Company registration number 08593670 (England and Wales)
PAYWARD LTD.
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
PAYWARD LTD.
COMPANY INFORMATION
Directors
B Das
(Appointed 30 November 2023)
C Dolan
(Appointed 10 January 2023)
Company number
08593670
Registered office
6th Floor
One London Wall
London
EC2Y 5EB
Auditor
Gravita Audit II Limited
Aldgate Tower
2 Leman Street
London
E1 8FA
PAYWARD LTD.
CONTENTS
Page
Strategic report
1 - 3
Directors' report
4 - 5
Independent auditor's report
6 - 8
Statement of comprehensive income
9
Balance sheet
10
Statement of changes in equity
11
Statement of cash flows
12
Notes to the financial statements
13 - 22
PAYWARD LTD.
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 1 -

The directors present the strategic report for the year ended 31 December 2022.

Review of the business

Payward Ltd is a company registered in England and Wales. The company is a wholly owned subsidiary of Seven Cities Pte. Ltd. (the "parent company"), which is incorporated in Singapore. The principal activity of the company is to provide digital asset exchange services for UK customers.

 

Prior to 1 January 2022, the company derived revenue based on a cost-plus reimbursement from Payward Inc. (the “ultimate parent company”) which was recorded as service fee income. Effective 1 January 2022, the company entered into a Shared Services and Profit Split Agreement with the ultimate parent company. Under this agreement, the company provides shared services to members of the group and receives a split of the ultimate parent company's revenues and profit based on the residual profit split method ("RPSM") which is recorded in the statement of comprehensive income. For the year ended 31 December 2022, the company recognised total revenues amounting to €48.7 million (2021 – €56.4 million service fee income). The decrease in revenue for the year was mainly due to developments involving FTX and Genesis which saw a decline in trading volumes across the digital asset industry.

 

Despite the slowing market sentiment during the year, the platform continues to develop and enhance its tools and support for trading digital assets. In December 2022, the platform publicly launched a new web platform that encompasses a full suite of its advanced trading tools and unified access to spot and margin trading. As of the date of this report, the platform supports over 240 tokens.

 

In addition to the above-mentioned services that supports the ultimate parent company and the network of affiliated companies, the company is also responsible for the onboarding and offboarding of client monies and has internal operational banking accounts in the United Kingdom and the rest of Europe. As of 31 December 2022, the company has €964.3 million (2021 – €2,668.2 million) of cash and cash equivalents.

Principal risks and uncertainties

 

Market Risk

The risks around digital assets are mainly related to their volatility. Unexpected changes in market sentiment can lead to sharp and sudden movements in price. A sudden downward movement in price can create a loss of confidence among users. Conversely, a sudden upward movement in price may attract more users to trade digital assets. This directly impacts the number of users on the platform and the services the company provides on behalf of its ultimate parent company. The company is therefore directly subject to significant digital asset market risk as described in Key Performance Indicators. The ultimate parent company manages its digital assets and fiat holdings to ensure that there is sufficient liquidity to settle all of the ultimate parent company’s customer liabilities, if any unforeseen circumstances were to occur. Additionally, the ultimate parent company aims to maintain several months’ worth of operating cash and digital assets to settle any operating expenses incurred by the company.

 

Key performance indicators

As the company’s principal activity is to provide digital asset exchange services to its customers in the UK, the company’s revenue is directly impacted by market volatility and user confidence. User confidence, depends on the ultimate parent company’s level of activity, which can be monitored through trading volumes and the operating expenses required to support such activities, including bank fees. For the year ended 31 December 2022, the ultimate parent company’s trading volumes decreased by approximately 92% compared to the previous year. The company also incurred bank fees and net interest expense amounting to €16.3 million in 2022 (2021 – €31.5 million).

PAYWARD LTD.
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 2 -
Section 172(1) statement

Section 172 of the Companies Act 2006 requires each director of the company to act in a way in it considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard to a range of matters including:

 

The directors make decisions by taking their legal duty into account and also the priorities and requirements of the stakeholders. The directors fulfil their duties to act in good faith to promote success of the company through its implementation and shared strategy with the ultimate parent company.

 

Decision Making

The directors fulfills their duty by considering the consequences of their decisions on the long-term objectives and sustainability of the company, its stakeholders and the community whilst also preserving its values and culture. We are a business built on our standards and reputation and would not take a decision which would have a detrimental impact on this whether in the short term or the long term. We are dedicated to ensuring we maintain our culture whilst achieving our purpose.

 

Employee Engagement

Our employees are key so it is very important that they have the right attitude and the drive to create ideas and set high standards. The employees of the ultimate parent company are a diverse group of thinkers and doers that are dedicated to making digital assets available and accessible to the world.

 

Examples of the engagement with employees include:

 

Business Relationships

We are one of the longest running, most trusted and healthiest exchange and our clients benefit from access to industry-leading liquidity, deep markets and direct access to over-the-counter trading and futures exchange. We carry out our business with similar-minded people who we like and build on this to forge strong and lasting partnerships which is important for our long-term success.

 

Community and Environment

The ultimate parent company and by extension, the company, has an ongoing commitment to a high level of corporate social responsibility. is important to the company and it undertakes many initiatives in this area. The directors recognise the relevance of leading the company in such a way that it contributes to wider society.

 

Examples of corporate social responsibility actions include:

PAYWARD LTD.
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 3 -

High Standards of Business Conduct

The directors take a comprehensive approach to protecting clients’ digital assets with a team of experts who take a risk-based approach to ensuring clients’ assets are protected at the highest levels.

 

Examples of the ultimate parent company and the company’s commitment to maintain the high standards of business conduct include:

 

Fairness Between Members and Stakeholders

The company’s mission is to accelerate the worldwide adoption of digital assets. The directors will act with integrity and courtesy in all of its business relationships and will consider all members and stakeholders when making decisions for the overall good of the company.

On behalf of the board

B Das
Director
2 August 2024
PAYWARD LTD.
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 4 -

The directors present their annual report and financial statements for the year ended 31 December 2022.

Principal activities

The principal activity of the company is to provide digital asset exchange services and the onboarding and offboarding of client monies for UK customers.

Results and dividends

The results for the year are set out on page 9.

Directors

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

B Das
(Appointed 30 November 2023)
C Dolan
(Appointed 10 January 2023)
B Halliday
(Appointed 10 January 2023 and resigned 30 November 2023)
C Ting
(Resigned 8 December 2023)
K Ng
(Resigned 7 January 2022)
J Powell
(Resigned 11 May 2022)
D Ripley
(Appointed 11 May 2022 and resigned 8 December 2023)
Post reporting date events

The company has performed an assessment of the potential impact of the Russian invasion of Ukraine. We continuously monitor our dealings and have appropriate controls in place to enforce the sanctions that have been imposed in the wake of the conflict in Ukraine.

 

The company also evaluated the recent market developments and concluded that the company has no material direct or indirect exposure to the affected companies (FTX and Genesis) in the digital asset industry.

 

Refer to Note 15 to the financial statements.

Future developments

The company continues to enhance its trading platform to attract and retain customers.

 

Key elements of the company's strategy include but are not limited to the following:

Energy and carbon report

As the company has not consumed more than 40,000 kWh of energy in this reporting period, it qualifies as a low energy user under these regulations and is not required to report on its emissions, energy consumption or energy efficiency activities.

PAYWARD LTD.
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 5 -
Statement of directors' responsibilities

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

 

 

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Statement of disclosure to auditor

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

Going concern

The directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis in preparing the financial statements. Further details regarding the adoption of the going concern basis can be found in Note 1.2 to the financial statements.

On behalf of the board
B Das
Director
2 August 2024
PAYWARD LTD.
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF PAYWARD LTD.
- 6 -
Opinion

We have audited the financial statements of Payward Ltd. (the 'company') for the year ended 31 December 2022 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

 

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

 

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

 

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

PAYWARD LTD.
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF PAYWARD LTD.
- 7 -
Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

 

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

Responsibilities of directors

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

The extent to which our procedures are capable of detecting irregularities, including fraud

The objectives of our audit, in respect to fraud are: to identify and assess the risks of material misstatement of the financial statements due to fraud, through designing and implementing appropriate responses: and to respond appropriately to fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management. Our approach was as follows:

 

PAYWARD LTD.
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF PAYWARD LTD.
- 8 -

To address the risk of fraud through management bias and override of controls, we:

 

 

In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:

 

 

There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any.

 

Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment by for example forgery, or intentional misrepresentation or through collusion. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing noncompliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Daniel Howarth
Senior Statutory Auditor
For and on behalf of Gravita Audit II Limited
2 August 2024
Chartered Accountants
Aldgate Tower
Statutory Auditor
2 Leman Street
London
E1 8FA
PAYWARD LTD.
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
- 9 -
2022
2021
as restated
Notes
€'000
€'000
Turnover
3
48,681
56,395
Cost of sales
(70,221)
(32,272)
Gross (loss)/profit
(21,540)
24,123
Administrative expenses
(2,569)
(1,244)
Operating (loss)/profit
(24,109)
22,879
Other interest receivable and similar income
6
15,681
8,019
Other interest payable and similar expenses
7
(8,217)
(18,302)
(Loss)/profit before taxation
(16,645)
12,596
Tax on (loss)/profit
8
3,332
(1,110)
(Loss)/profit for the financial year
(13,313)
11,486

The profit and loss account has been prepared on the basis that all operations are continuing operations.

PAYWARD LTD.
BALANCE SHEET
AS AT
31 DECEMBER 2022
31 December 2022
- 10 -
2022
2021
Notes
€'000
€'000
€'000
€'000
Non-current assets
Debtors - deferred tax
11
5,868
5,370
Current assets
Debtors
9
695,770
513,730
Cash at bank and in hand
964,346
2,668,203
1,660,116
3,181,933
Creditors: amounts falling due within one year
10
(1,646,888)
(3,154,894)
Net current assets
13,228
27,039
Net assets
19,096
32,409
Capital and reserves
Called up share capital
12
-
0
-
0
Retained earnings
13
19,096
32,409
Total equity
19,096
32,409
The financial statements were approved by the board of directors and authorised for issue on 2 August 2024 and are signed on its behalf by:
B Das
Director
Company registration number 08593670 (England and Wales)
PAYWARD LTD.
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
- 11 -
Retained earnings
Total
€'000
€'000
Balance at 1 January 2021
20,923
20,923
Year ended 31 December 2021:
Profit and total comprehensive income
11,486
11,486
Balance at 31 December 2021
32,409
32,409
Year ended 31 December 2022:
Loss and total comprehensive income
(13,313)
(13,313)
Balance at 31 December 2022
19,096
19,096
PAYWARD LTD.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 12 -
2022
2021
Notes
€'000
€'000
€'000
€'000
Cash flows from operating activities
Cash (absorbed by)/generated from operations
18
(1,710,631)
1,734,746
Interest paid
(8,217)
(18,302)
Income taxes paid
(690)
(477)
Net cash (outflow)/inflow from operating activities
(1,719,538)
1,715,967
Investing activities
Interest received
962
7
Other income received from investments
14,719
8,012
Net cash generated from investing activities
15,681
8,019
Net (decrease)/increase in cash and cash equivalents
(1,703,857)
1,723,986
Cash and cash equivalents at beginning of year
2,668,203
944,217
Cash and cash equivalents at end of year
964,346
2,668,203
PAYWARD LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 13 -
1
Accounting policies
Company information

Payward Ltd. is a private company limited by shares incorporated in England and Wales. The registered office is 6th Floor, One London Wall, London, EC2Y 5EB.

1.1
Accounting convention

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in Euros, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest €'000.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

1.2
Going concern

These truefinancial statements have been prepared on a going concern basis. The directors, having considered the financial position of the company for a period of at least twelve months from the date of signing these financial statements, have no reason to believe that a material uncertainty exists that may cast doubt about the ability of the company to continue as a going concern.

 

The company has also taken into consideration the current global events and do not expect any significant impact on the operations of the company due to the nature of services the company provides to its ultimate parent company. Refer to Note 15 to the financial statements.

 

Accordingly, the directors have a reasonable expectation that the company will continue in operational existence and thus they adopt the going concern basis of accounting in preparing the financial statements.

1.3
Turnover

Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.

Effective 1 January 2018, revenue was recognised in the form of service fees which were calculated based on cost plus reimbursement of services.

 

Effective 1 January 2022, the company receives a split of the ultimate parent company's revenues and profit based on the residual profit split method ("RPSM").

 

Revenue is recognised when customers execute trading and asset based transactions on the platform, which is operated by an affiliate of the company. This includes fees charged to customers for depositing funds into or withdrawing funds out of their account and trading related fees. Revenue is recognised when platform related transactions are completed.

1.4
Cash and cash equivalents

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

PAYWARD LTD.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 14 -
1.5
Financial instruments

The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

 

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

 

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Other financial assets

Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.

Impairment of financial assets

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

 

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

 

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Derecognition of financial assets

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

Classification of financial liabilities

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

PAYWARD LTD.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 15 -
Basic financial liabilities

Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

 

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

 

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Other financial liabilities

Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.

 

Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

Derecognition of financial liabilities

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

1.6
Equity instruments

Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

1.7
Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

PAYWARD LTD.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 16 -
Deferred tax

Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

 

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

1.8
Employee benefits

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

 

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

 

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

1.9
Leases

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leases asset are consumed.

1.10
Foreign exchange

The company's functional and presentational currency is Euros.

 

Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.

 

At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.

 

Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit and loss account.

 

All other foreign exchange gains and losses are presented in the profit and loss account.

PAYWARD LTD.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 17 -
1.11

Digital assets

Our customers have the ability to hold, receive, transfer, sell and convert a wide range of digital assets on the exchange platform for their benefit. The company has presented these digital assets, held on behalf of our customers, off balance sheet. This has been determined in consideration of a variety of factors due to the lack of an accounting standard that specifically deals with this determination. Factors considered include:

 

Refer to Note 16 for further details.

2
Judgements and key sources of estimation uncertainty

In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

 

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

 

Recoverability of amounts owed by group undertakings

At each reporting date, amounts owed by group undertakings are assessed for recoverability. If there is any evidence of impairment, the carrying amount of the debtor is reduced to its recoverable amount. Impairment loss is calculated based on a review of the current status of existing amounts owed and historical collections experience. The impairment loss is recognised immediately in the profit and loss account. See Note 9 for the carrying amount of amounts owed by group undertakings.

3
Turnover and other revenue
2022
2021
€'000
€'000
Turnover analysed by class of business
Digital assets trading income
48,681
56,395
2022
2021
€'000
€'000
Turnover analysed by geographical market
United Kingdom
48,681
56,395
PAYWARD LTD.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
3
Turnover and other revenue
(Continued)
- 18 -
4
Auditor's remuneration
2022
2021
Fees payable to the company's auditor and associates:
€'000
€'000
For audit services
Audit of the financial statements of the company
157
119
5
Employees

The company has no employees other than directors, who did not receive any remuneration during the year (2021: €nil).

 

The average number of employees, including directors, during the year were as follows:

2022
2021
Number
Number
2
2
6
Interest receivable and similar income
2022
2021
€'000
€'000
Interest income
Interest on bank deposits
962
7
Other income from investments
Gains on financial instruments measured at fair value through profit or loss
14,719
8,012
Total income
15,681
8,019
Disclosed on the profit and loss account as follows:
Other interest receivable and similar income
15,681
8,019
2022
2021
Investment income includes the following:
€'000
€'000
Gains on financial instruments measured at fair value through profit or loss
14,719
8,012
PAYWARD LTD.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 19 -
7
Interest payable and similar expenses
2022
2021
€'000
€'000
Interest on bank overdrafts and loans
8,217
18,302
8
Taxation
2022
2021
€'000
€'000
Current tax
Foreign current tax on profits for the current period
(3,332)
1,110

The actual (credit)/charge for the year can be reconciled to the expected (credit)/charge for the year based on the profit or loss and the standard rate of tax as follows:

2022
2021
€'000
€'000
(Loss)/profit before taxation
(16,645)
12,596
Expected tax (credit)/charge based on the standard rate of corporation tax in the UK of 19.00% (2021: 19.00%)
(3,163)
2,393
Effect of overseas tax rates
-
0
(1,132)
Deferred tax adjustments in respect of prior years
(169)
(151)
Taxation (credit)/charge for the year
(3,332)
1,110
9
Debtors
2022
2021
Amounts falling due within one year:
€'000
€'000
Corporation tax recoverable
4,204
680
Amounts owed by group undertakings
691,017
511,369
Other debtors
549
1,681
695,770
513,730
2022
2021
Amounts falling due after more than one year:
€'000
€'000
Deferred tax asset (note 11)
5,868
5,370
Total debtors
701,638
519,100
PAYWARD LTD.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 20 -
10
Creditors: amounts falling due within one year
2022
2021
€'000
€'000
Amounts owed to group undertakings
1,645,341
3,153,291
Accruals and deferred income
1,547
1,603
1,646,888
3,154,894
11
Deferred taxation

The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:

Assets
Assets
2022
2021
Balances:
€'000
€'000
Origination and reversal of timing differences
5,964
5,034
Others
(96)
336
5,868
5,370
2022
Movements in the year:
€'000
Asset at 1 January 2022
(5,370)
Credit to profit or loss
(594)
Effect of change in tax rate - profit or loss
(188)
Other
284
Asset at 31 December 2022
(5,868)

The deferred tax asset set out above is expected to reverse in the subsequent years and relates to the utilisation of tax losses against future expected profits of the same period.

12
Share capital
2022
2021
2022
2021
Alloted, issued and fully paid
Number
Number
Ordinary shares of £0.01 each
100
100
1
1

There is a single class of ordinary shares. There are no restrictions on the distribution of dividends and the repayment of capital.

13
Retained earnings

The company's reserves comprise of cumulative profits or losses, net of any dividends paid, and other adjustments.

PAYWARD LTD.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 21 -
14
Events after the reporting date

The directors have considered the impact of Russian forces entering Ukraine on the company’s business and the recent digital asset market developments involving FTX and Genesis. The directors are satisfied that these are non-adjusting, post balance sheet events which does not materially impact the balances included in these financial statements.

15
Related party transactions

Related party transactions

The company has taken advantage of exemption, under the terms of Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', not to disclose related party transactions with wholly owned subsidiaries within the group.

 

Digital assets

An affiliate entity, Payward Ventures Inc ("PVI"), acting as the custodian for the company, maintains the internal record-keeping of our customers' digital assets, including among other things, cryptographic addresses and the amount and type of digital assets held in their accounts. As of 31 December 2022, PVI held US$596,672,995 of crypto assets on behalf of our UK customers. These balances represent the entire crypto assets for UK customers and have been determined using unadjusted quoted prices in active markets.

16
Ultimate controlling party

The immediate parent undertaking is Seven Cities Pte. Ltd., a company incorporated in Singapore. The ultimate parent undertaking and controlling party is Payward, Inc., a company incorporated in the United States.

17
Contingent liability

We are subject to legal proceedings, regulatory investigations and claims that arise in the ordinary course of business. We review each proceeding, investigation and claim on a case by case basis and determine the probability of losses after considering, among other things, opinions and views of legal counsel and outcomes of similar cases and circumstances. There is significant judgment in making these estimates and actual results may be materially different from these estimates. As at 31 December 2022, no provision for any liability has been made in these financial statements.

18
Cash (absorbed by)/generated from operations
2022
2021
€'000
€'000
(Loss)/profit for the year after tax
(13,313)
11,486
Adjustments for:
Taxation (credited)/charged
(3,332)
1,110
Finance costs
8,217
18,302
Investment income
(15,681)
(8,019)
Decrease in provisions
-
0
(115)
Movements in working capital:
Increase in debtors
(178,516)
(400,015)
(Decrease)/increase in creditors
(1,508,006)
2,111,997
Cash (absorbed by)/generated from operations
(1,710,631)
1,734,746
PAYWARD LTD.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 22 -
19
Analysis of changes in net funds
1 January 2022
Cash flows
31 December 2022
€'000
€'000
€'000
Cash at bank and in hand
2,668,203
(1,703,857)
964,346
20
Prior period adjustment

The company previously incurred negative interest expense on its Euro denominated bank balances due to the negative interest rate policy set by the European Central Bank ("ECB"). In previous years, these amounts were presented under cost of sales in the Statement of Comprehensive Income. In 2022, the ECB announced changes to the interest rate which has resulted in the company earning an interest income on its Euro denominated bank balances. Management believes it is more appropriate to present the interest income and expense as a separate line item.

 

Please see details below:

Reconciliation of changes in equity
The prior period adjustments do not give rise to any effect upon equity.
Reconciliation of changes in profit for the previous financial period
2021
€'000
Adjustments to prior year
Cost of sales
18,295
Interest income
7
Interest expense
(18,302)
Total adjustments
-
Profit as previously reported
11,486
Profit as adjusted
11,486
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