Company registration number 12858595 (England and Wales)
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2022
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
CONTENTS
Page
Directors' report
1 - 2
Directors' responsibilities statement
3
Independent auditor's report
4 - 6
Group statement of comprehensive income
7 - 8
Group statement of financial position
9 - 10
Parent company statement of financial position
11
Group statement of changes in equity
12
Parent company statement of changes in equity
13
Group statement of cash flows
14
Parent company statement of cash flows
15
Notes to the group financial statements
16 - 44
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
COMPANY INFORMATION
Directors
Mr D Marinelli
Mr A Junevicius
(Appointed 9 February 2024)
Mr G Sanna
(Appointed 16 May 2023)
Secretary
Mr David Kaye
Registered office
55 Station Road
Beaconsfield
HP9 1QL
Auditor
Velaudit SRL
Viale Regina Margherita 46
Roma
198
Italy
Bankers
Papaya Ltd
31 Sliema Road
Gzira
GZR 1637
Malta
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
DIRECTORS' REPORT
FOR THE PERIOD ENDED 31 DECEMBER 2022
- 1 -
The directors present the audited consolidated and separate financial statements of DTSOCIALIZE HOLDING PLC (Formerly known as DTSOCIALIZE HOLDING LTD) (the “Company”), Azure Systems Limited, DTSocialize OU, ABC Mobile IT, SIA, Xward Pay Inc and Synapsia SRL (the “Subsidiaries”) and DTSocialize Malta Ltd (the “Sub-Subsidiary”) (together referred as the “Group”), for the period ended 31 December 2022.
Principal activities
The principal activities of the Company are to offer solutions ranging from financial services, messaging and socializing tools and digital assets brought together in a single technological ecosystem.
The Subsidiary and Sub-Subsidiary activities are as follows:
Azure Systems Limited: issues electronic money, executes payment transactions and works with ClearJunction for IBAN provision.
DTSocialize OU: is a blockchain Technology Development Hub. It also markets blockchain-based smartphones and home cloud boxes for remote data backup.
ABC Mobile IT SIA: is a software development company, provides white-label banking platforms tailored to clients’ preferences, enabled through financial contracts with partners.
Xward Pay Inc: provides customers with a progressive and convenient tool of personal banking.
Synapsia SRL: creates value in business situations with advanced AI for natural language interactions.
DTSocialize Malta Ltd: is responsible for the R&D activity in fintech space.
Change of name
The Company changed its name from DTSOCIALIZE HOLDING LTD to DTSOCIALIZE HOLDING PLC on 19 June 2023.
Results and dividends
The results of the Group and the Company for the period are shown in the statements of profit or loss and other comprehensive income and related notes.
No dividend has been paid or declared for the period under review.
Directors
The present membership of the Board is set out on the company information page.
Auditor
Velaudit SRL have been appointed as auditors of the Group and the Company and they have indicated their willingness to continue in office until the next Annual Meeting.
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
DIRECTORS' REPORT (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
- 2 -
On behalf of the board
Mr D Marinelli
Director
4 March 2024
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE PERIOD ENDED 31 DECEMBER 2022
- 3 -
Company law requires the directors to prepare consolidated and separate financial statements for each financial year which present fairly the financial position, financial performance and cash flows of the Group and the Company. In preparing those financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
prepare the consolidated and separate financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business.
The directors have confirmed that they have complied with the above requirements in preparing the consolidated and separate financial statements.
The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and the Company and to enable them to ensure that the consolidated and separate financial statements comply with relevant laws and regulations. They are also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of frauds and other irregularities.
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
- 4 -
Opinion
We have conducted an audit of the consolidated financial statements of DTSOCIALIZE HOLDING PLC ('Group'), including the financial position as of 31 December 2022, the statement of comprehensive income, the statement of changes in equity, the cash flow statement for the year then ended, and the notes to the financial statements, which also include a summary of the most significant accounting principles applied.
In our opinion, the consolidated financial statements present a true and fair view of the financial position and performance of DTSOCIALIZE HOLDING PLC group as of 31 December 2022, and of the financial results for the year then ended, in accordance with International Financial Reporting Standards.
We conducted the audit in accordance with international auditing standards (ISA Italy). Our responsibilities under these standards are further described in the section 'Responsibilities of the audit firm for the audit of the consolidated financial statements' in this report. We are independent from the Group in accordance with the rules and principles of ethics and independence applicable in the Italian legal framework for the audit of financial statements. We believe that we have obtained sufficient and appropriate audit evidence upon which to base our opinion.
Responsibilities of directors
The directors are responsible for preparing the consolidated financial statements that provide a true and fair representation in accordance with the applicable principles including the section of internal control considered necessary by them to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or unintentional errors or events.
The directors are responsible for assessing the Group's ability to continue as a going concern and, in preparing the consolidated financial statements, for the appropriateness of using the going concern assumption, as well as for providing adequate disclosure in this regard, The directors rely on the going concern assumption in preparing the consolidated financial statements.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance that the consolidated financial statements as a whole are free from material misstatements, whether due to fraud, unintentional errors, or other events, and to issue an audit report that includes our opinion, Reasonable assurance is a high level of assurance, but it does not guarantee that an audit conducted in accordance with international auditing standards (ISA Italy) will always detect a material misstatement when it exists. Errors may result from fraud, unintentional errors, or other events and are considered material if it is reasonably expected that they, individually or collectively, could influence the economic decisions made by users based on the consolidated financial statements.
As part of the audit conducted in accordance with international auditing standards (ISA Italy), we have exercised professional judgment and maintained professional scepticism throughout the audit.
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
- 5 -
We have evaluated the presentation, structure, and content of the consolidated financial statements as a whole, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that provides a true and fair view.
We have communicated to those charged with governance, identified at an appropriate level as required by ISA Italy, among other matters, the planned scope and timing of the audit, and significant findings, including any significant deficiencies in internal control identified during the audit.
We declare that no services other than the statutory audit, prohibited under Article 5, paragraph 1, of Regulation (EU) 537/2014, have been provided, and we have remained independent from the group in the conduct of the statutory audit.
Furthermore:
we have identified and assessed the risks of material misstatements in the financial statements, whether due to fraud, unintentional errors, or other events; we have defined and performed audit procedures in response to these risks; we have obtained sufficient and appropriate audit evidence upon which to base our judgment. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting a material misstatement arising from unintentional errors or other events, as fraud may involve collusion, falsification, intentional omissions, misleading representations, or override of internal controls;
we have reached a conclusion on the appropriateness of the directors' use of the going concern assumption and, based on the evidence obtained, on the possible existence of a significant uncertainty regarding events or circumstances that may cast significant doubt on the Group's ability to continue as a going concern. In the presence of significant uncertainty, we are required to draw attention in the audit report to the related disclosure in the financial statements or, if such disclosure is inadequate, to reflect this in the wording of our opinion. Our conclusions are based on the evidence obtained up to the date of this report. However, subsequent events or circumstances may result in the Group ceasing to operate as a going concern;
We have evaluated the presentation, structure, and content of the consolidated financial statements as a whole, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that provides a true and fair view.
We have communicated to those charged with governance, identified at an appropriate level as required by ISA Italy, among other matters, the planned scope and timing of the audit, and significant findings, including any significant deficiencies in internal control identified during the audit.
We declare that no services other than the statutory audit, prohibited under Article 5, paragraph 1, of Regulation (EU) 537/2014, have been provided, and we have remained independent from the group in the conduct of the statutory audit.
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
- 6 -
Mario Pagnotta
Senior Statutory Auditor
For and on behalf of
Velaudit SRL
4 March 2024
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 31 DECEMBER 2022
- 7 -
Period
Period
ended
ended
31 December
30 September
2022
2021
Notes
£
£
Revenue
12,501,643
30,363,187
Cost of sales
(1,501,184)
(11,307,683)
Gross profit
11,000,459
19,055,504
Other operating income
88,940
-
Administrative expenses
(10,069,920)
(5,366,734)
Operating profit
1,019,479
13,688,770
Investment revenues
77,561
Finance costs
(61,499)
Profit before taxation
1,035,541
13,688,770
Income tax expense
3
(13,722)
(4,426,892)
Profit for the Period
1,021,819
9,261,878
Other comprehensive income:
Items that may be reclassified to profit or loss
Currency translation differences:
- Translation gain/(loss) arising in the Period
539,943
(294,419)
Total items that may be reclassified to profit or loss
539,943
(294,419)
Total other comprehensive income for the Period
539,943
(294,419)
Total comprehensive income for the Period
1,561,762
8,967,459
Profit for the financial Period is attributable to:
- Owners of the parent company
866,976
9,261,878
- Non-controlling interests
154,843
-
1,021,819
9,261,878
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
GROUP STATEMENT OF COMPREHENSIVE INCOME (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
31 December
30 September
2022
2021
Notes
£
£
- 8 -
Total comprehensive income for the Period is attributable to:
- Owners of the parent company
1,401,170
8,967,459
- Non-controlling interests
160,592
-
1,561,762
8,967,459
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
GROUP STATEMENT OF FINANCIAL POSITION
AS AT
31 DECEMBER 2022
31 December 2022
- 9 -
31 December
30 September
2022
2021
Notes
£
£
ASSETS
Non-current assets
Intangible assets
4
3,515,805
3,224,491
Property, plant and equipment
5
251,653
161,565
Investments
6
7,577,141
931,218
11,344,599
4,317,274
Current assets
Inventories
8
41,696
-
Trade and other receivables
9
5,141,207
8,245,386
Cash and cash equivalents
2,671,698
985,095
7,854,601
9,230,481
Total assets
19,199,200
13,547,755
EQUITY
Called up share capital
11
1,000
1,000
Foreign currency translation reserve
245,524
(294,419)
Retained earnings
10,365,231
9,261,878
Equity attributable to owners of the parent company
10,611,755
8,968,459
Non-controlling interests
160,592
Total equity
10,772,347
8,968,459
LIABILITIES
Current liabilities
Trade and other payables
10
4,229,506
151,234
Current tax liabilities
4,197,347
4,428,062
8,426,853
4,579,296
Total liabilities
8,426,853
4,579,296
Total equity and liabilities
19,199,200
13,547,755
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
GROUP STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT
31 DECEMBER 2022
31 December 2022
- 10 -
The financial statements were approved by the board of directors and authorised for issue on 4 March 2024 and are signed on its behalf by:
Mr D Marinelli
Director
Company registration number 12858595 (England and Wales)
DTSOCIALIZE HOLDINGS PLC
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
31 December 2022
- 11 -
31 December
30 September
2022
2021
Notes
£
£
Non-current assets
Investments
7,598,804
1,095,312
Current assets
Trade and other receivables
1,341,421
Cash and cash equivalents
52,648
1,394,069
-
Current liabilities
Trade and other payables
9,344,688
1,094,312
Net current liabilities
(7,950,619)
(1,094,312)
Net (liabilities)/assets
(351,815)
1,000
Equity
Called up share capital
1,000
1,000
Retained earnings
(352,815)
Total equity
(351,815)
1,000
As permitted by s408 Companies Act 2006, the company has not presented its own income statement and related notes. The company’s loss for the year was £352,815 (2021 - £0 profit).
The financial statements were approved by the board of directors and authorised for issue on 4 March 2024 and are signed on its behalf by:
Mr D Marinelli
Director
Company registration number 12858595 (England and Wales)
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 31 DECEMBER 2022
- 12 -
Share capital
Foreign currency translation reserve
Retained earnings/(revenue deficit)
Attributable to equity holders of the company
Non-controlling interest
Total
£
£
£
£
£
£
Balance at 1 October 2021
1,000
(294,419)
9,261,878
8,968,459
-
8,968,459
Profit for the period
-
-
866,976
866,976
154,843
1,021,819
Foreign operations - foreign currency translation difference
-
539,943
-
534,194
5,749
539,943
Transactions with owners:
Adjustments upon group restructuring
-
-
242,126
242,126
-
242,126
Balance at 31 December 2022
1,000
245,524
10,370,980
10,611,755
160,592
10,772,347
DTSOCIALIZE HOLDINGS PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 31 DECEMBER 2022
- 13 -
Share capital
Retained earnings
Total
£
£
£
Balance at 1 October 2021
1,000
-
1,000
Period ended 31 December 2022:
Loss and total comprehensive income
-
(352,815)
(352,815)
Balance at 31 December 2022
1,000
(352,815)
(351,815)
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
GROUP STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 31 DECEMBER 2022
- 14 -
2022
2021
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from operations
16
10,182,152
5,532,379
Net cash inflow from operating activities
10,182,152
5,532,379
Investing activities
Purchase of intangible assets
(1,734,520)
(3,441,042)
Purchase of property, plant and equipment
(131,168)
(176,024)
Purchase of investments
(6,645,923)
(931,218)
Interest received
77,561
Net cash used in investing activities
(8,434,050)
(4,548,284)
Financing activities
Proceeds from issue of shares
-
1,000
Interest paid
(61,499)
Net cash (used in)/generated from financing activities
(61,499)
1,000
Net increase in cash and cash equivalents
1,686,603
985,095
Cash and cash equivalents at beginning of year
985,095
Cash and cash equivalents at end of year
2,671,698
985,095
DTSOCIALIZE HOLDINGS PLC
COMPANY STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 31 DECEMBER 2022
- 15 -
2022
2021
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from operations
17
6,556,140
1,094,312
Net cash inflow from operating activities
6,556,140
1,094,312
Investing activities
Purchase of investments
(6,503,492)
(1,095,312)
Net cash used in investing activities
(6,503,492)
(1,095,312)
Financing activities
Proceeds from issue of shares
-
1,000
Net cash (used in)/generated from financing activities
-
1,000
Net increase in cash and cash equivalents
52,648
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
52,648
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2022
- 16 -
1
Accounting policies
Company information
The Company was incorporated as DTSOCIALIZE HOLDING LTD on 04th September 2020. Subsequently the Company changed its name to DTSOCIALIZE HOLDING PLC on 19 June 2023.
The principal activities of the Company are to offer solutions ranging from financial services, messaging and socializing tools and digital assets brought together in a single technological ecosystem.
The Subsidiaries and Sub-Subsidiary activities are as follows:
Azure Systems Limited: issues electronic money, executes payment transactions and works with ClearJunction for IBAN provision.
DTSocialize OU: is a blockchain Technology Development Hub. It also markets blockchain-based smartphones and home cloud boxes for remote data backup.
ABC Mobile IT,SIA: is a software development company, provides white-label banking platforms tailored to clients’ preferences, enabled through financial contracts with partners.
Xward Pay Inc: provides customers with a progressive and convenient tool of personal banking.
Synapsia SRL: creates value in business situations with advanced AI for natural language interactions.
DTSocialize Malta Ltd: is responsible for the R&D activity in fintech space.
The financial statements of the Group and the Company are presented in Great Britain Pound (“GBP”).
1.1
Accounting convention
Basis of consolidation
The consolidated and separate financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and in compliance with the relevant laws and regulations. The consolidated and separate financial statements have also been prepared under the historical cost convention.
The preparation of the consolidated and separate financial statements in accordance with IFRS requires the directors to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated and separate financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current events and actions, actual results may ultimately differ from these estimates. Where necessary, comparatives figures have been amended to conform to change in presentation in the current year.
The financial statements include the financial statements of the Company, its Subsidiaries and Sub- Subsidiary which are incorporated in Europe and Canada.
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 17 -
Subsidiaries are those entities over which the Company has power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are presently exercisable are considered when assessing whether the Company controls another entity.
Subsidiaries are from the date on which control is transferred to the Company to the date on which that control ceases. In preparing the consolidated financial statements, intercompany transactions are eliminated. Where applicable, adjustments are made to the consolidated and separate financial statements of subsidiaries to ensure consistency of accounting policies with those of the Group.
1.2
Business combinations
The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.
Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.
1.3
Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of the subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.
Transactions eliminated on consolidation
Intra-group balances and any unrealised income and expense arising from intra-group transaction are eliminated. Unrealised gains arising from transaction with equity accounted investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 18 -
Non-controlling interests (NCI)
Non-controlling interests are measured at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition.
Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.
1.4
Revenue
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.
Service revenue is recognised by reference to the stage of completion of the transaction at the end of the reporting period. The stage of completion is determined by surveys of work performed. When the outcome of a transaction involving the rendering of services cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable.
Revenue from sales of goods is recognised when all the following conditions are satisfied:
The Group and the Company have transferred to the buyer the significant risks and rewards of ownership of the goods;
The Group and Company retain neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
The amount of revenue can be measured reliably;
It is probable that the economic benefits associated with the transactions will flow to the entities; and
The costs incurred or to be incurred in respect of the transaction can be measured reliably.
Interest income
Interest income is accrued on a time-proportion basis using the effective interest method. When a receivable is impaired, the Group and Company reduce the carrying amount to its recoverable amount, being the estimated future cash flow discounted at original effective interest rate of the instrument and continues unwinding the discount as interest income.
Interest income on impaired loans is recognised either as cash is collected or on a cost-recovery basis as conditions warrant. The Group and the Company did not have any impaired loans during the reporting period.
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 19 -
1.5
Property, plant and equipment
The Group measures an item of property, plant and equipment at initial recognition at its cost. Cost includes expenditure that is directly attributable to the acquisition of the items and includes:
• its purchase price, including legal and brokerage fees, import duties and non-refundable purchase taxes, after deducting trade discounts and rebates;
• any costs directly attributable to bringing the asset to location and condition necessary for it to be capable of operating in the manner intended by the Director; and
• the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which the Group incurs on acquiring the item.
Property, plant and equipment is subsequently stated at cost less accumulated depreciation and any accumulated impairment losses, except for land which is stated at cost less any accumulated impairment losses.
Depreciation of an asset commences when the asset is available for use as intended by management. Depreciation is charged to write off the asset’s carrying amount over its estimated useful life to its estimated residual value, using a method that best reflects the pattern in which the asset’s economic benefits are consumed by the Group.
The useful lives of items of property, plant and equipment have been assessed as follows:
Furniture, fixtures and other equipment
10% per annum
Software and computer equipment
25% per annum
Factors such as a change in how an asset is used, significant unexpected wear and tear, technological advancements, changes in market prices or any indication of impairment of an asset may indicate that the residual value, depreciation method or useful life of an asset has changed since the most recent annual reporting date. If such indicators are present, the Group reviews its previous estimates and if the current expectations differ, amend the residual value, depreciation method or useful life, with the effect of any changes accounted for as a change in an accounting estimate and accounted for on a prospective basis.
Depreciation is not charged to an asset if its estimated residual value exceeds or is equal to its carrying amount.
When indicators are present that the useful lives and residual values of items of property, plant and equipment have changed since the most recent annual reporting date, they are reassessed. Any changes accounted for prospectively as a change in accounting estimate.
1.6
Borrowings
Borrowings are recognised at the proceeds received, net of transaction costs incurred.
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 20 -
1.7
Impairment of tangible and intangible assets
At end of each reporting period, the Group and the Company review the carrying amounts of its tangible assets (whether owned or leased) to determine whether there is any indication that those assets have suffered an impairment loss. If, and only if, any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group and the Company estimate the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified . (A cash generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets).
In assessing whether there is any indication that an asset may be impaired, the Group and the Company consider indicators such as a significant decline in the asset's market value, increase in interest rates which are likely to reduce the discount rate used in calculating the asset's value in use, evidence of obsolescence or physical damage of an asset, change in the manner in which an asset is used or expected to be used, reassessment of useful life of an asset as finite rather than indefinite, decline in the economic performance of an asset, etc.
The recoverable amount of an asset or a cash generating unit is the higher of its fair value less costs. to sell and its value in use.
Fair value less costs to sell is the amount obtainable from the sale of an asset or cash-generating unit in an arm's length transaction between knowledgeable, willing parties, less the costs of disposal. Value in use is the present value of the future cash flows expected to be derived from an asset. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax rate of interest that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If,and only if, the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset ( or cash-generating unit ) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
1.8
Inventories
Inventories are stated at the lower of cost and estimated selling price less cost to complete and sell. Inventories comprise of merchandise held for sale. This cost comprises of the costs of purchase and other costs incurred in bringing the goods to their present location and condition. These costs include raw material costs, transport inward, levies, duties and other direct costs and a systematic allocation of variable operating overheads and fixed indirect production overheads which are based on normal operating capacity. Selling costs and borrowing costs are excluded.
At the end of each reporting period, the Group assesses whether any inventories are impaired, i.e. the carrying amount is not fully recoverable (e.g. because of damage, obsolescence or declining selling prices) by comparing the carrying amount of each item of inventory, or group of similar items, with its selling price less costs to complete and sell. If an item, or group of items, of inventory is impaired, the Group reduces the carrying amount of such inventory to its selling price less costs to complete and sell, and recognises such reduction, which is an impairment loss, immediately in profit or loss.
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 21 -
At end of each reporting period, the Group makes a new assessment of selling price less costs to complete and sell. When the circumstances that previously caused inventories to be impaired no longer exist or when there is clear evidence of an increase in selling price less cost to complete and sell because of changed economic circumstances, the amount of impairment loss is reversed (reversal being limited to the original impairment loss), so that the new carrying amount is the lower of cost and the revised selling price less costs to complete and sell.
When inventories are sold, the Group recognises the carrying amount of those inventories as an expense in the period in which the related revenue is recognised.
1.9
Cash and cash equivalents
Cash comprises cash at bank. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.
1.10
Financial instruments
Recognition
The Group and the Company recognise a financial asset or a financial liability when, and only when, they become parties to the contractual provisions of the instrument.
Purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the marketplace are recognised on the trade date, i.e., the date that the Group and Company commit to purchase or sell the asset.
Classification and subsequent measurement of financial assets
On initial recognition, a financial asset is classified as measured at: amortised cost; FVOCI – debt investment; FVOCI – equity investment; or FVTPL.
Financial assets are not reclassified subsequent to their initial recognition unless the Group and Company change their business models for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:
it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest (“SPPI”) on the principal amount outstanding.
All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. On initial recognition, the Group and Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 22 -
Business model assessment
The Group and the Company make an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:
These include whether management’s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realising cash flows through the sale of the assets;
Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.
Assessment whether contractual cash flows are solely payments of principal and interest
For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.
In assessing whether the contractual cash flows are solely payments of principal and interest, the Group and the Company consider the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group and Company consider:
contingent events that would change the amount or timing of cash flows
terms that may adjust the contractual coupon rate, including variable-rate features; and
pre-payment and extension feature; and terms that limit the Group and Company’s claim to cash flows from specified assets (e.g. non-recourse features).
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 23 -
Subsequent measurement and gains and losses
Financial assets at FVTPL | These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss. |
Financial assets at amortised cost | These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss. |
Financial assets at fair value through OCI | Upon initial recognition, the Company can elect to classify irrevocably its equity investments as equity instruments designated at fair value through OCI when they meet the definition of equity under IAS 32 Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument-by- instrument basis. Upon initial recognition, the Company can elect to classify irrevocably its equity investments as equity instruments designated at fair value through OCI when they meet the definition of equity under IAS 32 Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument-by- instrument basis |
The Group and the Company have adopted the following classifications for financial liabilities: Financial liabilities at amortised cost – Loans from related parties, loans from third parties trade and other payables and finance lease liabilities.
Subsequent measurement
Subsequent to initial recognition, financial liabilities are measured at amortised cost using the effective interest method.
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 24 -
Derecognition
The Group and the Company derecognise a financial asset when the contractual rights to the cash flows from the financial asset expire, or when they transfer the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred or in which the Group and Company neither transfer nor retain substantially all the risks and rewards of ownership and do not retain control of the financial asset.
Any interest in transferred financial assets that qualify for derecognition that is created or retained by the Group and Company is recognised as a separate asset or liability in the statements of financial position. On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised), and the consideration received (including any new asset obtained less any new liability assumed) is recognised in profit or loss.
The Group and the Company derecognise a financial liability when its contractual obligations are discharged or cancelled or expired.
Impairment
Non-derivative financial assets
The Group and Company recognise loss allowances for expected credit losses (ECLs) on financial assets measured at amortised cost.
The Group and Company measure loss allowances at an amount equal to lifetime ECLs, except for the following, which are measured at 12-month ECLs:
debt securities that are determined to have low credit risk at the end of the reporting period; and
other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.
Loss allowances for trade receivables are always measured at an amount equal to lifetime ECLs.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group and Company consider reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group and Company’s historical experience and informed credit assessment and including forward-looking information.
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 25 -
The Group and Company assume that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.
The Group and Company consider a financial asset to be in default when:
the borrower is unlikely to pay its credit obligations to the Group and Company in full, without recourse by the Group and Company to actions such as realising security (if any is held); and/or
the financial asset is more than 90 days past due.
Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.
12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the end of the reporting period (or a shorter period if the expected life of the instrument is less than 12 months).
The maximum period considered when estimating ECLs is the maximum contractual period over which the Group and Company are exposed to credit risk.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group and Company expect to receive). ECLs are discounted at the effective interest rate of the financial asset.
Credit-impaired financial assets
At end of each reporting period, the Group and Company assess whether financial assets carried at amortised cost are credit impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes the following observable data:
significant financial difficulty of the borrower or issuer;
a breach of contract such as a default or being more than 90 days past due;
the restructuring of a loan or advance by the Group and Company on terms that the Group and Company would not consider otherwise;
it is probable that the borrower will enter bankruptcy or other financial reorganisation; and/or
the disappearance of an active market for a security because of financial difficulties
Presentation of allowance for ECL in the statement of financial position
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 26 -
Write-off
The gross carrying amount of a financial asset is written off when the Group and Company have no reasonable expectations of recovering a financial asset in its entirety or a portion thereof.
Fair value estimation
Several assets and liabilities of the Group and the Company are measured at fair value.
The valuation process requires management to always first consider whether there is a quoted price in an active market for an identical or similar asset. If no such quoted price exists, then the fair value is determined by reference to a recent binding sale agreement or a recent transaction for an identical or similar asset.
The recent binding sale agreement or transaction is only applied where it is between knowledgeable willing parties in an arm’s length transaction and where there has not been a significant change in economic circumstances or significant time lapse between the date of such agreement or transaction and the measurement date. Where there have been significant changes in economic circumstances, then the price is adjusted to determine fair value. If there is no quoted price and there have been no recent binding sale agreements or recent transactions for the identical or similar assets, then management will determine fair value by applying appropriate valuation techniques. Observable market data is used as inputs to the extent that it is available.
Investments in subsidiary companies
Investments in subsidiary companies are shown at cost. Where an indication of impairment exists, the recoverable amount of the investment is estimated. Whenever the carrying amount of the investment is greater than the estimated recoverable amount, it is written down immediately to its recoverable amount and the difference is charged to the statement of profit or loss and other comprehensive income.
On disposal of an investment, the difference between the net disposal proceeds and the carrying amount is charged or credited in the statement of profit or loss and other comprehensive income.
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 27 -
Reversal of an impairment loss
At end of each reporting period, the Group and the Company assess whether there is any indication that an impairment loss recognized in prior periods may no longer exit or may have decreased. If any such indication exits, the carrying amount of the asset (or cash-generating unit ) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss unless the relevant assets is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
Standards, Amendments to published Standards and Interpretations effective in the reporting period
The following standards and interpretations apply for the first time to financial reporting periods commencing on or after 01 January 2022.
| | |
IFRS 1 First-time Adoption of International Financial Reporting Standards | Annual Improvements to IFRS Standards 2018– 2020: Extension of an optional exemption permitting a subsidiary that becomes a first-time adopter after its parent to measure cumulative translation differences using the amounts reported by its parent, based on the parent’s date of transition to IFRSs. A similar election is available to an associate or joint venture. | |
IFRS 3 Business Combinations | Reference to the Conceptual Framework: The amendment updates a reference in IFRS 3 to the Conceptual Framework for Financial Reporting without changing the accounting requirements for business combinations. | |
IFRS 9 Financial Instruments | Annual Improvements to IFRS Standards 2018– 2020: The amendment clarifies which fees an entity includes when it applies the ’10 per cent’ test in assessing whether to derecognise a financial liability. | |
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 28 -
IAS 16 Property, Plant and Equipment | Property, Plant and Equipment: Proceeds before Intended Use: The amendments prohibit an entity from deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognises the proceeds from selling such items, and the cost of producing those items, in profit or loss | |
IAS 37 Provisions, Contingent Liabilities and Contingent Assets | Onerous Contracts—Cost of Fulfilling a Contract: The amendments specify which costs should be included in an entity’s assessment whether a contract will be loss-making. | |
| Annual Improvements to IFRS Standards 2018– 2020: The amendment removes the requirement for entities to exclude taxation cash flows when measuring the fair value of a biological asset using a present value technique. | |
These amendments had no impact on the consolidated and separate financial statements of the Group and the Company.
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 29 -
| | |
IFRS 17 Insurance contracts | IFRS 17 creates one accounting model for all insurance contracts in all jurisdictions that apply IFRS. o IFRS 17 requires an entity to measure insurance contracts using updated estimates and assumptions that reflect the timing of cash flows and take into account any uncertainty relating to insurance contracts. The financial statements of an entity will reflect the time value of money in estimated payments required to settle incurred claims. Insurance contracts are required to be measured based only on the obligations created by the contracts. An entity will be required to recognise profits as an insurance service is delivered, rather than on receipt of premiums. This standard replaces IFRS 4 – Insurance Contracts | |
IAS 1 Presentation of Financial Statements | Disclosure of Accounting Policies: The amendments require companies to disclose their material accounting policy information rather than their significant accounting policies, with additional guidance added to the Standard to explain how an entity can identify material accounting policy information with examples of when accounting policy information is likely to be material. | |
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors | Definition of Accounting Estimates: The amendments clarify how companies should distinguish changes in accounting policies from changes in accounting estimates, by replacing the definition of a change in accounting estimates with a new definition of accounting estimates. Under the new definition, accounting estimates are “monetary amounts in financial statements that are subject to measurement uncertainty”. The requirements for recognising the effect of change in accounting prospectively remain unchanged. | |
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 30 -
Derecognition of financial liabilities
| | |
| Deferred Tax related to Assets and Liabilities arising from a Single Transaction: The amendment clarifies how a company accounts for income tax, including deferred tax, which represents tax payable or recoverable in the future. In specified circumstances, companies are exempt from recognising deferred tax when they recognise assets or liabilities for the first time. The aim of the amendments is to reduce diversity in the reporting of deferred tax on leases and decommissioning obligations, by clarifying when the exemption from recognising deferred tax would apply to the initial recognition of such items. | |
IAS 1 Presentation of Financial Statements | Classification of Liabilities as Current or Noncurrent: Narrow-scope amendments to IAS 1 to clarify how to classify debt and other liabilities as current or non-current. | |
| Lease Liability in a Sale and Leaseback: The amendment clarifies how a seller-lessee subsequently measures sale and leaseback transactions that satisfy the requirements in IFRS 15 to be accounted for as a sale. | |
IFRS10 Consolidated Financial Statements | Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28): Narrow scope amendment address an acknowledged inconsistency between the requirements in IFRS 10 and those in IAS 28 (2011), in dealing with the sale or contribution of assets between an investor and its associate or joint venture. | The effective date of this amendment has been deferred indefinitely until further notice |
IAS 28 Investments in Associates and Joint Ventures | Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28): Narrow scope amendment to address an acknowledged inconsistency between the requirements in IFRS 10 and those in IAS 28 (2011), in dealing with the sale or contribution of assets between an investor and its associate or joint venture. | The effective date of this amendment has been deferred indefinitely until further notice |
Where relevant, the Group and the Company are still evaluating the effect of these Standards, Amendments to published Standards and Interpretations issued but not yet effective, on the presentation of the consolidated and separate financial statements.
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 31 -
Critical accounting judgments and key sources of estimation uncertainty
Critical accounting judgments in applying the Group’s and the Company’s accounting policies
In the process of applying the Group’s and the Company’s accounting policies, which are described in Note 2, the directors have made the following judgments that have the most effect on the amounts recognised in the financial statements.
Determination of functional currency of the Group and Company
The determination of functional currency of the Group and the Company is critical since recording of transactions and exchange differences arising thereon are dependent on the functional currency selected. As described in Note 2(l), the directors have considered those factors and have determined that the functional currency of the Subsidiary and Sub-Subsidiary is Europe and America and that of the Company is the Great Britain Pound (GBP).
Going concern
The consolidated and separate financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. The directors believe that the Group and the Company have adequate financial resources to continue in operation for the foreseeable future and accordingly the consolidated and separate financial statements have been prepared on the going concern basis.
Impairment of investments in subsidiary companies
The carrying value of investments in subsidiary companies is tested for impairment whenever there is any objective evidence or indication that the investment may be impaired. This determination requires significant judgement. In estimating the recoverable amount of the investments, the Group and the Company evaluate, amongst other factors, the future profitability of the subsidiary, its financial health and near-term business outlook, including factors such as industry and sector performance, changes in technology, and operational and financing cash flows.
Depreciation policies
Property, plant and equipment are depreciated over its useful life taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In reassessing asset lives, factors such as technological innovation, and maintenance programmes are taken into account.
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 32 -
Critical accounting judgments and key sources of estimation uncertainty (continued)
Depreciation policies (continued)
Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values.
Consideration is also given to the extent of current profits and losses on the disposal of similar assets.
The directors make estimates based on historical experience and use best judgement to assess the useful lives of assets and to forecast the expected residual values of the assets at the end of their expected useful lives.
Measurement of the expected credit loss (ECL) allowance
The measurement of the expected credit loss allowance for financial assets measured at amortised cost is an area that requires significant assumptions about future economic conditions and credit behaviour (e.g. the likelihood of customers defaulting and the resulting losses).
A number of significant judgements are also required in applying the accounting requirements for measuring ECL, such as:
Determining criteria for significant increase in credit risk;
Establishing the number and relative weightings of forward-looking scenarios for each type of debtor segment and the associated ECL; and
Establishing groups of similar financial assets for the purposes of measuring ECL.
When using the simplified approach for measurement of expected credit loss for trade receivables, the application of a provision matrix requires significant assumptions and judgements, such as:
Determining the appropriate groupings of receivables into categories of shared credit risk characteristics;
Determining the period over which historical loss rates are obtained to develop estimates of expected future loss rates;
Considering macro-economic factors and adjust historical loss rates to reflect relevant future economic conditions; and
Calculating the expected credit losses.
1.11
Equity instruments
Ordinary shares are classified as equity.
1.12
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 33 -
Current tax
Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items credited or debited directly to equity, in which case the tax is also recognised directly in equity, or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or in determining the access of the acquirer's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities over the cost of the business combination.
Deferred tax
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which those deductible temporary differences can be utilized. Such assets and liabilities are not recognised if the temporary differences arise from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
A valuation allowance is recognised against deferred tax assets so that the net carrying amount equals the highest amount that is more likely than not to be recovered based on current and future taxable profits. The net carrying amount of a deferred tax asset is reviewed at end of each reporting period and the valuation allowance is adjusted to reflect the current assessment of future taxable profits. Such adjustment is recognised in profit or loss.
Deferred tax asset and liabilities are measured at the tax rates that are expected to apply in the period in which the asset is realised or the liability settled, based on tax rates (and tax laws) that have been enacted or substantially enacted by the end of the reporting period.
Deferred tax assets and liabilities are offset when there is legally enforceable right to setoff current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the intends to settle its current assets and liabilities on a net basis.
1.13
Provisions
Provisions are recognised when the Group and the Company have a present or constructive obligation as a result of past events, which will probably result in an outflow of economic benefits that can be reasonably estimated. Contingent liabilities are not recognised but are disclosed in the notes. Contingent assets are neither recognised nor disclosed in the consolidated and separate financial statements.
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 34 -
1.14
Foreign exchange
Functional and presentation currency
The Company’s functional currency is the GBPounds (‘GBP’). The Company’s performance is evaluated, and its liquidity is managed in GBP. Therefore, the GBP is considered as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions. The subsidiaries presentation currency is in Euro (“EUR”) whereas the Company’s presentation currency is in GBP.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies at the end of the reporting period are retranslated to the functional currency at the exchange rate at that date.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of the transaction.
Foreign currency differences arising on retranslation are recognised in the statement of profit or loss and other comprehensive income except for retranslation of available for sales equity investments which are recognized in other comprehensive income. However, upon impairment of financial assets at fair value through other comprehensive income, foreign currency differences that have been recognised in other comprehensive income are reclassified to statement of profit or loss.
1.15
Related parties are individuals and companies where the individuals or companies have the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions.
2
Employees
The average monthly number of persons (including directors) employed by the group during the Period was:
2022
2021
Number
Number
31
18
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
- 35 -
3
Income tax expense
2022
2021
£
£
Current tax
Foreign taxes and reliefs
13,722
4,426,892
13,722
4,426,892
4
Intangible assets
Computer software
£
Cost
At 1 January 2021
1,287,417
Additions
3,441,042
At 30 September 2021
4,728,459
Additions - purchased
1,734,520
Foreign currency adjustments
164,494
At 31 December 2022
6,627,473
Amortisation and impairment
At 1 January 2021
321,854
Charge for the year
1,182,114
At 30 September 2021
1,503,968
Charge for the year
1,530,832
Foreign currency adjustments
76,868
At 31 December 2022
3,111,668
Carrying amount
At 31 December 2022
3,515,805
At 30 September 2021
3,224,491
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
- 36 -
5
Property, plant and equipment
Furniture, fixtures and other equipment
Software and computer equipment
Total
£
£
£
Cost
At 1 January 2021
12,516
12,516
Additions
155,263
20,761
176,024
At 30 September 2021
155,263
33,277
188,540
Additions
76,709
54,459
131,168
Foreign currency adjustments
5,875
2,222
8,097
At 31 December 2022
237,847
89,958
327,805
Accumulated depreciation and impairment
At 1 January 2021
-
3,129
3,129
Charge for the Period
15,527
8,319
23,846
At 30 September 2021
15,527
11,448
26,975
Charge for the Period
23,605
23,691
47,296
Foreign currency adjustments
991
890
1,881
At 31 December 2022
40,123
36,029
76,152
Carrying amount
At 31 December 2022
197,724
53,929
251,653
At 30 September 2021
139,736
21,829
161,565
6
Investments
Current
Non-current
2022
2021
2022
2021
£
£
£
£
Other investments
-
-
7,577,141
931,218
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
- 37 -
7
Subsidiaries
The company purchased investments in subsidiary companies amounting to £198,445.
Details of the company's subsidiaries at 31 December 2022 are as follows:
Name of subsidiary company
Country of incorporation
Number and
% Held
type of shares
Indirect
Azure Systems Limited
UK
85,100 Ordinary
100.00
-
DTSocialize OU
Estonia
25,000 Ordinary
100.00
-
Xward Pay Inc
Canada
950 Ordinary
95.00
-
Synapsia SRL
Italy
8,000 Ordinary
80.00
-
ABC Mobile IT
Latvia
2,296 Ordinary
82.00
-
DT Circle Holdings Limited
Malta
1,200 Ordinary
100.00
-
DT Socialize Ltd
Malta
240 Ordinary
-
100.00
The directors believe that there are no impairment in value of the investments in subsidiary companies as 31 December 2022 and that their cost approximate their fair value.
8
Inventories
2022
2021
£
£
Cost of finished goods
41,696
-
9
Trade and other receivables
2022
2021
£
£
Trade receivables
3,527,332
Other receivables
1,442,431
6,154,824
Prepayments
171,444
2,090,562
5,141,207
8,245,386
Other receivables are interest free, unsecured and receivable on demand.
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
- 38 -
10
Trade and other payables
2022
2021
£
£
Trade payables
3,633,188
125,736
Accruals
236,372
19,124
Other payables
359,946
6,374
4,229,506
151,234
11
Share capital
2022
2021
2022
2021
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of £1 each
1,000
1,000
1,000
1,000
Each ordinary share shall confer on its holder the right to attend and vote on any resolution at any shareholder meeting, no right to dividends or other form of distribution and shall not be redeemable.
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
- 39 -
12
Financial risks and instruments
Overview
The Group has exposure to the following risks from its use of financial instruments:
• Credit risk
• Liquidity risk
• Market risk
This note presents information about the Group's exposure to each of the above risks, the Group's objectives, policies and processes for measuring and managing risk, and the Group's management of capital. Further quantitative disclosures are included throughout these financial statements.
The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework.
The Group's risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are regularly reviewed to reflect changes in market conditions and the Group's activities.
Fair values
A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.
The Group’s investments are valued as described in Note 3. The Group's financial assets and liabilities consist of trade and other receivables, cash and cash equivalents, other non-current liabilities, borrowings and trade and other payables which are realised or settled within a short-term period. The carrying amounts of these assets and loans and other payables approximate their fair values.
| | |
31 December 2022 Financial assets | | |
| | |
| | |
| | |
Cash and cash equivalents | | |
Trade and other receivables | | |
| | |
| | |
| | |
| | |
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
- 40 -
12
| | |
| | |
| | |
| | |
| | |
Cash and cash equivalents | | |
Trade and other receivables | | |
| | |
| | |
| | |
The levels are defined as follows:
- Level 1 (highest level): fair values measured using quoted prices (unadjusted) in active markets for identical financial instruments;
- Level 2: fair values measured using quoted prices in active markets for similar financial instruments, or using valuation techniques in which all significant inputs are directly or indirectly based on observable market data; and
- Level 3 (lowest level): fair values measured using valuation techniques in which any significant input is not based on observable market data.
Accounting classifications and fair values
The following table shows the carrying amounts and fair value of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
- 41 -
12
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Financial assets not measured at fair value | | | | |
Trade and other receivables | | | | |
Cash and cash equivalents | | | | |
| | | | |
Financial liabilities not measured at fair value | | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Financial assets not measured at | | | | |
| | | | |
Trade and other receivables | | | | |
Cash and cash equivalents | | | | |
| | | | |
Financial liabilities not | | | | |
| | | | |
| | | | |
Credit risk
Credit risk represents the potential loss that the Group would incur if counter parties fail to perform pursuant to the terms of their obligations to the Group. The Group limits its credit risk by carrying out transactions through companies within the Group. At the end of the reporting period, the exposure to credit risk was as follows:
The Group The Company
GBP GBP
Trade and other receivables 4,969,763 1,341,421
Cash and cash equivalents 2,671,698 52,648
7,641,461 1,394,069
Prepayments of GBP171,444 have not been included.
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
- 42 -
12
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group maintains sufficient cash and investments, and manages liquidity risk through the ability to close out market position.
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements for the Group:
Market risk
Market risk represents the potential loss that can be caused by a change in the market value of the financial instrument. The Group’s exposure to market risk is determined by a number of factors, including interest rates, foreign currency exchange rates and market volatility.
Foreign currency risk
The customer base of the Group is varied. Accordingly, revenues and costs are transacted in EUR and exposes the Group to foreign currency risk on its transactions that are denominated in EUR.
Currency profile
The currency profile of the financial assets and liabilities of the Group are summarised as follows:
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
- 43 -
Sensitivity
At 31 December, if exchange rate had strengthened/weakened by 1% against the following currency the result would be as follows:
Interest rate risk
The Group's income and operating cash flows are substantially independent of changes in market interest rates. The Group's interest earning financial assets are cash at bank. Interest income may fluctuate in amount, in particular due to changes in interest rates. Interest rate risk is the risk associated to fluctuations in rate of interest in relation to interest bearing financial assets and liabilities held by the Group. The Group is exposed to interest rate risk because of borrowed funds at floating interest rates.
13
Related party transactions
All related party transactions have been carried out at arms length and in normal course of the business.
14
Capital risk management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust dividend payments to shareholders, return capital to shareholders or issue new shares. Any decision to manage the capital structure is taken by the Board of Directors.
No changes were made in the objectives, policies and processes for managing capital during the year ended 31 December 2022.
15
Events after the reporting date
There are no events after the reporting date that would require additional disclosures to the financial statements of the Group.
DTSOCIALIZE HOLDING PLC (FORMERLY KNOWN AS DTSOCIALIZE HOLDING LTD) AND ITS SUBSIDIARIES
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2022
- 44 -
16
Cash generated from operations
2022
2021
£
£
Profit for the Period before income tax
1,035,541
13,688,770
Adjustments for:
Finance costs
61,499
-
Investment income
(77,561)
-
Amortisation and impairment of intangible assets
1,530,832
1,182,114
Depreciation and impairment of property, plant and equipment
47,296
23,846
Exchange differences
(93,842)
(1,268,199)
Movements in working capital:
Increase in inventories
(41,696)
-
Decrease/(increase) in trade and other receivables
3,104,179
(8,245,386)
Increase in trade and other payables
4,615,904
151,234
Cash generated from operations
10,182,152
5,532,379
17
Cash generated from operations
2022
2021
£
£
Loss for the year after tax
(352,815)
-
Movements in working capital:
Increase in trade and other receivables
(1,341,421)
-
Increase in trade and other payables
8,250,376
1,094,312
Cash generated from operations
6,556,140
1,094,312
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