Consolidated financial statements • Annual report 2020 • ALK 59
Notes to the consolidated financial statements
1 Accounting policies – continued
items to the exchange rates at the balance
sheet date and on the translation of the income
statements from average exchange rates to
exchange rates at the balance sheet date are
recognised in other comprehensive income.
is recognised in the income statement, and the
tax expense relating to items recognised in other
comprehensive income and directly in equity,
respectively, is recognised in other comprehensive
income or directly in equity. Exchange rate
countries when the deferred tax is expected to
Revenue from the sale of goods is recognised in the
income statement upon the control of the goods
being transferred to the customer, i.e. when goods
are delivered. Revenue is recognised by the ALK
Group at a point in time.
crystallise as current tax. Changes in deferred
tax as a result of changed tax rates or rules are
recognised in the income statement, in other
comprehensive income or in equity, depending on
where the deferred tax was originally recognised.
Deferred tax related to equity transactions is
recognised in equity.
adjustments of deferred tax are recognised as part
of the adjustment of deferred tax for the year.
Foreign exchange rate adjustment of receivables
or debt to subsidiaries which are considered part
of the parent company’s overall investment in
the subsidiary in question are also recognised in
other comprehensive income in the consolidated
financial statements.
The ALK Group's customers have payment terms
that reflect the customer type and the market in
which sales take place, which typically varies from
0 to 180 days.
Current tax payable and receivable is recognised
in the balance sheet as the expected tax on the
taxable income for the year, adjusted for tax paid
on account.
Deferred tax assets, including the tax value of tax
loss carry-forwards, are recognised in the balance
sheet at the value at which the asset is expected
to be realised, either through a set-off against
deferred tax liabilities or as net assets to be offset
against future positive taxable income. Deferred
tax assets including the tax value of tax losses are
recognised if it is probable that it can be utilised
against future taxable income within a foreseeable
future (5 years). This includes an assessment of the
possibilities to utilise tax losses in the joint Danish
taxation scheme with the Lundbeck Foundation
(Lundbeckfond Invest A/S).
Revenue is measured as the fair value of the
consideration received or receivable.
Share-based incentive plans
The current tax charge for the year is calculated
based on the tax rates and rules enacted at the
balance sheet date.
Share-based incentive plans (equity-settled share-
based payments), which comprise share options
and performance share units, are measured at
the grant date at fair value and recognised in the
income statement under the respective functions
over the vesting period and offset in equity.
Revenue is measured exclusive of VAT, taxes etc.
charged on behalf of third parties and less any
commissions and discounts in connection with
sales.
Uncertain tax position is recognised for those
matters for which the tax determination is uncertain
but it is considered probable that there will be a
future outflow of funds to a tax authority (and a
future inflow of funds from a tax authority). The
uncertain tax positions are measured at the best
estimate of the amount expected to become
payable (and receivable).
Furthermore, revenue includes licence income
and royalties from outlicensed products as well
as up-front payments, milestone payments and
services in connection with partnerships. These
revenues are recognised in the income statement
in accordance with the agreements and when the
ALK Group obtains the right to the payments, which
is at the point in time the subsequent sales occur or
services have been delivered to the customer.
The fair value of share options is determined
using the Black & Scholes model. The fair value of
performance share units is determined using the
average share price (closing) 5 days after annual
general meeting.
At each balance sheet date, it is reassessed
whether it is likely that there will be sufficient future
taxable income for the deferred tax asset to be
utilised.
Deferred tax is measured using the balance sheet
liability method on all temporary differences
between the carrying amount and the tax base
of assets and liabilities. However, deferred tax is
not recognised on temporary differences relating
to the initial recognition of goodwill or the initial
recognition of a transaction, apart from business
combinations, and where the temporary difference
existing at the date of initial recognition affects
neither profit/loss for the year nor taxable income.
The ALK Group settles the equity-settled share-
based incentive plans in shares. However, the
share option agreement entitles the ALK Group
to demand cash settlement of the options. The
ALK Group recognises share options, in case of
cash settlement, as other liabilities and adjusts
to fair value as from the time when the ALK Group
has an obligation to settle in cash. The ALK Group
recognises subsequent adjustment to fair value in
the income statement under financial income or
financial expenses.
The parent company is included in a joint Danish
taxation scheme with the Lundbeck Foundation
(Lundbeckfond Invest A/S) and its Danish
subsidiaries. The tax charge for the year is
allocated among the jointly taxed companies in
proportion to the taxable incomes of individual
companies, taking into account taxes paid.
Nonrefundable payments that are not attributable
to subsequent research and development activities
are recognised when the related right is obtained,
whereas payments attributable to subsequent
research and development activities are
recognised over the term of the activities.
When combined contracts are entered into, the
elements of the contracts are identified and
assessed separately for accounting purposes.
Deferred tax is calculated based on the planned
use of each asset and settlement of each liability,
respectively. Deferred tax is measured using the
tax rates and tax rules that, based on legislation
enacted or in reality enacted at the balance sheet
date, are expected to apply in the respective
Income statement
Tax
Revenue
Tax on the profit for the year comprises the year’s
current tax and changes in deferred tax. The tax
expense relating to the profit/loss for the year
The primary performance obligation of the ALK
Group is the sale and delivery of own-manufactured
goods and goods for resale for allergy treatment.
Cost of sales
The item comprises cost of sales and production
costs incurred in generating the revenue for the
