REG - MTI Wireless Edge - Final Results <Origin Href="QuoteRef">MWEE.L</Origin> - Part 2

MTI Wireless EdgeAnnouncement

20/02/2015 07:00

- Part 2: For the preceding part double click  ID:nRST4157Fa 

objectively to an event occurring
after the impairment was recognized. The amount of the reversal, which is limited to the amount of any previous impairment,
is recorded in profit or loss. 
 
Government grants: 
 
Grants received from the Israel-U.S. Bi-national Industrial Research and Development Foundation (henceforth "BIRD") as
support for a research and development projects include an obligation to pay back royalties conditional on future sales
arising from the project. Grants received from the BIRD on or after January 1, 2009,  are accounted for as forgivable
loans, in accordance with IAS 20 (Revised), pursuant to the provisions of IAS 39, "Financial Instruments: Recognition and
Measurement". Accordingly, when the liability for the loan is first recognized, it is measured at fair value using a
discount rate that reflects a market rate of interest. The difference between the amount of the grants received and the
fair value of the liability is accounted for upon recognition of the liability as a grant and recognized as a reduction of
research and development expenses. After initial recognition, the liability is measured at amortized cost using the
effective interest method. Changes in the projected cash flows are discounted using the original effective interest and
recorded in profit or loss in accordance with the provisions of IAS 39. 
 
At the end of each reporting period, the Group evaluates, based on its best estimate of future sales, whether there is
reasonable assurance that the liability recognized, in whole or in part, will not be repaid. If there is such reasonable
assurance, the appropriate amount of the liability is derecognized and recorded in profit or loss as an adjustment of
research and development expenses. If the estimate of future sales indicates that there is no such reasonable assurance,
the appropriate amount of the liability that reflects expected future royalty payments is recognized with a corresponding
adjustment to research and development expenses. 
 
1.     Accounting policies (Cont.) 
 
Deferred tax 
 
Deferred taxes are computed in respect of temporary differences between the carrying amounts of assets and liabilities in
the financial statements and the amounts attributed for tax purposes. Deferred taxes are recognized directly in other
comprehensive income or in equity if the tax relates to those items. 
 
Deferred taxes are measured at the tax rates that are expected to apply in the period when the taxes are reversed in profit
or loss, other comprehensive income or equity, based on tax laws that have been enacted or substantively enacted at the end
of the reporting period. Deferred taxes in profit or loss represent the changes in the carrying amount of deferred tax
balances during the reporting period, excluding changes attributable to items recognized outside profit or loss. 
 
Deferred tax assets are reviewed at the end of each reporting period and reduced to the extent that it is not probable that
they will be utilized. In addition, temporary differences (such as carryforward losses) for which deferred tax assets have
not been recognized are reassessed and deferred tax assets are recognized to the extent that their recoverability is
probable. Any resulting reduction or reversal is recognized on " income tax" within the statement of comprehensive income. 
 
Taxes that would apply in the event of the disposal of investments in investees have not been taken into account, as long
as the disposal of such investments is not expected in the foreseeable future and the group has control over such disposal.
In addition, deferred taxes that would apply in the event of distribution of dividends have not been taken into account,
since the distribution of dividends does not involve an additional tax liability, and if so, the Group's policy is not to
initiate distribution of dividends that triggers an additional tax liability. 
 
All deferred tax assets and liabilities are presented in the statement of financial position as non-current items,
respectively. Deferred taxes are offset in the statement of financial position if there is a legally enforceable right to
offset a current tax asset against a current tax liability and the deferred taxes relate to the same taxpayer and the same
taxation authority. 
 
Taxes on income 
 
Tax-exempt income derived from "approved enterprises" will be subject to additional income tax in the event of distribution
of dividends out of such income. Such additional income tax has not been provided for in the financial statements, since
the current policy of the Group is not to distribute dividends incurring additional income tax. 
 
Inventories 
 
Inventories are initially recognized at cost, and subsequently at the lower of cost and net realizable value. Cost is
calculated according to weighted average model. 
 
1.     Accounting policies (Cont.) 
 
Property, plant and equipment 
 
Items of property, plant and equipment are initially recognized at cost. Cost includes directly attributable costs and the
estimated present value of any future costs of dismantling and removing items. Depreciation is computed by the straight
line method, based on the estimated useful lives of the assets, as follows: 
 
                                 Rate of depreciation  Mainly %  
 Buildings                       3 - 4 %               3.13      
 Machinery and equipment         6 - 20 %              10        
 Office furniture and equipment  6 - 15 %              6         
 Computers                       10 - 33 %             33        
 Vehicles                        15 %                  15        
 
 
Leasehold improvements are depreciated over the term of the expected lease including optional extension, or the estimated
useful lives of the improvements, whichever is shorter. 
 
Investment property 
 
An investment property is property (land or a building or both) held by the owner (lessor under an operating lease) or by
the lessee under a finance lease to earn rentals or for capital appreciation or both rather than for use in the production
or supply of goods or services, for administrative purposes or for sale in the ordinary course of business. 
 
Investment property is measured initially at cost, including costs directly attributable to the acquisition. After initial
recognition, investment property is measured at cost, accumulated depreciation and accumulated impairment losses and
accounted for as property, plant and equipment measured at cost. 
 
Investment property is depreciated on a straight-line basis at annual rates of 3.13%, over its useful life. 
 
Investment property is derecognized on disposal or when the investment property ceases to be used and no future economic
benefits are expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the
asset is recognized in profit or loss in the period of the disposal. 
 
Cash and cash equivalents 
 
Cash equivalents are considered by the Group to be highly-liquid investments, including, inter alia, short-term deposits
with banks, the maturity of which do not exceed three months at the time of deposit and which are not restricted. 
 
Provision for warranty 
 
The Group generally offers up to three years warranties on its products. Based on past experience, the Group does not
record any provision for warranty of its products and services. 
 
1.     Accounting policies (Cont.) 
 
Share-based payments 
 
Where equity settled share options are awarded to employees, the fair value of the options at the grant date is charged to
the statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by
adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative
amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions
are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is
made irrespective of whether the market vesting conditions are satisfied. The cumulative expense charged is not adjusted
for failure to achieve a market vesting condition. 
 
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options,
measured immediately before and after the modification, is also charged to the statement of comprehensive income over the
remaining vesting period. 
 
Employee benefits 
 
The Group has several employee benefit plans: 
 
1.     Short-term employee benefits: Short-term employee benefits include salaries, paid annual leave, paid sick leave,
recreation and social security contributions and are recognized as expenses as the services are rendered. A liability in
respect of a cash bonus or a profit-sharing plan is recognized when the Group has a legal or constructive obligation to
make such payment as a result of past service rendered by an employee and a reliable estimate of the amount can be made. 
 
2.     Post-employment benefits: The plans are normally financed by contributions to insurance companies and classified as
defined contribution plans or as defined benefit plans. 
 
The Group has defined contribution plans pursuant to Section 14 to the Severance Pay Law since 2004 under which the Group
pays fixed contributions and will have no legal or constructive obligation to pay further contributions if the fund does
not hold sufficient amounts to pay all employee benefits relating to employee service in the current and prior periods.
Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense
simultaneously with receiving the employee's services and no additional provision is required in the financial statements
except for the unpaid contribution. 
 
The Group also operates a defined benefit plan in respect of severance pay pursuant to the Severance Pay Law. According to
the Law, employees are entitled to severance pay upon dismissal retirement and several other events prescribed by that Law.
The liability for termination of employee-employer relationship is measured using the projected unit credit method. 
 
The actuarial assumptions include rates of employee turnover and future salary increases based on the estimated timing of
payment. The amounts are presented based on discounted expected future cash flows using a discount rate determined by
reference to yields on corporate bonds with a term that matches the estimated term of the benefit obligation. In respect of
its severance pay obligation to certain of its employees, the Company makes current deposits in pension funds and insurance
companies ("plan assets"). Plan assets comprise assets held by a long-term employee benefit fund or qualifying insurance 
 
1.     Accounting policies (Cont.) 
 
policies. Plan assets are not available to the Group's own creditors and cannot be returned directly to the Group. The
liability for employee benefits presented in the statement of financial position presents the present value of the defined
benefit obligation less the fair value of the plan assets. 
 
Earnings per Share (EPS) 
 
Earnings per share are calculated by dividing the net profit or loss attributable to equity holders of the Company by the
weighted number of Ordinary shares outstanding during the period. Basic earnings per share only include shares that were
actually outstanding during the period. Potential Ordinary shares (convertible securities such as employee options) are
only included in the computation of diluted earnings per share when their conversion decreases earnings per share or
increases loss per share from continuing operations. Further, potential Ordinary shares that are converted during the
period are included in the diluted earnings per share only until the conversion date, and since that date they are included
in the basic earnings per share. The Company's share of earnings of investees is included based on the earnings per share
of the investees multiplied by the number of shares held by the Company. 
 
Segment reporting 
 
An operating segment is a component of the Group that meets the following three criteria: 
 
1.     Is engaged in business activities from which it may earn revenues and incur expenses; 
 
2.    Whose operating results are regularly reviewed by the Group's chief operating decision maker to make decisions about
allocated resources to the segment and assess its performance; and 
 
3.     For which separate financial information is available. 
 
Segment revenue and segment costs include items that are attributable to the relevant segments and items that can be
distributed among segments. Non-distributed items include the Group's financial income and expenses and income tax. 
 
New IFRSs in the period prior to their adoption 
 
-        IFRS 9 Financial Instruments: 
 
In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments" ("IFRS 9"), which replaces
IAS 39, " Financial Instruments: Recognition and Measurement". IFRS 9 mainly focuses on the classification and measurement
of financial assets and it applies to all assets in the scope of IAS 39. 
 
According to IFRS 9, all financial assets are measured at fair value upon initial recognition. In subsequent periods, debt
instruments are measured at amortized cost only if both of the following conditions are met: 
 
-    the asset is held within a business model whose objective is to hold assets in order to collect the 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 on the principal amount outstanding. 
 
1.     Accounting policies (Cont.) 
 
-        IFRS 9 Financial Instruments(Cont.): 
 
Subsequent measurement of all other debt instruments and financial assets should be at fair value. IFRS 9 establishes a
distinction between debt instruments to be measured at fair value through profit or loss and debt instruments to be
measured at fair value through other comprehensive income. 
 
Financial assets that are equity instruments should be measured in subsequent periods at fair value and the changes
recognized in profit or loss or in other comprehensive income (loss), in accordance with the election by the Company on an
instrument-by-instrument basis. If equity instruments are held for trading, they should be measured at fair value through
profit or loss. 
 
According to IFRS 9, the provisions of IAS 39 will continue to apply to de-recognition and to financial liabilities for
which the fair value option has not been elected. 
 
According to IFRS 9, changes in fair value s of financial liabilities which are attributable to the change in credit risk
should be presented in other comprehensive income. All other changes in fair value should be presented in profit or loss. 
 
IFRS 9 also prescribes new hedge accounting requirements. 
 
IFRS 9 is to be applied for annual periods beginning on January 1, 2018. Early adoption is permitted. 
 
The Company is evaluating the possible impact of IFRS 9 but is presently unable to assess its effect, if any, on the
financial statements. 
 
-        IFRS 15 - "Revenue from Contracts with Customers" (hereafter - IFRS 15) 
 
Upon first time application, IFRS 15 shall replace other IFRS provisions relating to revenue recognition. 
 
The core principle of IFRS 15 is that an entity will recognize revenue to depict the transfer of promised goods or services
to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those
goods or services. 
 
IFRS 15 sets out a single revenue recognition model, according to which the entity shall recognize revenue in accordance
with the said core principle by implementing a five-step model framework: 
 
1) Identify the contract(s) with a customer 
 
2) Identify the performance obligations in the contract 
 
3) Determine the transaction price 
 
4) Allocate the transaction price to the performance obligations in the contract 
 
5) Recognize revenue when the entity satisfies a performance obligation. 
 
IFRS 15 provides guidance about various issues related to the application of the said model, including: recognition of
revenue from variable consideration set in the contract, adjustment of the price of transaction set in the contract in
order to reflect the effect of the time value of money and costs to obtain or fulfil a contract. 
 
IFRS 15 extends the disclosure requirements regarding revenue and requires, among other things, that entities disclose
qualitative and quantitative information about significant judgments made by management in determining the amount and
timing of the revenue. 
 
1.     Accounting policies (Cont.) 
 
-        IFRS 15 - "Revenue from Contracts with Customers" (hereafter - IFRS 15)(Cont.): 
 
The standard shall be applied retrospectively for annual reporting periods starting on January 1, 2017 or thereafter,
taking into account the reliefs specified in the transitional provisions of IFRS 15. Under these provisions, early adoption
of the standard is allowed. The Group has not as yet examined the implication of implementation of the IFRS 15 on the
financial statements. 
 
2.     Revenues 
 
                            For the year ended December 31,  
                            2014                               2013    
                            $'000                              $'000   
 Revenues arises from:                                                 
 Sale of goods              11,032                             10,210  
 Projects                   3,309                              3,212   
                            14,341                             13,422  
                                                                       
 
 
3.       Profit from operations 
 
                                               For the year ended December 31,  
                                               2014                               2013    
 This has been arrived at after charging:      $'000                              $'000   
                                                                                          
 Wages and salaries                            4,957                              4,892   
 Depreciation                                  451                                436     
 Material and subcontractors                   6,867                              6,336   
 Operating lease expense                       54