| Summary of significant accounting policies | 2. Summary of significant accounting policies The
accounting policies set out below have been applied consistently to all years presented in these consolidated financial statements and
have been applied consistently by all Group entities. Cash
and cash equivalents Cash
and cash equivalents consist of unrestricted cash on hand and balances with banks, as well as short-term interest-bearing deposits, such
as money market accounts, that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in
value, with a maturity of three months or less from the date of acquisition. Aeterna
Zentaris Inc. Notes
to Consolidated Financial Statements As
of December 31, 2022 and December 31, 2021 and for the years ended December
31, 2022, 2021 and 2020 (in
thousands of US dollars, except share and per share data and where otherwise noted) Inventory Inventory
is valued at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method. The Company’s
policy is to write down inventory that has become obsolete and inventory that has a cost basis in excess of its expected net realizable
value. Increases in the reserve are recorded as charges in cost of sales. For product candidates that have not been approved by the FDA,
inventory used in clinical trials is written down at the time of production and recorded as research and development (“R&D”)
costs. For products that have been approved by the FDA, inventory used in clinical trials is expensed at the time the inventory is packaged
for the clinical trial. All direct manufacturing costs incurred after approval are capitalized into inventory. As of December 31, 2022
and 2021, all inventory related to work in process. Restricted
cash equivalents Restricted
cash equivalents are comprised of bank deposits, which are related to a guarantee for a long-term operating lease obligation, and for
corporate credit card programs that cannot be used for current purposes. Property
and equipment Items
of property and equipment are recorded at cost, net of accumulated depreciation and impairment charges. Depreciation is calculated using
the following methods, annual rates and period: Summary
of depreciation using methods, annual rates and period
Equipment [member] Methods Annual
rates and period
Equipment Declining
balance and straight-line 20
Computer
equipment Straight-line 25%
to 33 1 Depreciation
expense, which is recorded in the consolidated statement of loss and comprehensive loss, is allocated to the appropriate functional expense
categories to which the underlying items of property and equipment relate. Right
of use assets are measured at cost, which comprises the initial lease liability, lease payments made at or before the lease commencement
date, initial direct costs and restoration obligations, less lease incentives. Right of use assets are subsequently measured at amortized
cost. The assets are depreciated over the shorter of the assets’ useful life and the lease terms on a straight-line basis, less
any accumulated impairment losses, and adjusted for any remeasurement of the lease liability. The lease term includes periods covered
by an option to extend if the Company is reasonably certain to exercise that option. Identifiable
intangible assets Identifiable
intangible assets with finite useful lives consist of in-process R&D acquired in business combinations, patents, trademarks, in-licensed
technology and rights to serialization equipment located at the Company’s third-party macimorelin manufacturer. In-process R&D
acquired in business combinations is recognized at fair value at the acquisition date. Patents and trademarks are comprised of costs,
including professional fees incurred in connection with the filing of patents and the registration of trademarks for product marketing
and manufacturing purposes, net of related government grants, impairment losses and accumulated amortization. Identifiable intangible
assets with finite useful lives are amortized beginning at the time at which the assets are available for use, on a straight-line basis
over the assets’ estimated useful lives, which range from seven fifteen years ten
years Aeterna
Zentaris Inc. Notes
to Consolidated Financial Statements As
of December 31, 2022 and December 31, 2021 and for the years ended December
31, 2022, 2021 and 2020 (in
thousands of US dollars, except share and per share data and where otherwise noted) Contingent
payments The
Company accounts for contingent variable payments for separately acquired intangible assets, such as in-licensed technology, under the
cost accumulation approach. Contingent consideration is not considered on initial recognition of the asset but instead is added to the
cost of the asset initially recorded when incurred. Goodwill Goodwill
is recognized as the fair value of the consideration transferred, including the recognized amount of any non-controlling interest in
the acquiree, less the fair value of the net identifiable assets acquired, and liabilities assumed, as of the acquisition date. Subsequent
to initial recognition, goodwill is measured at cost less accumulated impairment losses. Goodwill acquired in business combinations is
allocated to groups of cash generating units (“CGU”) that are expected to benefit from the synergies of the combination. Impairment
of long-lived assets Items
of property and equipment and identifiable intangible assets with finite lives that are subject to depreciation or amortization, respectively,
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable.
Intangible assets that are not subject to amortization are tested when there are indications that their carrying value may not be recoverable,
or, at a minimum, annually. Management is required to assess at each reporting date whether there is any indication that an asset may
be impaired. Where such an indication exists, the asset’s recoverable amount is compared to its carrying value, and an impairment
loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is
the higher of an asset’s fair value less costs to sell and value in use. For purposes of assessing impairment, assets are grouped
at the lowest levels for which there are separately identifiable cash flows, or CGU. In determining value in use of a given asset or
CGU, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset. Items
of property and equipment and identifiable intangible assets with finite lives that have suffered impairment are reviewed for possible
reversal of the impairment if there has been a change, since the date of the most recent impairment test, in the estimates used to determine
the impaired asset’s recoverable amount. However, an asset’s carrying amount, increased due to the reversal of a prior impairment
loss, must not exceed the carrying amount that would have been determined, net of depreciation or amortization, had the original impairment
not occurred. Goodwill
is not subject to amortization, but instead is tested for impairment annually or more often if there is an indication that the group
of CGUs to which the goodwill has been allocated may be impaired. Impairment is determined for goodwill by assessing whether the
carrying value of the group of CGUs, including the allocated goodwill, exceeds the group of CGU’s recoverable amount, which is
the higher of fair value less costs of disposal and the group of CGU’s value in use. Fair value less costs of disposal is
determined based on a market approach and also derived from market data, including, information from market participants regarding
the price that the Company could receive in a sale of the group of CGUs. Value in use is determined based on cash flow projections
from financial budgets approved by senior management covering a five-year period. The estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the group of CGUs. In the event that the carrying amount of the group of CGU’s, including the allocated goodwill
exceeds its recoverable amount, an impairment loss is recognized in an amount equal to the excess. Impairment losses related to
goodwill, which are recorded in the consolidated statement of loss and comprehensive loss, are not subsequently reversed. Provisions Provisions
represent liabilities to the Company for which the amount or timing is uncertain. Provisions are recognized when the Company has a present
legal or constructive obligation as a result of past events when it is probable that an outflow of resources will be required to settle
the obligation and where the amount can be reliably estimated. Provisions are not recognized for future operating losses. Aeterna
Zentaris Inc. Notes
to Consolidated Financial Statements As
of December 31, 2022 and December 31, 2021 and for the years ended December
31, 2022, 2021 and 2020 (in
thousands of US dollars, except share and per share data and where otherwise noted) Provisions
are made for any contracts which are deemed onerous. A contract is onerous if the unavoidable costs of meeting the obligations under
the contract exceed the economic benefits expected to be received under it. Provisions for onerous contracts are measured at the present
value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Present
value is determined based on expected future cash flows that are discounted at a pre-tax rate that reflects current market assessments
of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized in finance costs. Leases At
the inception of a contract, the Company assesses whether a contract is or contains a lease. A lease is a contract in which the right
to control the use of an identified asset is granted for an agreed-upon period of time in exchange for consideration. The Company assesses
whether a contract conveys the right to control the use of an identified asset when there is both the right to direct the use of the
asset and obtain substantially all the economic benefits from that use. The Company recognizes a right of use asset and a lease liability
at the lease commencement date. The
lease liability is initially measured at the present value of the non-cancellable lease payments over the lease term and discounted at
the rate implicit in the lease. If that rate cannot be determined, the Company’s incremental borrowing rate, or the rate that Company
would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms
and conditions, is used. Lease payments include fixed payments and such variable payments that depend on an index or a rate less any
lease incentives receivable. The
lease liability is subsequently measured at amortized cost using the effective interest method and is remeasured when there is a change
in future lease payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount
expected to be payable under a residual value guarantee or if the Company changes its assessment of whether it will exercise a purchase,
extension or termination option. When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of
the right of use asset, with any difference recorded in the statement of loss and comprehensive loss. The
Company accounts for a lease modification as a separate lease if both of the following conditions exist: (a) the modification increases
the scope of the lease by adding the right to use one or more underlying assets; and (b) the consideration for the lease increases by
an amount equivalent to the standalone price for the increase in scope and any appropriate adjustments to that stand-alone price to reflect
the circumstances of the particular contract. Where the Company accounts for a lease modification as a new lease, the separate lease
is accounted for in the same way as a new lease, as described above. Where
the Company does not account for a lease modification as a separate lease, the lease liability is remeasured by: (a) decreasing the carrying
amount of the right of use asset to reflect the partial or full termination of the lease for lease modifications that decrease the scope
of the lease, with any gain or loss relating to the partial or full termination of the lease recorded in the consolidated statement of
loss and comprehensive loss; or (b) making a corresponding adjustment to the right of use asset for all other lease modifications. Payments
associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as an expense in the consolidated
statement of loss and comprehensive loss. Post-employment
benefits The
Company has partially funded and unfunded defined benefit multi-employer pension plans, namely the DUPK pension plan and the RUK 1990
and 2006 pension plans, (the “Pension Benefit Plans”) and unfunded post-employment benefit plans in Germany. Provisions for
pension obligations are established for benefits payable in the form of retirement, disability and surviving dependent pensions. The
Company also provides defined contribution plans to some of its employees. Aeterna
Zentaris Inc. Notes
to Consolidated Financial Statements As
of December 31, 2022 and December 31, 2021 and for the years ended December
31, 2022, 2021 and 2020 (in
thousands of US dollars, except share and per share data and where otherwise noted) For
defined benefit pension plans and other post-employment benefits, net periodic pension expense is actuarially determined on a quarterly
basis using the projected unit credit method. The cost of pension and other benefits earned by employees is determined by applying certain
assumptions, including discount rates, rate of pension benefit increases, the projected age of employees upon retirement and the expected
rate of future compensation. The
employee future benefits liability is recognized at its present value, which is determined by discounting the estimated future cash outflows
using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that
have terms to maturity approximating the terms of the related future benefit liability. Actuarial gains and losses that arise in calculating
the present value of the defined benefit obligation are recognized in other comprehensive loss, net of tax, and simultaneously reclassified
in the deficit in the consolidated statement of financial position in the year in which the actuarial gains and losses arise and without
recycling to the consolidated statement of loss and comprehensive loss in subsequent periods. For
defined contribution plans, expenses are recorded in the consolidated statement of loss and comprehensive loss as incurred–namely,
over the period that the related employee service is rendered. Financial
instruments The
Company classifies its financial instruments in the following categories: financial assets at fair value through profit or loss (“FVTPL”);
financial liabilities at FVTPL; financial assets at amortized cost; financial liabilities at amortized cost and financial assets at fair
value through other comprehensive income (“FVTOCI”). Financial
assets at FVTPL Financial
assets carried at FVTPL are initially recorded at fair value, and transaction costs directly attributable to issuing the financial assets
are expensed in the statement of loss and comprehensive loss. Realized and unrealized gains and losses arising from changes in the fair
value of the financial assets held at FVTPL are included in the statement of loss and comprehensive loss in the period in which they
arise. As of December 31, 2022 and 2021, the Company did not have any financial assets at FVTPL. Financial
liabilities at FVTPL These
financial liabilities are initially recognized at fair value, and transaction costs directly attributable to issuing the financial liabilities
are expensed in the statement of loss and comprehensive loss. Financial liabilities that are required to be measured at FVTPL are re-measured
at each reporting date, with changes in fair value reported in the statement of loss and comprehensive loss. As of December 31, 2022
and 2021, the Company did not have any financial liabilities at FVTPL. Financial
assets at amortized cost A
financial asset is measured at amortized cost if the objective of the business model is to hold the financial asset for the collection
of contractual cash flows, and the asset’s contractual cash flows are comprised solely of payments of principal and interest. Financial
assets at amortized cost are classified as current or non-current based on their maturity date and are initially recognized at fair value
and subsequently carried at amortized cost, less any impairment. Aeterna
Zentaris Inc. Notes
to Consolidated Financial Statements As
of December 31, 2022 and December 31, 2021 and for the years ended December
31, 2022, 2021 and 2020 (in
thousands of US dollars, except share and per share data and where otherwise noted) Financial
liabilities at amortized cost Financial
liabilities classified as amortized cost are initially recognized at fair value, less directly attributable transaction costs. After
initial recognition, costs are subsequently measured at amortized cost using the effective interest rate method with interest expense
recognized on an effective yield basis. The effective interest rate is the rate that discounts estimated future cash payments through
the expected life of the financial liability, or, where appropriate, a shorter period. Interest accretion is recorded in interest expense
in the consolidated statement of loss and comprehensive loss. Financial
assets at FVTOCI Investments
in equity instruments at FVTOCI are initially recognized at fair value, plus incremental transaction costs. Subsequently, financial assets
at FVTOCI are measured at fair value, with gains and losses arising from changes in fair value recognized in other comprehensive loss
in the period in which those gains or losses arise. As of December 31, 2022 and 2021, the Company did not have any financial assets at
FVTOCI. Impairment
of financial assets at amortized cost The
Company applies the simplified approach on trade receivables, which allows for the use of a lifetime expected credit loss (“ECL”)
provision considering the probability of default over the expected life of the financial asset. The 12-month ECL only considers default
events that are possible within the year following the reporting date. The Company uses a provision matrix to calculate ECLs for trade
receivables. The provision matrix is initially based on the Company’s historical observed default rates and is subsequently evaluated
and updated based on new and forward-looking information. Share
capital Common
shares are classified as equity. Incremental costs that are directly attributable to the issuance of common shares are recognized as
a deduction from equity, net of any tax effects. Share-based
compensation costs The
Company operates an equity-settled share-based compensation plan under which the Company receives services from directors, senior executives,
employees and other collaborators as consideration for equity instruments of the Company. The Company accounts for all forms of share-based
compensation using the fair value-based method. Fair value of stock options is determined at the date of grant using the Black-Scholes
option pricing model, which includes estimates of the number of awards that are expected to vest over the vesting period. Where granted
share options vest in installments over the vesting period (defined as graded vesting), the Company treats each installment as a separate
share option grant. Share-based compensation expense is recognized over the vesting period, or as specified vesting conditions are satisfied,
and credited to other capital. Any consideration received by the Company in connection with the exercise of stock options is credited
to share capital. Any other capital component of the share-based compensation is transferred to share capital upon the issuance of shares. The
Company grants deferred share units (“DSUs”) to members of its Board of Directors who are not employees or officers of the
Company. DSUs cannot be redeemed until the holder is no longer a director of the Company and are considered equity-settled instruments.
Under the terms of the DSU agreement, the DSUs vest immediately upon grant. The value attributable to the DSUs is based on the market
value of the share price at the time of grant and share based compensation expense is recognized in general and administrative expenses
in the consolidated statement of loss and comprehensive loss. At the time of redemption, each DSU may be exchanged for one common share
of the Company, net of applicable holding taxes. Any consideration received by the Company in connection with the exercise of DSUs is
credited to share capital. Any other capital component of the share-based compensation is transferred to share capital upon the issuance
of shares. Aeterna
Zentaris Inc. Notes
to Consolidated Financial Statements As
of December 31, 2022 and December 31, 2021 and for the years ended December
31, 2022, 2021 and 2020 (in
thousands of US dollars, except share and per share data and where otherwise noted) Revenue
recognition The
Company generates revenue from license and collaboration agreements with customers (license fees, milestone revenue, royalties), the
provision of development services, the sale of certain active pharmaceutical ingredients (“API”), semi-finished goods and
finished goods, and from certain supply chain activities, which are comprised largely of oversight or supervisory support services related
to stability studies or development activities carried out with respect to API batch production as specified in underlying contracts
with customers. The
Company applies the provisions of IFRS 15, Revenue from Contracts with Customers The
transaction price is allocated among the performance obligations on a relative standalone selling price basis, and the applicable revenue
recognition criteria are applied to each of the separate performance obligations. Standalone selling prices may be estimated via methods
that include, but are not limited to, an adjusted market assessment approach, an expected cost-plus-margin approach or a residual approach.
Determining the standalone selling price for performance obligations requires significant judgment. The
Company applies judgment in determining whether a combined performance obligation is satisfied at a point in time or over time, and,
for performance obligations satisfied over time, in concluding upon the appropriate method of measuring progress to be applied for purposes
of recognizing revenue. The Company evaluates the measure of progress each reporting period and, as estimates related to the measure
of progress change, related revenue recognition is adjusted accordingly. Changes in the Company’s estimated measure of progress
are accounted for on a cumulative catch-up basis as a change in accounting estimate and are recorded in the consolidated statement of
loss and comprehensive loss in the period of adjustment. License
fees If
the license to the Company’s intellectual property is determined to be distinct from the other promises or performance obligations
identified in the arrangement, the Company recognizes revenue from non-refundable, upfront fees allocated to the license when the license
is transferred to the customer and the customer is able to use and benefit from the license. In assessing whether a license is distinct
from the other promises, the Company considers whether the collaboration partner can benefit from the license for its intended purpose
without the receipt of the remaining promises, whether the value of the license is dependent on the unsatisfied promises, whether there
are other vendors that could provide the remaining promises and whether it is separately identifiable from the remaining promises. For
licenses that are combined with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation
and whether the license is the predominant promise within the combined performance obligation to determine whether the combined performance
obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes
of recognizing revenue. Aeterna
Zentaris Inc. Notes
to Consolidated Financial Statements As
of December 31, 2022 and December 31, 2021 and for the years ended December
31, 2022, 2021 and 2020 (in
thousands of US dollars, except share and per share data and where otherwise noted) Development
services Arrangements
that include a promise for the Company to provide development services are assessed to determine whether the services are capable of
being distinct, are not highly interdependent or do not significantly modify one another, and if so, the services are accounted for as
a separate performance obligation as the services are provided to the customer. Otherwise, when development services are determined not
to be capable of being distinct, such services are added to the performance obligation that includes the underlying license. For development
services that are combined with other promises, the Company applies judgment to assess the nature of the combined performance obligation
to determine whether the combined performance obligation is satisfied over time or at a point in time. The Company utilizes judgment
to determine the appropriate method of measuring progress for purposes of recognizing revenue, which is generally an input measure such
as costs incurred. Milestone
payments At
the inception of any contracts with a customer that includes milestone payments, which are oftentimes payable upon the successful achievement
of development or regulatory events, the Company evaluates whether the milestones are considered probable of being reached and estimates
the amount to be included in the transaction price using the most likely amount method. If the Company concludes it is highly probable
that a significant revenue reversal will not occur, the associated milestone payment is included in the transaction price. Milestone
payments that are not within the control of the Company or the licensee, such as regulatory approvals, are generally not considered probable
of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation on a relative
stand-alone selling price basis, for which the Company recognizes revenue when (or as) the performance obligations under the contract
are satisfied. At the end of each subsequent reporting period, the Company reassesses the probability of achievement of milestones and
any related constraints, and, if necessary, adjusts the estimate of the overall transaction price on a cumulative catch-up basis. Royalty
payments For
arrangements that include sales-based royalties, including milestone payments based on the level of sales, and when the license is deemed
to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (a) when the related sales occur,
or (b) when the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially satisfied. Product
sales The
Company recognizes revenue from the sale of certain API and semi-finished goods, including Macrilen TM Supply
chain revenue Supply
chain services are contracted with fixed fees and are provided over a period of time. The Company recognizes revenue on a straight-line
basis over time as it best represents the pattern of performance of the services. While
providing services, the Company incurs certain direct costs for subcontractors and other expenses that are recoverable directly from
its customers. The recoverable amounts of these direct costs are included in the Company’s operating expenses as the Company controls
the services before they are transferred to the customer and acts as a principal in these arrangements. Aeterna
Zentaris Inc. Notes
to Consolidated Financial Statements As
of December 31, 2022 and December 31, 2021 and for the years ended December
31, 2022, 2021 and 2020 (in
thousands of US dollars, except share and per share data and where otherwise noted) Contract
costs The
Company recognizes as an asset the incremental costs of obtaining a contract with a customer if the costs are expected to be recovered,
and any capitalized contract costs are amortized on a systematic basis that is consistent with the transfer to the customer of the goods
or services to which the asset relates. As a practical expedient, the Company recognizes the incremental costs of obtaining a contract
as an expense when incurred if the amortization period of the asset that it otherwise would have recognized is one year or less. To date,
the Company has not incurred any incremental costs of obtaining a contract with a customer. Contract
modifications Contract
modifications are defined in IFRS 15 as changes in the scope or price (or both) of a contract that are approved by the parties to the
contract, such as a contract amendment. Contract modifications exist when the parties to a contract approve a modification that either
creates new or changes existing enforceable rights and obligations of the parties to the contract. Depending on facts and circumstances,
the Company accounts for a contract modification in one of the following ways: (a) as a separate contract; (b) as a termination of the
existing contract and a creation of a new contract; or (c) as a combination of the preceding treatments. A contract modification is accounted
for as a separate contract if the scope of the contract increases because of the addition of promised goods or services that are distinct
and the price of the contract increases by an amount of consideration that reflects the Company’s standalone selling prices of
the additional promised goods or services. When a contract modification is not considered a separate contract and the remaining goods
or services are distinct from the goods or services transferred on or before the date of the contract modification, the Company accounts
for the contract modification as a termination of the existing contract and a creation of a new contract. When a contract modification
is not considered a separate contract and the remaining goods or services are not distinct, the Company accounts for the contract modification
as an add-on to the existing contract and as an adjustment to revenue on a cumulative catch-up basis. Income
tax Income
tax on profit or loss comprises current and deferred tax. Tax is recognized in profit or loss, except that a change attributable to an
item of income or expense recognized as other comprehensive loss or directly in equity is also recognized directly in other comprehensive
loss or directly in equity. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable
tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid
to the tax authorities. The
current income tax charge is calculated in accordance with tax rates and laws that have been enacted or substantively enacted by the
reporting date in the countries where the Company’s subsidiaries operate and generate taxable income. Deferred
income tax is recognized on temporary differences (other than, where applicable, temporary differences associated with unremitted earnings
from foreign subsidiaries and associates, to the extent that the investment is essentially permanent in duration, and temporary differences
associated with the initial recognition of goodwill) arising between the tax bases of assets and liabilities and their carrying amounts
in the consolidated financial statements and on unused tax losses or R&D non-refundable tax credits in the Group. Deferred income
tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date. Deferred
income ta |
