2      Summary of significant accounting policies (continued)

Going concern (continued)

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman's statement on pages 2 to 5.

The financial statements at 31 December 2022 show that the Group generated an operating loss for the year of £8.8 million (2021: £7.9 million); with cash used in operating activities of £7.5 million (2021: £6.2 million). Group balance sheet also showed cash reserves at 31 December 2022 of £8.6 million (2021: £7.1 million). The Group is dependent on further equity fundraising in order to operate as a going concern for at least twelve months from the date of approval of the financial statements.

New and amended standard, and interpretations issued and effective for the financial year beginning 1 January 2022.

The adoption of the following mentioned amendments, which were all effective for the period beginning 1 January 2022, have not had a material impact on the Group's and Company's financial statements:

·      Amendments to IAS 16 Property, Plant and Equipment: Proceeds before Intended Use;

·      Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41);

·      Amendments to IFRS 3 References to Conceptual Framework);

·      Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets

New standards, interpretations and amendments not yet effective

There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has decided not to adopt early.

The following amendments are effective for the period beginning 1 January 2023:

·      Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current and Amendments to IAS 1: Classification of Liabilities as Current or Non-current - Deferral of Effective Date - effective 1 January 2023*

·      Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting Policies - effective 1 January 2023

·      Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors -Definition of Accounting Estimates - effective 1 January 2023

·      Amendments to IAS 12 Income Taxes - Deferred Tax Related to Assets and Liabilities arising from a Single Transaction - effective 1 January 2023

The following amendments are effective for the period beginning 1 January 2024:

·      IFRS 16 Leases (Amendment - Liability in a Sale and Leaseback)

·      IAS 1 Presentation of Financial Statements (Amendment - Classification of Liabilities as Current or Non-current)

·      IAS 1 Presentation of Financial Statements (Amendment - Non-current Liabilities with Covenants)

Bidstack Group Plc is currently assessing the impact of these new accounting standards and amendments.

2      Summary of significant accounting policies (continued)

Revenue Recognition

Under IFRS 15, revenue is recognised to depict the transfer of promised goods or services to a customer in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services. The underlying principle is a five-step approach to identify a contract, determine performance obligations, the consideration and the allocation thereof, and timing of revenue recognition. IFRS 15 also includes guidance on the presentation of assets and liabilities arising from contracts with customers, which depends on the relationship between Company's performance and the customers' payment.

The Group recognises revenue from the follow activities:

·      Revenue from Media contracts; whereby Group's inventory is sold to advertisers directly or programmatically;

·      Revenue from Sponsorship contracts; whereby the Group enter into a contract with the brand direct or advertising agency to provide a customized campaign in a chosen video game;

·      Revenue from Licensing contracts; whereby the Group enters into a contract that provides the exclusive licensing agreement of the Pubguard Technology;

·      Revenue from Minimum Guarantee; whereby the Group entered into an exclusive contract with Azerion as its provider of reseller services in relation to Bidstack SDK formats.

Revenue from contracts with customers is recognised when or as the Company satisfies a performance obligation by transferring a promised good or service to a customer. A good or service is transferred when the customer obtains control of that good or service.

The Group identified the performance obligations that related to the above stated revenue activities as follows:

·      Revenue from Media contracts; based on agreed impressions that have been delivered between the campaign start and end date;

·      Revenue from Sponsorship contracts; the delivery of a customised placement of advertising into the agreed game;

·      Revenue from Licensing contracts; the point at which the brand rights were made available, and the point that exclusive licensing access to the Pubguard technology was provided; 

·      Revenue from Minimum Guarantee; for the provision of an agreed amount of in-game advertising inventory over the duration of the contract.

For each performance obligation that is satisfied over time, the Group applies a single method of measuring progress towards complete satisfaction of the obligation. The objective is to depict the transfer of control of the goods or services to the customer. To do this, the Group have adopted an appropriate output method. For the Group, that is the rights to access and use the brand assets and the provision of in-game advertising inventory over the period of the contract.

The Group identifies the transaction price that relate to the above stated revenue generating activities as follows:

·      Revenue from Media contracts; based on the Group's rate card by CPM multiplied by the agreed number of impressions;

·      Revenue from Sponsorship contracts; based on the cost set by the game developer. The Group implements a cost plus model for sponsorship;

·      Revenue from Licensing contracts; determined by the contract over the duration of the term;

·      Revenue from Minimum Guarantee; the minimum guarantee's transaction price is included within the contract .

2      Summary of significant accounting policies (continued)

Revenue Recognition

The Group have applied a practical expedient which allows an entity to apply the accounting for a contract with a customer to a portfolio of contracts with similar characteristics if the entity reasonably expects the effects on the financial statements of applying IFRS 15. The Group have assessed the contracts and is comfortable that the effects on the financial statements of applying IFRS 15 would not differ materially from applying this Standard to the individual contracts (or performance obligations) within that portfolio.  

The Company assesses the contract with the customer to identify the separate performance obligations which would consist of an 'access rights' and the 'provision of in-game advertising inventory'. The Company transfer of the in-game advertising inventory sold usually coincides with the delivery of that inventory and the customer being able to utilise it. The Company principally satisfies its performance obligations at that point in time and recognises revenue on delivery.

The Group recognises a contract asset when revenue has been recognised on satisfying performance obligations but have not yet been billed to the customer. Contract assets relate to impressions that have been delivered but not billed to the customers. Contract liabilities are recognised when the Group has an obligation to transfer goods or services to the customer for which consideration has been received from the customer. Contract liabilities relate to advanced payments from customers against a campaign.

Net finance costs

Finance costs comprise interest on bank loans and other interest payable. Interest on bank loans and other interest is charged to the Statement of Comprehensive Income over the term of the debt using the effective interest rate method so that the amount charged is at a constant rate on the carrying amount.

Finance income comprises interest receivable on loans to related parties. Interest income is recognised in the Statement of Comprehensive Income as it accrues using the effective interest method.

Taxation

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the Statement of Comprehensive Income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is recognised as the amount of corporation tax payable in respect of taxable profit for the current or past reporting periods using tax rates and laws that have been enacted or substantively enacted by the reporting date.

Deferred tax is recognised in respect of all timing differences at the reporting date, except as otherwise indicated.

Deferred tax assets are only recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Deferred tax is calculated using the tax rates and laws that have been enacted or substantively enacted by the reporting date that are expected to apply to the reversal of the timing difference.

With the exception of changes arising on initial recognition of a business combination, the tax expense/(income) is presented either in the income statement, other comprehensive income or equity depending on the transaction that resulted in the tax expense/(income).

2              Summary of significant accounting policies (continued)

Taxation (continued)

Deferred tax liabilities are presented within provisions for liabilities and deferred tax assets within debtors.  Deferred tax assets and deferred tax liabilities are offset only if:

- the Group has a legally enforceable right to set off current tax assets against current tax liabilities, and

- the deferred tax assets and deferred tax liabilities relate to corporation tax levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously.

- Research and Development Tax Credits are recognised as receivables when an inflow of economic benefit is certain, until then a contingent asset in respect of probable Corporation Tax is disclosed.

Valuation of investments

Investment in subsidiary undertakings are accounted for at cost less impairment. Advances to subsidiaries are initially recorded at fair value based on a market rate of interest and subsequently at amortised cost. The difference between funds advanced and fair value is recorded in investments.

Impairment of fixed asset investments

Fixed asset investments are assessed for the presence of impairment indicators, if any indicators are present then an impairment review is conducted. An impairment review of Goodwill is conducted annually, any resulting impairment loss is measured and recognised on a consistent basis.

Leased assets

All leases are accounted for by recognising a right-of-use asset and a lease liability except for:

-       Leases of low value assets; and

-       Leases with a duration of 12 months or less.

Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the incremental borrowing rate on commencement of the lease is used.

On initial recognition, the carrying value of the lease liability also includes:

-       amounts expected to be payable under any residual value guarantee;

-       any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of the termination option being exercised.

Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:

-       lease payments made at or before commencement of the lease;

-       initial direct costs incurred; and

2      Summary of significant accounting policies (continued)

-       the amount of any provision recognised where the Group is contractually required to dismantle, remove or restore the leased asset.

Leased assets (continued)

Subsequent to initial measurement, lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term. When the Group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted at the same discount rate that applied on lease commencement.

An equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term.

Goodwill

Goodwill represents the difference between amounts paid on the cost of a business combination and the fair value of Bidstack Group's share of the identifiable assets and liabilities of the acquiree at the date of acquisition. Subsequent to initial recognition, Goodwill is measured at cost less accumulated impairment losses.

Intangible assets

An intangible asset, which is an identifiable non-monetary asset without physical substance, is recognised to the extent that it is probable that the expected future economic benefits attributable to the asset will flow to the Group and that its cost can be measured reliably, the asset is deemed to be identifiable when it is separable or when it arises from contractual or other legal rights.

Amortisation is charged on a straight-line basis and is included in administrative expenses through the profit or loss. The rates applicable, which represent the Directors' best estimate of the useful economic life, are:

-       Website costs - 5 years

-       Trademarks - 10 years

-       Brand - 5 years

-       Software - 5 years

-       Research and Development - 5 years

Property, plant and equipment

Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable costs. Depreciation is provided on all items of property, plant and equipment, so as to write off their carrying value over their expected useful economic lives. It is provided at the following rates:

-       Computer equipment - 33.33% straight line

-       Office equipment - 20% straight line