The merger of YIT and Lemminkäinen took effect on February 1, 2018. Going forward, YIT will report in accordance with IFRS principles in its Group reporting as well as its segment reporting.
Starting from 2019, YIT will be reporting only in accordance with IFRS. The company previously reported certain figures for the Housing Finland and CEE segment and the Housing Russia segment under the percentage of completion (POC) principle in addition to IFRS reporting. In IFRS reporting, revenue is recognised for consumer housing projects when the projects are completed.
YIT published pro forma financial information on the merged company for the financial year ended on December 31, 2017, taking the new segment structure and reporting practices into consideration, before the publication of the interim report for the first quarter of 2018. YIT changed over to IFRS on January 1, 2005. Prior to the adoption of IFRS, YIT’s financial reporting was based on FAS, Finnish Accounting Standards.
New IFRS standards
The adoption of the IFRS 16 standard as of 1 January 2019
IFRS 16 Leases became effective on January 1, 2019. The standard replaced the previous IAS 17 Leases standard and related interpretations. Under the new standard, all leases are recognised on the balance sheet, with the exception of leases for which the underlying asset is of low value and short-term leases. Leases other than finance leases were previously reported as off-balance sheet minimum lease payment obligations. Following the adoption of the IFRS 16 standard, both items are reported as lease liabilities. The company applied the modified retrospective approach in transition and thus, the it will not adjust the figures of the comparison period or year retrospectively.
The adoption of the IFRS 16 standard had an impact on several key indicators reported by YIT: gearing ratio will increase and equity ratio decrease, among others. In order to improve comparability, in its reports the company will present also adjusted figures for the net debt, gearing ratio and equity ratio.
The estimated impact on 2019 income statement
In 2019, the annual impact on EBITDA is expected to be approximately EUR 45 million positive and on operating profit approximately EUR 10 million positive, of which approximately half is allocated to the Housing Finland and CEE segment. It is estimated that the impact on the Group’s result before taxes is approximately EUR 8 million negative and on the result for the financial year approximately EUR 6 million negative. The application of the standard will not have a material impact on the Group’s revenue or earnings per share.
Impact on the1 January 2019 balance sheet
The adoption of the standard had an impact on the company’s capital employed. The most significant items increasing the capital employed are leased plots, leased properties as well as machinery and equipment. Leased plots increase the capital employed by approximately EUR 190 million, leased properties by approximately EUR 90 million and machinery and equipment approximately by EUR 30 million. The company’s lease plot reserve is mainly located in Finland.
The adoption of the standard also had an impact on the company’s interest-bearing net debt. Borrowings and lease liabilities are included in the interest-bearing debt. Borrowings did not increase due to the application of the standard. The amount of the lease liabilities was approximately EUR 300 million.
Please find below the link to a pdf that presents the key accounting policies related to the IFRS 16 standard as well as the opening balance sheet 2019, the most significant key indicators calculated on the basis of the opening balance sheet in accordance with the IFRS 16 standard and the definitions of the most significant key indicators.