FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED S 1 BASIS OF ACCOUNTING CONTINUED Foreign currency translation TR Going concern continued Transactions in foreign currencies are initially recorded in the functional A The Directors have considered a severe but plausible downside scenario currency of the operation by applying the exchange rate ruling at the date TE G I that includes considering the impact of a 15% reduction in DBX volumes of the transaction. Monetary assets and liabilities denominated in foreign C and a 10% reduction in sports volumes from forecast levels covering, currencies are retranslated at the rate of exchange ruling at the reporting R E although not exclusively, instances of reduced volume due to delayed date. All differences are taken to the Income Statement except for the P O product launches, operating costs higher than the base plan, incremental translational differences on monetary items that form part of designated R working capital requirements such as a reduced deposit inflows or hedge relationships. T increased deposit outflows and the impact of the strengthening of the The assets and liabilities of foreign operations are translated into sterling sterling dollar exchange rate. G at the rate of exchange ruling at the reporting date. Income and expenses O The Group plans to make continued investment for growth in the period are translated at average exchange rates for the period. The resulting VE and, accordingly, funds generated through operations are expected to be exchange differences are taken through Other Comprehensive Income R reinvested in the business mainly through new model development and to the translation reserve. On disposal of a foreign entity, the deferred NAN other capital expenditure. To a certain extent, such expenditure is cumulative amount recognised in the translation reserve relating to the C discretionary and, in the event of risks occurring which could have a foreign operation is recognised in the Income Statement. E particularly severe effect on the Group, as identified in the severe but Non-monetary items that are measured in terms of historical cost in a plausible downside scenario, actions such as constraining capital F foreign currency are translated using the exchange rates as at the dates I spending, working capital improvements, reduction in marketing of the initial transactions. Non-monetary items measured at fair value in a NAN expenditure and the continuation of strict and immediate expense control foreign currency are translated using the exchange rates at the date when C would be taken to safeguard the Group’s financial position. the fair value was determined. IAL In addition, we also considered the circumstances which would be needed S Revenue recognition T to exhaust the Group’s liquidity over the assessment period, a reverse A T Revenue is recognised when the Group satisfies its performance E stress test. This would indicate that vehicle sales would need to reduce by obligation to supply a product or service to the customer. Revenue is M E more than 15% from forecast levels without any of the above mitigations N measured at the fair value of the consideration receivable, deducting T to result in having no liquidity. The likelihood of these circumstances dealer incentives, VAT and other sales taxes or duty. The following S occurring is considered remote both in terms of the magnitude of the criteria must also be met before revenue is recognised. reduction and that over such a long period, management could take F substantial mitigating actions, such as reducing capital spending to Sale of vehicles U R preserve liquidity. Revenue from the sale of vehicles is recognised when control of T H the vehicle is passed to the dealer or individual, thus evidencing the E Accordingly, after considering the forecasts, appropriate sensitivities, R current trading and available facilities, the Directors have a reasonable satisfaction of the associated performance obligation under that contract. INF Control is passed when the buyer can direct the use of and obtain expectation that the Group has adequate resources to continue in substantially all of the benefits of the vehicle which is typically at the point OR operational existence for the foreseeable future and to comply with its of despatch. When despatch is deferred at the formal request of the M A financial covenants, therefore, the Directors continue to adopt the going T buyer and a written request to hold the vehicle until a specified delivery I concern basis in preparing the Financial Statements. date has been received, revenue is recognised when the vehicle is ready ON 2 ACCOUNTING POLICIES for despatch and the Group can no longer use or direct the vehicle to an Basis of consolidation alternative buyer. The Consolidated Financial Statements consist of the Financial The Group estimates the consideration to which it will be entitled in Statements of the Group and all entities controlled by the Group. All exchange for satisfaction of the performance obligation as part of the intercompany balances and transactions, including unrealised profits sale of a vehicle. Revenue is recognised at the wholesale selling price arising, are eliminated. net of dealer incentives (variable marketing expense or “VME”). VME is Subsidiaries estimated and accrued for at the time of the wholesale sale to the dealer Subsidiaries are entities controlled by the Group. The Group controls an where no other obligations exist. For those elements of VME connected entity when it is exposed to, or has rights to, variable returns from its with retail sales by the dealer where there is also a contractual involvement with the entity and has the ability to affect those returns requirement for the dealer to make additional wholesale purchases through its power over the entity. In assessing control, the Group takes at that time to receive the incentive, the incentive is accrued at the time into consideration potential voting rights that are currently exercisable. of the retail sale by the dealer to the end customer. The acquisition date is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are included in the Group Financial Statements from the date that control commences until the date that control ceases. The financial statements of subsidiaries used in the preparation of the Consolidated Financial Statements are prepared for the same reporting year as the Group and are based on consistent accounting policies. ASTON MARTIN LAGONDA ANNUAL REPORT AND ACCOUNTS 2023 148