Accounting Principles

Accounting policies

Basic information on the Group

Avidly is a modern and growing Finnish company offering creative marketing communications services. 

The group’s parent company is Avidly Plc. The parent company’s domicile is Helsinki, its country of incorporation is Finland and its registered address is Konepajankuja 1, 00510 Helsinki, Finland. 

A copy of the consolidated financial statements is available at Konepajankuja 1, 00510 Helsinki, Finland. Avidly Plc’s Board of Directors has approved these financial statements for publication in its meeting on 4 March, 2020. Pursuant to the Finnish Limited Liability Companies Act, shareholders may approve or reject the financial statements in a General Meeting held following their publication. The General Meeting may decide on amending the financial statements. 

Accounting policies

The consolidated financial statements are drawn up according to the International Financial Reporting Standards (IFRS), and the IAS and IFRS standards and SIC and IFRIC interpretations in force as of 31 December 2019 have been used during their preparation. In the Finnish Accounting Act and the regulations issued based on it, the International Financial Reporting Standards refer to the standards approved for application within the EU according to the procedure decreed in EU Regulation no. 1606/2002. The notes to the consolidated financial statements are also in line with the Finnish accounting and company legislation that supplements the IFRS regulations. 

Unless otherwise stated in these accounting policies, the consolidated financial statements are based on historical cost. 

The financial statements are presented in thousands of euros.

 The consolidated financial statements utilize the exemptions available for first-time adopters in the IFRS 1 standard for business acquisitions prior to 1 January 2015. Any other exemptions allowed by the IFRS 1 standard have not been applied.

Policies requiring management judgment and key sources of estimation uncertainty

The preparation of the financial statements pursuant to the IFRS standards requires certain estimates and judgments from the group management. Furthermore, judgment is required in the application of the accounting policies and in the preparation of estimates for depreciation periods and impairment tests, for example. 

The estimates made during the preparation of the financial statements are based on the management’s best available outlook on the final date of the reporting period. The estimates are based on earlier experience as well as assumptions concerning the future that are considered to be the most likely at the time of the closing of the accounts. Any changes in the estimates or assumptions are entered in the accounting records for the accounting period during which the estimate or assumption is adjusted, and for all accounting periods following it. 

In Avidly Group, the key assumptions concerning the future and the key sources of estimation uncertainty on the date of the financial statements are related to the determination of fair value of the assets and liabilities of acquired businesses, the allocation of acquisition cost to unrecognized assets of the acquired company, and the impairment testing of goodwill and intangible assets with an unlimited useful life. The valuation of inventories involves estimates and judgment especially as regards the obsolescence of inventories. 

Each year, the Group performs impairment tests on goodwill and those intangible assets with an unlimited useful life, and estimates any indications of impairment. The recoverable amounts from units generating cash flow have been determined using calculations based on value in use. Preparing these calculations requires using estimates. Additional information regarding the sensitivity of the recoverable amount to changes in the assumptions is available in note 11, “Intangible assets”. 

Consolidation principles

Policies for preparation of the consolidated financial statements

Subsidiaries are companies that the Group has control over. Control is created when the Group, by participating in an entity, is exposed to the entity’s variable profit or is entitled to partake in its variable profit, and it is able to affect the said profit by exercising its control over the entity. 

The acquisition method has been used to eliminate share ownership between group companies. The transferred consideration and the acquired company’s identifiable assets and liabilities have been recognized at fair value at the time of acquisition. Costs related to the acquisition have been recognized as expenses. The consideration transferred does not include transactions that are treated separately from the purchase. These are usually recognized in profit or loss. Any possible contingent purchase price is valued at fair value at the time of acquisition, and it is classified as either liability or equity. A contingent purchase price classified as a liability is valued at fair value at the end of each reporting period, and the resulting profit or loss is recognized in profit or loss. A contingent purchase price classified as equity is not valued again. Any possible non-controlling interests in the object of the acquisition are recognized either at fair value or at an amount corresponding to the non-controlling interests’ proportional share of the object’s identifiable net assets. The recognition principle is defined separately for each business acquisition. The treatment of goodwill resulting from the purchase of subsidiaries is described in the section titled “Goodwill”. 

Acquired subsidiaries are included in the consolidated financial statements from the moment the Group gains control, and transferred subsidiaries are included up to the moment the control ceases to exist. Any business transactions between Group companies, receivables, liabilities and unrealized gains as well as the internal distribution of profits are eliminated when the consolidated financial statements are prepared. Unrealized losses are not eliminated if the loss is due to impairment. Changes in the Parent Company’s ownership interest in the subsidiary that do not lead to loss of control are treated as business transactions concerning equity. 

Associated companies are companies that the Group has significant influence over. Significant influence is generally established when the Group owns more than 20% of the votes in the company or when the Group otherwise has significant influence but no control. 

Associated companies are consolidated into the consolidated financial statements by means of the equity method. If the Group’s share of the losses of an associate exceed the investment’s book value, the investment is recorded at zero value and losses exceeding book value are not consolidated unless the group is committed to fulfilling the obligations of associates. Investments in associates include the goodwill created by the acquisition. Unrealized gains and losses between the group and the associate have been eliminated in proportion to the group’s ownership interest. Unrealized losses are not eliminated if the business transaction points toward the impairment of the transferred asset. The share of profit in an associated company, proportional to the group’s ownership interest, is presented prior to operating profit. Correspondingly, the group’s share of any changes recognized under other items in the associated companies’ comprehensive income is recognized under other items in the Group’s comprehensive statement of income. The Group’s associated companies have had no such items during the accounting periods 2015–2019. 

Avidly Group does not have any joint ventures. 

Segment information

Avidly Group changed its reporting structure at the beginning of 2019 and reports two segments for the financial year beginning 1 January 2019. These business areas and reporting segments are Marketing Services and Inbound Marketing.

Conversion of items denominated in a foreign currency

The consolidated financial statements are presented in euros, which is the operation and presentation currency of the Group’s parent entity. 

Receivables and liabilities are converted at the closing rate. Exchange differences caused by the conversion are recognized in profit or loss. 

Revenue recognition policies and revenue

Income from the sales of products and services, adjusted for indirect taxes and discounts, is presented as revenue. 

Revenue is recognized when the service has been rendered and the control has been transferred to the customer. The control is transferred when the Group is entitled to receive payment from the service, the risks and benefits are transferred to the customer, and the customer has approved the service. 

Other operating income

Other operating income includes, for example, profit from the sales of fixed assets and income from the transfer of business operations. 

Employee benefits

Pension plans are classified as defined benefit plans and defined contribution plans. Avidly’s statutory and voluntary pension plans are defined contribution plans. 

The pension insurance fees for defined contribution pension plans are paid to the pension insurance company. Payments into defined contribution plans are recognized as expenses in the income statement for the accounting period that it concerns.

Operating profit

The Group has defined operating profit as follows: operating profit is the net sum received from revenue added by other operating income and subtracted by costs from materials and services adjusted for inventory changes, employee benefit expenses, depreciations and any possible impairment losses, other operating expenses, and share of profit in associated companies. All other income statement items than those listed above are presented below the operating profit. 

Income taxes

The income taxes in the consolidated income statement consist of current and deferred taxes. Taxes are recognized in profit or loss, except for when they are directly related to items recognized as equity or other items in the comprehensive income statement. In this case, the tax is also recognized under these items. 

Deferred taxes are calculated from the temporary differences between book value and the tax base. The largest temporary differences arise from the treatment of finance leases and the amortization differences between sales recognition and incomplete work. No deferred tax is recognized for goodwill impairment that is not tax deductible. Deferred taxes are calculated using tax rates that have been enacted or substantively enacted by the date of the financial statements. 

Deferred tax assets are recognized up to an amount of probable future taxable income against which the deferred tax assets can be utilized; this approach has been applied in the calculation of deferred tax assets from losses confirmed in taxation. Deferred tax liabilities are recognized in full. 

The Group will subtract deferred tax assets from deferred tax liabilities in cases where the Group has a legally enforceable right to settle current tax assets and liabilities and the deferred tax assets and liabilities are related to income taxes collected by the same recipient, from either the same taxpayer or different taxpayers who aim to settle the current tax assets and liabilities or realize the receivables and pay off the liabilities contemporaneously.

Tangible assets

Tangible assets are valued at acquisition cost deducted by accrued depreciations and impairment losses. Acquisition cost includes costs directly resulting from the purchase of tangible assets. Other expenses, such as normal maintenance and repair, are recognized as costs in the income statement.

Tangible assets consist of machinery and equipment. A straight-line method of depreciation is used accounting to the useful life of 3–5 years. 

Intangible assets


Goodwill created from business acquisitions is recognized at the amount by which the total sum of the transferred consideration, non-controlling interests in the object of purchase, and the previously owned share exceed the fair value of the acquired net assets. 

According to the Finnish financial reporting framework, goodwill is calculated as the difference of the purchase price and the subsidiary’s equity, and registered to those subsidiary assets that are considered to be the cause of the difference. In IFRS financial statements, the identifiable assets and liabilities of the acquired subsidiary are valued at fair value on the date of acquisition, which will usually reduce the portion of goodwill. The consolidated financial statements retroactively apply the IFRS 3 standard. Pursuant to the requirement in IFRS 1, all goodwill is tested for impairment at the time of transition. The test did not lead to recognition of impairment in the IFRS balance sheet. 

Other tangible assets 

In business acquisition, a part of the difference between the purchase price and the subsidiaries’ equity is registered to customer relationships for which a 5-year straight-line depreciation is used. 


The book values of assets are regularly assessed in order to detect any possible signs of impairment. If signs of impairment are observed, the recoverable amount for the asset is determined. Goodwill is registered to cash generating units. It is tested for impairment annually. Impairment loss is generated if the book value of an asset or cash-generating unit exceeds the asset’s recoverable amount.

Impairment loss is registered in the income statement. Impairment loss from a cash-generating unit is primarily registered as a reduction of goodwill for the cash-generating unit and secondarily as a reduction of other assets in the unit on a pro rata basis. 

The recoverable amount from intangible and tangible assets is defined as either the fair value less costs to sell or the value in use, whichever is higher. When determining value in use, the estimated future cash flows are discounted to present value using discount rates that depict the average capital cost before tax for the cash-generating unit in question. Impairment loss related to tangible assets and other intangible assets, except goodwill, is reversed if the estimates used when determining the asset’s recoverable amount have changed. Impairment loss is reversed at most up to the amount that would have been determined as the book value for the asset if no impairment loss had been registered in previous years. 


The new IFRS 16 Leases standard was adopted by Avidly Group on 1 January 2019. As a result, non-cancellable leases were recognized in the Group. The Group followed a simplified approach to the transition. Comparative year figures have not been restated and equity has not been restated due to the adoption of the standard. The effect of the adoption of the standard on the Group's balance sheet items on 1 January 2019 was EUR 2,644 thousand. Correspondingly, the lease liability amounting to EUR 2,644 thousand has been recognized in non-current and current interest-bearing liabilities on 1 January 2019. The change in the standard also affected the income statement, as interest expense and depreciation have been replaced by rental expenses included in other operating expenses. The adoption of the standard had no significant impact on operating profit.


Inventories consist of work in process that is valued under variable expenses in a manner where the value of the work in process does not exceed the net realizable value available from it. Net realizable value is the estimated selling price for the inventories received during ordinary course of business, deducted by the estimated costs for completion and the estimated necessary selling costs. 

Assets held for sale and discontinued operations

Non-current assets held for sale and asset related to discontinued operations are valued pursuant to the IFRS 5 standard at book value or fair value, whichever is lower, deducted by the estimated selling costs. Once an asset has been classified as a non-current asset held for sale or a disposal group, no depreciation is made. Non-current assets classified as held for sale and assets included in the disposal group are presented as separate items in the balance sheet. Debt related to a disposal group is also presented as a separate item in the balance sheet. 

A discontinued operation is a component of the group that has been disposed of or classified as held for sale and that meets the classification criteria for a discontinued operation pursuant to IFRS 5. Earnings from discontinued operations are presented as a separate item in the consolidated statement of comprehensive income. 

On the date of the financial statements, the Group has no discontinued operations or non-current assets held for sale pursuant to IFRS 5. 

Accounts receivable

Accounts receivable are valued at acquisition cost, and receivables from which no future profit is expected are registered as impairment. Based on the available information, the company’s management assesses the client’s ability to fulfil its responsibilities and, if it appears probable that the entire sum cannot be collected, estimates the amount of credit loss.

Financial instruments

Group’s financial instruments are valued and classified according to IFRS 9 standard in the following groups: financial instruments at amortized cost, financial instruments at fair value through comprehensive income statement, and financial instruments at fair value through profit and loss. The financial instruments are classified based on targets related to the business model and the contractual cash flow nature at the original trade date. Financial instruments at fair value through profit and loss includes contingent purchase price receivables and derivative financial instruments. Contingent purchase price receivables are recorded in business acquisitions. Purchase price receivables and derivative financial instruments are recorded at fair value in balance sheet on the trade date and revalued at the end of the accounting period. Changes in the contingent purchase price receivables is recorded in financial items in income statement. The valuation of contingent purchase price receivables and contingent considerations is based on estimated discounted values of corresponding cash flows. The valuation is done on each reporting day based on the conditions set in purchase agreement. Management estimates the fulfillment of conditions on each reporting day.

Financial instruments valued at amortized cost include account receivables and other receivables. According to IAS 39, these items were included in item ‘loans and other receivables’. Account receivables and contractual assets are written off from balance sheet as final credit loss when no payment within reason can be expected. Indications on no payment being expected include significant financial difficulties of debtor, likelihood of bankrupt, nonpayment of bills or late payments of over 180 days. Impairment loss related to account receivables and contractual assets are presented in other operating expenses in income statement. Shares in unlisted companies are classified as financial instruments at fair value through comprehensive income statement and the profit or loss related to the changes in fair value is recorded in other items of comprehensive income statement and are not recognized in profit or loss when sold. The dividends from these shares are recorded in financial income when the Group is entitled to a dividend. 

Cash and cash equivalents

Cash and cash equivalents comprise cash, demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash, and that are subject to an insignificant risk of change in value.

Provisions and contingent liabilities

Provisions are entered in the balance sheet when the Group has, as a consequence of a past event, a present legal or constructive obligation, it is probable that meeting the obligation will require a payment or cause a financial loss, and the amount of the obligation can be reliably assessed. Provisions may be related to restructuring of operations, onerous contracts, litigation, and tax risks. A contingent liability presented in the notes is either a potential obligation generated as a consequence of past events whose realization is uncertain, or a present obligation that will probably not require making a payment or the amount of which cannot be reliably determined.

Applied new and amended standards and interpretations

The new IFRS 16 Leases standard was adopted by Avidly Group on 1 January 2019. The effect of the amendment is described in the section 'Leases' in the accounting policies.

New and renewed standards and interpretations to be applied later

Conceptual framework for financial reporting

The IASB has published a revised conceptual framework, which has been used immediately in decision-making for standards. The most significant changes to the standard are as follows:

  • increasing the emphasis of stewardship as a concept in financial reporting
  • restoring predence as a component of neutrality
  • defining a reporting entity, which may be a legal entity or a part thereof
  • revising the definitions of assets and liabilities
  • removing the probability-based recognition threshold and adding guidance on when assets and liabilities are removed from financial statements
  • adding guidance on different measurement bases
  • recognizing that profit or loss is a primary measure of performance and that income and expenses recognized in other comprehensive income should, in principle, be transferred to profit or loss when it increases the relevance of the financial statements or improves the fair presentation.

No changes will be made to any existing standard. Entities shall apply the revised framework from 1.1.2020 if they use it to determine the accounting policies applicable to transactions, events and conditions that are not otherwise dealt with in the Standards. These companies should consider whether the accounting policies they apply are still appropriate under the revised framework. Avidly will carry out this assessment during 2020.