1
JOINT STOCK COMPANY
 
MOGO
(UNIFIED REGISTRATION NUMBER
 
LV50103541751)
 
ANNUAL REPORT
FOR THE YEAR ENDED 31 DECEMBER 2021
SEPARATE
 
FINANCIAL STATEMENTS
 
PREPARED IN ACCORDANCE
WITH INTERNATIONAL FINANCIAL
 
REPORTING STANDARDS AS
 
ADOPTED BY THE EU
TOGETHER WITH INDEPENDENT AUDITOR'S REPORT
Riga, 2022
2
mogo JSC
Annual report for the year ended 31 December 2021
Address: Skanstes street 52, Riga, Latvia
Unified registration number: 50103541751
CONTENTS
General Information
3
Management Report
4
Statement of Management Responsibility
6
Separate financial statements
Separate Statement of Comprehensive Income
7
Separate Statement of Financial Position
8
Separate Statement of Changes in Equity
10
Separate Statement of Cash Flows
11
Notes to the separate financial statements
12
Independent Auditor's Report
64
3
mogo JSC
Annual report for the year ended 31 December 2021
Address: Skanstes street 52, Riga, Latvia
Unified registration number: 50103541751
General information
Name of the Company
mogo
Legal status of the Company
JSC
Unified registration number, place and date of
registration
50103541751, Latvia, 03.05.2012
Registered office
Skanstes street 52, Riga, Latvia
Shareholders
31.12.2021.
Eleving Stella JSC (Mogo Eastern Europe JSC) from
01.09.2021
98%
Eleving Luna JSC (Mogo Baltics and Caucasus JSC) till
31.08.2021
98%
Other
2%
TOTAL
100%
Ultimate parent company
Eleving Group S.A. (Mogo Finance S.A.), Luxembourg
Board Members
Krišjānis Znotiņš - Chairman of the Board from 17.08.2020.
Krišjānis Znotiņš - Member of the Board from 14.03.2019. till 17.08.2020.
Aivis Lonskis - Member of the Board from 17.08.2020.
Council Members
Valerij Petrov - Chairman of the Council from 17.08.2020.
Vladislavs Mejertāls - Deputy Chairman of the Council from 17.08.2020.
Neringa Plauškiene - Member of the Council from 17.08.2020.
Subsidiary
Renti JSC, Latvia (100%)
Financial year
January - December 2021
Previous financial year
January - December 2020
Auditors
KPMG Baltics LLC
Commercial licence No. 55
Vesetas iela 7, Riga, Latvia, LV-1013
Certified auditor in charge
Armine Movsisjana
Certificate No. 178
4
mogo JSC
Annual report for the year ended 31 December 2021
Address: Skanstes street 52, Riga, Latvia
Unified registration number: 50103541751
Management report
2 May 2022
The Board members of the Company present the report on the separate financial statements for the year
 
ended 31.12.021. All the figures are presented in EUR (euro).
General information
JSC mogo
 
(hereinafter –
 
the Company)
 
is specializing
 
in used
 
car financing
 
for private
 
individuals as
 
well as
 
providing operational
 
management services
 
to other
 
companies
operating in used car
 
financing or rent.
 
The Company provides quick
 
and convenient car financing
 
services through more than
 
220 partners (professional car
 
sellers) network,
Company’s branded website, mobile homepage and onsite at customer service centre located in strategic location
 
at road traffic safety directorate (CSDD).
 
During the year Company continued to serve its existing customers, ensure stable new sales and increase service and development operations provided to 100% subsidiary JSC
Renti and associated consumer crediting company JSC Primero Finance, using Company's resources and long lasting experience in leasing field. Services include full cycle from
product development to customer service and debt collection activities.
Company's website www.mogo.lv has been renewed to support improvements in customer journey.
 
The Company complies with local laws relating to environmental protection.
Mission, vision and values
Mission
Make personal mobility easily accessible to all residents of Latvia while being united in love for the car.
Values
▪Courage - We see challenge in everything that gets in our way and growth in what we
 
do. Change is our driving force, and we expect it with our heads held high. We
 
say yes to
every turn by showing strength and courage!
▪ Energy - We strive
 
for success and excellence. We enjoy the
 
process and the challenges in our path,
 
but our results are the thing
 
that matters. Our victories give us spirit
 
and
energy for the future!
▪Ambition - We take full responsibility for our actions and decisions and we encourage others to do the same. The initiative allows us to move forward rather than react passively.
Although the road may be winding, purposefulness takes us forward!
 
▪Love - Our business is based on love for the work we do and the customers we serve. We create opportunities that provide mobility, because we understand the desire to love a
car.
 
Operations and Financial Results
Total
 
assets of
 
the Company
 
reached 56.3
 
million euro
 
(2% increase,
 
compared to
 
2020), interest
 
and similar
 
income reached
 
7.8 million
 
euro (26%
 
decrease compared
 
to
2020), and net profit of the Company amounted to 6.1 million euro (-4.9% lower compared to 2020).
Gross value of the lease and loans portfolio reached 7.3 million euro (52% decrease compared to 2020)
 
at the end of December 2021.
The reporting period was a good
 
year for a Company.
 
High net profit level (close to
 
highest year 2019) was secured through servicing
 
related entities and continuing strategy of
portfolio sale
 
transactions. During
 
2021
 
portfolios
 
were
 
sold
 
in
 
February and
 
July
 
amounting to
 
nominal amount
 
of
 
6.5
 
million
 
euro
 
to
 
JSC
 
Primero
 
Finance. Transactions
generated 2 million euro
 
profit and continued to
 
strengthen liquidity and profitability.
 
At the same
 
time financing provided to
 
related entities increased from
 
33.9 million euros at
the end of 2020 to 42 million euro at the end
 
of 2021, thus stressing Companies importance in Eleving group structure. Sufficient capitalization allowed to decrease share capital
from 5 million euro to 425 thousand euro.
 
Decreasing portfolio and stable customer payment discipline have helped to
 
decrease impairment expense level from 1.1 million euro in 2020 to 170 thousand euro in 2021.
Increasing income from related parties servicing allowed to increase other operating
 
income level from 2.9 million euros in 2020 to 3.1 million euro in 2021.
Further operational improvements in our customer service and partner account management
 
processes were implemented, enabling us to serve our customers more efficiently.
 
Historical gross underforming portfolio
 
in amount of 2
 
million euro, including unsecured
 
balances and complicated cases, were
 
sold as a
 
result of forward flow
 
transactions and
one off cession tenders. Company's balance sheet was cleaned, having 90 thousand euro loss from transactions.
In 2021, the Company continued its
 
operations in order to accomplish its
 
mission –
 
make personal mobility easily accessible to all
 
residents of Latvia while being united
 
in love
for the car.
 
Some of developments planned
 
for 2021 to
 
increase automation level and
 
improve customer journey were
 
postponed due to
 
uncertainty caused by COVID
 
19 and
accessibility of
 
IT resources. Postponed
 
developments are picked
 
up and
 
prioritized for 2022.
 
Improvements would have
 
positive effect
 
on the clients
 
of the
 
Company as well
those serviced for subsidiary and JSC
 
Primero Finance. Main target in automation field includes
 
instant decision for customers. MTPL insurances in cooperation
 
with AAS Balta
are being offered to customers adding to monthly payments.
The
 
Company proceeded
 
with
 
various
 
digital
 
and
 
offline
 
marketing
 
campaigns in
 
order
 
to
 
promote
 
the
 
brand visibility
 
and
 
strengthen
 
the
 
Company
 
brand awareness
 
and
recognition.
On March 1, 2021, through public
 
offering JSC mogo successfully issued secured corporate
 
bond (LV0000802452) in the
 
amount of EUR 30 million,
 
which from 31 March 2021
are included
 
in the
 
regulated market –
 
the Baltic Bond
 
List of
 
“Nasdaq Riga” stock
 
exchange. The notes,
 
with minimum subscription
 
amount of
 
EUR 1’000, are
 
issued at par,
have a
 
maturity of
 
3 years
 
and carry
 
a fixed
 
coupon of
 
11%
 
per annum,
 
paid monthly
 
in arrears.
 
The bonds
 
were offered
 
to existing
 
Mogo bondholders
 
and other
 
retail and
institutional investors from
 
the Baltic region.
 
The public offering
 
consisted of
 
two parts –
 
subscription by new
 
investors and exchange
 
offer to
 
existing bondholders, which
 
has
been comfortably oversubscribed with more than 840 investors participating in the offering.
5
mogo JSC
Annual report for the year ended 31 December 2021
Address: Skanstes street 52, Riga, Latvia
Unified registration number: 50103541751
Management report (continued)
The future development of the Company
The Company
 
management plans
 
to continue
 
investing in
 
process automation
 
and digitalization,
 
creating seamless
 
digital experience
 
to customers.
 
The main
 
focus areas
 
in
2022 will be to continue ensuring stable portfolio quality and providing improved customer experience
 
through related parties servicing.
 
Financial risk management
The Company's key principles of finance risk management are presented in the Note 39.
Assessment of COVID-19 impact
Covid-19 continued having impact on used car sales market, causing high sales
 
amounts volatility from month to month. Total
 
2021 used car sales volume have exceeded 2020
levels. Company
 
has introduced
 
solutions for
 
customers to
 
overcome
 
short term
 
financial difficulties.
 
In addition
 
cost discipline
 
measures have
 
been implemented.
 
Debtors
amounts have not increased while total portfolio have decreased due portfolio sale and cession.
 
During the year there were periods when customers were
 
serviced only remotly, except the branch
 
located at the premises of JSC Ceļu satiksmes drošības direkcija (JSC
 
Road
Safety directorate) in Riga, where services were available upon prior appointment. The sales of cars were ensured at the points of sale and in cooperation with partners. Curently
restrictions are
 
cancelled and
 
customers are
 
serviced both
 
in presence
 
withouth prior
 
appointments and
 
remotely. The
 
Company has
 
taken all
 
mandatory and
 
recommended
safety measures and ensured that its staff can work from home when necessary.
The Company has successfully performed through Covid-19 waves, and it comfortably enters 2022 from
 
both operational as well as future funding availability perspectives.
 
Subsequent events
In 2022 many significant sanctions have been imposed by European Union and various countries on Russia and Belarus, certain Russian and Belarusian companies, companies
in other jurisdictions,
 
officials, businessmen and
 
other physical persons
 
in connection with
 
the ongoing war
 
in Ukraine, which
 
began on 24
 
February, 2022.
 
Imposed sanctions
and restrictions
 
and military
 
actions create
 
the economic
 
uncertainty in
 
the World
 
and in
 
Latvia. The
 
full impact
 
of the
 
sanctions and
 
restrictions and
 
military actions
 
on the
Company's operations
 
in 2022
 
cannot be
 
fully predicted,
 
but the
 
Company believes
 
that they
 
will not
 
materially affect
 
the Company's
 
operations both
 
directly and
 
indirectly.
Customers of the Company are local private individuals with income generating sources in Latvia. Company`s assumption is based on available information at the time of signing
the financial statements, and the impact of future events on the Company's future operations may
 
differ from Company's assessment.
JSC mogo Corporate
 
Governance Statement for 2021
 
is prepared according
 
with the requirements
 
of the Financial
 
Instruments Market Law
 
part 3 of
 
article 56.2 and
 
Code of
Corporate Governance issued by the Corporate Governance Advisory Board of the Ministry
 
of Justice of the Republic of Latvia. Report is
 
available to the public electronically on
the Nasdaq Baltic webpage www.nasdaqbaltic.com.
 
The
 
Company’s
 
shareholder has
 
changed from
 
Eleving
 
Luna
 
JSC (previously
 
Mogo
 
Baltics
 
and
 
Caucasus JSC)
 
to
 
Eleving
 
Stella JSC
 
in
 
2021. The
 
new shareholder
 
has
decreased
 
Company’s share capital in December 2021.
The share capital of the Company is EUR 425 000 and consists of 425 000 shares. The par value of each
 
share is EUR 1. All the shares are fully paid.
Signed on behalf of the Company on 2 May 2022 by:
Krišjānis Znotiņš, Chairman of the Board
Aivis Lonskis, Member of the Board
THIS DOCUMENT HAS BEEN SIGNED WITH A SECURE ELECTRONIC SIGNATURE AND IT HAS A TIME-STAMP
6
mogo JSC
Annual report for the year ended 31 December 2021
Address: Skanstes street 52, Riga, Latvia
Unified registration number: 50103541751
Statement of Management Responsibility
2 May 2022
JSC mogo management is responsible for preparation of the separate financial statements.
Management
 
of
 
the
 
Company
 
declares
 
that
 
in
 
accordance
 
with
 
the
 
information in
 
their
 
possession,
 
separate
 
financial statements
 
have
 
been
 
prepared
 
in
 
accordance
 
with
accounting transaction
 
documentation and
 
with
 
the International
 
Financial Reporting
 
Standards as
 
adopted by
 
EU
 
and give
 
a
 
true and
 
fair
 
view of
 
the
 
Company’s assets,
liabilities, financial position as at 31 December 2021, results of operations and cash flows for the year ended
 
31 December 2021.
Management of the Company confirms that an appropriate and consistent accounting policies
 
and management estimates are used. Management of the Company confirms that
the separate financial
 
statements are prepared
 
using prudence principle
 
as well as
 
the going concern
 
assumption. Management of
 
the Company confirms
 
its responsibility for
maintaining proper accounting records, as well as monitoring, control and safeguarding of the Company’s
 
assets.
The Company's management is
 
responsible for detection and prevention of
 
the error, inaccuracy
 
and / or fraud.
 
The Company's management is responsible
 
for the Company's
activities to be carried out in compliance with the legislation of the Republic of Latvia.
The management report includes a fair view of the development of the Company's business
 
and results of operation.
Signed on behalf of the Company on 2 May 2022 by:
Krišjānis Znotiņš, Chairman of the Board
Aivis Lonskis, Member of the Board
THIS DOCUMENT HAS BEEN SIGNED WITH A SECURE ELECTRONIC SIGNATURE AND IT HAS A TIME-STAMP
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7
mogo JSC
Annual report for the year ended 31 December 2021
Address: Skanstes street 52, Riga, Latvia
Unified registration number: 50103541751
Separate Financial Statements
Separate Statement of Comprehensive Income
2021
2020
 
EUR
EUR
Interest revenue
4
7,752,943
10,465,330
Interest expense
5
(4,105,164)
(4,127,633)
Net interest income
 
3,647,779
6,337,697
Fee and commission income related to finance lease activities
6
77,298
339,883
Impairment expense
7
(170,438)
(1,110,993)
Net gain/(loss) from de-recognition of financial assets measured at amortised cost
8
2,022,003
584,633
Expenses related to peer-to-peer platforms services
9
(53,616)
(86,496)
Revenue from car sales
-
7,190
Cost of sales of cars
(2,250)
(6,662)
Selling expense
10
(40,217)
(88,671)
Administrative expense
11
(2,380,836)
(2,374,189)
Other operating income
12
3,088,142
2,888,395
Other operating expense
13
(110,131)
(49,593)
Net foreign exchange result
(42,379)
(5)
Profit before tax
6,035,355
6,441,189
Net profit for the period
6,035,355
6,441,189
Other comprehensive loss:
Items that may be reclassified subsequently to profit or loss:
Debt investments at FVOCI - net change in fair value
 
23,991
(23,991)
Other comprehensive income/(loss) for the period, net of tax
23,991
(23,991)
Total comprehensive income for the year
6,059,346
6,417,198
Profit is attributable to:
Equity holders of the Parent Company
5,914,648
6,312,365
Non-controlling interests
120,707
128,824
Net profit for the year
6,035,355
6,441,189
Other comprehensive loss is attributable to:
Equity holders of the Parent Company
5,938,159
6,288,854
Non-controlling interests
121,187
128,344
Comprehensive income for the year
6,059,346
6,417,198
The accompanying notes are an integral part of these separate financial statements.
Signed on behalf of the Company on 2 May 2022 by:
Krišjānis Znotiņš, Chairman of the Board
Aivis Lonskis, Member of the Board
Rita Kaktiņa, Chief accountant
THIS DOCUMENT HAS BEEN SIGNED WITH A SECURE ELECTRONIC SIGNATURE AND IT HAS A TIME-STAMP
 
 
 
 
 
 
 
 
 
 
 
 
8
mogo JSC
Annual report for the year ended 31 December 2021
Address: Skanstes street 52, Riga, Latvia
Unified registration number: 50103541751
 
Separate Statement of Financial Position
ASSETS
31.12.2021.
31.12.2020.
NON-CURRENT ASSETS
EUR
EUR
Intangible assets
Other intangible assets
15
-
14,511
Total intangible assets
-
14,511
Tangible assets
Right-of-use assets
16, 17
603,145
1,026,650
Property and equipment
16
44,239
75,488
Leasehold improvements
16
3,803
6,322
Total tangible assets
651,187
1,108,460
Non-current financial assets and lease receivables
Finance lease receivables
18
2,004,863
1,999,765
Loans and advances to customers
19
2,447,697
6,453,877
Loans to related parties
34
42,079,330
33,952,977
Investments in Subsidiary
35
5,500,000
5,500,000
Investment in debt securities
20
-
609,000
Other investments
36
20
26
Trade receivables
23
512,164
187,315
Total non-current financial assets and lease receivables
52,544,074
48,702,960
TOTAL NON-CURRENT ASSETS
53,195,261
49,825,931
CURRENT ASSETS
Receivables and other current assets
Finance lease receivables
18
462,314
872,351
Loans and advances to customers
19
963,525
2,657,254
Loans to related parties
34
-
246,530
Trade receivables
23
969,061
1,022,940
Prepaid expense
22
77,436
113,842
Other receivables
14, 24
50,917
76,208
Contract assets
25
331,574
198,160
Cash and cash equivalents
26
191,318
98,891
Total receivables and other current assets
3,046,145
5,286,176
Assets held for sale
21
32,118
62,640
Total assets held for sale
32,118
62,640
TOTAL CURRENT ASSETS
3,078,263
5,348,816
TOTAL ASSETS
56,273,524
55,174,747
The accompanying notes are an integral part of these separate financial statements.
Signed on behalf of the Company on 2 May 2022 by:
Krišjānis Znotiņš, Chairman of the Board
Aivis Lonskis, Member of the Board
Rita Kaktiņa, Chief accountant
THIS DOCUMENT HAS BEEN SIGNED WITH A SECURE ELECTRONIC SIGNATURE AND IT HAS A TIME-STAMP
 
 
 
 
 
 
 
 
 
 
9
mogo JSC
Annual report for the year ended 31 December 2021
Address: Skanstes street 52, Riga, Latvia
Unified registration number: 50103541751
Separate Statement of Financial Position
EQUITY AND LIABILITIES
31.12.2021.
31.12.2020.
EQUITY
EUR
EUR
Share capital
27
425,000
5,000,000
Foreign currency translation reserve
27
1
1
Fair value reserve
27
-
(23,511)
Other reserves
38
(1,925,471)
(3,474,331)
Retained earnings
19,816,601
16,486,308
 
brought forward
13,901,953
10,173,943
 
for the period
5,914,648
6,312,365
Total equity attributable to equity holders of the Parent Company
18,316,131
17,988,467
Non-controlling interests
404,421
335,976
TOTAL EQUITY
18,720,551
18,324,443
LIABILITIES
Non-current liabilities
Liabilities for issued debt securities
 
29
29,205,009
-
Funding attracted through peer-to-peer platforms
29
2,677,385
4,783,925
Lease liabilities for right-of-use assets
17, 29
532,457
878,613
Loans from related parties
29
1,705,000
-
Total non-current liabilities
34,119,851
5,662,538
Provisions for financial guarantees
38
1,751,009
1,663,804
Other provisions
28
140,053
432,922
Total provisions for liabilities and charges and financial guarantees
1,891,062
2,096,726
Current liabilities
Liabilities for issued debt securities
 
29
-
24,480,115
Funding attracted through peer-to-peer platforms
29
636,780
1,893,372
Loans from banks
29
-
1,689,826
Lease liabilities for right-of-use assets
17, 29
77,821
103,079
Prepayments and other payments received from customers
30
58,433
50,374
Trade payables to related companies
34
6,140
-
Trade payables
 
117,891
88,407
Corporate income tax payable
14
2,943
3,163
Taxes payable
31
49,276
103,596
Other liabilities
32
363,893
383,726
Accrued liabilities
33
228,883
295,382
Total current liabilities
1,542,060
29,091,040
TOTAL LIABILITIES
37,552,973
36,850,304
TOTAL EQUITY AND LIABILITIES
56,273,524
55,174,747
The accompanying notes are an integral part of these separate financial statements.
Signed on behalf of the Company on 2 May 2022 by:
Krišjānis Znotiņš, Chairman of the Board
Aivis Lonskis, Member of the Board
Rita Kaktiņa, Chief accountant
THIS DOCUMENT HAS BEEN SIGNED WITH A SECURE ELECTRONIC SIGNATURE AND IT HAS A TIME-STAMP
 
 
 
 
 
10
mogo JSC
Annual report for the year ended 31 December 2021
Address: Skanstes street 52, Riga, Latvia
Unified registration number: 50103541751
Separate Statement of Changes in Equity
Share
capital
Fair value
reserves
Currency
revaluation
reserve
Other
Reserves
Retained
earnings
Total equity
attributable
to Equity
holders of
the Parent
Company
Non-
controlling
interest
Total
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
Balance at 01.01.2020.
5,000,000
-
1
(4,103,142)
10,173,943
11,070,802
207,632
11,278,434
Profit for the reporting year
-
-
-
-
6,312,365
6,312,365
128,824
6,441,189
Other comprehensive income
-
(23,511)
-
-
-
(23,511)
(480)
23,911
Total comprehensive income for the period
-
(23,511)
-
-
6,312,365
6,288,854
128,344
6,417,198
Net result of original guarantee derecognition and
recognition of modified guarantee (Note 38)
-
-
-
628,811
-
628,811
-
628,811
Balance at 31.12.2020.
5,000,000
(23,511)
1
(3,474,331)
16,486,308
17,988,467
335,976
18,324,443
Balance at 01.01.2021.
5,000,000
(23,511)
1
(3,474,331)
16,486,308
17,988,467
335,976
18,324,443
Profit for the reporting year
-
-
-
-
5,914,648
5,914,648
120,707
6,035,355
Other comprehensive loss for the period
-
23,511
-
-
-
23,511
480
23,991
Total comprehensive income for the period
-
23,511
-
-
5,914,648
5,938,159
121,187
6,059,346
Share capital decrease (Note 27)
(4,575,000)
-
-
-
-
(4,575,000)
-
(4,575,000)
Guarantee derecognition (Note 38)
-
-
-
3,474,331
(2,584,355)
889,976
(52,742)
837,234
Issue of financial guarantees (Note 38)
-
-
-
(2,886,850)
-
(2,886,850)
-
(2,886,850)
Decrease in fair value of the guarantees due to non-
substantial modifications (Note 38)
-
-
-
961,379
-
961,379
-
961,379
Dividends distribution (Note 28)
-
-
-
-
-
-
-
-
Balance at 31.12.2021.
425,000
(0)
1
(1,925,471)
19,816,601
18,316,131
404,421
18,720,552
The accompanying notes are an integral part of these separate financial statements.
Signed on behalf of the Company on 2 May 2022 by:
Krišjānis Znotiņš, Chairman of the Board
Aivis Lonskis, Member of the Board
Rita Kaktiņa, Chief accountant
THIS DOCUMENT HAS BEEN SIGNED WITH A SECURE ELECTRONIC SIGNATURE AND IT HAS A TIME-STAMP
 
 
 
 
 
 
 
 
 
11
mogo JSC
Annual report for the year ended 31 December 2021
Address: Skanstes street 52, Riga, Latvia
Unified registration number: 50103541751
Separate Statement of Cash Flows
2021
2020
Cash flows to/from operating activities
EUR
EUR
Profit before tax from continuing operations
6,035,355
6,441,189
 
Adjustments for:
 
Amortisation and depreciation
15, 16
149,771
213,044
 
Interest expense
5
4,105,164
4,127,633
 
Interest income
4
(7,752,943)
(10,465,330)
 
Disposals of property, equipment and intangible assets
-
4,503
 
Impairment expense
7
170,438
1,110,993
 
Financial guarantees
38
(1,043,412)
(1,383,329)
 
Operating profit before working capital changes
1,664,373
48,703
 
Increase in finance lease, loans and advances to customers, trade and other receivables
7,160,610
7,592,290
 
Increase in advances received and trade
payables and guarantees
(468,536)
992,898
 
Cash generated to/from operations
8,356,447
8,633,891
 
Interest received
8,265,726
10,472,410
 
Interest paid
29
(4,208,644)
(3,800,105)
 
Corporate income tax paid
(3,514)
(8,252)
Net cash flows to/from operating activities
12,410,015
15,297,944
Cash flows to/from investing activities
 
Purchase of property and equipment and other intangible assets
15, 16
(679,881)
(27,223)
 
Loan repayments received from related parties
57,206,147
33,404,745
 
Loans to related parties
(65,332,500)
(39,405,710)
Net cash flows to/from investing activities
(8,806,234)
(6,028,188)
Cash flows to/from financing activities
 
Proceeds from borrowings
29
45,267,024
19,297,656
 
Repayments for borrowings
29
(43,197,901)
(28,646,217)
 
Payments for borrowings acquisition costs
29
(927,439)
-
 
Repayment of lease liabilities for right-of-use assets
29
(78,038)
(92,875)
 
Paid out Share Capital
(4,575,000)
-
Net cash flows to/from financing activities
(3,511,354)
(9,441,436)
Change in cash
92,427
(171,680)
Cash at the beginning of the year
98,891
270,571
Cash at the end of the year
26
191,318
98,891
The accompanying notes are an integral part of these separate financial statements.
Signed on behalf of the Company on 2 May 2022 by:
Krišjānis Znotiņš, Chairman of the Board
Aivis Lonskis, Member of the Board
Rita Kaktiņa, Chief accountant
THIS DOCUMENT HAS BEEN SIGNED WITH A SECURE ELECTRONIC SIGNATURE AND IT HAS A TIME-STAMP
 
 
12
mogo JSC
Annual report for the year ended 31 December 2021
Address: Skanstes street 52, Riga, Latvia
Unified registration number: 50103541751
Notes to the separate financial statements
1. Corporate information
 
mogo JSC
 
(the "Company")
 
is a
 
Latvian company.
 
The Company
 
was incorporated
 
on
 
May 3,
 
2012 as
 
a joint
 
stock company
 
for an
 
unlimited duration,
 
subject to
 
general
company law.
The ultimate parent company of mogo JSC is
 
Eleving Group S.A. (Luxembourg). The ultimate beneficiary owner of
 
mogo JSC is Aigars Kesenfelds (37.985%). The share
 
of the
rest shareholders does not exceed 25%.
The core business activity of the Company comprises of providing finance lease services, leaseback
 
services and loans and advances to customers.
On March 1, 2021, through public offering the Company issued new secured corporate bond (LV0000802452) in the amount of EUR 30 million, which from March 31, 2021
 
is
included in the regulated market of NASDAQ OMX Baltic.
 
For additional information see Note 29.
Annual report of 2021 has been approved by decision of the board on 2 May 2022.
Shareholders have the separate financial statements approval rights after their approval by the Board
 
of Directors.
2021
2020
Average number of employees during the reporting year
49
52
2. Summary of significant accounting policies
a) Basis of preparation
These annual
 
separate financial statements
 
as of
 
and for
 
the year ended
 
31 December
 
2021 are
 
prepared in accordance
 
with International
 
Financial Reporting Standards
 
as
adopted in the European Union.
 
 
The Company’s annual separate
 
financial statements and its
 
financial result are affected
 
by accounting policies, assumptions,
 
estimates and management judgement (Note
 
3),
which necessarily have
 
to be
 
made in
 
the course of
 
preparation of the
 
annual separate
 
financial statements. The
 
Company makes estimates
 
and assumptions that
 
affect the
reported
 
amounts
 
of
 
assets
 
and
 
liabilities within
 
the
 
current
 
and
 
next
 
financial
 
period.
 
All
 
estimates
 
and
 
assumptions required
 
in
 
conformity
 
with
 
IFRS
 
are
 
best
 
estimates
undertaken in accordance
 
with the
 
applicable standard. Estimates
 
and judgements are
 
evaluated on a
 
continuous basis, and
 
are based on
 
past experience and
 
other factors,
including expectations
 
with regard
 
to future
 
events. Accounting
 
policies and
 
management’s judgements
 
for certain
 
items are
 
especially critical
 
for the
 
Company’s results
 
and
financial situation due to their
 
materiality. Future events occur
 
which cause the assumptions used
 
in arriving at the estimates
 
to change. The effect
 
of any changes in estimates
will be recorded in the separate financial statements, when determinable. See Note 3.
 
 
 
 
 
 
 
 
The consolidated financial statements for the year ended 31 December 2021 are prepared separately.
 
The separate financial statements are prepared on a historical cost basis except for
 
the recognition of financial instruments measured at fair value.
The Company's presentation and functional currency is euro (EUR). The separate financial statements cover the period from 01 January 2021 till 31 December 2021. Accounting
policies
and methods are consistent with those applied in the previous years, except as described below.
The management
 
does not
 
use segmental
 
approach to
 
operational decision-making.
 
All of
 
the Company's
 
economic activities
 
are carried
 
out in
 
one geographical
 
segment -
Latvia. The
 
Company continued
 
developing loan
 
servicing business
 
line in
 
2021, however;
 
it is
 
considered to
 
not yet
 
be material
 
enough to
 
be disclosed
 
separately in
 
the
standalone financial statements as at the reporting period end and its assets and profitability
 
are not analyzed saparately.
 
Going concern
These separate financial statements are prepared on the going concern basis.
 
b) Changes in accounting policy disclosures and presentation
The accounting policies adopted are consistent with those of
 
the previous financial year except for the following amended IFRSs
 
which have been adopted by the Group as of 1
January 2021.
13
IFRS 16: Leases
The Company
 
has early
 
adopted COVID-19
 
- Related
 
Rent Concessions –
 
Amendment to
 
IFRS 16
 
issued on
 
28 May
 
2020. The
 
amendment introduces an
 
optional practical
expedient for leases in which the Group is a lessee – i.e. for leases to which the Company applies the practical expedient, the Company is not required to assess whether eligible
rent concessions that are
 
a direct consequence of
 
the COVID-19 coronavirus pandemic are
 
lease modifications. The Company has
 
applied the amendment retrospectively,
 
the
effect of application is not significant.
The effect is reflected for year 2020 in Note 12 and Note 17, no significant effect for year 2021.
 
 
Adoption of new and revised standards and interpretations
A number of new standards (or amendments) are effective from 1 January 2021 but they do not have a material
 
effect on the Company’s separate financial statements.
 
– COVID-19-Related Rent Concessions (Amendment to IFRS 16);
 
– Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS
 
16).
c) Standards issued but not yet effective and not early adopted
Other standards
The following new and amended standards are not expected to have a significant impact on the
 
Company’s separate financial statements.
— Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);
— Reference to Conceptual Framework (Amendments to IFRS 3);
— Cost of Fulfilling a Contract (Amendments to IAS 37);
— Classification of Liabilities as Current or Non-current (Amendments to IAS 1);
 
— Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16);
— IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance Contracts.
d) Significant accounting policies
 
Licenses and other intangible assets
Intangible non-current
 
assets are
 
initially stated
 
at cost
 
and amortized
 
over their
 
estimated useful
 
lives on
 
a straight-line
 
basis. The
 
carrying values
 
of intangible
 
assets are
reviewed for impairment
 
when events or
 
changes in circumstances
 
indicate that the
 
carrying value may
 
not be recoverable. Losses
 
from impairment are
 
recognized where the
carrying value of intangible non-current assets exceeds their recoverable amount.
Other intangible assets mainly consists of acquired computer software products.
Amortization is calculated on a straight-line basis over the estimated useful life of the asset as follows:
Concessions, patents, licences and similar rights
- over 1 year;
Other intangible assets - acquired IT Systems
- over 2, 3 and 5 years.
Property and equipment
Equipment is stated
 
at cost less
 
accumulated depreciation and
 
any impairment in
 
value. Depreciation is
 
calculated on a
 
straight-line basis over
 
the estimated useful
 
life of the
asset as follows:
Computers
- over 3 years;
Furniture
- over 5 years;
Vehicles
- over 7 years;
Leasehold improvements
- according to lease term;
Other equipment
- over 2 years.
Depreciation of an
 
asset begins when
 
it is available
 
for use,
 
i.e. when it
 
is in
 
the location and
 
condition necessary for
 
it to be
 
capable of operating
 
in the manner
 
intended by
management. The carrying values of equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any
such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written
 
down to their recoverable amount.
The recoverable
 
amount of
 
equipment is
 
the
 
higher of
 
an asset’s
 
net selling
 
price and
 
its value
 
in use.
 
In assessing
 
the value
 
in use,
 
the
 
estimated future
 
cash flows
 
are
discounted to
 
their present value
 
using a pre-tax
 
discount rate that
 
reflects current market
 
assessments of the
 
time value of
 
money and the
 
risks specific to
 
the asset. For
 
an
asset that does not generate largely independent cash inflows, the recoverable amount is determined for the
 
cash-generating unit to which the asset belongs. Impairment losses
are recognized in the statement of comprehensive income in the impairment expense caption.
An item of equipment is derecognized
 
upon disposal or when no future economic benefits
 
are expected to arise from the
 
continued use of the asset. Any gain
 
or loss arising on
derecognition of the asset
 
(calculated as the difference
 
between the net disposal
 
proceeds and the
 
carrying amount of the
 
item) is included
 
in the statement of
 
comprehensive
14
income in the year the item is derecognized.
Financial assets
Financial instruments – initial recognition
Date of recognition
Loans and advances to
 
customers are recognized when
 
funds are transferred to
 
the customers’ accounts. Other assets
 
are recognized on the
 
date when Company enters
 
into
the contract giving rise to the financial instruments.
Initial recognition and measurement
The classification of financial
 
instruments at initial recognition depends
 
on their contractual terms and
 
the business model for
 
managing the instruments, as described
 
further in
the accounting policies. Financial instruments are initially measured at their fair value, except in the
 
case of financial assets and financial liabilities recorded at FVPL, transaction
costs are added to, or subtracted from, this amount. Other receivables are measured at the transaction
 
price.
 
Classification of financial assets
The Company only measures Loans and advances to customers, Loans to related parties, Receivables
 
from related parties, Cash equivalents and Other loans and receivables at
amortized cost if both of the following conditions are met:
• The financial asset is held within a business model with the objective to hold financial assets in order to collect
 
contractual cash flows
•
 
The
 
contractual terms
 
of
 
the
 
financial asset
 
give
 
rise on
 
specified
 
dates to
 
cash
 
flows
 
that are
 
solely payments
 
of
 
principal and
 
interest (SPPI)
 
on
 
the
 
principal amount
outstanding.
Business model assessment
The Company determines its business model at
 
the level that best reflects
 
how it manages Company's of financial
 
assets to achieve its business
 
objective - the risks that
 
affect
the performance
 
of the
 
business model
 
(and the
 
financial assets
 
held within
 
that business
 
model) and
 
the way
 
those risks are
 
managed. The
 
expected frequency,
 
value and
timing of sales are also important aspects of the Company's assessment. The business model assessment is based on reasonably expected
 
scenarios without taking 'worst case'
or 'stress case’ scenarios into account. If cash flows after initial recognition are realized in a way that is different from the Company's original expectations, the Company does not
change the classification of
 
the remaining financial assets
 
held in that
 
business model, but incorporates
 
such information when assessing
 
newly originated or newly
 
purchased
financial assets going forward. The assessed business model is with the intention to hold financial assets in
 
order to collect contractual cash flows.
SPPI test
As a second
 
step of its
 
classification process the Company
 
assesses, where relevant, the
 
contractual terms of the
 
financial assets to
 
identify whether they meet
 
the SPPI test.
Financial assets
 
subject to
 
SPPI testing
 
are loans
 
and advances
 
to customers
 
(including financial
 
assets arising
 
from sales
 
and leaseback
 
transactions, as
 
discussed
 
in a
separate section of this note)
 
and loans to related parties that solely include payments of principal and interest.
 
‘Principal’ for the purpose of this test is defined as the fair
 
value
of
 
the
 
financial
 
asset
 
at
 
initial
 
recognition
 
and
 
may
 
change
 
over
 
the
 
life
 
of
 
the
 
financial
 
asset
 
(for
 
example,
 
if
 
there
 
are
 
repayments
 
of
 
principal
 
or
 
amortization
 
of
 
the
premium/discount). The most significant elements of interest within a lending arrangement are typically
 
the consideration for the time value of money and credit risk.
In assessing whether the
 
contractual cash flows are
 
SPPI, the Company considers
 
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 the assessment, the Company
principally considers:
-
 
contingent events that would change the amount and timing of cash flows;
-
 
prepayment and extension terms; and
- terms that limit the Company’s claim to cash flows from specified assets (e.g. non-recourse loans).
In general, the loan contracts stipulate that in case of default and collateral repossession the claim is
 
not limited to the collateral repossession and if the collateral value does not
cover the remaining debt,
 
additional resources can still be
 
claimed from the borrower
 
to compensate for credit risk
 
losses. Accordingly, this
 
aspect does not create obstacles
 
to
passing SPPI test. However, in some cases, loans made by the Company that are secured by collateral of the borrower limit the Company’s claim to cash
 
flows of the underlying
collateral (non-recourse
 
loans). The
 
Company applies
 
judgment in
 
assessing whether
 
the non-recourse
 
loans meet
 
the SPPI
 
criterion. The
 
Company typically
 
considers the
following information when making this judgement:
-
 
whether the contractual arrangement specifically defines the amounts and dates of the cash
 
payments of the loan;
-
 
the fair value of the collateral relative to the amount of the underlying loan;
 
-
 
the ability and willingness of the borrower to make contractual payments, notwithstanding a decline in the
 
value of collateral;
-
 
the Company’s risk of loss on the asset relative to a full-recourse loan; and
 
-
 
whether the Company will benefit from any upside from the underlying assets.
According to the judgement made the non-recourse loans that are secured by collateral of the borrower meet the SPPI
 
criterion.
Embedded derivatives
The Company has
 
certain call and
 
put option
 
agreements that can
 
accelerate repayment of
 
the issued bonds.
 
These options arise
 
out of bond
 
(host contract) prospectus
 
and
individual agreements
 
with certain
 
bondholders and
 
meet the
 
definition of
 
an embedded
 
derivative in
 
accordance with
 
IFRS 9.
 
An embedded
 
derivative is
 
a component
 
of a
hybrid instrument that also
 
includes a non-derivative host contract
 
with the effect
 
that some of the
 
cash flows of the
 
combined instrument vary in
 
a way similar to
 
a stand-alone
derivative. An embedded derivative
 
causes some or all
 
of the cash
 
flows that otherwise would
 
be required by
 
the contract to
 
be modified according
 
to a specified
 
interest rate,
financial instrument
 
price, commodity
 
price, foreign exchange
 
rate, index of
 
prices or rates,
 
credit rating
 
or credit
 
index, or
 
other variable,
 
provided that,
 
in the
 
case of
 
a non-
financial
 
variable,
 
it
 
is
 
not
 
specific
 
to
 
a
 
party
 
to
 
the
 
contract.
 
A
 
derivative
 
that
 
is
 
attached
 
to
 
a
 
financial
 
instrument,
 
but
 
is
 
contractually
 
transferable
 
independently of
 
that
instrument, or has
 
a different
 
counterparty from that
 
instrument, is not
 
an embedded derivative,
 
but a
 
separate financial instrument.
 
The Company accounts
 
for an embedded
derivative separately from the host contract when:
• the host contract is not an asset in the scope of IFRS 9;
• the host contract is not itself carried at FVPL;
• the terms of the embedded derivative would meet the definition of a derivative if they were contained in a separate contract;
 
and
• the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics
 
and risks of the host contract.
Separated embedded
 
derivatives are
 
measured at
 
fair value,
 
with all
 
changes in
 
fair value
 
recognised in
 
profit or
 
loss (unless
 
they form
 
part of
 
a qualifying
 
cash flow
 
or net
investment hedging
 
relationship) and
 
presented
 
in
 
the statement
 
of
 
financial position
 
together with
 
the host
 
contract. The
 
Company
 
has
 
derivatives embedded
 
in
 
financial
liabilities and
 
non-financial host
 
contracts. Financial
 
assets are
 
classified based
 
on the
 
business model
 
and SPPI
 
assessments as
 
outlined above.
 
Please refer
 
to Note
 
3 for
further discussion on embedded derivative details and considerations of separability.
15
Reclassification of financial assets
The Company does not
 
reclassify its financial assets
 
subsequent to their initial
 
recognition, apart from the exceptional
 
circumstances in which the
 
Company acquires, disposes
of, or terminates a business line.
Financial liabilities are never reclassified. The Company did not reclassify any of its financial
 
assets or liabilities in 2021 or 2020.
Derecognition of financial assets and finance lease receivables
Derecognition provisions below apply to all financial assets measured at amortized cost.
 
Derecognition due to substantial modification of terms and conditions
The Company derecognizes loan to a customer or finance lease receivable when the
 
terms and conditions have been renegotiated to the extent that, substantially,
 
it becomes a
new loan or
 
lease, with the
 
difference recognized as
 
a derecognition gain
 
or loss, to
 
the extent
 
that an impairment
 
loss has not
 
already been recorded.
 
The newly recognized
loans are classified as Stage 1 for ECL measurement purposes, unless the new financial asset is deemed to be purchased
 
or originated credit impaired (POCI).
When assessing
 
whether or
 
not
 
to derecognize
 
a financial
 
asset, the
 
Company
 
evaluates whether
 
the
 
cash flows
 
of the
 
modified asset
 
are substantially
 
different and
 
the
Company considers the following qualitative factors:
• Change in currency of the loan
• Change in counterparty
• If the modification is such that the instrument would no longer meet the SPPI criterion
• Whether legal obligations have been extinguished.
•
 
Furthermore,
 
for
 
loans
 
to
 
customers
 
and
 
financial
 
lease
 
receivables
 
the
 
Company
 
specifically considers
 
the
 
purpose
 
of
 
the
 
modification
 
for
 
increase
 
in
 
lease
 
term.
 
It
 
is
evaluated whether modification was entered into for
 
commercial reasons upon customer initiative or for
 
credit restructuring reasons. Management has performed analysis of
 
the
changes being made due to business
 
reasons and evaluated that changes due to business
 
reasons result in substantial modification of terms and
 
conditions. This is in line with
the
 
objective
 
of
 
this
 
modification
 
that
 
is
 
to
 
originate
 
a
 
new
 
asset
 
with
 
substantially
 
different
 
terms.
 
If
 
the
 
DPD
 
(days
 
past
 
due)
 
of
 
the
 
counterparty
 
immediately
 
prior
 
the
modification is less than 5 DPDs and the characteristics of financial asset are substantially modified (e.g. on average financial asset term increases for several years substantially
changing
 
the
 
term structure
 
of
 
the asset),
 
the
 
respective modification
 
is considered
 
to occur
 
for a
 
commercial reasons
 
and
 
results in
 
derecognition of
 
the
 
initial lease/loan
receivable.
Other modifications to the agreement terms are treated as modifications that do not result in derecognition
 
(see section on Modifications below).
Derecognition other than for substantial modification
A financial
 
asset or
 
finance lease
 
receivable (or,
 
where applicable,
 
a part
 
of a
 
financial asset
 
or finance
 
lease receivable
 
or part
 
of a
 
Company of
 
similar financial
 
assets or
finance
 
lease
 
receivables)
 
is
 
derecognized
 
when
 
the
 
rights
 
to
 
receive
 
cash
 
flows
 
from
 
the
 
financial
 
asset
 
or
 
finance
 
lease
 
receivable
 
have
 
expired.
 
The
 
Company
 
also
derecognizes the financial asset or finance lease receivable if it has both transferred the financial asset or finance lease receivable
 
and the transfer qualifies for derecognition.
The Company has transferred the financial asset or finance lease receivable if the Company has transferred its contractual rights to receive cash flows from the financial asset or
finance lease receivable.
The Company has transferred the asset if, and only if, either:
- The Company has transferred its contractual rights to receive cash flows from the asset or
- It
 
retains
 
the rights
 
to the
 
cash flows,
 
but has
 
assumed an
 
obligation to
 
pay the
 
received cash
 
flows in
 
full without
 
material delay
 
to a
 
third party
 
under a
 
‘pass–through’
arrangement.
Pass-through arrangements are transactions when
 
the Company retains the contractual
 
rights to receive the cash
 
flows of a financial asset
 
(the 'original asset'), but assumes
 
a
contractual obligation to pay those cash flows to one or more entities (the 'eventual recipients'),
 
when all of the following three conditions are met:
- Company has no obligation to
 
pay amounts to the eventual recipients unless it
 
has collected equivalent amounts from the original asset,
 
excluding short-term advances by the
entity with the right of full recovery of the amount lent plus accrued interest at market rates;
- Company cannot sell or pledge the original asset other than as security to the eventual recipients for the obligation
 
to pay them cash flows;
- Company has to remit any cash flows it collects
 
on behalf of the eventual recipients without material delay.
 
In addition, the Company is not entitled to reinvest such
 
cash flows,
except for investments
 
in cash or
 
cash equivalents during
 
the short settlement period
 
from the collection date
 
to the date
 
of required remittance
 
to the eventual recipients,
 
and
interest earned on such investments is passed to the eventual recipients.
A transfer only qualifies for derecognition if either:
- The Company has transferred substantially all the risks and rewards of the asset, or
- The Company has neither transferred nor retained substantially all the risks and rewards of the
 
asset, but has transferred control of the asset.
Modifications
The Company
 
sometimes makes
 
modifications to
 
the original
 
terms of
 
loans/lease as
 
a response
 
to the
 
borrower’s financial
 
difficulties, rather
 
than taking
 
possession or
 
to
otherwise enforce
 
collection of
 
collateral. The
 
Company considers
 
a
 
lease/loan restructured
 
when such
 
modifications are
 
provided as
 
a
 
result of
 
the borrower’s
 
present
 
or
16
expected financial difficulties
 
and the Company
 
would not have
 
agreed to them
 
if the borrower
 
had been financially
 
healthy. Indicators
 
of financial difficulties
 
include default or
DPDs prior to the modifications. Such modifications may involve extending the payment arrangements
 
and the agreement of new loan conditions.
If the modification does not
 
result in cash flows that
 
are substantially different, as set
 
out above, the modification does
 
not result in derecognition. Based
 
on the change in
 
cash
flows discounted at the
 
original EIR, the Company
 
records a modification gain
 
or loss in
 
interest revenue/expenses calculated using
 
the effective interest method
 
(Note 4, 5) in
the statements
 
of comprehensive income,
 
to the
 
extent that
 
an impairment
 
loss has
 
not already
 
been recorded
 
(Note 7). Further
 
information on
 
modified financial assets
 
and
finance lease receivables is disclosed in the following section on impairment.
As described
 
in section on
 
'Derecognition due to
 
substantial modification of
 
terms and
 
conditions' if modification
 
is performed
 
for commercial reasons,
 
then it is
 
considered to
result in
 
derecognition of
 
the initial
 
lease/loan receivable.
 
Such modifications
 
include increase
 
in the
 
lease amount
 
and increase
 
in lease
 
term, which
 
are agreed
 
upon with
customers for commercial reasons (i.e.-, customers and
 
the Company are both interested in
 
substantially modifying the scope of the
 
lease/loan transaction). Whenever such an
agreement to modify is reached the old agreement and respective receivable is derecognized.
Treatment of non-substantial modifications
If expectations of fixed rate financial assets’ cash flows are revised for reasons other than
 
credit risk, then changes to future contractual cash flows are discounted at the
 
original
EIR with
 
a consequential adjustment
 
to the carrying
 
amount. The difference
 
from the previous
 
carrying amount is
 
booked as a
 
positive or negative
 
adjustment to
 
the carrying
amount of
 
the financial
 
asset on
 
the consolidated
 
statement of
 
financial position
 
with a
 
corresponding increase
 
or decrease
 
in Interest
 
revenue/expense calculated
 
using the
effective interest method.
The carrying
 
amount of
 
the financial
 
asset or
 
financial liability
 
is adjusted
 
if the
 
Company revises
 
its estimates
 
of payments
 
or receipts.
 
If modification
 
of a
 
financial asset
 
or
liability measured at amortized
 
cost does not result
 
in the derecognition a
 
modification gain/loss is calculated.
 
The adjusted carrying amount
 
is calculated based on
 
the original
effective interest rate and the change in carrying amount is recorded as interest income or expense.
Changes in
 
the contractual
 
cash flows
 
of the
 
asset are
 
recognized in
 
statement of
 
comprehensive income
 
and any
 
costs or
 
fees incurred
 
adjust the
 
carrying amount
 
of the
modified
 
financial
 
asset
 
and
 
are
 
amortized
 
over
 
the
 
remaining
 
term
 
of
 
the
 
modified
 
instrument.
 
Therefore,
 
the
 
original
 
EIR
 
determined
 
at
 
initial
 
recognition
 
is
 
revised
 
on
modification to reflect any costs or fees incurred.
Overview of the expected credit loss principles
 
If there
 
has been
 
no significant increase
 
in credit
 
risk since origination,
 
the ECL allowance
 
is based on
 
the 12 months’
 
expected credit
 
loss (12mECL) as
 
outlined in below.
 
If
there has been significant increase in credit
 
risk since initial recognition, the ECL allowance
 
is based on the credit losses expected
 
to arise over the life of
 
the asset (the lifetime
expected credit loss or LTECL). The Group’s policies for determining if there has been a significant increase in credit risk are set out in below.
The 12mECL is the portion of LTECLs
 
that represent the ECLs that result from default
 
events on a financial instrument that are possible
 
within the 12 months after the reporting
date. Both LTECLs and 12mECLs are calculated on either an individual basis or a collective basis, depending on the nature of the underlying portfolio
 
of financial instruments.
The Company has established
 
a policy to perform
 
an assessment, at the
 
end of each
 
reporting period, of whether
 
a financial instrument’s credit
 
risk has increased significantly
since
 
initial recognition,
 
by considering
 
the change
 
in the
 
risk of
 
default occurring
 
over the
 
remaining life
 
of the
 
financial instrument.
 
This is
 
further explained
 
in section
 
on
Impairment of financial assets (Note 3).
Impairment of finance lease receivables and loans and advances to customers
Defining credit rating
Company’s core
 
business assets
 
– financial
 
lease receivables and
 
loans and
 
advances to
 
customers –
 
are of
 
retail nature, therefore
 
are grouped
 
per countries
 
and products
(finance lease receivables and loans and advances
 
to customers) for a collective ECL calculation
 
that is modelled based on DPD
 
(days past due) classification. Specifically,
 
the
Group analyses
 
its portfolio
 
of finance
 
lease receivables
 
and loans
 
and advances to
 
customers by
 
segregating receivables in
 
categories according
 
to country,
 
product group,
days past due and presence of underlying collateral (for secured products). Financial lease receivables and secured
 
loans (more specifically vehicle secured loans) are combined
due to similar nature of the products.
The Company continuously
 
monitors all assets
 
subject to
 
ECLs. To
 
determine whether an
 
instrument or a
 
portfolio of instruments
 
is subject
 
to 12mECL or
 
LTECL, the
 
Group
assesses whether there has been a significant increase in credit risk since initial recognition. When estimating ECLs on a collective basis for a group of similar assets, the
 
Group
applies the same
 
principles for assessing
 
whether there has
 
been a
 
significant increase
 
in credit risk
 
since initial
 
recognition across the
 
portfolios within the
 
country based on
product type – lease or loan product.
The Company segregates finance lease receivables and loans and advances to customers in the following
 
categories:
Finance lease receivables and secured loans:
1) not past due;
2) days past due up to 30 days;
3) days past due 31 up to 60 days;
4) days past due over 60 days;
5) unsecured (general definition: days past due over 90 or collateral is not available, i.e. lost or sold).
Loans and advances to customers (unsecured loans):
1) not past due;
2) days past due up to 30 days;
 
 
17
3) days past due 31 up to 60 days;
4) days past due over 60 days.
Based on the above process, the Company groups its leases and loans into Stage 1, Stage 2, and
 
Stage 3, as described below:
• Stage 1: When loans/leases are first recognized, the Company recognizes an allowance based on 12mECLs. The Company considers leases and loans that are current or with
DPD up to 30 as Stage 1.
A healing period of 2 months is applied before
 
an exposure previously classified as Stage 2 can be transferred to Stage
 
1 and such an exposure must meet the general Stage
 
1
DPD criteria above. Healing period concept is not applied for unsecured loans. Exposures are classified
 
out of Stage 1 if they no longer meet the criteria above.
• Stage
 
2: When
 
a loan/lease
 
has shown
 
a significant
 
increase in
 
credit risk
 
since origination,
 
the Company
 
records an
 
allowance for
 
the LTECLs.
 
The Company
 
generally
considers leases
 
and secured loans
 
that have
 
a status
 
of 31-60
 
DPD to
 
being Stage
 
2. Also
 
unsecured loan is
 
considered Stage 2
 
if DPD
 
is in
 
the range
 
of 31
 
to 60.
 
Lease
exposures remain in Stage 2 for a healing period of 2 months, even if they otherwise would meet Stage 1 criteria above
 
during this period.
• Stage 3: Leases and loans considered credit-impaired and at default. The Company
 
records an allowance for the LTECLs. The Company
 
considers a finance lease agreement
and secured
 
loan agreement
 
defaulted and
 
therefore Stage
 
3 in
 
all cases
 
when the
 
borrower becomes
 
61 DPD
 
on its
 
contractual payments
 
or the
 
lease/ loan
 
agreement is
terminated.
 
The Company considers an unsecured loan agreement defaulted and therefore Stage 3 in all cases when the borrower becomes 61 days past due on its contractual
payments. Exposures remain in Stage 3 for a healing period of 1 months even if they otherwise
 
would meet Stage 2 criteria above during this period.
Due to the nature
 
of credit exposures of
 
the Company qualitative assessment of
 
whether a customer is
 
in default is not
 
performed and primary reliance
 
is placed on the
 
above
criteria.
Temporary debt restructuring (TDR) and restructuring
As response to COVID-19 Company introduced TDR program which consists 2 main products:
Extension – is a payment holiday for 1
 
month (or several months) . Customer pays extension fee and
 
returns to the original schedule in next several
 
months. Paid extension fee
is an indication that customer
 
is willing to cooperate, and
 
the Company expects customer to
 
return to previous payment discipline under
 
normal circumstances. Classification in
such cases to the stage is bases as per DPD.
Restructuring
 
- permanent amendment of the schedule. Classification to the stage is bases as per DPD.
TDR and restructuring (further
 
change of the original
 
payment schedule) is almost
 
the only feasible solution
 
to reduce financial burden
 
on customers given circumstances, thus
fact of the forbearance as such does not lead to the recognition of SICR if customer pays according to new terms and later
 
returns to the original schedule or close to it.
The Company
 
made changes in
 
impairment policy,
 
effective until
 
further notice,
 
but not
 
later than
 
December 2021*: cases
 
where the
 
Company has
 
sound grounds to
 
expect
customer to return to the regular discipline not longer than in 12-month time should not be classified as SICR even if customer
 
has been granted forbearance tool.
TDRs performed to customers that was previously in default result in continued Stage
 
3 treatment during the one-month healing period followed by 2 months of healing period in
Stage 2. In case of modification for credit reasons prior to default (generally extension), exposure
 
is moved to Stage 2 for a healing period of 2 months.
*During 2021
 
the Company
 
decreased usage
 
of TDRs
 
significantly,
 
however due
 
uncertain pandemic
 
development and
 
stricter restrictions
 
and lockdowns
 
remaining, it
 
was
decided to extend TDR program till December 2022.
The calculation of ECLs
The Company calculates ECLs based
 
on probability-weighted scenarios to measure the expected
 
cash shortfalls, discounted at an
 
approximation to the EIR. A
 
cash shortfall is
the difference between the cash flows that are due to the Company in accordance with the contract and the cash flows that the
 
Company expects to receive.
Key elements of the model are, as follows:
• PD The Probability of Default is an estimate of the likelihood of default over a 12 month or lifetime horizon (time
 
horizon depends on ECL type - i.e., 12mECL or LTECL).
Default distribution vector (DDV) is the estimate of the time to default, more specifically it provides distribution
 
of PD over the course of a 12 month or lifetime horizon.
•
 
EAD
 
The
 
Exposure
 
at
 
Default
 
is an
 
estimate
 
of
 
the
 
exposure
 
at
 
a
 
future default
 
date,
 
considering
 
expected
 
changes in
 
the
 
exposure
 
after
 
the
 
reporting date,
 
including
repayments, whether scheduled by contract or otherwise.
• LGD The Loss Given Default is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the cash flows due at the
moment of
 
default and
 
those that
 
the
 
lender would
 
expect to
 
receive, including
 
from the
 
realization of
 
any collateral
 
and deducting
 
expenses related
 
to cash
 
collections or
collateral realization processes. It is usually expressed as a percentage of the defaulted balance.
18
•
 
Lifetime period is estimated as average remaining contractual term of respective portfolio.
 
The Company may choose to use actual balance isntead of EAD and do not apply DDV for the segments
 
with the elevated credit risk.
 
The Company employs multiplication model across all Stages for the ECL calculation:
 
ECL=EAD*PD*
LGD*[DDV]
Given that DDV is
 
a multidimensional vector (generally 12
 
or 13 dimensions but
 
can be shorter if
 
representative historical data is
 
available for a shorter
 
period) it is aggregated
into one value before multiplication - [DDV]. DDV aggregated value is obtained as follows:
•
 
each value of the DDV is multiplied with discount factor;
 
•
 
discount factor is calculated
 
in a regular way
 
(e.g. NPV formula), where discount
 
is calculated on EIR
 
of the portfolio and
 
number of periods corresponds
 
to the dimension of
the respective DDV value;
•
 
[DDV] is the sum of all respective multiplications of DDV values with respective discount factors.
Depending on Stage following specifics are applied to the general ECL model:
 
• Stage 1: The 12mECL is calculated. The Company calculates the 12mECL allowance using 12 months (or
 
shorter if lifetime of the product is less than 12 months or
representative historical data is available for a shorter period) PDs and DDV over the 12-month horizon. These
 
12-month default probabilities are applied to an estimated EAD
and multiplied by the expected LGD and discounted by an approximation to the original EIR using DDV, in this way incorporating time to default into model.
• Stage
 
2: When
 
a loan
 
has shown
 
a significant
 
increase in
 
credit risk
 
since origination,
 
the Company
 
records an
 
allowance for
 
the LTECLs.
 
The mechanics
 
are like
 
those
explained above, but PDs and DDV
 
are estimated over the lifetime of
 
the instrument. The expected cash shortfalls
 
are discounted by an approximation to
 
the original EIR using
DDV.
• Stage 3: For loans considered credit-impaired, the Company recognizes the LTECLs for these loans. The method is similar to that for Stage 2 assets, with the
 
PD set at 100%.
Write off of unrecoverable debts
The Company
 
considers any kind
 
of receivable completely
 
unrecoverable and writes
 
off the
 
receivable from balance
 
sheet entirely if
 
all legal
 
actions have been
 
performed to
recover the receivable and the Company has no reasonable expectations of recovering a financial
 
asset.
Impairment of financial assets other than loans and advances
 
Financial assets where the Company calculates ECL on an individual basis or collective basis are:
• Other receivables from customers/contract assets
• Trade receivables
• Loans to related parties
• Cash and cash equivalents
• Financial guarantees
Impairment of other receivables from customers/contract assets (Trade receivables)
During the course of business, the Company may
 
have other type of claims against its leasing customers.
 
In such cases the ECL methodology of
 
the related lease receivable is
mirrored and the ECL
 
mirrors the impairment of the
 
lease receivable. For other receivables
 
and contract assets that
 
are not related to
 
lease portfolio receivables, the Company
applies a simplified approach in calculating ECLs. Therefore, the Company does not track changes in credit risk, but instead recognizes a loss allowance based on
 
lifetime ECLs
at
 
each
 
reporting
 
date.
 
The
 
ECL
 
recorded
 
is
 
based
 
on
 
its
 
historical
 
credit
 
loss
 
experience,
 
adjusted
 
for
 
forward-looking factors
 
specific
 
to
 
the
 
debtors
 
and
 
the
 
economic
environment. For claims against its leasing customers the Company mirrors the staging applied to the underlying
 
lease exposure.
Impairment for loans to related parties
Receivables from related parties inherently are subject
 
to the Company’s credit risk. Therefore,
 
a benchmarked PD rate based on
 
Standard & Poor's corporate statistics studies
has been applied in determining the ECLs. The LGD has been assessed considering the related party's financial
 
position.
Impairment of cash and cash equivalents
For cash and cash equivalents default is considered as soon as balances are not cleared
 
beyond conventional banking settlement
 
timeline, i.e., a few days.
Therefore, transition is straight from
 
Stage 1 to Stage 3
 
given the low number of
 
days that it would take
 
the exposure to reach Stage
 
3 classification, meaning default. For cash
and cash equivalents no Stage 2 is applied given that any past due days would result in default.
19
Financial guarantees
Guarantees that are not integral to
 
a loan contractual terms are accounted
 
as separate units of accounts subject
 
to ECL. For this purpose, the
 
Company estimates ECLs based
on the value of the expected payments to reimburse the holder for a credit loss that it would incur. ECLs are calculated on an individual basis.
 
The ECL allowance is based on the
 
credit losses expected to arise over the
 
life of the guarantee, unless there has been
 
no significant increase in credit risk since
 
origination, in
which case, the allowance is
 
based on the 12months ECL. Company’s
 
policy and judgements for determining if there
 
has been a significant increase in
 
credit risk are set out
 
in
Note 3.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through
 
profit or loss, loans and borrowings or payables as appropriate.
All financial
 
liabilities are
 
recognised initially at
 
fair value and,
 
in the case
 
of loans
 
and borrowings and
 
payables, net of
 
directly attributable transaction
 
costs. The Company’s
financial liabilities include trade and other payables, loans and borrowings.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
 
- Financial liabilities at fair value through the statement of comprehensive income
Financial
 
liabilities
 
at
 
fair
 
value
 
through
 
the
 
statement
 
of
 
comprehensive
 
income
 
include
 
financial
 
liabilities
 
held
 
for
 
trading
 
and
 
financial
 
liabilities
 
designated
 
upon
 
initial
recognition as at fair value through the statement of comprehensive income.
Financial liabilities are classified as
 
held for trading if
 
they are incurred for the
 
purpose of repurchasing in the
 
near term. Separated embedded derivatives are
 
also classified as
held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the statement of comprehensive
 
income.
Financial liabilities designated upon initial recognition at fair value through the statement of comprehensive
 
income are designated at the initial date of recognition, and only if the
criteria in IFRS 9 are satisfied. The Company has not designated any financial liability as at fair value through
 
statement of comprehensive income.
 
- Loans and borrowings
This
 
is
 
the category
 
most
 
relevant to
 
the Company.
 
After
 
initial recognition,
 
interest-bearing loans
 
and borrowings
 
are subsequently
 
measured at
 
amortised cost
 
using
 
the
 
effective interest
 
method (EIR).
 
Gains and
 
losses are
 
recognised in
 
the statement of
 
comprehensive income
 
when the
 
liabilities are
 
derecognised as
 
well as
 
through the
 
EIR
amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included
as finance costs (interest expense) in the statement of comprehensive income.
This category generally applies to interest-bearing loans and borrowings.
Modification of financial liabilities
For financial
 
liabilities, the Company
 
considers a modification
 
substantial based on
 
qualitative factors and
 
if it
 
results in
 
a difference
 
between the
 
adjusted discounted present
value and the original
 
carrying amount of the
 
financial liability of, or
 
greater than, ten percent.
 
If the modification is
 
substantial, then a derecognition
 
gain or loss
 
is recorded on
derecognition. If the modification does not result in cash flows that are substantially different the modification does not result in derecognition. Based on the change in cash flows
discounted at the original EIR, the Company records a modification gain or loss.
Treatment of non-substantial modifications
If expectations
 
of fixed
 
rate financial
 
liabilities’ cash
 
flows are
 
revised, then
 
changes to
 
future contractual
 
cash flows
 
are discounted
 
at the
 
original EIR
 
with a
 
consequential
adjustment to
 
the carrying
 
amount. The
 
difference from
 
the previous
 
carrying amount
 
is booked
 
as a
 
positive or
 
negative adjustment
 
to the
 
carrying amount
 
of the
 
financial
liability on the consolidated statement of financial position with a corresponding increase or decrease
 
in Interest revenue/expense calculated using the effective interest method.
The carrying amount of the financial liability is
 
adjusted if the Company revises its estimates of
 
payments or receipts. If modification of a
 
financial liability measured at amortized
cost does not
 
result in the
 
derecognition a modification
 
gain/loss is calculated.
 
The adjusted carrying
 
amount is calculated
 
based on the
 
original effective interest
 
rate and the
change in carrying amount is recorded as interest income or expense (Note 4; 5).
Changes in
 
the contractual
 
cash flows
 
of the
 
asset are
 
recognized in
 
statement of
 
comprehensive income
 
and any
 
costs or
 
fees incurred
 
adjust the
 
carrying amount
 
of the
20
modified financial asset or liability and are amortized over the remaining term of the modified instrument. Therefore, the original EIR determined at initial recognition is revised on
modification to reflect any costs or fees incurred.
Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or
 
cancelled or expires. When an existing financial liability is replaced by another from the
same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the
original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the statement of comprehensive income.
The Company considers
 
a modification substantial
 
based on
 
qualitative factors and
 
if it
 
results in a
 
difference between
 
the adjusted discounted
 
present value and
 
the original
carrying amount of the financial liability of, or greater than, ten percent.
Offsetting of financial instruments
Financial assets and
 
financial liabilities are offset
 
and the net
 
amount is reported
 
in the financial
 
statements of financial
 
position if there
 
is a currently
 
enforceable legal right
 
to
offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities
 
simultaneously.
Provisions for financial guarantees and Other reserves
Where a contract meets the definition of a financial guarantee contract the Company,
 
as an issuer, applies specific accounting and measurement requirements of IFRS 9. These
IFRS 9 measurement requirements are applied for all guarantee contracts, including guarantees issued between entities under common control, as well as guarantees issued by
a subsidiary on
 
behalf of a
 
parent. If a
 
Company gives a
 
guarantee on behalf of
 
an entity under
 
common control, a
 
respective provision is recognised
 
in the separate
 
financial
statements. Where transaction is driven by the Company’s shareholders in
 
their capacity as owners, Company treats such transactions as an
 
increase in Provisions for financial
guarantees and an equal and opposite decrease in equity (as a distribution of equity). Distributions
 
of equity under financial guarantees are recognized in Other reserves.
 
Financial
 
guarantees
 
are
 
initially
 
recognised
 
in
 
at
 
fair
 
value.
 
Subsequently,
 
unless
 
the
 
financial
 
guarantee
 
contract
 
is
 
designated
 
at
 
inception
 
as
 
at
 
fair
 
value
 
through
comprehensive income,
 
Company’s liability
 
under each
 
guarantee is
 
measured at
 
the higher
 
of the
 
amount initially
 
recognised less
 
cumulative amortisation recognised
 
in the
statement
 
of
 
comprehensive
 
income,
 
and
 
ECL
 
provision
 
determined
 
in
 
accordance
 
with
 
IFRS
 
9
 
(as
 
set
 
out
 
in
 
Note
 
3).
 
Amortisation
 
is
 
recognised
 
in
 
the
 
statement
 
of
comprehensive income under Other operating income on a straight line basis over the term of the guarantee.
 
Financial guarantees
 
are derecognized if
 
the terms
 
of the
 
guarantee are
 
substantially changed. Changes
 
in guarantee
 
limit are
 
treated as
 
a derecognition.
 
In such
 
cases the
original guarantee is derecognized and
 
a new guarantee is
 
recognized at fair value.
 
Change in the
 
fair value is recognized
 
as a decrease or
 
increase in Provisions for financial
guarantees and an
 
equal and opposite
 
decrease or increase to
 
Other reserves. Other reserves
 
are transferred to retained
 
earnings upon extinguishment of
 
liabilities under the
financial guarantee.
 
 
Finance lease – Company as lessor
Finance leases, which
 
transfer substantially all
 
the risks and
 
rewards incidental to
 
ownership of the
 
assets, are recognised
 
as assets
 
at amounts equal
 
at the inception
 
of the
lease
 
to the
 
net
 
investment in
 
the lease.
 
The
 
finance income
 
is allocated
 
over time
 
period in-line
 
with the
 
lease term
 
to produce
 
a constant
 
return on
 
the
 
net investments
outstanding in respect of the finance leases.
Whilst financial lease receivables that represent financial instruments and to which IAS 17 or IFRS 16 applies are within the scope
 
of IAS 32 and IFRS 7, they are only within the
scope of
 
IFRS 9
 
to the
 
extent that
 
they are
 
(1) subject
 
to the
 
derecognition provisions,
 
(2) ‘expected
 
credit loss’
 
requirements and
 
(3) the
 
relevant provisions
 
that apply
 
to
derivatives embedded within leases.
The Company is engaged in financial lease transactions by selling vehicles to its customers through financial lease
 
contracts.
 
At inception of a contract, the Company assesses whether the contract is, or contains, a lease. The inception of the lease is the earlier of the date of the lease agreement and the
date of commitment by the parties to the principal provisions of the lease. As of this date:
•
 
a lease is classified as a finance lease; and
•
 
the amounts to be recognized at the commencement of the lease term are determined.
The commencement of the lease
 
is the date from which
 
the lessee is entitled to
 
exercise its right to use
 
the leased asset. It is
 
the date of initial recognition
 
of the lease (i.e. the
recognition of the assets, liabilities, income or expenses resulting from the lease, as appropriate).
A lease is classified as a
 
finance lease at the inception of
 
the lease if it transfers substantially
 
all the risks and rewards
 
incidental to ownership. The inception of
 
the lease is the
earlier of the date of the lease agreement and the date of commitment by the parties to the principal
 
provisions of the lease. As of this date:
• the lease transfers ownership of the asset to the lessee by the end of the lease term;
• the
 
lessee has
 
the option
 
to purchase
 
the asset
 
at a
 
price which
 
is expected
 
to be
 
sufficiently lower
 
than fair
 
value at
 
the date
 
the option
 
becomes exercisable
 
that, at
 
the
inception of the lease, it is reasonably certain that the option will be exercised;
21
• the lease term is for the major part of the economic life of the asset, even if title is not transferred;
• at the inception of the lease, the present value of the minimum lease payments amounts to
 
at least substantially all of the fair value of the leased asset;
• the lease assets are of a specialized nature such that only the lessee can use them without major modifications being
 
made.
Further indicators that individually or in combination would also lead to a lease being classified as a finance lease are:
• the lessee can cancel the lease, the lessor’s losses associated with the cancellation are
 
borne by the lessee;
• gains or losses from the fluctuation in the fair value of the residual accrue to the lessee;
• the lessee has the ability to continue the lease for a secondary period at a rent that is substantially lower
 
than market rent.
Initial measurement
At lease commencement, the Company accounts for a finance lease, as follows:
•derecognises the carrying amount of the underlying asset;
•recognises the net investment in the lease; and
•recognises, in profit or loss, any selling profit or selling loss.
 
Upon
 
commencement
 
of
 
finance
 
lease,
 
the
 
Company
 
records
 
the
 
net
 
investment
 
in
 
leases,
 
which
 
consists
 
of
 
the
 
sum
 
of
 
the
 
minimum
 
lease
 
term
 
payments,
 
and
 
gross
investment in lease less the unearned
 
finance lease income. The difference between
 
the gross investment and its present value
 
is recorded as unearned finance lease
 
income.
Initial direct
 
costs, such
 
as client
 
commissions and
 
commissions paid
 
by the
 
Company to
 
car dealers,
 
are included
 
in the
 
initial measurement
 
of the
 
lease receivables.
 
The
calculations are done using the effective interest method.
Prepayments and
 
other payments
 
received from
 
customers are
 
recorded in
 
statement of
 
financial position
 
upon receipt
 
and settled
 
against respective
 
client’s finance
 
lease
receivables agreement at the moment of issuing next monthly invoice according to the agreement
 
schedule.
Prepayments received from customers are presented separately as part of liabilities due to uncertainty of
 
how they will be utilized.
Prepayments received from customers are recorded in the statement of financial position upon receipt
 
and settled against respective client’s finance lease receivables.
Subsequent measurement
Finance lease income consists of the
 
amortization of unearned finance lease income. Finance
 
lease income is recognized based on
 
a pattern reflecting a constant periodic
 
rate
of return on
 
the net investment
 
according to effective
 
interest rate in
 
respect of the
 
finance lease. The
 
Company applies the
 
lease payments relating
 
to the
 
period against the
gross investment in the lease to reduce both the principal and the unearned finance income.
The Company recognises income from variable payments that are
 
not included in the net investment in
 
the lease (e.g. performance based variable payments, such as penalties
or debt collection
 
income) separately in the
 
period in which
 
the income is earned.
 
Such income is
 
recognized under 'Fee and
 
commission income' (Note 6)
 
in accordance with
IFRS 15.
After lease commencement, the net investment in a lease is not remeasured unless the lease is modified
 
and the modified lease is not accounted for as a separate contract or
the lease term is revised when there is a change in the non-cancellable period of the lease.
 
The Company applies derecognition and impairment requirements in IFRS 9 to the net investment in the lease.
 
Operating lease – Company as lessor
Leases in
 
which the
 
Company does
 
not transfer
 
substantially all
 
the risks
 
and rewards
 
of ownership
 
of an
 
asset are
 
classified as
 
operating leases.
 
Rental income
 
arising is
accounted for on a
 
straight-line basis over the
 
lease terms and is
 
included in revenue in
 
the statement of comprehensive
 
income. Initial direct costs
 
incurred in negotiating and
arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the
 
same basis as rental income. Contingent rents are
recognised as revenue in the period in which they are earned.
Company as lessee
 
Lease liability
Initial recognition
At the commencement date
 
of the lease
 
the Company measures the
 
lease liability at the
 
present value of the
 
lease payments that are
 
not paid at that
 
date in accordance
 
with
lease term. Lease payments included in the measurement of the lease liability comprise:
• fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• variable lease payments that depend on an index or a rate, initially measured using the index or rate as
 
at the commencement date;
• amounts expected to be payable by the Company under residual value guarantees;
• the exercise price of a purchase option if the Company is reasonably certain to exercise that option; and
• payments of penalties for terminating the lease, if the lease term reflects the Company exercising an option to terminate
 
the lease.
22
The Company has elected for all classes of
 
underlying assets not to separate non-lease components from
 
lease components in lease payments. Instead Company accounts for
each lease component and any associated non-lease components as a single lease component. The lease payments are discounted using the interest rate implicit in the lease, if
that rate can be readily determined. If that rate cannot be readily determined, the Company uses the incremental
 
borrowing rate.
 
Lease term is the non-cancellable period for which the Company has the right to use an underlying asset, together
 
with both:
(a) Periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option; and
(b) Periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option.
At the commencement date, the Company assesses whether it is reasonably certain to exercise an option to extend
 
the lease or to purchase the underlying asset, or not to
exercise an option to terminate the lease.
Subsequent measurement
After the commencement date, the Company measures the lease liability by:
• increasing the carrying amount to reflect interest on the lease liability;
• reducing the carrying amount to reflect the lease payments made; and
• remeasuring the carrying amount to reflect any reassessment or lease modifications specified, or to reflect revised in-substance
 
fixed lease payments.
Right-of-use assets
Initial recognition
At the commencement date of the lease, the Company recognises right-of-use asset at cost. The cost of a right-of-use
 
asset comprises:
•
 
the amount of the initial measurement of the lease liability;
•
 
any lease payments made at or before the commencement date, less any lease incentives received;
•
 
any initial direct costs incurred by the Company; and
•
 
an estimate of costs to be incurred by the Company in dismantling and removing the underlying
 
asset, restoring the site on which it is located or restoring the
underlying asset to the condition required by the terms and conditions of the lease, unless those costs
 
are to produce inventories.
Subsequent measurement
The Company measures the right-of-use asset at cost, less any accumulated depreciation and accumulated
 
impairment losses; and adjusted for the remeasurement of the lease
liability. Depreciation of the right-of-use asset is recognised on a straight-line basis in profit or loss. If the lease transfers ownership of the underlying asset to the Company by the
end of the lease term or if the cost of the right-of-use asset reflects that the Company will exercise a purchase option, the
 
Company depreciates the right-of-use asset from the
commencement date to the end of the useful life of the underlying asset in accordance with the Company`s
 
policy of similar owned assets. Otherwise, the right-of-use asset is
depreciated from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term.
 
Company involvement with the underlying asset before the commencement date
If a Company incurs costs relating to the construction or design of an underlying asset, the lessee accounts for those costs applying other IFRS, such as IAS 16. Costs relating to
the construction or design of an underlying asset do not include payments made by the lessee for the right to use the underlying
 
asset.
Company applies IAS 36 to determine whether the right-of-use asset is impaired and to account for any impairment loss
 
identified.
 
Initial recognition exemptions applied
As a recognition exemption the Company elects not to apply the recognition requirements of right-of-use
 
asset and lease liability to:
(a) Short term leases – for all classes of underlying assets; and
(b) Leases of low-value assets – on a lease-by-lease basis.
For leases qualifying as short-term leases and/or leases of low-value assets, the Company does not recognise a lease liability or right-of-use asset. The Company recognises the
lease payments associated with those leases as an expense on either a straight-line basis over the lease term.
 
(a) Short term leases
A short-term lease is a lease that, at the commencement date, has a lease term of 3 months or less. A lease that contains a
 
purchase option is not a short-term lease. This lease
exemption is applied for all classes of underlying assets.
 
(b) Leases of low-value assets
The Company defines a low-value asset as one that:
1)
 
has a value, when new of 5 000 EUR or less. The Company assesses the
 
value of an underlying asset based on the value of the asset when it is new,
 
regardless of
the age of the asset being leased.
2)
 
the Company can benefit from use of the assets on its own, or together with, other resources that are readily
 
available to the
 
Company; and
3)
 
the underlying asset is not dependent on, or highly interrelated with, other assets.
 
Sale and leaseback transactions
The Company also engages in financing of vehicles already owned by the customers. Under such leaseback transactions the Company purchases the underlying asset and then
leases it back to the same customer. Vehicle serves as a collateral to
 
secure all leases. The Company applies the requirements for determining when a performance obligation is
satisfied in
 
IFRS 15
 
to determine whether
 
the transfer
 
of an
 
asset is
 
accounted for as
 
a sale
 
of that
 
asset. If the
 
transfer of an
 
asset by
 
the seller-lessee does
 
not satisfy
 
the
requirements of IFRS 15 to
 
be accounted for as a
 
sale of the asset,
 
the buyer-lessor shall not recognize
 
the transferred asset and shall
 
recognize a financial asset equal
 
to the
transfer
 
proceeds. It
 
shall
 
account for
 
the financial
 
asset
 
as
 
loans and
 
advances to
 
customers by
 
applying IFRS
 
9.
 
As
 
at 31
 
December 2020
 
and
 
31 December
 
2021
 
the
23
Company concluded that
 
its sale and
 
leaseback contracts' provisions (including
 
repurchase options embedded) are
 
such that the
 
transfer of asset
 
from the seller-lessee to
 
the
Company does not satisfy and never satisfied the requirements of IFRS 15.
Such conclusion differs from the Company judgement as at 31 December 2019 and on the initial adoption of IFRS 9 and IFRS 15 and IFRS 16 as of 1 January 2018. Accordingly
receivables under sale and leaseback contracts were reclassified to loans and advances to customers
 
both as at 31 December 2020 and 31 December 2019.
The Company has performed SPPI test for its sale and leaseback arrangements. Vehicle
 
serves as a collateral to secure all of such loans. Sale
 
and leaseback contracts include
contractual terms that can vary the contractual cash
 
flows in a way that is
 
unrelated to a basic lending arrangement. Such cash
 
flows arise in the case or borrowers' default
 
and
are related to repossessed car sales for which any excess gains can be retained by the Company
 
and commissions and other fees charged to the customer that are not directly
linked
 
to
 
outstanding principal/interest
 
(e.g. external
 
debt
 
recovery costs
 
being charged
 
to
 
clients
 
with
 
mark-up). Other
 
contract elements
 
relevant to
 
SPPI
 
assessment for
components include the leased asset repurchase options, where the option value is below the car market
 
value at the moment of exercise and significant termination penalties for
certain non-recourse contracts.
The Company has made relevant judgements and concluded that SPPI test is met in all above circumsances
 
as
 
1) repossession commissions and
 
fees charged by
 
the Company are intended
 
to cover the
 
costs incurred by
 
the Company in
 
the debt servicing
 
process under regular lending
model,
 
2) the fact
 
that the Company
 
maintains proceeds from sale
 
of repossessed car
 
in excess of
 
recovered exposure (if applicable)
 
is not an
 
evidence that the
 
risk taken up by
 
the
Company is in fact the price risk of the car and
 
not the credit risk. The Company is able to sell the collateral and
 
keep any surplus only on default and the occasional trivial gains
from the transaction are not the purpose of the
 
core business model (which is to earn interest income
 
from the loan asset) and are not the
 
focus of the business, but instead are
just an instrument to minimise the credit losses,
 
3) termination penalties for non-recourse sale and leaseback transactions
 
charged to the customers in certain jurisdictions are also contractual elements intended to compensate
for credit risk and do not result in any notable net gains to the Company.
Cash and cash equivalents
Cash comprises cash at bank and on hand with an original maturity of less than three months.
Assets held for sale
The Company
 
classifies non-current assets
 
and disposal
 
groups as
 
held for
 
sale if
 
their carrying
 
amounts will
 
be recovered
 
principally through
 
a sale
 
transaction rather
 
than
through continuing use.
 
Assets held for sale includes vehicles which are obtained by enforcement of repossession in case clients default on existing lease agreements. Such repossessed collaterals are
classified
 
as
 
held
 
for
 
sale
 
and
 
measured at
 
the
 
lower
 
of
 
their
 
carrying amount
 
and
 
fair
 
value
 
less costs
 
to
 
sell (FVLCTS).
 
Costs
 
to
 
sell are
 
the
 
incremental costs
 
directly
attributable to the disposal of an asset, excluding finance costs and income tax expense.
The criteria for held for sale
 
classification is regarded as met only
 
when the sale is highly probable
 
and the asset is available for immediate
 
sale in its present condition. Actions
required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. Management must be
committed to the plan to sell the asset and the sale expected to be completed within one year from the date
 
of the classification.
Assets classified as held for sale are presented separately as current items in the statement of financial position.
Vacation pay reserve
Vacation pay reserve is calculated based on Latvian legislation requirements.
Investments in subsidiary
These are the Company's
 
separate financial statements. Consolidated financial
 
statements are prepared as
 
a separate set. Investments
 
in Subsidiary (i.e. where
 
the Company
holds more
 
than 50%
 
interest of
 
the share capital
 
or otherwise
 
controls the
 
company) and associates
 
(i.e. an
 
entity over which
 
the Company has
 
significant influence without
control
 
over
 
the
 
financial and
 
operating policy
 
decisions
 
of
 
the
 
investee) are
 
recognised at
 
cost
 
in
 
the
 
separate
 
financial statements
 
according
 
to
 
IAS
 
27.
 
Following
 
initial
recognition,
 
investments
 
in
 
Subsidiary
 
and
 
associates
 
are
 
carried
 
at
 
cost
 
less
 
any
 
accumulated
 
impairment
 
losses.
 
The
 
carrying
 
values
 
of
 
investments
 
are
 
reviewed
 
for
impairment at each statement of financial
 
position date. The Company calculates
 
the amount of impairment as the
 
difference between the recoverable amount of
 
the subsidiary
or associate and its carrying value, then, recognises the loss in the statement of comprehensive income.
Other investments
Equity investments at FVOCI
Upon initial recognition, the Company can choose to
 
irrevocably classify its equity investments that are not held for trading as equity instruments designated at fair value through
OCI (FVOCI). The Company evaluates and applies this classification for each instrument separately. These instruments are initially measured at fair value plus transaction costs,
directly attributable to their acquisition. After the
 
initial recognition, these instruments are measured at fair value. Dividends
 
are recorded in comprehensive statement of income.
Other net gains and losses are accumulated in OCI and are never applied or reclassified to profit or loss
 
statement.
 
24
Equity investments in non-listed companies are
 
classified and measured as Equity instruments
 
designated at fair value through
 
OCI as described above. The
 
Company elected
to classify irrevocably its non-listed equity investments under this category as it intends to hold these
 
investments for the foreseeable future.
Debt instruments at FVOCI
The Company classifies debt instruments at FVOCI when both of the following conditions are
 
met:
— The instrument is held within a business model, the objective of which is achieved by both collecting contractual
 
cash flows and selling financial assets;
— The contractual terms of the financial asset meet the SPPI test.
The debt
 
instruments measured at
 
FVOCI
 
are initially
 
measured at fair
 
value plus
 
transaction costs, directly
 
attributable to their
 
acquisition. After the
 
initial recognition, these
instruments are measured at amortized costs. Interest income and losses are recognised in profit or loss in the same manner as for financial assets
 
measured at amortised cost.
See Note 20.
 
In the
 
year end
 
FVOCI debt
 
instruments are
 
subsequently measured
 
at fair
 
value with
 
gains and
 
losses arising
 
due to
 
changes in
 
fair value
 
recognised in
 
OCI. Where
 
the
Company holds more
 
than one
 
investment in the
 
same security,
 
they are deemed
 
to be
 
disposed of on
 
a first–in
 
first–out basis. On
 
derecognition, cumulative gains
 
or losses
previously recognised in OCI are reclassified from OCI to profit or loss.
Transactions with peer-to-peer platforms
Background
The Company, as loan originator, have signed cooperation agreements with operator of a peer-to-peer (P2P) investment internet-based platform. Cooperation agreement and the
related assignment
 
agreements are
 
in
 
force until
 
parties agree
 
to terminate.
 
Purpose of
 
the cooperation
 
agreement for
 
the Company
 
is to
 
attract
 
funding through
 
the P2P
platform.
P2P platform makes possible for individual and
 
corporate investors to obtain a fully
 
proportionate interest cash flows and the principal
 
cash flows from debt instruments (finance
lease
 
receivables
 
or
 
loans
 
and
 
advances
 
to
 
customers)
 
issued
 
by
 
the
 
Company
 
in
 
exchange
 
for
 
an
 
upfront
 
payment.
 
These
 
rights
 
are
 
established
 
through
 
assignment
agreements between investors and P2P platform, who is acting as an agent on behalf
 
of the Company. Assignment agreements are of two types:
1) Agreements with recourse rights which require
 
the Company to guarantee full repayment of
 
invested funds by the investor in case
 
of default of the Company’s customer (buy
back guarantee);
2) Agreements without
 
recourse rights which
 
do not require
 
the Company to
 
guarantee repayment of
 
invested funds by
 
the investor in
 
case of default
 
of the customer
 
(no buy
back guarantee).
The Company retains the legal title to its debt instruments (including payment collection), but transfers
 
a part of equitable title and interest to investors through P2P platform.
Receivables and payables from/to P2P platform
P2P
 
platform
 
is
 
acting
 
as
 
an
 
agent
 
in
 
transferring
 
cash
 
flows
 
between
 
the
 
Company
 
and
 
investors.
 
Receivable
 
for
 
attracted
 
funding
 
from
 
investors
 
through
 
P2P
 
platform
corresponds to the due payments from P2P platform.
Receivable is arising from assignments made through P2P platform where the related investment is not yet transferred
 
to the Company (Note 24).
P2P platform commissions and service fees incurred by the Company are fees charged by P2P platform for servicing the funding attracted through peer-to-peer platform and are
disclosed in Note 9.
Funding attracted through peer-to-peer platform
Liabilities arising from
 
assignments with or
 
without recourse rights
 
are initially recognized
 
at cost, being
 
the fair value
 
of the consideration
 
received from investors
 
net of issue
costs associated with the loan.
Liabilities to investors are recognized in the statement of financial position caption Funding attracted
 
through peer-to-peer platform (Note 29) and are treated as loans received.
 
After initial recognition
 
Funding attracted through
 
peer-to-peer platform is
 
subsequently measured at
 
amortized cost using
 
the effective interest
 
rate method. Amortized
 
cost is
calculated by taking
 
into account any
 
issue costs, and any
 
discount or premium on
 
settlement. Gains and
 
losses are recognized in
 
the statement of comprehensive
 
income as
interest income/ expense when the liabilities are derecognized.
The Company
 
has to
 
repay to
 
the investor
 
the proportionate
 
share of
 
the attracted
 
funding for
 
each debt
 
instrument according
 
to the
 
conditions of
 
the respective
 
individual
agreement with Company’s client, which can be up to 72 months.
Assignments with recourse rights (buy back guarantee)
Assignments with recourse
 
rights provide for
 
direct recourse to
 
the Company,
 
thus do not
 
meet the requirements
 
to be
 
classified as pass-through
 
arrangement in accordance
with IFRS 9.
 
Therefore, the Company’s respective debt instruments
 
do not qualify to be
 
considered for partial derecognition and interest
 
expense paid to investors is
 
shown in gross amount
25
under Interest revenue calculated using the effective interest method (Note 4).
Assignments without recourse rights (no buy back guarantee)
Assignments without recourse
 
rights are arrangements
 
that transfer to
 
investors substantially all
 
the risks and
 
rewards of ownership
 
equal to a
 
fully proportionate share
 
of the
cash flows to be received from the Company’s debt instruments. Therefore such arrangements are classified
 
as pass-through arrangements in accordance with IFRS 9.
As such, a fully proportionate share, equal to investor’s claim in relation to the related debt instrument,
 
is derecognized.
The derecognized part is accounted as an off
 
-balance sheet item (Note 18) and interest income is
 
recognized to the extent of being the residual
 
interest. Residual income is the
difference between the interest earned on the respective debt instrument by the Company and the respective share
 
of interest earned by the investor.
Reserves
Foreign currency translation reserve
The Company has currency revaluation reserve amount 1 EUR, due to switch from Latvian Lats to
 
EUR currency.
Fair value reserve
The fair value reserve comprises the cumulative net change in fair value of debt securities at FVOCI until the
 
assets are derecognised or reclassificed.
 
Other reserves
Other reserves is used to record the effect of transactions with owners in their capacity as owners and includes financial guarantees
 
given by the Company.
 
Provisions
Provisions are recognized when
 
the Company has a
 
present obligation (legal or
 
constructive) as a result
 
of a past
 
event, it is
 
probable that an outflow
 
of resources embodying
economic benefits
 
will be
 
required to
 
settle the
 
obligation, and
 
a reliable
 
estimate can
 
be made
 
of the
 
amount of
 
the obligation.
 
Where the
 
Company expects
 
some or
 
all of
provisions to be reimbursed, for example, under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain.
The expense
 
relating to
 
any provision
 
is presented
 
in the
 
Statement of comprehensive
 
income net
 
of any
 
reimbursement. If the
 
effect of
 
the time
 
value of
 
money is
 
material,
provisions are
 
determined by
 
discounting the
 
expected future
 
cash flows
 
at a
 
pre-tax rate
 
that reflects
 
current market
 
assessments of
 
the time
 
value of
 
money and,
 
where
appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a borrowing cost.
Contingencies
 
Contingent liabilities are not recognized in the separate financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is
remote. A contingent asset is not recognized in the separate financial statements but disclosed when an inflow
 
of economic benefits is probable.
Share-based payments
Equity-settled transactions
The cost
 
of equity-settled
 
transactions is
 
determined by
 
the fair
 
value at
 
the date
 
when the
 
grant is
 
made using
 
an appropriate
 
valuation model.
 
That cost
 
is recognized
 
in
employee
 
benefits
 
expense,
 
together
 
with
 
a
 
corresponding
 
increase
 
in
 
equity
 
(other
 
capital
 
reserves),
 
over
 
the
 
period
 
in
 
which
 
the
 
service
 
and,
 
where
 
applicable,
 
the
performance conditions are fulfilled
 
(the vesting period). The
 
cumulative expense recognized for
 
equity-settled transactions at each
 
reporting date until the
 
vesting date reflects
the extent to
 
which the vesting
 
period has expired
 
and the Company’s
 
best estimate of
 
the number of
 
equity instruments that
 
will ultimately vest.
 
The expense or
 
credit in the
statement of comprehensive income for a period represents the movement in cumulative
 
expense recognized as at the beginning and end of that period.
No expense is recognized for awards that do not ultimately vest because non-market performance and/or service conditions have
 
not been met. Where awards include a market
or non-vesting condition, the transactions are treated as vested irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and/or
service conditions are satisfied.
When the terms of an equity-settled award are modified, the minimum expense recognized is the grant date fair value
 
of the unmodified award, provided the original terms of the
award are met. An additional expense, measured as at
 
the date of modification, is recognized for any modification
 
that increases the total fair value of the share-based payment
transaction, or is otherwise beneficial to the employee.
 
Where an award is cancelled by the entity
 
or by the counterparty,
 
any remaining element of the fair value
 
of the award is
expensed immediately through statement of comprehensive income.
Income and expenses
Expenses are recognized
 
as incurred. Expenses
 
are recognized net
 
of the amount
 
of value added
 
tax. In certain
 
situations value added
 
tax incurred on a
 
services received or
calculated in accordance
 
with legislation requirements
 
is not
 
recoverable in
 
full from the
 
taxation authority.
 
In such cases
 
value added tax
 
is recognized as
 
part of
 
the related
expense item as applicable. The same principles is applied if value added tax is not recoverable
 
on acquisition an asset.
26
Revenue is recognized in
 
accordance with the related
 
standard’s requirements and to
 
the extent that it
 
is probable that the
 
economic benefits will flow
 
to the Company and
 
the
revenue can be reliably measured.
 
The effective interest rate method
According to IFRS
 
9 for all
 
financial instruments measured at
 
amortized cost interest
 
income or expense
 
is recorded at
 
the effective interest
 
rate, which is
 
the rate that
 
exactly
discounts estimated future
 
cash payments or
 
receipts through the
 
expected life of
 
the financial instrument
 
to the net
 
carrying amount of
 
the financial asset
 
or financial liability.
 
The calculation takes into
 
account all contractual terms of
 
the financial instrument and
 
includes any fees or
 
incremental costs that are directly
 
attributable to the instrument
 
and
are an integral part of the effective interest rate, but not future credit losses.
 
When a
 
financial asset
 
becomes credit-impaired
 
and is
 
regarded as
 
‘Stage 3’,
 
the Company
 
calculates interest
 
income by
 
applying the
 
EIR to
 
the net
 
amortized cost
 
of the
financial asset. If the financial asset cures and is no longer credit-impaired, the Company reverts to calculating interest income
 
on a gross basis.
Income from cession of bad debt
Gain or loss from sale of doubtful financial lease receivables and loans and advances to customers is presented on net basis under "Net gain/loss from de-recognition of financial
assets measured at
 
amortized cost". Gains
 
or losses arising
 
on cession deals
 
are recognized in
 
the statement of
 
comprehensive income at
 
transaction date as
 
the difference
between the proceeds received and the carrying amount of derecognized lease/ loan receivables assigned
 
through cession agreements.
Expenses related to attracting funding
Expenses related to attracting funding consists of administration fee for using
 
peer-to-peer platform. Expenses are charged monthly and recognised in the Company's statement
of comprehensive income when they occur.
Revenue and expenses from contracts with customers
 
Revenue from contracts with customers in
 
scope for IFRS 15 encompasses
 
sold goods or services provided as
 
output of the Company’s ordinary
 
activities. The Company uses
the following criteria to identify contracts with customers:
– the parties to the contract have approved the contract (in writing, orally or in accordance with other customary
 
business practices) and are committed to perform their respective
obligations;
– can be identified each party’s rights regarding the goods or services to be transferred;
– can be identified the payment terms for the goods or services to be transferred;
– the contract has commercial substance (i.e. the risk, timing or amount of the entity’s future cash flows is expected to
 
change as a result of the contract);
– it is probable that the Company will collect the consideration to which it will be entitled in exchange for the goods
 
or services that will be transferred to the customer.
Performance obligations are promises
 
in the contracts (either
 
explicitly stated or implied)
 
with the Company’s customers
 
to transfer to the
 
customers distinct goods or services.
Promised goods or
 
services represent separate performance
 
obligations if the
 
goods or services
 
are distinct. A
 
promised good or
 
service is considered
 
distinct if the
 
customer
can benefit
 
from the
 
good or
 
service on
 
its own or
 
with other
 
readily available resources
 
(i.e. distinct individually)
 
and the
 
good or
 
service is
 
separately identifiable from
 
other
promises in the contract (distinct within the context of the contract). Both of these criteria must be met to conclude
 
that the good or service is distinct.
The Company
 
considers whether
 
there are
 
other promises
 
in the
 
contract that
 
are separate
 
performance obligations
 
to which
 
a portion
 
of the
 
transaction price
 
needs to
 
be
allocated. In
 
determining the
 
transaction price
 
for the
 
sale of
 
equipment, the
 
Company considers
 
the effects
 
of variable
 
consideration, the
 
existence of
 
significant financing
components, noncash consideration, and consideration payable to the customer (if any).
 
The Company recognizes revenue when (or as) it satisfies a performance obligation to transfer a promised good or service to a customer. Revenue is recognized when customer
obtains control of the respective good
 
or service. Revenue from contracts with customers is
 
recognized when control of the goods or
 
services are transferred to the customer at
an amount that reflects the consideration to which the Company expects to be entitled in exchange for those
 
goods or services.
Revenue from satisfied performance obligations is recognized over time, if one of the following criteria is met:
– customer simultaneously receives and consumes the benefits;
– customer controls the asset as it is created or enhanced;
– the Company’s performance creates an asset and has a right to payment for performance completed.
Payment
 
terms
 
for goods
 
or services
 
transferred to
 
customers according
 
to contract
 
terms are
 
within 45
 
to
 
60
 
days
 
from the
 
provision
 
of services
 
or
 
sale of
 
goods. The
transaction price is generally determined by the contractually agreed conditions. Invoices typically
 
are issued after the goods have been sold or service provided.
In the year 2021 and 2020 the Company did not enter into contracts with rights of return, financing
 
components, non cash considerations or consideration payable to customer.
27
The Company has generally concluded that it is the principal in its revenue arrangements, except for the debt collection activities and agency services below,
 
because it typically
controls the goods or services before transferring them to the customer.
 
When another
 
party is
 
involved in
 
providing goods
 
or services
 
to Company's
 
customers, the
 
Company considers
 
that it
 
is a
 
principal,
 
if it
 
obtains control
 
of any
 
one of
 
the
following:
a) a good or another asset from the other party that it then transfers to the customer.
b) a right to a service to be performed by the other party, which gives the entity the ability to direct that party to provide the service to the customer on the entity's behalf.
c) a good or service from the other party that it then combines with other goods or services in providing the specified
 
good or service to the customer.
 
Management judgment on transactions where the Company acts as agent is disclosed in Note 3.
Fee and commission income related to finance lease activities (Note 6)
Income from debt collection activities and earned penalties (point in time)
Income from
 
debt collection
 
activities and
 
penalties is
 
recognized in
 
the Company's
 
statement of
 
comprehensive income
 
at the
 
moment when
 
the likelihood
 
of consideration
being settled for such services is high, therefore income is recognized only when actual
 
payment for provided services is actually received.
 
Income from penalties arise in case customers breach the contractual terms of financial lease receivables and loans and advances to customers agreements, such as exceeding
the payment date. In those situations the Company is entitled to charge the customers in accordance with the agreement terms. The Company recognizes income from penalties
at the
 
moment of
 
cash receipt
 
as likelihood
 
and timing
 
of settlement
 
is uncertain.
 
In case
 
customers does
 
not settle
 
the penalty
 
amount, the
 
Company is
 
entitled to
 
enforce
repossession of the collateral.
Revenue from debt
 
collection activities typically
 
arises when customers
 
delay the payments
 
due. As a
 
lessor, the
 
Company has protective
 
rights in the
 
lease agreements with
customers that
 
require the
 
customers to
 
safeguard and
 
maintain the
 
condition of
 
the
 
vehicle, as
 
it serves
 
as a
 
collateral to
 
the
 
lease. Company’s
 
revenue encompasses
 
a
compensation of internal and external
 
costs incurred by the Company
 
in relation to debt management, legal
 
fees as well as
 
repossession of vehicle in case of
 
lease agreement
termination and
 
are recharged
 
to the
 
customers in
 
accordance with
 
the agreement
 
terms. Debt
 
collection income
 
is recognized
 
on net
 
(agent) basis
 
as it
 
these amounts
 
are
recharged to the customers in
 
accordance with agreement terms and the
 
Company does not control these services
 
before they are transferred to
 
a customer. The performance
obligation is satisfied when respective service has been provided.
Other operating income (Note 12)
Revenue from client acquisition (point in time)
Income from commission fee for client acquisition: The Company provides client acquisition services to related parties. The Company independently concludes lease agreements
in name of
 
related parties. In
 
addition, the Company
 
consults and communicates
 
with clients, ensures
 
clients’ complaints and
 
applications receipt and
 
reviews, validates client
identity
 
and
 
truth
 
of
 
submitted
 
information
 
from
 
public
 
registers,
 
explains
 
the
 
agreement
 
obligations
 
and
 
legal
 
consequences,
 
reviews
 
the
 
application
 
and
 
concludes
 
the
agreement on behalf of
 
related parties. The service is
 
provided when the customer of
 
the related parties has signed
 
the lease agreement and such
 
income is recognized at the
point in time.
Variable consideration revenue from client acquisition (point in time)
The Company
 
has entered
 
into a
 
contract with
 
JSC Primero
 
Finance on
 
providing commercial
 
client acquisition
 
services with
 
the variable
 
component of
 
the contract
 
on 26
September, 2019.
The fee is paid on all concluded agreements with clients. The fee consists of two elements – fixed and variable. Fixed
 
fee is set as % from total loan amount and is invoiced every
month based on concluded
 
agreement list for previous
 
month. Variable fee
 
part is an additional
 
fee and is set
 
as percentage dependant on the
 
specific annual percentage rate
(APR) threshold for each individual concluded agreement.
The
 
fixed
 
and
 
variable
 
part
 
of
 
client
 
acquisition
 
fee
 
is
 
calculated
 
and
 
invoiced
 
monthly.
 
The
 
revenue
 
from
 
the
 
fixed
 
part
 
of
 
the
 
fee
 
is
 
recognized
 
at
 
point
 
in
 
time
 
as
 
the
corresponding performance
 
obligations are
 
satisfied, and
 
there is
 
no significant
 
judgement applied
 
to determine
 
the
 
transaction price
 
or the
 
satisfaction of
 
the performance
obligations.
The additional client acquisition fee is determined to be a variable consideration as it is based on the individual
 
APR of each concluded agreement.
While the additional fee is recognised at point in time when the agreement is concluded between customer and JSC Primero Finance, the Company recognizes revenue from the
variable consideration only to the extent that
 
it is 'highly probable', that a significant reversal
 
in the amount of cumulative revenue recognised will
 
not occur when the uncertainty
associated with the variable consideration is resolved.
 
Additional fee invoicing continues until the
 
moment when agreement is terminated, irrespectively to
 
the termination basis,
which can be early repayment or default. Any not yet invoiced client acquisition fee cannot be invoiced to
 
JSC Primero Finance.
In the case of loan
 
defaults, the parties agreed to measure
 
the default loss. In the
 
cases when not all outstanding
 
debt has been covered after
 
the collateral sale, the Company
returns part (proportional to the uncovered debt) of the additional fee, which has been invoiced to JSC Primero Finance.
From the signing date to 31 December 2021 there were 98 default cases, and for 30 cases the additional fee had been returned (31 December 2020 there were 18 default cases,
and for 3 cases the additional fee had been returned).
28
Revenue from variable
 
and fixed parts
 
are recognized in
 
the statement of
 
comprehensive income and
 
classified as commission
 
from client acquisition,
 
for detailed information
see Note 12.
Revenue from recharging expenses - agency services (point in time):
 
Agency services consist
 
of different services,
 
such as settlement
 
of costs
 
on behalf of
 
3rd and
 
related parties and
 
recharging
 
those costs to
 
customers or related
 
parties. The
Company is
 
acting as
 
an agent
 
in provision of
 
these services
 
to the customers.
 
Such services are
 
provided with
 
the intention
 
to realize the
 
economies of scale
 
of purchasing
power for a service that is both used by
 
the Company, related parties and the
 
3rd party. The performance obligation is satisfied when respective
 
service has been provided. The
Company does not charge any mark up on these services.
Revenue from service fee (point in time):
 
The Company provides marketing, partnership managment, car evaluation, debt collection, car sales,
 
IT systems support and other services to related parties. The fees earned in
exchange for
 
these services
 
are recognised
 
at the
 
point in
 
time the
 
transaction is completed
 
because the
 
customer only
 
receives the
 
benefits of
 
the Company's
 
performance
upon successful
 
completion of
 
the
 
underlying procedures.
 
The service
 
fee is
 
calculated and
 
accrued monthly,
 
the Company
 
issues the
 
invoice in
 
the
 
following month.
 
The
revenue is recognised at point in time when the services are provided.
Contract balances
Contract assets
A contract
 
asset is
 
the right
 
to consideration
 
in exchange
 
for goods
 
or services
 
transferred to
 
the customer.
 
If the
 
Company performs
 
by transferring
 
goods or
 
services to
 
a
customer before the customer pays consideration or before payment is due, a contract asset is recognized
 
for the earned consideration.
At 31 December the Company have contract assets in its statement of financial position. See
 
Note 25.
Trade receivables
A receivable represents the Company’s right to an amount of
 
consideration that is unconditional (i.e., only the passage of time
 
is required before payment of the consideration is
due).
These receivables are disclosed in balance sheet caption 'Trade receivables' (Note 23).
Trade receivables are non-interest bearing and are generally on terms of 30 to 120 days.
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an
 
amount of consideration is due) from the
customer. If a customer
 
pays consideration before the Company
 
transfers goods or services to the
 
customer, a contract liability
 
is recognized when the payment
 
is made or the
payment is due (whichever is earlier). Contract liabilities are recognized as revenue when the Company performs under
 
the contract.
At 31 December the Company had no contract liabilities in its statement of financial position.
Income taxes
Legal entities have not been required to pay income tax on earned profits starting
 
from 1 January 2018 in accordance with amendments made to the Corporate Income Tax
 
Law
of the Republic of Latvia. Corporate income
 
tax is paid on distributed profits and deemed
 
profit distributions. Consequently, current tax
 
assets and liabilities are measured at the
tax rate applicable to undistributed profits. Both distributed profits and deemed profit distributions have been subject to
 
the tax rate of 20 per cent of
 
their gross amount, or 20/80
of net
 
expense. Corporate
 
income tax
 
on dividends
 
is recognized
 
in the
 
separate statement
 
of comprehensive
 
income as
 
expense in
 
the reporting
 
period when
 
respective
dividends are declared, while, as regards other deemed profit items, at the time when expense is incurred in
 
the reporting year.
No provision is recognized for income tax payable on a dividend distribution before dividends are
 
declared.
As income tax has to
 
be paid on distributed profits and
 
deemed profit distributions, no temporary differences are
 
arising between the tax bases
 
of assets and liabilities and their
carrying values for accounting purposes. Therefore deferred tax assets and liabilities are not recognized.
Related parties
The parties are
 
considered related when
 
one party
 
has a possibility
 
to control
 
the other one
 
or has significant
 
influence over the
 
other party
 
in making financial
 
and operating
decisions. Related parties
 
of the Company
 
are shareholders who
 
could control or
 
who have significant
 
influence over the
 
Company in accepting
 
operating business decisions,
key management personnel of the
 
Company including members of Supervisory body
 
– Audit committee and close
 
family members of any above-mentioned
 
persons, as well as
entities over which those
 
persons have a control or significant influence.
The Company has defined that a person or a close member of that person’s family is related to a reporting entity if that person:
 
 
29
• has control or joint control of the reporting entity;
 
• has significant influence over the reporting entity; or
 
• is a member of the key management personnel of the reporting entity or of a parent of the reporting entity.
An entity is related to a reporting entity if any of the following
conditions applies:
• The entity and the reporting entity are members of the same group (which means that each parent, subsidiary
 
and fellow subsidiary is related to the others);
• One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group
 
of which the other entity is a member);
• Both entities are joint ventures of the same third party;
• One entity is a joint venture of a third entity and the other entity is an associate of the third entity;
•
 
The entity is a
 
post
‑
employment benefit plan for
 
the benefit of employees of
 
either the reporting entity or
 
an entity related to
 
the reporting entity.
 
If the reporting entity is
 
itself
such a plan, the sponsoring employers are also related to the reporting entity;
• The entity is controlled or jointly controlled by a person identified in (a);
• A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel
 
of the entity (or of a parent of the entity);
•
 
The entity, or any member of a group of which it is a part, provides key management personnel services to the reporting entity or to the parent of the reporting entity.
A related party transaction is a transfer of resources, services or obligations between a reporting entity and
 
a related party, regardless of whether a price is charged.
2. Summary of significant accounting policies (continued)
d) Significant accounting policies (continued)
Dividend distribution
Dividend distribution
 
to the
 
shareholders of
 
the Company
 
is recognised
 
as a
 
liability and
 
distribution of
 
retained earnings
 
in the
 
separate financial
 
statements in
 
the period
 
in
which the dividends are approved by the shareholders. (Note 27)
Subsequent events
Post
 
period-end events
 
that provide
 
additional information
 
about
 
the Company’s
 
position
 
at
 
the
 
statement of
 
financial position
 
date
 
(adjusting events)
 
are reflected
 
in
 
the
separate financial statements.
 
Post-period-end events that are not adjusting events are disclosed in the notes when material
 
(Note 41).
3. Significant accounting judgments, estimates and assumptions
The preparation
 
of the
 
separate financial
 
statements in
 
conformity with
 
IFRS requires
 
management to
 
make judgements,
 
estimates and
 
assumptions that
 
affect the
 
reported
amounts of
 
assets, liabilities, income
 
and expenses, and
 
disclosure of contingencies.
 
The most
 
significant judgment is
 
related to the
 
Company's ability to
 
continue as
 
a going
concern, while
 
significant areas
 
of estimation
 
uncertainty used
 
in the
 
preparation of
 
the separate
 
financial statements are
 
impairment of
 
financial assets,
 
impairment tests
 
for
investments in subsidiaries and fair value of financial guarantees. Although these estimates and judgements along with
 
other items listed below are based on the management’s
best knowledge of current events and actions, the actual results may ultimately differ from those estimates.
In
 
the
 
process
 
of
 
applying
 
the
 
Company’s
 
accounting
 
policies,
 
management
 
has
 
made
 
the
 
following
 
judgements,
 
which
 
have
 
the
 
most
 
significant
 
effect
 
on
 
the
 
amounts
recognized in the separate financial statements.
Going concern
These financial statements are prepared on going concern basis.
The Company's performance
 
The Company's
 
has successfully
 
performed through
 
first, second,
 
and current
 
Covid-19 waves,
 
all of
 
which have
 
left minimal
 
impact on
 
the operational
 
performance for
 
the
Company. The Company has had relative stable portfolio quality throughout this period and it comfortably enters 2022 from both operational perspective as well as future funding
availability perspective:
 
- Considering its own planned loan issuance volume (3.3 million EUR), as
 
well as its service and agency arrangements with subsidiary JSC Renti and
 
related party JSC Primero
finance, the Company plans
 
to service circa 4,3
 
thousand new lease,
 
loan and rent contracts,
 
which is 26%
 
higher compared to 2021.
 
Operations were unaffected by
 
the third
Covid-19 wave
 
in 2021,
 
therefore Company's
 
management believes that
 
further growth
 
in service
 
volumes is
 
a reasonably
 
conservative assumption
 
given the
 
lift of
 
Covid-19
restrictions in 2022.
 
The Company monitors its
 
liquidity ratios on an ongoing
 
basis. The main liquidity
 
ratios for the Company are
 
capitalisation ratio and interest coverage
 
ratio. As at 31 December
2021,
 
the Company's
 
capitalisation ratio
 
and
 
interest coverage
 
ratio
 
were
 
accordingly 1,60
 
and
 
2,59
 
(31.12.2020: 1,53
 
and
 
2,61), indicating
 
stable
 
liquidity outlook
 
for
 
the
Company. The Company has
 
maintained strong funding and liquidity position with
 
its robust diversified funding base, and
 
it has improved significantly after public
 
offering, as at
31 December 2021 the
 
Company is compliant with all
 
financial covenants. The Company's management foresees
 
that it will be
 
able to fully satisfy
 
the requirements of financial
covenants in the future as well.
On March 1,
 
2021, through public
 
offering the Company
 
issued new secured corporate
 
bond (LV0000802452)
 
in the amount of
 
EUR 30 million,
 
which from March 31,
 
2021 is
included in the regulated market of NASDAQ OMX Baltic (Note 29).
The Company
 
controls its
 
liquidity by
 
managing the amount
 
of funding
 
it attracts
 
through P2P platform
 
Mintos and
 
other sources.
 
P2P platform
 
Mintos provides
 
management
greater flexibility
 
to manage
 
the level
 
of borrowings
 
and available
 
cash balances.
 
Despite the
 
current uncertainty
 
in the
 
global economy,
 
the amount
 
of loans
 
funded through
Mintos have remained stable, demonstrating that investors trust in Mogo as a stable company, and they continue to invest in Mogo loans.
 
In management’s
 
view,
 
the above
 
factors and
 
measures taken
 
support the
 
assertion that
 
the Company
 
will have
 
sufficient resources
 
to continue
 
for a
 
period of
 
at least
 
12
months from the reporting date and that there are no material uncertainties related to events or conditions that may cast significant doubt on
 
the Company's ability to continue as
a going concern.
 
30
Impairment of financial assets
 
The measurement of impairment losses under IFRS 9 across all categories of financial assets in scope requires judgement, in particular, the
 
estimation of the amount and timing
of future
 
cash flows
 
and collateral
 
values when
 
determining impairment
 
losses and
 
the assessment
 
of a
 
significant increase
 
in credit
 
risk. These
 
estimates are
 
driven by
 
a
number of factors,
 
changes in which
 
can result in
 
different levels of
 
allowances. The Company’s
 
ECL calculations are
 
outputs of complex
 
models with a
 
number of underlying
assumptions regarding the choice of variable inputs and their interdependencies. Elements of the ECL models that are considered accounting judgements and estimates
 
include
Probability of Default and Loss Given Default, judgment is applied also when determining significant increase
 
in credit risk.
Probability of default (PD)
The Probability of Default is an estimate of the likelihood of default over a given time horizon, where
 
default is defined as: 61 DPD.
In order to estimate PDs the Company utilises Markov chains methodology. This methodology employs statistical analysis of historical transitions
 
between delinquency buckets to
estimate the probability that loan will eventually end up in default state which is set as absorbing state.
The Company uses12 months continuous horizon window (or smaller if actual lifetime of the product is shorter or if representative historical data is available for a shorter period),
and estimation over lifetime is defined as nth power of 12 months matrix (n-depends on the estimated lifetime, e.g., if
 
lifetime is 36 months then n=3).
Exposures are grouped into buckets of days past due (DPD) loans/leases.
Company uses 6 months (continuous horizon) transition
 
window and estimation over lifetime is
 
defined as nth power of 6
 
months matrix. The approach improves consistency of
PD calculations, i.e., accounted for 6 months seasonality effect and smoothened volatile impact of the regular
 
changes in the business processes.
Calculations are applied at product level (leasing and secured loans vs unsecured loans). Exposures
 
are grouped into buckets of days past due (DPD) loans/leases.
Forward-looking macroeconomic indicators model for portfolio impairment assessment
Guided by IFRS 9, the Company assesses forward looking information and incorporates it into impairment model. Impairment change is modelled given expected future changes
of macroeconomic factors’
 
(hereinafter macro model).
 
In 2021
 
the Company changed
 
Hierarchical Bayes model
 
approach to simplified
 
approached based on
 
relation analysis
between changes in input variables and changes in PD and the Company expert’s opinion. Description of the new macro model
 
is provided further.
Macro model uses expected changes in macroeconomic indicators year on year and assumes the same
 
or similar change to Stage 1 PD.
 
Following variables are used:
1. GDP growth (GDP)
2. Unemployment rate change (UR)
3. Inflation rate change (IR).
The model includes
 
indicators which, based
 
on the Company
 
experts’ opinion and
 
used practice in
 
industry, might
 
have a significant
 
impact on finance
 
products default rates.
Such indicators are also widely used by
 
banking and non-banking industry across the world. The
 
model assumes relation between changes in macro indicators and Stage
 
1 PD
change. If there is strong correlation between Stage 1 PD and macro indicator change then used linear regression equation to determine the impact on PD
 
due to macro indicator
changes. If there is
 
no visible correlation between Stage
 
1 PD and macro
 
indicators change then impact on PD
 
is evaluated based on qualitative
 
analysis of available data
 
and
reasonable experts’ assumptions.
To take into account possible economic fluctuations and uncertainty, three scenarios are considered and used for final calculation to arrive at weighted average probability:
 
1. base case scenario - based on actual data and forecasts by external source.
 
2. worst case scenario - based on expert judgement of potential worsening of macroeconomic indicators.
 
3. best case scenario - based on expert judgement of potential improvement of macroeconomic indicators.
Worse and best
 
scenario is obtained
 
from base scenario
 
increasing or decreasing base
 
scenario by confidence
 
interval of given
 
macro indicator forecast. Confidence
 
intervals
are available for each macroeconomic indicator forecast and are easy to
 
read from the graph. Each scenario also has a specific
 
probability of occurring. The Group applies 15%
probability for worst-case scenario and only 5% for best-case.
To
 
obtain final
 
effect on
 
PD from
 
macro indicator change,
 
applied weights for
 
each macro
 
indicator and
 
the final result
 
is taken
 
as a
 
weighted average of
 
macro indicator PD
effect.
 
Weights
 
are
 
changed
 
based
 
on
 
their
 
significance
 
in
 
affecting
 
default
 
rate
 
overall.
 
Considering
 
model
 
main
 
assumptions,
 
the
 
Company’s
 
experts
 
evaluate
 
historical
relationship and chooses weights for each country individually. For Latvia weights are the following: UR – 48%, IR – 48% and GDP – 5%.
To
 
account for
 
future uncertainty
 
in case
 
the model
 
yields positive
 
PD correction,
 
the Company
 
decided to
 
be prudent
 
and not
 
to apply
 
improving PD
 
effect for
 
impairment
correction. In such case 0% improvement ceiling is set for 2022.
Result of the macro model is then applied to stage 1 PDs for each month close starting from December
 
2021. Macro outlook is updated in a consistent manner once per quarter;
thus, the macro model is expected to be updated once per quarter in 2022.
The Default distribution vector (DDV)
 
The default distribution vector provides distribution of PD over the course of a 12 month or lifetime horizon.
 
It is calculated from historical data samples of all defaulted loans.
Loss Given Default
Finance lease receivables
31
The Company closely follows recoveries from defaulted finance lease receivables and revises LGD rates
 
every month for portfolios based on actual recoveries received.
- The
 
sample used for
 
LGD calculation consists
 
of all
 
the finance
 
lease receivables that
 
have been defaulted
 
historically. If
 
termination of
 
the contract happens
 
before default
state is reached, then
 
loan is considered defaulted
 
(early default) and it
 
is considered in LGD
 
sample. Subsequent recoveries on such
 
loans are monitored on
 
a monthly basis.
Recoveries from regular collections process, car sales, cessions and legal process are followed.
- Renewed leases (restored payments capacity after termination) also affect the LGD rate by incorporating recovered cash after renewal of the agreement and comparing it to the
exposure at default of the agreements subsequently renewed, implying the cure rate.
 
Cure rate from renewals is calculated over a
 
three-year period. For the 31 December 2021
impairment purposes 82.53% (31.12.2020.: 93.6%) recovery rate for renewed cases was applied. Above described LGD rate is used for all portfolio groups except for unsecured
portfolio part. For unsecured portfolio part LGD
 
is estimated using triangular recovery matrix on all
 
unsecured cases. Received recovery is discounted with effective
 
interest rate
depending on
 
the number
 
of months
 
between the
 
date account
 
got unsecured
 
status and
 
the date
 
when recovery
 
was received.
 
Given that
 
majority of
 
the car
 
sales happen
before unsecured status, the LGD for unsecured portfolio is higher than for other buckets.
Loans and advances to customers (unsecured loans)
For unsecured loans LGD is determined based on debt sales market activity and offered prices. For the later stages (DPD
 
360) LGD is set to 100%.
Exposure at default (EAD ) modelling
Exposure at default is modelled by adjusting the unpaid balance of lease and loan receivables as at the reporting date by expected future repayments during the next 12 months.
As
 
of
 
31
 
December 2021,
 
it
 
is
 
applied
 
for
 
Stage
 
1
 
exposures only.
 
This
 
is
 
performed based
 
on
 
contractual
 
repayment schedules,
 
adjusted
 
for
 
historical prepayment
 
rate
observed. Historical prepayment patterns are assumed to be a reliable estimate for future prepayment
 
activity
Impairment for loans to and receivables from related parties and non-related parties
Receivables from related parties and non-related parties inherently are subject to the Company’s credit risk.
 
Therefore, a benchmarked PD and LGD rate - based on Standard &
Poor's corporate statistics studies has been applied in determining the ECLs.
Significant increase in credit
 
risk for related and non-related
 
party transactions is determined based on
 
information available in the Company
 
about the financial performance of
the
 
parties. Financial position of related and non-related parties as at
 
impairment assessment date is compared to that when the exposure was
 
originated. Further 30 days past
due back stop indicator is utilized to transfer exposures to Stage 2.
Impairment assessment of investments in subsidiary
Key assumptions used in value in use calculations:
The recoverable amount was determined based on the free cash flow to equity model (value in use) using perpetuity discounted cash flow projections covering a five -year period
with a terminal year.
 
To determine the recoverable amount, discount rate applied to the cash flow projections was 11.61% (2020: 13.94%) and was based on external sources of information. Terminal
growth rate was assumed at 1% (2020: 1%). Other key assumption,
 
on which management based its cash flow projections for the period,
 
was future profitability of the operation
of the subsidiary.
 
It is expected that
 
in the forecast period,
 
considering the changes in
 
the business, rental income
 
is expected to decrease.
 
The growth will resume
 
from 2025.
The costs in 2022 and onwards were estimated based on the budget approved by the management of the Company
 
which are dependent on the volume of rental portfolio.
Taking
 
into account
 
all
 
the aspects
 
mentioned above,
 
as at
 
31
 
December 2021
 
and
 
as at
 
31
 
December 2020
 
the Company
 
has not
 
recognised
 
impairment allowance
 
for
investment in subsidiary.
 
The headroom between the recoverable and carrying amount of the investment is highly sensitive
 
to the changes in future growth rates of the subsidiary.
Determination of the FVLCTS of assets held for sale
 
Determination of the FVLCTS for repossessed vehicles is performed on an individual basis at the moment of the repossession.
Management estimate
 
is based
 
on
 
available data
 
from historical
 
sales transactions
 
for such
 
assets in
 
previous reporting
 
periods.
 
Company also
 
considers factors
 
such
 
as
historical actual average loss (if
 
any) from the previous years.
 
Management considers whether also events after
 
the reporting year indicate a
 
decline in the sales prices
 
of such
assets.
While of lesser likelihood and/or magnitude of uncertainty, the following estimates and judgements also affect the financial statements:
Separation of embedded derivatives from the host contract
The Company has
 
certain call and
 
put option
 
agreements that can
 
accelerate repayment of
 
the issued bonds.
 
These options arise
 
out of bond
 
(host contract) prospectus
 
and
individual agreements with certain bondholders and meet the definition of an embedded derivative
 
in accordance with IFRS 9.
Call option included in the bond prospectus
 
gives the Company the right, but
 
not the obligation to carry out early
 
redemption, either in full or partially,
 
of the issued bonds with a
1% premium. Call and
 
put options included in
 
the agreements signed with
 
certain bondholders give the
 
Company and bondholder the
 
respective right of buying
 
back or selling
the bonds at exercise price equal to the amortized cost of the respective bond notes.
The Company’s
 
management has
 
evaluated that
 
the embedded
 
derivatives are
 
not contractually
 
separable, not
 
contractually transferrable
 
independently and
 
has the
 
same
counterparty. Each option’s
 
exercise price is approximately equal on
 
each exercise date to the
 
amortized cost of bond, therefore
 
these embedded derivatives are not separated
from the host contract.
 
Financial guarantees
Fair value (FV) determination and initial recognition
32
The Company has elected to determine
 
the FV of guarantee using valuation of
 
expected loss approach. FV of guarantee
 
is calculated as multiple of EAD,
 
PD and LGD. EAD is
determined based on
 
the contractual guaranteed
 
amount per guarantee
 
agreement (Note 38)
 
and considering Company’s
 
pro-rata share of
 
the guaranteed amount
 
estimated
considering
 
the
 
total
 
assets
 
of
 
guarantors
 
(Company
 
and
 
other
 
Subsidiary
 
of
 
Eleving
 
Group
 
S.A.)
 
as
 
at
 
end
 
of
 
the
 
reporting
 
period
 
included
 
in
 
the
 
respective guarantee
agreement.
 
 
Guarantee is issued to secure the bond issuance of the
 
ultimate parent of the Company, Eleving
 
Group S.A. The Company would incur loss in case
 
Eleving Group S.A. defaults
on obligations towards its bondholders. Accordingly, PD of
 
Eleving Group S.A.is determined based on the Eleving Group S.A. credit rating as determined by
 
credit rating agency
Fitch Ratings and historical statistics of average occurrence of defaults for companies with the respective
 
credit rating.
ECL determination for subsequent measurement
For the
 
purposes of
 
FV estimation the
 
Company is
 
using the
 
ultimate parent Company’s
 
Eleving Group
 
S.A. credit rating
 
as determined
 
by credit
 
rating agency Fitch
 
Ratings
Since initial recognition the Company
 
has assessed that that ultimate parent’s credit risk has not increased and guarantee liability
 
is therefore considered as Stage 1 exposure.
Lease term determination under IFRS 16 (Company as a lessee)
IFRS
 
16
 
requires that
 
in determining
 
the lease
 
term and
 
assessing
 
the length
 
of the
 
non-cancellable period
 
of
 
a lease,
 
an
 
entity
 
shall apply
 
the definition
 
of
 
a contract
 
in
accordance with
 
IFRS 15
 
and determine
 
the period
 
for which
 
the contract
 
is enforceable.
 
In assessment
 
of lease
 
term determination
 
the Company
 
considers the
 
enforceable
rights and obligations of both parties. If
 
both the lessee and the lessor can
 
terminate the contract without more than an insignificant penalty
 
at any time at or after
 
the end of the
non-cancellable term, then there are no enforceable rights and obligations beyond the non-cancellable term. For
 
lease agreements without a fixed term and agreements that are
“rolled over”
 
on monthly
 
basis until
 
either party
 
gives notice
 
the Company
 
considers that
 
it does
 
have enforceable
 
rights and
 
obligations under
 
such agreements,
 
therefore a
reasonable estimate of the lease term assessment is made.
In considering the Company’s options to extend or not to terminate the lease the Company evaluates what are the rights of
 
the Company and the lessor under such options. The
Company considers whether
 
options included
 
in the
 
lease agreements (1)
 
give an
 
unilateral right
 
for one
 
party (i.e.
 
Company) and
 
(2) creates an
 
obligation to
 
comply for the
other
 
party
 
(i.e.
 
lessor).
 
If
 
neither
 
party
 
in
 
the
 
contract
 
has
 
an
 
obligation
 
then
 
Company
 
assessment
 
is
 
that
 
no
 
options
 
are
 
to
 
be
 
considered
 
in
 
the
 
context
 
of
 
lease
 
term
assessment. In such
 
situations the lease
 
term would not
 
exceed the non-cancellable
 
contractual term. In
 
determining the lease
 
term the Company
 
has assessed the
 
penalties
under the lease agreements as well as economic incentives to prolong the lease agreements
 
such as the underlying asset being strategic.
Lease liability incremental borrowing rate determination under IFRS 16 (Company
 
as a lessee)
The lease liability is
 
initially measured at the present
 
value of the lease
 
payments that are not paid
 
at the commencement date, discounted
 
using the interest rate
 
implicit in the
lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.
The Company has used market rates as its incremental borrowing rate. The Company considers market
 
rates used as an appropriate measure for incremental borrowing rates as
they correctly reflect the ability
 
to finance a specific asset purchase.
It is further considered that the way how local lenders would approach asset financing at each subsidiary level. As per Company’s assessment each of the Company’s Subsidiary
would qualify as a good quality borrower in the local markets in the context of overall the Company results.
Sale and leaseback transactions
Under sale and leaseback transactions the Company purchases the underlying asset and then leases it
 
back to the same customer. To determine how to account for a sale and
leaseback transaction, the Company first considers whether the initial transfer of the underlying asset from the
 
seller-lessee (Customer) to the buyer-lessor (the Company) is a
sale. The Company applies IFRS 15 to determine whether a sale has taken place.
 
The key indicators that control has passed to the Company include the Company having:
• a present obligation to pay ;
 
• physical possession (of the purchased asset);
 
• a legal title (to the purchased asset);
 
• the risks and rewards of ownership (of the purchased asset);
 
• the Company has accepted the asset;
 
• the borrower can or must repurchase the asset for an amount that is less than the original selling price of the asset.
 
SPPI assessment
In assessing whether the contractual cash flows are SPPI, the Company considers 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 the assessment, the Company
considers:
 
• contingent events that would change the amount and timing of cash flows;
• leverage features;
• prepayment and extension terms;
• terms that limit the Company’s claim to cash flows from specified assets (e.g. non-recourse loans); and
• features that modify consideration of the time value of money (e.g. periodical reset of interest rates).
 
Please refer to Note 2 for further detailed descriptions of the judgements made by management to assess
 
whether regular loan, non-recourse loan and sale and leaseback
financing arrangement contracts meet SPPI criteria.
 
Principal versus agent assessment
In provision of
 
debt collection services (Note
 
6) the Company
 
has assessed that it
 
does not obtain
 
control of these
 
services before they are
 
transferred to customers, as
 
these
services or goods are acquired on their behalf. Therefore, it is considered agent in these transactions.
 
The Company is also
 
acting as an agent
 
(Note 12 and Note
 
34) in purchasing specific
 
goods and services from
 
3rd parties on behalf
 
of customers and related
 
parties - mainly
legal, recruitment and similar services.
The Company does not obtain control of the service, does not incur inventory risk nor has discretion in determining the
 
sales price.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
33
4. Interest revenue
2021
2020
EUR
EUR
Interest income from finance lease receivables
1,083,568
1,390,830
Interest income from intercompany loans calculated applying effective interest rate method
5,155,061
3,814,270
Interest income from loans and advances to customers calculated applying effective interest rate method
1,514,314
5,260,230
TOTAL:
7,752,943
10,465,330
Interest income contains earned interest on portfolio derecognized from Company's
 
assets (see Note 18 and Note 19).
Gross and net earned interest are as follows:
2021
2020
EUR
EUR
Gross interest income
7,753,108
10,468,329
Interest derecognized due to derecognition of portfolio from Company's assets*
(165)
(2,999)
TOTAL NET
INTEREST:
7,752,943
10,465,330
*Interest derecognized due to derecognition of portfolio from Company's assets relates to P2P interest for loans
 
without buy back guarantee.
Part of interest
 
revenue is derecognized as
 
the Company has assigned
 
to P2P investors part
 
of its finance lease
 
receivables and loans and advances
 
to customer. In
 
case the
assignment is done without a buy back obligation
 
the related interest revenue earned on such agreements is derecognized
 
from Company's interest revenue in amount equal to
investor’s claim towards the interest earned.
5.Interest expense
2021
2020
EUR
EUR
Interest expenses on financial liabilities measured at amortised cost:
Interest expense on issued bonds
3,551,694
3,106,056
Interest expense on issued bonds related parties
-
34,008
Interest expenses for loans from P2P platform investors
418,475
808,606
Interest expenses for loans from related parties
16,062
-
Interest expenses for lease liabilities
20,001
28,782
Interest expenses for loans from banks
98,932
150,181
TOTAL:
4,105,164
4,127,633
During the financial year, the Company
 
has successfully continued financing using peer-to-peer platforms.The interest expense form the peer platform
 
has decreased compared
to the previous year due to a decrease in the amount of funding used from peer-to-peer platforms.
See Note 29 for additional information.
6. Fee and commission income related to finance lease activities
2021
2020
Revenue from contracts with customers recognised point in time:
EUR
EUR
Gross income from debt collection activities
31,477
248,312
Gross expenses from debt collection activities
(87,514)
(123,505)
Net debt collection income:
(56,037)
124,807
Income from commissions
1,149
1,535
Income from penalties received
132,186
213,541
TOTAL:
77,298
339,883
7. Impairment expense
2021
2020
EUR
EUR
Change in impairment in finance lease (see Note 18)
(349,111)
(200,512)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
34
Change in impairment in loans and advances to customers
 
(see Note 19)
(1,184,875)
(595,643)
Written off debts
1,704,424
1,907,148
TOTAL:
170,438
1,110,993
8. Net gain/(loss) from de-recognition of financial assets measured
 
at amortized cost
2021
2020
EUR
EUR
Financial lease
Income arising from cession of financial lease receivables to related parties
568,074
146,596
Loss arising from cession of financial lease receivables to related parties
(788)
(55)
TOTAL:
567,286
146,541
Financial lease
Income arising from cession of financial lease receivables to non related parties
9,465
5,962
Loss arising from cession of financial lease receivables to non related parties
(26,594)
(3,256)
TOTAL:
(17,129)
2,706
Loans and advances to customers
Income arising from cession of loans and advances to customers receivables to related parties
1,544,805
589,816
Loss arising from cession of loans and advances to customers receivables to related parties
-
(2,082)
TOTAL:
1,544,805
587,734
Loans and advances to customers
Income arising from cession of loans and advances to customers receivables to non related parties
52,238
25,873
Loss arising from cession of loans and advances to customers receivables to non related parties
(125,197)
(178,221)
TOTAL:
(72,959)
(152,348)
Net Income/ (Loss) arising from cession of financial lease and loans and advances to customers
receivables
 
TOTAL:
2,022,003
584,633
During 2021 the Company performed cessions to related and non related parties. See Note 34 for additional information
 
on transactions with related parties.
The portfolio that was ceded to the related party includes only the active contracts, which significantly increased the proceeds from the cession, while the contracts ceded to non-
related parties include bad debtors with which the contracts have been terminated and the Company
 
did not expect to receive all due debt amount repayment.
When financial lease receivables or Loans and advances to customers portfolio is sold in cession,
 
the Company reverses the respective part of impairment allowance of the
ceded assets. For additional information see Note 18 and 19.
The Company then separately recognizes net losses arising from derecognition of the ceded portfolio, which
 
is reduced by the respective cession income.
9. Expenses related to peer-to-peer platforms services
2021
2020
EUR
EUR
Service fee for using P2P platform
53,616
86,496
TOTAL:
53,616
86,496
10. Selling expense
2021
2020
EUR
EUR
TV and radio marketing expenses
-
3,459
Marketing services (include out-of-home advertising)
8,116
34,600
Online advertising
2,045
19,953
Total marketing expenses
10,161
58,012
Other selling expenses
30,056
30,659
TOTAL:
40,217
88,671
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
35
11. Administrative expense
2021
2020
EUR
EUR
Employees' salaries
1,267,673
1,265,871
Amortization and depreciation
149,771
213,044
Management fee
558,916
515,980
Professional services*
70,466
113,616
Credit database expenses
102,571
90,333
IT services
92,974
33,646
Office and branches' maintenance expenses
59,356
58,080
Business trips
-
163
Communication expenses
11,369
20,878
Other personnel expenses
31,549
36,220
Low value equipment expenses
6,498
4,592
Bank commissions
18,872
4,329
Transportation expenses
495
1,838
Other administration expenses
10,326
15,599
TOTAL:
2,380,836
2,374,189
*Audit fees for Company 2021- Annual report is
 
- 55 000 EUR (2020: EUR 60 000).
Key management personnel compensation
 
2021
2020
Board and Council Members
EUR
EUR
Remuneration
208,349
140,287
Social security contribution expenses
49,149
33,795
TOTAL:
257,498
174,082
There are
 
no outstanding
 
balances as
 
of 31
 
December 2021
 
with members
 
of the
 
Company’s Management
 
Board members
 
(none as
 
at 31
 
December 2020).
 
There are
 
no
benefits granted to the members of the Board and commitments in respect of retirement pensions for former members
 
of the Board.
12. Other operating income
2021
2020
EUR
EUR
Commission for client acquisition*
529,705
638,851
Income from service fee**
1,263,356
643,331
Income recognised from amortization of financial guarantee (Note 38)
1,043,412
1,383,329
Change in provisions for possible VAT liabilities and penalty (Note 28)
211,280
130,013
Income from the discount application of the rights of use assets (Note 17)
-
19,397
Other operating income
40,389
73,474
TOTAL:
3,088,142
2,888,395
*Income from commission for
 
client acquisition includes income
 
from subsidiary and related
 
party. Income
 
from related party increased
 
from EUR 221 064
 
in 2020 to
 
EUR 529
705 in 2021 which
 
is explained by the
 
JSC Primero Finance business
 
development. In turn, the significant
 
reduction in the client
 
acquisition fee paid for attracting
 
customers to
the
 
subsidiary
 
from
 
EUR
 
417 787
 
in
 
2020
 
to
 
EUR
 
0
 
in
 
2021
 
is
 
related
 
to
 
the
 
stabilization of
 
JSC
 
“Renti” operations.
 
The
 
cooperation agreement
 
with
 
the subsidiary
 
was
terminated as of June 30, 2020. New contract for servicing existing clients was signed instead in July 2020.
**Income
 
from
 
service
 
fee for
 
marketing, partnership
 
management, car
 
evaluation, debt
 
collection,
 
car
 
sales, IT
 
systems support
 
and
 
other
 
services includes
 
income from
subsidiary in 2021 EUR 970 409
 
(2020: 415 850) and income from related
 
party in 2021 EUR 292 947
 
(2020: EUR 227 481). Significant increase
 
in the service fee is related
 
to
the service provision period - in 2021 the services were provided full year (2020: July till December) for subsidiary
 
and full year to related party.
Revenue from contracts with customers recognized point in time where the Company acted as
 
an agent *
2021
2020
EUR
EUR
Gross income from transactions with related parties
635,297
786,579
Gross expenses from transactions with related parties
(635,297)
(786,579)
TOTAL:
-
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
36
* Revenue from recharging expenses, such as dealer commissions, car services and maintenances,
 
databases e.c.t. is presented as revenue in net amount in these separate
financial statements.
13. Other operating expense
2021
2020
EUR
EUR
Annual lending license fee
55,000
14,225
Loss from rights of use assets derecognition on lease cancellation (Note 17)
42,155
-
Write off trade receivables
-
12,284
Loss from sale of subsidiary
1
-
Other operating expenses
12,975
23,084
TOTAL:
110,131
49,593
The amount of the annual state fee for the supervision of the activities of a credit service provider is
 
55 000 EUR (2020: EUR 14 225).
14. Corporate income tax payable
31.12.2021.
31.12.2020.
EUR
EUR
Corporate income tax (liabilities)/ receivables
(2,943)
(3,163)
TOTAL:
(2,943)
(3,163)
Income tax is payable to Company for gifts and the decrease in the profits, turnover or other
 
base quantity which the taxpayer makes upon his or her own initiative or by order of
the shareholder.
15. Intangible assets
 
Licenses
Other
intangible
assets
Total intangible assets
Cost
50,590
123,375
173,965
Accumulated amortization
(50,590)
(95,476)
(146,066)
As at 1 January 2020
-
27,899
27,899
2020
Additions
-
12,919
12,919
Disposals (cost)
-
(91,268)
(91,268)
Reclassification
(11,920)
11,920
-
Amortization charge
-
(26,307)
(26,307)
Disposals (amortization)
-
91,268
91,268
Reclassification
11,920
(11,920)
-
Cost
38,670
56,946
95,616
Accumulated amortization
(38,670)
(42,435)
(81,105)
As at 31 December 2020
-
14,511
14,511
2021
Additions
-
-
-
Disposals (cost)
-
-
-
Reclassification
 
-
-
-
Amortization charge
-
(14,511)
(14,511)
Disposals (amortization)
-
-
-
Reclassification (amortization)
-
-
-
Cost
38,670
56,946
95,616
Accumulated amortization
(38,670)
(56,946)
(95,616)
 
 
 
 
 
 
 
 
 
 
 
 
37
As at 31 December 2021
-
-
-
Amortization costs are included in Note 11 - 'Administrative expense'.
16. Property and equipment, Advance payments for tangible
 
assets and Right-of-use assets
Property and
equipment
Advance
payments for
tangible
assets
Leasehold
improve-
ments
Right-of-use
premises
Right-of-use
motor
vehicles
Total Right-
of-use
assets
TOTAL
Cost
407,120
37,583
 
18,386
 
 
1,224,206
 
 
13,664
 
1,237,870
1,700,959
Acumulated depreciation
(285,940)
-
 
(11,781)
 
(77,694)
 
(9,936)
(87,630)
(385,351)
As at 1 January 2020
121,180
37,583
 
6,605
 
 
1,146,512
 
 
3,728
 
1,150,240
1,315,608
2020
Additions
11,753
-
2,500
51
-
51
14,304
Transferred
-
(35,552)
-
35,552
-
35,552
-
Disposals (cost)
(237,454)
-
(1,603)
(77,963)
(13,664)
(91,627)
(330,684)
Depreciation charge
(56,223)
-
(1,534)
(126,910)
(2,070)
(128,980)
(186,737)
Disposals (depreciation)
236,232
(2,031)
354
49,408
12,006
61,414
295,969
Cost
181,419
2,031
19,283
1,181,846
-
1,181,846
1,384,579
Accumulated depreciation
(105,931)
(2,031)
(12,961)
(155,196)
-
(155,196)
(276,119)
As at 31 December 2020
75,488
-
6,322
1,026,650
-
1,026,650
1,108,460
2021
Additions
13,518
-
 
-
 
 
666,363
 
 
-
 
666,363
679,881
Transferred
-
-
 
-
 
 
-
 
 
-
 
-
-
Disposals (cost)
(2,151)
-
 
-
 
 
(1,172,495)
 
-
 
(1,172,495)
(1,174,646)
Depreciation charge
(44,767)
-
 
(2,519)
 
(87,974)
 
-
 
(87,974)
(135,260)
Disposals (depreciation)
2,151
-
 
-
 
 
170,601
 
 
-
 
170,601
172,752
Cost
192,786
2,031
 
19,283
 
 
675,714
 
 
-
 
675,714
889,814
Accumulated depreciation
(148,547)
(2,031)
 
(15,480)
 
(72,569)
 
-
 
(72,569)
(238,627)
As at 31 December 2021
44,239
-
 
3,803
 
 
603,145
 
 
-
 
603,145
651,187
Amortization costs are included in Note 11 - 'Administrative expense'.
17. Right-of-use assets and lease liabilities
Right-of-use assets and other liabilities for rights to use assets are shown as follows in the statement of financial position
 
and statement of comprehensive income:
31.12.2021.
31.12.2020.
ASSETS
EUR
EUR
Non-current assets
Right-of-use assets - premises
603,145
1,026,650
TOTAL:
603,145
1,026,650
EQUITY AND LIABILITIES
Non-current liabilities
Lease liabilities for right-of-use assets
532,457
878,613
Current liabilities
Lease liabilities for right-of-use assets
77,821
103,079
TOTAL:
610,278
981,692
 
 
 
 
 
 
 
 
 
 
 
 
38
2021
2020
Leases in the statement of comprehensive income
EUR
EUR
Administrative expense
Expenses relating to leases of low-value assets and short-term leases
(98,039)
(54,743)
Depreciation of right-of-use premises
 
(Note 16)
(87,974)
(126,910)
Depreciation of right-of-use vehicles (Note 16)
-
(2,070)
Other income
Income/(expenses) from discounts for rights of use assets (Note 12)
-
19,397
Income/(expenses) from cancellation of the rights of use assets (Note 13)
(42,155)
-
Interest expense (finance cost)
Interest expense for right-of-use premises (Note 5)
(20,001)
(28,750)
Interest expense for right-of-use vehicles (Note 5)
-
(32)
Total cash outflow from leases
(248,169)
(193,108)
The weighted average borrowing rate for lease liabilities in 2021 was 2.73% (2020: 2.8%.)
 
Significant decrease
 
in
 
lease
 
liabilities for
 
right-of-use assets
 
is related
 
to
 
the
 
reduction of
 
rental space.
 
Mogo JSC
 
has new
 
rental
 
agreement, as
 
a
 
result
 
of which
 
rental
expenses decreased for 32% per month.
The cost relating to
 
variable lease payments that do
 
not depend on an
 
index or a rate
 
amounted to EUR nil
 
for the year ended
 
December 31, 2021. There were
 
no leases with
residual value guarantees or leases not yet commenced to which the Company is committed.
18. Finance Lease Receivables
The table below shows
 
the credit quality and
 
the maximum exposure to
 
credit risk based on
 
the Company’s internal credit
 
rating system and
 
year-end stage classification. The
amounts presented are gross of impairment allowances.
2,021
2020
EUR
EUR
EUR
EUR
EUR
Finance lease receivables
Stage 1
Stage 2
Stage 3
TOTAL
TOTAL
Not past due
2,134,465
75,748
54,483
2,264,696
2,323,396
1-30
208,595
87,808
12,541
308,943
581,200
31-60
-
61,492
43,825
105,317
71,757
>60
-
0
281,483
281,483
713,541
TOTAL, GROSS:
2,343,060
225,049
392,332
2,960,440
3,689,894
The analysis of changes in the gross carrying amount and the corresponding ECL allowances
 
in relation to finance lease receivables are, as follows:
2021
EUR
EUR
EUR
EUR
Finance lease receivables
Stage 1
Stage 2
 
Stage 3
Total
Balance at 1 January 2021
2,556,602
329,679
803,613
3,689,894
Transfer to Stage 1
81,230
(72,868)
(8,361)
-
Transfer to Stage 2
(85,165)
93,029
(7,864)
-
Transfer to Stage 3
(49,172)
(26,682)
75,854
-
New financial assets acquired
1,925,826
64,264
72,852
2,062,942
Receivables settled
(169,415)
(34,626)
(20,733)
(224,775)
Receivables written off
(1,855,547)
(88,385)
(483,232)
(2,427,165)
Receivables partially settled
(61,299)
(39,362)
(39,795)
(140,456)
Balance at 31 December 2021
2,343,060
225,049
392,332
2,960,440
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
39
2020
EUR
EUR
EUR
EUR
Finance lease receivables
Stage 1
Stage 2
 
Stage 3
Total
Balance at 1 January 2020
4,356,399
505,764
1,007,336
5,869,499
Transfer to Stage 1
121,621
(101,502)
(20,119)
-
Transfer to Stage 2
(194,228)
215,116
(20,888)
-
Transfer to Stage 3
(242,283)
(123,591)
365,874
-
New financial assets acquired
491,922
18,096
12,842
522,860
Receivables settled
(584,287)
(45,337)
(53,674)
(683,298)
Receivables written off
(977,403)
(74,105)
(303,787)
(1,355,295)
Receivables partially settled
(415,139)
(64,762)
(183,971)
(663,872)
Balance at 31 December 2020
2,556,602
329,679
803,613
3,689,894
Transfers between stages capture the annual movement in
 
financial assets that are in a different stage
 
at the closing balance sheet from that at
 
the opening balance sheet. The
transfers between each stage are based on the opening balances. New financial assets acquired
 
are based on the closing balances.
Receivables partially
 
settled on
 
stage transfer
 
is reported
 
within the
 
stage that
 
the assets
 
are transferred
 
into. This
 
represents the
 
period to
 
date finance
 
lease receivables
movement transferred into a particular stage.
2021
EUR
EUR
EUR
EUR
Impairment allowance
Stage 1
Stage 2
 
Stage 3
Total
Balance at 1 January 2021
47,606
41,811
654,012
743,429
Transfer to Stage 1
14,383
(9,005)
(5,378)
-
Transfer to Stage 2
(2,793)
8,156
(5,363)
-
Transfer to Stage 3
(1,919)
(4,011)
5,930
-
Impairment for new financial assets acquired
37,934
10,765
34,755
83,453
Reversed impairment for settled receivables
(3,620)
(4,347)
(11,202)
(19,168)
Reversed impairment for written off receivables
(30,938)
(10,986)
(396,440)
(438,364)
Net remeasurement of loss allowance
 
(11,110)
6,136
29,943
24,968
Balance at 31 December 2021
49,544
38,519
306,256
394,318
2020
EUR
EUR
EUR
EUR
Impairment allowance
Stage 1
Stage 2
 
Stage 3
Total
Balance at 1 January 2020
121,025
101,562
721,354
943,941
Transfer to Stage 1
26,429
(19,442)
(6,987)
-
Transfer to Stage 2
(9,129)
16,383
(7,254)
-
Transfer to Stage 3
(9,685)
(24,059)
33,744
-
Impairment for new financial assets acquired
6,512
2,731
6,636
15,879
Reversed impairment for settled receivables
(13,852)
(9,230)
(36,572)
(59,654)
Reversed impairment for written off receivables
(24,017)
(15,710)
(213,956)
(253,683)
Net remeasurement of loss allowance
 
(49,677)
(10,424)
157,047
96,946
Balance at 31 December 2020
47,606
41,811
654,012
743,429
Transfers between
 
stages capture
 
the annual
 
loss allowance
 
movement of
 
financial assets
 
that are
 
in a
 
different stage
 
at the
 
closing balance
 
sheet from
 
that at
 
the opening
balance. sheet. The transfers between each stage are based on ECL at the start of the period. Impairment
 
for new financial assets acquired is based on the closing balances.
The net
 
remeasurement of loss
 
allowance on stage
 
transfer is reported
 
within the stage
 
that the assets
 
are transferred into.
 
This represents the
 
period to date
 
loss allowance
movement transferred into a particular stage.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
40
The analysis of changes in the gross carrying amount and the corresponding ECL allowances
 
in relation to finance lease receivables are, as follows:
Minimum lease payments
Minimum lease payments
EUR
%
EUR
%
Finance lease receivables
31.12.2021.
31.12.2021.
31.12.2020.
31.12.2020.
Stage 1
2,343,060
79%
2,556,602
69%
Stage 2
225,049
8%
329,679
9%
Stage 3
392,332
13%
803,613
22%
TOTAL, GROSS:
2,960,440
100%
3,689,894
100%
Minimum
lease
payments
Change
during the
period
Minimum
lease
payments
EUR
EUR
%
EUR
Finance lease receivables
31.12.2021.
31.12.2020.
Stage 1
2,343,060
(213,542)
-8%
2,556,602
Stage 2
225,049
(104,630)
-32%
329,679
Stage 3
392,332
(411,281)
-51%
803,613
TOTAL, GROSS:
2,960,440
(729,454)
-20%
3,689,894
Impairment allowance
Impairment allowance
EUR
%
EUR
%
Impairment allowance on finance lease receivables
31.12.2021.
31.12.2021.
31.12.2020.
31.12.2020.
Stage 1
49,544
13%
47,606
6%
Stage 2
38,519
10%
41,811
6%
Stage 3
306,256
78%
654,012
88%
TOTAL, ALLOWANCE:
394,318
100%
743,429
100%
Impairment
allowance
Change
during the
period
Impairment
allowance
EUR
EUR
%
EUR
Impairment allowance on finance lease receivables
31.12.2021.
31.12.2020.
Stage 1
49,544
1,938
4%
47,606
Stage 2
38,519
(3,292)
-8%
41,811
Stage 3
306,256
(347,756)
-53%
654,012
TOTAL, ALLOWANCE:
394,318
(349,111)
-47%
743,429
Minimum
 
lease
payments
Present value
of minimum
lease
payments
Minimum
lease
payments
Present value
of minimum
lease
payments
EUR
EUR
EUR
EUR
Finance lease receivables
31.12.2021.
31.12.2021.
31.12.2020.
31.12.2020.
Up to one year
1,452,080
789,066
2,417,908
1,551,062
Years 2 through 5 combined
3,035,507
1,469,936
3,145,113
1,983,123
More than 5 years
863,037
701,438
197,081
155,709
TOTAL, GROSS:
5,350,624
2,960,440
5,760,102
3,689,894
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
41
31.12.2021.
31.12.2020.
Unearned finance income
EUR
EUR
Up to one year
663,014
866,846
Years 2 through 5 combined
1,565,571
1,161,990
More than 5 years
161,599
41,372
TOTAL, GROSS:
2,390,184
2,070,208
31.12.2021.
31.12.2020.
Finance lease receivables
EUR
EUR
Non-current finance lease receivables
2,171,376
2,138,832
Current finance lease receivables
730,687
1,449,159
Accrued interest
58,377
101,903
TOTAL, GROSS:
2,960,440
3,689,894
31.12.2021.
31.12.2020.
Movement in impairment allowance
EUR
EUR
Impairment allowance as at 1 January
743,429
943,941
Net impairment loss for the year
89,211
177,739
Net impairment elimination due to cession of receivables
(438,322)
(378,251)
Impairment allowance as at 31 December
394,318
743,429
Non-Current
Current
Non-Current
Current
31.12.2021.
31.12.2021.
31.12.2020.
31.12.2020.
Finance lease receivables, net
EUR
EUR
EUR
EUR
Finance lease receivables
2,171,377
730,687
2,138,832
1,449,159
Accrued interest
 
-
58,377
-
101,903
Fees paid and received upon loan disbursement
(74,034)
(24,912)
(44,320)
(30,029)
Impairment allowance
(92,480)
(301,838)
(94,747)
(648,682)
2,004,863
462,314
1,999,765
872,351
As of 31 December
 
2021 part of the
 
gross finance lease portfolio in
 
the amount of EUR
 
237 017 was pledged in
 
favour of the JSC
 
Citadele bank as collateral for
 
the credit line
(31 December 2020: EUR 324 595).
Transactions with peer-to-peer platforms
Agreements are offered
 
with buy back
 
guarantee, which means
 
that all risks
 
of such agreements
 
remain with the
 
Company and in
 
case of client
 
default the Company
 
has the
liability to repay the
 
whole remaining principal and
 
accrued interest to P2P
 
investor. By using
 
the same platform Company
 
also offers loans
 
without buy back guarantee,
 
which
means that all risks related to client default were transferred to P2P investor.
 
Portions of agreements purchased by investors therefore are considered as financial assets eligible
for derecognition from the Company's statement of financial position.
Total gross portfolio and associated liabilities for the portfolio derecognised from Company financial assets were:
31.12.2021.
31.12.2020.
Non-current
EUR
EUR
Finance lease receivable
-
5,596
Associated liabilities
-
(5,596)
NET POSITION:
-
-
Current
EUR
EUR
Finance lease receivable
-
4,058
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
42
Associated liabilities
-
(4,058)
NET POSITION:
-
-
Total gross portfolio derecognized from Company's financial assets
-
9,654
Total associated liabilities
-
(9,654)
TOTAL NET POSITION:
-
-
As at end of reporting year 0.00% of all gross portfolio was purchased by P2P investors without
 
buyback guarantee (0.30% in 2020).
19. Loans and advances to customers
The table below shows
 
the credit quality and
 
the maximum exposure to
 
credit risk based on
 
the Company’s internal credit
 
rating system and
 
year-end stage classification. The
amounts presented are gross of impairment allowances.
2,021
2020
EUR
EUR
EUR
EUR
EUR
Loans and advances to customers
Stage 1
Stage 2
Stage 3
TOTAL
TOTAL
Not past due
2,676,342
129,933
118,118
2,924,394
7,565,810
1-30
483,220
146,719
38,304
668,243
1,732,243
31-60
-
71,938
9,489
81,428
368,979
>60
-
-
656,827
656,827
1,713,889
TOTAL, GROSS:
3,159,562
348,591
822,739
4,330,891
11,380,921
The analysis of changes in the gross carrying amount and the corresponding ECL allowances
 
in relation to loans and advances to customers are, as follows:
2021
EUR
EUR
EUR
EUR
Loans and advances to customers
Stage 1
Stage 2
 
Stage 3
Total
Balance at 1 January 2021
8,311,441
999,139
2,070,341
11,380,921
Transfer to Stage 1
427,654
(317,909)
(109,746)
-
Transfer to Stage 2
(175,972)
204,977
(29,005)
-
Transfer to Stage 3
(168,886)
(158,785)
327,671
-
New financial assets acquired
1,116,793
33,539
40,745
1,191,077
Receivables settled
(814,182)
(93,939)
(40,886)
(949,007)
Receivables written off
(5,013,229)
(252,351)
(1,252,682)
(6,518,262)
Receivables partially settled
(524,058)
(66,080)
(183,700)
(773,838)
Balance at 31 December 2021
3,159,562
348,591
822,739
4,330,891
2020
EUR
EUR
EUR
EUR
Loans and advances to customers
Stage 1
Stage 2
 
Stage 3
Total
Balance at 1 January 2020
16,263,860
1,583,838
2,264,216
20,111,914
Transfer to Stage 1
443,158
(381,254)
(61,904)
-
Transfer to Stage 2
(731,461)
757,670
(26,209)
-
Transfer to Stage 3
(839,788)
(332,186)
1,171,974
-
New financial assets acquired
1,114,243
41,745
81,453
1,237,441
Receivables settled
(2,093,092)
(151,673)
(116,746)
(2,361,511)
Receivables written off
(4,429,680)
(348,866)
(778,672)
(5,557,218)
Receivables partially settled
(1,415,799)
(170,135)
(463,771)
(2,049,705)
Balance at 31 December 2020
8,311,441
999,139
2,070,341
11,380,921
Transfers between stages capture the annual movement in
 
financial assets that are in a different stage at
 
the closing balance sheet from that at the opening
 
balance sheet. The
transfers between each stage are based on opening balances. Receivables partially settled on stage transfer is reported within the stage that the assets are transferred into. This
represents the period to date finance lease receivables movement transferred into a particular stage.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
43
2021
EUR
EUR
EUR
EUR
Impairment allowance
Stage 1
Stage 2
 
Stage 3
Total
Balance at 1 January 2021
230,953
146,243
1,610,037
1,987,233
Transfer to Stage 1
95,878
(42,818)
(53,059)
-
Transfer to Stage 2
(7,012)
19,423
(12,411)
0
Transfer to Stage 3
(5,507)
(25,089)
30,595
0
Impairment for new financial assets acquired
20,390
5,048
20,250
45,688
Reversed impairment for settled receivables
(27,678)
(12,660)
(27,945)
(68,283)
Written off impairment for written off receivables
(101,411)
(42,197)
(1,002,217)
(1,145,825)
Net remeasurement of loss allowance
 
(117,947)
10,988
90,503
(16,455)
Balance at 31 December 2021
87,666
58,939
655,753
802,358
2020
EUR
EUR
EUR
EUR
Impairment allowance
Stage 1
Stage 2
 
Stage 3
Total
Balance at 1 January 2020
584,503
358,256
1,640,117
2,582,876
Transfer to Stage 1
97,362
(75,710)
(21,652)
-
Transfer to Stage 2
(32,241)
41,343
(9,102)
-
Transfer to Stage 3
(33,861)
(78,878)
112,739
-
Impairment for new financial assets acquired
30,325
9,335
47,736
87,396
Reversed impairment for settled receivables
(81,798)
(36,269)
(80,214)
(198,281)
Reversed impairment for written off receivables
(155,423)
(93,046)
(574,955)
(823,424)
Net remeasurement of loss allowance
 
(177,914)
21,212
495,368
338,666
Balance at 31 December 2020
230,953
146,243
1,610,037
1,987,233
Transfers between
 
stages capture
 
the annual
 
loss allowance
 
movement of
 
financial assets
 
that are
 
in a
 
different stage
 
at the
 
closing balance
 
sheet from
 
that at
 
the opening
balance. sheet. The transfers between each stage are based on ECL at
 
the start of the period. The net remeasurement of loss
 
allowance on stage transfer is reported within the
stage that the assets are transferred into. This represents the period to date loss allowance movement transferred
 
into a particular stage.
The analysis of changes in the gross carrying amount and the corresponding ECL allowances
 
in relation to loans and advances to customers are, as follows:
Present value of minimum loan payments
Present value of minimum loan payments
EUR
%
EUR
%
Loans and advances to customers
31.12.2021.
31.12.2021.
31.12.2020.
31.12.2020.
Stage 1
3,159,562
73%
8,311,441
73%
Stage 2
348,591
8%
999,139
9%
Stage 3
822,739
19%
2,070,341
18%
TOTAL, GROSS:
4,330,891
100%
11,380,921
100%
Change during the period
EUR
EUR
%
EUR
Loans and advances to customers
31.12.2020.
Stage 1
3,159,562
(5,151,879)
-62%
8,311,441
Stage 2
348,591
(650,548)
-65%
999,139
Stage 3
822,739
(1,247,602)
-60%
2,070,341
TOTAL, GROSS:
4,330,891
(7,050,030)
-62%
11,380,921
Impairment allowance
Impairment allowance
EUR
%
EUR
%
Impairment allowance on loans and advances to
customers
31.12.2021.
31.12.2021.
31.12.2020.
31.12.2020.
Stage 1
87,666
11%
230,953
12%
Stage 2
58,939
7%
146,243
7%
Stage 3
655,753
82%
1,610,037
81%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
44
TOTAL, ALLOWANCE:
802,358
100%
1,987,233
100%
Impairment allowance
Change
during the
period
Impairment allowance
EUR
EUR
%
EUR
Impairment allowance on loans and advances to customers
31.12.2021.
31.12.2020.
Stage 1
87,666
(143,287)
-62%
230,953
Stage 2
58,939
(87,304)
-60%
146,243
Stage 3
655,753
(954,284)
-59%
1,610,037
TOTAL, ALLOWANCE:
802,358
(1,184,875)
-60%
1,987,233
Minimum
loan
payments
Present
value of
minimum
loan
payments
Minimum loan
payments
Present value of minimum
 
loan payments
EUR
EUR
EUR
EUR
Loans and advances to customers
31.12.2021.
31.12.2021.
31.12.2020.
31.12.2020.
Up to one year
2,604,212
1,652,966
6,876,843
4,361,318
Years 2 through 5 combined
3,786,083
2,258,047
10,389,693
6,553,564
More than 5 years
508,622
419,878
571,415
466,039
TOTAL, GROSS:
6,898,917
4,330,891
17,837,951
11,380,921
31.12.2021.
31.12.2020.
Unearned finance income
EUR
EUR
Up to one year
951,246
2,515,525
Years 2 through 5 combined
1,528,036
3,836,129
More than 5 years
88,744
105,376
TOTAL, GROSS:
2,568,026
6,457,030
31.12.2021.
31.12.2020.
Loans and advances to customers
EUR
EUR
Non-current loans and advances to customers
2,677,926
7,019,602
Current loans and advances to customers
1,546,680
4,032,307
Accrued interest
106,285
329,012
TOTAL, GROSS:
4,330,891
11,380,921
31.12.2021.
31.12.2020.
Movement in impairment allowance
EUR
EUR
Impairment allowance as at 1 January
1,987,233
2,582,876
Net impairment loss for the year
88,100
825,171
Net impairment elimination due to cession of receivables
(1,272,975)
(1,420,814)
Impairment allowance as at 31 December
802,358
1,987,233
Non-
Current
Current
Non-Current
Current
31.12.2021.
31.12.2021.
31.12.2020.
31.12.2020.
Loans and advances to customers, net
EUR
EUR
EUR
EUR
Loans and advances to customers
2,677,926
1,546,680
7,019,602
4,032,307
Accrued interest
-
106,284
-
329,012
Fees paid upon loan disbursement
37,707
21,779
75,116
43,149
Fees received upon loan disbursement
(112,069)
(64,727)
(254,581)
(146,241)
Impairment allowance
(155,867)
(646,491)
(386,260)
(1,600,973)
2,447,697
963,525
6,453,877
2,657,254
As of
 
31 December
 
2021 part
 
of the
 
gross loan
 
portfolio in
 
the amount
 
of EUR
 
544 526
 
was pledged
 
in favour
 
of the
 
JSC Citadele
 
bank as
 
collateral for
 
the credit
 
line (31
December 2020: EUR 997 441).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
45
20. Investment in debt securities
The following table shows investments in securities
that are designated at FVOCI.
 
31.12.2021.
31.12.2020.
EUR
EUR
Investment in Mogo Finance S.A issued bonds
-
609,000
TOTAL:
-
609,000
In 2020, the Company bought bonds from the ultimate parent company with the aim of decreasing
 
the Company's net debt position. Bonds were purchased with a nominal value
of EUR 700 000 and a fixed rate of 9.5% with maturity date 10.07.2022.
None of investments were disposed during 2020 and
 
there were no transfers of any cumulative gain or
 
loss. The change in fair value on
 
these investments was 23 991 EUR for
the year ended 31.12.2020 and recognised in fair value reserves and other comprehensive income.
In 2021 all bonds were sold to non-related parties.
21. Assets held for sale
31.12.2021.
31.12.2020.
Other non-current assets held for sale, net
EUR
EUR
Repossessed collateral
32,118
62,640
32,118
62,640
Repossessed collaterals are vehicles taken over by the Company in case of default by the Company's clients on the related lease agreements.
 
After the default of the client, the
Company has the right to repossess the
 
vehicle and sell it to third
 
party. The Company does not
 
have the right to repossess, sell
 
or pledge the vehicle in the absence of
 
default
by Company's clients. The Company usually sells the repossessed vehicles within 60 days after repossession.
22. Prepaid Expense
 
31.12.2021.
31.12.2020.
EUR
EUR
Prepaid Mintos service fee
-
32,634
Other prepaid expenses
77,436
81,208
TOTAL:
77,436
113,842
23. Trade receivables
 
31.12.2021.
31.12.2020.
EUR
EUR
Receivables from cession to related parties non-current
512,164
187,315
Receivables from cession to related parties current
609,306
277,853
Receivables from related parties
351,978
733,385
Receivables from Eleving Stella JSC
 
175
-
Receivables from cession to non related parties current
7,357
11,597
Receivables for commissions
-
105
Other receivables
245
-
TOTAL:
1,481,225
1,210,255
An analysis of Trade and other receivable staging and the corresponding ECL allowances at the year end are as follows:
Non-current receivables
Current receivables
Without
delay
Total Non-
current
receivables
Without
delay
1-30
31-90
> 90 days
Total current
receivables
2021
Receivables from cession to related parties
512,164
512,164
609,306
-
-
-
609,306
Receivables from related parties
-
-
216,806
135,187
-
160
352,153
Receivables from cession
-
-
7,357
-
-
-
7,357
Other trade receivables
-
-
-
-
245
-
245
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
46
Total trade receivables
512,164
512,164
833,469
135,187
245
160
969,061
In line with the
 
expectations and agreement reached with
 
the related parties on
 
the settlement of the
 
debts, material overdue related party
 
receivables at year end
 
were settled
shortly after end of reporting period.
As
 
at
 
year
 
end ECLs
 
for receivables
 
from cession
 
to
 
related parties
 
are
 
assessed based
 
on
 
expected settlement.
 
The
 
management has
 
performed an
 
assessment of
 
the
receivables form the related party, and concluded there is no significant credit risk increase. Accordingly, no ECL is recognized as at the end of the reporting period (2020: EUR 0
as well).
Non-current receivables
Current receivables
Without
delay
Total Non-
current
receivables
Without
delay
1-30
31-90
> 90 days
Total current
receivables
2020
Receivables from cession to related parties
187,315
187,315
277,853
-
-
-
277,853
Receivables from related parties
-
-
134,638
264,205
238,205
96,337
733,385
Receivables from cession
-
-
11,597
-
-
-
11,597
Other trade receivables
-
-
-
-
-
105
105
Total trade receivables
187,315
187,315
424,088
264,205
238,205
96,442
1,022,940
As at year end ECLs are assessed based on expected settlement. Accordingly, no ECL is recognized as at the end of the reporting period. (2020: EUR
 
0).
24. Other receivables
31.12.2021.
31.12.2020.
EUR
EUR
Receivable for attracted funding through P2P platform (Note 29)*
28,452
27,884
Advances paid for goods and services
1,128
7,237
Security deposit for office lease
-
22,179
Overpaid company risk fee
-
12
Other debtors
21,337
18,896
TOTAL:
50,917
76,208
25. Contract assets
31.12.2021.
31.12.2020.
EUR
EUR
Contract asset from subsidiary
75,247
102,319
Contract assets from related parties
256,327
95,841
TOTAL:
331,574
198,160
Majority of
 
the invoices
 
are issued
 
after the
 
year end
 
and receivables
 
from these
 
invoices are
 
paid, except
 
for EUR
 
227 047
 
(2020: EUR
 
51 791)
 
representing the
 
accrued
revenue from related party JSC Primero Finance as a result of revenue variable consideration recognition.
 
The Company
 
assesses material
 
amounts recovery
 
individually.
 
The Company’s
 
management decides
 
on the
 
performance assessment
 
on an
 
individual basis,
 
reflecting the
possibility of
 
obtaining information on
 
a particular contract
 
asset and
 
a significant
 
increase in
 
the credit
 
risk of
 
that particular contract
 
asset. As
 
at year
 
end ECLs
 
are as
 
well
assessed based
 
on the
 
expected settlements.
 
The contract
 
assets, which
 
are settled
 
shortly after
 
end of
 
reporting period,
 
have no
 
ECL recognised.
 
The management
 
has
performed an assessment of the contract assets and concluded there is no significant credit risk increase. Accordingly, no ECL is recognized as at the end of the reporting period
(2020: EUR 0 as well).
26. Cash and cash equivalents
31.12.2021.
31.12.2020.
EUR
EUR
Cash at bank
190,007
98,891
Money in transit
1,311
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
47
TOTAL:
191,318
98,891
This financial asset is not impaired as of 31.12.2021. (31.12.2020.: 0 EUR).
The Company has not created
 
ECL allowances for cash and cash
 
equivalents on the basis that
 
placements with banks are of short
 
term nature and the lifetime
 
of these assets
under IFRS 9 is so short that the low probability of default would result in immaterial ECL amounts (2020:
 
0 EUR).
27. Share capital
The share capital of the Company on
 
1 January 2020 was EUR 5
 
000 000 and consists of 5 000
 
000 shares. The par value of each
 
share was EUR 1. During the Shareholders
Meeting held on 29.
 
October 2021, it was decided
 
to decrease share capital by
 
EUR 4 575 000.
 
The share capital of
 
the Company on 31 December
 
2021 is EUR 425
 
000 and
consist of 425 000 shares. The par value of each share is EUR 1. All the shares are fully paid.
Share
capital
EUR
Opening balance as at 1 January 2020
5,000,000
Closing balance as at 31 December 2020
5,000,000
Opening balance as at 1 January 2021
5,000,000
Decrease
 
(4,575,000)
Closing balance as at 31 December 2021
425,000
The Company has currency revaluation reserve amount 1 EUR, due to switch from Latvian Lats to
 
EUR.
28. Other provisions
During financial year 2016, the
 
Company adjusted its VAT
 
returns for the periods from
 
2014 to 2016 which
 
resulted in additional input VAT.
 
The same approach is applied
 
also
for
 
all
 
periods until
 
31.12.2021. However,
 
there
 
is uncertainty
 
of
 
possible recovery
 
of
 
those input
 
VAT
 
and as
 
a result
 
possible VAT
 
liabilities might
 
arise.
 
Due to
 
this,
 
the
Company recognizes a provision at the amount of the declared input tax which as at 31.12.2021 is equal to EUR
 
108 421 (at 31.12.2020 EUR 333 608).
31.12.2021.
31.12.2020.
EUR
EUR
Provision for possible VAT liabilities*
108,421
333,608
Provision for possible penalties
31,632
99,314
TOTAL:
140,053
432,922
* Provision for possible taxes and duties are calculated based
 
on rates applied by tax body of Republic
 
of Latvia and discounted with rate of 0.42%
 
(2020:
 
0.51%) for estimated
litigation process period of remaining of 3 years. The provisions are made for VAT possible liabilities.
Change in provision for possible VAT liabilities is recognized proportionally in those expense accounts, where the related VAT
 
input is claimed.
Provisions
for current
year
Reversed
provisions*
Unwinding of
discount
Total
increase/
(decrease) in
provisions
Increase/
(decrease) in
VAT
liabilities
Changes in other provisions
31.12.2020.
31.12.2021.
Provision for possible VAT liabilities in Latvia
333,608
40,489
(179,640)
(4,447)
(143,598)
(81,589)
108,421
Provision for possible penalties in Latvia
99,314
11,561
(79,713)
470
(67,682)
-
31,632
TOTAL:
432,922
52,051
(259,353)
-
(3,977)
(211,280)
(81,589)
140,053
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
48
*During the financial year 2021 the Company has reversed the provision for possible VAT
 
liabilities and penalties in Latvia for the period December 2017 to November
 
2018 due
to the expiry of the statute of limitations in accordance with the national legislation.
Provisions
for current
year
Reversed
provisions*
Unwinding of
discount
Total
increase/
(decrease) in
provisions
Increase/
(decrease) in
VAT
liabilities
31.12.2019.
31.12.2020.
Provision for possible VAT liabilities in Latvia
365,495
17,991
(124,486)
4,344
(102,151)
70,264
333,608
Provision for possible penalties in Latvia
127,176
26,003
(55,376)
1,511
(27,862)
-
99,314
TOTAL:
492,671
43,994
(179,862)
5,855
(130,013)
70,264
432,922
*During the financial year 2020 the Company has reversed the provision for possible VAT penalties liabilities in Latvia by changing the fine calculation estimates.
29. Borrowings
Non-current
Interest rate
per annum
(%)
Maturity
31.12.2021.
31.12.2020.
Liabilities for issued debt securities
EUR
EUR
Bonds 30 million EUR notes issue
3)
11%
3/31/2024
29,859,000
-
Bond additional interest accrual
 
6)
29,753
-
Bonds acquisition costs
(683,744)
-
TOTAL:
29,205,009
-
Funding attracted through peer-to-peer platforms
Funding attracted through peer-to-peer platforms
4)
6% - 10.5%
12/31/2028
2,703,858
4,809,762
Liabilities for acquisition costs for funding attracted through peer-to-peer platform
(26,473)
(25,837)
TOTAL:
2,677,385
4,783,925
Lease liabilities for right-of-use assets
Lease liabilities for right-of-use assets - premises
5)
2.14-2.96%
up to 5 years
213,336
441,503
Lease liabilities for right-of-use assets - premises
5)
2.14-2.96%
>1 year -
 
< 5
year
319,121
437,110
TOTAL:
532,457
878,613
Loans from related parties
 
Loans from related parties
 
9)
12.00%
10/18/2026
1,705,000
-
TOTAL:
1,705,000
-
TOTAL NON-CURRENT BORROWINGS:
34,119,851
5,662,538
Current
Interest rate
per annum
(%)
Maturity
31.12.2021.
31.12.2020.
Liabilities for issued debt securities
EUR
EUR
Bonds 20 million EUR notes issue
1)
10-12%
31.03.2021.
-
17,166,000
Bonds 10 million EUR notes issue
2)
10-12%
31.03.2021.
-
6,963,000
Bond additional interest accrual
 
6)
-
367,626
Bonds acquisition costs
-
(16,511)
TOTAL:
-
24,480,115
Funding attracted through peer-to-peer platforms
Funding attracted through peer-to-peer platforms
4)
6% - 10.5%
12/31/2028
623,243
1,854,866
Accrued interest for funding attracted through peer-to-peer platforms
13,537
38,506
TOTAL:
636,780
1,893,372
Lease liabilities for right-of-use assets
 
 
 
 
 
 
 
 
 
49
Lease liabilities for right-of-use assets - premises
5)
2.14-2.96%
up to 1 years
77,821
103,079
TOTAL:
77,821
103,079
Loans from banks
Loan from bank
 
7) 8)
7.5% - 8.0% + 6m
EURIBOR
2/26/2021
-
1,689,618
Accrued interest expense
-
208
TOTAL:
-
1,689,826
TOTAL CURRENT BORROWINGS:
714,601
28,166,392
1) On 17 March 2014 the Company registered with the Latvian Central Depository a bond facility through
 
which it can raise up to EUR 20 million.
 
This bond issue is unsecured. The notes are issued at par, have a maturity of seven years and carry a fixed coupon of 10% per annum, paid monthly in arrears. The note type on
11 November 2014 was changed to "publicly issued notes" and were listed on the regulated market of NASDAQ OMX Baltic.
2) On 1 December 2017 the Company registered with the Latvian Central Depository a bond facility through
 
which it can raise up to EUR 10 million.
This bond
 
issue is
 
unsecured. The notes
 
are issued
 
at par,
 
have a
 
maturity of
 
three years
 
four months and
 
carry a
 
fixed coupon
 
of 10%
 
per annum, paid
 
monthly in arrears.
Bonds are listed on the alternative market Firth north of NASDAQ OMX Baltic and are "private issued notes".
 
In accordance with the initial repayment of
 
both bond facilities starts from 30.06.2019. Accordingly,
 
those liabilities are split between current and
 
non-current as at 31 December
2018. Subsequent to the reporting period the initial repayment terms were amended.
In March 2019 noteholders
 
of JSC mogo bonds
 
have accepted the amendments to
 
the prospectuses of both
 
emissions. The terms of
 
the amendment provide that
 
the principal
amount of the notes shall be fully repaid in one instalment on 31 March 2021.
3) On March
 
1, 2021, through
 
public offering JSC
 
mogo successfully issued
 
secured corporate bond
 
(LV0000802452) in
 
the amount of
 
EUR 30
 
million, which from
 
March 31,
2021 are included in the regulated market – the Baltic Bond List of “Nasdaq Riga” stock exchange.
The notes, with minimum subscription amount of
 
EUR 1’000, are issued at par,
 
have a maturity of 3 years
 
and carry a fixed coupon of
 
11% per annum,
 
paid monthly in arrears.
The bonds were offered
 
to existing Mogo bondholders and other
 
retail and institutional investors from
 
the Baltic region. The public
 
offering consisted of two
 
parts – subscription
by new investors and exchange offer to existing bondholders, which has been comfortably oversubscribed with
 
more than 840 investors participating in the offering.
Allocation results are as follows:
Investors
Nominal amount (% of issue
size)
Number of investors
Existing bondholders
71.40%
181
New investors
28.60%
662
Geographic breakdown:
Nominal amount
Country:
(% of issue size)
Latvia
73.30%
Estonia
17.70%
Lithuania
0.30%
Other
8.60%
TOTAL:
100%
Due to existing bondholders’ exchange to newly issued bonds, the LV0000801363 issue size was decreased to EUR 5,979,000 and LV0000880029 decreased to EUR 2,602,000
and both bond issues were repaid in full on maturity date – March 31, 2021.
 
4) Attracted funding
 
from P2P platform
 
is transferred to
 
the Company's bank
 
accounts once per
 
week. The Company
 
repurchased less loans
 
back than put
 
in P2P platform
 
in
December 2021 than in December 2020.
 
5) The
 
Company has entered
 
into several lease
 
agreements for office
 
premises and branches.
 
(Note 2 section
 
IFRS 16: Leases).
 
During 2021
 
the Company has
 
signed new
office rent agreement with related company JSC Eleving Vehicle Finance for period till August 2029.
6) The item represents accrued interest, which is to be paid at the maturity of the bonds,
 
therefore the accrued interest is classified as short term in 2020 and long term in 2021.
7)
 
On 2nd August 2019 JSC
 
"Citadele banka" granted to JSC
 
“mogo” (Latvia), JSC “mogo LT”
 
(Lithuania) and JSC “mogo” (Estonia) the
 
credit line up to EUR
 
10 million at the
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50
cost of 6M EURIBOR
 
+ 8% for refinancing
 
of existing indebtedness.
 
The agreement has been
 
amended in 2021 November by
 
increasing the credit line limit
 
to EUR 15 million
and changing the interest rate to 6M EURIBOR + 7.5% or 6M EURIBOR + 8% depending on the amount. Maturity of agreement
 
is 30th September 2023.
The credit line agreement was amended on November 29, 2021, which stipulates the term an the amounts of the credit
 
line.
8) On
 
29 December
 
2020 JSC
 
Signet Bank
 
granted to
 
JSC mogo
 
the credit
 
in the
 
amount of
 
EUR 500
 
000. Maturity
 
of agreement
 
- February
 
2021. The
 
loan principal
 
and
accrued interest were repaid on February 2021.
9) On 15 December 2021 JSC Eleving Vehicle Finance granted to JSC mogo the credit in the amount of EUR 5 000 000. Maturity of agreement - October
 
2026.
 
P2P platform payables/ receivables position as at the year end dates were:
31.12.2021.
31.12.2020.
EUR
EUR
(Payable)/ Receivable from attracted funding through P2P platform (Note 24, 32)
28,452
27,884
TOTAL:
28,452
27,884
Total accrued expenses for services for attracted funding through P2P platform as at statement of financial position dates were:
31.12.2021.
31.12.2020.
EUR
EUR
Accrued for expenses from attracted funding through peer-to-peer platform (Note 33)
16,779
7,026
TOTAL:
16,779
7,026
Incoming
 
cash flow
Outgoing
 
cash flow
Changes in liabilities
31.12.2020.
Other
31.12.2021.
Funding attracted through peer-to-peer platforms
6,664,628
4,887,015
(8,700,038)
475 497*
3,327,102
Lease liabilities for right-of-use assets
981,692
-
(78,038)
(293,375)
610,278
Liabilities for issued debt securities
24,129,000
16,033,708
(10,282,000)
(21,708)
29,859,000
Loans from related party
-
7,800,000
(6,095,000)
-
1,705,000
Loans from bank
1,689,618
16,546,301
(18,120,862)
(115,057)
-
TOTAL BORROWINGS PRINCIPAL:
33,464,938
45,267,024
(43,275,938)
45,357
35,501,380
*Other movement in Funding
 
attracted through peer-to-peer platforms
 
is related with the
 
offsetting of mutual
 
debts by companies
 
on a weekly
 
basis to each
 
other without cash
transfer.
Incoming
 
cash flow
Outgoing
 
cash flow
Calculated
for the
financial year
Changes in liabilities
31.12.2020.
31.12.2021.
Additional bond interest accrual
367,626
-
(390,512)
52,639
29,753
Bonds interest expenses
(16,511)
-
(892,978)
225,745
(683,744)
Bonds servicing expenses
-
-
(34,461)
34,461
-
Bonds interest expenses
-
-
(3,238,849)
3,238,849
-
Accrued interest for financing received from P2P investors
38,506
-
(439,479)
414,510
13,537
Funding attracted through peer-to-peer platforms acquisition costs
(25,837)
-
(4,601)
3,965
(26,473)
Interest expenses from right-of-use assets
-
-
(20,001)
20,001
-
Interest expenses from related party loans
-
-
(16,062)
16,062
-
Interest expense from bank loan
208
-
(99,140)
98,932
-
TOTAL INTEREST LIABILITIES:
363,992
-
(5,136,083)
4,105,163
(666,928)
TOTAL BORROWINGS:
33,828,930
45,267,024
(48,412,021)
4,150,520
34,834,452
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
51
Incoming
 
cash flow
Outgoing
 
cash flow
Changes in liabilities
31.12.2019.
Other
31.12.2020.
Funding attracted through peer-to-peer platforms
8,406,312
1,939,656
(4,999,995)
1 318 655*
6,664,628
Lease liabilities for right-of-use assets
1,123,242
-
(92,875)
(48,675)
981,692
Liabilities for issued debt securities
30,000,000
6,305,000
(12,176,000)
-
24,129,000
Loan from bank
2,106,840
11,053,000
(11,470,222)
-
1,689,618
TOTAL BORROWINGS PRINCIPAL:
41,636,394
19,297,656
(28,739,092)
1,269,980
33,464,938
*Other movement in Funding
 
attracted through peer-to-peer platforms
 
is related with the
 
offsetting of mutual
 
debts by companies
 
on a weekly
 
basis to each
 
other without cash
transfer.
31.12.2019.
Incoming
Outgoing
Calculated
for the
financial year
31.12.2020.
Changes in liabilities
 
cash flow
 
cash flow
Additional bond interest accrual
299,203
-
(9,967)
78,390
367,626
Bonds acquisition costs
(239,960)
-
-
223,449
(16,511)
Bonds interest expenses
-
-
(2,838,225)
2,838,225
-
Accrued interest for financing received from P2P investors
48,868
-
(769,258)
758,896
38,506
Funding attracted through peer-to-peer platforms acquisition costs
(71,647)
-
(3,900)
49,710
(25,837)
Interest expenses from right-of-use assets
-
-
(28,782)
28,782
-
Interest expense from bank loan
-
-
(149,973)
150,181
208
TOTAL INTEREST LIABILITIES:
36,464
-
(3,800,105)
4,127,633
363,992
TOTAL BORROWINGS:
41,672,858
19,297,656
(32,539,197)
5,397,613
33,828,930
30. Prepayments and other payments received from customers
31.12.2021.
31.12.2020.
EUR
EUR
Unrecognized payments received*
14,627
15,760
Overpayments from historical customers
43,806
34,614
TOTAL:
58,433
50,374
* Unrecognised
 
payments are
 
payments received
 
from former
 
clients after
 
contractual terms
 
are ended
 
and payments
 
received which
 
cannot be
 
identified and
 
allocated to
 
a
respective finance lease or loan and advance to customer balance.
Advances received from customers are shown under finance lease receivables and loans and advances
 
to customers in year 2021 and 2020.
31. Taxes payable
31.12.2021.
31.12.2020.
EUR
EUR
Social security contributions
29,411
60,129
Personal income tax
15,376
43,467
Other taxes
4,489
-
TOTAL:
49,276
103,596
 
 
 
 
 
 
 
 
 
 
 
52
32. Other liabilities
31.12.2021.
31.12.2020.
EUR
EUR
Liabilities against employees for salaries
54,374
60,120
Payable for received payments from customers of the related parties
305,856
315,566
Other liabilities
3,663
8,040
TOTAL:
363,893
383,726
33. Accrued liabilities
31.12.2021.
31.12.2020.
EUR
EUR
Accrued liabilities for services from non related parties
54,510
74,408
Accrued liabilities for management services from related parties
39,031
69,174
Accrued unused vacation
67,323
81,377
Accruals for bonuses
51,240
63,397
Accrued expenses from attracted funding through peer-to-peer platform (Note 29)
16,779
7,026
TOTAL:
228,883
295,382
34. Related parties disclosures
Receivables and payables incurred are not secured with any kind of pledge.
Transactions with related parties for years 2021 and 2020 were as follows:
2021
2020
EUR
EUR
Services provided
 
- Revenue from recharging expenses (Note 12)*
635,297
786,579
 
- Parent company******
6,442
19,958
 
- Subsidiary
66,316
375,861
 
- HUB**
15,696
126,028
 
- Other related companies
546,843
264,732
 
- Other services provided
1,617,806
1,284,785
 
- Client acquisition services and other provided services to Subsidiary (Note 12)
970,409
833,637
 
- Client acquisition services and other services provided for other related companies
647,397
451,148
Services received
 
- Management services (Note 11)****
558,916
515,980
 
- Eleving Stella JSC (parent company from 01.09.2021)
558,916
390,808
 
- Eleving Luna JSC (parent company till 31.08.2021)
-
125,172
 
- Other services received***
199,962
51,117
 
- HUB**
143,661
11,702
 
- Parent company
19,677
2,063
 
- Subsidiary
20,211
20,065
 
- Longo Latvia JSC****
-
11,939
 
- Other related companies
16,414
5,348
 
 
 
 
 
 
 
 
 
 
 
53
Assets
 
201,450
312,758
 
- Purchase of fixed assets from HUB**
2,020
-
 
- Vehicles sold to subsidiary
199,430
312,758
Acquired vehicles for sale through finance leases
 
1)
67,590
32,395
 
- Cars from subsidiary
67,590
32,395
Interest income (Note 4)
5,155,060
3,814,270
 
- Eleving Group S.A.
2,329,958
2,715,262
 
- Parent company
1,133,292
-
 
- Subsidiary
808,705
591,360
 
- Other related companies
883,105
507,648
Interest expenses (Note 5)
16,062
34,008
 
- Eleving Group S.A.
12,698
34,008
 
- HUB**
3,363
-
Cession income
 
(Note 8)
 
2)
2,112,091
734,275
 
- Other related companies
2,112,091
734,275
* When another party is involved in providing goods or services to the Company's customers, the Company considers
 
that in these transactions it acts as an agent. (Note 3, 12).
** HUB
 
- under HUB
 
there are disclosed
 
the Company's
 
related parties JSC
 
Mogo Balkans and
 
Central Asia, JSC
 
Eleving Stella
 
(JSC Mogo Eastern
 
Europe) transactions till
31.08.2021, JSC Eleving Solis (JSC Mogo Africa), JSC Eleving Finance (JSC Mogo Consumer Finance) and JSC Eleving Vehicle Finance, JSC Eleving Luna (JSC Mogo Baltics
and Caucasus) transactions from 01.09.2021.
*** Other
 
services received
 
- include
 
car dealership
 
commissions (that
 
form part
 
of net
 
finance lease
 
receivable). It
 
also includes
 
vacation compensations
 
to employees
 
who
moved from mogo JSC to HUB - and no gain or loss occurred on this transaction.
**** Management services - include non deductible VAT.
***** Starting from 03.03.2020 Longo Latvia JSC is not related party.
****** Parent company - JSC Eleving Luna till 01.09.2021, JSC Eleving Stella from 01.09.2021.
1)
 
The
 
Company
 
has
 
acquired
 
vehicles
 
from
 
Subsidary
 
and
 
these
 
vehicles
 
were
 
sold
 
to
 
customers
 
through
 
finance
 
lease
 
(Note
 
18).
 
No
 
gain
 
or
 
loss
 
occurred
 
on
 
these
transactions.
2) Cession income from transaction with related parties is included in the net gain/(loss) from de-recognition
 
of financial assets measured at amortized costs
 
(Note 8).
Receivables from related companies
Interest rate per annum (%)
31.12.2021.
31.12.2020.
Non-current
Maturity
EUR
EUR
Loan receivable from related company 1)
12.50
April 2023
700,000
23,173,036
Loan receivable from related company 2)
12.00
April 2023
8,827,118
-
Loan receivable from related company 3)
12.00
June 2026
7,934,000
-
Loan receivable from related company 4)
12.00
October
2026
17,640,000
-
Loan receivable from subsidiary company 5)
12.50
January
2024
6,978,212
5,620,212
Loan receivable from other related company 6)
12.50
September
2024
-
5,159,729
Current
Accrued interest 1)
-
246,530
TOTAL:
42,079,330
34,199,507
1) In 2017 the Company has signed the
 
loan agreement with its ultimate Parent Company Eleving Group S.A. Loan
 
agreement allows both parties to agree on flexible loan
 
pay-
out and loan repayment arrangement with maximum loan amount of 30 million EUR with maturity date 27.04.2023.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
54
2) In 2021 the Company has signed the loan agreement with Parent Company Eleving
 
Stella JSC Loan agreement allows both parties
 
to agree on flexible loan pay-out and loan
repayment arrangement with maximum loan amount of 9.12 million EUR with maturity date 27.04.2023.
3) In 2021 the Company has signed the loan agreement with Parent Company Eleving
 
Stella JSC Loan agreement allows both parties
 
to agree on flexible loan pay-out and loan
repayment arrangement with maximum loan amount of 30 million EUR with maturity date 21.06.2026.
4) In 2021 the Company has signed the loan agreement with Parent Company Eleving
 
Stella JSC Loan agreement allows both parties
 
to agree on flexible loan pay-out and loan
repayment arrangement with maximum loan amount of 17.64 million EUR with maturity date 13.10.2026.
5) On 03.01.2019 the Company signed loan agreement with Renti JSC for credit line of EUR 10
 
000 000 with maturity date 03.01.2024 and fixed interest rate 12.5%.
6) On 09.04.2020 the Company signed loan agreement with Eleving Vehicle
 
Finance JSC for credit line of EUR 15
 
000 000 with maturity date 24.09.2024 and fixed interest rate
12.5%.
An analysis of loan receivable staging and the corresponding ECL allowances at the year end are as follows:
2021
Stage 1
Stage 2
Stage 3
Total
Loan receivable from ultimate Parent company
700,000
-
-
700,000
Loan receivable from Subsidiary company
6,978,212
-
-
6,978,212
Loan receivable from related company
34,401,118
-
-
34,401,118
Loan receivables from
 
related parties inherently are
 
subject to the
 
Group’s credit risk.
 
Therefore, a benchmarked PD
 
rate was based
 
on Standard &
 
Poor's corporate statistics
studies. The LGD has been assessed considering the related parties' financial position.
As a result no ECLs are recognized for the loan receivable from related parties (2020: EUR nil).
 
2020
Stage 1
Stage 2
Stage 3
Total
Loan receivable from ultimate Parent company
23,419,566
-
-
23,419,566
Loan receivable from Subsidiary company
5,620,212
-
-
5,620,212
Loan receivable from related company
5,159,729
-
-
5,159,729
The distribution of issued loans by related party has changed due to the change of the parent company.
31.12.2021.
31.12.2020.
Current
EUR
EUR
Receivables from Eleving Stella JSC
 
175
-
Receivables from subsidiary
93,332
655,616
Receivables from cession to related parties
1,121,470
465,168
Receivables from related companies
258,646
77,769
TOTAL:
1,473,623
1,198,553
TOTAL RECEIVABLES:
43,552,953
35,398,060
Ageing of receivables from related companies is disclosed in Note 23.
Payables and other liabilities to related companies
31.12.2021.
31.12.2020.
EUR
EUR
Other liabilities to Primero Finance JSC (see Note 32)
305,856
315,566
Payables to subsidiary
796
-
Payables to other related companies
5,344
-
TOTAL:
311,996
315,566
35. Investments in subsidiary
The Company’s investments in subsidiary as of 31 December 2021 and 31 December 2020 are set out below:
Company's investment
31.12.2021.
31.12.2020.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
55
Company
Business
Shareholding
EUR
EUR
Renti JSC
Vehicle rent
100%
5,500,000
5,500,000
Total Net Investments in subsidiary:
5,500,000
5,500,000
Impairment testing of the
 
investments in subsidiary has
 
been performed by the
 
management of the Company
 
using valuation methods and
 
based on assumptions described
 
in
section impairment testing.
 
As a result of performed impairment test calculations there is no additional impairment recognised
 
in the year ended 31 December 2021 (2020: nill).
Income from investments
There were no dividends received from Company's subsidiary during years 2021 and 2020.
Additional investments in subsidiary
The following settlements for the new equity shares were made by the Company:
31.12.2021.
31.12.2020.
EUR
EUR
Establishment / increase of Renti JSC
 
-
 
 
-
 
TOTAL:
 
-
 
 
-
 
Impairment testing
The recoverable amount of Renti
 
JSC is determined based on
 
a value in use calculation
 
using cash flow projections from
 
financial budgets approved by the
 
management. As a
result
 
of
 
performed calculations
 
the
 
management has
 
not
 
identified
 
impairment
 
for
 
Company’s
 
investment in
 
Renti
 
JSC
 
for
 
the
 
year
 
ended
 
31
 
December,
 
2021
 
the
 
same
approach as for the year ended 31 December, 2020.
Please refer to the Note 3 for more details on sensitivity of key assumptions used.
 
Operating results of Renti JSC are presented below:
2021
2020
EUR
EUR
Revenue from rent
6,543,201
6,240,662
Loss
(1,094,813)
(1,442,333)
31.12.2021.
31.12.2020.
EUR
EUR
Current assets
928,483
1,562,656
Non-current assets
10,810,787
14,711,103
Curent liabilities
(1,350,478)
(2,346,248)
Non-curent liablities
(9,129,799)
(11,896,383)
Net assets
1,258,993
2,031,128
36. Other investments
31.12.2021.
31.12.2020.
Company
Shareholding
EUR
EUR
Mogo IFN (Romania)
0.01%
20
20
LLC Mogo Belarus
0.01%
-
6
TOTAL:
20
26
Equity investments are classified and
 
measured as Equity instruments designated
 
at fair value through
 
OCI. The Company elected
 
to classify irrevocably its equity
 
investments
under this category as it intends to hold these investments for the foreseeable future.
37. Commitments and contingencies
Starting from 14
 
October 2021 Eleving
 
Group and certain
 
of its Subsidiaries
 
(including Mogo JSC)
 
entered into several
 
pledge agreements with
 
TMF Trustee Services
 
GmbH,
establishing pledge
 
over shares
 
of those
 
Subsidiaries, pledge
 
over present
 
and future
 
loan receivables
 
of those
 
Subsidiaries, pledge
 
over trademarks
 
of those
 
Subsidiaries,
general business pledge over those Subsidiaries, pledge over primary bank
 
accounts if feasible, in order to secure Eleving
 
Group obligations towards bondholders deriving from
Eleving Group
 
bonds (ISIN:
 
XS2393240887). The
 
value of
 
the assets
 
pledged in
 
accordance with
 
the commercial
 
pledge agreement
 
concluded with
 
TMF Trustee
 
Services
56
GmbH is estimated to be 53.2 million EUR as of 31.12.2021.
 
Starting from
 
14 October,
 
2018 Eleving
 
Group S.A.
 
as Issuer
 
and its
 
Subsidiaries (including
 
Mogo JSC)
 
as
 
Guarantors have
 
entered into
 
a guarantee
 
agreement dated
 
14
October 2021 (as
 
amended and restated from
 
time to time)
 
according to which
 
the guarantors
 
unconditionally and irrevocably guaranteed
 
by way of
 
an independent payment
obligation to each holder of the Eleving Groupe S.A. bonds (ISIN: XS2393240887) the due and punctual payment of principal of, and interest on, and
 
any other amounts payable
under the Eleving Group S.A. bonds (ISIN: XS2393240887) offering memorandum (Note 38).
 
 
 
On 26
 
February 2018
 
the Company
 
entered into
 
a surety
 
agreement with
 
Ardshinbank CJSC
 
and Mogo
 
LLC, in
 
order to
 
secure Mogo
 
LLC obligations
 
towards Ardshinbank
CJSC deriving from
 
loan agreement concluded between
 
Ardshinbank CJSC and
 
Mogo LLC on
 
26 February 2018,
 
with a maximum
 
liability not exceeding
 
the principal amount
EUR 1 000 000. As described in the Note 38 below, the surety agreement has been prolonged till 2022.
On 11
 
December 2018
 
mogo JSC
 
issued a
 
payment guarantee
 
No.2018.12.05 for
 
the benefit
 
of third
 
party with
 
a maximum
 
liability not
 
exceeding EUR
 
200 000,
 
where the
liability of mogo JSC is limited to the performance of other subsidiary's Eleving Luna JSC obligations from the
 
secured agreement with this party.
On 31
 
July 2019
 
mogo JSC
 
has concluded
 
a Commercial
 
pledge with
 
JSC Citadele
 
banka by
 
virtue of
 
which certain
 
receivables of
 
mogo JSC
 
are pledged
 
in favor
 
of JSC
Citadele banka in order to secure mogo JSC (Latvia), mogo OU (Estonia) and JSC mogo LT
 
(Lithuania) obligations towards JSC Citadele banka under the Credit line agreement
of 8 July 2019. The
 
same Commercial pledges are issued by
 
the remaining Credit line agreement parties
 
- mogo OU (Estonia) and
 
JSC mogo LT
 
(Lithuania). On 23 December
2021 Renti
 
JSC (Latvia)
 
and on
 
Renti LT
 
JSC (Lithuania)
 
have as
 
well concluded
 
Commercial pledges
 
with JSC
 
Citadele banka
 
by virtue
 
of which
 
certain receivables
 
are
pledged in favor of JSC Citadele banka in order to secure
 
mogo JSC, mogo OU and JSC mogo LT
 
obligations, if the credit line is also used to finance
 
the loans and receivables
issued by Renti JSC (Latvia) and Renti LT
 
JSC (Lithuania).
 
The commercial pledge providers are jointly liable for the maximum
 
amount of EUR 22.5 million, however, the rights
of claims referred to the commercial pledge agreement are variable as Credit line
 
amounts granted to the parties shall not exceed 90% of the
 
total amount of the rights specified
as pledged to the Bank. As
 
of 31 December 2021 the
 
Parent company’s finance lease portfolio in
 
the amount of EUR 0.8
 
million was pledged in favor of
 
the JSC Citadele bank
as collateral (31 December 2020: EUR 1,3 millions). The credit facility terms have been updated after the reporting
 
period, see Note 41.
On 5 December 2017 mogo JSC entered into a commercial pledge agreement with Mintos Finance Estonia OU, in order to secure mogo JSC obligations towards Mintos Finance
Estonia OU deriving from
 
Cooperation agreement on issuance of
 
loans No. 36/2017-L, dated
 
5 December 2017. The
 
Company pledged gross receivables
 
in amount of EUR
 
3
328 587 on 31.12.2021 (31.12.2020.: 7 279 306 EUR).
On 12 December 2018 the Company issued guarantee letters for the benefit of SIA Skanste City (previously
 
SWH Grupa JSC) to secure Eleving Vehicle Finance JSC (previously
Mogo Group JSC) and previously related party Longo Group JSC obligations from the secured office space lease agreements concluded on 12 December 2018. According to the
guarantee letters,
 
the Company
 
undertook to
 
fulfil Eleving
 
Vehicle Finance
 
JSC and
 
Longo Group
 
JSC obligations
 
towards SIA
 
Skanste City
 
if they
 
are overdue
 
on liabilities
under the agreements terms. The guarantees expire if the lease agreements are amended,
 
renewed without prior written approval by the Company and is effective
 
for the entire
duration of the respective lease agreements.
 
At the beginning of 2020 lease
 
agreement was amended and the Company
 
provided the new guarantee to secure only
 
obligations
of Eleving Vehicle Finance JSC. The guarantee for Longo Group JSC is deemed to be expired.
 
Externally imposed capital requirements
The Company
 
considers both
 
equity capital
 
as well
 
as borrowings
 
a part
 
of overall
 
capital risk
 
management strategy.
 
The Company
 
is subject
 
to externally
 
imposed capital
requirements.
 
Main requirements are listed below:
mogo JSC credit limit agreement with JSC Citadele banka
- To maintain Mogo Group (Latvia) capitalization ratio of minimum 10%;
- To ensure that DSCR* is above certain level.
Mogo JSC Bonds
There are restrictions in prospectus for bonds issued in Nasdaq Baltic (ISIN: LV0000802452)
- To maintain positive amount of equity at all times;
- To maintain capitalization ratio of minimum 15% until full repayment of the bonds;
- To ensure that DSCR* is above certain level.
 
Cooperation agreement with P2P platform
There are
 
no specific
 
capital
 
requirements applied
 
on
 
the Company,
 
except for
 
the
 
limitations on
 
capital movement
 
(share capital
 
change, dividend
 
distribution, etc.)
 
if the
respective agreements Guarantor (Eleving Group S.A.) does not comply with specific financial covenants (Capitalization
 
ratio, DSCR* to be ensured above certain level).
* DSCR
 
(debt service
 
coverage ratio) is
 
EBITDA /
 
(divided by)
 
sum of
 
all payments of
 
interest and
 
principal for
 
all interest
 
bearing debt
 
(loan commitments,
 
bonds and
 
other
financingloan commitments, bonds and other financing) to be paid under all concluded agreements
 
within period for which DSCR is calculated.
 
 
 
57
During the reporting period the Company complied with all externally imposed capital requirements to
 
which it was subjected to.
38. Provisions for financial guarantees
2021
2020
EUR
EUR
Effect on other reserves
Other
reserves
Other
 
reserves
Outstanding as at 1 January
 
(3,474,331)
(4,103,142)
Fair value of the newly issued guarantees (1), (2)
(2,886,850)
-
Guarantees derecognition (3), (4)
3,474,331
-
Decrease in fair value of the guarantees due to revaluation
961,379
628,811
Outstanding as at 31 December
(1,925,471)
(3,474,331)
2021
2020
Effect on provisions for financial guarantees
EUR
EUR
Financial
guarantees
Financial
guarantees
Outstanding as at 1 January
 
1,663,804
3,675,944
Fair value of the newly issued guarantees (1), (2)
2,886,850
-
Decrease in fair value of the guarantees due to revaluation
(961,379)
(628,811)
Amortized as income prior to derecognition
(826,570)
-
Derecognition of guarantee (3),(4)
(837,234)
-
Fair value of the guarantees subsequent to modification
1,925,471
3,047,133
Foreign exchange gain/loss
42,379
-
Amortised as income for newly issued guarantees
(216,842)
(1,383,329)
Outstanding as at 31 December
1,751,009
1,663,804
Financial guarantee in favour of bondholders of Eleving Group S.A.
1,465,319
1,647,579
Financial guarantee in favour of Ardshinbank
285,690
16,225
Total
1,751,009
1,663,804
Total recognized as income (Note 12)
(1,043,412)
(1,383,329)
(1) On 14
 
October 2021 the
 
Company entered a
 
financial guarantee agreement issued
 
in favor of
 
bondholders of Eleving
 
Group. The guarantee
 
was issued to
 
secure Eleving
Group exposure after issuing corporate bonds, ISIN XS2393240887 (as of 31 December 2021 the total nominal value of bonds is EUR 150 million), which are
 
listed on the Open
Market of the Frankfurt Stock Exchange. Under the guarantee agreement the Company irrevocably guarantees
 
the payment of Eleving Group liabilities towards its bondholders in
case of default of Eleving Group under the provisions of bond prospectus.
 
The Company did
 
not receive compensation
 
for the guarantee
 
provided. Fair value
 
of financial guarantee
 
is recognized as
 
liability and
 
as a distribution
 
of equity under
 
“Other
reserves”. Liabilities under the financial guarantee agreement are recognized in income (Note
 
12) on straight line basis till bond maturity, which is October 2026.
(2) On
 
15 June
 
2021
 
the Company
 
entered into
 
a surety
 
agreement with
 
Ardshinbank CJSC
 
and Mogo
 
UCO LLC
 
(Armenia), in order
 
to secure
 
Mogo UCO
 
LLC obligations
towards Ardshinbank CJSC deriving from loan agreement concluded between Ardshinbank
 
CJSC and Mogo UCO LLC.
The Company did not
 
receive compensation for the
 
guarantee provided. Fair value
 
of financial guarantee is
 
recognized as a liability
 
and as a
 
distribution of equity under
 
Other
reserves. Liabilities under the financial guarantee agreement are recognized in income (Note
 
12) on straight line basis till loan maturity, which is February 2024.
 
 
 
 
(3) On
 
9 July 2018
 
the Company entered
 
a financial guarantee
 
agreement issued in
 
favor of
 
bondholders of Eleving
 
Group S.A. The
 
guarantee was issued
 
to secure Eleving
Group S.A. exposure
 
after issuing corporate
 
bonds, ISIN
 
XS1831877755 (as of
 
31 December 2020
 
and 2019
 
the total nominal
 
value of bonds
 
is EUR
 
100 million), which
 
are
listed on the
 
Open Market of the
 
Frankfurt Stock Exchange. Under
 
the guarantee agreement the
 
Company irrevocably guarantees the
 
payment of Mogo Finance
 
S.A. liabilities
towards its bondholders in case of default of Mogo Finance S.A. under the provisions of bond prospectus.
The Company did
 
not receive compensation
 
for the guarantee
 
provided. Fair value
 
of financial
 
guarantee is recognized
 
as liability and
 
as a distribution
 
of equity under
 
“Other
reserves”. Liabilities under the financial guarantee agreement are recognized in income (Note
 
12) on straight line basis till bond maturity, which is July 2022.
On 12 October 2021 was
 
signed Global release agreement stipulating that
 
all collateral documents (guarantees and pledges) of
 
the old bonds
 
will be terminated in full after
 
the
redemption of the old bonds.Under that agreement, the guarantee was terminated and Other reserves
 
and provision were derecognized.
(4) On
 
26 February
 
2018
 
the Company entered
 
into a surety
 
agreement with Ardshinbank
 
CJSC and
 
Mogo LLC
 
(Georgia), in order
 
to secure
 
Mogo LLC obligations
 
towards
58
Ardshinbank CJSC deriving from loan agreement concluded between Ardshinbank
 
CJSC and Mogo LLC.
The Company did not
 
receive compensation for the
 
guarantee provided. Fair value
 
of financial guarantee is
 
recognized as a liability
 
and as a
 
distribution of equity under
 
Other
reserves. Liabilities
 
under the
 
financial guarantee
 
agreement are
 
recognized in income
 
(Note 12)
 
on straight
 
line basis
 
till loan
 
maturity. The
 
surety agreement has
 
significant
changes in loan agreement therefore previous guarantee provisions and
 
other reserves were derecognized.
 
 
39. Financial risk management
The risk management function within the Company is
 
carried out in respect of financial risks, operational
 
risks and legal risks. Financial risk comprises market
 
risk (including the
currency risk and interest rate risk), credit risk and liquidity risk. The
 
primary objectives of the financial risk management function are to establish risk limits, and then
 
ensure that
exposure to
 
risks stays within
 
these limits. The
 
operational and legal
 
(compliance, regulatory) risk
 
management functions are
 
intended to ensure
 
proper functioning of
 
internal
policies and procedures, in order to minimize operational and legal risks.
Operational risks
The Company's operational risks are managed by successful risk underwriting procedures
 
in the loan issuance process as well as efficient debt collection procedures.
Legal risks
Legal risks are mainly derived from regulatory changes, which the
 
Company successfully manages with the help of in-house legal department and external legal advisors,
 
which
assist in addressing any current or future regulatory developments that might have an impact on
 
Company’s business activities.
See further information in Note 37.
Compliance risk
Compliance risk
 
refers to
 
the risk
 
of losses
 
or business
 
process disruption
 
resulting from
 
inadequate or
 
failed internal
 
processes systems,
 
that have
 
resulted in
 
a breach
 
of
applicable law or other regulation currently in place.
Regulatory risk
The Company’s
 
operations are
 
subject to
 
regulation by
 
a variety
 
of consumer
 
protection, financial
 
services and
 
other state
 
authorities, including,
 
but not
 
limited to,
 
laws and
regulations relating to consumer loans and consumer rights protection, debt collection
 
and personal data processing.
 
Anti-money laundering and Know Your Customer laws compliance risk
The
 
Company
 
is
 
subject
 
to
 
anti-money
 
laundering laws
 
and
 
related compliance
 
obligations.
 
The
 
Company
 
has
 
put
 
in
 
place
 
anti-money
 
laundering policies.
 
As
 
a
 
financial
institution, the Company is required to comply with anti-money laundering regulations that are generally less restrictive
 
than those that apply to banks.
As a
 
result, the
 
Company often
 
relies on
 
anti-money laundering
 
and know
 
your customer
 
checks performed
 
by our
 
customers’ banks
 
when such
 
customers open
 
new bank
accounts, however Company has implemented further internal policies to minimise these risks. The Company has put in place internal control framework to identify and report all
suspicious transactions with a combination of IT based solutions and human involvement. Internal policies of the Company typically include customers’ background
 
check against
sanctioned lists and other public sources as required by local law and Consumer Rights Protection Centre.
Privacy, data protection compliance risk
The Company’s business is subject
 
to a variety of
 
laws and regulations internationally that involve user
 
privacy, data protection,
 
advertising, marketing, disclosures, distribution,
electronic contracts and other communications, consumer protection and online payment services. The Company has put in place an internal control framework consisting from a
combination of IT based
 
solutions and business procedures
 
that are designed to
 
capture any potential non-compliance matter
 
before it has occurred
 
and to ensure compliance
with these requirements.
Financial risks
The main financial risks arising from the Company’s financial instruments are liquidity and credit risk.
Market risks
The Company takes on exposure to market
 
risks, which are the risks that the
 
fair value or future cash flows of
 
a financial instrument will fluctuate because of
 
changes in market
prices. Market risks arise from open positions in interest rate and currency products, all of which are exposed to general and specific market movements and changes in the level
of volatility or market rates or prices such as interest rates.
Interest rate risk
The Company is not exposed to interest rate risk because all of its interest bearing assets and liabilities are with a fixed interest
 
rate.
Capital risk management
 
 
 
 
 
59
The Company considers both equity
 
capital as well as
 
borrowings a part of
 
overall capital risk management strategy.
 
The Company manages its
 
capital to ensure that
 
it will be
able to
 
continue as
 
going concern.
 
In order
 
to maintain
 
or adjust
 
the
 
capital structure,
 
the Company
 
may attract
 
new credit
 
facilities, issue
 
bonds, borrow
 
in P2P
 
platform,
increase its share capital or sell
 
the assets to reduce the debt.
 
The management of the borrowings is driven
 
by monitoring and complying the lender imposed
 
covenants as well
as planning the further borrowing needs to ensure business development of the Company.
The Company monitors equity capital on the basis of the capitalization ratio as
 
defined in Eurobond prospectus as well as other financing agreements. This ratio is
 
calculated as
Net worth (the sum of paid in capital, retained earnings, reserves and shareholder loan) divided by Net Loan portfolio. During
 
the reporting period the Company has complied with
all externally imposed equity capital requirements
 
to which it is subject as
 
stated in Note 37. The
 
Company has several other covenants to
 
comply with due to the bonds
 
issued
and funds borrowed in P2P platform - Company has complied with all of them during the reporting period.
 
Liquidity risk
Liquidity risk is
 
the risk that
 
the Company will
 
encounter difficulty in
 
meeting the obligations
 
associated with its
 
financial liabilities that
 
are settled by
 
delivering cash or
 
another
financial asset. The Company's approach
 
to managing liquidity is
 
to ensure, as far as
 
possible, that it will
 
have sufficient liquidity to
 
meet its liabilities when
 
they are due, under
both normal and stressed conditions, without
 
incurring unacceptable losses or risking damage
 
to the Company's reputation. The Company controls
 
its liquidity risk by managing
the amount of funding it attracts through P2P platforms, which provide management greater flexibility to manage the level of borrowings and the cash levels. In
 
addition, it issues
bonds and attracts external credit facilities.
The table
 
below presents
 
the cash
 
flows payable
 
by the
 
Company and
 
to the
 
Company under
 
non-derivative financial liabilities
 
and assets
 
held for
 
managing liquidity risk
 
by
remaining contractual
 
maturities at
 
the date
 
of the
 
statement of
 
financial position.
 
The amounts
 
disclosed in
 
the table
 
are the
 
contractual undiscounted
 
cash flow.
 
Cash flow
payable for borrowings includes estimated interest payments assuming principal is paid in full
 
at maturity date.
Contractual cash flows
As at 31.12.2021.
Carrying
value
On demand
Up to 1 year
1-5 years
More than
5 years
Total
Assets
EUR
EUR
EUR
EUR
EUR
EUR
Cash and cash equivalents
191,318
191,318
-
-
-
191,318
Loans and advances to customers
3,411,223
-
2,604,209
3,786,083
508,622
6,898,914
Loans to related companies
42,079,330
-
5,087,911
54,656,776
-
59,744,687
Trade receivables from related companies (w/o mogo group)
1,380,116
-
867,952
512,141
23
1,380,116
Trade receivables from related companies (mogo group)
93,507
-
93,507
-
-
93,507
Other trade receivables
7,602
-
7,602
-
-
7,602
Finance lease receivables
2,467,176
-
1,452,080
3,035,507
863,039
5,350,626
Total undiscounted financial assets
49,630,272
191,318
10,113,261
61,990,507
1,371,684
73,666,770
Liabilities
Funding attracted through peer-to-peer platforms
(3,314,165)
-
(810,385)
(379,801)
(2,711,710)
(3,901,896)
Liabilities for issued debt securities
 
(29,205,009)
-
(3,300,000)
(33,330,009)
-
(36,630,009)
Provisions for financial guarantees
(1,751,008)
-
-
(1,751,008)
-
(1,751,008)
Lease liabilities for right-of-use assets (mogo group)
(590,789)
-
(72,703)
(304,750)
(213,336)
(590,789)
Other lease liabilities for right-of-use assets
(19,489)
-
(5,118)
(14,371)
-
(19,489)
Loans from related companies (mogo group)
(1,705,000)
-
(204,600)
(2,482,480)
-
(2,687,080)
Payables to related companies (w/o mogo group)
(2,035)
-
(2,035)
-
-
(2,035)
Payables to related companies (mogo group)
(4,105)
-
(4,105)
-
-
(4,105)
Other trade payables
(117,891)
-
(117,891)
-
-
(117,891)
Other current liabilities to related companies (w/o mogo group)
(305,862)
-
(305,862)
-
-
(305,862)
Other current liabilities to related companies (mogo group)
(39,025)
-
(39,025)
-
-
(39,025)
Other current liabilities
(358,541)
-
(358,541)
-
-
(358,541)
Total undiscounted financial liabilities
(37,412,919)
-
(5,220,265)
(38,262,419)
(2,925,046)
(46,407,730)
Net undiscounted financial assets / (liabilities)
12,217,353
191,318
4,892,996
23,728,088
(1,553,362)
27,259,040
 
 
 
 
 
 
 
 
 
 
60
Contractual cash flows
As at 31.12.2020.
Carrying
value
On demand
Up to 1 year
1-5 years
More than
5 years
Total
Assets
EUR
EUR
EUR
EUR
EUR
EUR
Cash and cash equivalents
98,891
98,891
-
-
-
98,891
Loans and advances to customers
9,111,131
-
6,876,843
10,389,693
571,415
17,837,951
Loans to related companies
34,199,507
-
4,490,652
41,052,403
-
45,543,055
Trade receivables from related companies (w/o mogo group)
542,937
-
355,622
187,315
-
542,937
Trade receivables from related companies (mogo group)
655,616
-
655,616
-
-
655,616
Other trade receivables
11,702
-
11,702
-
-
11,702
Investment securities
609,000
-
63,022
569,969
-
632,991
Finance lease receivables
2,872,116
-
2,417,908
3,145,113
197,081
5,760,102
Total undiscounted financial assets
48,100,900
98,891
14,871,365
55,344,493
768,496
71,083,245
Liabilities
Funding attracted through peer-to-peer platforms
(6,677,297)
-
(2,346,167)
(5,751,123)
(25,049)
(8,122,339)
Liabilities for issued debt securities
 
(24,480,115)
-
(25,230,115)
-
-
(25,230,115)
Provisions for financial guarantees
(1,663,804)
-
-
(1,663,804)
-
(1,663,804)
Loan from banks
(1,689,826)
-
(1,728,007)
-
-
(1,728,007)
Lease liabilities for right-of-use assets
(981,692)
-
(103,079)
(437,110)
(441,503)
(981,692)
Other trade payables
 
(88,407)
-
(88,407)
-
-
-
Other current liabilities to related parties (w/o mogo group)
(315,566)
-
(315,566)
-
-
(315,566)
Other current liabilities to related parties (mogo group)
(69,174)
-
(69,174)
-
-
(69,174)
Other current liabilities
(451,501)
-
(451,501)
-
-
(451,501)
Total undiscounted financial liabilities
(36,417,382)
-
(30,332,016)
(7,852,037)
(466,552)
(38,650,605)
Net undiscounted financial assets / (liabilities)
11,683,518
98,891
(15,460,651)
47,492,456
301,944
32,432,640
Credit risk
The
 
Company
 
is
 
exposed
 
to
 
credit
 
risk
 
through
 
its
 
finance
 
lease
 
receivables,
 
loans
 
and
 
advances
 
to
 
customers,
 
trade
 
and
 
other
 
receivables,
 
as
 
well
 
as
 
cash
 
and
 
cash
equivalents. Maximum credit risk exposure is represented by the gross carrying value of the respective financial assets.
The key areas of credit risk policy cover lease granting process (including solvency check of the lease), monitoring methods, as well as decision making principles. The Company
uses financed vehicles as collaterals to significantly reduce credit risks, and provides loans in amount
 
of no more than 90% of the market values of the collateral.
31.12.2021.
31.12.2020.
EUR
EUR
Finance lease receivables
2,960,440
3,689,894
Loans and advances to customers
4,330,891
11,380,921
Loans to related parties
42,079,330
34,199,507
Investment in securities
-
609,000
Contract assets
331,574
198,160
Trade and other receivables
1,532,142
1,286,463
Cash and cash equivalents
191,318
98,891
TOTAL:
 
51,425,695
51,462,836
The Company operates by
 
applying a clear set
 
of finance lease granting
 
criteria. This criteria includes
 
assessing the credit history
 
of customer, means
 
of lease repayment
 
and
61
understanding the lease object. The
 
Company takes into consideration both
 
quantitative and qualitative factors when
 
assessing the creditworthiness of the
 
customer. Based on
this analysis, the Company sets the credit limit for each and every customer.
When the lease agreement has been signed, the Company monitors the lease
 
object and customer’s solvency. The Company has developed lease monitoring
 
process so that it
helps
 
to
 
quickly
 
spot
 
any
 
possible
 
non-compliance
 
with
 
the
 
provisions
 
of
 
the
 
agreement.
 
The
 
receivable balances
 
are
 
monitored
 
on
 
an
 
ongoing
 
basis
 
to
 
ensure
 
that
 
the
Company’s exposure to bad debts is minimized, and, where appropriate, sufficient provisions are being made.
The Company does not have a significant credit risk exposure to any single counterparty, but has risk to group of counterparties having similar characteristics.
See Notes 18 and 19 for more information.
Excessive risk concentration
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have similar economic features
that would
 
cause their
 
ability to
 
meet contractual
 
obligations to be
 
similarly affected
 
by changes
 
in economic,
 
political or
 
other conditions.
 
Concentrations indicate the
 
relative
sensitivity of the Company’s performance to developments affecting a particular industry or geographical location.
In order to
 
avoid excessive concentrations of
 
risk, the Company
 
is maintaining a diversified
 
portfolio. It’s main
 
product is subprime lease,
 
however it is
 
offering also near
 
prime
lease, as well as loans and advances to customers.
40. Fair value of financial assets and liabilities
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair
value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes
 
place either:
- In the principal market for the asset or liability; or
- In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous
 
market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,
 
assuming that market participants
act in their economic best interest. A fair
 
value measurement of a non-financial asset takes into account a
 
market participant's ability to generate economic benefits by using the
asset in its highest and
 
best use or by
 
selling it to another market participant
 
that would use the asset
 
in its highest and best
 
use. The Company uses valuation
 
techniques that
are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of
unobservable inputs. All
 
assets and liabilities
 
for which fair
 
value is
 
measured or disclosed
 
in the separate
 
financial statements are
 
categorized within the
 
fair value hierarchy,
described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
- Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
- Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
- Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
Instruments within Level 1 include highly liquid cash and cash equivalent assets and standard derivative
 
financial instruments
 
traded on the stock exchange.
 
Fair value
 
for such
 
financial instruments
 
as
 
Financial assets
 
at fair
 
value
 
through profit
 
and loss
 
is mainly
 
determined based
 
on publicly
 
available quoted
 
prices (bid
 
price,
obtainable from Bloomberg system).
 
Instruments within Level 2
 
include assets, for
 
which no active
 
market exists, such as
 
over the counter
 
financial instruments that are
 
traded outside the stock
 
exchange, bonds.
Bonds fair value is observable in Frankfurt Stock Exchange/ Nasdaq Riga Stock Exchange public information.
 
Instruments within Level 3 include loans and finance lease receivables, other trade receivables,
 
current and non-current borrowings and trade and other trade payables.
 
Fair value of current and non-current borrowings is based on cash flows discounted using effective agreement interest rate which represents current market rate. The Company's
management believes that interest rates applicable to loan portfolio and borrowings are in line with current market
 
interest rates for companies similar to Mogo JSC.
Fair value of finance lease and loan receivables is equal to the carrying value, which is present value of minimum lease and loan payments discounted using effective agreement
interest rate and adjusted for impairment allowance.
Fair value of finance lease receivables and loans and advances to customers is determined using discounted cash flow model consisting of contractual lease and loan cash flows
that are adjusted by expectations about possible variations in
 
the amount and timings of cash flows using methodology consistent with
 
the expected credit loss determination as
at 31 December 2021 to
 
determine the cash flows expected
 
to be received net of
 
impairment losses. The pre-tax weighted average
 
cost of capital (WACC) of
 
the entity holding
the respective financial assets is
 
used as the basis for
 
the discount rate. The WACC
 
is based on the actual
 
estimated cost of equity and
 
cost of debt that reflect
 
any other risks
relevant to
 
the
 
leases
 
and
 
loans
 
that
 
have
 
not been
 
taken into
 
consideration by
 
the
 
impairment loss
 
adjustment described
 
above and
 
also
 
includes compensation
 
for
 
the
opportunity cost of
 
establishing a similar
 
lease or loan. An
 
additional 1.5% is
 
added to the
 
discount rate as
 
an adjustment to
 
consider service costs of
 
the portfolio that
 
are not
captured by the cash flow adjustments.
 
The annual
 
discount rate
 
was determined
 
as 12,18%
 
(2020: 13.59%).
 
Impairment loss
 
is estimated
 
by applying
 
PD and
 
LGD rates,
 
which are
 
in line
 
with ECL
 
methodology
described under 'The calculation of ECLs' (Note 2).
The management recognizes that if
 
a fair value of
 
such assets/liabilities would be assessed as
 
an amount at which an
 
asset could be exchanged
 
or liability settled on an
 
arm’s
length basis with knowledgeable third parties, the fair values obtained of the respective assets and liabilities
 
would not be materially different.
For assets and liabilities that are recognized in the separate financial statements on a recurring basis, the Company determines whether transfers have occurred between Levels
 
 
 
 
 
 
 
62
in the hierarchy by re-assessing categorization
 
(based on the lowest level input
 
that is significant to the
 
fair value measurement as a
 
whole) at the end of
 
each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or
 
liability
and the level of the fair value hierarchy as explained above.
The table below summarizes the carrying amounts and fair values of financial assets and liabilities:
Carrying
value
Fair value
Carrying
value
Fair value
31.12.2021.
31.12.2021.
31.12.2020.
31.12.2020.
Financial assets measured at fair value:
EUR
EUR
EUR
EUR
Investment in debt securities (Eleving Group S.A. bonds)
-
-
609,000
609,000
Financial assets not measured at fair value:
Loans to related companies
42,079,330
42,079,330
33,952,977
33,952,977
Finance lease receivables
 
2,467,177
3,383,635
2,872,116
4,122,209
Loans and advances to customers
 
3,411,222
4,505,170
9,111,131
12,767,295
Trade receivables from related companies (w/o mogo group)
1,380,116
1,380,116
542,937
542,937
Trade receivables from related companies (mogo group)
93,507
93,507
655,616
655,616
Trade receivables
7,602
7,602
11,702
11,702
Other receivables
50,917
50,917
76,208
76,208
Cash and cash equivalents
191,318
191,318
98,891
98,891
Total financial assets
 
49,681,189
51,691,595
47,930,578
52,836,835
Financial liabilities not measured at fair value:
Liabilities for issued debt securities
29,205,009
30,000,000
24,480,115
23,566,794
Funding attracted through peer-to-peer platforms
3,314,165
3,314,165
6,677,297
6,677,297
Loans from banks
-
-
1,689,826
1,689,826
Loans from related companies (w/o mogo group)
-
-
-
-
Loans from related companies (mogo group)
1,705,000
1,705,000
-
-
Trade payables to related companies (w/o mogo group)
2,035
2,035
-
-
Trade payables to related companies (mogo group)
4,105
4,105
-
-
Other trade payables
 
117,891
117,891
88,407
88,407
Other current liabilities to related companies (w/o mogo group)
305,862
305,862
315,566
315,566
Other current liabilities to related companies (mogo group)
39,025
39,025
69,174
69,174
Other liabilities
358,541
358,541
451,501
451,501
Total financial liabilities
35,051,633
35,846,624
33,771,886
32,858,565
The table below specified analysis by fair value levels (based on their carrying amounts):
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
31.12.2021.
31.12.2021.
31.12.2021.
31.12.2020.
31.12.2020.
31.12.2020.
Financial assets
EUR
EUR
EUR
EUR
EUR
EUR
Loans to related parties
-
-
42,079,330
-
-
33,952,977
Finance lease receivables
 
-
-
2,467,177
-
-
2,872,116
Loans and advances to customers
 
-
-
3,411,222
-
-
9,111,131
Investment in debt securities
-
-
-
-
609,000
-
Trade receivables
-
-
1,481,225
-
-
1,210,255
Other receivables
-
-
50,917
-
-
76,208
Cash and cash equivalents
191,318
-
-
98,891
-
-
Total financial assets
 
191,318
-
49,489,871
98,891
609,000
47,222,687
Financial liabilities
Liabilities for issued debt securities
-
29,205,009
-
-
24,480,115
-
Funding attracted through peer-to-peer platforms
-
-
3,314,165
-
-
6,677,297
Loans from banks
-
-
-
-
-
1,689,826
 
 
63
Loans from related companies
-
-
1,705,000
-
-
-
Trade payables
 
-
-
124,031
-
-
88,407
Other liabilities
-
-
703,428
-
-
836,241
Total financial liabilities
-
29,205,009
5,846,624
-
24,480,115
9,291,771
41. Events after reporting period
Since the last day of the reporting year several significant events took place:
In 2022, many significant sanctions have been imposed by European Union and various countries on Russia and Belarus, certain Russian and Belarusian
 
companies, companies
in other jurisdictions,
 
officials, businessmen and
 
other physical persons
 
in connection with
 
the ongoing war
 
in Ukraine, which
 
began on 24
 
February, 2022.
 
Imposed sanctions
and restrictions
 
and military
 
actions creates
 
the economic
 
uncertainty in
 
the World
 
and in
 
Latvia. The
 
full impact
 
of the
 
sanctions and
 
restrictions and
 
military actions
 
on the
Company's operations in 2022 cannot be fully predicted, but
 
the Company believes that the sanctions and restrictions imposed and
 
military actions after the date of the
 
financial
statements will
 
not materially
 
affect the
 
Company's operations both
 
directly and
 
indirectly. Company`s
 
assumption is
 
based on
 
available information at
 
the time
 
of signing
 
the
financial statements, and the impact of future events on the Company's future operations may differ from Company's
 
assessment.
In 2022 April the
 
Company has amended the
 
credit line issued by
 
JSC "Citadele banka" granted
 
to JSC “mogo” (Latvia),
 
JSC "mogo LT"
 
(Lithuania) and JSC "mogo"
 
(Estonia)
decreasing its exposure to EUR 12 000 000. The other conditions remained unchanged.
As of the last day
 
of the reporting year until the
 
date of signing these separate
 
financial statements there have been no
 
other events requiring adjustment of or
 
disclosure in the
separate financial statements or Notes thereto.
Signed on behalf of the Company on 2 May 2022 by:
Krišjānis Znotiņš, Chairman of the Board
Aivis Lonskis, Member of the Board
Rita Kaktiņa, Chief accountant
THIS DOCUMENT HAS BEEN SIGNED WITH A SECURE ELECTRONIC SIGNATURE AND IT HAS A TIME-STAMP
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