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| N°. | | 0466.460.429 | | | | F-cap 6.19 |
VALUATION RULES
The valuation rules were prepared in accordance with the provisions of Chapter II of the Royal Decree of April 29, 2019 related to corporate financial statements and are valid for evaluating all assets, receivables, payables and obligations of the company.
Any changes will be submitted in advance to the Board of Directors for approval.
The current rules have been established and the evaluation rules are being carried in view of the continuation of the company. Summary of Valuation Rules:
1. Fixed assets
(a) Intangible assets
The company invests in research and development projects. Research and development expenses are, as of fiscal year 2010, recorded on the assets only to the extent that their cost does not exceed a prudent estimate of their value in use or their future return for the company and amortized over a 3-year period through fiscal year 2015. As from fiscal year 2016 research and development costs that do not qualify as part of a development phase are recorded on the assets and fully amortized in the same fiscal year (according to CBN Opinions 2016/16 and 2016/27).
Research and development in progress acquired through licensing agreements, business combinations, collaboration agreements or separate acquisitions are recognized as intangible assets if they are separately identifiable, controlled by us and can generate economic benefit. Since there is a consideration that for separately acquired research and development assets the probability criterion is met, upfront and success payments to third parties for products or drug candidates for which approval has not yet been received have been recognized as intangible assets. We consider these intangible fixed assets not yet available for use until the underlying asset is approved and commercially launched.
As from approval for commercialization of the underlying asset, depreciation is recorded and the asset will be depreciated over its useful life.
Licenses, patents and know-how are amortized on a straight-line basis over the useful life (usually between 5 and 20 years). Other intangible assets, including acquired intellectual property, are recorded at acquisition cost. These assets are depreciated on a straight-line basis over their estimated useful lives as soon as they are ready for their intended use. They are included in the assets to the extent that their net book value does not exceed a prudent estimate of their value in use or their future returns for the company.
(b) Tangible fixed assets
Property, plant and equipment are recorded at cost. Depreciation is on a straight-line basis, taking into account the economic life of the assets.
| | • | | Lab material: 5-10 years |
| | • | | IT hardware and software: 3-5 years |
| | • | | Furniture and rolling stock: 5-10 years |
2. Trade receivables
Trade receivables are recorded at face value. Foreign currency receivables are translated at the exchange rate valid at the balance sheet date. Exchange differences are recognized in the income statement.
When collection becomes doubtful, a provision is made for doubtful debtors.
3. Stocks
Raw materials, auxiliary materials and trade goods are valued at acquisition cost.
Work in progress and finished goods are valued at cost.
Cost includes, in addition to direct production and material costs, a proportionate share of depreciation and amortization of assets that were used in the production process used.
Inventories are valued using the FIFO method. If the acquisition cost or cost exceeds the net realizable value, valuation at the lower net realizable value is applied. Net realizable value is equal to the estimated normal sales price, less estimated completion costs and estimated costs required to make the sale.
4. Cash investments and liquid assets
Deposits with financial institutions are valued at nominal value. Securities are valued at acquisition cost.
Additional costs are immediately charged to earnings. Write-downs are recorded if the realization value at the balance sheet date is less than the amount previously recorded.
Foreign currency balances are translated at the exchange rate valid at the balance sheet date. Exchange differences are recorded in the income statement.
5. Provisions for other risks and costs.
This included this year’s provisions for restricted stock units following the 2018/16 CBN opinion and this reasoning was upheld for the deferred management bonus.
6. Revenue
Revenue to date consists primarily of success payments, license fees, and prepayments obtained from collaboration agreements. The Company also generates revenues from various research and development incentives and grants.
Cooperation agreements with the Company’s commercial partners for activities related to research and development generally include non-refundable prepayments received; success payments, whose receipt depends on the achievement of certain clinical, regulatory or commercial milestones; license fees and royalties on selling.
In case of revenue recognition staggered over time, the unrecognized portion is recorded as revenue carried forward.
The revenue recognition policy can be summarized as follows:
(a) Prepayments received
Non-refundable prepayments received in connection with cooperative research agreements and development are spread and recognized over the relevant and desired period of the company’s performance commitment. Payments and company involvement are contractually defined by phase. At the outset, Management makes a estimate of the duration of the company’s involvement, as well as the costs related to the project. Prepayments are recognized over the expected period of engagement, either on a straight-line basis or based on costs incurred in the framework of the project if these costs can be reliably estimated. Periodically, the Company reviews the estimated time and cost for the project and adjusts the period over which revenue is spread.
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