or gross assets. Management does not view revenue as a major factor in determining whether a component is a discontinued operation or not because the revenue factor does not contribute any real economic benefits to the Group. While a component of the entity has distinguished financial data, judgments must be exercised on the presentation of inter-company transactions between components that are presented as discontinued operations and those that are presented as continuing operations. Furthermore, the allocation of income tax expense (recovery) also involves the exercise of judgments as the tax position of continuing operations may have an impact on the tax position of discontinued operations, or vice versa. In 2019, the Group disposed of its interests in two product lines in Europe which management considered not to be discontinued operations because (i) they did not form separate segments or cash generating units, (ii) they did not have financial results which could be clearly identified from the rest of the Group, (iii) each of them was not a separate major geographical area, and (iv) the dispositions were not part of a single coordinated plan to dispose of them. Management, when exercising its judgments in terms of their respective contribution to the Group's net loss, total assets and net assets, concluded that these disposed components were not separate major lines of business or geographical area of operations. Based on the Group's consolidated financial statements as of June 30, 2019 (the latest publicly available financial results prior to their dispositions), the net income or loss of these disposed units represented 2% and 7%, of the combined reported loss of all entities that reported a loss and each of them represented 1% of consolidated total assets and less than 1% of consolidated net assets of the Group. The combined revenue (third parties only), loss before taxes, income tax expense and net loss, respectively, was $81,766, ($63), ($575) and ($638) during the year of 2019 to the dates of their dispositions, which were included in the Group's continuing operations for the year ended December 31, 2019. The net gain on dispositions of these entities was $207. (v) Purchase Price Allocations There was a business combination in 2017. For every business combination, the Group measured the identifiable assets acquired and the liabilities assumed at their acquisition-date fair values. The determination of fair value required the Group to make assumptions, estimates and judgments regarding future events, including the profit forecast of the new subsidiary in the future. The allocation process is inherently subjective and impacts the amounts assigned to individual identifiable assets and liabilities, including the fair value of long-lived assets, the recognition and measurement of any unrecorded intangible assets and/or contingencies and the final determination of the amount of goodwill or bargain purchase. The inputs to the exercise of judgments include legal, contractual, business and economic factors. As a result, the purchase price allocation impacts the Group’s reported assets and liabilities and future net earnings due to the impact on future depreciation, depletion and amortization and impairment tests. (vi) Credit Losses and Impairment of Receivables On January 1, 2018, the Group adopted IFRS 9. As a result, the Group applies credit risk assessment and valuation methods to its trade and other receivables under IFRS 9 which establishes a single forward-looking expected loss impairment model to replace the incurred impairment model under IAS 39. The Group measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on the financial instrument has increased significantly since initial recognition. The objective of the impairment requirements is to recognize lifetime expected credit losses for all financial instruments for which there have been significant increases in credit risk since initial recognition — whether assessed on an individual or collective basis — considering all reasonable and supportable information, including that which is forward-looking. At each reporting date, management assesses whether the credit risk on a financial instrument has increased significantly since initial recognition. When making the assessment, management uses the change in the risk of a default occurring over the expected life of the financial instrument instead of the change in the amount of expected credit losses. To make that assessment, management compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and consider reasonable and supportable information, that is available without undue cost or effort, that is indicative of significant increases in credit risk since initial recognition. Allowance for credit losses is maintained at an amount considered adequate to absorb the expected credit losses. Such allowance for credit losses reflects management’s best estimate of changes in the credit risk on the Group’s financial instruments and judgments about economic conditions. The assessment of allowance for credit losses is a complex process, particularly on a looking-forward basis; which involves a significant degree of judgment and a high level of estimation uncertainty. The input factors include the assessment of the credit risk of the Group’s financial instruments, legal rights and obligations under all the contracts and the expected future cash flows from the financial instruments, which include inventories, mortgages and other credit enhancement instruments. The major source of estimation uncertainty relates to the likelihood of the various scenarios under which different amounts are expected to be recovered through the security in place on the financial assets. The expected future cash flows are projected under different scenarios and weighted by probability, which involves the exercise of significant judgment. Estimates and judgments could change in the near-term and could result in a significant change to a recognized allowance. |
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Major Sources of Estimation Uncertainty | D. Major Sources of Estimation Uncertainty The timely preparation of the consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The major assumptions about the future and other major sources of estimation uncertainty at the end of the reporting period that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. These items require management’s most difficult, subjective or complex estimates. Actual results may differ materially from these estimates. (i) Interests in Resource Properties and Reserve Estimates The Group had interests in resource properties mainly comprised of an interest in the Scully iron ore mine, and to a lesser extent, hydrocarbon properties, with an aggregate carrying amount of $270,070 as at December 31, 2019. Estimation of reported recoverable quantities of proved and probable reserves include judgmental assumptions regarding production profile, prices of products produced, exchange rates, remediation costs, timing and amount of future development costs and production, transportation and marketing costs for future cash flows. It also requires interpretation of geological and geophysical models and anticipated recoveries. The economical, geological and technical factors used to estimate reserves may change from period to period. Changes in reported reserves can impact the carrying amounts of the Group’s interests in resource properties and/or related property, plant and equipment, the recognition of impairment losses and reversal of impairment losses, the calculation of depletion and depreciation, the provision for decommissioning obligations and the recognition of deferred income tax assets or liabilities due to changes in expected future cash flows. The recoverable quantities of reserves and estimated cash flows from the Group’s hydrocarbon interests are independently evaluated by reserve engineers at least annually. During the year ended December 31, 2019, the Group did not recognize any impairment in respect of its interest in resource properties. The Group’s hydrocarbon reserves represent the estimated quantities of petroleum, natural gas and natural gas liquids which geological, geophysical and engineering data demonstrate with a specified degree of certainty to be economically recoverable in future years from known reservoirs and which are considered commercially producible. Such reserves may be considered commercially producible if management has the intention of developing and producing them and such intention is based upon: (a) a reasonable assessment of the future economics of such production; (b) a reasonable expectation that there is a market for all or substantially all the expected hydrocarbon production; and (c) evidence that the necessary production, transmission and transportation facilities are available or can be made available. Reserves may only be considered proven and probable if producibility is supported by either production or conclusive formation tests. Included in interests in resource properties as at December 31, 2019, were exploration and evaluation assets with an aggregate carrying amount of $17,007. Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount and upon reclassification to hydrocarbon development and production assets. If such indicators exist, impairment, if any, is determined by comparing the carrying amounts to the recoverable amounts. The measurement of the recoverable amount involves a number of assumptions, including the timing, likelihood and amount of commercial production, further resource assessment plans and future revenue and costs expected from the asset, if any. (ii) Impairment of Other Non-Financial Assets The Group had property, plant and equipment aggregating $55,413 as at December 31, 2019, consisting mainly of a power plant and a natural gas processing facility. Impairment of the Group’s non-financial assets is evaluated at the CGU level. In testing for impairment, the recoverable amounts of the Company’s CGUs are determined as the higher of their values in use and fair values less costs of disposal. In the absence of quoted market prices, the recoverable amount is based on estimates of future production rates, future product selling prices and costs, discount rates and other relevant assumptions. Increases in future costs and/or decreases in estimates of future production rates and product selling prices may result in a write-down of the Group’s property, plant and equipment. (iii) Taxation The Group is subject to tax in a number of jurisdictions and judgment is required in determining the worldwide provision for income taxes. Deferred income taxes are recognized for temporary differences using the liability method, with deferred income tax liabilities generally being provided for in full (except for taxable temporary differences associated with investments in subsidiaries and branches where the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future) and deferred income tax assets being recognized to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilized. The Group recognized deferred income tax assets of $14,295 as at December 31, 2019. In assessing the realizability of deferred income tax assets, management considers whether it is probable that some portion or all of the deferred income tax assets will be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income in Malta and Canada during the periods in which temporary differences become deductible or before tax loss and tax credit carry-forwards expire. Management considers the future reversals of existing taxable temporary differences, projected future taxable income, taxable income in prior years and tax planning strategies in making this assessment. Unrecognized deferred income tax assets are reassessed at the end of each reporting period. The Group does not recognize the full deferred tax liability on taxable temporary differences associated with investments in subsidiaries and branches where the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. The Group may change its investment decision in its normal course of business, thus resulting in additional income tax liabilities. The operations and organization structures of the Group are complex, and related tax interpretations, regulations and legislation are continually changing. The Group companies’ income tax filings are subject to audit by taxation authorities in numerous jurisdictions. There are audits in progress and items under review, some of which may increase the Group’s income tax liabilities. In addition, the companies have filed appeals and have disputed certain issues. While the results of these items cannot be ascertained at this time, the Group believes that the Group has an adequate provision for income taxes based on available information. (iv) Contingencies Pursuant to IAS 37, Provisions, Contingent Liabilities and Contingent Assets, the Group does not recognize a contingent liability. By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The assessment of contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events. If it becomes probable that an outflow of future economic benefits will be required for an item previously accounted for as a contingent liability, an accrual or a provision is recognized in the consolidated financial statements in the period in which the change in probability occurs. See Note 24 for further disclosures on contingencies. (v) Pandemic COVID-19 The COVID-19 pandemic in 2020 leads the world into a new era of uncertainties. The pandemic is dynamic and expanding and its ultimate scope, duration and effects are currently uncertain. The impact of the pandemic and the global response thereto has, among other things, significantly disrupted global economic activity, negatively impacted gross domestic product and caused significant volatility in financial markets; although, since May 2020, the pandemic seems to be under control in some regions of the world and some countries and jurisdictions are planning to ease up their lockdown measures.
While various countries have implemented stimulus packages and other fiscal measures to attempt to reduce the impact of the pandemic on their economies, the impact of the pandemic on global economic activity and markets both in the short and longer term is uncertain at this time. The magnitude and duration of the disruption and resulting decline in business activity resulting from the COVID-19 pandemic is currently uncertain. While the Group expects that there will likely be some negative impact on its results of operations, cash flows and financial position from the pandemic beyond the near-term, the extent to which the COVID-19 pandemic impacts the Group’s business, operations and financial results will depend on numerous evolving factors that management may not be able to accurately predict, including: the duration and scope of the pandemic; governmental, business and individuals' actions that have been and continue to be taken in response to the pandemic; the impact of the pandemic on economic activity and actions taken in response thereto; the effect on the Group’s customers, including the borrowers and customers of the Bank (as defined herein); its impacts on suppliers; and the impact of the pandemic on counterparties and their ability to carry out their obligations to the Group.
The Group's results of operations, cash flows and financial position will likely be adversely affected by the pandemic beyond near-term. However management does not believe the pandemic will have significant impact on the going concern of the Group in the foreseeable future, which is considered to be 12 months from the date of approval of these financial statements, as the Group currently has sufficient cash, good working capital position and steady cash inflows from operations. Management has performed stress tests on their forecasts with various assumptions and the results showed that the Group would be able to withstand any significant impact on operations within the aforesaid timeframe.
Although disruption and effects of the COVID-19 pandemic may be temporary, given the dynamic nature of these circumstances and the worldwide nature of the Company’s business and operations, the duration of any business disruption and the related financial impact to us cannot be reasonably estimated at this time but could materially affect the Group’s business results of operations and financial condition. Ultimately, the severity of the impact of the pandemic on the Group's business and going concern basis will depend on a number of factors, including, the duration and severity of the pandemic and the impact and new developments concerning the global severity of, and actions to be taken to contain the outbreak.
Management took into consideration all of these various factors and risks when concluding on the Company’s ability to continue as a going concern and the appropriateness of this presentation when preparing these consolidated financial statements.
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Accounting Changes | E. Accounting Changes Future Accounting Changes In October 2018, IASB issued amendments to its definition of material to make it easier for companies to make materiality judgements. The updated definition amends IAS 1, Presentation of Financial Statements, and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors. The amendments clarify the definition of material and how it should be applied and ensure that the definition of material is consistent across all IFRS Standards. The changes are effective from January 1, 2020, although earlier application is permitted. Management is assessing its impacts on the Group’s financial statement presentation.
In October 2018, the IASB amended IFRS 3, Business Combinations, seeking to clarify whether an acquisition transaction results in the acquisition of an asset or the acquisition of a business. The amendments are effective for acquisition transactions on or after January 1, 2020, although earlier application is permitted. The amended standard has a narrower definition of a business, which could result in the recognition of fewer business combinations than under the current standard; the implication of this is that amounts which may have been recognized as goodwill in a business combination under the current standard may now be recognized as allocations to net identifiable assets acquired under the amended standard (with an associated effect in an entity's results of operations that would differ from the effect of goodwill having been recognized). Management is currently assessing the impacts and transition provisions of the amended standard and will apply the standard prospectively from January 1, 2020. |
Basis of Presentation and Summary of Significant Accounting Policies (Tables) |
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Schedule of reconciliation of historically restated amounts in statement of operations |
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Schedule of reconciliation of historically restated amounts in statement of cashflows |
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Schedule of sets out exchange rates for the translation of the Euro and U.S. dollar |
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Schedule of carrying amount of property, plant and equipment on adoption of IFRS 16 |
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Schedule of estimated useful lives and methods of property, plant and equipment |
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Schedule of of initial application and lease liabilities recognized |
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Capital Disclosure on the Group's Objectives, Policies and Processes for Managing Its Capital Structure (Tables) |
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Schedule of debt or long term debt to adjusted capital or equity ratio |
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Business Segment Information (Tables) |
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Segment Information | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of segment operating | Segment Operating Results
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Schedule of cash flow by operating segments |
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Schedule of geographic information |
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Securities (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Securities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of securities |
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Trade Receivables (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade Receivables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of trade receivable |
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Schedule of movement in the loss allowance | The movement in the loss allowance during the year ended December 31, 2019 and 2018 was as follows:
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Other Receivables (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Receivables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of other current receivables |
* In 2019, the Group had various amounts owing from an affiliate owned by our Chairman equal to $828 (see Note 26). ** The loan, which was due from a former subsidiary, was written off in 2019. |
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Schedule of movement of contract assets under contracts with customers |
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Inventories (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of inventories |
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Investment Property (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Property | ||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Changes in Investment Property |
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Schedule of rental Income investment property |
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Property, Plant and Equipment (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Property, Plant and Equipment | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of changes in property, plant and equipment | The following changes in property, plant and equipment were recorded during the year ended December 31, 2019:
* right-of-use assets. The following changes in property, plant and equipment were recorded during the year ended December 31, 2018:
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Interests in Resource Properties (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interests in Resource Properties | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of components of interests in resource properties |
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Schedule of movements in interest in resource properties | The movements in the interest in an iron ore mine and hydrocarbon development and production assets included in non-current assets during the year ended December 31, 2019 were as follows:
The movements in the interest in an iron ore mine and hydrocarbon development and production assets included in non-current assets during the year ended December 31, 2018 were as follows:
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Schedule of movements in exploration and evaluation assets |
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Deferred Income Tax Assets and Liabilities (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Income Tax Assets and Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of of temporary differences of deferred income tax assets and liabilities |
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Schedule of estimated accumulated non capital losses |
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Account Payables and Accrued Expenses (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Account Payables and Accrued Expenses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of account payables and accrued expenses |
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Schedule of movement of contract liabilities under contracts with customers |
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Schedule of contract liabilities expects to recognize as revenue |
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Schedule of future lease payments included in the measurement and principal amounts of the lease liabilities |
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Schedule of Lease liabilities |
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Bond Payables (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bond Payables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of contractual maturities of bond payables | As at December 31, 2019, the contractual maturities of the bond payables are as follows:
|
Decommissioning Obligations (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||
Decommissioning Obligations | |||||||||||||||||||||||||||||||||||||||||||
Schedule of decommissioning obligations |
|
Shareholders' Equity (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||||||
Shareholders' Equity | |||||||||||||||||||||||||||||
Schedule of treasury stock |
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Consolidated Statements of Operations (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated Statements of Operations | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of gross revenue |
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Schedule of group's costs of sales and services comprised |
Credit losses, which were included in costs of sales and services in the years ended December 31, 2018 and 2017, were reclassified and shown separately on the current year’s consolidated statements of operations.
The Group's net gain on dispositions of subsidiaries comprised:
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Schedule of Group's credit lossees |
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Schedule of costs of sales and services |
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Schedule of Gain on Disposition of subsidiaries |
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Schedule of selling, general and administrative expenses |
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Schedule of nature of expenses incurred in continuing operations |
* Employee benefits expenses do not include the directors’ fees. For directors’ fees, see Note 26. |
Share-Based Compensation (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of changes in stock options granted |
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Schedule of information about stock options outstanding and exercisable |
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Schedule of share-based compensation expenses recognized |
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Schedule of black-scholes-merton formula |
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Income Taxes (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of (Loss) income before income taxes |
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Schedule of income tax expense |
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Schedule of reconciliation of (loss) income before income taxes |
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(Loss) Earnings Per Share (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Loss) Earnings Per Share | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of (Loss) Earnings Per Share |
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Consolidated Statements of Cash Flows - Supplemental Disclosure (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated Statements of Cash Flows - Supplemental Disclosure | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of reconciliation of liabilities arising from financing activities |
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Related Party Transactions (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of transactions with related party |
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Schedule of key management personnel |
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Financial Instruments (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Instruments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of carrying amounts that approximate their fair values due to their short-term nature |
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Schedule of statements of financial position classified by level of the fair value hierarchy |
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Schedule of nature of the risks of financial instruments | The nature of the risks that the Group’s financial instruments are subject to as at December 31, 2019 is set out in the following table:
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Schedule of maximum credit risk exposure |
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Schedule of profit or loss from continuing operations |
* Correction of error |
Fair Value Disclosure for Non-financial Assets (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosure for Non-financial Assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of non-financial assets measured at fair value in consolidated statements of financial position, classified by level | Assets measured at fair value on a recurring basis as at December 31, 2019:
Assets measured at fair value on a recurring basis as at December 31, 2018:
|
Scully and its Significant Subsidiaries (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||
Scully and its Significant Subsidiaries | |||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of country of incorporation and proportion of interest |
* The Group's proportional voting interests are identical to its proportional beneficial interests, except that it holds a 99.72% proportional beneficial interest in each of Merkanti (A) International Ltd. and Merkanti (D) International Ltd.
|
Basis of Presentation and Summary of Significant Accounting Policies - Foreign Currency Translation (Details) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019
USD ($)
EUR (€)
|
Dec. 31, 2018
USD ($)
EUR (€)
|
Dec. 31, 2017
USD ($)
EUR (€)
|
|
Euro Member Countries, Euro | |||
Foreign Currency Translation | |||
Closing rate | € | 1.4583 | 1.5613 | 1.5052 |
Average rate | € | 1.4856 | 1.5302 | 1.4650 |
United States of America, Dollars | |||
Foreign Currency Translation | |||
Closing rate | $ | 1.2988 | 1.3642 | 1.2545 |
Average rate | $ | 1.3269 | 1.2957 | 1.2986 |
Basis of Presentation and Summary of Significant Accounting Policies - Real Estate Held For Sale (Details) € in Thousands |
Dec. 31, 2019
EUR (€)
|
---|---|
Basis of Presentation and Summary of Significant Accounting Policies | |
Real Estate Held for Sale Included in Principal Amount of Bonds | € 25,000 |
Basis of Presentation and Summary of Significant Accounting Policies - Initial Applicationof IFRS 16 (Details) - CAD ($) $ in Thousands |
Dec. 31, 2019 |
Jan. 01, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|
Disclosure of initial application of standards or interpretations [line items] | ||||
Property, plant and equipment | $ 55,413 | $ 58,325 | $ 83,954 | |
IFRS 16 | ||||
Disclosure of initial application of standards or interpretations [line items] | ||||
Adjustment for the lease liabilities under IFRS 16 on the date of initial application | $ 2,911 | $ 2,911 | ||
Property, plant and equipment | $ 61,236 |
Basis of Presentation and Summary of Significant Accounting Policies - Leases (Details) $ in Thousands |
Jan. 01, 2019
CAD ($)
|
---|---|
Disclosure of initial application of standards or interpretations [line items] | |
Operating leases | $ 4,786 |
Exemptions for short term leases for which the underlying assets are of low value | (1,505) |
Discounting | (370) |
IFRS 16 | |
Disclosure of initial application of standards or interpretations [line items] | |
Lease liabilities recognized on the initial adoption of IFRS 16 | $ 2,911 |
Capital Disclosure on the Group's Objectives, Policies and Processes for Managing Its Capital Structure (Details) $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2019
CAD ($)
|
Dec. 31, 2018
CAD ($)
|
Dec. 31, 2017
CAD ($)
|
Dec. 31, 2016
CAD ($)
|
|
Capital Disclosure on the Group's Objectives, Policies and Processes for Managing Its Capital Structure | ||||
Total debt | $ 35,418 | $ 0 | ||
Less: cash and cash equivalents | (78,274) | (67,760) | $ (74,870) | $ (120,676) |
Net debt | ||||
Shareholders' equity | $ 353,612 | $ 386,376 | ||
Net debt-to-adjusted capital ratio | ||||
Long-term debt | $ 35,418 | $ 0 | ||
Long-term debt-to-equity ratio | 0.10 |
Capital Disclosure on the Group's Objectives, Policies and Processes for Managing Its Capital Structure (Details) - CAD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Capital Disclosure on the Group's Objectives, Policies and Processes for Managing Its Capital Structure | ||
Non-interest bearing long-term loan payable | $ 4,769 | $ 3,981 |
Long-term liabilities | $ 832 |
Acquisitions of Consolidated Entities (Details) $ in Thousands |
Oct. 01, 2017
CAD ($)
|
---|---|
Metal processing company | |
Acquisitions of Consolidated Entities | |
Goodwill recognized | $ 502 |
Assets Classified as Held for Sale (Details) $ in Thousands |
Dec. 31, 2016
CAD ($)
|
---|---|
Assets Classified as Held for Sale | |
Net assets held for sale | $ 15,770 |
Business Segment Information (Details) - CAD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Business Segment Information | ||
Segment assets | $ 503,349 | $ 506,913 |
Segment liabilities | 141,335 | 112,507 |
Operating segments | ||
Business Segment Information | ||
Segment assets | 503,349 | 506,913 |
Segment liabilities | 141,335 | 112,507 |
Operating segments | Iron Ore Royalty | ||
Business Segment Information | ||
Segment assets | 222,385 | 224,043 |
Segment liabilities | 53,489 | 55,369 |
Operating segments | Industrial Equity | ||
Business Segment Information | ||
Segment assets | 162,772 | 195,642 |
Segment liabilities | 37,482 | 48,784 |
Operating segments | Merkanti Holding plc | ||
Business Segment Information | ||
Segment assets | 117,790 | 86,369 |
Segment liabilities | 45,808 | 7,168 |
Operating segments | All other segments | ||
Business Segment Information | ||
Segment assets | 402 | 859 |
Segment liabilities | $ 4,556 | $ 1,186 |
Business Segment Information - external customers by geographic region (Details) - CAD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Business Segment Information | |||
Gross revenues | $ 113,267 | $ 139,751 | $ 274,035 |
Canada | |||
Business Segment Information | |||
Gross revenues | 13,730 | 13,035 | 19,595 |
Africa | |||
Business Segment Information | |||
Gross revenues | 4,114 | 4,254 | 4,283 |
Americas | |||
Business Segment Information | |||
Gross revenues | 5,880 | 1,786 | 22,446 |
Asia | |||
Business Segment Information | |||
Gross revenues | 1,909 | 1,549 | 14,894 |
Europe | |||
Business Segment Information | |||
Gross revenues | $ 87,634 | $ 119,127 | $ 212,817 |
Business Segment Information - other non-current assets (Details) - CAD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Business Segment Information | ||
Non-current assets other than financial instruments, deferred income tax assets and other non-current assets | $ 376,728 | $ 383,729 |
Canada | ||
Business Segment Information | ||
Non-current assets other than financial instruments, deferred income tax assets and other non-current assets | 293,974 | 297,537 |
Africa | ||
Business Segment Information | ||
Non-current assets other than financial instruments, deferred income tax assets and other non-current assets | 29,930 | 33,258 |
Asia | ||
Business Segment Information | ||
Non-current assets other than financial instruments, deferred income tax assets and other non-current assets | 24 | 20 |
Europe | ||
Business Segment Information | ||
Non-current assets other than financial instruments, deferred income tax assets and other non-current assets | $ 52,800 | $ 52,914 |
Business Segment Information - Additional Information (Details) |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Business Segment Information | ||
Percentage of merchant banking in total revenue | 13.00% | 16.00% |
Securities (Details) - CAD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Short-term securities | ||
Current securities | $ 14,174 | $ 7,400 |
Long-term securities | ||
Long-term securities | 3,809 | 4,702 |
Equity | ||
Short-term securities | ||
Equity securities at FVTPL, publicly traded | 1,822 | 4 |
Equity securities at FVTPL, unlisted | 1,130 | 0 |
Long-term securities | ||
Equity securities at FVTPL, publicly traded | 0 | 701 |
Equity securities at FVTPL, privately held | 3,809 | 4,001 |
Debt securities | ||
Short-term securities | ||
Equity securities at FVTPL, publicly traded | 2,403 | 1,068 |
Debt securities at FVOCI, publicly traded | $ 8,819 | $ 6,328 |
Trade Receivables - Carrying Amount (Details) - CAD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Trade Receivables | ||
Trade receivables, gross amount | $ 4,204 | $ 5,654 |
Less: Allowance for expected credit losses under IFRS 9 or credit losses under IAS 39 | (46) | (311) |
Trade receivables, net amount | $ 4,158 | $ 5,343 |
Trade Receivables - Loss Allowance Additional Information (Details) - CAD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Trade Receivables | ||
Less: Allowance for credit losses | $ 46 | $ 311 |
Trade Receivables - Additional Information (Details) - CAD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2019 |
|
Trade Receivables | |||
Cumulative allowance for credit losses | $ 311 | $ 46 | |
Net trade receivables due from former customer group | 5,343 | $ 4,158 | |
Net trade receivables due from customer and affiliates | $ 21,375 | ||
Credit risk | |||
Trade Receivables | |||
Management recognized credit loss | $ 21,812 | 1,317 | |
Large exposure customers | Credit risk | |||
Trade Receivables | |||
Reversals | 1,541 | ||
Increase in valuation allowance based on revision of expected future cash flows | $ 224 |
Other Receivables (Details) - CAD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|
Other Receivables | |||
Interest receivables (including $352 and $nil due from an affiliate as of December 31, 2019 and 2018, respectively) | $ 145 | $ 83 | |
Contract assets under contracts with customers | 0 | 295 | $ 876 |
Indemnification asset (see Note 26) | 6,362 | 0 | |
Loans | 828 | 6,087 | |
Other | 769 | 2,210 | |
Total | $ 8,104 | $ 8,675 |
Other Receivables - contracts with customers (Details) - CAD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Other Receivables | ||
Balance, beginning of the year | $ 295 | $ 876 |
A change in the time frame for a right to consideration to become unconditional | (295) | (581) |
Balance, end of the year | $ 0 | $ 295 |
Other Receivables - Additional Information (Details) $ in Thousands |
Dec. 31, 2019
CAD ($)
|
---|---|
Other Receivables | |
Allowance of loans and leases receivables | $ 16 |
Inventories (Details) - CAD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Inventories | ||
Raw materials | $ 1,877 | $ 3,640 |
Work-in-progress | 20 | 3,568 |
Finished goods | 491 | 1,960 |
Commodity inventories | 2,238 | |
Inventories | 2,388 | 11,406 |
Inventories contracted at fixed prices or hedged | 9,432 | |
Inventories - other | 2,388 | 1,974 |
Current inventories | $ 2,388 | $ 11,406 |
Investment Property (Details) - CAD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Investment Property | ||
Balance, beginning of year | $ 37,804 | $ 37,660 |
Change in fair value during the year | 2,996 | (274) |
Disposals | (976) | |
Currency translation adjustments | (2,595) | 1,394 |
Balance, end of year | $ 38,205 | $ 37,804 |
Investment Property - profit or loss in relation to investment property (Details) - CAD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Investment Property | |||
Rental income | $ 1,652 | $ 1,611 | $ 1,510 |
Direct operating expenses (including repairs and maintenance) arising from investment property during the year | $ 266 | $ 193 | $ 256 |
Property, Plant and Equipment - Additional Information (Details) - CAD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Property, Plant and Equipment | |||
Carrying amount | $ 55,413 | $ 58,325 | $ 83,954 |
Costs | |||
Property, Plant and Equipment | |||
Carrying amount | $ 72,482 | 73,770 | $ 97,272 |
Impairments | $ 46 | ||
A power plant | |||
Property, Plant and Equipment | |||
Discount rate (as a percent) | 8.00% | ||
Impairments | $ 0 | ||
Reasonably possible increase in discount rate (as a percent) | 1.00% | ||
Increase (decrease) in net loss due to reasonably possible increase in discount rate | $ 0 | ||
A power plant | Costs | |||
Property, Plant and Equipment | |||
Carrying amount | $ 29,931 |
Interests in Resource Properties (Details) - CAD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|
Interests in Resource Properties | |||
Tangible exploration and evaluation assets | $ 270,070 | $ 273,250 | |
Interest in an iron ore development project | |||
Interests in Resource Properties | |||
Tangible exploration and evaluation assets | 216,575 | 218,203 | |
Hydrocarbon development and production assets | |||
Interests in Resource Properties | |||
Tangible exploration and evaluation assets | 36,488 | 38,040 | |
Hydrocarbon Probable Reserves | |||
Interests in Resource Properties | |||
Tangible exploration and evaluation assets | 12,367 | 12,367 | $ 12,367 |
Hydrocarbon Undeveloped lands | |||
Interests in Resource Properties | |||
Tangible exploration and evaluation assets | $ 4,640 | $ 4,640 | $ 9,335 |
Interests in Resource Properties - exploration and evaluation assets (Details) - CAD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Disclosure Of Movements In Exploration And Evaluation Assets [Roll Forward] | ||
Opening balance | $ 273,250 | |
Ending balance | 270,070 | $ 273,250 |
Hydrocarbon Probable Reserves | ||
Disclosure Of Movements In Exploration And Evaluation Assets [Roll Forward] | ||
Opening balance | 12,367 | 12,367 |
Additions | 0 | 0 |
Disposal | 0 | 0 |
Ending balance | 12,367 | 12,367 |
Hydrocarbon Undeveloped lands | ||
Disclosure Of Movements In Exploration And Evaluation Assets [Roll Forward] | ||
Opening balance | 4,640 | 9,335 |
Additions | 0 | 0 |
Disposal | 0 | (4,695) |
Ending balance | $ 4,640 | $ 4,640 |
Deferred Income Tax Assets and Liabilities (Details) - CAD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Deferred Income Tax Assets and Liabilities | ||
Non-capital tax loss carry-forwards | $ 27,214 | $ 26,363 |
Interests in resource properties | (60,589) | (56,904) |
Other assets | (7,181) | (8,800) |
Other liabilities | (10,456) | (11,345) |
Net | (51,012) | (50,686) |
Presented on the consolidated statements of financial position as follows: | ||
Deferred income tax assets | 14,295 | 15,735 |
Deferred income tax liabilities | (65,307) | (66,421) |
Net | $ (51,012) | $ (50,686) |
Account Payables and Accrued Expenses (Details) - CAD ($) $ in Thousands |
Dec. 31, 2019 |
Jun. 30, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|
Account Payables and Accrued Expenses | ||||
Trade and account payables | $ 9,921 | $ 19,993 | ||
Interest payables | 486 | 46 | ||
Value-added, goods and services and other taxes (other than income taxes) | 477 | 831 | ||
Compensation | 206 | 247 | ||
Contract liabilities under contracts with customers | 4,637 | 5,198 | ||
Lease liabilities | 364 | |||
Losses on corporate guarantees | 3,070 | $ 3,134 | 0 | $ 1,502 |
Account payables and accrued expenses | $ 19,161 | $ 26,315 |
Account Payables and Accrued Expenses - Movement of contract liabilities (Details) - CAD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Account Payables and Accrued Expenses | ||
Balance, beginning of the year | $ 6,446 | $ 797 |
Considerations received | 4,949 | 5,649 |
Reclassification to profit or loss upon satisfaction of performance obligations | (6,758) | 0 |
Balance, end of the year | $ 4,637 | $ 6,446 |
Account Payables and Accrued Expenses - recognize the contract liabilities (Details) - CAD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|
Account Payables and Accrued Expenses | |||
Year 1 after the year-end (included in current liabilities) | $ 4,637 | $ 5,198 | |
Year 2 after the year-end (included in long-term liabilities) | 0 | 1,248 | |
Contract liabilities, revenue | $ 4,637 | $ 6,446 | $ 797 |
Account Payables and Accrued Expenses - Future lease payments included in the measurement of the lease liabilities (Details) $ in Thousands |
Dec. 31, 2019
CAD ($)
|
---|---|
Disclosure of maturity analysis of operating lease payments [line items] | |
Principal | $ 1,196 |
Interest | 116 |
Total | 1,312 |
2020 | |
Disclosure of maturity analysis of operating lease payments [line items] | |
Principal | 364 |
Interest | 49 |
Total | 413 |
2021 | |
Disclosure of maturity analysis of operating lease payments [line items] | |
Principal | 229 |
Interest | 34 |
Total | 263 |
2022 | |
Disclosure of maturity analysis of operating lease payments [line items] | |
Principal | 196 |
Interest | 19 |
Total | 215 |
2023 | |
Disclosure of maturity analysis of operating lease payments [line items] | |
Principal | 204 |
Interest | 11 |
Total | 215 |
2024 | |
Disclosure of maturity analysis of operating lease payments [line items] | |
Principal | 203 |
Interest | 3 |
Total | $ 206 |
Account Payables and Accrued Expenses - Principal amounts lease Liablities (Details) $ in Thousands |
Dec. 31, 2019
CAD ($)
|
---|---|
Account Payables and Accrued Expenses | |
Current liabilities | $ 364 |
Long-term liabilities | 832 |
Total lease liabilities | $ 1,196 |
Account Payables and Accrued Expenses - Lease liabilities (Details) $ in Thousands |
12 Months Ended |
---|---|
Dec. 31, 2019
CAD ($)
| |
Account Payables and Accrued Expenses | |
Interest expense | $ 71 |
Expense relating to short-term leases with payments directly charged to profit or losses | 881 |
Expense relating to leases of low-value assets with payments directly charged to profit or losses | 0 |
Expense relating to variable lease payments not included in the measurement of lease liabilities | 0 |
Total cash outflows for leases | 1,824 |
Depreciation charge for right-of-use assets (see Note 12) | 738 |
Carrying amount of right-of-use assets at the end of the reporting period (see Note 12) | $ 1,188 |
Account Payables and Accrued Expenses - Additional information (Details) - CAD ($) $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2019 |
Jun. 30, 2019 |
|
Account Payables and Accrued Expenses | ||||
Losses on corporate guarantees | $ 0 | $ 1,502 | $ 3,070 | $ 3,134 |
Guarantees recovered | 833 | |||
Minimum lease payments recognized as expenses | 2,303 | 3,120 | ||
Contingent rents | $ 423 | $ 115 |
Bond Payables (Details) € in Thousands, $ in Thousands, $ in Thousands |
1 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|
Aug. 31, 2019
USD ($)
|
Aug. 31, 2019
EUR (€)
|
Dec. 31, 2019
CAD ($)
|
Dec. 31, 2019
EUR (€)
|
Dec. 31, 2019
CAD ($)
|
Aug. 31, 2019
EUR (€)
|
|
Disclosure of detailed information about borrowings [line items] | ||||||
Commissions and issuance costs | $ 1,078 | |||||
Bond payables | $ 35,418 | |||||
Bonds payable | ||||||
Disclosure of detailed information about borrowings [line items] | ||||||
Notional amount | $ 36,511 | € 25,000 | $ 36,458 | € 25,000 | ||
Commissions and issuance costs | $ 1,078 | € 738 | ||||
Nominal interest rate | 4.00% | 4.00% | ||||
Effective interest rate | 4.41% | |||||
Bond payables | $ 35,418 |
Decommissioning Obligations (Details) - CAD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Decommissioning Obligations | ||
Decommissioning obligations, beginning of year | $ 13,641 | $ 13,699 |
Changes in estimates | 1,167 | (338) |
Accretion | 210 | 280 |
Decommissioning obligations, end of year | $ 15,018 | $ 13,641 |
Decommissioning Obligations - Additional Information (Details)) |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Decommissioning Obligations | ||
Decommissioning obligations using an average discount rate | 1.61% | 1.98% |
Shareholders' Equity (Details) - CAD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Shareholders' Equity | ||
Total number of common shares held as treasury stock | 65,647 | 65,647 |
Total carrying amount of treasury stock | $ 2,643 | $ 2,643 |
Shareholders' Equity - Additional Information (Details) |
12 Months Ended |
---|---|
Dec. 31, 2019
USD ($)
$ / shares
shares
| |
Shareholders? Equity | |
Value of shares authorized | $ | $ 450,000 |
Description of voting rights | one vote |
Common Shares | |
Shareholders? Equity | |
Number of shares authorized | shares | 300,000,000 |
Par value of shares authorized | $ / shares | $ 0.001 |
Preferred Shares | |
Shareholders? Equity | |
Number of shares authorized | shares | 150,000,000 |
Par value of shares authorized | $ / shares | $ 0.001 |
Consolidated Statements of Operations - Revenue (Details) - CAD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Consolidated Statements of Operations | |||
Merchant banking products and services | $ 101,013 | $ 124,059 | $ 249,581 |
Interest | 1,057 | 676 | 973 |
Dividends | 168 | 0 | |
Gain on securities, net | 931 | 3,856 | 0 |
Other, including medical and real estate sectors | 10,266 | 10,992 | 23,481 |
Revenue | $ 113,267 | $ 139,751 | $ 274,035 |
Consolidated Statements of Operations - costs of sales and services (Details) - CAD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Consolidated Statements of Operations | |||
Merchant banking products and services | $ 95,189 | $ 119,552 | $ 223,049 |
Market value (increase) decrease on commodity inventories | (160) | 109 | (400) |
Write-downs of inventories | 1,822 | ||
(Gain) loss on derivative contracts, net | (122) | 794 | (1,934) |
Loss on securities, net | 0 | 619 | |
(Gain) loss dispositions of subsidiaries, net | (485) | (25,771) | 10,219 |
Gains on settlements and derecognition of liabilities | (1,168) | (9,502) | (3,779) |
Gains on settlements and derecognition of liabilities | (1,168) | (9,502) | (3,779) |
Change in fair value of loan payable at FVTPL | 979 | 167 | |
Other, including medical and real estate sectors | 2,264 | 9,188 | 11,889 |
Total cost of sales and services | $ 98,319 | $ 94,537 | $ 239,663 |
Consolidated Statements of Operations - Inventories as costs of goods sold (Details) - CAD ($) $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Consolidated Statements of Operations | ||||
Net (liabilities) assets in excess of considerations received | $ (485) | $ (25,771) | $ 10,219 | |
Reclassification adjustment for the exchange differences upon dispositions of subsidiaries | (1,758) | 672 | (11,306) | |
Gain on dispositions of subsidiaries, net (see Note 29) | $ (2,243) | (25,099) | (1,087) | |
Inventories as costs of goods sold (including depreciation, amortization and depletion expenses allocated to costs of goods sold) | $ 72,414 | $ 92,138 | $ 206,644 |
Consolidated Statements of Operations - Credit losses (Details) - CAD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Disclosure of financial assets [line items] | |||
Credit losses on loans and receivables and guarantees, net of recoveries | $ 13,398 | $ 34,985 | $ 23,923 |
Credit losses on corporate guarantees | 3,134 | ||
Credit losses from write off of royalty income receivables | 3,875 | 1,425 | |
Former consolidated entity | |||
Disclosure of financial assets [line items] | |||
Credit losses on loans and receivables and guarantees, net of recoveries | 6,087 | $ 9,957 | $ 8,585 |
Credit losses relating to the consideration on sale of subsidiary | $ 3,200 |
Consolidated Statements of Operations - selling, general and administrative expenses (Details) - CAD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Consolidated Statements of Operations | |||
Compensation (wages and salaries) | $ 6,762 | $ 10,305 | $ 16,369 |
Legal and professional | 5,050 | 4,469 | 8,860 |
Accounting | 1,965 | 1,784 | 1,979 |
Consulting and fees | 2,365 | 4,276 | 5,506 |
Depreciation and amortization | 502 | 254 | 1,640 |
Office | 874 | 1,026 | 1,797 |
Reimbursement of expenses (net of recovery) | 749 | (1,579) | (2,387) |
Other | 4,306 | 5,830 | 11,708 |
Selling, general and administrative expense | $ 22,573 | $ 26,365 | $ 45,472 |
Consolidated Statements of Operations - Additional information on the nature of expenses incurred in continuing operations (Details) - CAD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Consolidated Statements of Operations | |||
Depreciation, amortization and depletion | $ 8,287 | $ 5,712 | $ 6,732 |
Employee benefits expenses | $ 13,727 | $ 18,403 | $ 21,016 |
Consolidated Statements of Operations - Additional Information (Details) - CAD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Consolidated Statements of Operations | |||
Revenue from merchant banking products and services | $ 101,013 | $ 124,059 | $ 249,581 |
Metals | 77,527 | 107,540 | 143,572 |
Food products | 2,465 | ||
Plastics | 98 | ||
Steel products | 23,898 | ||
Minerals, chemicals and alloys | 57,768 | ||
Natural gas | 7,712 | 10,371 | 8,931 |
Royalty revenue | 5,687 | 2,437 | 8,868 |
Power and electricity | 4,075 | 4,254 | 4,215 |
Fees | $ 3,547 | 4,331 | 2,231 |
Interest to contract liabilities | 2,437 | ||
Underpayment of resource property royalties from prior years | $ 5,619 | ||
Loss on settlement | $ 5,600 |
Share-Based Compensation - stock options outstanding and exercisable (Details) - Eight Point Seven Six Exercise Price Per Share |
Dec. 31, 2019
Option
Y
$ / shares
|
---|---|
Share-Based Compensation | |
Exercise price per share | $ / shares | $ 8.76 |
Number of options, outstanding and exercisable | Option | 426,000 |
Weighted average remaining contractual life | Y | 7.92 |
Share-Based Compensation - share-based compensation expenses (Details) - CAD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Share-Based Compensation | |||
Share-based compensation expenses arising from stock options granted by the Company | $ 0 | $ 69 | $ 2,876 |
Share-Based Compensation - assumptions and inputs (Details) |
12 Months Ended | ||||
---|---|---|---|---|---|
Dec. 01, 2017
Option
|
Dec. 31, 2018
Y
CAD ($)
$ / shares
|
Dec. 31, 2018
Y
CAD ($)
$ / shares
$ / shares
|
Dec. 31, 2017
Y
CAD ($)
$ / shares
|
Dec. 31, 2017
Y
CAD ($)
$ / shares
$ / shares
|
|
Share-Based Compensation | |||||
Number of options granted | 535,000 | 20,000 | 20,000 | 535,000 | 535,000 |
Vesting requirements | Immediately | Immediately | Immediately | Immediately | |
Contractual life | 9 years 6 months 15 days | 9 years 6 months 15 days | 10 years | 10 years | |
Method of settlement | In equity | In equity | In equity | In equity | |
Exercise price, share options granted | $ 8.76 | $ 8.76 | |||
Market price per share on grant date | $ 6.30 | $ 6.30 | $ 8.40 | $ 8.40 | |
Expected volatility | 37.86% | 37.86% | 37.74% | 37.74% | |
Expected option life | Y | 9.54 | 9.54 | 10 | 10 | |
Expected dividends | 0.00% | 0.00% | 0.00% | 0.00% | |
Risk-free interest rate | 2.93% | 2.93% | 2.38% | 2.38% | |
Fair value of option granted (per option) | (per share) | $ 2.69 | $ 3.44 | $ 4.22 | $ 5.38 |
Share-Based Compensation - Additional Information (Details) |
1 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|
May 12, 2018
Option
$ / shares
|
Dec. 01, 2017
Option
$ / shares
|
Jul. 31, 2019
Options
$ / shares
|
Dec. 31, 2019
CAD ($)
|
Dec. 31, 2018
CAD ($)
|
Dec. 31, 2017
CAD ($)
Option
|
|
Share-Based Compensation | ||||||
Number of common shares subject to all awards | Option | 575,403 | |||||
Number of options issued in exchange for options issued and outstanding | Option | 40,000 | |||||
Number of options granted | 535,000 | 20,000 | 535,000 | |||
Exercise price of outstanding share options | $ / shares | $ 8.76 | |||||
Aggregate fair value of options granted recognized as Share-based compensation expenses | $ | $ 0 | $ 69,000 | $ 2,876,000 | |||
Common Shares | ||||||
Share-Based Compensation | ||||||
Number of options granted | 20,000 | 20,000 | ||||
Weighted average exercise price of share options granted in share-based payment arrangement | $ / shares | $ 8.76 | $ 8.76 | ||||
Closing price of shares | $ / shares | $ 14.76 | |||||
Number of options, surrendered for cancellation | Option | 20,000 |
Income Taxes - (Loss) income before income taxes (Details) - CAD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Income Taxes | |||
Income (loss) before income taxes | $ (16,784) | $ 167,829 | $ (38,407) |
Canada | |||
Income Taxes | |||
Income (loss) before income taxes | (1,691) | 170,538 | 7,360 |
Outside Canada | |||
Income Taxes | |||
Income (loss) before income taxes | $ (15,093) | $ (2,709) | $ (45,767) |
Income Taxes - components of income tax expense (Details) - CAD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Income Taxes | |||
Current taxes | $ (384) | $ (867) | $ (3,744) |
Deferred taxes | (98) | (55,238) | (3,141) |
Resource property (expense) recovery | (1,137) | 487 | (1,773) |
Provision for income taxes | $ (1,619) | $ (55,618) | $ (8,658) |
Income Taxes - reconciliation of (loss) income before income taxes (Details) - CAD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Income Taxes | |||
(Loss) income before income taxes | $ (16,784) | $ 167,829 | $ (38,407) |
Computed recovery (expense) of income taxes | 4,743 | (50,137) | 9,792 |
Decrease (increase) in income taxes resulting from: | |||
Effect of change in income tax rate | 891 | 0 | 0 |
Other non-taxable income | 24 | 45 | 7 |
Revisions to prior years | 88 | (1,355) | 4,650 |
Capital gains and losses on dispositions, net | (7,663) | (5,357) | (3,150) |
Resource property revenue taxes | (830) | 356 | (1,311) |
Unrecognized losses in current year | (228) | (1,411) | (20,916) |
Previously unrecognized deferred income tax assets, net | 1,229 | 3,041 | 2,877 |
Permanent differences | (178) | (306) | (363) |
Other, net | 305 | (494) | (244) |
Provision for income taxes | $ (1,619) | $ (55,618) | $ (8,658) |
Income Taxes - Additional Information (Details) - New MFC - CAD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Income Taxes | |||
Statutory tax rate | 0.00% | ||
Current and deferred income tax relating to items charged directly to other comprehensive income or loss | $ 0 | $ 0 | $ 0 |
(Loss) Earnings Per Share (Details) - CAD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
(Loss) Earnings Per Share | |||
Basic income (loss) attributable to holders of common shares | $ (18,553) | $ 112,276 | $ (47,855) |
Effect of dilutive securities: | |||
Diluted (loss) income | $ (18,553) | $ 112,276 | $ (47,855) |
Weighted average number of common shares outstanding - basic | 12,543,271 | 12,534,801 | 12,544,141 |
Effect of dilutive securities: | |||
Options | 0 | 0 | 0 |
Weighted average number of common shares outstanding - diluted | 12,543,271 | 12,534,801 | 12,544,141 |
(Loss) earnings per share - basic and diluted | $ (1.48) | $ 8.96 | $ (3.81) |
(Loss) Earnings Per Share - Additional Information (Details) - shares |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
(Loss) Earnings Per Share | |||
Number of stock option not included in diluted earnings per share | 426,000 | 450,000 | 575,000 |
Commitments and Contingencies - Additional Information (Details) € in Thousands, $ in Thousands |
12 Months Ended | |||||
---|---|---|---|---|---|---|
Dec. 31, 2019
CAD ($)
|
Dec. 31, 2017
CAD ($)
subsidiary
|
Dec. 31, 2019
EUR (€)
|
Dec. 31, 2019
CAD ($)
|
Jun. 30, 2019
CAD ($)
|
Dec. 31, 2018
CAD ($)
|
|
Commitments and Contingencies | ||||||
Amount of assessment | $ 2,996 | |||||
Amount of assessment paid in dispute | $ 899 | |||||
Litigation guarantee | € 43,800 | $ 63,874 | ||||
Provision for guarantee | $ 1,502 | $ 3,070 | $ 3,134 | $ 0 | ||
Number of subsidiaries | subsidiary | 2 | |||||
Maximum percentage of share capital of subsidiaries | 10.00% | |||||
Period for expiration of rights | 10 years |
Consolidated Statements of Cash Flows Supplemental Disclosure - Non-cash transactions (Details) - CAD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Consolidated Statements of Cash Flows - Supplemental Disclosure | |||
Non-cash transaction liabilities | $ 1,128 | ||
Non controlling interest receivable | $ 390 | ||
Non-cash settlement loss | $ 5,600 | ||
Offsetting of payable against receivable due from entity | $ 12,264 | ||
Redemption of preferred shares | 52,299 | ||
Fair value of trade receivables | 52,299 | ||
Offsetting of long-term deposit liabilities against finance lease receivables | $ 545 | ||
Deconsolidation of subsidiary recognition of long-term non-interest bearing loan payable | $ 3,645 |
Related Party Transactions (Details) - CAD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Related Party Transaction [Line Items] | ||
Fee income | $ 10 | |
Interest income | 31 | |
Dividends received | $ 168 | |
Royalty expenses | (210) | |
Credit losses on corporate guarantees | (3,134) | |
ECL allowance under IFRS 9 | (46) | $ (311) |
Reimbursements of expenses, primarily including employee benefits and lease and office expenses | (811) | |
IFRS 9 | ||
Related Party Transaction [Line Items] | ||
ECL allowance under IFRS 9 | $ (16) |
Related Party Transactions - Key management personnel (Details) - CAD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Related Party Transactions | |||
Short-term employee benefits | $ 1,451 | $ 1,245 | $ 1,777 |
Directors' fees | 531 | 594 | 576 |
Share-based compensation | 0 | 0 | 713 |
Total | $ 1,982 | $ 1,839 | $ 3,066 |
Related Party Transactions - Additional Information (Details) - CAD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Related Party Transactions | |||
Share-based compensation | $ 0 | $ 0 | $ 713 |
Directors | |||
Related Party Transactions | |||
Share-based compensation | 323 | ||
Other key management personnel | |||
Related Party Transactions | |||
Share-based compensation | $ 390 |
Financial Instruments - Credit risk exposure (Details) - CAD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|---|---|
Financial Instruments | ||||
Cash and cash equivalents and restricted cash | $ 78,274 | $ 67,760 | $ 74,870 | $ 120,676 |
Credit risk | ||||
Financial Instruments | ||||
Cash and cash equivalents and restricted cash | 78,359 | |||
Receivables | 12,262 | |||
Amounts recognized in the consolidated statement of financial position | 90,621 | |||
Guarantees (see Note 26) | 0 | |||
Maximum credit risk exposure | $ 90,621 |
Financial Instruments - Additional disclosure (Details) - CAD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Financial Instruments | |||
Interest income on financial assets not at FVTPL | $ 955 | $ 661 | $ 434 |
Interest income on financial assets classified at FVTPL | 102 | 15 | 539 |
Total interest income | 1,057 | 676 | 973 |
Interest expense on financial liabilities not at FVTPL | 710 | 513 | 3,509 |
Interest expense on financial liabilities classified at FVTPL | 30 | 989 | 1,195 |
Total interest expense | 740 | 1,502 | 4,704 |
Dividend income on financial assets at FVTPL | 0 | 168 | 0 |
Dividend income on financial assets classified not at FVTPL | 0 | 0 | 0 |
Net gain on financial assets at fair value through profit or loss | 1,142 | 3,785 | 6,825 |
Loss on loan payable at FVTPL | (979) | (167) | 0 |
Reversal of impairment on securities measured at FVTOCI | $ (3) | $ 3 | $ 0 |
Scully and its Significant Subsidiaries (Details) |
12 Months Ended |
---|---|
Dec. 31, 2019 | |
MFC Bancorp and its Significant Subsidiaries | |
Proportion of Interest | 99.72% |
Merkanti Holding plc | |
MFC Bancorp and its Significant Subsidiaries | |
Subsidiaries | Merkanti Holding plc |
Country of Incorporation | Malta |
Proportion of Interest | 100.00% |
1178936 B.C. Ltd | |
MFC Bancorp and its Significant Subsidiaries | |
Subsidiaries | 1178936 B.C. Ltd. |
Country of Incorporation | Canada |
Proportion of Interest | 100.00% |
Merkanti (A) International Ltd. | |
MFC Bancorp and its Significant Subsidiaries | |
Subsidiaries | Merkanti (A) International Ltd. |
Country of Incorporation | Malta |
Proportion of Interest | 100.00% |
Merkanti (D) International Ltd. | |
MFC Bancorp and its Significant Subsidiaries | |
Subsidiaries | Merkanti (D) International Ltd. |
Country of Incorporation | Malta |
Proportion of Interest | 100.00% |