Match Group, LLC v. Bumble Trading Inc.

Western District of Texas, txwd-6:2018-cv-00080

Exhibit B

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0 Exhibit B 0 Registered No. 07540255 Badoo Trading Limited Consolidated financial statements and accounts For the year ended 31 December 2017 11111111111111111111 *J7HEFH6J* JNI. 26/10/2018 #16 COMPANIES HOUSE 0 Badoo Trading Limited TABLE OF CONTENTS Page Company information 2 Strategic report 3 Director's report 5 Director's responsibilities statement 7 Independent auditor's report 8 Consolidated statement of profit or loss 11 Consolidated statement of other comprehensive income 12 Consolidated statement of financial position 13 Consolidated statement of changes in equity 14 Consolidated statement of cash flows 15 Notes to the consolidated financial statements 16 Statement of directors' responsibilities in relation to parent company 48 Company statement of financial position 49 Company statement of changes in equity 50 Notes to the company financial statements 51 0 Badoo Trading Limited COMPANY INFORMATION Directors A Parker V Kornilovski I W allichman Company Secretary Reed Smith Corporate Services Limited Registered number 07540255 Auditor Ernst & Young LLP Bedford House 16 Bedford Street Belfast BT2 7DT Bankers Barclays Bank Plc Level27 I Churchill Place Canary Wharf London El4 5HP HSBC Bank Plc Level 3 62-76 Park Street Southwark London SEI 9DZ Solicitors Mishcon De Reya Africa House 70 Kingsway London WC2B 6AH United Kingdom Registered Office The Broadgate Tower Third Floor 20 Primrose Street London EC2A 2RS United Kingdom 2 0 Badoo Trading Limited Strategic report for the year ended 31 December 2017 The directors present their strategic report for the year ended 31 December 2017. Business review The Group's principal activity is to operate social networking applications and websites. The loss for the year ended 31 December 2017, after taxation, is £5,890k (2016: loss £3,630k). The directors do not recommend a final ordinary dividend for the year ended 31 December 2017 (2016: £nil). The Group's key financial and other performance indicators during the year were as follows: 2017 2016 Change £'000 £'000 % Revenue 144,107 107,233 34% Operating loss (5,660) (3,518) (61%) Loss for the financial year (5,890) (3,630) (62%) Shareholder's equity (8,533) (2,493) (242%) Revenue from continuing operations increased by 34% during 2017, this was due to the business investing in user acquisition marketing and a full year of monetisation of a key portfolio applications. Operating losses increased by 61 % during 2017. This was primarily due to the marketing focus of the business with spend being channelled into user acquisition marketing and the marketing of portfolio applications. Management are satisfied with the performance of the business during the year and are hopeful that the investment in growth will benefit the business long term. Principal risks and uncert~inties The Group's goal in risk management is to ensure that the management understands measures and monitors the various risks that arise in connection with their operations. Policies and guidelines have been developed to identify, analyse, appraise and monitor the principal risks facing the Group. Based on this assessment, the Group adopts appropriate measures to mitigate these risks in accordance with its view of the balance between risks and rewards. Further details on these risks are discussed in Note 19. Business performance risk. The business trades in many markets globally with varied economic landscapes. The breadth and diversity of the geographical spread of our revenue generation protects the company against over reliance on individual markets. Management and staff development Senior Management is committed to development and retention of key staff. Financial risk management Financial risk management is an essential part of corporate treasury management. Treasury activities are closely monitored with appropriate controls in place to ensure orderly and efficient workflows and to ensure the completeness and accuracy of records. The Group's financial instruments consist of amounts due from shareholders, trade and other receivables, borrowings and other payables. The main financial risks faced by the Group through its normal activities are credit risk, foreign currency risk and liquidity risk. 3 0 Badoo Trading Limited Strategic report (continued) Financial risk management (continued) Credit risk Credit risk is the potential exposure of the Group to losses in the event of non-performance by counterparties. The Group minimises credit risk by entering into contracts with high credit rated counterparties and through credit approval, financial limits and ongoing monitoring procedures. Counterparties credit evaluation is done systematically using quantitative and qualitative criteria on credit risks as specified by management. Foreign currency risk The Group has a limited foreign exchange management policy, it broadly relies on natural hedges and is prepared to accept the exposures arising from currency movements. Liquidity risk Liquidity risk arises from the requirement to raise funds for the business on an ongoing basis to meet existing and future commitments which are not funded from internal resources. The carrying amounts in respect of trade and other receivables and trade and other payables approximate fair values due to the relatively short term nature of these financial instruments. · Non-financial risks The Group faces a number of non-financial risks that arise as a result of the business climate which are not directly controllable by the Group. The senior executives work to minimise the exposure to these risks and also the impact, should they materialise. Environmental risk No material risk have been identified due to the size and nature of the operations. Compliance risk Incidents of non-compliance with applicable laws and regulations or ethical misconduct could be damaging to the Group's reputation. Inherent in the Group's business activities are operational hazards and potential breach of statutory requirements that require continual oversight and control. Competitive risk The Group faces a number of competition risks that arise as a result of the dating and social networking industries having no single, dominant brand. The Group faces stiff competition in the online dating space and also from social media platforms and offline dating companies. To successfully compete in such a crowded marketplace the Group is continually looking to strengthen its brand and increase the acceptance of online matchmaking and meeting of people. Brexitrisk The current uncertainty over Brexit, creates some uncertainty for the business, although with relatively low risk. The directors are confident that the business is in a strong position to react quickly at the appropriate time, when the future UK/EU relationship does become clearer, in order to continue to provide the highest levels of service to our customers. This report was approved by the board on 25 October 2018 and signed on its behalf. ~[;1 V Kornilovski I Wallichman Director Director 4 0 Badoo Trading Limited Directors' report Registered No. 07540255 The directors present their report for the year ended 3 I December 20 I 7. Directors of the company The present directors are listed below: A Parker V Kornilovski I Wallichman M Kennedy resigned on 28 June 20I 7. Dividends The directors do not recommend a final ordinary dividend for the year ended 3 I December 20I 7 (20I6: £nil). Future developments The Group intends to continue operating the Badoo social network whilst investing in the growth of portfolio applications. Financial instruments The company has chosen to present information on its financial risk management policies in the Strategic Report in accordance with Section 4I4 C (I I) of the Companies Act 2006. Research and development The company carries out research and development on an ongoing basis, the value of this is expensed when incurred. Events since the balance sheet date On April 30 20I8 Match Group Inc (Match) filed a lawsuit against Bumble Trading Inc (Bumble), a subsidiary ofBadoo Trading Limited. Going concern The Group has had a satisfactory year and the directors believe that the Group has adequate resources to continue to grow the user bases and revenues of the products within the portfolio. The Group's forecasts and projections show that the Group has sufficient financial resources, and has assets that are expected to generate free cash flow to the Company. There are no significant changes in business activities expected in the foreseeable future. As such, the directors have a reasonable expectation that the Company is well placed to manage its business risks and to continue in operational existence for the foreseeable future. Accordingly, the directors continue to adopt the going concern basis in preparing the financial statements. Auditor A resolution to reappoint Ernst & Young LLP as auditor will be put to the members at the Annual General Meeting. 5 0 Badoo Trading Limited Directors' report (continued) Directors' statement as to disclosure of information to auditors The directors who were members of the board at the time of approving the directors' report are listed on page 2. Having made enquiries offellow directors and of the Company's auditor, each of these directors confirms that: • to the best of each director's knowledge and belief, there is no information (that is, information needed by the Company's auditors in. connection with preparing their report) of which the Company's auditor is unaware; and • each director has taken all the steps a director might reasonably be expected to have taken to be aware ofrelevant audit information and to establish that the Company's auditor is aware of that information. By order of the board c=:/ 2. ~,I .µ..,(. V Kornilovski I Wallichman Director Director Date: 25 October 2018 6 0 Badoo Trading Limited Directors' Responsibilities Statement The directors are responsible for preparing the Strategic report, the Directors' report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and the company and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to: • Select suitable accounting policies and then apply them consistently; • Make judgments and accounting estimates that are reasonable and prudent; • State whether applicable International Financial Reporting Standards as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements; The din:t:Lors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The direclors t:unfinn Lhal they have complied with the requirements; have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future and continue to adopt the going concern basis in preparing the accounts. 7 0 Independent auditor's report to the members of Badoo Trading Limited Opinion We have audited the financiaf statements ofBadoo Trading Limited ('the parent company') and its subsidiaries {the 'group') for the year ended 31 December 2017 which comprise Consolidated Statement of Profit or Loss, the Consolidated Statement of Other Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statements of Changes in Equity, the Consolidated Statement of Cash Flows, the Company Statement of Financial Position, the Company Statement of Changes in Equity and the related Group's notes 1to33 and the related Company's notes 1 to 21, including a summary of significant accounting policies. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and International Financial Reporting Standards {IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 "Reduced Disclosure Framework" (United Kingdom Generally Accepted Accounting Practice). In our opinion: .,. the financial statements give a true and fair view of the group's and of the parent company's affairs as at 31 December 2017 and of the group's loss for the year then ended; .,. the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;, .,. the parent company financiafsfatemeiits have b~en properly prepared in accordance in with United Kingdom Generally Accepted Accounting Practice; and .,. the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) {ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report below. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Conclusions relating to going concern We have nothing to report in respect of the following matters in relation to which the IS As (UK) require us to report to you where: • the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or • the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the group's or the parent company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue. 8 0 Independent auditor's report (continued) Other information The other information comprises the information included in the annual report as set out on pages 3 to 6, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact. We have nothing to report in this regard. Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: ~ the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and ~ the strategic report and directors' report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or directors' report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors' remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Responsibilities of directors As explained more fully in the directors' responsibilities statement set out on page 7 and 47, the directors are responsible for the preparation of the financial statements and for being satisfiied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group's and the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. 9 0 Independent auditor's report (continued) Auditor's responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a ·material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report. Use of our report This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. Ruth Logan (Senior statutory auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor Belfast 9-btt.._ ~ oJi4v 10 0 Badoo Trading Limited Consolidated statement of profit or loss for the year ended 31 December 2017 2016 As restated 2017 Note 30 Notes £'000 £'000 Revenue 8 144,107 107,233 Cost of sales 9 {81,935) {60,421} Gross profit 62,172 46,812 Administrative expenses 12 (67,832) (50,330) Operating loss (5,660) (3,518) Finance costs 14 (112) (60) Finance income 15 191 Loss before tax (5,581) (3,578) Income tax· expense 16 {309} {52} Net loss {5,890) {3,630} Attributable to: Equity holders of the parent (7,295) (2,700) Non-controlling interest 1,405 {930} {5,890) {3,630} 11 0 Badoo Trading Limited Consolidated statement of other comprehensive income for the year ended 31 December 2017 2016 As restated 2017 Note 30 £'000 £'000 Net loss for the year (5,890) (3,630) Other comprehensive income Item that will be reclassified subsequently to profit or loss Exchange difference on retranslation of foreign operations (23) (140) Total comprehensive loss for the year, net of tax (5,913) (3,770) Attributable to: Equity holders of the parent (7,318) (2,840) Non-controlling interest 1,405 (930) (5,913) (3,770) 12 0 Badoo Trading Limited Consolidated statement of financial position at 31 December 2017 31 December 1 January 2016 2016 31 December As restated As restated 2017 Note 30 Note 30 Notes £'000 £'000 £'000 Assets Non-current assets Property, plant and equipment 17 3,287 1,109 1,012 Intangible assets 18 148 152 126 Deferred tax assets 16 138 57 3,573 1,318 1, 138 Current assets Trade and other receivables 19,20 24,920 22,567 14,388 Income tax receivable 16 255 108 Cash at bank 21 3,885 2,189 1,977 Total current assets 28,821 25,011 16,473 Total assets 32,394 26,329 17,611 Equity and liabilities Equity Issued capital 22 Capital contribution 22 215 225 209 Retained earnings 22 {8,578} {l,306} 1,534 Equity attributable to equity holders of the parent (8,363) (1,081) 1,743 Non-controlling interests {170} {1,412} {482} Total equity (8,533) (2,493} 1,261 Liabilities Non-current liabilities Deferred tax liabilities 45 Non-current payables 23 241 Total non-current liabilities 286 Current liabilities Trade and other payables 19,24 40,927 28,822 12,687 Short-term borrowings 25 3,377 Total current liability 40,927 28,822 16,064 Total liabilities 40,927 28,822 16,350 Total equity and liability 32,394 26,329 17,611 (K-' These financial statements were approved by the Board of Directors on 25 October 2018. Signed on behalf of the Board of Directors: V Kornilovski I Wallichman -· Director Director 13 0 Badoo Trading Limited Consolidated statement of changes in equity for the year ended 31 December 2017 Attributable to the equity holders of the parent Non- Contribution Translation Retained controlling Notes Issued capital from parent reserve earnings interest Total equity £'000 £'000 £'000 £'000 £'000 £'000 At l January 2016 209 (65) 1,599 (482) 1,261 Loss for the year (2,700) (930) (3,630) Share based payment 26 16 16 Other comprehensive income Foreign exchange translation of net investment in foreign operations during the year (140} (140} At 31 December 2016 225 (205} (l,101) (l,412) (2,493} Attributable to the equity holders ofthe parent Non- Contribution Translation Retained controlling Notes Issued capital from parent reserve earnings interest Total equity £'000 £'000 £'000 £'000 £'000 £'000 At l January 2017 225 (205) (1,101) (1,412) (2,493) Loss for the year (7,295) 1,405 (5,890) Share based payment 26 (10) (10) Dividends 22 (163) (163) Other comprehensive income Foreign exchange translation of net investment in foreign operations during the year 23 23 At 31 December 2017 215 (182} (8,396) (170} (8,533) 14 0 Badoo Trading Limited Consolidated statement of cash flows for the year ended 31 December 2017 Notes 2016 As restated 2017 Note 30 £'000 £'000 Operating activities Loss before tax (5,581) (3,578) Adjustments to reconcile profit before tax to net cash flows: Depreciation of property, plant and equipment 11 810 603 Amortisation of intangible assets 11 52 110 Impairment loss 43 Gain on disposal of property, plant and equipment (1) (5) Share-base payment transaction 26 (10) 16 Net finance income (191) Net foreign exchange difference {23} {43} Cash flows from operations before working capital changes (4,901) (2,897) Working capital adjustments: Increase in trade and other receivables and prepayments (2,353) (4,553) Increase in trade and other payables 12,105 9,132 Decrease in non-current payables {241} 4,851 1,441 Interest received 191 Taxes paid {74} {344) Net cash flows from operating activities 4,968 1,097 Investing activities Proceeds from sale of property and equipment 11 10 Purchase of property and equipment 17 (2,992) (702) Purchase of intangible assets 18 _ _-----"-'(9....::.lL}._ _. .>.:(1=3.:::.L6} Net cash flows used in investing activities (3,072) (828) Financing activities Payment of dividends (163) Net cash flows from operating activities (163} Net increase in cash and cash equivalents 1,733 269 Net foreign exchange difference (37) (57) Cash and cash equivalents at 1 January 2,189 1,977 Cash and cash equivalents at 31 December 3,885 2,189 15 0 Badoo Trading Limited Notes to the consolidated financial statements at 31 December 2017 1. Corporate information The consolidated financial statements ofBadoo Trading Limited and its subsidiaries (collectively, the Group) for the year ended 31December2017 were approved by the Board on 25 October 2018. The Group is principally engaged in the operation of social networking applications and websites. Information on the Group's structure is provided in note 7. Information on other related party relationships of the Group is provided in note 26. 2. Basis of preparation The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union. The consolidated financial statements have been prepared on a historical cost basis. The consolidated financial statements are presented in pounds and all values are rounded to the nearest thousand pounds (£'000s), except when otherwise indicated. The consolidated financial statements provide comparative information in respect of the previous period. In addition, the Group presents an additional statement of financial position at the beginning of the earliest period presented when there is a retrospective application of accounting policy, a retrospective restatement, or a reclassification of items in the financial statements 3. Basis of consolidation The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December 2017. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has: • Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee) • Exposure, or rights, to variable returns from its involvement with the investee • The ability to use its power over the investee to affect its returns Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: • The contractual arrangement(s) with the other vote holders of the investee • Rights arising from other contractual arrangements • The Group's voting rights and. potential voting rights The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. Profit or loss and each component ofOCI are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value. 16 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 4. Summary of significant accounting policies a) Business combinations and goodwill Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope ofIAS 39 Financial Instruments: Recognition and Measurement, is measured at fair value with the changes in fair value recognised in the statement of profit or loss. Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests) and any previous interest held over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group's cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill has been allocated to a cash-generating unit (CGU) and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained. b) Current versus non-current classification The Group presents assets and liabilities in the statement of financial position based on current/non- current classification. An asset is current when it is: • Expected to be realised or intended to be sold or consumed in the normal operating cycle • Held primarily for the purpose of trading • Expected to be realised within twelve months after the reporting period Or • Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period All other assets are classified as non-current. A liability is current when: • It is expected to be settled in the normal operating cycle • It is held primarily for the purpose of trading • It is due to be settled within twelve months after the reporting period 17 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 4. Summary of significant accounting policies (continued) b) Current versus non-current classification (continued) Or • There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period The Group classifies all other liabilities as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities. c) Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is received. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The specific rec.ognition criteria described below must also be met before revenue is recognised. Rendering of services Revenue from rendering of services through subscription on mobile apps is recognised when the service or subscription credits are consumed by the customer. Interest income For all financial instruments measured at amortised cost and interest-bearing financial assets classified as AFS, interest income is recorded using the effective interest rate (EIR). The EIR is the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset. Interest income is included in finance income in the statement of profit or loss. d) Taxes Current income tax Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the countries where the Group operates and generates taxable income. Current income tax relating to items recognised directly in other comprehensive income or equity is recognised in other comprehensive income or equity and not in profit or loss. Management periodically evaluates po~itions taken in the tax returns with respect to situations where applicable tax regulations are subject to interpretation and establishes provisions where appropriate. Deferred tax Deferred tax is recognized in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more, tax, with the following exceptions: • deferred tax assets are recognized only to the extent that the Directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. 18 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 4. Summary of significant accounting policies (continued) d} Taxes (continued} Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, are recognised subsequently if new information about facts and circumstances change. The adjustment is either treated as a reduction in goodwill (as long as it does not exceed goodwill) if it was incurred during the measurement period or recognised in profit or loss. Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date. e} Foreign currencies The Group's consolidated financial statements are presented in pounds, the parent company's functional currency is euro. For each entity, the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency. The Group uses the direct method of consolidation and on disposal of a foreign operation, the gain or loss that is reclassified to profit or loss reflects the amount that arises from using this method. a. Transactions and balances Transactions in foreign currencies are initially recorded by the Group's entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Differences arising on settlement or translation of monetary items are recognised in profit or loss with the exception of monetary items that are designated as part of the hedge of the Group's net investment of a foreign operation. These are recognised in OCI until the net investment is disposed of, at which time, the cumulative amount is reclassified to profit or loss. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in OCI. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in OCI or profit or loss are also recognised in OCI or profit or loss, respectively). Group companies On consolidation, the assets and liabilities of foreign operations are translated into pounds at the rate of exchange prevailing at the reporting date and their statements of profit or loss are translated at exchange rates prevailing at the dates of the transactions. The exchange differences arising on translation for consolidation are recognised in OCI. On disposal of a foreign operation, the component ofOCI relating to that particular foreign operation is recognised in profit or loss. f) Property and equipment Property and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost of property, plant and equipment includes labour and overhead costs arising directly from the construction or acquisition of an item of property, plant and equipment. All other repair and maintenance costs are recognised in profit or loss as incurred. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. All other subsequent costs are charged · to the group statement of comprehensive income during the financial period in which they occurred. 19 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 4. Summary of significant accounting policies (continued) f) Property and equipment (continued) Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, as follows: Leasehold improvements 5 years or remaining life of lease Fixtures and fittings 4 years IT hardware 3 years Motor vehicles 4 years An item of property and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. 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 asset) is included in the statement of profit or loss account when the asset is derecognised. The residual values, useful lives and methods of depreciation of property and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate. g) Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred. The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortised on a straight-line basis from the date they are available as follows: Software and mobile applications 3 years Trademark 10 years Domain 3 years The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least atthe end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit or loss in the expense category that is consistent with the function of the intangible assets. Trademarks are measured initially at purchase cost and amortised on a straight line basis over their useful life, not exceeding a period of ten years. Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. Gains or losses arising from derecognition of an intangible asset are measiired as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised. 20 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 4. Summary of significant accounting policies (continued) g) Intangible assets (continued) Research and development costs Research and development costs are expensed as incurred. h) Leases The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even ifthat right is not explicitly specified in an arrangement. Operating leases All leases held by the group are operating leases. Operating lease payments are recognised as an operating expense in the statement of profit or loss on a straight-line basis over the lease term. i) Financial instruments - initial recognition and subsequent measurement A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets Initial recognition and measurement Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale (AFS) financial assets, or derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a timeframe established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date at which the Group commits to purchase or sell the asset. The Group's financial assets include cash and cash equivalents, trade and other receivables and derivative financial assets. Subsequent measurement For purposes of subsequent measurement financial assets are classified into two categories: • Financial assets at fair value through profit or loss • Loans and receivables Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments, as defined by IAS 39. Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value presented as finance costs (negative changes in fair value) or finance revenue (positive net changes in fair value) in the statement of profit or loss and other comprehensive income. The Group has not designated any financial assets at fair value through profit or loss. 21 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 4. Summary of significant accounting policies (continued) i) Financial instruments - initial recognition and subsequent measurement (continued) Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value iftheir economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value though profit or loss. These embedded derivatives are measured at fair value, with changes in fair value recognised in the statement of profit or loss and other comprehensive income. Reassessment occurs only ifthere is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or there is a reclassification of a financial asset out of the fair value through profit or loss category. Loans and receivables This category is the most relevant to the Group. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate method, less impairment. 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 effective interest rate. The effective interest rate amortisation is included in finance income in the statement of profit or loss and other comprehensive income. The losses arising from impairment are recognised in the statement of profit or loss and other comprehensive income in finance costs for loans and in cost of sales or other operating expenses for receivables. . This category generally applies to trade and other receivables. For more information on receivables, refer to note 20. Derecognition A financial asset (or, where applicable, a part of a financial asset or part of a Group of similar financial assets) is primarily derecognised (i.e., removed from the Group's consolidated statement of financial position) when either: • The rights to receive cash flows from the asset have expired, or • The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset; or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. The Group assesses at each reporting date whether there is objective evidence that a financial asset or a Group of financial assets is impaired. An impairment exists if one or more events that has occurred since the initial recognition of the asset (an incurred 'loss event') has an impact on the estimated future cash flows of the financial asset or the Company of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtor or a Company of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments; the probability that they will enter bankruptcy or other financial reorganisation; and observable data indicating that there is a measurable decrease in the estimated futUre cash flows, such as changes in arrears or economic conditions that correlate with defaults. 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, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. 22 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 4. Summary of significant accounting policies (continued) i) Financial instruments - initial recognition and subsequent measurement (continued) All financial liabilities are recognised initially at fair value and, in the case ofloans and borrowings and payables, net of directly attributable transaction costs. The Group's financial liabilities include trade and other payables, loans and borrowings including bank overdrafts and derivative financial liabilities. Subsequent measurement The measurement of financial liabilities depends on their classification, as described below: • Financial liabilities at fair value through profit or loss • Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by IAS 39. 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 profit or loss and other comprehensive income. Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial recognition date and only ifthe conditions in IAS 39 are satisfied. The Group has not designated any financial liabilities as at fair value through profit or loss. Loans and borrowings This is the category most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the statement of profit or loss and other comprehensive income when the liabilities are derecognised, as well as through the effective interest rate 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 effective interest rate. The effective interest rate amortisation is included as finance costs In the statement of profit or loss and other comprehensive income. This category generally applies to interest-bearing loans and borrowings. Derecognition A financial liability is derecognised 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 recognised in the statement of profit or loss and other comprehensive income. Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position ifthere is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. 23 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 4. Summary of significant accounting policies (continued) j) Impairment of non-financial assets The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or CGU's fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing 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. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators. Impairment losses of continuing operations are recognised in the statement of profit or loss in expense categories consistent with the function of the impaired asset. For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Group estimates the asset's or CGU's recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of profit or loss unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase. Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group ofCGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods. Intangible assets with indefinite useful lives are tested for impairment annually as at 31 October at the CGU level, as appropriate, and when circumstances indicate that the carrying value may be impaired. I) Cash and short-term deposits Cash and short-term deposits in the statement of financial position comprise cash at banks and on hand and short-term deposits with a maturity of three months or less, which are subject to an insignificant risk of changes in value. For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Group's cash management. m) Share-based payments Employees (including senior executives) of the Group receive remuneration in the form ofshare- based payments, whereby employees render services as consideration for equity instruments of the ultimate parent, Worldwide Vision Limited (equity-settled transactions). Equity-settled transactions The cost of equity-settled transactions is recognised 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). 24 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 4. Summary of significant accounting policies (continued) m) Share-based payments (continued) The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The expense or credit in the statement of profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Group's best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an award, but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions. No expense is recognised for awards that do not ultimately vest because non-market performance condition 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. Where the terms of an equity-settled transaction award are modified, the minimum expense recognised 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 recognised 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 profit or loss. 5. Significant accounting judgements, estimates and assumptions The preparation of the Group's financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities at the date of the consolidated financial statements. Estimates and assumptions are continuously evaluated and are based on management's experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. Other disclosures relating to the Group's exposure to risks and uncertainties includes: • Financial instruments risk management and policies (note 19) • Capital management (note 29) In particular, the Group has identified the following areas where significant judgements, estimates and assumptions are required. Further information on each of these areas and how they impact the various accounting policies are described below and also in the relevant notes to the financial statements. Changes in estimates are accounted for prospectively. Judgements In the process of applying the Group's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements: Taxes The Group establishes provisions based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which it operates. The amount of such provisions is based on various factors, such as experience with previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. 25 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 5. Significant accounting judgements, estimates and assumptions Judgements (continued) Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits, together with future tax planning strategies. The Group has not any tax losses carried forward. Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised ifthe revision affects only that period or in the period of the revision and future periods ifthe revision affects both current and future periods. In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the Group financial statements are described in the following notes: · • Note4 impairment of non-financial assets • Note4 taxes 6. New and amended standards and interpretations adopted by the group The Group applied for the first time certain amendments to the standards, which are effective for annual periods beginning on or after 1 January 2017. The Group has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective. The nature and the impact of each amendment is described below: Amendments to /AS 7 Statement of Cash Flows: Disclosure Initiative The amendments require entities to provide disclosure of changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). The Group has assessed that the amendment does not impact the consolidated financial statements. Amendments to /AS 12 Income Taxes: Recognition ofDeferred Tax Assets for Unrealised Losses The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of deductible temporary difference related to unrealised losses. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount. The Group applied amendments retrospectively. However, their application has no effect on the Group's financial position and performance as the Group has no deductible temporary differences or assets that are in the scope of the amendments. 26 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 6. New and amended standards and interpretations adopted by the group (continued) Annual Improvements Cycle - 2014-2016 Amendments to IFRS 12 Disclosure of Interests in Other Entities: Clarification of the scope ofdisclosure requirements in IFRS 12 The amendments clarify that the disclosure requirements in IFRS 12, other than those in paragraphs B 1O- B 16, apply to an entity's interest in a subsidiary, a joint venture or an associate (or a portion of its interest in a joint venture or an associate) that is classified (or included in a disposal group that is classified) as held for sale. As at 31 December 2017 the Group does not classified its interest to any of its subsidiary as held for sale, thus these amendments did not affect the Group's financial statements. 7. Group information Information about subsidiaries Principal Country of Registered name activities incorporation Ownership interest 2017 2016 Or Not Inc (formerly Badoo America Inc) Trading USA 100% 100% Social Online Payments Inc. (formerly Badoo Aggregation America Inc) Trading USA 100% 100% Huggle App (UK) Limited Trading United Kingdom 99% 100% Bumble Holding Limited Trading United Kingdom 78.2% 78.2% Bumble Trading Inc. Trading USA *78.2% *78.2% The principal address of Or Not Inc, Social Online Payments Inc. and Bumble Trading Inc is 1209 Orange Street, Wilmington, DE 19801, United States. The principal address of Bumble Holding Limited and Huggle App (UK) Limited is The Broadgate Tower Third Floor, 20 Primrose Street, London, United Kingdom, EC2A 2RS. *Held by a subsidiary undertaking Ultimate Group Undertakings The Company's immediate patent is Worldwide Vision and ultimate parent undertaking is Rimberg International Corp., a company incorporated in the British Virgin Islands. The ultimate controlling party is Mr A Ogandzhanyants. 8. Revenue 2017 2016 £'000 £'000 Mobile and web revenue 144, 107 107,233 Total revenue 144,107 107,233 27 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 9. Cost of sales 2017 2016 £'000 £'000 Licensing agreement 58,139 40,957 Direct aggregator expenses 14,549 10,318 Data centre expenses 8,393 8,419 Bulk messaging expenses 798 693 Domain expenses 56 34 Total cost of sales 81,935 60,421 10. Staff costs 2017 2016 £'000 £'000 Wages and salaries 9,130 8,342 Social security costs 852 857 Pension costs 122 97 Other costs 1,444 1,628 Total staff costs 11,548 10,924 The average monthly number of employees during the period was made up as follows: 2017 2016 No. No. Billing and Operations 33 31 Administration 38 26 Marketing 56 22 Executive 2 1 Product and Business Intelligence 23 Total 129 103 Included in wages and salaries is a total expense of share-base payments of £10k (2016: £16k) which arises from transactions accounted for as equity-settled share-based payment transactions (see note 24). Directors' remuneration Group 2017 2016 £'000 £'000 Short-term employee benefits 927 466 Post-employment benefits 22 3 Termination benefits 30 Share-base payments 22 971 499 28 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 10. Staff costs (continued) Directors' remuneration (continued) Company 2017 2016 £'000 £'000 Short-term employee benefits. 268 95 Post-employment benefits 22 3 Termination benefits 30 Share-based payments 22 312 128 11. Depreciation and amortisation Amounts are included in the Administrative expenses in the consolidated statement of profit or loss 2017 2016 £'000 £'000 Depreciation of owned fixed assets (note 17) 810 603 Amortisation of intangible assets (note 18) 52 110 862 713 12. Administrative expenses 2017 2016 £'000 £'000 PR and marketing 42,800 24,968 Wages and salaries 9,130 8,342 Professional fees 2,971 2,698 Rent and utilities 1,812 1,754 Other staff costs 1,566 1,726 Social security cost 852 857 Depreciation fixed assets 810 603 Amortisation intangible assets 52 110 Impairment loss 43 Foreign exchange gain (1,439) (441) Profit on sale of property and equipment (1) (5) Other expenses 9,236 9,718 67,832 50,330 As a result of the decision to cease marketing the Huggle App, an impairment has been recorded in 2017 (2016: £nil). 29 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 13. Auditor's remuneration The Group has recognised the following in respect of amounts paid or payable to its auditors in respect of the audit of the financial statements and for other services provided to the group. 2017 2016 £'000 £'000 Fees payable to the company's auditor for the audit of the company's annual accounts 50 80 Fees payable to the group's auditor and its associate for other services: The audit of the company's subsidiaries pursuant to legislation 16 7 Non audit-related services 18 15 Tax compliance services 55 34 Tax advisory services 56 89 195 145 14. Finance cost 2017 2016 £'000 £'000 Bank charges 112 60 112 60 15. Finance income 2017 2016 £'000 £'000 Interest income from other financial assets 191 191 16. Income tax The major components of income tax expense for the years ended 31 December 2017 and 2016 are: Consolidated statement of profit or loss 2017 2016 £'000 £'000 Income tax expense: Current income tax charge 92 283 Adjustments in respect of current income tax of previous years 298 8 Deferred income tax: Origination and reversal of timing differences (81) (235) . Impact on change in rate on opening balance (3) Origination and reversal of timing differences - prior period (1) Income tax expense reported in the statement of profit or loss and other comprehensive income 309 52 30 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 16. Income tax (continued) Reconciliation between tax expense and the accounting profit multiplied by UK's domestic tax rate for the years ended 31 December 2017 and 2016 is, as follows: 2017 2016 £'000 £'000 Accounting loss before tax (5,581) (3,578) At UK's statutory income tax rate of 19.25% (2016: 20%) {l,074) (716) Effects of: Disallowed expense and non-taxable income 93 187 Non taxable income (122) Group relief (surrendered)/claimed (276) 173 Difference in current tax and DT rate 11 17 Change in rate on opening balance (3) Difference in foreign tax rates 49 Adjustments to tax in respect of previous years 298 6 Deferred tax not recognised 1,199 432 Effect of higher taxes on overseas earnings 40 Foreign exchange rate 18 Other taxes 29 Total tax expense reported in the statement of profit or loss and other comprehensive income 309 52 Deferred tax Deferred tax relates to the following: At 1 January 2016 (45) Increase in deferred tax 102 At 31 December 2016 57 Increase in deferred tax 81 At 31 December 2017 138 The provision for deferred taxation is made up as follows: 2017 2016 2015 £'000 £'000 £'000 Accelerated Capital Allowance 138 57 (45) As at 31 December 2017 there was a total unrecognised deferred tax asset of£ 1,213,577. This comprised of a deferred tax asset of£ 1,484,086 in relation to unutilised tax losses in BUHL (UK), and the unrecognised deferred tax liability in the US entities of $270,509 in relation to accelerated capital allowances and other temporary differences. Factors that may affect future tax charges The Finance Act 2015, has provided that from 1 April 2017 taxable profits will be taxed at the rate of 19% and the Finance Act 2016, has provided that from 1 April 2020 taxable profits will be taxed at 17%. This will affect the future tax charge ofBadoo Trading Limited. It is not expected that this rate reduction will have a material impact on Badoo Trading Limited. 31 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 17. Property and equipment Leasehold Fixtures 11' Motor improvements and fittings hardware vehicles Total £'000 £'000 £'000 £'000 £'000 Cost At I January 2016 1,450 539 998 2,987 Additions 208 30 464 702 Disposals (1) (19) (20) Exchange difference 2 2 At 31 December 2016 1,657 569 1,445 3,671 Additions 1,641 443 900 8 2,992 Disposals (17) (29) (46) Exchange difference {I} {3} {4} At 31 December 2017 3,281 1,011 2,313 8 6,613 Accumulated depreciation At I January 2016 997 319 659 1,975 Charge for the year 268 72 263 603 Disposals (I) (16) (17) Exchange difference I At 31 December 2016 1,264 391 907 2,562 Charge for the year 291 110 409 810 Disposals (12) (24) (36) Exchange difference {6} (2} {2} (IO} At 31 December 2017 1,537 499 1,290 3,326 Net book value At 31 December 2016 393 178 538 1,109 At 31 December 2017 1,744 512 1,023 8 3,287 32 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 18. Intangible assets Domain Software name Trademarks Total £'000 £'000 £'000 £'000 Cost At 1 January 2016 966 54 1,020 Additions 2 134 136 At 31 December 2016 968 54 134 1,156 Additions 6 10 75 91 At 31 December 2017 974 64 209 1,247 Amortisation At 1 January 2016 879 15 894 Amortisation for the year 74 18 18 110 At 31 December 2016 953 33 18 1,004 Amortisation for the year 15 19 18 52 Impairment 43 43 At 31 December 2017 968 52 79 1,099 Net book value At 31 December 2016 15 21 116 152 At 31 December 2017 6 12 130 148 19. Financial assets and liabilities 2017 2016 £'000 £'000 Financial assets at amortised cost Trade and other receivables (note 20) 1,304 976 Receivables from related parties (note 20) 19,633 18,338 20,937 19,314 2017 2016 £'000 £'000 Other financial liabilities at amortised cost Trade and other payables (note 24) 8,269 5,198 Payables to related parties (note 24) 26,440 18,840 34,709 24,038 Financial risk management The Group has exposure to credit risk, liquidity risk and market risk arising from its use of financial instruments in the normal course of the Group's business. The Group's goal in risk management is to ensure that the management understands, measures and monitors the various risks that arise in connection with its operations. Policies and guidelines have been developed to identify, analyse, appraise and monitor the dynamic risks facing the Group. Based on this assessment, the Group adopts appropriate measures to mitigate these risks in accordance with the business unit's view of the balance between risk and reward. 33 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 19. Financial assets and liabilities (continued) Credit risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. Cash and cash equivalents The group maintains the majority of its cash and cash equivalents in chequing accounts with major international banks. The risk of default is not considered significant by management. Trade and other receivables The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer. The Group's receivable balances are predominately with other Group companies or listed companies, these are subject to normal credit risks which management view to be not significant. Cash deposits and trade receivables give rise to credit risk, which represents the loss that would be recognised if a counter-party failed to perform as contracted. Credit risk associated with trade receivables is managed through credit control policies. Any impairment is recorded in accordance with the policy for the allowance for impairment of receivables, based on management's assessment of the risk of contractual default. The carrying amount of these Group financial instruments represents the maximum credit risk exposure at the reporting date. Management do not believe credit exposure to be significant due to material, third party customers all being listed companies. Credit exposure is monitored and assessed on an ongoing basis. The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of accounts receivable. There has been no allowance for impairment recorded in the financial statements as all amounts are considered collectable. The ageing of trade receivables as at the reporting date is as follows: £'000 £'000 Current 1,304 976 1,304 976 The maximum exposure to credit risk for trade receivables at the reporting date by geographic region is as follows: 2017 2017 2016 2016 £'000 % £'000 % Europe-zone countries 886 68% 958 98% United States 418 32% 18 2% 1,304 100% 976 100% Interest rate risk Interest rate risk arises from changes in the prevailing levels of market interest rates. The Group earns interest at variable rates on its cash and cash equivalents. It is management's opinion that the Group is not exposed to significant interest rate risk. Liquidity risk Liquidity risk is the risk that the Group will encounter difficulties meetings its financial liability obligations. The Group maintains sufficient cash together with cash generated from fees to meet its liabilities as they fall due. 34 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 19. Financial assets and liabilities (continued} Liquidity risk (continued) The following table categorises the Group's consolidated financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts in the table are contractual undiscounted cash flows. Balances due within 12 months approximate their carrying values, as the impact of discounting is not significant. Carrying Greater amount On demand 0-3 months 3-12 months than] year £ '000 £ '000 £ '000 £ '000 £'000' At 31 December 2017 Trade and other payables 8,271 7,986 285 Payables to related parties 26,439 26,439 Total financial liabilities 34,710 26,439 7,986 285 At31 December2016 Trade and other payables 5,198 4,870 328 Payables to related parties 18,840 18,840 Total financial liabilities 24,038 18,840 4,870 328 Currency risk The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of Group entities. The currencies in which these transactions primarily are denominated are the EURO ("EUR") and US dollars ("USD"). The summary of quantitative data about the Group's exposure to foreign currency risk provided to t.nanagement of the Group based on its risk management policy was as follows: USD EUR £'000 £'000 At 31 December 2017 Trade and other receivables 560 Trade and other payables (3,503) (29) Net Group statement of financial position exposure (2,943) (29) At 31 December 2016 Trade and other receivables 106 Trade and other payables (2,459) (45) Net Group statement of financial position exposure (2,353) (45) The following significant exchange rates against pound sterling applied during the year. Average rate Reporting date spot rate 2017 2016 2017 2016 USD 0.7770 0.7402 0.7398 0.8122 EUR 0.8825 0.8161 0.8873 0.8561 35 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 19. Financial assets and liabilities (continued) Currency risk (continued) A strengthening (weakening) of the US dollar and EURO, as indicated below against the GBP at 31 December would have increased (decreased) equity and profit by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the group considers to be reasonably possible at the reporting date. The analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecasted sales and purchases. Strengthening Weakening Profit or Profit or Equity (loss) Equity (loss) £'000 £'000 £'000 £'000 At 31 December 2017 USD (5% movement) (140) 140 EUR (5% movement) (1) At 31 December 2016 USD (5% movement) (100) 100 EUR (5% movement) (2) 2 20. Trade and other receivables 31 December 1 January 2016 2016 31 December As restated As restated 2017 Note 30 Note 30 £'000 £'000 £'000 Trade receivables 1,304 976 147 Receivables from related parties 19,633 18,338 11,789 Accrued income 180 16 34 Prepayments 2,380 2,489 1,955 Other receivables 1,423 748 463 24,920 22,567 14,388 Receivables from related parties are repayable on demand. Trade receivables are non-interest bearing and are generally on terms 14-90 days. 21. Cash at bank 2017 2016 £'000 £'000 Cash at bank 3,885 2,189 3,885 2,189 22. Issued capital and reserves Authorised shares 2017 2016 No. No. Ordinary shares of£ par value each 36 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 22. Issued capital and reserves (continued) Allotted, called up and fully paid 2017 2017 2016 2016 No. £ No. £ Ordinary shares of£ par value each Equity share capital The balance classified as equity share capital includes the total net proceeds (both nominal value and share premium) on issue of the Company's equity share capital. Capital Contribution from parent This pertains to the share-based payment charge to the Company as discussed in note 26. Non-controlling interest Non-controlling interests represent the portion of profit or loss and net assets in subsidiaries not wholly owned by Company. Bumble Holding Limited, a subsidiary of the Company, issued dividend amounting to US$ 1 million (£747k) with £163k relating to non-controlling interest. Retained earnings This reserve includes the accumulated profits and losses of the company less any dividends declared. 23. Non-current payables 31 December 1 January 2016 2016 31 December As restated As restated 2017 Note 30 Note 30 £'000 £'000 £'000 Long-term payables 241 24. Trade and other payables 31 December 1 January 2016 2016 31 December As restated As restated 2017 Note 30 Note 30 £'000 £'000 £'000 Trade payables 4,776 2,720 1,332 Accruals 3,208 2,149 3,241 Deferred income 6,218 4,784 3,889 Other payables 285 329 219 Payables from related parties 26,440 18,840 4,005 40,927 28,822 12,686 The group's exposure to liquidity risk related to trade and .other payables is discussed in note 19. Loans from related parties are interest-free and witµ no fixed repayment terms. 37 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 25. Short-term borrowings 31 December 31 December 1 January 2017 2016 HJJ6 £'000 £'000 £'000 Borrowings owed to related party 3,377 The loan is interest-free and with fixed payments. 26. Share-based payments The Worldwide Vision Limited (WVL) Board of Directors has the power to issue any unissued shares in WVL on such terms and conditions as it may determine. Since 2011, the WVL Board has granted growth shares to employees based on their management grade, with shares vesting on various timeframes as stated in the relevant restrictive stock agreement. Growth shares have no voting rights and their value will only be returned on an exit to the extent that the growth share hurdle value is achieved. Growth share hurdle values vary depending on the class of growth share. The expense recognised for employee services received during the year was £10k (2016 £16k). There have been no cancellations or modifications to the plan during 2017 or 2016. Movements during the year The following table illustrate the number (No.) and weighted average exercise price (W AEP) of, and movements in, growth shares during the year. 2017 2017 2016 2016 No. WAEP£ No. WAEP£ Outstanding at 1 January 767,188 4.07 582,875 2.86 Options granted during the year 200,000 4.16 Adjustment for prior year 5,375 3.94 Forfeited during the year (1,875) 3.94 (15,687) 5.09 Outstanding at 31 December 770,688 767,188 The following table lists the inputs to the model used in the plan for years ended 31 December 2016 and 31 December 2017 2017 2016 Weighted average fair values at the measurement date (£) 0.23 0.2 Dividend yield(%) 8.30 8.39 Expected volatility(%) 36.00 36 Risk-free interest rate(%) 1.82 1.84 Expected life of growth shares 8.64 8.64 Weighted average share price(£) 2.82 2.98 Black Scholes Black Scholes Model used Model Model 27. Commitments and contingencies Operating lease commitments The Group has entered into operating leases on certain properties, with lease terms from one year to over five years. 38 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 27. Commitments and contingencies (continued) Future minimum rentals payable under non-cancellable operating leases as at 31 December 2017 are, as follows: 2017 2016 £'000 £'000 Operating leases which expire: Within one year 2,942 1,411 In two to five years 9,095 4,711 Over five years 1,591 114 13,628 6,236 Capital commitments Badoo Trading Limited also had a capital commitment outstanding of£ l,574k for the leasehold improvements to the Third Floor, Medius House. 28. Related party disclosures Note 7 provides information about the Group's structure, including details of the subsidiaries and tlie holding company. The following table provides the total amount of transactions that have been entered into with related parties for the relevant financial year. These transactions are unsecured and repayable on demand. Amounts Sales to Purchases Secondment owed by/(to) related from related agreement related parties parties recharge parties £'000 £'000 £'000 £'000 Parent Company: Worldwide Vision Ltd 2016 5,213 2017 (12,985) Other group undertaking: Badoo Holdings Ltd 2016 77 2017 6 Badoo Worldwide Ltd 2016 9 2017 Badoo Software Ltd 2016 (40,957) (17,517) 2017 (58, 139) (12,264) Badoo Technologies Ltd 2016 (8,419) (1,260) 2017 (8,393) (1,164) Social Online Payments Ltd 2016 (9,337) 12,649 2017 (l 1,560) 16,206 Badoo Limited 2016 (86) (9,371) 212 2017 (8,746) 375 Badoo Media Limited 2016 (63) 2017 28 39 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 28. Related party disclosures (continued) Amounts Sales to Purchases Secondment owed byl(to) related from related agreement related parties parties recharge parties £'000 £'000 £'000 £'000 Other grouQ undertaking: Chappy Limited 2016 178 2017 3,017 WeTrend Limited 2016 2017 (27) Other related parties Amounts Sales to Purchases Secondment owed byl(to) related from related agreement related parties parties recharge parties £'000 £'000 £'000 £'000 Common director Eyelink Media 2016 20 372 (37) 2017 24 186 AMMP Consulting Limited 2016 115 2017 41 MTKT Limited 2016 162 2017 Eyelink Media Limited is a related party of the Badoo Trading Group by virtue of Vladimir Kornilovski, a director of the Group, being a director. AMMP Consulting Limited is a related party of the Badoo Trading Group by virtue of Andrew Parker, a Director of the Group, being a director. MTKT Limited is a related party of the Badoo Trading Group by virtue of Michelle Kennedy, a Director of the Group, who resigned during the year being a director. Transactions with key management personnel Compensation of key management personnel of the Group: 2017 2016 £'000 £'000 Short-term employee benefits 905 561 Post-employment benefits 22 8 Termination benefits 30 Share-based payments 22 949 599 40 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 28. Related party disclosures (continued) Directors' interests in the Growth Share Plan Shares held by the Board of Directors under the Growth Share Plan have the following vesting dates and exercise prices: Date ofgrant Vested date Exercise price 2017 2016 Number Number outstanding outstanding 2011 2014 1.65 10,000 2011 2014 1.71 225,000 225,000 2013 2016 5.07 90,000 2017 2020 10.00 200,000 200,000 425,000 525,000 29. Capital management For the purpose of the Group's capital management, capital includes issued capital, convertible preference shares, share premium and all other equity reserves attributable to the equity holders of the Group. Given the nature of the Group's services and its position within the Group, the Group has minimal policies with regards to capital management and little requirement for capital management. The Group manages capital only to the extent that looks to maintain positive reserves, there are no financial covenants placed over the business that require additional capital management. To maintain or adjust capital structure, the Group may, if required, adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Group monitors capital to ensure a sufficient capital balance and that the gearing ratio, which is net debt divided by total capital plus net debt, does not become negative or the gearing ratio excessively high. 2017 2016 £'000 £'000 Trade and other payables 40,927 28,822 Less: cash and short-term deposits (3,885) (2,189) Net debt 37,042 26,633 2017 2016 £'000 £'000 Equity (8,533) (2,493) Total capital (8,533) (2,493) Capital and net debt 28,509 24,140 Gearing ratio 130% 110% No changes were made in the objectives, policies or processes for managing capital during the years ended 31 December 2017 and 2016. 41 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 30. Prior year adjustment During the year the company reviewed their accounting treatment in rellltinn for their principal activity of the aggregation and collection of revenues from customer and intermediaries and the provision of services to group companies. The company concluded that it was the principal in the relationship with the group companies and therefore the company has restated the 2016 financial statements so that income includes only gross inflows of economic benefits that are received or receivable by the company on its own account. The effect of the restatement on each financial statement line is as follows: Consolidated statement ofprofit and loss for the year ended 31December2016 (extract) Adjustment Restated 31 December 31 December 31 December 2016 2016 2016 £'000 £'000 £'000 Revenue 97,896 9,337 107,233 Cost of sales (51,084) (9,337) (60,421) Gross profit 46,812 46,812 There is no profit impact as a result of this restatement. Consolidated statement offinancial position as at 31 December 2016 (extract) Adjustment Restated 2016 2016 2016 £'000 £'000 £'000 Receivable from related company 14,712 3,626 18,338 Deferred income (1,158) (3,626) (4,784) Consolidated statement ofcash flows for the year ended 31 December 2016 (extract) Adjustment Restated 2016 2016 2016 £'000 £'000 £'000 Cash flows from operations before working capital changes (2,897) (2,897) Increase in trade and other receivables and prepayments (8,296) (3,743) (4,553) Increase in trade and other payables 12,875 3,743 9,132 Decrease in non-current payables (241) (241) Cash flows from operations 1,441 1,441 Consolidated statement offinancial position as at 1 January 2016 (extract) Adjustment Restated 1 January 1 January 1 January 2016 2016 2016 £'000 £'000 £'000 Receivable from related company 8,046 3,743 11,789 Deferred income (147) (3,743) (3,889) There is no profit impact as a result of this restatement. 42 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 31. Contingent liability The Company and its subsidiaries are currently, may be from time to time, involved in a number of legal proceedings, including inquiries from or discussions with governmental authorities, that are incidental to their operations. However, save as disclosed below, the Company and its subsidiaries are not involved currently in any legal or arbitration proceedings (including any governmental proceedings which are pending or known to be contemplated) which may have, or have had in the 12 months preceding the date of this report, a significant effect on the financial position or profitability of the Company and its subsidiaries. The Parent Company, Badoo Trading Limited, is currently responding to an enquiry by HMRC with regard to the 2013 to 2016 Corporation Tax returns. Management believes the threshold of"more likely than not" to have been crossed for an adjustment to be made, however quantifying the size of a provision is still problematic. Management have assessed and recorded a best estimate based on current discussions and believe that the maximum size of a possible uplift in the Corporation Tax liability to be immaterial to the financial statements. On April 30 2018 Match Group Inc (Match) filed a lawsuit against Bumble Trading Inc (Bumble), a subsidiary ofBadoo Trading Limited for: (i) infringement ofutility patents and a design patent, (ii) trademark infringement, (iii) trademark-related unfair competition (iv) trade dress infringement and (v) trade secret misappropriation. Bumble, in turn, is bringing a counterclaim against Match for tortuous interference with business relations. Match has not yet substantiated its damages and there is inherent difficulty in providing any reliable estimate as to the size and likelihood of any liability falling due. 32. Events after the reporting period Other than those disclosed in note 31, there were no significant events after the end of the reporting period. 33. Standards issued but not yet effective The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Company's financial statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective. IFRS 15 Revenue from Contracts with Customers IFRS 15 was issued in May 2014 and establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The new revenue standard will supersede all current revenue recognition requirements under IFRS. Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after 1 January 2018, when the IASB finalises their amendments to defer the effective date ofIFRS 15 by one year. Early adoption is permitted. The Group plans to adopt the new standard on the required effective date using the full retrospective method. During 2017, the Group performed a preliminary assessment ofIFRS 15, which is subject to changes arising from a more detailed ongoing analysis. Rendering ofservices The Group is principally engaged in the provision of services through subscriptions on mobile apps and recognise revenue when the service or subscription credits are consumed by the customer or when the subscription expires. The Group expects that the provision of services are satisfied over time. Consequently, under IFRS 15 the Group would continue to recognise revenue for these service contracts/service components of bundled contracts over time rather than at a point of time. The Group will complete its assessment of the potential effect ofIFRS 15 on its consolidated financial statements in 2018. 43 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 34. Standards issued but not yet effective {continued) IFRS 9 Financial Instruments In July 2014, the IASB issued the final version oflFRS 9 Financial Instruments that replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions oflFRS 9. IFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Except for hedge accounting, retrospective application is required but providing comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions. The Company plans to adopt the new standard on the required effective date. During 2017, the Company has performed a high-level impact assessment of all three aspects oflFRS 9. This preliminary assessment is based on currently available information and may be subject to changes arising from further detailed analyses or additional reasonable and supportable information being made available to the Company in the future. Overall, the Company expects no significant impact on its balance sheet and equity except for the effect of applying the impairment requirements oflFRS 9. The Company expects a higher loss allowance resulting in a negative impact on equity and will perform a detailed assessment in the future to determine the extent. (a) Classification and measurement The Company does not expect a significant impact on its balance sheet or equity on applying the classification and measurement requirements oflFRS 9. It expects to continue measuring at fair value all financial assets currently held at fair value. Quoted equity shares currently held as available-for-sale with gains and losses recorded in OCI will be measured at fair value through profit or loss instead, which will increase volatility in recorded profit or loss. The AFS reserve currently presented as accumulated OCI will be reclassified to opening retained earnings. Debt securities are expected to be measured at fair value through OCI under IFRS 9 as the Company expects not only to hold the assets to collect contractual cash flows but also to sell a significant amount on a relatively frequent basis. The equity shares in non-listed companies are intended to be held for the foreseeable future. The Company expects to apply the option to present fair value changes in OCI, and, therefore, believes the application of IFRS 9 would not have a significant impact. If the Company were not to apply that option, the shares would be held at fair value through profit or loss, which would increase the volatility of recorded profit or loss. Loans as well as trade receivables are held to collect contractual cash flows and are expected to give rise to cash flows representing solely payments of principal and interest. Thus, the Company expects that these will continue to be measured at amortised cost under IFRS 9. However, the Company will analyse the contractual cash flow characteristics of those instruments in more detail before concluding whether all those instruments meet the criteria for amortised cost measurement under IFRS 9. (b) Impairment IFRS 9 requires the Company to record expected credit losses on all of its debt securities, loans and trade receivables, either on a 12-month or lifetime basis. The Company expects to apply the simplified approach and record lifetime expected losses on all trade receivables. The Company expects a significant impact on its equity due to unsecured nature of its loans and receivables, but it will need to perform a more detailed analysis which considers all reasonable and supportable information, including forward-looking elements to determine the extent of the impact. 44 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 33. Standards issued but not yet effective (continued} IFRS 16 Leases IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance ofTransactions Involving the Legal Form ofa Lease. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. The standard includes two recognition exemptions for lessees - leases of 'low-value' assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognise a· liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognise the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset. Lessor accounting under IFRS 16 is substantially unchanged from today's accounting under IAS 17. Lessors will continue to classify all leases using the same classification principle as in IAS 17 and distinguish between two types of leases: operating and finance leases. IFRS 16 also requires lessees and lessors to make more extensive disclosures than under IAS 17. IFRS 16 is effective for annual periods beginning on or after 1January2019. Early application is permitted, but not before an entity applies IFRS 15. A lessee can choose to apply the standard using either a full retrospective or a modified retrospective approach. The standard's transition provisions permit certain reliefs. In 2018, the Group will continue to assess the potential effect ofIFRS 16 on its consolidated financial statements. Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture The amendments address the conflict between IFRS 10 and IAS 28 in dealing with the loss of control of a subsidiary that is sold or contributed to an associate or joint venture. The amendments clarify that the gain or loss resulting from the sale or contribution of assets that constitute a business, as defined in IFRS 3, between an investor and its associate or joint venture, is recognised in full. Any gain or loss resulting from the sale or contribution of assets that do not constitute a business, however, is recognised only to the extent of unrelated investors' interests in the associate or joint venture. The IASB has deferred the effective date of these amendments indefinitely, but an entity that early adopts the amendments must apply them prospectively. The Group will apply these amendments when they become effective. IFRS 2 Classification and Measurement of Share-based Payment Transactions - Amendments to IFRS 2 The IASB issued amendments to IFRS 2 Share-based Payment that address three main areas: the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash settled to equity settled. On adoption, entities are required to apply the amendments without restating prior periods, but retrospective application is permitted if elected for all three amendments and other criteria are met. The amendments are effective for annual periods beginning on or after 1January2018, with early application permitted. The Group is assessing the potential effect of the amendments on its consolidated financial statements. 45 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 33. Standards issued but not yet effective (continued) IFRS 17 Insurance Contracts In May 2017, the IASB issued IFRS 17 Insurance Contracts (IFRS 17), a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure. Once effective, IFRS 17 will replace IFRS 4 Insurance Contracts (IFRS 4) that was issued in 2005. IFRS 17 applies to all types of insurance contracts (i.e., life, non-life, direct insurance and re-insurance), regardless of the type of entities that issue them, as well as to certain guarantees and financial instruments with discretionary participation features. A few scope exceptions will apply. The overall objective of IFRS 17 is to provide an accounting model for insurance contracts that is more useful and consistent for insurers. In contrast to the requirements in IFRS 4, which are largely based on grandfathering previous local accounting policies, IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects. The core of IFRS 17 is the general model, supplemented by: • A specific adaptation for contracts with direct participation features (the variable fee approach) • A simplified approach (the premium allocation approach) mainly for short-duration contracts. IFRS 17 is effective for reporting periods beginning on or after 1 January 2021, with comparative figures required. Early application is permitted, provided the entity also applies TFRS 9 and IFRS 15 on or before the date it first applies IFRS 17. This standard is not applicable to the Group. Transfers of Investment Property - Amendments to IAS 40 The amendments clarify when an entity should transfer property, including property under construction or development into, or out of investment property. The amendments state that a change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. A mere change in management's intentions for the use of a property does not provide evidence of a change in use. Entities should apply the amendments prospectively to changes in use that occur on or after the beginning of the annual reporting period in which the entity first applies the amendments. An entity should reassess the classification of property held at that date and, if applicable, reclassify property to reflect the conditions that exist at that date. Retrospective application in accordance with IAS 8 is only permitted if it is possible without the use of hindsight. Effective for annual periods beginning on or after 1January2018. Early application of the amendments is permitted and must be disclosed. The Group will apply amendments when they become effective. However, since Group's current practice is in line with the clarifications issued, the Group does not expect any effect on its consolidated financial statements. Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts - Amendments to IFRS4 The amendments address concerns arising from implementing the new financial instruments standard, IFRS 9, before implementing IFRS 17 Insurance Contracts, which replaces IFRS 4. The amendments introduce two options for entities issuing insurance contracts: a temporary exemption from applying IFRS 9 and an overlay approach. The temporary exemption is first applied for reporting periods beginning on or after 1January2018. An entity may elect the overlay approach when it first applies IFRS 9 and apply that approach retrospectively to financial assets designated on transition to IFRS 9. The entity restates comparative information reflecting the overlay approach if, and only if, the entity restates comparative information when applying IFRS 9. These amendments are not applicable to the Group. If RIC Interpretation 22 Foreign Currency Transactions and Advance Consideration The Interpretation clarifies that, in determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non- monetary liability relating to advance consideration, the date of the transaction is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the entity must determine the transaction date for each payment or receipt of advance consideration. 46 0 Badoo Trading Limited Notes to the consolidated financial statements (continued) 33. Standards issued but not yet effective {continued) IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration (continued) Entities may apply the amendments on a fully retrospective basis. Alternatively, an entity may apply the Interpretation prospectively to all assets, expenses and income in its scope that are initially recognised on or after: (i) The beginning of the reporting period in which the entity first applies the interpretation Or (ii) The beginning of a prior reporting period presented as comparative information in the financial statements of the reporting period in which the entity first applies the interpretation. The Interpretation is effective for annual periods beginning on or after 1January2018. Early application of interpretation is permitted and must be disclosed. The Group is currently assessing the impact of this in the consolidated financial statements. IFRIC Interpretation 23 Uncertainty over Income Tax Treatment The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12 and does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The Interpretation specifically addresses the following: • Whether an entity considers uncertain tax treatments separately • The assumptions an entity makes about the examination of tax treatments by taxation authorities • How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates • How an entity considers changes in facts and circumstances IFRIC Interpretation 23 Uncertainty over Income Tax Treatment An entity must determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The approach that better predicts the resolution of the uncertainty should be followed. The interpretation is effective for annual reporting periods beginning on or after 1 January 2019, but certain transition reliefs are available. The Group will apply interpretation from its effective date. Since the Group operates in a complex multinational tax environment, applying the Interpretation may affect its consolidated financial statements and the required disclosures. In addition, the Group may need to establish processes and procedures to obtain information that is necessary to apply the Interpretation on a timely basis. 47 0 Badoo Trading Limited Statement of directors' responsibilities in relation to parent company The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgments and estimates that are reasonable and prudent; • state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. 48 0 Badoo Trading Limited Company statement of financial position at 31 December 2017 Registered No. 07540255 31 December 1 January 2016 2016 31 December As restated As restated 2017 Note 16 Note 16 Notes £'000 £'000 £'000 Non-current assets Property, plant and equipment 6 1,646 1,070 1,004 Intangible assets 5 6 15 87 Investments 7 2,702 1,925 1,925 Deferred tax assets 11 138 57 4,492 3,067 3,016 Current assets Trade and other receivables 8 24,459 29,753 14,843 Cash at bank 9 3,330 2,007 1,895 Total current assets 27,789 31,760 16,738 Total assets 32,281 34,827 19,754 Equity and liabilities Shareholders' equity Issued capital 10 Capital contribution 10 215 225 209 Retained earnings 10 {7,866} 4;703 3,266 Total equity (7,651} 4,928 3,475 Non-current liabilities Deferred tax liabilities 11 45 Non-current payables 12 241 286 Current liabilities Trade and other payables 13 39,932 29,899 12,616 Short-term borrowings 14 3,377 Total current liabilities 39,932 29,899 15,993 Total liabilities 39,932 29,899 16,279 Total equity and liability 32,281 34,827 19,754 These financial statements were approved by the Board of Directors on 25 October 2018.- Signed on behalf of the Board of Directors: I Wallichman V Kornilovski Director Director 49 0 Badoo Trading Limited Company Statement of Changes in Equity for year ended 31 December 2017 Issued Contribution Retained capital from parent earnings Total £'000 £'000 £'000 £'000 At 1 January 2016 209 3,266 3,475 Profit for the year 1,437 1,437 Share-based payment 16 16 At 31 December 2016 225 4,703 4,928 At 1 January 2017 225 4,703 4,928 Loss for the year (12,569) (12,569) Share-based payment (10) (10) At 31 December 2017 215 {7,866} {7,651) 50 0 Badoo Trading Limited Notes to the Company financial statements at 31 December 2017 1. Corporate information Badoo Trading Limited is incorporated and domiciled in England and Wales. The company's registered number is 07540255 with a registered office address of The Broadgate Tower Third Floor, 20 Primrose Street, London EC2A 2RS, United Kingdom. The Company is principally engaged in the operation of social networking applications and websites. Information on the Company's structure and information on other related party relationships of the Company are provided in note 14. 2. Basis of preparation The financial statement of the Company for the year ended 31 December 2017 were authorised for issue by the board of directors and the statement of financial position was signed on the board's behalf by Vladimir Komilovski and Idan Wallichman. · These financial statements were prepared in accordance with United Kingdom Accounting Standards including Financial Reporting Standard (FRS) 101 "Reduced Disclosure Framework (United Kingdom Generally Accepted Accounting Practice). The results ofBadoo Trading Limited are included in the consolidated financial statements ofBadoo Trading Limited, which are available in The Broadgate Tower Third Floor, 20 Primrose Street, London, UK. The principal accounting policies adopted by the Company are set out in note 4. The financial statements have been prepared on a historical cost basis. The Company's functional and presentation currency is British Pounds(£). All values are rounded to the nearest thousand (£'000), except when otherwise indicated. The Company has taken the following disclosure exemptions in the preparation of these financial statement, in accordance with FRS 101: • The requirement of IFRS 7, Financial Instruments: Disclosures; • Paragraphs 91 to 99 ofIFRS 13, Fair value Measurement; • Paragraph 38 of IAS 1, Presentation of Financial Statements comparative information requirements in respect of paragraph 79(a)(iv) ofIAS 1 paragraph 73(e) ofIAS 16, Property, Plant and Equipment, paragraph l 18(e) ofIAS 38, Intangible Assets • IAS 7, Statement of Cash Flows • Paragraph 30 and 31 ofIAS 8, Accounting policies, changes in accounting estimates and errors (requirement for the disclosure of information when an entity has not applied a new IFRS that has been issued but is not yet effective) • The following paragraphs of IAS 24, Related party disclosures (key management compensation): 17 (Key management compensation), and l 8A (Key management services provided by a separate management entity) • The requirement ofIAS 24, Related party disclosures to disclose related party transactions entered into between two or more member of a group The Company has taken advantage of the exemption provided under section 408 of the Companies Act 2006 not to publish its individual income statement and related notes. The financial statements have been prepared on a going concern basis because in the opinion of the Directors, the Company has in place a contract and financing structure that ensures it is able to meet all financial commitments as they fall due. 51 0 Badoo Trading Limited Notes to the Company financial statements (continued) at 31 December 2017 3. Summary of significant accounting judgements, estimates and a$$1Jmptions The preparation of the Company's financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities at the date of the consolidated financial statements. Estimates and assumptions are continuously evaluated and are based on management's experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. In particular, the Company has identified the following areas where significant judgements, estimates and assumptions are required. Further information on each of these areas and how they impact the various accounting policies are described below and also in the relevant notes to the financial statements. Changes in estimates are accounted for prospectively. Judgements 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 recognised in the financial statements: Provision for bad and doubtfal debts The Company reviews its trade and other receivables for evidence of their recoverability. Such evidence includes the customer's payment record and the customer's overall financial position. If indications of irrecoverability exist, the recoverable amount is estimated and a respective provision for bad and doubtful debts is made. The amount of the provision is charged through profit or loss. The review of credit risk is continuous and the methodology and assumptions used for estimating the provision are reviewed regularly and adjusted accordingly. Taxes The Company establishes provisions based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which it operates. The amount of such provisions is based on various factors, such as experience with previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits, together with future tax planning strategies. The Company has not any tax losses carried forward. Contingencies Contingent liabilities may arise from the ordinary course of business in relation to claims against the Company, including legal, contractor, land access and other claims. By their nature, contingencies will be resolved only when one or more uncertain future events occur or fail to occur. The assessment of the existence, and potential quantum, of contingencies inherently involves the exercise of significant judgement and the use of estimates regarding the outcome of future events. Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market change or circumstances arising beyond the control of the Company. Such changes are reflected in the assumptions when they occur. 52 0 Badoo Trading Limited Notes to the Company financial statements (continued) at 31 December 2017 3. Summary of significant accounting judgements, estimates and assumptions (continued) Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the company financial statements are described in the following notes: • Note4 impairment of non-financial assets • Note4 income taxes Fair value measurement 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 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. Changes in estimates and assumptions about these inputs could affect the reported fair value. 4. Summary of significant accounting policies a) Income taxes Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates and laws that are enacted or substantively enacted by the balance sheet date. Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, with the following exceptions: • deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised. Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the balance sheet date. The carrying amount of deferred income tax assets is reviewed at each balance sheet date. Deferred income tax assets and liabilities are offset, only if a legally enforcement right exists to set off current tax assets against current tax liabilities, the deferred income taxes relate to the same taxation authority and that authority permits the company to make a single net payment. b) Investments Investments in subsidiaries are held at historical cost less any provisions for impairment in value. The carrying values of investments are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. 53 0 Badoo Trading Limited Notes to the Company financial statements (continued) at 31 December 2017 4. Summary of significant accounting policies (continued) c) Intangible assets Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised. Software and mobile applications 3 years Research and development costs Research and development costs are expensed as incurred. d) Tangible assets Plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses. Cost comprises the aggregate amount paid and the fair value of any other consideration given to acquire the asset and includes costs directly attributable to making the asset capable of operating as intended. Borrowing costs directly attributable to assets under construction and which meet the recognition criteria in IAS 23 are capitalised as part of the cost of that asset. Depreciation is provided on all property, plant and equipment, other than land, on a straight-line basis over its expected useful life as follows: Leasehold improvements 5 years or remaining life of lease IT hardware 3 years Fixtures and fittings 4 years The carrying values of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable, and are written down immediately to their recoverable amount. Useful lives and residual values are reviewed annually and where adjustments are required these are made prospectively. e) Impairment Impairment of non-financial assets The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset's recoverable amount in order to determine the extent of the impairment loss. An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses on continuing operations are recognised in the income statement in those expense categories consistent with the function of the impaired asset. f) Current versus non-current classification The Company presents assets and liabilities in the statement of financial position based on current/non-current classification. An asset is current when it is: • Expected to be realised or intended to be sold or consumed in the normal operating cycle • Held primarily for the purpose of trading, • Expected to be realised within twelve months after the reporting period 54 0 Badoo Trading Limited Notes to the Company financial statements (continued) at 31 December 2017 4. Summary of significant accounting policies (continued) f) Current versus non-current classification (continued) Or • Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period All other assets are classified as non-current. A liability is current when: • It is expected to be settled in the normal operating cycle • It is held primarily for the purpose of trading • It is due to be settled within twelve months after the reporting period Or • There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period The Company classifies all other liabilities as non-current. g) Financial instruments - initial recognition and subsequent measurement A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets Initial recognition and measurement Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale (AFS) financial assets, or derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a timeframe established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date at which the Company commits to purchase or sell the asset. The Company's financial assets include cash and cash equivalents and trade and other receivables. Subsequent measurement For purposes of subsequent measurement financial assets are classified as loans and receivables: Loans and receivables This category is the most relevant to the Company. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate method, less impairment. 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 effective interest rate. The effective interest rate amortisation is included in finance income in the statement of profit or loss and other comprehensive income. The losses arising from impairment are recognised in the Profit and Loss Account in Administrative expenses. This category generally applies to "Trade and other receivables", refer to note 8. 55 0 Badoo Trading Limited Notes to the Company financial statements (continued) at 31 December 2017 4. Summary of significant accounting policies (continued) g) Financial instruments - initial recognition and subsequent measurement (continued) Derecognition A financial asset (or, where applicable, a part of a financial asset or part of a Company of similar financial assets) is primarily derecognised (i.e., removed from the Company's consolidated statement of financial position) when either: • The rights to receive cash flows from the asset have expired, or • The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset; or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. The Company assesses at each reporting date whether there is objective evidence that a financial asset or a Company of financial assets is impaired. An impairment exists if one or more eveuls lhal has occurred since the initial recognition of the asset (an incurred 'loss event') has an impact on the estimated future cash flows of the financial asset or the Company of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtor or a Company of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments; the probability that they will enter bankruptcy or other financial reorganisation; and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. 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 as derivatives designated as hedging instruments in an effective hedge, 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 liability included in "Trade and other payables" and is classified as loans and borrowings, refer to note 13. Subsequent measurement 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 rate method. Gains and losses are recognised in the Profit and Loss Account when the liabilities are derecognised, as well as through the effective interest rate 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 effective interest rate. The effective interest rate amortisation is included as finance costs in the statement of profit or loss and other comprehensive income. This category generally applies to interest-bearing loans and borrowings. Derecognition A financial liability is derecognised 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 56 0 Badoo Trading Limited Notes to the Company financial statements (continued) at 31December2017 4. Summary of significant accounting policies (continued) g) Financial instruments - initial recognition and subsequent measurement (continued) a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss and other comprehensive income. Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position ifthere is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. h) Cash at bank Cash at banks in the statement of financial position comprise cash at banks, which are subject to an insignificant risk of changes in value. i) Share-based payments Employees (including senior executives) of the Group receive remuneration in the form of share- based payments, whereby employees render services as consideration for equity instruments (equity- settled transactions). Equity-settled transactions The cost of equity-settled transactions is recognised 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 recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The expense or credit in the statement of profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Group's best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an award, but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions. No expense is recognised for awards that do not ultimately vest because non-market performance condition 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. Where the terms of an equity-settled transaction award are modified, the minimum expense recognised 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 recognised 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 profit or loss. j) Changes in accounting policies and disclosure The Company applied for the first time certain standards and amendments, which are effective for annual periods beginning on or after 1 January 2017. The Company has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. 57 0 Badoo Trading Limited Notes to the Company financial statements (continued) at 31 December 2017 4. Summary of significant accounting policies {continued} j) Changes in accounting policies and disclosure (continued) The nature and the effect of these changes are disclosed below. Although these new standards and amendments applied for the first time in 2017, they did not have a material impact on the annual financial statements of the Company. The nature and the impact of each new standard or amendment is described below: Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12) Amends IAS 12 Income Taxes to clarify the following aspects: • Unrealised losses on debt instruments measured at fair value and measured at cost for tax purposes give rise to a deductible temporary difference regardless of whether the debt instrument's holder expects to recover the carrying amount of the debt instrument by sale or by use. • The carrying amount of an asset does not limit the estimation of probable future taxable profits. • Estimates for future taxable profits exclude tax deductions resulting from the reversal of deductible temporary differences. • An entity assesses a deferred tax asset in combination with other deferred tax assets. Where tax law restricts the utilisation of tax losses, an entity would assess a deferred tax asset in combination with other deferred tax assets of the same type. Disclosure Initiative (Amendments to !AS 7) Amends IAS 7 Statement of Cash Flows to clarify that entities shall provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities. 5. Intangible assets Software Total £'000 £'000 Cost At 1 January 2016 966 966 Additions 2 2 At 31 December 2016 968 968 Additions 6 6 At 31 December 2017 974 974 Software Total £'000 £'000 Amortisation At 1 January 2016 879 879 Amortisation for the year 74 74 At 31 December 2016 953 953 Amortisation for the year 15 15 At 31 December 2017 968 968 Net book value At 31 December 2016 15 15 At 31 December 2017 6 6 58 0 Badoo Trading Limited Notes to the Company financial statements (continued) at 31 December 2017 6. Property and equipment Leasehold Fixtures IT improvements and fittings hardware Total £'000 £'000 £'000 £'000 Cost At 1 January 2016 1,450 539 990 2,979 Additions 208 20 437 665 Disposals {1} {19} {20} At 31 December 2016 1,657 559 1,408 3,624 Additions 344 59 800 1,203 Disposals {16} {29} {45) At 31 Dt:ct:mbt:r 2017 1,985 618 2,179 4,782 Fixtures IT Leasehold and fittings hardware Total £'000 £'000 £'000 £'000 Accumulated depreciation At 1 January 2016 997 319 659 1,975 Charge for the year 268 71 257 596 Disposals {1} {16} (17} At 31 December 2016 1,264 390 900 2,554 Charge for the year 172 66 380 618 Disposals {12} {24} {36} At 31 December 2017 1,424 456 1,256 3,136 Net book value At 31 December 2016 393 169 508 1,070 At 31 December 2017 561 162 923 1,646 7. Investments 2017 2016 £'000 £'000 Cost At 1 January 1,925 1,925 Additions 777 At 31 December 2,702 1,925 During the year, the Company made an additional contribution to Bumble Holding Limited in the amount of £777,920 (USD 1 million). 59 0 Badoo Trading Limited Notes to the Company financial statements (continued) at 31 December 2017 1. Investments (continued) Information about subsidiaries Principal Country of Registered name activities incorporation Ownership interest 2017 2016 Or Not Inc (formerly Badoo America Inc) Trading USA 100% 100% Social Online Payments Inc. (formerly Badoo Aggregation America Inc) Trading USA 100% 100% Huggle App (UK) Limited Trading United Kingdom 99% 100% Bumble Holding Limited Trading United Kingdom 78.2% 78.2% Bumble Trading Inc. Trading USA *78.2% *78.2% *Held by.a subsidiary undertaking The principal address of Or Not Inc, Social Online Payments Inc. and Bumble Trading Inc is 1209 Orange Street, Wilmington, DE 19801, United States. The principal address of Bumble Holding Limited and Huggle App (UK) Limited is The Broadgate Tower Third Floor, 20 Primrose Street, London, United Kingdom, EC2A 2RS. Ultimate Group Undertakings The Company's immediate parent is Worldwide Vision and ultimate parent undertaking is Rimberg International Corp., a company incorporated in the British Virgin Islands. The ultimate controlling party is Mr A Ogandzhanyants. 8. Trade and other receivables 31 December 1 January 2016 2016 31 December As restated As restated 2017 Note 30 Note 30 £'000 £'000 £'000 Trade receivables 1,304 975 147 Receivables from related parties 19,699 24,971 12,025 Accrued income 180 16 34 Prepayments 2,041 2,112 1,938 Tax receivables 12 253 243 Other receivables 1,223 1,426 456 24,459 29,753 14,843 Receivables from related parties are repayable on demand. Trade receivables are non-interest bearing and are generally on terms of 14-90 days 9. Cash at bank 2017 2016 £'000 £'000 Cash at bank 3,330 2,007 3,330 2,007 60 0 Badoo Trading Limited Notes to the Company financial statements (continued) at 31 December 2017 10. Issued capital and reserves Authorised shares Equity share capital The balance classified as equity share capital includes the total net proceeds (both nominal value and share premium) on issue of the Company's equity share capital. Contribution from parent This pertains to the share-based payment charge to the Company as discussed in note 15. Retained earnings This reserve includes the accumulated profits and losses of the company less any dividends declared. 11. Deferred tax Deferred tax Deferred tax relates to the following: At 1 January 2016 (45) Increase in deferred tax 102 At 31 December 2016 57 Increase in deferred tax 81 At 31 December 2017 138 The provision for deferred taxation is made up as follows: 2017 2016 2015 £'000 £'000 £'000 Accelerated capital allowance 138 57 (45) Factors that may affect future tax charges The Finance Act 2015, has provided that from 1April2017 taxable profits will be taxed at the rate of 19% and the Finance Act 2016, has provided that from 1 April 2020 taxable profits will be taxed at 17%. This will affect the future tax charge of Badoo Trading Limited. It is not expected that this rate reduction will have a material impact on Badoo Trading Limited. 61 0 Badoo Trading Limited Notes to the Company financial statements (continued) at 31 December 2017 12. Non-current payables 31 December 31 December 1 January 2017 2016 2016 £'000 £'000 £'000 Long-term payables 241 13. Trade and other payables 31 December 1 January 2016 2016 31 December As restated As restated 2017 Note 30 Note 30 f'OOO £'000 £'000 Trade payables 3,778 2,628 1,330 Accruals 2,478 3,060 3,371 Deferred income 6,218 4784 3,743 Other payables 268 329 221 Payables from related parties 27,190 19,098 3,951 39,932 29,899 12,616 Loans from related parties are interest-free and with no fixed repayment terms. 14. Short-term borrowings 31 December 31 December 1 January 2017 2016 2016 £'000 £'000 £'000 Borrowings owed to related party 3,377 The loan is interest-free and with fixed payments. 15. Share-based payments The Worldwide Vision Limited (WVL) Board of Directors has the power to issue any unissued shares in WVL on such terms and conditions as it may determine. Since 2011, the WVL Board has granted growth sha;es to employees based on their management grade, with shares vesting on various timeframes as stated in the relevant restrictive stock agreement. Growth shares have no voting rights and their value will only be returned on an exit to the extent that the growth share hurdle value is achieved. Growth share hurdle values vary depending on the class of growth share. The expense recognised for employee services received during the year was £10k (2016 £16k). There have been no cancellations or modifications to the plan during 2017 or 2016. 62 0 Badoo Trading Limited Notes to the Company financial statements (continued) at 31 December 2017 15. Share-based payments {continued) Movements during the year The following table illustrate the number (No.) and weighted average exercise price (W AEP) of, and movements in, growth shares during the year. 2017 2017 2016 2016 No. WAEP£ No. WAEP£ Outstanding at l January 767,188 4.07 582,875 2.86 Options granted during the year 200,000 4.16 Adjustment for prior year 5,375 3.94 Forfeited during the year (L,875) 3.94 (15,687) 5.09 Outstanding at 31 December 770,688 767,188 The following table lists the inputs to the model used in the plan for years ended 31December2016 and 31 December 2017 2017 2016 Weighted average fair values at the measurement date(£) 0.23 0.2 Dividend yield (%) 8.30 8.39 Expected volatility(%) 36.00 36 Risk-free interest rate(%) 1.82 1.84 Expected life of growth shares 8.64 8.64 Weighted average share price(£) 2.82 2.98 Black Scholes Black Scholes Model used Model Model 16. Related Party disclosures As outlined in note 2 the company has taken advantage of the exemption in IAS 24 "Related Party Disclosures" from disclosing transactions between two or more members of a group provided that any subsidiary which is party to the transaction is wholly owned by such a member. Amounts Sales to Purchases Secondment owed by/(to) related from related agreement related parties parties recharge parties £'000 £'000 £'000 £'000 Parent Company: Worldwide Vision Ltd 2016 5,255 2017 (12,985) Other group undertaking: Badoo Holdings Ltd 2016 77 2017 6 Badoo Worldwide Ltd 2016 9 2017 63 0 Badoo Trading Limited Notes to the Company financial statements (continued} at 31 December 2017 16. Related Party disclosures (continued) Amounts Sales to Purchases Secondment owed by/(to) related from related agreement related parties parties recharge parties £'000 £'000 £'000 £'000 Badoo Software Ltd 2016 (40,957) (17,517) 2017 (58,139) (12,264) Badoo Technologies Ltd 2016 (8,419) (1,260) 2017 (8,393) (1,164) Social Online Payments Ltd 2016 (9,337) 12,649 2017 (15,560) 16,206 Badoo Limited 2016 (9,371) 375 2017 (8,746) 376 Badoo Media Limited 2016 2017 28 Bumble Holding Limited 2016 (3,628) 5,309 2017 (693) Chappy Limited 2016 169 2017 3,017 WeTrend Limited 2016 2017 (27) Other related parties Amounts Sales to Purchases Secondment owed byl(to) related from related agreement related parties parties recharge parties £'000 £'000 £'000 £'000 Common director Eyelink Media 2016 20 .372 (37) 2017 24 186 AMMP Consulting Limited 2016 106 2017 41 MTKT Limited 2016 162 2017 64 0 Badoo Trading Limited Notes to the Company financial statements {continued) at 31 December 2017 16. Related Party disclosures (continued) Eyelink Media Limited is a related party of the Badoo Trading Group by virtue of Vladimir Kornilovski, a director of the Group, being a director. AMMP Consulting Limited is a related party of the Badoo Trading Group by virtue of Andrew Parker, a Director of the Group, being a director. MTKT Limited is a related party of the Badoo Trading Group by virtue of Michelle Kennedy, a Director of the Group, who resigned during the year being a director. Transactions with key management personnel Compensation of key management personnel of the Company: 2017 2016 £'000 £'000 Short-term employee benefits 245 191 Post-employment pension and medical benefits 22 8 Termination benefits 30 Share-based payment 22 289 229 Directors' interests in the Growth Share Plan Shares held by the Board of Directors under the Growth Share Plan have the follo~ing vesting dates and exercise prices: Date ofgrant Vested date Exercise price 2017 2016 Number Number outstanding outstanding 2011 2014 1.65 10,000 2011 2014 1.71 225,000 225,000 2011 2016 1.65 2013 2016 5.07 90,000 2017 2020 10.00 200,000 200,000 425,000 525,000 17. Commitments and contingencies The Company has entered into operating leases on certain properties, with lease terms over five years. Future minimum rentals payable under non-cancellable operating leases as at 31 December 2017 are, as follows: 2017 2016 £'000 £'000 Operating leases which expire: Within one year 2,524 1,220 In two to five years 8,696 4,118 Over five years 1,591 114 12,811 5,452 Capital commitments Badoo Trading Limited also had a capital commitment outstanding of £1,574k for the leasehold improvements to the Third Floor, Medius House. 65 0 Badoo Trading Limited Notes to the Company financial statements (continued) at 31 December 2017 18. Prior year adjustment During the year the company reviewed their accounting treatment in relation for their principal activity of the aggregation and collection of revenues from customer and intermediaries and the provision of services to group companies. The company concluded that an agency relationship exists with the group companies and therefore the company has restated the 2016 financial statements so that income includes only gross inflows of economic benefits that are received or receivable by the company on its own account. The effect of the restatement on each financial statement line is as follows: Company statement offinancial position as at 31December2016 (extract) Adjustment Restated 31 December 31 December 31 December 2016 2016 2016 £'000 £'000 £'000 Receivable from related company 21,345 3,626 24,971 Deferred income (1,158) (3,626) (4,784) There is no profit impact as a result of this restatement. Consolidated statement offinancial position as at 1 January 2016 (extract) Adjustment Restated 1 January 1 January 1 January 2016 2016 2016 £'000 £'000 £'000 Receivable from related company 8,282 3,743 12,025 Deferred income (3,743) (3,743) There is no profit impact as a result of this restatement. 19. Events after reporting date Other than those discussed in note 20, there were no significant events after the end of the reporting period. 20. Contingent liability The Company is currently, may be from time to time, involved in a number of legal proceedings, including inquiries from or discussions with governmental authorities, that are incidental to their operations. However, save as disclosed below, the Company is not involved currently in any legal or arbitration proceedings (including any governmental proceedings which are pending or known to be contemplated) which may have, or have had in the 12 months preceding the date of this report, a significant effect on the financial position or profitability of the Company. The Company, is currently responding to an enquiry by HMRC with regard to the 2013 to 2016 Corporation Tax returns. Management believes the threshold of "more likely than not" to have been crossed for an adjustment to be made, however quantifying the size of a provision is still problematic. Management have assessed and recorded a best estimate based on current discussions and believe that the maximum size of a possible uplift in the Corporation Tax liability to be immaterial to the financial statements. 66 0 Badoo Trading Limited Notes to the Company financial statements (continued) at 31 December 2017 20. Contingent liability (continued) On April 30 2018 Match Group Inc (Match) filed a lawsuit against Bumble Trading Inc (Bumble), a subsidiary ofBadoo Trading Limited for: (i) infringement of utility patents and a design patent, (ii) trademark infringement, (iii) trademark-related unfair competition (iv) trade dress infringement and (v) trade secret misappropriation. Bumble, in tum, is bringing a counterclaim against Match for tortuous interference with business relations. Match has not yet substantiated its damages and there is inherent difficult in providing any reliable estimate as to the size and likelihood of any liability falling due. 21. Ultimate group undertaking The Company's immediate parent is Worldwide Vision and ultimate parent undertaking is Rimberg International Corp., a company incorporated in the British Virgin Islands. The ultimate controlling party is Mr A Ogandzhanyants. .. 67 0 Badoo Trading Limited Company Statement of Profit or Loss for the year ended 31 December 2017 2017 2016 Notes £'000 £'000 Revenue 144,099 107,230 Cost of Sales (118,434} {65,546} Gross profit 25,665 41,684 Administrative expenses (39,122) (40,974) Operating loss (13,457) 710 Finance costs (46) (43) Finance income 553 676 Dividend income 585 Loss before tax (12,365) 1,343 Income tax expense {204} 94 .Net Loss (12,569) 1,437 68