The accounting policies applied in the preparation of the Financial Statements are set out below.
Basis of preparation
The Financial Statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU and further requirements in the Danish Financial Statements Act. The Company has applied the standards and interpretations that are mandatory for financial years beginning on 1 January 2018.
The Financial Statements have been prepared under the historical cost convention.
The preparation of Financial Statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires Management to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, and areas where assumptions and estimates are significant to the Consolidated Financial Statements, are disclosed in note 1.
The Financial Statements are presented in DKK, which is also the functional currency of the Company.
Implementation of new standards, amendments and interpretations
The Company has implemented the standards and amendments taking effect for the financial year. The implementation did not resulted in changes to accounting policies.
New standards, amendments and interpretations adopted but not yet effective
The IASB has adopted a number of standards and interpretations that will come into effect later, and will not be implemented in the Annual Report until they take effect.
Given the Company’s current activity, only a few of these are expected to be of relevance for the Company. These are discussed below:
Adopted by the
- IFRS 16 ”Leases”. New standard on the accounting treatment of leases. Going forward, the lessee is required to recognise all leases as a lease liability and a lease asset in the balance sheet. The standard will be effective for financial years beginning on or after 1 January 2019.
NeuroSearch has assessed the effect of the new standards, amendments and interpretations. The Company expects - given the current activity – that they will not have any effect at the time of implementation.
The Company is managed as a single business unit. The internal management and reporting structure comprises only one business unit, and the Company therefore has only one operating segment, for which reason no segment information is provided.
Net profit after taxation of discontinued operations divested pursuant to a comprehensive plan or closed is presented in one line after profit/(loss) from continuing operations. Write-downs related to assets of the discontinued operations are included in the item.
Foreign currency translation
The functional currency is the currency used in the primary economic environment. Transactions in currencies other than the functional currency are transactions denominated in foreign currencies.
On initial recognition, transactions denominated in foreign currencies are translated into the functional currency at the exchange rate ruling at the transaction date. Exchange differences arising between the exchange rate at the transaction date and the exchange rate at the date of actual payment are recognised in the income statement under financial income or financial expense.
Receivables, payables and other monetary items denominated in foreign currencies are translated into the functional currency at the exchange rates ruling at the balance sheet date. The difference between the exchange rate ruling at the balance sheet date and the exchange rate ruling at the date when the receivable or payable arose, or the exchange rate applied in the most recent annual report, is recognised in the income statement under financial income or financial expense.
On full or partial divestment of foreign entities or on repayment of balances that are considered to be part of the net investment, the attributable part of the accumulated exchange rate adjustment recognised in other comprehensive income is recognised in the income statement together with any gain or loss on the divestment
Income tax and deferred tax
Tax on income for the year, consisting of the year’s current tax and deferred tax, is recognised in the income statement to the extent that it relates to the income or loss for the year and in other comprehensive income or equity to the extent that it relates thereto. Current tax liabilities are recognised in the balance sheet as short-term liabilities to the extent such items have not been paid. If the tax paid during the year exceeds current tax for the year and prior years, the amount expected to be repaid is recognised in the balance sheet under receivables. Current tax includes tax payable based on the year’s expected taxable income and any adjustments of prior year tax charged to the income statement.
Deferred tax is calculated on all temporary differences between accounting and tax values. Deferred taxes are measured according to current tax rules and at the tax rates expected to be in force on the elimination of the temporary differences. Deferred tax arising on tax-deductible temporary differences (tax assets) is included in the balance sheet only if there is reasonable certainty that the tax assets can be set off by NeuroSearch A/S against future taxable income. The amounts of tax-deductible temporary differences which are not capitalised are disclosed in a note to the Financial Statements.
Revenue consists of milestone payments and other income from research and development agreements. Revenue is recognised when it is probable that future economic benefits will flow to