NOTES TO THE FINANCIAL STATEMENTS CONTINUED S S 1 BASIS OF ACCOUNTING CONTINUED Foreign currency translation TR2 ACCOUNTING POLICIES CONTINUED Finance expense TR Going concern continued Transactions in foreign currencies are initially recorded in the functional ARevenue recognition continued Finance expense comprises interest payable on borrowings calculated using A The Directors have considered a severe but plausible downside scenario currency of the operation by applying the exchange rate ruling at the date TEWarranties are issued on new vehicles sold with no separate purchase the effective interest rate method, interest expense on the net Defined TE G G I I that includes considering the impact of a 15% reduction in DBX volumes of the transaction. Monetary assets and liabilities denominated in foreign Coption available to the customer and, on this basis, are accounted for in Benefit pension liability, gains and losses on financial instruments that C and a 10% reduction in sports volumes from forecast levels covering, currencies are retranslated at the rate of exchange ruling at the reporting Raccordance with IAS 37. Service packages sold as part of the supply of a are recognised at fair value through the Income Statement and foreign R E E although not exclusively, instances of reduced volume due to delayed date. All differences are taken to the Income Statement except for the Pvehicle are accounted for as a separate performance obligation with the exchange losses on foreign currency denominated financial liabilities. P O O product launches, operating costs higher than the base plan, incremental translational differences on monetary items that form part of designated Rrevenue deferred, based on the term of the package, at the original point R working capital requirements such as a reduced deposit inflows or hedge relationships. Tof sale. The deferred revenue is released to the Income Statement over Interest incurred on lease liabilities accounted for under IFRS 16, interest T increased deposit outflows and the impact of the strengthening of the the shorter of the period that the service package covers or the number charged in relation to significant financing components on customer The assets and liabilities of foreign operations are translated into sterling advance payments, and the unwind of discounting on long term liabilities sterling dollar exchange rate. Gof vehicle services that the end user is entitled to. G at the rate of exchange ruling at the reporting date. Income and expenses O are all recognised within finance expense. O The Group plans to make continued investment for growth in the period are translated at average exchange rates for the period. The resulting VEWhere a sale of a vehicle(s) includes multiple performance obligations, VE and, accordingly, funds generated through operations are expected to be exchange differences are taken through Other Comprehensive Income Rthe Group determines the allocation of the total transaction price by Current/non-current classification R reinvested in the business mainly through new model development and to the translation reserve. On disposal of a foreign entity, the deferred NANreference to their relative standalone selling prices. Current assets include assets held primarily for trading purposes, cash NAN and cash equivalents, and assets expected to be realised in, or intended other capital expenditure. To a certain extent, such expenditure is cumulative amount recognised in the translation reserve relating to the C C discretionary and, in the event of risks occurring which could have a foreign operation is recognised in the Income Statement. ESales of parts for sale or consumption as part of the Group’s normal identifiable E particularly severe effect on the Group, as identified in the severe but Revenue from the sale of parts is recognised upon transfer of control to operating cycle which is assumed to be 12 months. All other assets Non-monetary items that are measured in terms of historical cost in a the customer, generally when the parts are released to the carrier are classified as non-current assets. plausible downside scenario, actions such as constraining capital F F foreign currency are translated using the exchange rates as at the dates Iresponsible for transporting them. Where the dealer is Aston Martin I spending, working capital improvements, reduction in marketing of the initial transactions. Non-monetary items measured at fair value in a NANWorks Limited, an indirect subsidiary of the Company, revenue is Current liabilities include liabilities held primarily for trading purposes in NAN expenditure and the continuation of strict and immediate expense control line with the Group’s identifiable normal operating cycle. These liabilities foreign currency are translated using the exchange rates at the date when Crecognised upon despatch to a customer outside of the Group. C would be taken to safeguard the Group’s financial position. the fair value was determined. IAL are expected to be settled as part of the Group’s normal course of IAL In addition, we also considered the circumstances which would be needed SServicing and restoration of vehicles business. All other liabilities are classified as non-current liabilities. S Revenue recognition TRevenue is recognised upon completion of the service /restoration Customer deposits and advances are typically presented as current, T to exhaust the Group’s liquidity over the assessment period, a reverse A A T T Revenue is recognised when the Group satisfies its performance Etypically when the service or restoration is completed in accordance with although, due to the timing between deposit payment and a sale 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 Mthe customers’ requirements. completing, can take longer than 12 months to unwind. M E E more than 15% from forecast levels without any of the above mitigations N N measured at the fair value of the consideration receivable, deducting T T to result in having no liquidity. The likelihood of these circumstances dealer incentives, VAT and other sales taxes or duty. The following SBrands and motorsport Goodwill S occurring is considered remote both in terms of the magnitude of the criteria must also be met before revenue is recognised. Revenue from brands and motorsport is recognised when the performance For acquisitions on or after 1 January 2010, the Group measures goodwill reduction and that over such a long period, management could take obligations, principally use of the Aston Martin brand name or supply of a at the acquisition date as: F F substantial mitigating actions, such as reducing capital spending to Sale of vehicles Umotorsport vehicle, are satisfied. Revenue is recognised either at a point in U R – the fair value of the consideration transferred; plus R preserve liquidity. Revenue from the sale of vehicles is recognised when control of Ttime or over a period of time in line with IFRS 15 according to the terms of T H – the recognised amount of any non-controlling interests H the vehicle is passed to the dealer or individual, thus evidencing the Ethe contract. E Accordingly, after considering the forecasts, appropriate sensitivities, R in the acquiree; plus R current trading and available facilities, the Directors have a reasonable satisfaction of the associated performance obligation under that contract. INFCustomer advance payments – the fair value of the existing equity interest in the acquiree; less 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 ORThe Group receives advance cash payments from customers to secure – the net recognised amount (generally fair value) of the identifiable OR operational existence for the foreseeable future and to comply with its of despatch. When despatch is deferred at the formal request of the Mtheir allocation of a vehicle produced in limited quantities, typically with assets acquired and liabilities assumed. M A A financial covenants, therefore, the Directors continue to adopt the going Ta lead time of greater than 12 months. The value of the advance, both T buyer and a written request to hold the vehicle until a specified delivery I Costs related to the acquisition, other than those associated with the issue I concern basis in preparing the Financial Statements. date has been received, revenue is recognised when the vehicle is ready ONcontractually refundable or non-refundable, is held as a contract liability of debt or equity securities, are expensed as incurred. ON 2 ACCOUNTING POLICIES for despatch and the Group can no longer use or direct the vehicle to an in the Statement of Financial Position. Upon satisfaction of the Basis of consolidation alternative buyer. performance obligation, the liability is released to revenue in the Income For the purpose of impairment testing, goodwill is allocated to the The Consolidated Financial Statements consist of the Financial Statement. If the deposit is returned to the customer prior to satisfaction related cash-generating unit. The only cash-generating unit of the Group Statements of the Group and all entities controlled by the Group. All The Group estimates the consideration to which it will be entitled in of the performance obligation, the contract liability is derecognised. is that of Aston Martin Lagonda Group as there are no smaller groups of intercompany balances and transactions, including unrealised profits exchange for satisfaction of the performance obligation as part of the Where a significant financing component exists, the contract liability assets that can be identified with certainty which generate specific cash arising, are eliminated. sale of a vehicle. Revenue is recognised at the wholesale selling price is increased over the same period of time as the contract liability is held flows independent of the inflows generated by other assets or groups net of dealer incentives (variable marketing expense or “VME”). VME is to account for the time value of money. A corresponding charge is of assets. Where the recoverable amount of the cash-generating unit is Subsidiaries estimated and accrued for at the time of the wholesale sale to the dealer recognised in the Income Statement within finance expenses. Upon less than the carrying amount, an impairment loss is recognised in the Subsidiaries are entities controlled by the Group. The Group controls an where no other obligations exist. For those elements of VME connected satisfaction of the linked performance obligation, the liability is released Income Statement. 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 to revenue. Intangible assets involvement with the entity and has the ability to affect those returns requirement for the dealer to make additional wholesale purchases Intangible assets acquired separately from a business are carried initially 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 The Group applies a practical expedient for short-term advances at cost. An intangible asset acquired as part of a business combination is into consideration potential voting rights that are currently exercisable. of the retail sale by the dealer to the end customer. received from customers whereby the advanced payment is not adjusted recognised outside of goodwill if the asset is separable or arises from The acquisition date is the date on which control is transferred to the for the effects of a significant financing component. contractual or other legal rights and its fair value can be measured reliably. acquirer. The financial statements of subsidiaries are included in the Finance income Group Financial Statements from the date that control commences until Finance income comprises interest receivable on invested funds Fair value adjustments are considered to be provisional at the first year- the date that control ceases. The financial statements of subsidiaries used calculated using the effective interest rate method, interest income and end date after the acquisition to allow the maximum time to elapse for in the preparation of the Consolidated Financial Statements are prepared currency gains arising on foreign currency denominated borrowings management to make a reliable estimate. for the same reporting year as the Group and are based on consistent (not designated under a hedge relationship) that are recognised in the accounting policies. Income Statement. ASTON MARTIN LAGONDA ANNUAL REPORT AND ACCOUNTS 2023 149