| Significant accounting policies (Policies) | 12 Months Ended |
| Dec. 31, 2018 |
| Text block [abstract] | |
| Basis for consolidation | 3.1.
Basis for consolidation
The consolidated financial statements consist of the financial
statements of Azul S.A. and its subsidiaries as at
December 31, 2018. Control is achieved when the Company is
exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns
through its power over the investee. Specifically, the Company
controls an investee if and only if the Company has:
•
Power over the investee (i.e. existing rights that
give it the current ability to direct the relevant activities of
the investee)
•
Exposure, or rights, to variable returns from its
involvement with the investee, and
•
The ability to use its power over the investee to
affect its returns.
The Company re-assesses
When necessary, adjustments are made to the financial statements of
subsidiaries to align their accounting policies with those of the
Company. All intra-group assets and liabilities, equity, income,
expenses and cash flows relating to transactions between members of
the Company are eliminated in full on consolidation. |
| Cash and cash equivalents | 3.2.
Cash and cash equivalents
Cash and cash equivalents are held in order to meet short-term cash
commitments and not for investment or other purposes. The Company
considers as cash equivalents deposits or instruments with original
maturities of less than three months, which are readily convertible
into a known cash amount and are subject to an insignificant risk
of change in value. |
| Financial instruments | 3.3
Financial instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
3.3.1.
Non-derivative
Initial recognition
Non-derivative
Trade receivables that do not contain a significant financing
component are measured at initial recognition at the transaction
price.
Classification of financial instruments
Under IFRS 9 classification and measurement of financial
instruments is based on the Company’s business model to
manage financial assets and on the contractual cash flow
characteristics of the financial assets.
Financial assets are classified in three categories:
(i)
measured at amortized cost,
(ii)
measured at fair value through other comprehensive
income, and
(iii)
measured at fair value through profit or loss
For a financial asset to be classified and measured at amortized
cost or at fair value through other comprehensive income, it need
to give rise to cash flows that are “solely payments of
principal and interest payments” (also referred to as the
“SPPI” test) on the principal amount outstanding. This
assessment is performed at instrument level.
The Company’s business model for managing financial assets
refers to how it manages its financial assets to generate cash
flows. The business model determines whether the cash flows will
result from the collection of contractual cash flows, the sale of
financial assets or both.
Purchases or sales of financial assets that require the delivery of
assets within a period established by regulation or convention in
the market (regular way trades) are recognized on the trade date,
that is, the date on which the Company commits to buy or sell the
asset.
Business model assessment
The business model assessment requires classification of the asset
in one of the business models defined by IFRS 9. The business
models reflect how the Company manages the financial asset in order
to generate cash flows on the basis of scenarios that the Company
reasonably expects to occur. In order to perform the business model
assessment the Company has grouped financial assets in portfolios
of assets that are managed together.
Management Objective
Measurement
Collect contractual payments over the life of
the instrument Amortized cost
Collecting contractual cash flows and selling
financial assets Fair value through other
comprehensive income
Held for trading or measured in a fair value basis Fair value through profit or loss
Contractual cash flow characteristics assessment
The contractual cash flow characteristic assessment requires to
determine whether the contractual cash flows of the assets consists
solely of payment of principal or interest on the principal amount
outstanding “SPPI”. When the asset cash flows is SPPI
it will be subsequently measured following the result of the
business model assessment. However when the asset cash flows is not
SPPI it will be measured at fair value through profit or loss
irrespective of the result of the business model assessment.
Subsequent measurement of the financial assets of the
Company
The criteria for subsequent measurement of the financial assets of
the Company is presented below:
•
At amortized cost – Financial assets at
amortised cost are subsequently measured using the effective
interest rate method and are subject to impairment. Gains and
losses are recognised in profit or loss when the asset is
derecognised, modified or impaired.
Financial assets at amortised cost includes: Restricted
investments, Trade and other receivables other than credit card
receivables, receivables from related parties, security deposits
and maintenance reserves;
At fair value through other comprehensive income – For debt
instruments at fair value through OCI, interest income, foreign
exchange revaluation and impairment losses or reversals are
recognised in the statement of profit or loss and computed in the
same manner as for financial assets measured at amortised cost. The
remaining fair value changes are recognised in OCI. Upon
derecognition, the cumulative fair value change recognised in OCI
is recycled to profit or loss.
•
At fair value through profit of loss—Financial
assets at fair value through profit or loss include financial
assets held for trading, financial assets designated upon initial
recognition at fair value through profit or loss, or financial
assets mandatorily required to be measured at fair value. Financial
assets are classified as held for trading if they are acquired for
the purpose of selling or repurchasing in the near term.
Derivatives, including separated embedded derivatives, are also
classified as held for trading unless they are designated as
effective hedging instruments. Financial assets with cash flows
that are not solely payments of principal and interest are
classified and measured at fair value through profit or loss,
irrespective of the business model. Notwithstanding the criteria
for debt instruments to be classified at amortised cost or at fair
value through OCI, as described above, debt instruments may be
designated at fair value through profit or loss on initial
recognition if doing so eliminates, or significantly reduces, an
accounting mismatch.
Financial assets at fair value through profit or loss are carried
in the statement of financial position at fair value with net
changes in fair value recognised in the statement of profit or
loss.
Financial assets at fair value through profit or loss
include:Financial instruments, short-term investments and the TAP
Convertible Bonds presented under long-term investments
3.3.2.
Non-derivative financial liabilities—initial
recognition and subsequent measurement
Initial recognition
Financial liabilities are initially classified as financial
liabilities at fair value through profit or loss, financial
liabilities at amortized cost, or as derivatives designated as
hedging instruments in an effective hedge, as appropriate.
Non-derivative
Subsequent measurement
The measurement of financial liabilities depends on their
classification, as described below:
Financial liabilities at fair value through profit or
loss
Financial liabilities at fair value through profit or loss include
financial liabilities held for trading and financial liabilities
designated upon initial recognition as at fair value through profit
or loss.
Financial liabilities are classified as held for trading if they
are incurred for the purpose of repurchasing in the near term. This
category also includes derivative financial instruments entered
into by the Company that are not designated as hedging instruments
in hedge relationships as defined by IFRS 9. Separated embedded
derivatives are also classified as held for trading unless they are
designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in
the statement of profit or loss. Financial liabilities designated
upon initial recognition at fair value through profit or loss are
designated at the initial date of recognition, and only if the
criteria in IFRS 9 are satisfied. The Company has not designated
any financial liability as at fair value through profit or
loss.
Loans and borrowings
This is the category most relevant to the Company. After initial
recognition, interest-bearing loans and borrowings are subsequently
measured at amortised cost using the EIR method. Gains and losses
are recognised in profit or loss when the liabilities are
derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or
premium on acquisition and fees or costs that are an integral part
of the EIR. The EIR amortisation is included as finance costs in
the statement of profit or loss.
All non-derivative
3.3.3.
Financial instruments and hedge accounting–
Initial recognition and subsequent measurement
Initial recognition and subsequent measurement
The Company uses financial instruments, such as currency forward
contracts options and NDF to hedge itself against currency risk,
heating oil Swaps to hedge the fuel price risk and interest rate
swaps to hedge against the interest risk. Financial instruments not
designated as hedge instruments are recognized initially at fair
value on the date when the derivative contract is entered into and
are subsequently remeasured at fair value. The accounting for
subsequent changes in fair value to derivatives that are hedge
instruments in a hedge accounting depends of the nature of the item
being hedged and the type of hedge relationship designated.
Derivatives are presented as financial assets when the
instrument’s fair value is positive and as financial
liabilities when fair value is negative.
Changes in the fair value of derivatives not designated to hedge
accounting during the year are recorded directly in profit or loss.
The accounting treatments for derivatives designated as hedge
instruments are presented below.
Hedge accounting
The following classifications are used for hedge accounting
purposes:
•
Fair value hedge when hedging against exposure to
changes in fair value of recognized assets or liabilities, or an
unrecognized firm commitment.
•
Cash flow hedge when providing protection against
changes in cash flows that is attributable to a particular risk
associated with a recognized asset or liability or a highly
probable forecast transaction which may affect the income or
foreign currency risk in an unrecognized firm commitment.
On inception of a hedge relationship, the Company formally
designates and documents the hedge relationship to which the
Company wishes to apply hedge accounting, as well as the
Company’s objective and risk management strategy for
undertaking the hedge. The documentation includes identification of
the hedge instrument and item or transaction being hedged, the
nature of the risk being hedged and risks excluded, and
effectiveness assessment approach using prospect basis proving the
existence of economic relationship between the hedged item and
hedge instrument, that credit risk does not dominate the value
changes that results from that economic relationship and how the
hedge ratio is determined, including possible sources of
ineffectiveness by performing a qualitative (when the critical
terms of hedged item and hedge instrument match or are closely
aligned—as nominal amount, maturity and underlying) or
quantitative.
Hedges that meet the criteria for hedge accounting are accounted
for as follows:
Fair value hedge
The gain or loss resulting from changes in fair value of a hedge
instrument (for derivative hedge instrument) or the foreign
exchange component of its carrying amount measured in accordance
with IAS 21 (for non-derivative on-balance
If the hedged item is derecognized, the unamortized fair value is
recognized immediately in profit or loss.
When an unrecognized firm sales commitment is designated as a
hedged item in a hedge relationship, the subsequent cumulative
change in fair value of the firm sales commitment attributable to
the hedge risk is recognized as a financial asset or as a financial
liability, with the recognition of a corresponding gain or loss in
the statements of net income. The accumulated balance in the
statement of financial position resulting from successive changes
in fair value of the firm sales commitment attributable to the
hedged risk will be transferred to the balance of the hedged item
upon its recognition (recognition of balance is either of accounts
payable or accounts receivable).
The Company holds interest rate swaps to hedge against its exposure
to changes in fair value of some of its aircraft financing (Note
21).
Cash flow hedge
The effective portion of a gain or loss from the hedging instrument
is recognized directly in other comprehensive income, while any
ineffective portion is recognized immediately in the statement of
net income. The cash flow hedge reserve is adjusted to the lower of
the cumulative gain or loss on the hedging instrument and the
cumulative change in the fair value of the hedged item.
Any gain or loss remaining from the hedge instrument (as result of
the rebalancing) is an ineffectiveness and shall be recorded in
profit or loss.
The amounts recorded in other comprehensive loss are transferred to
the statement of net income in tandem with the hedged transaction
impact on profit or loss. For example, when a forecasted sale
occurs or when the income or expense being hedged is recognized.
When the hedged item is the cost of a non-financial non-financial non-financial
The Company shall discontinue hedge accounting prospectively only
when the hedging relationship ceases to meet the qualifying
criteria (after taking into account any rebalancing of the hedging
relationship).
If the occurrence of the forecast transaction or firm commitment is
no longer likely, the amounts previously recognized in other
comprehensive loss are reclassified to the statement of net income.
If the hedge instrument expires or is sold, terminated, exercised
without replacement or rollover, or if its designation as a hedge
is revoked, any cumulative gain or loss previously recognized in
comprehensive loss remains deferred in other comprehensive loss
until the forecast transaction or firm commitment affects profit or
loss.
The Company uses swap contracts to hedge against its exposure to
the risk of changes in floating rates related to its finance lease
transactions and currency option to hedge the notional amount of
debt denominated in foreign currency.
Current and non-current
Derivative instruments that are not classified as effective hedge
instruments are classified as current, non-current non-current
•
When the Company expects to maintain a derivative as
an economic hedge (and do not apply hedge accounting) for a period
exceeding 12 months after the statement of financial position date,
the derivative is classified as non-current non-current
•
Embedded derivatives that are not closely related to
the host contract are classified in a manner consistent with the
cash flows of the host contract.
•
Derivative instruments that are designated as and are
effective hedge instruments are classified consistently with the
classification of the underlying hedged item. The derivative
instrument is segregated into current and non-current
3.3.4.
Derecognition of financial assets and financial
liabilities
Financial assets
Financial assets, or where appropriate, part of a financial asset
or part of a group of similar financial assets, are derecognized
when:
•
The rights to receive cash flows from the assets have
expired; or
•
The Company has transferred their rights to receive
cash flows of the assets and (a) the Company has substantially
transferred all the risks and benefits of the assets, or
(b) the Company has not transferred or retained substantially
all the risks and benefits related to the assets, but has
transferred control of the assets.
When the Company has transferred their rights to receive cash flows
from assets and has not transferred all the risks and rewards
relating to an asset, that asset is recognized to the extent of the
continuing involvement of the Company. In this situation, the
Company also recognizes an associated liability.
The transferred assets and associated liabilities are measured
based on the rights and obligations that the Company has
retained.
Continuing involvement that takes the form of a guarantee on the
assets transferred is measured by the original book value of the
assets or the maximum payment that may be required from the
Company, whichever is lower.
Financial liabilities
A financial liability is derecognized when the obligation under the
liability is discharged, cancelled or expires.
When an existing financial liability is replaced by another from
the same lender with substantially different terms, or the terms of
an existing liability are substantially modified, such an exchange
or modification is treated as the derecognition of the original
liability and the recognition of a new liability, with the
difference in the corresponding book values recognized in the net
income (loss).
3.3.5.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net
amount reported in the consolidated statement of financial position
if there is a currently enforceable legal right to offset the
recognized amounts and there is an intention to settle on a net
basis, to realize the assets and settle the liability
simultaneously.
3.3.6.
Impairment of financial assets
The Company recognizes an allowance for losses on financial assets
for expected credit losses in line of IFRS 9 requirements.
Trade receivables and contract assets
The Company uses the simplified approach allowed by IFRS 9 to
estimate the allowance for expected credit losses on trade
receivables.
Under the simplified approach the Company estimates expected credit
losses over the life of the receivables at the reporting date
(which in all cases have a contractual life shorter than 12 months)
since they result from transactions with customers and do not have
a significant financing component.
In estimating expected credit losses the Company considers credit
card receivables as receivables with a low risk of default.
Considering that it has a relevant history of no credit risk losses
on such receivables and that it does not expect losses during the
lifetime of those receivables no allowance has been recognized for
those assets.
In order to estimate expected credit losses for other trade
receivables and contract assets the Company aggregates such assets
in portfolios of receivables which share credit risk
characteristics. The Company currently use portfolios to estimate
credit losses. For each portfolio the Company measures the historic
rate of losses (net of recoveries) on defaulted receivables over a
relevant historic period considering that, generally, a receivable
has defaulted when is more than 90 days overdue. Such historical
default rate for the portfolio is subsequently adjusted to
incorporate an estimate of the impact of future economic conditions
on past historic rates.
The estimate of the impact of future economic conditions is based
on the observed correlation of defaults with macroeconomic
indicators. The Company periodically reviews the historic period
over which defaults are measured and, the relevant macroeconomic
indicator to use and how the correlate with the experience of
defaults.
Other financial assets
For other financial assets the Company assesses individually for
each counterparty whether there has been a significant increase in
the credit risk of the asset since initial recognition or not. Such
determination is based on information already available to the
Company. If and when credit risk ratings of the counterparty are
publicly available such information is also taken into
consideration.
For financial assets with no significant increase in credit risk an
estimate is made of expected credit losses that result from
default events on a financial instrument that are possible within
the 12 months after the reporting date while for those assets with
a significant increase in credit risk the estimate is made of
losses that result from default events that are possible over the
lifetime of the asset.
An allowance for loss is recognized when the Company estimates that
the risk of credit losses during the period. In measuring the
allowance the Company considers at least three scenarios (standard,
optimistic and pessimistic) and for each an estimate of cash
inflows (including cash inflows from collateral) is made. The
resulting estimated cash flows for each scenario is discounted to
present value to the reporting date and are probability-weighted
based on a judgmental determination of the probability of each
scenario.
3.3.7.
Fair value of financial instruments
The fair value of financial instruments actively traded in
organized financial markets is determined based on prices quoted in
the market at close of business at the statement of financial
position date, not including the deduction of transaction
costs.
The fair value of financial instruments for which there is no
active market is determined using valuation techniques. These
techniques can include use of recent market transactions,
references to the current fair value of other similar instruments,
analysis of discounted cash flows, or other valuation models.
An analysis of the fair value of derivative financial instruments
and more details about how they are calculated is described in Note
21. |
| Inventories | 3.4.
Inventories
Inventories consist of aircraft maintenance parts, snack supplies
and uniforms. Inventories are valued at cost or net realizable
value, whichever is lower, net of any provision for inventory. |
| Taxes | 3.5.
Taxes
Income tax expense, deferred tax assets and liabilities reflect
management’s best assessment of estimated current and future
taxes to be paid. Significant management judgment is required to
determine the amount of deferred tax assets that can be recognized
and the tax rates used, based upon the likely timing and the level
of future taxable profits together with future tax planning
strategies. In Brazil, income tax is determined on each legal
entity, that is, not on a consolidated basis.
Provisions for current income tax and social contribution are based
on the taxable income of the year considering the offset of tax
loss carryforwards, up to the limit of 30% of annual taxable
income. Tax rates and tax laws used to calculate the amounts are
those in force at the statement of financial position dates. The
income from foreign subsidiaries is subject to taxation pursuant to
local tax rates and legislation. In Brazil, these incomes are taxed
according to Law 12.973/14.
Deferred income taxes and social contribution are calculated using
the liability method from temporary differences between the tax
basis of assets and liabilities and their carrying amounts for
financial reporting purposes at the reporting date which will
result in taxable or deductible amounts in the future.
Deferred income tax assets and liabilities are measured at tax
rates that are expected to be applicable in the year that the
assets will be realized or the liability settled, based on tax
rates (and tax law) enacted or substantially enacted on each
statement of financial position date.
The book value of the deferred tax assets is presented net if there
is a legal or contractual right to offset tax assets against tax
liabilities and deferred taxes are related to the same taxable
entity and is reviewed on each reporting date and written off to
the extent that it is no longer probable that taxable profits will
be available to allow that all or part of the deferred taxes assets
will be used.
Unrecognized deferred tax assets are reassessed on each reporting
date and are recognized to the extent that it becomes probable that
future taxable profit will allow that the deferred tax assets be
recovered.
Deferred income tax and social contribution relating to equity
items are recognized either in other comprehensive income or
directly in equity. The Company assesses on a regular basis the tax
status of situations in which tax law requires interpretation and
records provisions if appropriate. |
| Foreign currency transactions | 3.6.
Foreign currency transactions
The consolidated financial statements are presented in Brazilian
reais (R$), which is the Company’s functional currency.
Transactions in foreign currencies are initially translated into
Brazilian reais using the exchange rates prevailing at the date of
the transaction.
Monetary assets and liabilities denominated in foreign currencies
are translated into the functional currency using the exchange
rates prevailing at the statement of financial position date.
Non-monetary Non-monetary |
| Property and equipment | 3.7.
Property and equipment
Assets included in property and equipment are stated at acquisition
or construction cost including interest and other financial
charges, net of accumulated depreciation and accumulated impairment
losses, if any. Pre-payments
The Company receives credits from manufacturers on acquisition of
certain aircraft and engines that may be used for the payment of
maintenance services. These credits are recorded as a reduction of
the cost of acquisition of the related aircraft and engines and
against other accounts receivable.
These amounts are then charged to expense or recorded as an asset,
when the credits are used to purchase additional goods or services.
In the case of operating leases, these credits are deferred and
recorded as a reduction of operating lease expenses on a straight
line basis during the term of the respective agreement.
Owned aircraft are recorded at cost of acquisition and are subject
to impairment testing, if there are impairment indicators. Aircraft
equipment, rotables and tools, including reparable spare parts with
useful lives that exceed one year, are recorded as property, plant
and equipment at cost of acquisition.
Aircraft lease agreements are accounted for as either operating or
finance leases (note 3.11).
Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets as follows:
Estimated useful lives
Aircraft 12 years
Furniture and fixtures 5 years
Aircraft equipment 12 years
Computer equipment and peripherals 5 years
Tools 5 years
Heavy maintenance – engines 5 to 6 years
Heavy maintenance – structural checks 2 to 10 years
Engines 12 years
Leasehold improvements 10 years
Simulators 20 years
Vehicles 5 years
The residual value and useful life of assets and the depreciation
methods are reviewed at the end of each year and adjusted
prospectively, if necessary.
The Company considers that its aircraft have four major components;
airframe, engines, heavy maintenance and structural checks. For
owned aircraft, the Company allocates a maintenance cost component
to engines and structural checks as a portion of the total aircraft
cost at the moment of acquisition. This component is depreciated
over its useful life, which is the period extending up to the next
heavy maintenance or structural check or the remaining useful life
of the engines, whichever is shorter. The Company has maintenance
contracts for its engines that cover all significant maintenance
activities. The Company has “power-by-the-hour”
Repairs and routine maintenance are expensed in the period in which
they are incurred. Significant maintenance costs are capitalized
when it is likely that they will result in future economic benefits
that exceed the originally assessed performance target for existing
assets of the Company. Capitalized maintenance cost is depreciated
over the period of time from when they were capitalized through the
next scheduled significant maintenance event. Heavy maintenance on
aircraft held under operating lease is expensed at the time of the
event, and it is recorded in the “maintenance material and
repair” line items.
Depreciation expense of major capitalized maintenance expenses is
recorded in “Depreciation and amortization” in the
consolidated statement of net income.
An item of property, plant and equipment and any significant part
initially recognized is derecognized upon disposal or when no
future economic benefits are expected from its use or disposal. 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 asset) is recognized in “Other operating
expenses, net”. |
| Business Combinations | 3.8.
Business Combinations
The Company accounts for business combinations using the
acquisition method. The cost of an acquisition is measured as the
sum of the consideration transferred, based on its fair value on
the acquisition date. Costs directly attributable to the
acquisition are expensed as incurred. The assets acquired and
liabilities assumed are measured at fair value, classified and
allocated according to the contractual terms, economic
circumstances and relevant conditions on the acquisition date.
Goodwill is measured as the excess of the consideration transferred
over the fair value of net assets acquired. If the consideration
transferred is smaller than the fair value of net assets acquired,
the difference is recognized as a gain on bargain purchase in the
statement of net income. After initial recognition, goodwill is
measured at cost less any accumulated impairment losses. During the
years ended December 31, 2018, 2017 and 2016 the Company has
not completed any business combination transactions. |
| Intangible assets | 3.9.
Intangible assets
Intangible assets acquired separately are measured at cost on
initial recognition. The cost of intangible assets acquired in
business combinations is their fair value at the date of
acquisition. After initial recognition, intangible assets are
stated at cost, less any accumulated amortization and accumulated
impairment losses.
The useful life of intangible assets is assessed as definite or
indefinite.
Intangible assets with definite useful lives are amortized over
their estimated useful lives and tested for impairment, whenever
there is an indication of any loss in the economic value of the
assets. The amortization period and method of amortization for
intangible assets with definite lives are reviewed at least at the
end of each fiscal year or when there are indicators of impairment.
Changes in estimated useful lives or expected consumption of future
economic benefits embodied in the assets are considered to modify
the amortization period or method, as appropriate, and treated as
changes in accounting estimates. The amortization of intangible
assets with definite lives is recognized in the statements of net
income in the expense category consistent with the use of
intangible assets (Note 15).
Intangible assets with indefinite useful lives are not amortized,
but are tested for impairment at each year-end
Gains and losses resulting from the disposal of intangible assets
are measured as the difference between the net disposal proceeds
and the book value of assets, and are recognized in the statements
of net income.
In connection with the acquisition of TudoAzul (former TRIP), the
Company identified airport operating licenses as having indefinite
useful lives. The fair value of Pampulha, Santos Dumont and
Fernando de Noronha airports operating licenses were recognized at
fair value at the acquisition date. Fair value of these operating
licenses was based on estimated discounted future cash flows.
Operating licenses are considered to have indefinite useful lives
due to several factors, including requirements for necessary
permits to operate within Brazil and limited landing rights
availability in Brazil’s most important airports regarding
traffic volume. |
| Impairment of non-financial assets | 3.10.
Impairment of non-financial
The Company performs an annual review for impairment indicators in
order to assess events or changes in economic, technological, or
operating conditions which may indicate that an asset is not
recoverable. If any, those indicators are identified when
performing the annual impairment testing and the Company estimates
the asset’s recoverable amount. An asset’s recoverable
amount is the higher of an asset’s or cash generating
unit’s (CGU) fair value less cost to sell or its value in
use. When the carrying amount of intangibles exceed its recoverable
amount, an impairment charge is recorded and the asset is written
down to its recoverable amount.
The Company operates as a single CGU.
In estimating the value in use, 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 asset. The fair value less cost to
sell is determined, whenever possible, based on a firm sales
agreement carried out on an arm’s length basis between known
and interested parties, adjusted for expenses attributable to asset
sales, or when there is no firm sale commitment, based on the
market price of an active market or most recent transaction price
of similar assets.
For assets excluding goodwill, an assessment is made at each
reporting date to determine whether there is an indication that
previously recognized impairment losses no longer exist or have
decreased. If such indication exists, the Company estimates the
recoverable amount. A previously recognized impairment loss is
reversed only if there has been a change in the assumptions used to
determine the asset’s recoverable amount since the last
impairment loss was recognized. 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, had no impairment loss been
recognized for the asset in prior years.
The following assets have specific characteristics for impairment
testing:
Goodwill
Goodwill is tested for impairment annually at December 31 or when
circumstances indicate that the carrying value may not be
recoverable.
Impairment is determined for goodwill by assessing the recoverable
amount of the single CGU taking the Company as a whole. When the
recoverable amount of the CGU is less than its carrying amount, an
impairment loss is recognized. Impairment losses relating to
goodwill cannot be reversed in future periods.
Intangible assets
Intangible assets with indefinite useful lives are tested for
impairment annually at December 31 at the CGU level, and when
circumstances indicate that the carrying value may be impaired. |
| Leases | 3.11.
Leases
A lease is classified at the inception date based on the substance
of the arrangement as a finance lease or an operating lease. The
arrangement is, or contains, a lease if fulfillment of the
arrangement is dependent on the use of a specific asset (or assets)
and the arrangement conveys a right to use the asset (or assets),
even if that asset is (or assets are) not explicityly specified in
an arrangement. The leases of property and equipment in which the
Company substantially hold the risks and rewards incidental to
ownership are classified as finance leases. Finance leases are
capitalized at the commencement of the lease at the inception date
fair value of the leased property or, if lower, at the present
value of the minimum lease payments. Lease payments are apportioned
between finance charges and reduction of the lease liability so as
to achieve a constant rate of interest on the remaining balance of
the liability. Finance charges are recognized in finance expenses
in the statement of net income.
The present value of the minimum lease payments, is calculated
using the implicit interest rate when it is clearly identified in
the lease agreement or the market interest rate.
The leased assets are depreciated over the shorter of the remaining
economic useful life of the leased assets or the contractual term,
whenever there is no reasonable certainty that the Company will
obtain ownership of the property at the end of the contractual
term.
An operating lease is a lease other than a finance lease. Operating
lease payments (including direct costs and incentives received from
the lessor of each contract) are recognized as an operating expense
on a straight-line basis over the lease term.
A sale and leaseback transaction involves the sale of an asset and
leasing back the same asset.
Gains or losses related to sale-leaseback transactions classified
as an operating leases upon the sale are immediately recognized as
other (expense) income when it is clear that the transaction was at
fair value. If the sale price is below fair value any gain or loss
is recognized immediately, except if a loss is compensated by
future lease payments at below market price, in which case, it is
deferred and amortized in proportion to the lease payments over the
contractual lease term.
Gains or losses related to sale-leaseback transactions classified
as financial lease upon the sale, are deferred and amortized over
the lease term.
Sublease is an operation in which the Company has an original lease
of a particular asset that is transferred to a third party
generating a new lease under conditions that may be the same or
different from the original lease. The original contract lease
expense is recognized in the statement of net income under
“Aircraft and other rent” and the income from the
sublease under “Other revenues”.
In certain circumstances, such as market conditions in which the
contracts were negotiated, it may occur that the amount of rental
expense paid is higher from the rental income received in the
sublease agreement. For contracts in which this situation is
identified, the Company records a provision for onerous contracts
in accordance with IAS 37—“Provisions, Contingent
Liabilities and Contingent Assets”. |
| Security deposits and maintenance reserves | 3.12.
Security deposits and maintenance reserves
a)
Security deposits
Security deposits are guarantee deposits held as collateral related
to aircraft lease contracts paid to lessors at the inception of the
lease agreement that will be refunded to the Company when the
aircraft is returned to the lessor at the end of the lease
agreement. Security deposits are denominated in U.S. Dollars and do
not bear interest.
b)
Maintenance reserves
Certain master lease agreements provide that we pay maintenance
reserves to aircraft lessors to be held as collateral in advance of
the performance of major maintenance activities. Maintenance
reserve deposits are reimbursable to us upon completion of the
maintenance event in an amount equal to the lesser of (1) the
amount of the maintenance reserve held by the lessor associated
with the specific maintenance event or (2) the qualifying
costs related to the specific maintenance event. Substantially all
of these maintenance reserve payments are calculated based on a
utilization measure, such as flight hours or cycles, and are used
solely to collateralize the lessor for maintenance.
At the lease inception and at each statement of financial position
date, we assess whether the maintenance reserve payments required
by the master lease agreements are expected to be recovered through
the performance of qualifying maintenance on the leased assets.
Maintenance deposits expected to be recovered from lessors are
reflected in security deposits and maintenance reserves in the
accompanying statements of financial position. We assess
recoverability of amounts currently on deposit with a lessor, by
comparing them to the amounts that are expected to be reimbursed at
the time of the next maintenance event, and amounts not recoverable
are considered maintenance costs. |
| Provisions | 3.13.
Provisions
Provisions are recognized when the Company has a present legal or
constructive obligation, as a result of past events,
it is probable that an outflow of resources will be
required to settle the obligation and a reliable estimate of the
amount can be made.
When the Company expects that some of all of the value of a
provision will be reimbursed, in whole or in part, as for example
under an insurance contract, the reimbursement is recognized as a
separate asset but only when reimbursement is virtually certain.
The expense relating to any provision is presented in the
statements of net income, net of any reimbursement.
The Company is party in other judicial and administrative
proceedings. Provisions are set up for all legal claims related to
lawsuits for which it is probable that an outflow of funds will be
required to settle the legal claims obligation and a reasonable
estimate can be made. The assessment of probability of loss
includes assessing the available evidence, the hierarchy of laws,
the most recent court decision and their relevance in the legal
system, as well as the assessment of legal counsel.
Lease contracts determine in what conditions the Company must
return the leased aircraft to the lessor. The Company estimates a
provision based on the projected future costs to be incurred to
return the asset in an acceptable condition as contractually
required, taking into consideration the current fleet and long-term
maintenance plans. |
| Treasury shares | 3.14.
Treasury shares
Own equity instruments that are reacquired (treasury shares) are
recognized at cost and deducted from equity. No gain or loss is
recognized in profit or loss on the purchase, sale, issue or
cancellation of the Company own equity instruments. Any difference
between the carrying amount and the consideration, if reissued, is
recognized in the share premium. |
| Employee benefits | 3.15.
Employee benefits
i)
Executive bonus
The Company records a provision for executive bonus, which payment
is contingent to meeting predefined goals, and is the related
expense is recorded under Salaries, wages and benefits as it is
earned.
ii)
Share-based payment
The Company offered its executives remuneration in the form of
share-based payments, to be settled with the Company shares, where
the Company receives services provided by these professionals in
consideration for share options and restricted stock units.
The cost of equity settled awards with employees is measured based
on the fair value at the grant date. In order to determine the fair
value of share options, the Company uses the Black-Scholes option
pricing model (Note 26).
The cost of equity settled awards is recognized in “Salaries,
wages, and benefits” together with a corresponding increase
in equity, over the period in which performance and/or service
conditions are fulfilled, ending on the date the employee acquires
the full right to the award (vesting date). The cumulative expense
for equity settled transactions at each reporting date until the
vesting date reflects the extent to which the vesting period has
expired and management’s best estimate of the number of
equity instruments that will will ultimately vest.
No expense is recognized for awards that do not vest because
non-market performance and/or service conditions have not been met.
Where awards include market or non-vesting
When the terms of an equity settled award are modified, the minimum
expense recognized is that the amount that would have been
recognized had the terms not been modified. An additional expense
is recognized for any modification that increases the total fair
value of the share based payment transaction or those otherwise
benefits the employee, as measured at the date of modification.
When an equity settled award is cancelled, it is treated as having
vested on the cancellation date and any expense not recognized for
the award is immediately recognized. This includes any award in
which the non-vesting
The cost of cash-settled transactions is measured initially at fair
value at the grant date. This fair value is expensed over the
service period with the recognition of a corresponding liability.
The liability is remeasured to fair value at each reporting date up
to, and including the settlement date, with changes in fair value
recognized in the statement of the net income for the period in
‘Salaries, wage and benefits’. |
| Accounts payable-Forfaiting | 3.16.
Accounts payable—Forfaiting
In 2018, the Company signed an agreement with financial
institutions to allow its suppliers, at their option, to discount
the receivables issued by the Company. The original terms of the
accounts payable issued by the supplier do not change and any
discount charged by the financial institution are born by the
supplier and the Company does not receive any benefit from the
financial institution. In addition, there is no change in the
accounts receivable subordination level in the event of judicial
execution. As of December 31, 2018, the balance of accounts payable
discounted under such agreement totaled R$162,778. |
| Revenue from contracts with customers | 3.17.
Revenue from contracts with customers
Passenger tickets revenue is recognized upon effective rendering of
the transportation service. Travel related services revenue is
recognized when the related transportation service is provided and
is being classified as passenger revenue as of January 1, 2018. In
2017 and 2016, certain travel related services were recognized when
provided and as other revenue Travel related services include
baggage fees, administrative charges, upgrades and other travel
related charges.
Air traffic liability represent the Company’s liability to
provide air transportation in the future as substantially all
tickets are sold in advance. All tickets sold at any given point of
time have travel dates extending up to twelve months. As a result,
the balance of the Company’s air traffic liability represents
activity that will be recognized in the next twelve months.
The Company recognizes revenue for tickets and travel related
services sold upon the departure of the related scheduled flight
and for tickets and travel related services sold that are expected
to expire unused (breakage). The Company estimates the value of
future refunds and exchanges, net of forfeitures for all unused
tickets, once the flight date has already passed. These estimates
are based on historical data and experience from past events.
IFRS 15 requires disclosure of quantitative and qualitative
information about transaction price allocation to unsatisfied or
partially satisfied performance obligations. The Company decided to
apply the practical expedient to not disclose such information as
the performance obligations are part of contracts with expected
duration of one year or less.
Revenue breakdown is as follows:
For the year ended December 31,
2018 2017 (*)
Operating revenue
Tickets revenue 7,744,031 6,695,340
Travel related services 926,101 704,391
Total passenger revenue 8,670,132 7,399,731
Cargo and other revenue 483,225 373,742
Total revenue 9,153,357 7,773,473
(*)
This column represents December 31, 2017 prepared
under IFRS 15 for comparison purposes only. |
| TudoAzul Program | 3.18.
“TudoAzul” Program
Under the “TudoAzul” program customers accrue points
based on the amount spent on tickets flown. The amount of points
earned depends on TudoAzul membership status, market, flight,
day-of-week,
Upon the sale of a ticket, the Company recognizes a portion of the
ticket sales as revenue when the transportation service occurs and
defers a portion corresponding to the points earned under the
TudoAzul Program, in accordance with IFRS 15, Customer Loyalty
Programs in the account “Air Traffic Liabilities”.
The Company determines the estimated selling price of the air
transportation and points as if each element had been sold on a
separate basis and was therefore based on the stand alone selling
price.
The Company sell mileage credits to customers and also to business
partners, including co-branded
Sales of mileage credits are comprised of two components,
transportation and marketing. Accordingly, we recognize the
marketing component in “other revenue” based on
contractual terms.
Points awarded or sold and not used are recorded in “Air
traffic liability”. The Company recognizes revenue for points
sold and awarded that will never be redeemed by program members.
The Company estimates such amounts annually based upon the latest
available information regarding redemption and expiration
patterns. |
| Segment information | 3.19.
Segment information
IFRS 8 requires that operations are identified by segment based on
internal reports that are regularly reviewed by the Company´s
chief operating decision maker to allocate funds to segments and
assess their performance.
The operations of the Company consist of air transportation
services in Brazil. The Company’s management allocates funds
based on the consolidated results. The main assets generating
revenue of the Company are its aircraft, from which revenue is
generated in Brazil. Other revenues are basically derived from
cargo operations and all items are directly attributed to air
transport services that are recognized in income for the year when
the services are rendered.
Based on how the Company manages its business and the way in which
fund allocation decisions are taken, the Company has only one
operating segment for financial reporting purposes. |
| New and amended standards and interpretations | 3.20.
New and amended standards and
interpretations
The Company applied IFRS 15 and IFRS 9 for the first time. The
nature and effect of the changes as a result of adoption of these
new accounting standards are described below.
Several other amendments and interpretations have been applied for
the first time in 2018, but did not have impact in the consolidated
financial statements of the Company. The Company has not early
adopted any standard, interpretation or amendment that have been
issued, but are not yet effective.
IFRS 9 – Financial instruments
In July 2014, the IASB issued the final version of IFRS 9 –
Financial Instruments, which superseded IAS 39 – Financial
Instruments: Recognition and Measurement. IFRS 9 is applicable for
annual periods beginning on or after January 1, 2018 bringing
together all three aspects of the accounting for financial
instruments: classification and measurement; impairment; and hedge
accounting.
Except for hedge accounting, retrospective application is required,
but comparative information is not required. The Company adopted
the new standard on January 1, 2018.
The Company has opted not to present comparative information
showing retroactively the results from the adoption of
IFRS 9.
The effect of adopting IFRS 9 as at 1 January 2018 was
immaterial.
Classification and measurement
The new standard establishes new requirements for the
classification and measurement of financial assets and liabilities
as detailed in note 3.3.
The Company classified its financial assets and liabilities in
accordance with the business models established in IFRS 9 and
evaluated the contractual terms of those instruments not measured
at fair value through profit or loss. As result of the new
classification and measurement requirements credit card receivables
previously measured at amortized cost are measured at fair value
through comprehensive income.
The following table presents for financial assets and liabilities
at January 1, 2018 the original measurement category under IAS
39 and the current measurement category under IFRS 9.
Original under IAS 39
Current under IFRS 9
Measurement category
Assets
Short-term investments Held for trading Fair value through profit of loss
Restricted investments Fair value through profit of loss Amortized cost
Trade and other receivables Loans and receivables Amortized cost except for credit card receivables
which are measured at fair value through other comprehensive
income
Financial instruments Held for trading except those under cash flow
hedge accounting Fair value through profit of loss except those
under cash flow hedge accounting
Non-current Loans and receivables Amortized cost
Long-term investments (TAP Convertible Bond) Hybrid instrument recorded on its entity at fair
value through profit or loss Fair value through profit of loss
Non-current Fair value through profit of loss Amortized cost
Security deposits and maintenance reserves Loans and receivables Amortized cost
Non-current Held for trading except those under cash flow
hedge accounting Fair value through profit of loss except those
under cash flow hedge accounting
Liabilities
Loans and financings Amortized cost Amortized cost
Accounts payable Amortized cost Amortized cost
Original under IAS 39
Current under IFRS 9
Measurement category
Financial instruments Held for trading except those under cash flow
hedge accounting Fair value through profit of loss except those
under cash flow hedge accounting
Non-current Amortized cost Amortized cost
Non-current Amortized cost Amortized cost
Non-current Held for trading except those under cash flow
hedge accounting Fair value through profit of loss except those
under cash flow hedge accounting
Impairment
As further detailed in Note 3.3 the new impairment model requires
the recognition of allowance for credit losses on assets not
measured at fair value through profit or loss based on expected
credit losses (ECL) rather than only incurred credit losses as was
the case under IAS 39.
The estimate of the expected credit loss is based on the
Company’s historical credit losses, adjusted for
management’s expectations about future economic conditions
for the relevant period.
The application of the requirements of impairment under IFRS 9
resulted in an increase in the allowance for doubtful accounts of
R$631 at January 1, 2018 and a decrease of R$209 during the
year ended December 31, 2018 which corresponds on its entirety
to trade receivables (other than credit card receivables) measured
at amortized cost.
Hedge accounting
On April 1, 2018, the Company opted to apply the new
requirements of IFRS 9 related to hedge accounting. These
requirements require that hedge accounting relationships reflects
the Company’s risk management objectives and strategies, the
effectiveness assessment has a qualitative and forward-looking
approach and prohibit voluntary discontinuation of hedge accounting
as well.
The new standard allows the designation of net exposure related to
group of similar instruments (not permitted on the previous
standard IAS 39), separate the forward element of forward contracts
as well as the foreign currency basis spread and temporal element
of options to be recorded in other comprehensive income (when they
are part of a hedge accounting relationship).
IFRS 15 – Revenue from Contracts with
Customers
IFRS 15 supersedes IAS 11 Construction Contracts Revenue
IFRS 15 requires entities to exercise judgement, taking into
consideration all of the relevant facts and circumstances when
applying each step of the model to contracts with their customers.
The standard also specifies the accounting for the incremental
costs of obtaining a contract and the costs directly related to
fulfilling a contract. In addition, the standard requires extensive
disclosures.
The Company adopted IFRS 15 using the modified retrospective method
of adoption with the date of initial application of January 1,
2018. Under this method, the standard can be applied either to all
contracts at the date of initial application or only to contracts
that are not completed at this date. The Company elected to apply
the standard to all contracts as at January 1, 2018.
The new standard requires reclassification of ancillary revenues,
such as baggage fees, administrative charges, upgrades and other
travel related charges that were previously classified in other
revenue, to passenger revenue in the amount of R$926,101 for the
year ended December 31, 2018. These ancillary fees are
directly related to passenger travel and will no longer be
considered distinct performance obligations separate from the
passenger travel component. In this context, such ancillary
revenues, which were previously recognized when sold, are now
recognized when transportation is provided.
In addition, the adoption of IFRS 15 slightly increases the rate
used to account TudoAzul Program credits in the amount of R$6.994
for the year ended December 31. 2018. We previously analyzed the
market prices of airfares offered to travel agencies with high
volumes of transactions to establish the selling price of our
mileage credits. Considering the application of the new standard,
the Company determined the stand alone selling price.
The effect of adopting IFRS 15 as at January 1, 2018 was, as
follows:
Increase /
Balance Sheet:
Air traffic liability 62,603
Deferred income taxes (21,284 )
Accumulated losses (41,319 )
Below, are the amounts by which each financial statement line item
is affected as at and for the year ended December 31, 2018 as a
result of the adoption of IFRS 15.
The first column shows amounts prepared under IFRS 15 and the
second column shows what the amounts would have been had IFRS 15
not been adopted:
Consolidated statement of net income and balance sheet for the year
ended December 31, 2018 as below:
Amounts prepared under
IFRS 15 Previous Increase/
Consolidated statement of net income
Passenger revenue 8,670,132 7,839,086 831,046
Cargo and other revenue 483,225 1,409,326 (926,101 )
Deferred income tax and social contribution (170,604 ) (202,923 ) 32,319
Net income 420,277 357,540 62,737
Amounts prepared under
IFRS 15 Previous Increase/
Balance Sheet:
Air traffic liability 1,672,452 1,577,397 95,055
Deferred income taxes 443,894 476,213 (32,319 )
Accumulated losses (836,214 ) (773,477 ) (62,737 )
IFRIC Interpretation 22 Foreign Currency Transactions
and Advance Considerations
The Interpretation clarifies that, in determining the spot exchange
rate to use on initial recognition of the related asset, expense or
income (or part of it) on the derecognition of a non-monetary non-monetary non-monetary non-monetary
Amendments to IFRS 2 Classification and Measurement of
Share-based Payment Transactions
The IASB issued amendments to IFRS 2 Share-based Payment |
| Standards issued but not yet effective | Standards issued but not yet effective
IFRS 16 was issued in January 2016 and it replaces IAS
17, Leases , Determining
whether an Agreement Contains a
Lease SIC-15, Operating
leases-Incentives SIC-27 Evaluating
the Substance of Transactions in the Legal Form of a Lease
IFRS 16 establishes the principles for the recognition,
measurement, presentation and disclosure of leases and requires
lessees to account for all leases under a single model in the
balance sheet, similar to accounting for finance leases under IAS
17. The standard includes two practical expedients to the
lessees—Leases of ‘low-value’
Lessees will be also required to remeasure the lease liability upon
the occurrence of certain events (e.g., a change in the lease term,
a change in future lease payments resulting from a change in an
index or rate used to determine those payments). The lessee will
generally recognize the amount of the remeasurement of the lease
liability as an adjustment to the right-of-use
Under IFRS 16, Azul will capitalize the right of use of all
aircraft and other assets such as properties, vehicles and
equipment currently held under operating leases. Azul will
recognize a right-of-use right-of-use
IFRS 16 is effective for annual periods beginning on or after
January 1, 2019.
Transition to IFRS 16
A lessee can apply IFRS 16 either by a full retrospective approach
or a modified retrospective approach. Azul will apply the full
retrospective transition approach to each prior reporting period
presented. Under the full retrospective method the comparative
information will be restated.
Azul will elect to use the exemptions proposed by the standard on
lease contracts for which the lease terms ends within 12 months as
of the date of initial application, and lease contracts for which
the underlying asset is of low value. Azul has leases of certain
equipment (i.e., personal computers, printing and photocopying
machines as well as communicating equipment) that are considered of
low value.
During 2018, Azul has performed a detailed impact assessment of
IFRS 16 in its consolidated financial statements. We note that the
actual impacts from the adoption of the standard in January 1,
2019 may change if there is a change in certain estimates as a
result of ongoing discussions. Given the complexity of the matter,
until the initial adoption in 2019 there might be a variation from
the amounts bellow are subject to change.
The Company’s aircraft lease rental payments are
predominantly denominated in USD. While the Company’s foreign
currency cash flow risk for lease rental payments are unchanged,
the adoption of IFRS 16 will result in foreign currency denominated
lease liabilities recognized on the balance sheet revaluing in
response to exchange rate fluctuations in the USD/BRL exchange
rate.
The main impacts of IFRS 16 on the consolidated statements of net
income and balance sheet for the year ended December 31, 2018
are presented below:
As reported IFRS 16 As adjusted
Consolidated Balance Sheets
Asset
Current assets
Sublease receivable (a) - 73 , 671 73 , 671
Prepaid expenses 163 , 829 (42 , 664 ) 121 , 165
Non-c urrent assets
Sublease receivable (a) - 288 , 067 288 , 067
Other non-current assets 520 , 723
(123 , 325 ) 397 , 398
Property, plant and equipment
3 , 289 , 219
(1 , 446 , 980 )
1 , 842 , 239
Right of use assets - leased aircraft and other assets - 4.805.900 4.805.900
Right of use assets - maintenance of leased aircraft - 622 , 241 622 , 241
Liabilities and equity
Current liabilities
Accounts payable
1 , 166 , 291 104 , 473
1 , 270 , 764
Current maturities of lease liabilities 176.197 1.078.008 1.254.205
Non-current liabilities
Long-term obligations under lease liabilities 773 , 694 6.897.134 7.670.828
Other non-current liabilities 321 , 139 (3 , 473 ) 317 , 666
Deferred income taxes 443 , 894 ( 203.033 ) 240.861
Equity
Other Comprehensive Income (117.324 ) 15.705 (101.619 )
Accumulated losses
(836 , 214 ) ( 3.711.904 ) ( 4.548.118 )
Consolidated statement of net income
Operating revenue
Cargo and other revenue (a) 483 , 225
(112 , 046 ) 371 , 179
Operating expense
Aircraft and other rent
(1 , 509 , 947 ) 1.439.335 ( 70.612 )
Maintenance materials and repairs
(504 , 477 ) 229 , 004
(275 , 473 )
Depreciation and amortization
(324 , 902 ) ( 920.048 ) ( 1.244.950 )
Financial result
Financial expense
(410 , 207 ) ( 571.585 ) ( 981.792 )
Foreign currency exchange, net
(194 , 706 ) ( 1.035.180 ) ( 1.229.886 )
Result from related parties transactions, net 342 , 083 6 , 187 348 , 270
Income tax
Deferred income tax (b) ( 170.604 ) (977 ) ( 171.581 )
Net income (loss) 420 , 277 ( 965.310 ) ( 545.033 )
Basic net income per common share - R$ 0 . 02 (0 . 04 ) (0 . 02 )
Diluted net income per common share - R$ 0 . 02 (0 . 04 ) (0 . 02 )
Basic net income per preferred share - R$ 1 .24 (2 . 86 ) (1 . 62 )
Diluted net income per preferred share - R$ 1 .23 (2 . 82 ) (1 . 59 )
(a)
The Company, as a lessor, has reassessed its sublease
agreements as finance lease. The leased assets have been
derecognized and finance lease asset receivables recognized. This
change in accounting changes the timing of recognition of the
related revenue (recognized as finance income).
(b)
Deferred tax assets are recognized only to the extend
that recovery is probable.
IFRIC 23 – Uncertainty over income tax treatments
The Interpretation IFRIC 23 addresses the he application of
requirements in IAS 12 “Income Taxes” when there is
uncertainty over the acceptance of income tax treatments by the tax
authority.
The interpretation clarifies that, if it is not probable that the
tax authority will accept the income tax treatments, the amounts of
tax assets and liabilities shall be adjusted to reflect the best
resolution of the uncertainty.
IFRIC 23 will be effective for annual periods beginning on or after
January 1, 2019, and the Company established processes and
procedures to obtain information that is necessary to apply the
Interpretation on a timely basis and did not identify significant
impacts from the adoption of this standard. |
