ANNUAL REPORT 2019
CONTENTS
1. Main information 4
2. DESA at a glance 7
3. Countries of Export 10
4. Key Performance Indicators 12
5. NINETEENSEVENTYTWO DESA 18
6. DESA in the World Press 20
7. Creative Director 23
8. NINETEENSEVENTYTWO DESA STORES 24
9. Samsonite 26
10. Message of Chairman 32
11. Board Members 34
12. Management Team 36
13. Vision & Mission & Our Value Chain 37
14. History of DESA 38
15. Differentiating Business Model of DESA 40
16. Human Resources 42
17. Investor Relations 43
18. Corporate Governance Compliance Report 44
19. Audit Report 57
20. Events After Reporting Period 121
21. Contact 122 4
MAIN
Production Facility and Headquarters Düzce Facility Indoor area for in Sefaköy with an encompasses an leather tanning indoor area of indoor area of facility in Çorlu 15.500 m² 10.000 m² 20.000 m²
Export Overseas Export to Champion for POS 18 4 109 countries Consecutive Years
FRANCHISE E-COMMERCE ALBANIA www.desa.com.tr constituting 5 % of retail turnover
Online Sales desa.com.tr 1972desa.com samsonite.com.tr americantourister.com.tr tumi.com.tr 5
INFORMATION
132 18,2 75,8 93,7 Total Million TL Million TL Million TL Stores Net Profit EBITDA Equity
428,1 16.749 m² 1909 369,2 Million TL Total Area Employees Million TL Total Revenues Of Stores Assets
Samsonite 3 56 24 YEARS Samsonite 13 YEARS Tumi Stores Distributorship of partnership Stores (40% DESA -60% Samsonite)
LONDON INTERNATIONAL Solution Provider of International Brands Corporate Office Design Team Building and Showroom 6 7 Desa at a FOUNDED AS A FAMILY COMPANY IN Desa attaches great importance to high Glance 1972, DESA HAS BEEN CONTINUING standard materials and specialized ITS OPERATIONS AS TURKEY’S TOP craftsmanship that provide superior PRODUCER OF LEATHER AND LEATHER quality and durability in its products. PRODUCTS BY ACHIEVING SIGNIFICANT ACCOMPLISHMENTS FOR 47 YEARS. The company has also achieved great success in e-commerce operation Taking the justified pride to become through www.desa.com.tr. As of Export Champion of Turkey in 2010, 2011, the current period, the online store 2012 and 2014 in its field and owning a constitutes 5% of the entire retail unique business model with completed turnover of Desa. vertical integration, Desa has added a new success in its sector by having With the perfectionism mentality adopted realized 76 % of the exports made to in its service quality, Desa always makes Italian market in 2019 alone. Desa investments to human source through proceeds on its way as a prestigious designs, researches and developments. brand in international markets by strengthening its current profile with its The long-term strategic target of the high quality products. company, which is ranked among the top 200 companies in Turkey thanks to R&D Desa’s operations include a tannery and investments it has made, is to increase two plants for production of women’s and sales of DESA branded products both at men’s wear, handbags and accessories, home and abroad. as well as distribution of these products through wholesale and retail channels. Desa is a public company that has Desa is carrying out its operations been traded in Borsa Istanbul A.Ş. with throughout Turkey with a total of 132 “DESA” code since May 2004. With its retail stores, including 63 Desa, 39 Desa total assets reaching 369,2 million TL as Samsonite, 3 Desa Franchise, 2 Albania of December 31st, 2019, Desa reported Franchise, 17 Samsonite JV, 3 Tumi and 428,1 million TL total revenues. Having 7 virtual stores. an outstanding year in 2019, DESA has achieved a historical high EBITDA NINETEENSEVENTYTWO DESA renders of 75,8 millon TL and a Net Income of services to its customers with 109 POS 18.2 millon TL . 54,3% of Desa’s shares abroad. In addition to production facilities belong to Çelet Holding, 10,0% to Mr. with a total area of 25.500 m2 in İstanbul Melih Çelet, 0,8% to other partners and and Düzce, Desa owns a tannery with the remaining 34,9% to the public. an area of 20.000 m2 located in Çorlu. Company provides integrated solutions for several international luxury brands such as Prada, Miu Miu, Tumi, Lipault and Furla. After 24 years of distribution in Turkey for Samsonite which is “DISTINGUISHING IN the world’s biggest travel products manufacturer, Desa strengthened its THE SECTOR WITH international company profile further PRODUCT QUALITY thanks to its 40%-60% partnership with AND DESIGN” Samsonite in 2007.
Establishment Date (Registration) 29.01.1982 – DESA received the title “Joint Stock Company”. Issued Capital TL 49.221.969,86 Registered Capitalceiling TL 150.000.000 Corporate Headquarters HALKALI CAD. NO.208 SEFAKÖY-İSTANBUL Trade Registry Office and No. İstanbul / 185047/132561 Tax Office and No. Büyük Mükellefler Tax Office Directorate / 293 004 8627 BIST Transaction Code DESA Web site www.desa.com.tr E-mail Address [email protected] / [email protected] / [email protected] 8 9 10 Countries of Export
GERMANY / ALBANIA / USA / AUSTRALIA / BELGIUM / DENMARK / FRANCE / FINLAND / SOUTH KOREA / INDIA / ENGLAND / MEXICO / ITALY / JAPAN / CANADA / PORTUGAL / MALAYSIA / SINGAPORE 11
The brand “NINETEENSEVENTYTWO DESA” continues taking firm steps forward to strengthen its position and increase brand awareness in the international market. The Company carries out its readymade garment collection sales through the powerful showrooms and sales agents of the region with which it cooperates in South Korea, Japan, Singapore and other countries, especially in Germany, Italy and Canada.
Desa has strengthened all of its At the fairs organized in parallel with NINETEENSEVENTYTWO Desa brand, R&D, design and brand management fashion weeks in Milano and Paris, positioned with premium segment infrastructures with its efforts on DESA takes place with its own brand. intention, is being sold at famous, branding within the scope of Turquality. Desa conducts the sales of its branded prestigious and popular multi-stage The fully integrated Company with products through Canada operations boutiques of Europe and USA side-by- advanced know-how, technology headquartered in Toronto in North side with world known luxury brands at in its R&D studies and all quality America. sale corners special for Desa. understanding following from the purchased leather to the used materials sells its leathers manufactured at tanning yard to respectful luxury brands of Italy. 12
Main Performance Indicators
Summary Balance Sheet (TL) 2018 2019 Summary Income Statement (TL) 2018 2019 Current Assets 202.756.635 229.066.067 Sales Revenues 347.648.021 428.112.815 Fixed Assets 76.511.081 140.137.313 Gross Profit 158.614.201 161.843.391 Total Assets 279.267.716 369.203.380 Gross Profit Margin 45,62% 37,80% Short Term Liabilities 167.161.017 215.647.070 Operating Profit 36.318.394 48.927.495 Long Term Liabilities 36.613.964 59.829.181 Operating Profit Margin 10,45% 11,43% Total Financial Liabilities 64.847.942 48.079.970 Net Profit 8.378.556 18.243.268 Net Financial Debt 64.527.082 28.746.984 Net Profit Margin 2,41% 4,26% Shareholder’s Equity 75.492.735 93.727.129 EBITDA 41.492.516 75.805.460 EBITDA Margin 11,94% 17,71%
EXPORT REVENUE BREAKDOWN 48% BASE ON CHANNELS
WHOLESALE RETAIL 49% 3% 13
EBITDA INCOME 428,1 TL Million 75,8 TL Million % 23,16 347,6 % 82,70 TL Million 41,5 TL Million
2018 2019 2018 2019
NUMBER OF STORES STORE AREA % 0,4 126 132 % 0,1 Stores Stores 2 17.044 M 16.749 M2
2018 2019 2018 2019 14 15 16 17 18 Release of Desa to World’s High Fashion
DESA, THE FIRST DESA, which has earned a well- NINETEENSEVENTYTWO DESA, deserved reputation with its which meets with its customers in TURKISH BRAND, distinguished collections since its the capitals of the fashion through its TAKEN PART IN THE foundation, has carried its products Men – Women collection prepared by OFFICIAL CALENDAR to the international arena for the last the famous designer Michele Cozzani twelve seasons with the brand name along with the 2020-2021 Fall - Winter OF MILANO FASHION NINETEENSEVENTYTWO DESA for season, has received great appreciation. WEEK, MEETS THE the memory of the year 1972, when it NINETEENSEVENTYTWO DESA launched its first handbag collection. preparing a collection of minimum 100 FASHION ADDICTS DESA introduces the leather to the pieces containing men and women IN 109 LUXURY world with high quality, contemporary products every season, carries out BOUTIQUES WITH and functional designs, and also takes marketing and advertising activities dynamic steps in order to increase for the purpose of penetrating into new THE COLLECTION brand recognition all around the world. potential markets in addition to the PREPARED IN THE existing ones. Desa, the first Turkish brand participated MEMORY OF THE in Milano Fashion Week, keeps the NINETEENSEVENTYTWO DESA handbag YEAR 1972 WHEN pulse of the global fashion with collection, which is composed of over THE FIRST HANDBAG its NINETEENSEVENTYTWO DESA 70 pieces, emphasizes the importance collection sold in 109 different locations of accessories concept with its COLLECTION WAS around the world, primarily in İtaly, sophisticated, innovative and personal OFFERED FOR SALE. Germany, France and Japan. line. This special collection, which is not yet offered for sale in Turkey and DESA attends with its own brand in exhibited in Milano and Paris Fashion showroom events and fairs organized Weeks scope for the last thirteen in parallel with Milano, Paris fashion seasons, gives a new dimension to the weeks. luxury concept.
FASHION WEEKS
SS20 Berlin Premium SS16 Supreme Munich Resort 16 Prefall SS20 Paris Tranoi Paris Fashion Week AW19-20 Paris Tranoi SS16 Düsseldorf Fashion Week SS19 Milano Fashion Week SS16 Show & Order Berlin SS19 Paris Fashion Week SS16 Paris Fashion Week SS18 Milano Fashion Week & La Tenda Introductory Invitation SS16 Milano Fashion Week SS18 Paris Fashion Week Resort Presummer 16 Paris Fashion Week SS17 Milano Fashion Week & Baglioni Hotel Introductory Invitation AW15 Paris Fashion Week AW17 Milano Fashion Week AW15 Milano Fashion Week + Palazzo Serbelloni Introductory AW17 Paris Fashion Week Invitation AW16 Premium Munich SS15 Paris Fashion Week AW16 Düsseldorf Fashion Week SS15 Milano Fashion Week + Palazzo Bovara Introductory Invitation FW16 Premium Berlin Resort Presummer15 Paris Fashion Week AW16 Pitti Uomo AW14 Milano Fashion Week AW16 Paris Fashion Week SS14 Milano Fashion Week AW16 Milano Fashion Week AW13 Milano Fashion Week 19 20 21 22 23
Michele Cozzani Ditria
Creative Director of the Brand NINETEENSEVENTYTWO DESA
In the early 90s, he launched the brand “total avant-garde look” in the most important store of the world.
Thereafter, he has continued his career as Fashion director in Max & Co Max Mara Fashion Group, Fashion director in Anna Molinari group BLUFIN, Creative director in Loro Piana, Creative collaboration with Moncler, Fashion director in Larusmiani Donna and Fashion creator in Manzoni 24.
Michele began to provide consultancy services for NINETEENSEVENTYTWO DESA team in 2019. His modern and visionary approach modernizes the leather. He combines product and patterns with a modern touch to the collection. 24
NINETEENSEVENTYTWO STORES
www.desa1972.com
AUSTRIA MILL LTD FASHION DIREKT MIKE SHAY GARSZTECKİ MODE HARRYS-FEDYNIAK HAMILTON FILDERSTADT KAMPEN DUSSELDORF GMBH WOLFSBERG GIRL CANDY SHOP GABRIELE GRIEM MODE KONZEPT FOELLER ITALY WINNIPEG MÜNCHEN BALDHAM BUGATTI UOMO BELGIUM UDINE NATAN NV GERMANY INGRID ZEHENDER MODEHAUS HUSKEN BRUXELLES BARBARA SEEFELDER BOUTIQUE LIPPSTADT AETOS SRL MUNICH BAD HOMBURG NOVARA CANADA PFEFFERS RAFFINEE COCO&CO IRIS HORBACH ESSEN BABYLON BUS DONNA WINDSOR WUPPERTAL MÜNCHEN SRL TRAUDEL PRÜFER PRATO AVENUE ROAD SHOWCASE DIFFERENT FASHION KONEN GÖPPINGEN TORONTO SYLT BEKLEIDUNGSHAUS KG BERNARDELLI DI DITTRICH GMBH MÜNCHEN TREND STUDIO AU PARK GOZZOLI HANGAR9 STUDIO INC ASSENHEIM BAD NAUHEIM TORONTO MEWS MODEHAUS STEFANO&C. SNC LÜTJENBURG WUNDERHAUS-SONIA MANTOVA 25
BERNE FOUR SRL PAPACHARALAMPOUS JAPAN SWITZERLAND BERGAMO MILANO ANASTASIA AND SIA E.E. A.F.C. ASIA LIMITED MODA&STYLE SA - BALU’ -AMELOT MOONBAT BOUTIQUE BERTINOTTI SAS FRATELLI VIRNO SNC ATHENS TOKYO ASCONA BERGAMO SALERNO PENELOPE BUSH CO. LTD. BUH LOCK TRAND SA BIFFI BOUTIQUE SPA GLUNGE COR HABEO BRESCIA BOUTIQUE CHIASSO MILANO JESOLO OKAYAMA CITY MODA IN PETER OEHLER CO. SNC. CHIASSO BIRBA’S SNC IL FARO UOMO BRESSANONE ESCOGITA SRL PORDENONE AVELLINO KYOTO USA PIER DI ORIANI ANGELO&C ALAN BILZERIAN BLOCK 60 INCONTRI BOUTIQUE SNC GOTHA JAPAN LTD. BOSTON RICCIONE MILANO VAILATE TOKYO MADDY’S 390 BRANA/ KABARDIN SRL KM SELECTION DI PIER ABBIGLIAMENTO ISETAN MITSUKOSHI LTD. GREENVALE ALTAMURA MIYANAGA KASUMI VAILATE TOKYO BOLOGNA BRONX REGINA SRL NEXIIDE LLC MILANO LA BOUTIQUE DI ADANI TORINO KOBE MODENA C SRL RICCI LINO SRL UNITED ARROWS LTD. TORINO LA TENDA 3 PERUGIA TOKYO MILANO CATALINA SPA ROMATRE SNC DI VIVO ITALIA SRL-SK&W VICENZA LOSCHI SRL RIPAMONTU FRAME TREVISO LECCO CHIARO SCURO CO. LTD/CINQ ESSENZIAL PIANCOGNO LOSCHI SALA DI SALA OSAKA TREVISO PIERANGELO COSE SAS MACHERIO NETHERLANDS CREMONA LOTO SRL PAUW MILANO SAM SRL AMSTERDAM D’O SPA COMO PALERMO LUISA RUSSIA RIMINI SAVE SRL MERCURY DISTRIBUTION DOMINI RICCIONE S.A. BARI LUNGOLIVIGNO ST PETERSBURG LIVIGNO SINAGRA SRL DONNA BUGATTI PALERMO SOUTH KOREA UDINE MARCO LONGONI DONNA VOLUME1 CO. LTD./ SRL SIR WILSON RAG. SOCIALE SABATIER EQUIPE RUMBA SRL MILANO SW.BD. W. SRL SEOUL SAN MARCELLINO TORINO MARCOS MONDOVI SRL GREEN TREE ETRE DI BRUNA CASELLA MONDOVI THILDA SEOUL MANTOVA BOLZANO MAURİZİO ZATTI BOAZ CO LTD FASHION SAS DI BRUNA ISEO UMBERTO GIUGLIANO SEOUL ROSSO ANTONELLA &C NOLA CUNEO MICHI D’AMATO MIDA SRL INTERSECTION BARI VIELLE SRL SEOUL FLAB- MAGENTA HOMME MILAN BRESCIA NUGNES 1920 SRL ILAIL-SHINSEGAE L’INTL BARI WHITE SRL SEOUL FLANELLA SRL NOVARA BOLOGNA O’ SRL SPAIN PARMA WHITE 7 SRL RIALTO LIVING FOLLOW DI GIULIA LECCE PALMA DE MALLORCA PROTANO PALEARI ABBIGLIAMENTO COMO SRL WHITE S.R.L. SEVESO NAPOLI 26 27 28 29 In 1983, Desa became the Distributor of Samsonite in Turkey the World’s Greatest Travel Products Brand.
By means of this distributorship, DESA has blazed a trail in development of this sector in our country by offering comfortable and practical suitcase alternatives to travel products market. After 24 years of distributorship in Turkey, a joint venture, owned by 40% Desa and 60% Samsonite, was established with Samsonite having a strong international profile. With the purchase of Tumi by Samsonite, 39 of total 59 Samsonite stores in Turkey, of which 3 are Tumi stores, belong to DESA and 20 to the joint venture by the end of 2019.
59 Samsonite Stores
39 Stores Belong to DESA
17 Belong to Samsonite
3 Belong to Tumi
Online Sales samsonite.com.tr americantourister.com.tr tumi.com.tr
24 years distributorship (between the years 1983 – 2007)
13 years partnership (40% Desa - 60% Samsonite) 30 31
59 24 13 Samsonite Stores Years Distributorship Years Partnership
17 39 4.002 m2 Samsonite Belong to JV DESA Samsonite Stores Total Area of Stores
Online Sales samsonite.com.tr 3 americantourister.com.tr Tumi Belong to JV tumi.com.tr 32 Message of Chairman
“WE TAKE FIRM STEPS TOWARD THE TARGET OF BEING A WORLD BRAND”
2019, which was full of difficulties, has By transporting our products to 109 ended with achievements that accord sales points in 18 countries, mainly in with Desa. Despite the economic hitches Germany, Italy, Canada and France, we experienced in our country and affected have positioned our brand more visible by each household, closed shopping and at a more accessible point to the mall, concordat or bankruptcy news we consumer. heard every day have influenced all of us deeply, DESA continues to grow through Our collaboration with Prada Spa and its illuminated way with its principles, our 37-year-old business partner, mission and vision adhered to for 47 SAMSONITE, has increasingly continued years. also in 2019.
In this atmosphere, DESA has succeeded With all these strategic operations, in expanding both retail and export we close 2019 with a growth of operations, and has also started to 23%. We reached this result without take the results of the importance compromising profitability and with regarding to the sale of DESA branded our efficiency-oriented approach. We products in foreign channels. Both our encountered cost increases during the belief in production and our operational year. In order to minimize the effect of capabilities have brought these these increases, we have taken some successes to us. measures to keep cost increases under control. Our operational competencies and our skills to take action quickly on the shoes Our main target in 2020 will be to grow and leather goods part, in addition to without giving up our principles of leather garments, have enabled us to efficiency first and then profitability in overcome by growing these challenging every field within the entire structure. In days in the domestic market. On the addition, the contribution of our export other hand, the year 2019 has been a revenues, which allow us to naturally turning point also for our online store protect against possible exchange rate which is the representation of the new risks and make us stronger against the generation retail concept. Thanks to the fluctuations by generating approximately infrastructure investment and successful half of our total revenues, will be an operations, www.desa.com.tr has taken important factor in the increase of our its place among the most profitable productivity. stores of Desa by realizing 5% of its retail turnover. Necessary investment We are taking sound steps towards and infrastructure developments are in becoming a world brand with our design, progress. manual labor, production, service and product quality in international We made internationally the difference standards. of our company in product development and design more distinctive in 2019. I would like to express my gratitude to all This year, our “NINETEENSEVENTYTWO of our employees, customers, suppliers DESA” branded products were exhibited and, of course, our investors who have in our showrooms that we opened been walking shoulder to shoulder with during Milano and Paris Fashion us in this 47-year-on this path. Weeks and gained great appreciation. 33 34 Board Members 35
Melih Çelet Board Chairman Founded DESA in 1972, Mr. Melih ÇELET graduated from TED Ankara College in 1968 and received his Undergraduate Education at Istanbul University, Faculty of Pharmacy. Mr. Melih ÇELET speaks English.
Burak Çelet Board Member - General Manager Graduated from Bogaziçi University, Department of Mechanical Engineering in 1999, Mr. Burak Çelet received his MBA Degree from the University of Wisconsin-Madison in 2001. He obtained a Master of Science Degree in Leather Technology at Northampton College in 2002. In addition to his current position of General Manager in our Company, he carries out Turquality Working Group Membership. Mr. Burak Çelet speaks English, Italian and German.
Burçak Çelet Board Member Mrs. Burçak ÇELET completed her bachelor’s degree at Yıldız Technical University, Department of Industry Engineering in 1999. Served as Planning Director at Toys”R”Us between 1999 and 2001, Mrs. Burçak ÇELET received her master’s degree in retail management at University of Surrey in 2002 and served as Maxitoys - Category Manager at Joker between 2003 and 2004. Ms. Burçak ÇELET, who has been serving as a Board Member in our Company since December 22nd 2006, speaks Italian, Spanish, English and French.
Muvaffak Batur Independent Board Member Mr. Muvaffak Batur, a graduate of Kabataş Male High School in 1967, completed his bachelor degree at Istanbul University, Faculty of Law in 1971. He has been working as a registered member of Istanbul Bar Association since 1973 and he is providing consultancy services as legal adviser to several companies in the fields of Commercial Law and Corporate Law. Mr. BATUR was elected as an independent member for two years at the ordinary general assembly of our company in 2017 dated 30.03.2018.
Numan Emre Bilge Independent Board Member After receiving a degree in Finance from Istanbul University in 1987, Mr. Numan Emre Bilge received his MSc degree in Business Management from City of London Polytechnic University - London. He started his professional career in 1992 at Goodyear Tires Inc., and between 1998 and 2000, he was assigned to the Marketing Manager of Goodyear Great Britain Limited. Since 2007, he has been carrying out his duties of General Manager and Vice President of the Executive Board at Zin D Investment and Management Development Inc. Mr. BİLGE was elected as an independent member for two years at the ordinary general assembly of our company in 2017 dated 30.03.2018. 36
Management Team
Ayhan Diribaş Hilmi İlker Sürek Executive Vice President of Executive Vice President of Financial Affairs Sales and Marketing
Completed his undergraduate education at Mugla University, School of Business Administration in 1994, Mr. Completed his bachelor’s degree at Uludağ University, School Ayhan DİRİBAŞ received his Pre-MBA degree in business of Business Administration in 1989, Mr. Hilmi İlker SÜREK administration at Lasalle University and Marmara University accomplished the Foreign Trade Certification Program in in 2003. Begun his career at Doğuş Holding in Finance Bournemouth, UK on 1991. Begun his career at Ditaş Doğan Department in 1992, Mr. DİRİBAŞ served as Internal Auditor Yedek Parça İmalat ve Teknik A.Ş., as Foreign Trade Manager on at Oger Holding between 1996 and 1998, Deputy General 1991, Mr. SÜREK served as Product Manager at Valeo Otomotiv Manager at Reysaş Holding A.Ş. between 1999 and 2004, Dağıtım A.Ş. between 1995 - 1998. He served as General as Accounting and Finance Director for Retail Group at Manager at Tanca Ayakkabıcılık San. ve Tic. Ltd. between 2015 Unitim Holding A.Ş. between 2005 and 2010. Mr. DİRİBAŞ is - 2016 after serving as Foreign Trade Manager, Production serving as Executive Vice President of Financial Affairs in our Manager, Sales Director and Operation Director at İnci Deri Company since January 2013. Mamulleri San. ve Tic. A.Ş. between 1998 - 2015. Mr. SÜREK is serving as Executive Vice President of Sales and Marketing at Desa Deri ve Ticaret A.Ş. since 27 April 2016. 37
OUR TARGETS Flexible Supply Chain We have a supply chain that adapts Customer Satisfaction quickly and flexibly to rapid changes. Vision & DESA operates in both production and retail sector by its business model. Flexible Production Capacity DESA aims to provide unconditional We have a production capacity in a customer satisfaction before and after manner adjusting itself according to Mission sales by offering its products to the the increasing demand and meeting the customer with an understanding of needs of the future growth. flawless service. Integrated Business Model Quality We save on costs thanks to vertical Our product quality, tradition of integration we provided in production. handcraft, modern and functional designs and our brand are our most Broad Experience important assets. We strive to offer We have a management team that a different style, understanding and seeks strategically opportunities and is lifestyle without compromising our experienced and competent in their field. To become a fashion brand, quality rather than offering just powered by İstanbul but being clothing and leather accessories to our Technology a citizen of the world, which customers. We have an advanced technological is elating and exciting its infrastructure supporting our growth. customers with the products Profitability Our investments in integration software, Profitability is the main source that which enables us to establish and and services which it provides DESA utilize for financing the new operate digital platforms that will listen throughits deep expertise in investments and R&D operations. to new customer experiences and meet design and leather. For this reason, the most important their needs as well as obtain the data criteria we consider when evaluating and communication permissions of the performance of our Company’s our customers through stores, online To become a fashion brand performance is profitability. By this way, and Desa Mobile Applications, continue drawing its strength from its our goal is to grow by making profit in increasingly. investments in design and its long term and become the indisputable expertise on leather, having a leader of every field we operate in. Design corner on the leather fashion The unique skill of our designers is sector in Turkey and the world OUR VALUE CHAIN embodying in expertly created designs. by means of its high quality and Our Stores Our Human Resource stylish products bearing the best We are maximizing shopping experience We bring expert handcraft together with values, providing its customers with our contemporary and inviting contemporary design. stores. with a pleasant shopping Our Brand environment, maximizing its Our Global Presence With our vertically integrated production shareholders’ profitability, We transcend national boundaries with model, we are capable to always reveal respecting to the society, our overseas stores. brand value. environment and its employees Our Marketing and Communication as well as remaining as a leader Activities fashion brand of leather in the We are strengthen our brand image consumers’ mind. and awareness with our effective and innovative communication. 38 History of Desa
to the figures declared by Association 1972 2004 of Exporters of Leather and Leather Founded by Mehmet, Melih and Listed on Istanbul Stock Exchange Products, DESA rank 210th in Istanbul Semih Çelet brothers as a collective Market, considering the values that Chamber of Commerce’s second list company. joining the capital markets will add of the biggest 500 industrial company. values to the company from the point of transparency, reliability and 1974 accountability. An incentive certificate 2011 First store was opened on Bağdat was received for the investment in Took the pride of deserving sector’s Caddesi. Introduced the Turkish Düzce Organized Industrial Zone, and first place in export once again. woman to the first shoulder bag it has an investment of TL 3.2 million was In the same year, Covent Garden produced. realized. store in London was chosen one of the best 60 stores of the world in VMSD International Store Design 1982 2006 Competition in which brands from DESA got the title of joint-stock Opened Düzce factory. all over the world participates. DESA company. was given a wide coverage in the book named “Retail Spaces / Small Stores” 2007 in which the stores ranked as a result 1983 Founded a joint venture with of the competition are included. Became distributor of the globally- Samsonite, which it has been a renown travel products brand distributor for 26 years. Desa owns “Samsonite” in Turkey. 40%; Samsonite owns 60% of this 2012 venture. Collaboration was made with Deserving sector’s first place in Genex, a British brand consultancy export for the third time, DESA took 1989 firm, to get consultancy services serious steps for proving the brand Established the leather processing on branding in accordance with the on the international platform. One plant in Çorlu upon the goal to build goal of being a world brand. For of these steps was to commission an integrated business model. this purpose, significant changes Graeme Black who worked with the were made in the concepts of logo, world’s giants like John Galliano, corporate identity and store. DESA Giorgio Armani, Salvatore Ferragamo 1990 has also continued its belief in quality and started as Designing Director at Opened the production facility in by obtaining the ISO/IEC 2007:2013 Desa to create AW 12-13 collection. Sefaköy that has an indoor space of quality certificate. The designing director showed his 15.500 square meters. differences in this field and created a collection to be able to compete with 2008 world’s giants on the international 1999 Moved up to 449th place in the platform. Desa distinguished once By managing to rank 937th in ISO 1000 Fortune 500 list. DESA purchased again with its two-sided designs in list thanks to its business concept Çorlu Plant including with the 2012. that always prioritizes quality, DESA building, land and all fixtures. opened the new tannery in Çorlu in the same year in order to enhance its 2013 producing force further and carry its 2009 NINETEENSEVENTYTWO collection cost control to the high levels. Taking the 355th place in Istanbul dedicated to 1972, when the first Chamber of Commerce’s the biggest handbag collection is launched, 500 industrial company list, the prepared and offered for sale in 2001 company took the 471st place in the almost 40 luxurious boutiques only Decided to take a path with global Fortune 500 list. abroad, has been exhibited at Milano vision and opened DESA U.K. office in Fashion Week in September 21st London. – 23rd, 2013, and at the Showroom 2010 organized in Ecape Commines within While putting its online shopping site the scope of Paris Fashion Week in 2002 into customers’ service, the company September 28th – October 4th, 2013 Crowned its faith in quality with ISO took the first steps for carrying its and proved with this special collection 9001:2000 Quality Certificate and took position as the leading fashion retailer that a Turkish brand has reached to justified proud of ranking 250th in ISO of Turkey into foreign markets with 2 summit in terms of design and quality. 500 list and the first place in its sector. new UK store. Becoming the Export Champion of Turkey in 2010 according 39
research done by Turkish Time in thanks to renewed face of www.desa. 2014 2017, the 155th company that invests com.tr representing new generation DESA renewed its online sale most in R&D was DESA. It continued marketing and sales approach. website through which it reaches its its belief in quality also in 2017 by customers everywhere independent of obtaining the ISO/IEC 2007:2013 location on 7/24 basis by means of its quality certificate. 2019 investment. DESA enhanced customer Michele COZZANI DITRI, who has experience in its website www. taken part in and managed the design desa.com.tr where all of its leather 2018 teams of global fashion brands such garment, shoe, accessory, textile and Desa and Adesa companies, ranked as Max Lara, Larusmiani and Loro travel product collections are just a among the top 5 companies that Piana, has begun to provide design click away for the customers. Desa made the largest exports of 2018, consultancy service for Desa in order Deutschland GmbH headquartered in have experienced this rightful pride to serve the Italian market. The 2nd Düsseldorf /Germany was established as the only “producer exporter” of DESA store has opened in Albania. in July. the leather industry in our country. The turnover of www.desa.com.tr has On the other hand, Desa Deri San. Ve reached 5% of Desa retail turnover. Tic. A.Ş. which has ranked at the top Investments have been made in data 2015 places in Turkey thanks to its R & D collection - data processing systems DESA maintains its confidence in investment in design and production enabling us to know and understand quality also in 2015 through ISO fields amounting to 2.3 million TL our customers as well as to organize 9001:2000 quality certificate obtained with an increase of 27% compared to customized marketing activities for in 2002. the previous year, is the only Turkish them, Ios and Android Desa mobile brand that manages all business application is opened. processes with its own team and 2017 facilities. Desa, which has joined in Ninenteenseventytwo Srl in Italy the international retailing arena by and Leather Fashion Bulgaria EOOD opening its first store in Albania, has in Bulgaria was established. In the achieved a turnover increase of 68% 40 The Vertical Integrated Business Model Distinguishing Desa
The element that makes DESA different from its peers is that DESA keeps all stages of the service process under control providing through the company’s tanneries, production skill of leather garments, bags and accessories and retail stores. Leading its sector in production, export and retail fields, DESA makes important investments in design, R&D, human resources and education fields to increase customer satisfaction through understanding of quality products and flawless service appropriate with today’s trends. 41
RAW MATERIAL RETAIL PRODUCTION PRODUCTION STORES
Leather production Production of leather 132 in the Çorlu tannery garments, handbags Total Stores having 20.000 m2 and accessories indoor production 63 area International Desa Mono Brand Stores design team 39 Weekly Capacity Desa Samsonite 28.850 kg Istanbul facility 3 Cattle raw leather 15.500 m2 Desa Franchises processing indoor production area 2 170.200 kg Weekly Capacity Desa Franchise Small cattle raw 2.000 Albania leather processing pieces of leather 5 garment Suede, Napa, Fur, Virtual Store Calf leather 1.000 desa.com.tr 1972desa.com processing pieces of textile samsonite.com.tr 6.000 americantourister.com.tr tumi.com.tr pieces of handbags 109 Düzce facility Overseas Stores 2 10.000 m 17 indoor production area Samsonite JV Stores
Weekly Capacity 3 14.000 TUMI JV Stores pieces of handbags 2 16.749 m Store Area 42 Looking At The World From DESA...
TOTAL NUMBER OF Having a labor-intense business inside and outside the country, our model, our Company’s total number of Company makes its employees enjoy EMPLOYEES IS 1.909 employees is 1.909 as of the end of 2019. being a part of a world brand. We AS OF THE END OF 2019. offer our employees the opportunity of We take our strength that we turned specializing, building a career in the into a worldwide success from our sector and getting awarded for their principles which we defined according works. to our priorities and committed strictly. Unconditional customer satisfaction, DESA, which ensures its success with flexibility and fast response to the the adherence to the principles, plans its customers’ queries are the most future by knowing its biggest foundation important criteria at this point to which is human resource. With this approach, we have come without compromising on we summarize our company’s philosophy quality and forgetting the fact that our of human resource development in this most important foundation and resource way: are people. “We will train our human resource at DESA miracle of 47 years is a product every stage by ourselves.” of the high performance and quality DESA conducts the operations of training mentality we provide at every point. As and development in house to train and our Company aims to have a competent improve its employees in accordance with human resource that lives today but this philosophy. thinks about the future, all of our employees strive to maintain the positive Desa Training System depends on raising image of our company and products both and improving its own workforce by locally and internationally. considering sector-specific conditions.
Created the brand of private products by working in the light of these principles and proved its quality and leadership
EMPLOYEE COLLAR BREAKDOWN
FEMALE MALE WHITE BLUE 2018 2018 COLLAR COLLAR 871 1.014 2018 2018 2019 2019 717 1.168 853 1.056 2019 2019 710 1.199 TOTAL 2018 2019 1885 1909 43 Investor Relations
Share Information Since the public offering in May 2004, The Company was registered in the our Investor Relations Department has registered capital system in 2007 Stock Exchange Code DESA aimed to build close relationships with and the registered capital ceiling Reuters Code DESA.IS our shareholders at an equal distance is TL 150.000.000. Paid-in capital Bloomberg Code DESA.TI and provided them with maximum is TL 49.221.970 and divided into Public Offering Date 06.05.2004 value in parallel with the corporate 4.922.196.986 shares with 1 Kr nominal Market Value* TL 223,4 governance standards that our Company value each. million embraces in accordance with honesty, accountability and reliability principles. Market capitalization of DESA as of *As of 31.12.2019 Total 36 material disclosures were December 31st, 2019 reached TL 223,4 made, and queries delivered by the Million. The average trading volume of 35% of DESA shares are publicly traded. analysts and investors to our investor DESA shares in 2019 was TL 2.001.537. The shareholding structure of our relations department via telephone Company as of 31.12.2019 is as stated or e-mail during 2019 were replied in below: accordance with the Capital Markets Legislations.
DESA shares were publicly traded with DESA code on Borsa Istanbul (BIST) on May 6th, 2004.
Shareholder Share Nominal Share Percentage Value (TL)
Çelet Holding Anonim Şirketi-1 26.717.682 54%
Melih Çelet-2 4.922.197 10%
Public-3 17.188.315 35%
Other-4 393.780 1%
Total 49.221.970 100,0%
2019 DESA Relative Share Performance 44
Corporate Governance Compliance Report
Pursuant to Article 8 titled Corporate Governance Compliance of Corporate Governance Communiqué (II-17.1) of Capital Markets Board, “the Corporate Governance Compliance Report (URF) and the Corporate Governance Information Form (KYBF)” that located in the relevant communiqué annex and published in the CMB Bulletin of the Board dated 10.01.2019 numbered 2019/2, also announced with the decision dated 10.01.2019 numbered 2/249, can be accessed from the KAP addresses listed below.
Corporate Governance Compliance Report (URF): https://www.kap.org.tr/en/ Bildirim/818450
Corporate Governance Information Form (KYBF): https://www.kap.org.tr/en/ Bildirim/818448 45 2019 Corporate Governance Compliance Report
DESA DERI SANAYI VE TICARET PART I – CORPORATE GOVERNANCE PART II – SHAREHOLDERS A.Ş. (“DESA”) HAS SET THE COMPLIANCE REPORT 2.1. Investor Relations Department PRINCIPLES CONTAINED IN Desa Deri Sanayi ve Ticaret A.Ş. (“DESA”) 2.1.1. Investor Relations Department THE CORPORATE PRINCIPLES has set the principles contained in the and its Duties Corporate Principles published by the PUBLISHED BY THE CAPITAL Capital Markets Board as a target for itself. The legislation and the Articles of MARKETS BOARD AS A TARGET Association are compiled for the exercise FOR ITSELF. The ability to operate at international of shareholders’ rights and practices are standards is also utmost importance implemented to ensure the exercise of besides creating value for shareholders with these rights. Desa Deri San. ve Tic. A.S. has a stable and profitable growth performance been established an “Investor Relations in order to effectively take a place in the Department” to manage relations with financial markets developing with the depth the investors since the date of the public emerging as a result of globalization trends offering in 2004. All relationships between in the financial markets. DESA and the shareholders are carried out under the responsibility of the “Investor Good corporate governance has a Relations Department” as a result of the significant contribution to the sustainability joint efforts conducted with the relevant of the Company as well as increase of its departments in accordance with the reliability and prestige in the finance and following principles. capital markets. The Investor Relations Department is DESA communicates the necessary responsible for informing regularly on the information to all its investors and analysts Company’s activities and financial condition, simultaneously in a timely, secure, stable excluding confidential information and and proper manner under the legal and trade secrets of the shareholders and regulatory rules. Investors and other potential investors, so as to not to cause an shareholders can access DESA-related information inequality and managing the historical and current information in real- communication between the shareholders time and full presented on our website in and the Company in coordination with the the Investor Relations section. other departments.
The Company’s management aims at In this context, the Investor Relations complying with the obligations arising Department is responsible for: from the Corporate Governance Principles Communiqué No: II-17.1 published by • Presenting the Company to the existing the Capital Markets Board Communiqué and potential investors and brokerage as a whole, and has taken the necessary institutions, replying the queries of actions for this purpose. The principles analysts and researchers working in these mandated for our company within the scope institutions, of the Corporate Governance Principles Communiqué are complied with. • Answering questions and requests from the shareholders,
• Ensuring investor-related databases and records to be kept up to date and orderly,
46
• Providing a two-way information flow 2.1.2. Information on Activities of the 2.3.1. General Assembly Pertaining to 2018 acting as a bridge among the shareholders, Investor Relations Department in 2019 the Company’s senior management and the The General Assembly meeting was held Board of Directors, Questions that were addressed to the on 29.03.2019 with a quorum of 83,04%. investor relations department were No specific period of time was provided to • Reporting to the relevant departments answered by phone or e-mail. The register the registered shareholders into within the Company and senior Company’s web-page was regularly the share ledger and the relevant provisions management about developments in the updated in order to ensure investors to of the Turkish Commercial Code were capital markets and stock performance, monitor up-to date information. Disclosures applied. The General Assembly meeting which are important for investors were was held in the Company’s headquarters in • Ensuring the shareholders to Access published on the Company’s web-page order to facilitate the participation under the the most accurate, quick and complete after announced in the Public Disclosure supervision of the Commissioner appointed information by updating regularly Platform (PDP). Totally 36 material by the Ministry of Industry and Trade. The the webpage, activity report, investor disclosures were announced to the public location where our General Assembly presentations, investor bulletins, corporate opinion in accordance with the Capital meetings are held is arranged in a manner promotional films etc. communication Markets Legislations throughout 2019. allowing participation of all shareholders. tools which the shareholders can receive A separate agenda item on the donations information about DESA, Updates in the investor tools are made and aids during the year was included in on a quarterly basis. Compliance with the the agenda of the General Assembly. Also In addition, the Department helps executing legislation is observed to the maximum no proposal with respect to the agenda was the General Assembly Meetings conducted extent in fulfilling the investor demands, submitted by the shareholders separately. within the Company in accordance with and no complaint against the Company Media did not participate in the meeting. the legislation in force, the Articles of about the exercise of the shareholders’ Association and other internal regulations. rights or administrative and legal Annual General Meeting for 2018 was held Minutes of the General Assembly meetings proceedings brought against the Company in a manner allowing electronic voting ensures keeping voting results recorded in this regard was made in the past year to pursuant to the Turkish Commercial Code. and the through the minutes of the General the best of our knowledge. Assembly meeting and relevant reports 2.3.2. Invitations and Announcements are submitted to the shareholders by the 2.2. SHAREHOLDERS’ RIGHT TO OBTAIN Investor Relations Department. INFORMATION Invitations to the General Assembly meetings are made by the Board of The Investor Relations Department 2.2.1. Principles regarding Exercise Directors in accordance with the Turkish performs all kinds of public disclosures, of the Right to Obtain and Review Commercial Code (TCC), the Capital Market such as disclosing financial reports Information Law and the provisions of the Company’s prepared by the Department of Accounting Articles of Association. As soon as the and particular events as required by No distinction is made between the Board of Directors adopts a resolution legislation. shareholders regarding the exercise of for a General Assembly, the necessary the right to obtain and review information. announcements are made via the PDP and Contact information of the Investor Apart from information in trade secret the public opinion is informed. Relations Department is provided below. nature from the shareholder, all requests to obtain information are discussed with Announcement for a General Assembly Pınar Kaya the relevant departments and shared with meeting is published on all editions of a Investor Relations Manager the shareholders by telephone or e-mail. newspaper published daily in Turkey and Phone: 0212 473 18 00 Any kind of information that would interest on the Trade Registry Gazette to reach the Fax: 0212 698 98 12 to the shareholders during the year is greatest possible number of shareholders Email: [email protected] disclosed with the necessary explanations within the framework of the necessary legal Email: [email protected] and published on the website. provisions.
Bülent Uyarlar 2.2.2. Right to Request a Private Auditor Announcement including information Accounting Manager of the date and time of the Ordinary Phone: 0212 473 18 00 Although there is is a regulation regarding General Assembly meeting for 2018, Fax: 0212 698 98 12 appointment of a private auditor in the the meeting place, the agenda items, Email: [email protected] Articles of Association, no request has attendance procedure to the Ordinary Email: [email protected] been received from the shareholders in General Assembly of the shareholders, this direction. The Company’s activities power of attorney sample and information Investor Relations Manager Pınar Kaya and are periodically audited by an Independent on issuance procedure thereof have been Accounting Manager Bülent Uyarlar carry Auditor and Statutory Auditors determined published on Turkish Trade Registry Gazette out their duties in a manner affiliated to at the General Assembly. The independent numbered. 9779 and dated 04.03.2019 and Ayhan Diribaş, our Company’s Executive auditing company selected at the Ordinary the issue of Cumhuriyet gazette numbered Vice President of Financial Affairs. The General Assembly for 2018 held on 34114 dated 02.03.2019, which is published report with respect to the investor relations 29.03.2019 is Birleşim Bağımsız Denetim ve throughout Turkey. activities carried out in 2019 was submitted YMM Anonim Şirketi. to the Board of Directors on 03.02.2020. Announcements published on the Investor Relations Manager Pınar Kaya 2.3. INFORMATION ON GENERAL Website along with the General Assembly holds an Advanced Level and Corporate ASSEMBLY Information Document; meeting day and Governance Grading License on Capital time, meeting place, agenda, and invitation Market Activities. In addition, Investor Our General Assembly meetings are held by being made by the Board of Directors and Relations Manager Pınar Kaya was taking into account the Turkish Commercial attendance procedure of the shareholders appointed as the Corporate Governance Code, the Capital Markets Legislation to the General Assembly are explained. Committee Member as per the Board of and the Corporate Governance Principles Directors’ resolution dated 18.04.2018. in a way that allow the shareholders to Along with these, total number of shares obtain adequate information and broad and voting rights reflecting the shareholding participation. structure of the Company, number of shares and voting rights representing each of the 47 privileged share group, if there is privileged 2018 annual general meeting held on members. There is no company with which shares in the Company’s capital, changes 29.03.2019. These shareholders may we have mutual participation. Cumulative and amendments in the management and attend the General Assembly meetings voting method is not included in the activities of the Company as well as the themselves as well as being represented Company’s Articles of Association. There is prominent affiliates and subsidiaries of by a third party. Such representatives no provision in the Articles of Association the Company in the previous fiscal year or are not required to be a shareholder. related to determining the minority rights planned to be made in the following fiscal The shareholders may have themselves in a manner less than one twentieth of the year which shall affect the Company’s represented by other shareholders or by capital. activities significantly and the reasons of a proxy to be appointed externally in the these changes and amendments along General Assembly meetings in accordance 2.5. DIVIDEND POLICY AND DIVIDEND with the activity reports and the annual with the Capital Markets Board regulations PERIOD financial statements of the last two fiscal on voting by proxy. Representatives, who periods of all the corporations subject to are shareholders of the Company, are 2.5.1. Dividend Policy these changes; reasons of dismissals or also authorized to vote on behalf of the replacement of the Members of the Board shareholders that they represent other than DESA Deri Sanayi Ve Ticaret A.S. carries of Directors, if the Agenda of the General their own votes. out its dividend in accordance with the CMB Assembly includes dismissal, replacement regulation. The Company unanimously or election of the Members of the Board of 2.3.5. Meeting Minutes resolved to follow a well-balanced and Directors; information about the persons prudent dividend policy by taking into nominated for the Membership of the Board Meeting minutes are available at www.kap. consideration utilizing internal and external of Directors; along with the resolution of the gov.tr and www.desa.com.tr immediately investment opportunities as well as Board of Directors on the amendment of the after the end of the meeting. In addition, the shareholders in the market and the Articles of Association taking place in the these minutes are available review by Company’s interests in order to consider agenda, the previous and the new versions the shareholders at the Company’s additional investments to be made abroad of the Articles of Association amendments; headquarters and are shared with investors and prevent possible effects of a global curriculum vitae of the persons to be who request to access these minutes. economic crisis in line with the targets nominated for the Memberships of the of “DESA” brand of growing, developing Board of Directors, their duties within the 2.4. VOTING RIGHTS AND MINORITY and being a global company with a strong last ten years and reasons for departure RIGHTS financial structure in accordance with the from these positions, quality and Corporate Governance Principles of the significance level of their relations with the 2.4.1. Exercise of Voting Right Capital Markets Board. The mentioned Company and the Company’s related parties dividend policy is available in the annual and whether they have the qualification of The Company avoids practices that make report and on the Company’s official independence as well as information on exercising voting rights difficult and web-page. There is no privilege as to the similar topics which might affect the provides all shareholders with an equal, participation in the Company’s profit. Company’s activities in case they are elected easy and convenient voting possibility. as the Members of the Board of Directors Nonpreferential shareholders having the 2.5.2. Dividend Period have been disclosed to public within 1 week right to vote in the Company may vote as after the date of the announcement of themselves as well as through a third party The approval of the General Assembly and the General Assembly. Announcements who is not a shareholder. No provision the determined legal periods are observed related to the General Assembly, along with that prevents non- shareholder from regarding dividend based on the provisions procedures stipulated by the legislation, voting by proxy as a representative for the of the Turkish Commercial Code, the have been published in the Company’s unprivileged shares exists in the Articles of Capital Market Board regulations and the registered office and the website (www. Association. With the decision of our Board provisions of the Company’s Articles of desa.com.tr) in a way to reach to a majority of Directors dated 06.01.2016, to make an Association. of the shareholders not later than 21 days application to the Capital Markets Board for before the General Assembly. There is no the purpose of amending the subparagraph 2.6. TRANSFER OF SHARES question which could not be answered d entitled “Voting and Appointment of Proxy” during the General Assembly meeting of the article 20 entitled “General Meeting” Our Articles of Association does not include but were answered later by the Investor of our Company’s Articles of Association in any provisions that make public Group Relations Department in writing. order to ensure compliance with the Turkish B shareholders to freely transfer their Commercial Code numbered 6102. The shares difficult and restrict share transfer. 2.3.3. Methods of Voting application for amendment to the Articles Bearer shares shall be transferred and of Association was approved by the letter of assigned in accordance with the provisions The example of the power of attorney for the Capital Markets Board dated 15.01.2016 of the Turkish Commercial Code and other shareholders who will be represented by a and numbered. 29833736-110.03.02-E.520. relevant legislation. For non-public Group A proxy in the General Assembly Meeting is The amendment draft was also approved by shares owned by a controlling shareholder, available on the Company’s web-page and the Ministry of Customs and Trade, General other Group A shareholders have a pre- newspaper advertisement. Directorate of Domestic Trade with its letter emption right in proportion to their shares numbered 67300147 – 431.02 and dated before the Company according to Article 9 of 2.3.4. Principles for Participating in the 26.01.2016. The text of the amendment the Articles of Association. General Assembly was submitted for approval and adopted by the shareholders in our Company’s Annual In our company Group A shares are General Meeting for 2015 dated 31.03.2016. registered to the name and Group B shares Part III –PUBLIC DISCLOSURE AND are bearer. The records in the Shareholders 2.4.2. Minority Rights TRANSPARENCY List of the shareholders, whose shares are in the investor accounts under the The Company pays attention to exercise 3.1 CORPORATE WEBSITE AND ITS Intermediary Institutions before the Central of the minority rights. No criticism or CONTENT Registry Agency and who wish to attend the complaint was made in this regard in 2019. General Assembly Meeting, which is held Since we have privileged shares for the The official website of Desa Deri San. Ve into account under the provisions governing voting rights, there is no regulation on the Tic. A.S. (www.desa.com.tr) is periodically the General Assembly Procedures of the cumulative voting. Group A shares have updated and the official website includes Central Registry Agency in the Company’s the right to determine 4 out of 5 board prospective information. 48
The necessary information is published business processes. There is no restriction our customers. Furthermore, the text of on the Company’s website in accordance for the stakeholders to transmit the “the social responsibility policy” is hanged with the CMB’s Corporate Governance Company’s actions that are contrary to the in visible places by all of the employees Principles. The Company’s Annual Reports legislation and unethical to the Company’s throughout the workplace. are published both in English and Turkish. Corporate Governance Committee and the The Company’s total number of employees Our investors are informed regularly on Audit Committee. Ensuring compliance with as of 31.12.2019 is 1.909. the following matters including the issues the legal regulations as well as supervision specified by the Corporate Governance thereof is under the responsibility of the 4.4. CODES OF CONDUCT AND SOCIAL Principles in the investor relations section Audit Committee and examining as well as RESPONSIBILITY of the website to provide the existing and settling the complaints from shareholders potential investors and intermediaries with and stakeholders about the matters related Codes of conduct have been created for a more comprehensive flow of information. with the corporate governance is under the the Company and employees, and these responsibility of the Corporate Governance determined codes of conduct have been • The Company’s Articles of Association Committee. disclosed to the employees with the Human Resources Manual and to the • Trade registry information 4.2. PARTICIPATION OF STAKEHOLDERS public in accordance with the disclosure IN MANAGEMENT policy. In its history of 47 years, the • Financial Data corporate culture of Desa in compliance No model was formed with respect to with honesty, respect, ethical behavior • Audit Reports inclusion of the stakeholders to the and the laws and regulations always has management of the company. On the other been at the forefront. Aiming at offering • Annual Reports hand, the requests and the proposals a healthy development, universal quality submitted in the meeting with the and standards of products and services • Corporate Governance Practices and employees and the other stakeholders are by ensuring customer satisfaction Compliance Report evaluated by management and policies together with its employees and in this as well as practices related thereto are way, becoming a symbol of credibility, • Duties and Working Principles of developed. continuity and prestige before our country, Corporate Governance Committee its customers, shareholders, the companies 4.3. HUMAN RESOURCES POLICY it exports to, the values of Desa shed light • Material Disclosures to the path to be followed to achieve these Without forgetting the fact that our objectives, and these are shared with the • Agenda of the General Assembly most important resource is human, public opinion through its website.The we summarize the human resource ethical valuse of Desa are the key factors • Minutes of the General Assembly development philosophy of our company lying behind its success and to achieve Meetings targeting to have human resources the future objectives. Desa has been necessary for the future while living today as attaching importance to support social and • Attendance Sheet follows: “We will train our human resources cultural activities since its foundation. For at every level by ourselves.” We carry out this purpose, the Company undertakes • Partnership Structure the training and development activities sponsorship in various activities. Desa under our own structure in order to train operates in line with the system that it • Company Policies and develop DESA employees in accordance has created within the framework of the with this philosophy. Furthermore, we try to Labor Law and Laws on Social Security and • Board Members ensure the conformity of the qualifications Employee Health and Safety. In addition, that we look for the personnel to be Desa have the ETI BASE CODE audits • Power of attorney sample employed in our company with the job performed by the companies accredited to be performed by such personnel and by Sedex system and all the reports are • Frequently asked questions choose individuals who are prescient as loaded to the Sedex system. Audits are well as have career expectations for the performed on various issues including • Contact success of this policy. We clearly explain quality, environment, management system their duties and responsibilities to all of and SA8000. The Company observes the 3.2. Annual Report the personnel employed in our company industry-specific norms on the environment during job interview, and provide them in production under the Environmental Annual reports are prepared in a manner with orientation training after employment Policy and System created by the Company to allow our shareholders, the public and and deliver their job definitions in writing. itself. No lawsuit was filed against the all other stakeholders to obtain full and “Joint Working Committee” was formed in Company for damage to the environment accurate information about the activities of order to ensure conveying the problems during the period. The Company’s codes of the Company and with details stipulated in encountered by the employees to the conduct are available on our website (www. Turkish Commercial Code as well as Capital management systematically for solution, desa.com.tr). Markets Legislation. to evaluate the demands of the employees within the scope of the social responsibility PART V – BOARD OF DIRECTORS Part IV – STAKEHOLDERS standard and to share the same with the management for the purpose of increasing 5.1. STRUCTURE AND FORMATION OF 4.1. DISCLOSURES TO STAKEHOLDERS the motivation within the business as well BOARD OF DIRECTORS as paralleling the corporate and individual Stakeholders are informed on the matters targets. This committee is constituted by the Turkish Commercial Code, Capital Markets that concern them through the press, representatives elected by our personnel Board regulations and the Corporate material disclosures, and press and analyst from each departmant with their own votes Governance Principles apply to the election meetings and in electronic media in line and carries out its activities in accordance of board members. The Board of Directors with the Company’s disclosure policy. with its written regulations. There is no consists of five members totally two of complaint with respect to discrimination which are independent members. Participation in the management requires in our company and also no complaint to be elected to the Board of Directors; arisen in social responsibility inspections however, employees are encouraged to carried out by independent auditors participate in the management with various regularly related thereto upon requests of 49
Melih ÇELET about subjects in relation with the Emre Bilge received his MSc degree in Executive Member – Chairman of Board conflicts of shareholders and for making Business Management from City of London independent decisions with taking into Polytechnic University - London. He started Burak ÇELET account of stakeholders’ rights, his professional career in 1992 at Goodyear Executive Member – General Manager Tires Inc., and between 1998 and 2000, he • I am able to allocate necessary time was assigned to the Marketing Manager of Burçak ÇELET for businesses of the company at a level Goodyear Great Britain Limited. Between Non-Executive Member - Corporate sufficient for monitoring the processes 2000 and 2004, he worked as VP of Sales Governance Committee Member and the activities of Desa Deri as well as and Marketing at Axa Oyak Hayat Sigorta fulfilling the requirements of my duties. A.Ş. Since 2007, he has been carrying out Muvaffak Batur his duties of General Manager and Vice Non-Executive Independent Member I submit above information to our Board, President of the Executive Board at Zin D shareholders and all related parties. Investment and Management Development Numan Emre Bilge Inc. Mr. BİLGE was elected as an Non-Executive Independent Member The resumes of the members of the Board independent member for two years at the of Directors are as follows: ordinary general assembly of our company Any event which would eliminate the for 2017 dated 30.03.2018. independency of the independent board Melih ÇELET Our independent Members of the Board of members as of the respective activity Chairman of the Board Directors have submitted their Declaration period. The independence statements of the Mr. Melih ÇELET, founded Desa in 1972, of Independence to the Corporate independent board members are as follows. graduated from Ankara College in 1968 and Management Committee executing also Since I have been elected as “Independent studied at Istanbul University, Faculty of the duty of the Nomination Committee. Member” of the Board of Directors in Pharmacy. Mr. Melih ÇELET speaks English. Corporate Management Committee has the General Assembly meeting dated submitted the nominating report prepared 30.03.2018, I hereby submit the following Burak ÇELET for the independent candidate members issues for our Board of Directors’, our Board Member - General Manager of the Board of Directors to the Board of shareholders’ and all other stakeholders’ Mr. Burak ÇELET graduated from Boğazici Directors on 15.03.2018. At the Ordinary information pursuant to the regulations University in 1999, with a Bachelor’s degree General Assembly dated 30.03.2018, Mr. of the Capital Markets Board regarding in Mechanical Engineering. He received Muvaffak Batur and Mr. Numan Emre Bilge corporate governance; an MBA degree in Corporate Finance from were elected in the capacity of “Independent University of Wisconsin, Madison, in 2001. Member” to the Board of Directors for • No direct or indirect relationship in terms He obtained a Master of Science degree 2 (two) years. Taking on other duties of of employment, capital or other important in Leather Technology from Northampton Member of Boards outside the company is trading activities has been formed among College in 2002. Mr. Burak ÇELET serves as not connected to a certain rule, Mr. Numan me, spouse or my blood or affinity relatives a Member of the Turquality Working Group Emre Bilge, from members, has been up to the third degree and any of Desa Deri in addition to his duty as General Manager carrying out his duties of General Manager San. Ve Tic. A.Ş’s related parties or legal in our Company. Mr. Burak ÇELET speaks and Vice President of the Executive Board entities which have management or capital English, Italian and German. at Zin D Yatırım ve Yönetim Geliştirme A.Ş. relation with shareholders having shares at There is one female member in the current a rate of 5% or more in the capital of Desa Burçak ÇELET Board of Directors of our Company. Deri directly or indirectly within last five Board Member years, Ms. Burçak ÇELET completed her 5.1. PRINCIPLES FOR ACTIVITIES OF bachelor’s degree in Industrial Engineering BOARD OF DIRECTORS • I have not been employed in a company, at Yıldız Technical University in 1999. primarily serving as auditing, consulting Between 1999 and 2001, she worked as Activities of the Board of Directors are and rating company, which undertakes full Planning Director at Toys’R’Us. She received carried out under the provisions of or partial activities or organization of Desa her Master of Science degree in Retail the Turkish Commercial Code and the Deri under an agreement and held any Management from University of Surrey in Articles of Association. Board of Directors position in such a company as a member 2002 and she served as Category Director at convenes as much as the work required. of the board of directors within the last five Joker Maxitoys between 2003 and 2004. The number of resolutions taken by the years, Burçak ÇELET, who joined DESA in 2004, Board of Directors increased to 33 with the has been serving as a member of the Board resolutions taken within the framework of • I have not been a partner, employee or of Directors since 2006. Ms. Burçak ÇELET the paragraph 4 of Article 390 of the Turkish a member of the board of directors of a speaks Italian, English, Spanish and French. Commercial Code numbered 6102 in 2019. company, which is providing significant The members of the Board do not have the amount of services and products to Desa Muvaffak BATUR right of casting vote and each member is Deri within the last five years, Independent Board Member entitled to one vote. Votes are announced Mr. Muvaffak Batur, a graduate of Kabataş as accepted or rejected at the meetings • I have the required professional training, Male High School in 1967, completed his of the Board of Directors. Those who have knowledge and experience for performing bachelor degree at Istanbul University, a counter vote shall write the justification the duties properly which I would assume Faculty of Law in 1971. He has been of the decision and sign. However, no with my capacity as an independent working as a registered member of Istanbul public disclosure has been made in this member of the board of directors, Bar Association since 1973 and he is regard recently as such kind of opposition providing consultancy services as legal or difference of opinion has not been • I am not a full-time employer of any public adviser to several companies in the fields declared. The Board Members pay attention institution or organization, of Commercial Law and Corporate Law. to the participation in the meeting of the Mr. BATUR was elected as an independent Company’s Board of Directors of in person. • I am considered as a resident in Turkey in member for two years at the ordinary accordance with the Income Tax Law general assembly of our company for 2017 dated 30.03.2018. • I have strong standards of ethics, Numan Emre Bilge – Independent Board The damages to the Company which may Professional reputation and experience for Member be caused by the defaults of the Board adding positive contribution in activities of After receiving a degree in Finance from Members during the performance of their Desa Deri, for securing my independency Istanbul University in 1987, Mr. Numan duties have not been insured yet. 50
5.1. NUMBER, STRUCTURE and Members of the Audit Committee: productivity of the activities, protection of INDEPENDENCY of COMMITTEES Chairman: Muvaffak Batur assets, complying laws, regulations and ESTABLISHED IN BOARD OF DIRECTORS Member: Numan Emre Bilge agreements. Tuncay Erol is the Responsible expert of Internal Audit of our Company. Efforts on Corporate Governance were 5.1.2. Corporate Governance Committee started in 2005. The Audit Committee 5.5. COMPANY’S STRATEGIC TARGETS acting under the Board of Directors was The Corporate Governance Committee established with decision of the board of performs acts to support and assist the Desa’s mission, vision, targets and ethical directors numbered 18, dated May 26th Board of Directors by performing efforts values are added to the corporate identity 2004.The Corporate Governance Committee for compliance of the Company with file and published on the Company’s has been established with the decision of the corporate governance principles, website. The Board of Directors attends and the board of directors numbered 22, dated determination of the board members approves the creation of strategic objectives June 19th 2012 within the framework of and senior executives, assessment of prepared by the managers. Activities are the Principles of Corporate Governance remuneration, reward and performance assessed on monthly, quarterly, semi- in the activity period of the year 2012. The evaluation and career planning, annual, 9 months and annual basis. The duties and responsibilities for Candidate investor relations and public disclosure. strategic objectives for the year 2020 Nomination Committee, Committee for The reason for Mr. Muvaffak Batur, have been formed and review of the Early Detection of Risk and Remuneration independent member, is assigned to sale-marketing and production targets Committee were assigned to the the both committees is that two of our has been started. Efforts for spread of established committee. The Committee for independent members are assigned to the the targets are ongoing. The next 5-year Early Detection of Risk was established with audit committee due to the requirement strategic planning process has begun. The decision of the board of directors numbered that the audit committee must consist of actual situation for the year 2019 has been 16, dated 20.05.2013. With the desition independent members. He carries out determined by creating all the indicators dated 18.04.2018 numbered 35 Numan these duties because the members of the for financial, customer, process and Emre Bilge were elected as the Chairman Corporate Governance Committee must learning, development targets for all the of the Committee and Burçak Çelet as consist of non-executive members. departments, and the forecast for the year membership of committee. 2020 has been created. Corporate Governance Committee 5.1.1. Audit Committee Members: 5.6. FINANCIAL RIGHTS Chairman: Muvaffak Batur The Audit Committee fulfills the duties Member: Burçak Çelet The rights, the interests and the fees provided for the audit committee in the Member: Pınar Kaya provided to the members of the Board Capital Markets Regulation. In this context, of Directors are applied based on the the Company’s accounting system performs 5.1.3. The Early Detection of Risk decisions taken at the General Assembly. disclosure of the financial information to the Committee No benefit, such as debt, surety, credit and public, independent audit and supervision etc., was provided to the Board Members of the operation and effectiveness of the Duties of the Early Detection of Risk during the interim. The financial rights internal control system of the partnership. Committee are to detect; determining fields in remuneration provided to the Board of Selection of the independent auditing which may create administrative risks and Directors are discussed at the General company, preparation of independent audit weaknesses and to receive opinions of the Assembly, and the public opinion is contracts and initiation of independent audit management and the related parties on informed through the meeting minutes. process and activities of the independent the plans for correcting the deficiencies. To The determined rights are informed not on auditing organization at each step take detect early the risks which may endanger an individual basis but whether or not they place under the supervision of the audit the existence, development and continuity are provided to the executive members or committee. The Audit Committee must of the Company, to apply the necessary independent members. The principles with submit the annual and interim financial precautions about the determined risks and respect to remunerations of the members statements to be disclosed to the public to perform studies on risk management. of the board of directors and the manager to the Board of Directors in writing with To review risk management systems at having administrative responsibilities have its own evaluations by obtaining the least once a year. To examin significant been adopted with decision of the board views of the responsible executives and complaints about the administration of directors numbered 15, dated May independent auditors of the partnership received by the Company, to provide the 20th 2013 and posted in investor relations regarding the compliance of the statements settlement of the problem and to ensure the section of the Company’s website. Policy with the accounting principles of the employees’ notices on these subjects to be also was submitted for the shareholders’ partnership, the truth and accuracy, and transmitted to the administration within the information in the Ordinary General shall convene at least four times in a framework of confidentiality principle. Assembly meeting for 2013. year and more frequently if necessary. The Audit Committee together with the Members of the Early Detection of Risk Company’s management are responsible Committee: for maintaining the internal and external Chairman: NUMAN EMRE BILGE auditing carefully and ensuring compliance Member: BURÇAK ÇELET of the records, procedures and reports with the relevant laws, rules and regulations as 5.4. RISK MANAGEMENT and INTERNAL well as the principles of the CMB and IFRS. CONTROL MECHANISM This committee consists of non-executive independent members. Risk management of the Company includes examining periodically the financial risks, market risks and operational risks. Internal audit evaluates the sufficiency and efficiency of the controls including the management and activities of the company and information systems depending on the results of the risk assessments. These evaluations involve financial and operational information reliability, efficiency and 51 52 53 Independent Auditor’s Report Pertaining To The Annual Report Of The Board Of Directors
DESA DERİ SANAYİ VE TİCARET A.Ş.
FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REPORT PERTAINING TO THE ACCOUNTING PERIOD ENDING ON 31ST DECEMBER 2019 54
To the General Assembly of Desa Deri Other responsibilities regarding the Code The Board of Directors also takes Sanayi ve Ticaret A.Ş. of Conducts and the ethics within the scope into account the secondary legislative of the legislation have also been fulfilled arrangements made by the Ministry of by us. We believe that the independent Customs and Trade and related institutions 1) Limited Positive Opinion audit evidence we have obtained during while preparing the annual report. our independent audit is sufficient and Since we have audited the full set financial appropriate basis to build our limited 5) Independent Auditor’s Responsibility for statements of Desa Deri Sanayi ve Ticaret unqualified opinion. Independent Auditing of the Annual Report A.Ş. (the “Company”) for 01 January - 31 December 2018 accounting period, we Under the provisions of the TCC and the have also audited the annual report for this 3) Our Auditor Opinion For Full Set Communiqué, our purpose is to give accounting period. Financial Statements an opinion about whether the financial information included in the annual report In our opinion, except the subject specified Due to the matters in the paragraph of the and the Board of Directors’ discussion in the Basis of Limited Positive Opinion, the Basis of Limited Unqualified Opinion, we is consistent with the audited financial financial information included in the annual have provided a limited unqualified opinion statements of the Company and the report of the Board of Directors and the in our auditor’s report dated 11 February information we obtained during the Board of Directors’ discussion about the 2020 about the full set financial statements independent audit and whether they reflect Company’s situation is consistent with the of the Company for the 1 January - 31 the truth and to issue a report containing full set of financial statements audited in all December 2019 accounting period. our opinion. important aspects and the information we have obtained during the independent audit The audit we made was conducted in and reflects the truth. 4) Responsibility of the Board of Directors accordance with the Independent Auditing For the Annual Report Standards issued by the Capital Markets 2) The Basis of Limited Positive Opinion Board and the BDSs. These standards The Company Management is responsible requires that independent audit should As explained in details in the Financial for the followings relating to the annual be conduct compliance with ethical Investments postscript (Note: 4 Shares in report according to Articles 514 and 516 requirements by planning to obtain Other Entities), Company should present of the Turkish Commercial Code No. 6102 reasonable assurance about whether its affiliate, that should be measured by (“TCC”) and Communiqué on Principles the financial information included in the reflecting fair value change to the profit or (“Communiqué”) Regarding Financial annual report and the Board of Directors’ loss, over cost prices in accordance with Reporting in the Capital Markets No. II-14.1 discussion is consistent with the financial TFRS 9 Financial Instruments Standard and of Capital Markets Board (“CMB”). statements and the information obtained by consolidating in financial statements during the independent audit and whether in accordance with TFRS 10 Consolidated a) Prepares the annual report in the first they reflect the truth. Financial Statements Standard, and three months following the balance sheet shows its subsidiaries that it controlled, day and submits it to the General Assembly. The cap auditor who conducted and as a financial asset over cost prices. The concluded this independent audit is Ergun Company has not performed an impairment b) Prepares the annual activity report; in Şenlik. study for these financial assets at year- a way to reflect the Company’s financial end. if the above mentioned liabilities are status accurate, complete, straightforward, Istanbul, February 11th, 2020 accounted in the financial statements dated truthfully and honestly in all aspects with 31 December 2019, we cannot make a the flow of its activities for that year. In this conviction about whether there is a need to report, the financial position is evaluated revise the impact of this information on the according to the financial statements. statement of financial position. The report also indicates the Company’s development and potential risks. The Our independent audit was conducted evaluation of the Board is also included in in accordance with The Independent the report. Audit Standards issued by the Capital Markets Board and the Independent c) The annual report also includes the Auditing Standards (BDSs) which is part followings: of Turkey Auditing Standards and was published by Public Oversight, Accounting - Events that occur in the group after the and Auditing Standards Authority (KGK). end of the activity year and have particular Our responsibilities within the scope of importance, these Standards are explained in details in the section of Responsibilities of the - Company’s research and development Independent Auditor for Independent Audit activities, of the Annual Report of our report. We hereby declare that we are independent - Financial benefits such as wages, from the Company in accordance with premiums, bonuses, allowances, travel, the Codes of Conducts for Independent accommodation and representation Auditors (Codes of Conduct) issued by KGK expenses, in-kind and in-cash facilities, and the ethical provisions in the legislation insurances and similar guarantees paid to relating to independent auditing. the board members and senior executives. 55 56 57 Financial Statements And Independent Auditor’s Report PERTAINING TO THE ACCOUNTING PERIOD ENDING ON 31ST DECEMBER 2019 58
FINANCIAL STATEMENT AND ANNUAL REPORT APPROVED BY THE BOARD OF DIRECTORS’ RESOLUTION DATE: 11 / 02 / 2020 RESOLUTION NO: 5 / 2020
OUR DECLARATION AS PER ARTICLE 9 OF THE SECOND PART OF THE COMMUNIQUÉ NO: II-14.1 OF THE CAPITAL MARKETS BOARD.
1 - We have reviewed independently audited Financial Statements and Annual Report of our Company for the period 01.01.2019 – 31.12.2019.
2- According to information to which we have access as a part of our duties and responsibilities within the Company, the Financial Statements and the Annual Report do not contain any material inaccurate disclosures or any shortcomings which may prove to be misleading because of the date of disclosure.
3- According to information to which we have access as a part of our duties and responsibilities within the Company, the Financial Statements, which have been prepared in accordance with the Financial Reporting Standards in force, reflect the truth relating to the assets, liabilities, financial standing as well as profits and losses of the Company fairly and the Annual Report faithfully reflects the development and performance of the business and the financial standing of the Company along with the risks and uncertainties that it is facing.
Board Chairman General Manager Vice General Manager MELİH ÇELET BURAK ÇELET AYHAN DİRİBAŞ 59
To the General Assembly of Desa Deri 2. Basis for Limited Positive Opinion Responsibilities for the Audit of the Sanayi ve Ticaret A.Ş. Financial Statements section of our report. As detailed in the Financial Investments We declare that we are independent of A. Independent Audit of the Financial foot note (Note: 4 Shares in Other Entities), the Company in accordance with the Statements Company recognizes its affiliate, of which Code of Ethics for Auditors issued by POA fair value change should be reflected (“POA’s Code of Ethics”) and the ethical 1. Limited Positive Opinion to the profit or loss pursuant to TFRS requirements in the regulations issued by 9 Financial Instruments Standard and POA that are relevant to audit of financial We have audited the financial statements its subsidiaries it controls, which it is statements, and we have fulfilled our other consisted of financial statement footnotes obliged to present by consolidating in its ethical responsibilities in accordance with regarding Desa Deri Sanayi ve Ticaret A.Ş. financial statements pursuant to TFRS the POA’s Code of Ethics and regulations. (“Company”), which comprise the statement 10 Consolidated Financial Statements We believe that the independent audit of financial position dated 31st December Standard, as a financial asset at cost. An evidences we have obtained during the 2019, the statement of profit or loss and impairment study has not been carried out independent audit are sufficient and the statement of other comprehensive for these financial assets at the end of the appropriate to provide a basis for our limited income, statement of changes in equity and period by the Company. If such liabilities positive opinion. statement of cash flows for the accounting are recognized in the financial statement period ended on the same date, and also dated 31st December 2019, we are not 3. Key Audit Matters the summary of the significant accounting able to express an opinion on whether policies. In our opinion, the accompanying there is a need to revise the impact of this Key audit matters are those matters that, financial statements present fairly, in all information on the items of the statement of in our professional judgment, were of material respects, the financial position of financial position. We conducted our audit most significance in independent audit the Company as of 31st December 2019, in accordance with Independent Auditing of the financial statements of the current and its financial performance and its cash Standards (IASs) which is a component of period. These matters were addressed flows for the accounting period ended on the Turkish Auditing Standards published in the context of the independent audit of the same date in accordance with Turkish by the Public Oversight Accounting and the financial statements as a whole, and Accounting Standards (“TASs”) except for Auditing Standards Authority (“POA”). Our in forming our opinion thereon, and we do the effects of matters mentioned on section responsibilities under those standards not provide a separate opinion on these of Basis for Limited Positive Opinion. are further described in the Auditor’s matters.
RECORDING THE REVENUE IN FINANCIAL STATEMENTS HOW THE MATTER WAS ADDRESSED IN THE AUDIT
Revenue recording the Company has generated sales revenue of TL The auditing procedure we applied with respect to this matter in 428.112.815 in the period between January 1st , 2019 and December brief as follows; 31st, 2019. - Understanding the recognition process relating to the revenue, Note 2.i As stated in the Summary of Significant Accounting Policies; sales revenue should be recognized at fair value when they can - Assessing accuracy and completeness of the amounts constituting be measured reliably and economic benefits arising from the basis for the calculations, assessing whether the amount reflected transactions are to be acquired by the Company. on the financial statements as provision is a liability arising from events taken place in previous periods and assessing the possibility Revenue represents one of the most significant amounts in the regarding outflow of resources embodying economic benefits from Company’s statement of profit or loss and contains an important the Company. aspect in terms of our audit procedures as it has a weighted effect on the Company’s key performance indicators.
The Company has started to apply TFRS 15 “Revenue from Contracts with Customers” standard as of January 1st, 2018. For the reasons mentioned above, recognition of said sales is an important issue in terms of our audit.
REVALUATION IN TANGIBLE FIXED ASSETS HOW THE MATTER WAS ADDRESSED IN THE AUDIT
Lands and buildings reported under tangible fixed assets in the Within the scope of the audit works carried out, sufficiency of Company’s financial statements are recognized at their re-appraised revaluation performed by the appraisers of the independent value. appraisal company, expedience and reasonability of findings and conclusions obtained by the appraisers as well as consistency of Fair values of lands and buildings have been determined by the these findings and conclusions with other audit evidences have appraisers of TSKB Gayrimenkul Değerleme A.Ş. licensed by the been assessed. CMB. Reconciliation of values determined by the appraisers for the real Accordingly, the value appraised for the lands is TL 11.025.000 and estates as specified in revaluation reports with the values explained the value appraised for the buildings is TL 27.940.000. Revaluation in footnote 14 has been checked. of said lands and buildings does not create a significant influence on the financial statements. No significant finding has been discovered in such study which we have carried out in connection with revaluation in tangible fixed assets. 60
INVENTORY VALUATION METHOD HOW THE MATTER WAS ADDRESSED IN THE AUDIT
Inventories are one of the significant assets in the financial During our audit, the following audit procedures have been applied statements of the Company. in connection with the inventory valuation method:
“The valuation method of inventories” has been determined as the - Analytical evaluations and detail tests related to the recording and key subject of the audit since it is significant in terms of the financial valuation process of inventories have been carried out. statements for the accounting period ended on December 31st, 2019. - Physical presence of inventories has been confirmed by the stocktaking carried out under supervision of experts employed The Company recognizes its inventories of raw leather, processed within the Company. leather and other textile materials with the lower of the cost or net realizable value in accordance with the TAS 2 Inventories Standard. - The technical competence and capability of the expert utilized The company supplies raw materials from domestic and foreign during the stocktaking have been evaluated. markets. - The mathematical conformity of the data used in the valuation In our audit work, we have focused on this issue for the following study has been tested. reasons: - Inventory valuation methods, technical data and components they Inventory cost calculation method is the process costing and this contain have been evaluated and tested for their suitability. system contains complex calculations and assumptions. - The relevance of the significant estimates used in the valuation - The existing stock amounts which are based on the costing studies has been evaluated and it has been concluded that it is within an are calculated by the experts employed within the Company. acceptable range.
Explanations regarding the Company’s accounting policies and As a result of our studies on inventory valuation method, we have not amounts related to inventories are given in note 10. identify any significant findings.
4. Responsibilities of Management and misstatement would be discovered in any conditions that may cast significant doubt Those Charged with Governance for the case. Misstatements can arise from fraud on the Company’s ability to continue as Financial Statements or error. They are considered material if, a going concern. If we conclude that a individually or in the aggregate, they could material uncertainty exists, we are required Management is responsible for the reasonably be expected to influence the to draw attention in our report to the related preparation and fair presentation of the economic decisions of users taken on the disclosures in the financial statements or, if financial statements in accordance with TASs basis of these financial statements. such disclosures are inadequate, to provide and for such internal control as management an opinion other than a positive one. Our determines is necessary to enable the As a requirement of an independent audit conclusions are based on the audit evidence preparation thereof in a manner free from conducted in accordance with the IASs, we obtained up to the date of the independent material misstatement, whether due to fraud exercise professional judgment and maintain auditor’s report. However, future events or or error. professional skepticism throughout the audit. conditions may cause the Company to cease We also: to continue as a going concern. In preparing the financial statements, management is responsible for assessing • Identify and assess the risks of material • Evaluate the overall presentation, structure the Company’s ability to continue as a going misstatement of the financial statements, and content of the financial statements, concern, disclosing, as applicable, matters whether due to fraud or error, design and including the disclosures, and whether these related to going concern and using the perform audit procedures responsive to financial statements represent the underlying going concern basis of accounting unless those risks, and obtain audit evidence that is transactions and events in a manner that management either intends to liquidate the sufficient and appropriate to provide a basis achieves fair presentation. Company or to cease operations, or has no for our opinion. (The risk of not detecting realistic alternative but to do so. a material misstatement resulting from We communicate with those charged fraud is higher than for one resulting from with governance regarding, among other Those charged with governance are error, as fraud may involve collusion, forgery, matters, the planned scope and timing of responsible for supervision of the Company’s intentional omissions, misrepresentations, or the independent audit and significant audit financial reporting process. the override of internal control.) findings, including any significant deficiencies in internal control that we identify during our 5. Independent Auditor’s Responsibilities • Obtain an understanding of internal control audit. for the Independent Audit of the Financial relevant to the audit in order to design audit Statements procedures that are appropriate in the We also provide those charged with circumstances, but not for the purpose of governance with a statement that we have Responsibilities of auditors in an independent expressing an opinion on the effectiveness of complied with relevant ethical requirements audit are as follows: the Company’s internal control. regarding independence, and to communicate with them all relationships and other matters Our objectives are to obtain reasonable • Evaluate the appropriateness of accounting that may reasonably be thought to bear on the assurance about whether the financial policies used and the reasonableness of independence, and where applicable, related statements as a whole are free from material accounting estimates and related disclosures safeguards. misstatement, whether due to fraud or made by management. error, and to issue an independent auditor’s From the matters communicated with those report that includes our opinion. Reasonable • Conclude on the appropriateness of charged with governance, we determine those assurance provided as a result of an management’s use of the going concern matters that were of most significance in the independent audit conducted in accordance basis of accounting and, based on the audit independent audit of the financial statements with the IASs is a high level of assurance, but evidence obtained, whether a material of the current period and are therefore the is not a guarantee that an existing significant uncertainty exists related to events or key audit matters. We describe these matters 61 in our independent auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
B. Other Legal and Regulatory Requirements
1. Pursuant to the fourth paragraph of Article 398 of Turkish Commercial Code (“TCC”) no. 6102; Auditors’ Report on System and Committee of Early Identification of Risks is presented to the Board of Directors of the Company on 10.02.2020.
2. Pursuant to the fourth paragraph of Article 402 of the TCC no.6102; no significant matter has come to our attention that causes us to believe that for the period of January 1st - December 31st, 2019, the Company’s bookkeeping activities and financial statements are not in compliance with the Law and provisions of the Company’s articles of association in relation to financial reporting.
3. Pursuant to the fourth paragraph of Article 402 of the TCC; the Board of Directors provided us the necessary explanations and required documents in connection with the audit.
The cap auditor who has conducted and concluded this independent audit is Ergun ŞENLİK.
İstanbul, February 11th, 2020
BİRLEŞİM BAĞIMSIZ DENETİM VE YMM A.Ş. Ergun Şenlik Cap Auditor 62
DESA DERİ SANAYİ VE TİCARET ANONİM ŞİRKETİ FINANCIAL POSITION STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON 31ST DECEMBER 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
Independently Audited Independently Audited
Note References Current Period Previous Period 31.12.2019 31.12.2018
ASSETS Current Assets Cash and Cash Equivalents 42 19.332.986 320.860 Trade Receivables 7 35.711.999 23.758.576 Trade Receivables from Related Parties 6 28.986.834 18.741.417 Trade Receivables from Non-Related Parties 7 6.725.165 5.017.159 Other Receivables 9 2.348.049 2.892.512 Other Receivables from Related Parties 6 2.112.057 2.659.486 Other Receivables from Non-Related Parties 9 235.992 233.026 Derivative Financial Instruments - - Inventories 10 161.176.661 167.345.611 Prepaid Expenses 4.482.568 4.693.842 Prepaid Expenses to Related Parties 6 10.095 16.469 Prepaid Expenses to Non-Related Parties 12 4.472.473 4.677.373 Assets Related to Current Period Tax 33 2.726.057 3.798 Other Current Assets 515.470 969.159 Other Current Assets to Non-Related Parties 25 515.470 969.159 Fixed assets classified for sale 32 2.772.277 2.772.277
TOTAL CURRENT ASSETS 229.066.067 202.756.635 Fixed Assets Financial Investments 4 7.724.212 7.724.212 Financial Assets Measured with Amortised Cost 7.724.212 7.724.212 Other Receivables 9 278.187 225.491 Other Receivables from Non-Related Parties 278.187 225.491 Investments Valued by Equity Method 4 11.935.938 10.443.447 Right of use Assets 2 59.832.183 - Tangible Fixed Assets 14 51.649.629 53.559.584 Intangible Fixed Assets 15 643.891 811.553 Deferred Tax Assets 33 8.073.273 3.746.794
TOTAL FIXED ASSETS 140.137.313 76.511.081 TOTAL ASSETS 369.203.380 279.267.716
The accompanying footnotes constitute an integral part of these financial statements. 63
DESA DERİ SANAYİ VE TİCARET ANONİM ŞİRKETİ FINANCIAL POSITION STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON 31ST DECEMBER 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
Independently Audited Independently Audited
Note References Current Period Previous Period 31.12.2019 31.12.2018 LIABILITIES Short Term Liabilities Short Term Financial Liabilities 36 43.110.899 4.995.324 Bank Loans 21.449.859 4.975.430 Leasing Payables 21.635.792 - Other Short Term Financial Liabilities 25.248 19.894 Short Term Parts of Long Term Financial Liabilities 36 15.545.778 32.386.507 Bank Loans 15.545.778 32.386.507 Trade Payables 7 125.579.239 103.110.780 Trade Payables to Related Parties 6 30.277.313 21.451.406 Trade Payables to Non-Related Parties 7 95.301.926 81.659.374 Payables within the Scope of Benefits to Employees 23 6.289.965 5.149.555 Other Payables 9.927.242 9.884.815 Other Payables to Related Parties 6 3.820.442 4.806.213 Other Payables to Non-Related Parties 9 6.106.800 5.078.602 Derivative Financial Instruments 37 - 1.698.296 Deferred Income 7.098.732 5.662.648 Deferred Income from Related Parties 6 4.948.367 3.929.266 Deferred Income to Non-Related Parties 12 2.150.365 1.733.382 Tax liability on profit for the period 33 3.639.435 214.468 Short Term Provisions 4.455.780 4.058.624 Short Term Provisions for Benefits to Employees 21 2.953.257 2.397.580 Other Short Term Provisions 21 1.502.523 1.661.044
TOTAL SHORT TERM LIABILITIES 215.647.070 167.161.017 Long Term Liabilities 59.829.181 36.613.964 Long Term Financial Liabilities 36 47.088.863 27.486.005 Bank Loans 11.084.333 27.486.005 Leasing Payables 36.004.530 - Long Term Provisions 21 4.152.893 5.437.074 Long-Term Provisions for Benefits to Employees 21 4.152.893 5.437.074 Deferred Tax Liability 33 8.587.425 3.690.885
TOTAL LONG TERM LIABILITIES 59.829.181 36.613.964 SHAREHOLDER’S EQUITY Shareholder’s Equity of Parent Company 93.727.129 75.492.735 Paid in capital 26 49.221.970 49.221.970 Capital Adjustment Distinction 26 5.500.255 5.500.255 Other Accumulated Comprehensive Incomes or Expenses not to be Reclassified as Profit or Loss 25.264.311 26.597.856 - Revaluation and Evaluation Earnings/Losses 26 27.549.294 28.245.208 - Actuarial (Loss) / Earning for Benefits to Employees 26 (2.284.983) (1.647.352) Other Accumulated Comprehensive Incomes or Expenses to be Reclassified as Profit or Loss - (1.324.671) - Cash Flow Hedge Gains (Losses) 37 - (1.324.671) Reserves on Retained Earnings 26 960.423 960.423 Accumulated Profits / (Losses) 26 (5.463.098) (13.841.654) Net profit / (loss) for the period 26 18.243.268 8.378.556
TOTAL SHAREHOLDER’S EQUITY 93.727.129 75.492.735 TOTAL LIABILITIES 369.203.380 279.267.716
The accompanying footnotes constitute an integral part of these financial statements. 64
DESA DERİ SANAYİ VE TİCARET ANONİM ŞİRKETİ PROFIT OR LOSS STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON 31ST DECEMBER 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
Independently Audited Independently Audited
Note References Current Period Previous Period 01.01- 31.12.2019 01.01- 31.12.2018
PROFIT OR LOSS PART
Revenue 27 428.112.815 347.648.021 Cost of Sales (-) 27 (266.269.424) (189.033.820) GROSS PROFIT/LOSS FROM BUSINESS OPERATIONS 161.843.391 158.614.201 GROSS PROFIT / LOSS 161.843.391 158.614.201 General Administrative Expenses (-) 28 (16.989.682) (16.228.332) Sales an Marketing Expenses (-) 28 (100.930.218) (109.710.704) Research and Development Expenses (-) 28 (1.566.956) (2.227.706) Other Incomes from Operating Activities 29 31.031.239 36.045.770 Other Expenses of Operating Activities (-) 29 (26.013.241) (31.933.239)
OPERATING PROFIT / LOSS 47.374.533 34.559.990 Incomes from Investing Activities 30 60.741 111.309 Expenses from Investing Activities (-) - - - Profit / (Loss) Share on Investments Valued by Equity Method 4 1.492.491 1.647.095
OPERATING PROFIT/LOSS BEFORE FINANCING INCOME (EXPENSE) 48.927.495 36.318.394 Financing Incomes 31 1.272.675 - Financing Expenses (-) 31 (27.855.174) (25.374.395)
CONTINUING OPERATIONS PROFIT/LOSS BEFORE TAX 22.344.996 10.943.999 Continuing Operations Tax Expense/Income (4.101.728) (2.565.443) Tax Expense/Income for the period 33 (3.639.435) (214.468) Deferred Tax Expense/Income 33 (462.293) (2.350.975)
CONTINUING OPERATIONS PROFIT/LOSS FOR THE PERIOD 18.243.268 8.378.556
PROFIT/LOSS FOR THE PERIOD 18.243.268 8.378.556 Distribution of profit / loss for the period 18.243.268 8.378.556 Non-controlling interests - - Parent Company’s shares 18.243.268 8.378.556 Earnings per Share - - Earnings per Share from Continuing Operations 0,0037 0,0017
The accompanying footnotes constitute an integral part of these financial statements. 65
DESA DERİ SANAYİ VE TİCARET ANONİM ŞİRKETİ OTHER COMPREHENSIVE INCOME STATEMENT PERTAINING TO THE ACCOUNTING PERIOD ENDING ON 31ST DECEMBER 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
Independently Audited Independently Audited
Note References Current Period Previous Period 01.01- 31.12.2019 01.01- 31.12.2018
PROFIT/LOSS FOR THE PERIOD 18.243.268 8.378.556 OTHER COMPREHENSIVE INCOME Items not to be Reclassified in Profit or Loss (1.333.545) (1.385.654)
Items not to be Reclassified in Profit or Loss (1.599.402) (1.624.682) Revaluation Increase (Decrease) of Tangible Assets 26 (781.926) (972.453) Defined Benefit Plans Recalculation Gains / (Losses) 21 (817.476) (652.229) Taxes Relating to Other Comprehensive Income not to be Reclassified in Profit or Loss 265.857 239.028 - Revaluation Increase (Decrease) of Tangible Assets, Tax Effect 26 86.012 95.538 - Other Comprehensive Income Items not to be Reclassified as Other Profit or Loss - - - Defined Benefit Plans Recalculation Gains / (Losses), Tax Effect 33 179.845 143.490
Items to be Reclassified in Profit or Loss - (1.324.671)
Items not to be Reclassified in Profit or Loss - (1.698.296) Cash Flow Hedge Gains (Losses) 37 - (1.698.296) Taxes Relating to Other Comprehensive Income not to be Reclassified in Profit or Loss - 373.625 - Cash Flow Hedge Gains (Losses) 37 - 373.625
OTHER COMPREHENSIVE INCOME (AFTER TAX) (1.333.545) (2.710.325) TOTAL COMPREHENSIVE INCOME 16 .909.723 5.668.231
The accompanying footnotes constitute an integral part of these financial statements. 66
DESA DERİ SANAYİ VE TİCARET ANONİM ŞİRKETİ STATEMENT OF CHANGES IN EQUITY PERTAINING TO THE ACCOUNTING PERIOD ENDING ON 31ST DECEMBER 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
Accumulated Other Comprehensive Incomes and Expenses not to be Reclassified in Profit or Loss
Distinction from Revaluation and Defined Benefit Plans Share Capital Measurement Recalculation Gains / Paid in Capital Adjustment Earnings / Losses Losses
Balances of 1st JANUARY 2018 49.221.970 5.500.255 29.122.123 (1.138.613) - 960.423 (13.563.380) (186.146) 69.916.632
Transfers ------(186.146) 186.146 - Total Comprehensive Income (Expense) - - (876.915) (508.739) (1.324.671) - - - (2.710.325) Impact due to TFRS 9 Policy Change ------(92.128) - (92.128) Shareholders’Other Contributions ------Net profit /(loss) for the period ------8.378.556 8.378.556
Balances of 31st DECEMBER 2018 49.221.970 5.500.255 28.245.208 (1.647.352) (1.324.671) 960.423 (13.841.654) 8.378.556 75.492.735
Balances of 1st JANUARY 2019 49.221.970 5.500.255 28.245.208 (1.647.352) (1.324.671) 960.423 (13.841.654) 8.378.556 75.492.735
Transfers ------8.378.556 (8.378.556) - Total Comprehensive Income (Expense) - - (695.914) (637.631) 1.324.671 - - - (8.874) Impact due to TFRS 9 Policy Change ------Shareholders’Other Contributions ------Net profit /(loss) for the period ------18.243.268 18.243.268
Balances of 31st DECEMBER 2019 49.221.970 5.500.255 27.549.294 (2.284.983) - 960.423 (5.463.098) 18.243.268 93.727.129 67
Accumulated Other Comprehensive Incomes and Expenses to be Reclassified in Profit or Loss Retained Earnings
Accumulated Total Cash Flow Hedge Restricted Profit Profits / Net Profit / Loss Shareholders’ Gains / Losses Reserves Losses for the Period Equity
Balances of 1st JANUARY 2018 49.221.970 5.500.255 29.122.123 (1.138.613) - 960.423 (13.563.380) (186.146) 69.916.632
Transfers ------(186.146) 186.146 - Total Comprehensive Income (Expense) - - (876.915) (508.739) (1.324.671) - - - (2.710.325) Impact due to TFRS 9 Policy Change ------(92.128) - (92.128) Shareholders’Other Contributions ------Net profit /(loss) for the period ------8.378.556 8.378.556
Balances of 31st DECEMBER 2018 49.221.970 5.500.255 28.245.208 (1.647.352) (1.324.671) 960.423 (13.841.654) 8.378.556 75.492.735
Balances of 1st JANUARY 2019 49.221.970 5.500.255 28.245.208 (1.647.352) (1.324.671) 960.423 (13.841.654) 8.378.556 75.492.735
Transfers ------8.378.556 (8.378.556) - Total Comprehensive Income (Expense) - - (695.914) (637.631) 1.324.671 - - - (8.874) Impact due to TFRS 9 Policy Change ------Shareholders’Other Contributions ------Net profit /(loss) for the period ------18.243.268 18.243.268
Balances of 31st DECEMBER 2019 49.221.970 5.500.255 27.549.294 (2.284.983) - 960.423 (5.463.098) 18.243.268 93.727.129 68
DESA DERİ SANAYİ VE TİCARET ANONİM ŞİRKETİ CASH FLOW STATEMENT PERTAINING TO THE ACCOUNTING PERIOD ENDING ON 31ST DECEMBER 2019 (All amounts expressed in Turkish Lira)
Independently Audited Independently Audited
Note References Current Period Previous Period 01.01.-31.12.2019 01.01.-31.12.2018
A. CASH FLOWS FROM OPERATING ACTIVITIES 63.140.578 17.584.807
PROFIT / (LOSS) FOR THE PERIOD 18.243.268 8.378.556 Profit / Loss for the Period from continuing operations 18.243.268 8.378.556 Adjustments relating to Profit/Loss Reconciliation for the Period: 27.690.726 4.405.235 Adjustments relating to Depreciation and Amortization Expenses 24 26.877.965 5.174.122 Adjustments Relating to Impairment (Cancellation) 1.399.883 (876.915) - Adjustments Relating to Impairment (Cancellation) of Tangible Assets (695.914) (876.915) - Adjustments Relating to Impairment (Cancellation) of Receivables 2.095.797 - Adjustments relating to Provisions (1.243.279) 29.946 - Adjustments relating to Provisions for Benefits to Employees 21-23 (1.084.758) 1.218.503 - Adjustments relating to case and/or punishment provisions (cancellation) 21 (158.521) (2.671.306) - Adjustments relating to General Provisions (Cancellation) 21 - 942.468 - Adjustments relating to Other Provisions (Cancellation) 21 - 540.281 Adjustments relating to Interest Incomes and Expenses 422.190 (983.943) - Adjustments relating to Interest Expenses 36 - (928.984) -Deferred financing expenses from forward purchases 7 1.204.625 679.300 -Unearned financing incomes from forward sales 7 (782.435) (734.259) Adjustments Relating to Income from Governmental Incentives 19 252.286 375.162 Adjustments Relating to Unrealized Foreign Currency Translation Differences 29-31 - 49.858 Adjustments Relating to Retained Profits of Investments Made by Equity Method (1.492.491) (1.647.095) - Adjustments relating to the Undistributed Earnings of Affiliates 4 (1.492.491) (1.647.095) Adjustments relating to Tax (Income)Expense 33 1.474.172 2.350.975 Other Adjustments relating to Profit (Loss) Reconciliation - (66.875)
Changes Realized in Operating Capital 17.206.584 4.801.016
Adjustments relating to Increase (Decrease) in Trade Receivables (13.266.785 (13.058.883) - Decrease (Increase) in Trade Receivables from Related Parties 6 (10.864.763) (12.832.955) - Decrease (Increase) in Trade Receivables from Non-Related Parties 7 (2.402.022) (225.928) Adjustments relating to Decrease (Increase) in Other Receivables relating to Activities 491.767 (1.659.796) - Decrease (Increase) in Other Receivables from Related Parties relating to Activities 6 547.429 (1.935.674) - Decrease (Increase) in Other Receivables from Non-Related Parties relating to Activities 7 (55.662) 275.878 Adjustments relating to Decrease (Increase) in Inventories 10 6.168.950 (15.047.953) Decrease (Increase) in Prepaid Expenses 12 (70.105) (3.204.646) Adjustments relating to Increase (Decrease) in Trade Payables 12.437.927 26.990.254 - Increase (Decrease) in Trade Payables to Related Parties 6 - 9.374.728 - Increase (Decrease) in Trade Payables to Non-Related Parties 7 12.437.927 17.615.526 Increase (Decrease) in Payables under Benefits to Employees 21 - 642.579 Adjustments relating to Increase (Decrease) in Other Payables relating to Activities 10.008.746 6.004.727 - Increase (Decrease) in Other Payables to Related Parties relating to Activities 7.840.136 4.806.213 - Increase (Decrease) in Other Payables to Non-Related Parties relating to Activities 9 2.168.610 1.198.514 Increase (Decrease) in Deferred Income 12 1.436.084 4.597.417 Adjustments related with other increases (decreases) in working capital - (462.683) - Decrease (Increase) in Other Assets relating to Activities 29 - 671.928 - Increase (Decrease) in Other Liabilities relating to Activities - (1.134.611)
Cash Flows from Operations 63.140.578 17.584.807 69
DESA DERİ SANAYİ VE TİCARET ANONİM ŞİRKETİ CASH FLOW STATEMENT PERTAINING TO THE ACCOUNTING PERIOD ENDING ON 31ST DECEMBER 2019 (All amounts expressed in Turkish Lira)
Independently Audited Independently Audited
Note References Current Period Previous Period 01.01.-31.12.2019 01.01.-31.12.2018
B. CASH FLOWS FROM INVESTMENT OPERATIONS (3.575.446) (5.341.297)
Cash Inflows from Sale of Tangible and Intangible Fixed Assets 14 26.040 150.203 Cash Outflows from Purchase of Tangible and Intangible Fixed Assets 14 (3.601.486) (5.491.500) - Cash Outflows from Purchase of Tangible Fixed Assets 14 (3.525.981) (5.124.567) - Cash Outflows from Purchase of Intangible Fixed Assets 15 (75.505) (366.933)
C. CASH FLOWS FROM FINANCIAL OPERATIONS (40.553.006) (20.811.044)
Cash Inflows from Borrowings 54.741.610 66.265.597 - Cash Inflows from Loans 54.741.610 66.265.597 Cash Outflows relating to Discharge of Debt 36 (66.454.737) (84.693.572) Cash Outflows from Loan Repayments 36 (66.454.737) (84.693.572) Cash Outflows relating to Discharge of Debt from Lease Contracts (24.198.691) - Interest paid 29 (4.267.563) (2.383.069) Cash Inflows and Outflows from Derivative Instruments (373.625) -
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS BEFORE EFFECT OF FOREIGN CURRENCY CONVERSION ADJUSTMENTS 19.012.126 (8.567.534)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 42 19.012.126 (8.567.534)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD 42 320.860 8.888.394
CASH AND CASH EQUIVALENTS AT THE END OF PERIOD 42 19.332.986 320.860
The accompanying footnotes constitute an integral part of these financial statements. 70
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
1. COMPANY’S ORGANIZATION AND SUBJECT OF ACTIVITY 1.3. Affiliates and Subsidiaries
1.1. Subject of Activity Titles, subjects of activity and headquarters of the Company’s affiliates and subsidiaries are as follows: Desa Deri Sanayi ve Ticaret A.Ş. (“Company”) has been established in January 29th , 1982 and engages in 31.12.2019 31.12.2018 manufacturing, sales, import and export of leather ready-to- Field of Headquarter Participation Participation wear, bags, shoes and all variety of leather craft products. Activity Rate % Rate %
The Company’s registered office is located in Halkalı Cad. No: Affiliate 208 Sefaköy- Küçükçekmece / İstanbul. The Company has also a branch operating in Tuzla Free Zone. Additionally, the Company Marfar Deri San. ve has three factories, one of which is located at the address of Tic. Ltd. Şti. Textile Istanbul-Turkey 50% 50% its registered office and the others in Ergene and Düzce at the following addresses: Samsonite Seyahat Ür. A.Ş. Textile Istanbul-Turkey 40% 40%
Ergene Factory: Sağlık Mahallesi Kuzey Caddesi No: 14-24 Subsidiary Ergene / Tekirdağ Düzce Factory: Organize Sanayi Bölgesi 9. Ada 4-5 Parsel Leather Fashion Limited Textile Moscow-Russia 100% 100% Beyköy / Düzce Desa International Textile London-England 100% 100% The Company’s contact information is as follows. Desa SMS Ltd. Textile London-England 100% 100% Telephone : 0090 212 473 18 00 Desa International (UK) Ltd. Textile London-England 100% 100% Fax : 0090 212 698 98 12 Desa Deutschland GmbH Textile Düsseldorf-Germany 100% 100% Web : www.desa.com.tr Leather Fashion Bulgaria Company’s stocks have been offered to the public on April 29- EOOD Textile Sofia-Bulgaria 100% 100% 30th, 2004 and 34.92% thereof are traded at the Istanbul Stock Exchange (“BİST”) as of December 31st , 2019. Desa Nineteenseventytwo SRL Italy Textile Milano-Italy 100% 100% The Company has 1.909 employees as of December 31st , 2019 (December 31st , 2018 - 1.885 employees) Financial statements dated December 31st , 2019 of Samsonite Seyahat Ürünleri A.Ş., which is one of the affiliates of the 1.2. Capital Structure Company, have been consolidated with the Company’s financial statements of the same term through equity method. The Company has shifted to registered capital system in 2007 and its registered authorized stock amounts to TL 150.000.000. Other affiliates and subsidiaries are entered into the financial Its paid capital is TL 49.221.970 as of December 31st , 2019 statements at their cost values. (Note 4) (December 31st , 2018: TL 49.221.970) and has been divided into 4.922.196.986 (December 31st , 2018: 4.922.196.986) stocks each 1.4. Approval of Financial Statements of which has a nominal value of 1 Kr. The Company’s financial statements have been approved on As of December 31st, 2019 and December 31st, 2018, issued and 11.02.2020 by the Board of Directors. General Board and certain paid in capital amounts at their carrying value are as follows: regulatory boards are entitled to change financial statements. 31.12.2019 31.12.2018 Name Surname Share Share Share Share 2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS Title Percentage Amount Percentage Amount 2.a. Basis for Presentation of Financial Statements Çelet Holding A.Ş. 54,28% 26.717.682 54,28% 26.717.682 Melih Çelet 10,00% 4.922.197 10,00% 4.922.197 Applied Financial Reporting Standards Free Float (*) 34,92% 17.188.312 34,92% 17.188.312 Other 0,80% 393.779 0,80% 393.779 The accompanying financial statements pertaining to the accounting period of December 31st, 2019 have been prepared in accordance with the provisions of the Communiqué serial TOTAL 100% 49.221.970 100% 49.221.970 II, No: 14.1 on Principles Regarding Financial Reporting in Capital Market of the Capital Markets Board published in official (*)The share with a nominal value of TL 4.129.566 representing gazette issue no 28676 dated June 13th, 2013 and Turkish 8.39% of the share capital in the free float belongs to Çelet Accounting Standards (“TAS”), Turkish Financial Reporting Holding A.Ş. and the share with a nominal value of TL 4.071.184 Standards (“TFRS”) issued by Public Oversight Accounting and representing 8,27% belongs to Melih Çelet as of 31.12.2019. Auditing Standards Authority of Turkey (“POA”) and annexes and comments regarding to them have been based on pursuant to (*)The share with a nominal value of TL 4.129.566 representing the Article 5 of the Communiqué. 8.39% of the share capital in the free float belongs to Çelet Holding A.Ş. and the share with a nominal value ofTL 3.958.808 The financial statements have been presented in accordance representing 8,04% belongs to Melih Çelet as of 31.12.2018. with the 2019 TMS taxonomy announced on April 15th, 2019 71
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
and issued by the POA in accordance with the Statutory Decree 2.c. Restatement of Financial Statements in High Inflation (“KHK”) No.660 article 9 paragraph (b). Periods
Under its resolution adopted on March 17th, 2005, the CMB Since the CMB has announced, under its resolution adopted on has announced that the application of inflation accounting March 17th, 2005, that the application of inflation accounting is is not required for publicly traded companies operating in not required for publicly traded companies operating in Turkey Turkey as from January 1st, 2005. Therefore, the Company’s and preparing their financial statements in accordance with the financial statements have been prepared in accordance with this CMB Accounting Standards as from January 1st, 2005, it has resolution. terminated the practice of preparing and presenting the financial statements in accordance with the International Accounting The Company and its subsidiaries in Turkey comply with Standard 29 “Financial Reporting in Hyperinflationary principles and rules issued by the Capital Markets Board (“the Economies” effective as of that date. CMB”), the Turkish Commercial Code (“the TCC”), tax legislation and rules for the Uniform Chart of Accounts issued by the 2.d. Comparative Information and Restatement of Previous Ministry of Finance in maintaining their books of account and Period Financial Statements preparing their statutory financial statements. The subsidiary operating in a foreign country has prepared its legal financial The financial statements of the Company are prepared statements in accordance with the laws and regulations comparatively with the previous period in order to enable applicable in the country in which it operates. Financial the determination of the financial position and performance statements are prepared by taking lands, buildings, underground evaluations. In order to maintain comparability when the and overland plants, machineries, facilities and devices from presentation or classification of the financial statement items tangible fixed assets group shown with their fair values, changes, the previous period financial statements are also biological assets carried with their fair values and historical reclassified accordingly: cost principle besides financial asset and liabilities, shown with their fair values as the basis, designed by reflecting necessary The Company has prepared its statement of financial position corrections and classifications to make an accurate presentation for the year ended on December 31st , 2019 comparatively to the legal records pursuant to TFRS, measured and submitted with its statement of financial position dated 31 2018 and its in Turkish Liras (“TL”) which is the functional currency of the profit or loss and other comprehensive income statement, cash Company. flow statement and statement of changes in equity the period between January 1st - December 31st, 2019 comparatively with Functional and Presentation Currency the period between January 1st and December 31st, 2018.
The accompanying financial statements have been presented in 2.e. Significant Accounting Valuation Estimates and the functional currency of the primary economic environment in Assumptions which the entity operates. The results and the financial position of the Company have been expressed in Turkish Lira (“TL”), The preparation of the financial statements in accordance with which is the functional currency of the Company. TAS requires the management to make decisions, estimates and assumptions which affect the application of accounting policies Netting / Offsetting and the reported amounts of assets, liabilities, incomes and expenses. Actual results may differ from these estimates. The Financial assets and liabilities are shown in the financial status assumptions and the assumptions underlying the estimates table with their net values if there is right of netting legally, paid are continuously reviewed. Updates in accounting estimates as net or possible to be collected or obtaining asset and fulfilling are recognized in the period in which they are updated and in liability are possible to be performed synchronically. subsequent periods affected by these updates.
Going Concern The interpretations which may have a significant impact on the amounts reflected in the financial statements and the The financial statements have been prepared on the basis of assumptions made by considering the main sources of the going concern under the assumption that the Company will estimates already available on the date of the statement of benefit from its assets and fulfill its obligations in the coming financial position or the future estimates are as follows: year and in the ordinary course of its activities. a) Severance pay and termination indemnity liability related 2.b. Declaration of Conformity with TAS to the Employee Benefits is determined by using the actuarial assumptions (discount rates, future salary increases and The Company prepared its financial statements for the year employee turnover rate). (Footnote 21) ended on December 31st , 2019 in accordance with the CMB’s b) The Company has depreciated its tangible and intangible Communiqué Serial: II-14.1 and its announcements clarifying assets on a straight-line basis over their useful lives. The this Communiqué. The financial statements and notes are estimated useful life residual value and depreciation method presented in accordance with the formats recommended by the are reviewed every year for the potential effects of the changes CMB and by including the compulsory disclosures. in the estimates and are recognized prospectively, if there is a change in the estimates. (Footnote 14,15) The Company’s financial statements as of December 31st, 2019 have been approved by meeting of the Board of Directors dated 2.f. Changes and Errors in Accounting Policies February 11th, 2020 The General Assembly is authorized to amend the financial statements. Changes are made in accounting policies, if they are necessary or if they have the nature which would result in a 72
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
more appropriate and reliable presentation of the effects of Company’s accounting policies related to its financial liabilities transactions and events on the Company’s financial position, and derivative financial instruments. The impact of TFRS 9 performance or cash flows in the financial statements. If the on the classification and measurement of financial assets is changes in accounting policies affect the previous periods, the specified hereunder. According to TFRS 9, at initial recognition policy is applied also retrospectively in the financial statements of a financial asset in financial statements, it is classified as as if it were always in use. In the current period, there has been measured at amortized cost, measured at fair value through no significant change in the accounting policies of the Company other comprehensive income (debt instruments), measured except for the impact of TFRS 9 Financial Instruments standard at fair value through other comprehensive income (equity and TFRS 16 Leasings standard. instruments) or measured at fair value through profit or loss. The classification of financial assets in accordance with IFRS 9 is TFRS 9 Financial Instruments generally based on the business model used by the entity for the management of financial assets and the contractual cash flows The Company has begun to apply TFRS 9 Financial Instruments characteristics of the financial asset. Standard as of January 1st, 2018. TFRS 9 is applied retrospectively as of the effective date. The Company has applied Assets Measured at Amortized Cost this standard retrospectively, but by choosing the simplified application in accordance with the application exemption A financial asset is measured at amortized cost, if both the thereof. In other words, the Company has applied the standard following conditions are met and it is not classified as Fair Value by choosing the approach of presenting the previous period’s Through Profit or Loss: effect of the transition to the new application to the retained earnings as a record of the change without need for presenting 1. The financial asset is held within a business model whose the balance sheets of three periods which contain the opening objective is to collect contractual cash flows; balance sheets of the current period in which the application and has been made, the previous period and the period before that 2. The contractual terms of the financial asset give rise on pursuant to TAS 8. The Company has evaluated the management specified dates to cash flows that are solely payments of models which are applicable for financial assets at the date principal and interest on the principal amount outstanding of the first application of TFRS 9 (January 1st, 2018) and has classified its financial instruments according to the appropriate Assets Measured at Fair Value Through Other Comprehensive TFRS 9 categories. The classification and measurement Income effect arising from this new reclassification has realized upon cancellation of such measurement exception of assets, which A debt instrument is measured at Fair Value Through Other are not traded on the stock exchange and of which the fair value Comprehensive Income, if both the following conditions are met cannot be measured reliably and therefore, which are permitted and it is not classified as Fair Value Through Profit or Loss: to be carried at cost in accordance with TAS 39, pursuant to TFRS 9 as well as upon measurement of fair values of these assets 1. The financial asset is held within a business model whose by valuation techniques. Apart from this, the measurement and objective is to collect contractual cash flows and to sell the classification of financial assets have not changed. In addition, financials and the Company has applied the TFRS 7 Financial Instruments: 2. The contractual terms of the financial asset give rise on Disclosures standard in 2018 and for the comparative periods. specified dates to cash flows that are solely payments of TFRS 9 has introduced new conditions for the followings: principal and interest on the principal amount outstanding.
1) Classification and measurement of financial assets and At initial recognition of the investments in equity instruments, liabilities. which are not held for trading, in financial statements, it 2) Impairment of financial assets. is possible to make an irrevocable election to present the 3) General hedge accounting. subsequent changes in fair value in other comprehensive income. The details of these new conditions and their impact on the financial statements of the Company are explained below. The Assets Measured at Fair Value Through Profit or Loss Company has applied TFRS 9 in accordance with the provisions regarding transition stipulated in TFRS 9. TFRS 9 regulates the All of the financial assets, which are not measured at amortized provisions regarding recognition and measurement of financial cost or at fair value through other comprehensive income as assets and financial liabilities. This standard supersedes the mentioned above, are measured at fair value through profit or TAS 39 Financial Instruments: Recognition and Measurement loss. These include all derivative financial assets as well. At standard. The details of new significant accounting policies as initial recognition of the financial assets in financial statements, well as the impact and nature of changes in previous accounting a financial asset can be irrevocably designated as fair value policies are specified hereunder. through profit or loss on condition that any accounting mismatch which would arise from measuring assets or liabilities or i) Classification and Measurement of Financial Assets and recognizing the gains and losses on them on different bases Financial Liabilities is removed or significantly reduced. At initial measurement of financial assets other than those measured at fair value TFRS 9 substantially protects the provisions of TAS 39 with through profit or loss (except for trade receivables measured respect to classification and measurement of financial liabilities. at the transaction cost and not having an important financing However, the previous TAS 39 classification categories have component at initial recognition thereof), the transaction costs been abrogated for financial assets, loans and receivables held directly attributable to the acquisition or issuance thereof are to maturity as well as available-for-sale financial assets. The also measured by being added to the fair value. application of TFRS 9 has not had a significant impact on the 73
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
The following accounting policies apply to subsequent measurement of financial assets.
Financial assets measured at fair These assets are measured at fair value in their subsequent measurements. Net value through profit/loss gains or losses related thereto, including any interest or dividend income, are recognized in profit or loss.
Financial assets measured at These assets are measured at amortized cost using the effective interest method in amortized cost their subsequent measurements. Their amortized costs are reduced by the amount of impairment losses, if any. Interest incomes, foreign currency gains and losses and impairment losses are recognized in profit or loss. Gains or losses arising from derecognition thereof from the statement of financial position are recognized in profit or loss. Debt instruments measured at fair These assets are measured at fair value in subsequent periods. Interest incomes, value through other comprehensive foreign currency gains and losses and impairment losses calculated using the effective income interest method are recognized in profit or loss. Other gains and losses are recognized in other comprehensive income. When financial assets are excluded from the statement of financial position, the gains or losses recognized in other comprehensive income previously are reclassified to profit or loss.
Equity instruments measured at fair These assets are measured at fair value in subsequent periods. Dividends are value through other comprehensive recognized in profit or loss unless it is expressly intended to recover part of the cost of income the investment. Other net gains and losses are recognized in other comprehensive income and cannot be reclassified to profit or loss.
The effect of the application of TFRS 9 on the carrying values of financial assets as of January 1st, 2018 stems only from the new provisions regarding impairment as explained hereunder in more detail. The following table and accompanying notes describe the original measurement categories under TAS 39 and the categories of new measurement made according to TFRS 9 for each class of the Company’s financial assets at January 1st, 2018.
Financial Assets Original classification New classification as per Original carrying New carrying as per TAS 39 TFRS 9 value as per TAS 39 value as per TFRS 9
Cash and cash equivalents Credit and receivables Amortized cost 19.332.986 19.320.240 Trade and Other Receivables Credit and receivables Amortized cost 38.456.348 38.338.235 Financial Investments Credit and receivables Assets measured at fair value through profit/loss 19.660.150 19.660.150
Total Financial Assets 77.449.484 77.318.625
Financial Liabilities Original classification New classification Original carrying New carrying value as per TAS 39 as per TFRS 9 value as per TAS 39 as per TFRS 9
Loans Credit and receivables Amortized cost 105.745.540 105.745.540 Derivative Instruments Credit and receivables Assets Measured at Fair Value Through Other Comprehensive Income - -
Total Financial Liabilities 105.745.540 105.745.540 ii. Impairment of Financial Assets Financial assets measured at amortized cost consist of trade receivables, cash and cash equivalents and private sector debt Upon implementation of TFRS 9, “Expected Credit Loss” instruments. (ECL) model has superseded “Incurred Loss” model in TAS 39. The new impairment model is applicable to financial Under TFRS 9, provisions for loss are measured by any of the assets measured at amortized cost, contractual assets and following: Debt instruments measured at fair value through other -12-month ECLs: are the part which represents the expected comprehensive income, but not applied for investments in equity credit losses that result from possible default event within 12 instruments. months after the reporting date. 74
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
-Lifetime ECLs: are the expected credit losses that result from decreasing the carrying value of the financial asset in the all possible default events over the expected life of the financial statement of financial position. instrument Impairment losses related to trade and other receivables, In determining whether the credit risk of a financial asset including the contractual assets, are presented separately in the has increased substantially since the initial recognition statement of profit or loss. thereof and in estimating its ECLs, the Company considers reasonable and supportable information that is relevant to Impairment losses on other financial assets are presented under the estimation of expected credit losses, including the effects “the financing costs” in a manner similar to the presentation in of expected prepayments, and that may be obtained without TAS 39 and are not shown separately in the statement of profit or incurring excessive costs or efforts. This information includes loss, taking into account their significance. quantitative and qualitative information and analysis basing on the Company’s past credit loss experience and containing Effect of new impairment model prospective information. The Company assumes that the credit risk on a financial asset is significantly increased if it is 30 days Impairment losses are expected to increase and become more past due. variable for the assets under the TFRS 9 impairment model. Transition to TFRS 9 has no material impact on retained The Company considers a financial asset as in default, if: earnings/losses. As of December 31st, 2019, the expected credit -the debtor does not fully fulfill its credit obligation without loss amounts to TL 12,746 (Note 42). resorting to any transactions such as the use of collateral (if any) by the Company or TFRS 16 Leasing -the financial instrument is 90 days past due. The Company – As a Lessee In order to determine whether a financial instrument has a low credit risk, the entity may use internal credit risk ratings or The Company evaluates in the beginning of an agreement other methodologies that are consistent with a globally accepted whether the agreement has a nature of leasing or involves a definition of low credit risk and take into account the type and leasing transaction. In case the agreement transfers the right of risks of the evaluated financial instruments. An external rating control of the use of a defined asset against a fee for a specific in form of “Investment score” may indicate that the financial period of time, then this agreement bears a leasing nature or instrument has a low credit risk. involves a leasing transaction.
Measurement of ECLs While evaluating whether an agreement transfers the right of control of the use of a defined asset for a specific period of time, ECLs are a weighted estimate of the probability of credit losses the Company takes the following conditions into consideration: over the expected life of the financial instrument. In another saying, it is the credit losses that are measured at the present 1) An agreement involving a defined asset; an asset is generally value of all cash deficits (for example, the difference between defined explicitly or implicitly in an agreement. the cash inflows to the entity and the cash flows that the entity 2) A functional part of an asset being physically separate or expects to deserve). represent almost the whole capacity of the asset. In case the supplier has a principal right for substituting an asset and The cash deficit is the difference between the cash flows achieves economic benefit from this, then the asset is not required to be made to and the cash flows expected to be defined. received by the entity. Since the amount and the timing of the 3) Having the right to obtain almost all of the economic benefits payments are considered in expected credit losses, a credit loss to be provided from the use of the defined asset takes place, even if the entity expects to receive the full payment 4) Having the right to manage the use of a defined asset. The later than the maturity specified in the contract. ECLs are Company evaluates the right of use of the asset it has in case discounted at the effective interest rate of the financial asset. decisions on how and what for the asset shall be used are determined before. The Company has the right of manage the Credit impairment of financial assets use of an asset in the following conditions:
At the end of each reporting period, the Company evaluates i. The Company having the operating right of the asset during whether the financial assets measured at amortized cost and the usage period (or directing the asset to others to operate as it the debt instruments measured at fair value through other has determined) and the supplier not having the right to change comprehensive income are impaired. When one or more events these operating instructions or that adversely affect the future cash flows of a financial asset ii. The Company having the asset (or specific properties of the take place, the financial asset is impaired. asset) designed in a way to determine beforehand how and for what the asset shall be used during the usage period. Presentation of Impairment The Company reflects a right of use asset and a lease liability in The provisions for losses in connection with the financial assets the financial statements on the date leasing is actually initiated. measured at amortized cost are deducted from the gross carrying value of the assets. Right of Use Asset
The provisions for losses in connection with the debt instruments Right of use asset is first accounted by cost method and includes measured at fair value through other comprehensive income the following: is reflected in the other comprehensive income instead of a) First measuring amount of the lease liability, 75
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
b) The amount obtained by deducting all leasing incentives easily determined, the periodical rate of interest is the implicit received from all lease payments made on the date the leasing interest rate in leasing. In case this ratio is not determined has commenced or before, easily, the Company uses the Company’s incremental borrowing c) All direct costs in the beginning borne by the Company and rate of interest. After the date on which leasing has actually commenced, the Company recalculates the lease liability in a While applying the cost method, the Company measures the way to reflect changes in the lease payments. The Company right of use asset over the cost which: reflects the new calculation amount of the lease liability on financial statements as a correction in right of use asset. a) accumulated depreciation and accumulated impairment losses are deducted from and In cases when one of the following situations occur, the Company b) is corrected according to the remeasuring of lease liability. recalculates the lease liability by reducing the revised lease payments over a revised rate of discount: The Company applies the provisions of depreciation in Turkish Accounting Standards (TAS) 16 Tangible Fixed Assets standard a) A change to occur in the leasing period. The Company while subjecting right of use asset to depreciation. In case the determines the revised lease payments on the basis of a revised Supplier transfers ownership of the underlying asset to the leasing period. Company in the end of the leasing period or shows that the right b) A change to occur in evaluating of an option relevant to of use asset cost shall use the Company’s option to purchase, purchasing an underlying asset. The Company determines the Company subjects its right of use asset to depreciation revised lease payments in a way to reflect the change in the from the date leasing has initiated actually to the end of the amounts to be paid within the scope of option to purchase. underlying asset’s useful life. In other situations, the Company subjects its right of use asset to depreciation, from the date The Company determines the revised rate of discount for the leasing has initiated actually to the shorter of the subject asset’s remaining part of the leasing period as the implicit interest rate useful life or leasing period. in the leasing if it is easily determined or as the incremental borrowing rate of interest of the Company on the date the The Company applies TAS 36 Impairment in Assets standard reevaluation is made if not determined easily. to determine whether right of use asset has been exposed to impairment and to account any determined impairment loss. In case one of the followings occurs, the Company reassesses lease liability by reducing revised lease payments: Lease Liability a) A change to occur in the amounts expected to be paid On the date leasing has actually commenced, the Company within the scope of residual value commitment. The Company calculates its lease liability over the current value of the lease determines revised lease payments in a way to reflect change payments unpaid on that date. Lease payments are discounted in the amounts expected to be paid within the scope of residual by using implicit interest rate in leasing if this rate is easily value commitment. determined. Unless this rate is determined easily, the Company uses the Company’s incremental borrowing rate of interest. b) A change to occur in these payments as a result of a change in an index or ratio used in determining future lease payments. Lease payments included in calculation of lease liability on The Company measures again the lease liability to reflect the the date leasing has actually commenced are composed of the subject revised lease payments only when there is a change in following payments to be made for right of use of the underlying cash flows. asset during the leasing period and unpaid on the date leasing has actually commenced: The Company determines revised lease payments on the remaining leasing period in accordance with the payments a) The amount obtained by deducting all kinds of leasing associated with the revised agreement. The Company in such incentive receivables from fixed payments, case uses an unchanged rate of discount. b) Variable lease payments depending on an index or ratio and their first evaluation is made on the date leasing has actually The Company accounts the restructuring of the leasing as commenced by using an index or ratio, a separate leasing in case both of the conditions below are c) In case the Company is reasonably sure that it shall use option provided: to purchase, price of use of this option and d) In case leasing period shows that the Company shall use an a) Restructuring to extend the scope of leasing by adding right of option to end the leasing, penalty payments on ending leasing. use of one or more underlying assets and b) Leasing fee to increase as much as the proper corrections After the date leasing has actually commenced, the Company made in the subject sole price to reflect the sole price of the evaluates lease liability as the following: increase in the scope and conditions of the relevant agreement. a) Increases Book value to reflect the interest in lease liability, The Company – As a Lessor b) Reduces Book value to reflect the lease payments made and c) Recalculates Book value in a way to reflect reassessments All of the leases of the Company as a lessor are operational and restructurings or in a way to reflect fixed lease payments as leases. In operational leases, leased assets are classified under of their revised essence. investment properties, tangible fixed assets or other current assets in consolidated balance sheet and rental incomes Interest on lease liability of each period in the leasing period is obtained are reflected in consolidated income statement in equal the amount found by applying a fixed periodical rate of interest amounts during leasing period. Rental incomes are reflected to the remaining balance of the lease liability. In case it is in consolidated income statement during the lease period by a 76
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
straight-line method. For an agreement including a component change in accounting estimate is related to only one period, it having one or more additional leasing quality or not along with is reflected in the financial statements in the current period in a leasing component, the Company distributes the fee stated which the change is made, if it is related to the future periods, in the agreement by applying TFRS 15, “Revenue arising from both in the period in which the change is made and in the future agreements concluded with the customer” standard. periods, for being considered in determining the period profit or loss prospectively. The nature and amount of a change in the accounting estimate which has an impact on the outcome TFRS 16 First Transition to Leases Standard of the current period or is expected to have an impact on the subsequent periods is disclosed in financial statements except The Company has applied TFRS 16 “Leases” standard taking for the cases in which the effect of future periods’ impact cannot the place of TAS 17 “Leasing Transactions” as of January 1st, be estimated. There is no change in the accounting estimates 2019 which is the first application date. The Company has not expected to have an impact on the results of operations in the rearranged the comparable amounts for the previous year by current period. using simplified transition application. By this method, all right of use assets are assessed over the amount of leasing debts at 2.h. Amendments in Turkish Financial Reporting Standards the transition to the application (corrected according to leasing costs which advance payment of is made or accrued). a) New standards in effect since December 31st, 2019 and changes brought in the existing previous standards and During the first application, the Company has recorded leasing comments: liability relevant to leases classified as operational leasing previously in compliance with TAS 17. These liabilities are - TFRS 9, “Financial Instruments” assessed over the current value discounted by using alternative borrowing rate of interest of remaining lease payments as of Valid on January 1st, 2018 or in annual reporting periods starting January 1, 2019. Alternative borrowing rate the Company uses as after this date. This standard is replacing TAS 39. Includes of January 1st, 2019 is 23% for Turkish Liras. Asset right of use requirements on classification and assessment of financial and liability of leases classified as financial leasing previously is assets and liabilities and also the expected credit risk model assessed over the value carried before transition if the subject which shall take the place of realized impairment loss model assets exist. being currently used. Stores Vehicles Office Total - TFRS 15, “Revenue from Customer Agreements” Increase within the period 80.524.454 1.314.560 - 81.839.014 Valid on January 1st, 2018 or in annual reporting periods starting Depreciation within after this date. The new standard arising as a result of the the period (21.614.038) ( 392.793) - ( 22.006.831) compliance study performed with the Accounting Standards Accepted in the United States aims to ensure financial reporting 58.910.416 921.767 - 59.832.183 of revenue and total revenues of financial statements to be worldwide comparable. The Company’s interest expenses in leasing liabilities are TL 18,413,778. - TAS 40, Changes in “Investment Properties” standard; Extension and termination options Leasing liability is being determined by considering extension Valid on January 1st, 2018 or in annual reporting periods starting and termination options in agreements. Majority of extension after this date. These changes made relevant to classification and early termination options in contracts are composed of of investment properties make netting related to classifications options which may be applied jointly by the lessor. The lessor made to investment properties or from real estate in case determines the leasing period by including the subject extension there is a change in using purpose. In case use of a real estate and early termination options if they are under the initiative changes, assessment of whether this real estate complies with of the Lessor according to the contract and use of options is definitions of ‘investment property’ is required. reasonably definite. This change should be supported with evidences.
TFRS 15 Revenue from Contracts with Customers - Annual Improvements of the Period of 2014-2016 Valid on January 1st, 2018 or in annual reporting periods starting TFRS 15 Revenue from Contracts with Customers standard after this date. provides a single and comprehensive model and guide for • Short term exceptions in the first application stages of TFRS recognition of revenue and superseded TAS 18 Revenue 1, “First Application of Turkish Financial Reporting Standards”, standard. The standard has entered into force on January 1st, TFRS 7, TAS 19 and TFRS 10 standards are revoked. 2018 and it has no material impact on the financial statements of • TAS 28, “Investments in Participations and Business the Company. Partners”; clarified assessing a participation or business partnership from fair value. 2.g. Changes and Errors in Accounting Estimates
Accounting estimates are made basing on reliable information - TFRS Comment 22, “Transactions and Advance Payments and reasonable estimation methods. However, estimates are Made in Foreign Currency” revised as a result of changes in circumstances under which the estimation has been made, obtaining new information or Valid on January 1st, 2018 or in annual reporting periods starting emergence of additional developments. If the impact of the after this date. This comment handles transactions performed 77
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
in foreign currency or making the payments as a part of this type tax calculation shall be evaluated and accounted in case of of transactions or pricing in foreign currency. This comment uncertainties in income taxes. Uncertainty of tax application guides situations where a single payment is made/received, and arises when it is not known whether a tax application made by a more than one payment is made/received. The purpose of this company is accepted or not by tax authorities. guidance is reducing variety in application. For example, specifically when a tax relevant to an expense to be accepted as a discount or whether a specific item to be included - TFRS 9, “Changes in Financial Instruments” in a returnable tax calculation or not is uncertain in law. TFRS Comment 23 is effective in any situation where tax applications Valid on January 1st, 2019 or in annual reporting periods starting of an item are uncertain; including tax base amounts of taxable after this date. This amendment certifies accounting profit or income, expense, asset or liability, tax expense, receivable and loss arising from a financial liability evaluated with an amortized tax rates. cost is changed without resulting to be left out of the financial statement directly in profit or loss. Profit or loss is calculated - 2015-2017 Annual Improvements as a difference between cash flows depending on an original agreement and cash flows discounted from original effective rate Valid for January 1st, 2019 and annual reporting periods after of interest and changed. This means that the difference, different this date. These improvements include the following changes: from TAS 39, is not possible to be accounted by spreading the • TFRS 3 ‘Business Combinations’, business enterprise ensuring instrument all lifelong. control reevaluates the share it has acquired previously in joint activity. - TAS 28, “Changes in Investments in Participations and • TFRS 11 ‘Joint Agreements’, business enterprise ensuring joint Business Partnerships” control does not reevaluate the share it has acquired previously in joint activity. Valid on January 1st, 2019 or in annual reporting periods starting • TAS 12 ‘Income Taxes’, business enterprise accounts income after this date. It has clarified that the Companies may account tax effects of dividends in the same way. their investments subject to long-term participation or joint • TAS 23 ‘Borrowing Costs, evaluates each borrowing made for management where they do not apply equity method by using a special asset to be ready for intended use or sale as a part of a TFRS 9. general borrowing.
- TFRS 16, “Leasing Transactions” - TAS 19 ‘Benefits Provided for the Employees’,
Valid on January 1st, 2019 or in annual reporting periods Change, improvements relevant to downsizing or execution starting after this date. By TFRS 15, ‘Revenue from customer made in the Plan; Valid for January 1st, 2019 and annual agreements’ standard, early application is allowed. This new reporting periods after this date. These improvements require standard substitutes the existing TAS 17 guidance and makes a the following changes: radical change in their accounting in terms of special lessors. According to the current TAS 17 rules, when the lessors are a • For the period after a change, improvements relevant to party of a leasing transaction, they have to differentiate financial downsizing or execution made in the Plan; using current leasing (within balance sheet) or activity leasing (out of balance assumptions to determine current service cost and net interest; sheet) for this transaction. However, according to TFRS 16, from • As a part of the service cost for the previous period, accounting now on, the lessors shall have to enter leasing liabilities they in profit or loss, or even if not included in financial statements shall pay in the future for almost all agreements and a right with the effect arising from asset ceiling, including any decrease of use of asset against this in their balance sheets. IASC has in excess value, a profit or loss in execution in financial stipulated an exception for short term leasing transactions and statements. low-value assets, however, this exception may only be applied in terms of the lessors. For the lessors, accounting remains b) Standards and changes issued as of December 31st, 2019 but almost the same. However, due to the change of definition of not put into effect yet: leasing transactions by IASC, (as it has changed the guidance in combining or decomposition of contents in the agreements) Changes in TAS 1 and TAS 8 materiality definition; Valid on the lessors shall also be affected from this new standard. In January 1st, 2020 or in annual reporting periods starting after this case, new accounting model is expected to cause some this date. evaluations between lessors and lessees. According to TFRS 16, if an agreement involves right of use of an asset and right to Changes in TAS 1 “Presentation of Financial Statements” and control that asset for a specific period of time against a specific TAS 8 “Accounting Policies, Changes and Errors in Accounting amount, then, that agreement is a leasing agreement or involves Policies” and changes in other TFRS’ in connection with these a leasing transaction. changes are as the following:
- TFRS Comment 23, “Uncertainties in Tax Applications” i) Using materiality definition consistent with TFRS and financial reporting frame Valid on January 1st, 2019 or in annual reporting periods starting ii) Clarifying explanation of materiality definition and after this date. This comment clarifies some uncertainties in iii) Relevant to information which are not significant, including applications of TAS 12 Income Taxes standard. IFRS Comment some guidance in TAS 1 Committee has clarified previously that in case there is any uncertainty in tax applications, TAS 37 ‘Provisions, Contingent Changes in TFRS 3 – Business Definition; Valid on January Liabilities and Contingent Assets’ standard should be applied, 1st, 2020 or in annual reporting periods starting after this not a standard according to TAS 12, for this uncertainty. TFRS date. Business definition is revised along with this change. Comment 23 brings an explanation relevant to how a deferred According to feedback received by IASC, it is thought that 78
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
existing application guidance is generally very complex and this Leather Fashion Limited Subsidiary results in excessive transactions to meet business combinations Desa International Ltd. Subsidiary definition. Desa SMS Ltd. Subsidiary TFRS 17, “Insurance Agreements”; Valid on January 1st, 2021 Desa International (UK) Ltd. Subsidiary or in annual reporting periods starting after this date. This standard substitutes TFRS 4 which currently allows a great Desa Deutschland GMBH Subsidiary variety of applications. TFRS 17, shall change accountings of Leather Fashion Bulgaria EOOD Subsidiary all business enterprises arranging insurance agreements and Desa Nineteenseventytwo SRL Italy Subsidiary investment agreements which have voluntary participation nature. The Company shall evaluate effects of abovementioned Adesa Mağ. Teks. ve Der. San. Tic.A.Ş. Melih Çelet changes on its operations and shall apply as of the effective date. Shareholder & Board Member Sedesa Deri San. ve Dış Tic. Ltd.Şti. Melih Çelet 2.i. Summary of Significant Accounting Policies Old Shareholder & Old Manager The significant accounting policies applied during the Serga Deri Mam.San.ve Tic. A.Ş. Melih Çelet preparation of the accompanying financial statements are as Shareholder & Board Member follows: Yapı Enerji Ürt. Sat. İnş.San.ve Tic. A.Ş. Melih Çelet Shareholder & Board Member Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand, cash at Financial Instruments banks and time deposits with maturities less than three months. Cash and cash equivalents are short-term highly liquid assets TFRS 9 “Financial Instruments” standard arranges provisions which are readily convertible to cash, have maturities not more relevant to accounting and measuring of financial assets than three months and have no risk of value loss. Cash and and financial liabilities. This standard has substituted TAS 39 cash equivalents have been at total of the acquisition costs and Financial Instruments: Accounting and Measuring standard. the accrued interests. Bank balances denominated in foreign Details of important new accounting policies and effects and currencies have been translated at year-end exchange rates. nature of the changes in the previous accounting policies are (Note: 42) given below.
Related Parties Classification and Assessment of Financial Assets and Liabilities Within the scope of this report, the shareholders of the Company, or its affiliates and subsidiaries in which it has indirect capital TFRS 9 substantially protects existing provisions in TAS 39 for and management relations, and the entities other than its classification and measuring of financial liabilities. However, subsidiaries, the management personnel who are directly previous TAS 39 classification categories are revoked for or indirectly authorized and responsible for the planning, financial assets, credits and receivables to be held until maturity conducting and supervising of the Company’s activities, such and financial assets ready to be sold. Application of TFRS 9 has as the members of the board of directors of the Company, the not have a significant effect on the accounting policies relevant general manager, the close family members of these persons to financial debts of the Company. Detailed information on how and the companies directly or indirectly controlled by such the Company classified, measured financial assets and how it persons, are considered as related parties. As of December 31st, accounts relevant income and expenses according to TFRS 9 are 2019, related parties of the Company are as follows; given below.
Name & Surname – Title of Related Parties Relation (i) Financial Assets According to TFRS 9, during a financial asset is entered in Çelet Holding A.Ş. Shareholder financial statements for the first time; is classified as measured over amortized cost; fair value (“FV”) difference is measured Melih Çelet Shareholder – Board Member by reflecting on other extensive income – debt instruments; FV Nihal Çelet Shareholder difference is measured by reflecting on other extensive income – Burak Çelet Shareholder - Board Member equity instruments or FV difference is measured by reflecting on profit or loss. Burcu Özden Shareholder İlgin Özden Shareholder Classification of financial assets within the scope of TFRS 9 depends generally on the business model the enterprise uses Geza Ümit Erwin Shareholder for management of financial assets and features of contractual Burçak Çelet Board Member cash flows of financial asset. Obligation of separating embedded Muvaffak Batur Board Member - Independent derivative within standard scope from financial asset is revoked and should be evaluated how a hybrid agreement should be Numan Emre Bilge Board Member - Independent classified as a whole. GSD Holding A.Ş. Affiliated Company A financial asset is measured over amortized cost if both Marfar Deri San. ve Tic. Ltd. Şti. Affiliated Company conditions below are provided and FV difference is not classified Samsonite Seyahat Ürünleri A.Ş Affiliated Company as measured by reflecting on profit or loss: 79
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
- financial asset being held within the scope of a business model Impairment in Financial Assets aiming collection of contractual cash flows and - Agreement conditions relevant to financial asset causing cash TFRS 9, changes “loss occurred” model in TAS 39 with “expected flows including only principal and interest payments arising from credit losses” model. New impairment model is applied to balance of principal on specific dates financial assets measured from their amortized cost and agreement assets; however, it is not applied on investments A debt instrument is measured by reflecting FV difference on made on equity instruments. Financial assets measured from other extensive income if both conditions below are provided and amortized cost are constituted of trade receivables, other is not classified as FV difference measured by reflecting on profit receivables and cash and cash equivalents. or loss: The Company takes expected credit loss provision in its records - Financial asset being held within the scope of a business for the items stated below within the scope of TFRS 9: model aiming collection of contractual cash flows and business model aiming financial assets to be sold and - Financial assets measured over amortized cost; the Company - Agreement conditions relevant to financial asset causing cash calculates provision for loss from an amount equal to lifelong flows including only principal and interest payments arising from expected credit losses for those other than the below items balance of principal on specific dates. measured from provision for loss 12-month expected credit losses: All financial assets which are not measured over the - Bank balances with credit risks which have not significantly abovementioned amortized cost or FV difference by reflecting increased since they are taken in financial statements for the on other extensive income are measured by reflecting FV first time. difference on profit or loss. These also include all derivative financial assets. During financial assets are entered in financial Loss provisions for trade receivables, other receivables, statements for the first time, irrevocable fair value change of a other assets and agreement assets are always measured financial asset may be defined as measured by reflect on profit over an amount equal to lifelong expected credit losses. or loss provided that accounting unconformity to arise from While determining whether credit risk in a financial asset measuring financial assets differently and their relevant profits has increased significantly since they are taken in financial or losses being entered in financial statements differently shall statements for the first time and estimating expected credit be recovered or significantly reduced. losses, reasonable and supportable information which may be obtained without excess cost or effort are taken into In the first measuring of financial assets other than those which consideration. These include qualitative and quantitative their fair value changes are reflected on profit or loss (besides information and analyses based on previous experiences of trade receivables measured over transaction fee during entering the Company and conscious credit evaluations and prospective in financial statements for the first time and do not have a information. The Company accepts that there is a significant significant finance component), they are measured by adding increase in credit risk of financial assets with 30 days overdue. also transaction costs directly associated with their acquiring or export to fair value. The Company accepts that there is default in financial assets in the following conditions: The following accounting policies are valid in the following If it is not possible for the Debtor to fulfill its liabilities to the measurements of financial assets. Company completely before the Company attempts for actions as liquidating collaterals (if there are collaterals); or financial asset Financial assets measured by FV difference being reflected on is overdue for more than 90 days. The Company accepts that in profit/loss: case risk rating of bank balances are equal to “investment note” with international definition, they shall have low credit risk. These assets are measured over fair values in the following measurings. Including any interest or dividend income, net Lifelong expected credit losses are a result of default conditions profits and losses relevant to these are accounted in profit or of a financial instrument expected to occur possibly lifelong. loss. 12-month expected credit losses are the part representing Financial assets measured over amortized cost: expected credit losses arising from default conditions possible to occur within 12 months after the reporting date. Maximum These assets are measured over their amortized cost by using period which expected credit losses shall be measured is the effective interest method in their following measuring. If there maximum agreement period the Company is exposed to credit are amortized costs, they are reduced in the amount equal to risk. impairment losses amount.Interest incomes, foreign currency profits and losses and impairments are accounted on profit The Company evaluates every reporting period whether financial or loss. Profits or losses arising from leaving these out of the assets measured from amortized cost is credit – impairment. financial status table are accounted in profit or loss. When one or more events affecting negatively the future estimated cash flows of a financial asset occur the subject The Company’s financial assets are constituted of trade financial asset is exposed to credit - impairment. receivables, other receivables and cash and cash equivalents; while these financial assets are classified as credits and Observable data relevant to the following incidents are receivables according to TAS 39, they are classified as financial evidences showing that the financial asset is exposed to credit - assets over amortized cost according to TFRS 9. impairment:
- The Debtor being in a significant financial difficulty; 80
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
- An agreement violation to occur due to default; Cash Flow Hedging - The creditor to bestow privilege to the debtor due to financial The effective portion of the changes in the fair value of difficulty the debtor is suffering for reasons relevant to economy derivatives designated as cash flow hedges are recognized within or agreement and which it does not consider bestowing in the hedging fund in equity. Income and expenses related to the normal conditions; ineffective portion are immediately classified as financial income - If it’s possible for the Debtor to be in bankruptcy or in any other / expense and recognized in the statement of comprehensive financial restructuring; or income. The amounts accumulated in the hedging fund are - active market relevant to this financial asset to disappear due associated with the income statement in the periods when the to financial difficulties. hedged items affect the income statement (e.g. realization of estimated cash flows that are hedged). In case that cash flow ii) Financial Liabilities hedge accounting cannot be continued due to the expiration, realization or sale of the hedging instrument or effectiveness A financial liability is measured at the fair value during its initial test related thereto fails, the amounts recognized under equity recognition.. During the first accounting of financial liabilities are transferred to the profit / loss accounts when the cash flows which their fair value difference is not reflected on profit or for the hedged item are realized. Based on this, some derivative loss, transaction costs which may be directly associated with contracts made by the Company have been evaluated and undertaking of the relevant financial liability are also added to recognized as hedging derivative instruments since they meet the subject fair value. the necessary conditions for risk accounting stipulated in TFRS 9.
Financial liabilities are accounted in the following periods over Trade Receivables cost amount amortized by using effective interest method, with interest expense calculated over effective rate of interest. The Company-induced trade receivables which are created by Financial liabilities are classified as financial liabilities which providing goods or services directly to a debtor have been valued their fair value difference is reflected on profit or loss or other at discounted cost using the effective interest method. Short- financial liabilities. term trade receivables with no stated interest rate have been valued at original invoice amount, if the effect of interest accrual Financial Liabilities which Fair Value Difference is Reflected on is insignificant. (Note: 7) Profit or Loss A risk provision for trade receivables is established, if there is Financial liabilities which fair value difference is reflected on a situation which indicates that the Company will not be able profit or loss are recorded with their fair value and in each to collect all amounts due. The amount of this provision is the reporting period, they are evaluated with the fair value on the difference between the carrying value of the receivable and the reporting date. Change in fair values is accounted in the income recoverable amount. The recoverable amount is the value of all statement. Net profits or losses accounted in profit or loss cash flows, including amounts recoverable from guarantees and table includes the interest amount paid for the subject financial collaterals, discounted based on the original effective interest liability. rate of the trade receivable. (Note: 7) (iii) Derivative Financial Instruments and Hedge Accounting If the amount of impairment decreases due to a situation that Derivative financial instruments are initially recognized at occurs after the write-down, the mentioned amount is reflected their fair value as of the date of entry into force of the related in the other incomes in the current period. derivative contract and are valued at their fair value also for the following periods. Derivative financial instruments are classified Trade payables as assets, if their fair values are positive and as liabilities, if their fair values are negative. The method of recognizing for Trade and other payables are presented in records at discounted gains and losses related to derivative financial instruments cost value representing the fair value of the invoiced or varies depending on whether the derivative financial instrument uninvoiced amount to be incurred in the future regarding the is hedged or not and on the type of hedged instrument. At the purchase of goods and services. transaction date, the Company associates the relationship between the hedging instrument and the hedged item together Inventories with the Company’s risk management objectives and strategies for hedging transactions. In addition, the Company also regularly Inventories are valued at the lower of cost or net realizable evaluates that the derivative transactions used for hedging can value. Costs, which include some of the fixed and variable effectively offset the changes in the fair value or cash flows of production overheads, are valued in accordance with the the hedged item. method to which the inventories are based. The Company uses the weighted moving average method in cost calculations. Derivative Financial Instruments for Trading Net realizable value is calculated by deducting the total of The Company’s derivative financial instruments for trading the estimated costs of completion and the estimated costs consist of forward foreign currency purchase and sales required to make the sale from the estimated selling price in contracts. While these derivative financial instruments provide the ordinary course of business. When the net realizable value effective protection against risks for the Company economically, of the inventories falls below their costs, the inventories are they are generally recognized as derivative financial instruments reduced to their net realizable value and reflected to the income for trading in financial statements since they do not meet the statement as an expense in the year in which the impairment requirements for risk accounting. All gains and losses arising occurs. In cases where the conditions that previously caused the from changes in the fair value of such derivative financial inventories to be reduced to net realizable value have become instruments are recognized as financial income / expense in the invalid or it has been proved that there is an increase in the income statement. net realizable value due to changing economic conditions, the 81
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
provision for impairment is canceled. The amount canceled is development stage of a project carried out within the entity), all limited to the amount of the impairment reserved previously. of the following conditions are met; (Note 10) • Completion of the intangible asset in order to be ready for Tangible Assets use or sale is technically feasible; • The entity intends to complete the intangible asset and use or Tangible assets are reported in the financial statements with sell such asset; their values determined after deduction of the accumulated • There is possibility for using or selling intangible asset; depreciation and permanent impairment, if any, at their adjusted • How the intangible asset is likely to generate future economic acquisition costs expressed in terms of purchasing power benefit is certain; of TL on December 31st, 2004 for the items acquired before • Sufficient technical, financial and other resources are January 1st, 2005 and at their acquisition costs for the items available to complete the development phase and to use or acquired after January 1st, 2005. Depreciation is calculated at sell the intangible asset; and inflation-adjusted amounts in accordance with the straight-line • Expenses on intangible assets in the development process depreciation method that reflects the economic useful lives of are measurable reliably. the tangible assets mentioned hereunder. Lands have not been depreciated since their economic useful lives are considered Otherwise, development expenses are recognized as expense infinite. as they are incurred. In projects where it is difficult to separate the research and development stages, the relevant project is The estimated useful lives of such assets are as follows: considered at the research stage and recognized as expense as incurred. Depreciation Time Buildings 40 years b) Rights and Other Intangible Assets Machinery & Equipment 5-10 years Rights and other intangible assets comprise acquired Fixtures 5-10 years information systems, information system development costs, Transport Vehicles 5-10 years purchased technology and other identifiable rights. Rights and Leasehold improvements 5-10 years other intangible assets are recognized at their acquisition costs and amortized on a straight-line basis over their estimated If the carrying value of an asset is higher than the recoverable useful lives not exceeding five years. amount thereof, its carrying value is reduced to its recoverable amount. The recoverable amount is the higher of the asset’s The depreciation periods of such assets determined according to net selling price or value in use. Net selling price is determined their estimated useful lives are as follows: by deducting the costs to be incurred in order to realize the sale from the fair value of the asset. Value in use is determined Depreciation Periods by adding residual values to estimated amounts of cash flows Rights 3-5-13 years expected to be obtained in the future as of the balance sheet Other Intangible Assets 3-5-13-24 years date by continuing to use the related asset.
Profit or loss on disposals of tangible assets are determined Fixed Assets Held for Sale and Discontinued Operations by comparing the adjusted amounts and the amounts collected and reflected to the related income and expense accounts Fixed assets held for sale are classified as fixed assets held for in the current period. Maintenance and repair expenses of sale and amortization is discontinued, if their carrying values tangible assets are normally recognized as expense. However, are recovered as a result of a sales transaction, not by use. Fixed in exceptional cases, if maintenance and repair results in assets held for sale are valued at the lower of their carrying expansion or substantial improvement in assets, such costs can value and fair value less costs to sell. be capitalized and depreciated over the remaining useful life of the related asset. (Note: 14) Income and expenses arising from discontinued operations are classified separately in the comprehensive income statement. Intangible Assets Investment Properties Intangible assets comprise acquired information systems, concession rights, computer software and development costs. The land or the building or any part of the building or both which Intangible assets are recognized at their acquisition costs is held (by its owner or lessee named in lease contract) for the and depreciated by using the straight-line method over their purpose of being used in production or supply of goods and estimated useful lives for a period not exceeding 15 years from services or for administrative purposes or for the purpose of the date of acquisition. There is no depreciation for the brands earning rental income or value increase gain or both during the due to their unlimited lives. In case of impairment, the carrying normal course of business instead of being sold are classified as value of the intangible assets is reduced to their recoverable investment properties. amount. (Note: 15) An investment property is recognized as an asset, if it is probable a) Research and Development Expenses that the future economic benefits associated with the property will be provided for the entity and the cost of the investment Research expenses are recognized as expense in the period property can be reliably measured. in which they are incurred. Development costs are recognized as intangible assets resulting from development (or from the The Company has changed its accounting policy related with 82
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
its buildings held for investment and has adopted the fair value The amount convertible into cash is the higher of the asset’s method. Differences arising from the fair value method have net selling price and its net carrying value in use. If the amount been recognized in profit / (loss) statement under investment convertible into cash can be determined, it is estimated for each properties appreciation adjustment under the income from asset and if it cannot be determined, it is estimated for the cash investment activities account group. generating unit to which the asset is included. However, the increase in the carrying value of the asset as a result of reversal Borrowing Costs of the provision for impairment is recognized on condition that it does not exceed the value to be determined if no impairment The Company reflects the borrowing costs to the profit / loss amount loss is reserved for such asset in previous periods. statement as finance cost over the loan period. Financing cost arising from loans is recognized in profit/loss statement when Leasing Transactions they occur. Borrowing costs directly attributable to acquisition, construction or production of a qualifying asset are included in Financial Leasing Transactions the cost of that asset. Such borrowing costs are capitalized as part of the cost of the qualifying asset, if they can be measured The tangible asset acquired under finance leases is capitalized reliably and are likely to provide future economic benefits to at the lower of the fair value of the asset net of less the tax the entity. Borrowing costs directly attributable to acquisition, benefits or incentives at the beginning of the lease term or of construction or production of a qualifying asset are the the reduced value of the minimum lease payments at that date. borrowing costs that will not arise if the expenditure associated Principal lease payments are reported as liabilities and reduced with a qualifying asset has not been made. as they are paid. Interest payments are recognized in the income statement as expense during the financial leasing period. The If an entity is borrowed particularly for the purpose of acquiring tangible assets acquired under finance leases are depreciated a qualifying asset, then the borrowing cost to be capitalized is over the useful life of the asset. determined by deducting the incomes from temporary accretion of these funds from the borrowing costs incurred for such Operational Leasing Transactions borrowing during the relevant period. In cases where some of the funds borrowed by an entity as a general purpose are used Leases contracts where the lessor owns all the risks and for the financing of a qualifying asset, the amount of borrowing benefits of the property are called operational leases. The costs that can be capitalized is determined with the help of an Company is a party to the operational leasing transactions activation ratio to be applied to the expenses related to the asset. both as a lessor and as a lessee. The rental amounts paid as a This capitalization rate is the weighted average of the borrowing result of the operational leases are recognized as an expense costs of all current liabilities of the entity during the relevant in accordance with ordinary method during the lease term. The period, excluding borrowings made for the purchase of qualifying rental income collected as a lessor is recognized as income assets. The amount of borrowing costs capitalized over a period during the lease term. may not exceed the amount of borrowing costs incurred during the relevant period. Provisions, Contingent Liabilities and Contingent Assets
When all transactions necessary to make an asset ready for its Provisions intended use or sale are completed virtually, capitalization of borrowing costs is ceased. In cases where the construction of a In cases where the Company has an existing liability arising from qualifying asset is completed in parts and each part can be used past events, outflow of resources containing economic benefits while other parts are under construction, the capitalization of from the entity in order to meet such liability is probable and the borrowing costs related to the respective part is ceased upon the amount of the liability can be estimated reliably, the related the virtually completion of all transactions necessary for the liability is recognized in the financial statements as provision. preparation of a particular part for the intended use or sale. Contingent liabilities are continuously valuated in order to Bank loans determine whether the possibility of an outflow of resources containing economic benefits is probable. If the possibility of Loans are recognized at the proceeds received on loan date, net an outflow of resources containing economic benefits in future of transaction costs incurred. Loans are reported at cost value becomes probable for the items transacted as contingent using the effective interest method, if the difference between the liability, such contingent liability is recognized in the financial discounted value and the first recognized value is significant. Any statements of the period in which the change in the probability difference between proceeds, net of transaction costs, and the arises, except for the cases where a reliable estimate is not discounted value is recognized as financing cost in the income made. statement over the loan period. Financing cost arising from loans is recognized in the income statement when it is incurred. Contingent Liabilities and Assets
Impairment of Assets Transactions giving rise to commitments and contingent liabilities refer to cases of which the occurrence is dependent on In case of occurrence of events or changes indicating that the the results of one or more events in the future. Therefore, some carrying values of assets cannot be realized, it is examined transactions are recognized as off-balance sheet items in terms whether there is any impairment. In case of having such of possible losses, risks or uncertainties. If an estimate is made indications or if the carried values exceed the realizable value, for possible liabilities or losses that may occur in the future, the assets are reduced to their realizable value. Impairment these liabilities are considered as expense and debt for the provision expense is recognized in the income statement when Company. However, the revenues and the profits which are likely the carrying value of assets exceeds the realizable value. to occur in the future are reflected in the financial statements. 83
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
In cases where it is expected that all or part of the economic Social Security Premiums benefits used for the payment of the provision will be covered by third parties, the amount to be collected is recognized as an The Company pays social security premiums to the Social asset, if the repayment of this amount is certain and the amount Security Institution mandatorily. The Company has no other is calculated reliably. liability as long as it pays these premiums. These premiums are reported as personnel expenses in the period they are incurred. Employee Benefits Other Balance Sheet Items Defined Benefit Plan Other Balance Sheet Items are reflected basically with their Provision for severance pays and termination indemnities is registered values. recognized based on actuarial studies in accordance with TAS 19 “Employee Benefits”. Severance pay and termination indemnity Capital and Dividends liability represents the value of the estimated total provision of the future probable obligation of the Company arising from Ordinary shares are classified as the capital. Dividends the retirement of the employees in accordance with the Turkish distributed over ordinary shares are recorded by deducting from Labor Law or the termination of the employment contract due to the profits accumulated in the period they are declared. The reasons specified by the relevant law on the date of statement of received dividends are recorded as revenue on the date the right financial position. of collection reveals (Note 26). The Company calculates and recognizes severance pays and termination indemnities by basing on information arising from Earnings Per Share Company’s own experience regarding resignation of personnel or termination of their employment as well as estimating Earnings per share disclosed in the income statement are recognition of entitled benefits at reduced net value. calculated by dividing the net profit by the weighted average number of shares that have been outstanding during the year. In Defined Contribution Plans case of capital increase from internal sources within the period, when calculating the weighted average of the number of shares, The Company pays social security premiums to the Social the new value is assumed to be valid at the beginning of the Security Institution mandatorily. The Group has no other period. liability as long as it pays these premiums. These premiums are The matter is discussed in TAS 33 as follows: reflected to personnel expenses in the period they accrue. Ordinary shares can be issued or the number of ordinary shares Employee Benefits / Severance Pays and Termination outstanding can be reduced without any change in the resources. Indemnities For example:
Severance Pay and Termination Indemnity a) Capitalization or issuance of bonus shares (sometimes referred to as share dividends) The Company is obliged to pay a certain amount of severance b) The existence of a bonus element in any other issue; for pay or termination indemnity to the personnel who has resigned example, a bonus element in an issuance transaction which due to retirement or has been dismissed due to reasons other includes new rights to existing shareholders than resignation and misconduct after servicing for a minimum c) Share split and period of one year, pursuant to the applicable labor law. Such d) Consolidation of shares by increasing the nominal value payments are calculated on the basis of 30 days’ total gross (consolidation of shares). wage and other benefits limited to a maximum of TL 6.379,86 (December 31st, 2018: TL 5.434,42) for each year of employment, In case of a capitalization or issuance of bonus shares or share as of December 31st, 2019. split, ordinary shares are issued to existing shareholders without requiring an additional payment. Therefore, the number of The Company has calculated the provisions for Severance ordinary shares outstanding increases without an increase in Pay and Termination Indemnity in the accompanying financial resources. The number of ordinary shares outstanding prior statements by using “Projection Method” and basing on the to the said transaction shall be adjusted in accordance with Company’s experiences gained in previous years in terms of the proportional change in the number of ordinary shares personnel’s completion of service period and entitlement to outstanding, if the transaction would have been realized at the retirement pay and has discounted the same by earning ratio of beginning of the earliest period. government bonds at the balance sheet date. All the calculated gains and losses are reflected in the income statement. Real Operating Incomes / (Charges), Revenue
The ratios of the underlying assumptions used in the balance In recognition of revenue, the Company has begun to use the sheet date are as follows: following five-step model in accordance with TFRS 15 “Revenue from contracts with customers”. 31.12.2019 31.12.2018 Interest rate 11,11% 22.39% - Identification of contracts entered into with customers - Identification of performance obligations in contracts Inflation rate 8,90% 21,57% - Determination of the transaction price in contracts Discount rate 2,03% 0,67% - Allocation of transaction price to performance obligations - Recognition of revenue 84
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
The Company recognizes a contract entered into with the Dividend and Interest Income: customer as revenue only if all of the following conditions are met: Interest income is accrued in the related period at the effective interest rate which reduces the remaining principal amount and a) The parties to the contract have approved the contract the estimated cash inflows from the respective financial asset (in accordance with written, oral or other commercial during the expected life thereof to the carrying value of the said practices) and undertakes to fulfil their own obligations, asset. b) The Company can identify the rights of each party related to the goods or services to be transferred, Dividend income earned from equity investments is recognized c) The Company can identify the payment terms for the when the shareholders’ right to receive dividends arises. Other goods or services to be transferred, incomes are recognized on an accrual basis at the fair value of d) The contract has commercial substance; the consideration received or receivable upon service delivery e) It is probable that the Company will collect the or revenue realization, transfer of risks and benefits, reliable consideration to which it is entitled for the goods or determination of the amount of revenue and the probable services to be transferred to the customer. When economic benefits to be transferred to the Company. assessing whether the collectability of a consideration is probable or not, the Company considers only the client’s Foreign Currency Assets and Liabilities ability and intend to make payment at the due date. The consideration, which the Company will be entitled to Foreign currency transactions are recognized at current collect, may be lower than the price specified in the exchange rates applicable on transaction date. The assets and contract, as it offers a price advantage to its customer. liabilities recorded in foreign currency are subject to valuation on the basis of exchange rates applicable at the end of the period. Revenues are recognized on an accrual basis at the fair value Exchange differences arising from the valuation process are of the consideration received or receivable on account of the recognized in the income statement as foreign exchange gain or reliable determination of the revenue amount and the probable loss. economic benefits associated with the transaction. Net sales have been calculated by deducting the sales returns and the Taxes Calculated over Corporate Earnings sales discounts from the sales of goods. Income tax expense consists of the sum of corporate tax and Sale of Goods: deferred tax expense.
Revenue from the sale of goods is recognized when the following Corporation Tax conditions are met: Corporate tax is calculated over the taxable portion of the - The Company transfers all significant risks and rewards in period’s profit. Taxable profit differs from profit reported in the connection with the ownership to the buyer, income statement, since it excludes items that are taxable or - The Company does not have an ongoing administrative deductible in following years and items that are not taxable involvement associated with the property and an effective or deductible. The Company’s corporate tax liability has been control over the goods sold; calculated using tax rates that have been legalized as of the - The amount of revenues is measured reliably balance sheet date. - It is probable that the economic benefits associated with the transaction will flow to the entity, Deferred Tax - The costs resulting from the transaction are measured reliably. Deferred tax asset and liability is determined by calculating the impacts of the temporary differences between the amounts of Service Sales: assets and liabilities reported in the financial statements and the amounts based on in calculation of the statutory tax base in In cases where the outcome of a transaction in connection with accordance with the balance sheet method by considering the the provision of services can be estimated reliably, the revenue legalized tax rates. related to the transaction is reflected in the financial statements by taking the level of completion as of the balance sheet date When calculating the deferred tax liabilities for all taxable into consideration. temporary differences, the deferred tax assets consisting of deductible temporary differences are recognized on condition In the case of the existence of all of the following conditions, the that it is strongly probable that future taxable profit will be results of the transaction can be estimated reliably: available against which the deductible temporary differences can be utilized. Such assets and liabilities are not recognized, if - The amount of revenue can be measured reliably; the temporary difference, in connection with a transaction which - It is probable that the economic benefits associated with does not affect the commercial or financial profit/loss, arises the transaction will be acquired by the entity; from initial recognition of goodwill or other assets and liabilities - The level of completion of the transaction as of the in financial statements (other than business combinations). balance sheet date can be measured reliably; and - Costs incurred for the transaction and the costs required Deferred tax liabilities are calculated for all taxable temporary to complete thetransaction can be measured reliably. differences associated with the investments in subsidiaries and affiliates as well as the shares in joint ventures, except for the cases where the Company is able to control the removal of temporary differences and in the near future it is unlikely that 85
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
such difference will be removed. Deferred tax assets resulting Statement of Cash Flow from taxable temporary differences associated with such investments and shares are calculated on the condition that it Cash flows of the period are classified and reported in the is highly probable to benefit from such differences by earning statement of cash flows on the basis of operating, investing sufficient taxable profit in near future and to remove these and financing activities. Cash flows from operating activities differences in future. represent cash flows from the Company’s operations.
The carrying value of the deferred tax asset is reviewed at each Cash flows related with investing activities represent cash flows balance sheet date. The carrying value of a deferred tax asset used in and obtained from investment activities (fixed asset is reduced to the extent that it is no longer probable to earn a investments and financial investments) by the Company. financial profit at a level which allows to get benefit of part or all of it. Deferred tax assets and liabilities are calculated over Cash flows related to financing activities represent the resources the tax rates (tax regulations), which have been legalized or used by the Company in financing activities and the repayments substantially legalized as of the balance sheet date and which of these resources. Cash and cash equivalents include cash and are expected to be valid during the period in which the assets bank deposits as well as short-term highly liquid investments will be realized or the liabilities will be fulfilled. with a maturity of 3 months or less that can easily be converted into cash. During the calculation of deferred tax assets and liabilities, the tax consequences of the methods that the Company forecasts to 3. BUSINESS COMBINATIONS recover the carrying value of its assets or fulfill its liabilities as of the balance sheet date are taken into consideration. None. (December 31st , 2018: None.)
Deferred tax assets and liabilities are set off when there is a 4. SHARES IN OTHER ENTITIES legal right to offset current tax assets and current tax liabilities, or if the assets and liabilities are associated with the income tax a) Financial Investments collected by the same tax authority, or if the Company intends to pay off the current tax assets and liabilities by means of netting. All of the financial investments are available-for-sale financial assets and consist of unlisted shares. Corporate tax other than those associated with the items recognized directly in equity as receivable or liability (in which Since Desa International Limited and Leather Fashion Limited, case deferred tax associated with these items is also recognized which are subsidiaries not consolidated due to their low directly in equity) or those resulting from initial recognition of turnover, have lost their equity capital as of December 31st, business combinations as well as deferred tax pertaining to 2019, an impairment equal to their value in assets has been the respective period is recognized in the statement of income calculated and reported in Financial Investments account. as income or expense. In business combinations, the tax effect is taken into consideration in the calculation of goodwill or in determining the part of the acquirer’s share in fair value of identifiable assets, liabilities and contingent liabilities of the acquired subsidiary which exceeds the cost of acquisition.
Events after Date of Statement of Financial Position
Events after the balance sheet date covers all events between the balance sheet date and the date of authorization for issuance of the balance sheet, even if they have occurred after any announcement or other selected financial information related to the period profit has been disclosed to the public. If events requiring an adjustment to the financial statements occur after balance sheet date, the Company adjusts amounts included in its financial statements accordingly.
Governmental Incentives and Aids
All governmental incentives, including non-monetary governmental incentive monitored at fair value, are recognized in the financial statements when there is reasonable assurance that the conditions related thereto will be satisfied and the incentive can be obtained by the entity.
Research and development incentives are reported in the financial statements when the Company’s incentive requests are approved by the competent authorities. The Company does not have any governmental incentives and aids in current and previous periods. The governmental incentives utilized by the Company in current and previous periods are disclosed in Note 19. 86
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
31.12.2019 31.12.2018
GSD Holding A.Ş. 38 38
Equity Security 38 38
Marfar Deri San. ve Tic. Ltd. Şti. 40.000 40.000 Investments Capital commitment (-) (30.000) (30.000)
Affiliates 10.000 10.000
Leather Fashion Limited 6.871 6.871 Provisions for losses of Leather Fashion Limited (-) (6.871) (6.871) Desa International Ltd. 3.100.203 3.100.203 Provisions for losses of Desa International Ltd (-) (3.100.203) (3.100.203) Desa SMS Ltd. 4.689.823 4.689.823 Desa International (UK) Ltd. 2.891.695 2.891.695 Desa Deutschland GMBH 72.760 72.760 Leather Fashion Bulgaria EOOD 20.421 20.421 Desa Nineteenseventytwo SRL Italy 39.475 39.475
Subsidiaries 7.714.174 7.714.174
7.724.212 7.724.212
The financial statements of Samsonite Seyahat Ürünleri A.Ş., one of the subsidiaries of the Company, as of December 31st, 2019 have been consolidated with the financial statements of the Company for the same period by using the equity method.
Other affiliates and subsidiaries are presented as financial assets at cost in the financial statements.
b) Investments valued by equity method are as follows:
It is stated below as of December 31st, 2019
Parent company Parent company retained and Location Share Percentage Value at Cost Profit/Loss share outstanding profit /loss share Net
Samsonite Sey. Ürünleri A.Ş. Turkey 39,99% 1.539.980 1.492.491 8.903.467 11.935.938
It is stated below as of December 31st, 2018:
Parent company Parent company retained and Location Share Percentage Value at Cost Profit/Loss share outstanding profit /loss share Net
Samsonite Sey. Ürünleri A.Ş. Turkey 39,99% 1.539.980 1.647.095 7.256.372 10.443.447 87
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
Capital amount of Samsonite SeyahatÜrünleri San. ve Tic. A.Ş., affiliate of which financial statements are consolidated by the Company by the equity method is TL 3.850.000 while participation value of the company is TL 1.539.980. Balance sheet value of the affiliate valued by the equity method is TL 11.935.938. (31.12.2018: TL 10.443.447)
Financial information of Samsonite Seyahat Ürünleri San.ve Tic. A.Ş. are as follows:
Samsonite Seyahat Ürünleri A.Ş 31.12.2019 31.12.2018
Total assets 55.050.410 44.922.095 Total liabilities (25.210.179) (18.813.139) Net assets 29.840.231 26.108.956 Net profit / loss 3.731.276 4.117.791
Affiliate net profit/loss share (%39,99) 1.492.491 1.647.095 Profit/Loss share of investment valued by equity method 1.492.491 1.647.095
5. REPORTING BY SEGMENTS
Reporting by segments has not been made since the entity does not have a distinguishable operating segment with characteristics different from other operating segments in terms of risk and return or a distinguishable geographical segment having different risk and return characteristics.
6. RELATED PARTY DISCLOSURES
6.1. Receivables from related parties as of December 31st, 2019 and December 31st, 2018 are as follows:
31.12.2019 31.12.2018
Trade Receivables 28.986.834 18.741.417 Other Receivables 2.112.057 2.659.486
31.098.891 21.400.903
Trade Receivables from related parties as of December 31st, 2019 and December 31st, 2018 are as follows:
Related Companies and Shareholders 31.12.2019 31.12.2018
Adesa Deri 27.571.978 18.072.471 Desa Deutschland Gmbh 314.966 59.610 Serga Deri 313.753 155.819 Leather Fashion Bulgarıa 236.456 150.989 Çelet Holding 234.836 144.882 Desa SMS 165.389 3.014 Desa Nineteenseventytwo SRL Italy 60.165 28.423 Desa International Ltd 37.473 61.620 Marfar Deri 24.358 24.358 Yapı Enerji 22.220 15.735 Desa International UK 5.240 17.745 Sedesa Deri - 6.751
28.986.834 18.741.417 88
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
Other Receivables from related parties as of December 31st, 2019 and 2018 are as follows:
Related Companies and Shareholders 31.12.2019 31.12.2018
Desa Deutschland Gmbh 1.920.571 2.028.758 Serga Deri 153.578 213.846 Leather Fashion Bulgaria 19.952 - Desa International UK 14.631 - Desa SMS 3.325 397.163 Desa Nineteenseventytwo SRL Italy - 19.719
2.112.057 2.659.486
6.2 Payables to related parties as of December 31st, 2019 and 2018 are as follows:
31.12.2019 31.12.2018
Trade Payables 30.227.313 21.451.406 Other Payables 3.820.442 4.806.213 Deferred Incomes from Related Parties 4.948.367 3.929.266
39.046.122 30.186.885
Trade payables to related parties and deferred incomes as of December 31st, 2019 and 2018 are as follows:
Related Companies and Shareholders 31.12.2019 31.12.2018
Samsonite Seyahat Ürünleri 27.874.266 21.404.891 Desa International UK 1.093.173 - Desa SMS 896.631 - Desa Int Ltd 325.627 - Serga Deri 73.345 40.382 Desa Nineteenseventytwo SRL Italy 14.631 - Desa Deutschland Gmbh - 6.133
Trade Payables 30.277.313 21.451.406
Adesa 4.948.367 3.830.396 Desa Int Ltd - 934 Desa SMS - 97.936
Deferred Incomes from Related Parties 4.948.367 3.929.266 35.225.680 25.380.672 89
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
Other Payables from related parties as of December 31st, 2019 and 2018 are as follows:
Related Companies and Shareholders 31.12.2019 31.12.2018
Adesa Deri 3.820.442 4.542.434 Desa Deutschland Gmbh - 263.779
3.820.442 4.806.213
6.3 Prepaid Expenses from related parties as of December 31st, 2019 and 2018:
Related Companies and Shareholders 31.12.2019 31.12.2018
Marfar Deri 10.095 10.027 Yapı Enerji - 6.362 Serga Deri - 80
10.095 16.469
6.4 Details of sale and purchase transactions made with related parties are as follows:
31.12.2019 31.12.2018 Related Company Purchases Sales Purchases Sales
Adesa Deri 226.070 200.213.406 - 160.204.074 Samsonite Seyahat Ürünleri 34.878.892 - 26.390.418 - Desa SMS Ltd - - - - Desa International UK - - - - Desa Deutschland 161.657 931 - 799.282 Leather Fashion Limited 164.206 -
TOTAL 35.430.825 200.214.337 26.390.418 161.003.356
6.5 Interest, rent and etc. received from and paid to related parties are as follows:
31.12.2019 31.12.2018
Service charges paid to Related Companies 3.031.011 2.368.409 Rents paid to related parties which are not shareholders 767.522 733.662 Interest expenses paid to Related Companies - 682.273 Rents paid to shareholders 757.495 814.933 Rents paid to Related Companies 27.009 22.233 Other expenses - 1.612
TOTAL PAID 4.583.037 4.623.122 90
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
31.12.2019 31.12.2018
Service charges billed to affiliates 5.962.347 4.451.129 Office rent received from affiliate 2.732.521 2.688.363 Service charge invoiced to Related Companies 1.772.999 1.790.097 Interest incomes collected from Related Companies 71.178 151.023 Office rent invoiced to Related Companies 580.146 496.014 Service charges billed to shareholdes 60.000 60.000
TOTAL COLLECTED 11.179.191 9.636.626
6.6 Wages and similar benefits provided to Top Executives are stated below:
Total of wages and similar benefits provided to top executives is TL 2.409.710 as of December 31st, 2019 (December 31st, 2018 – TL 1.850.854)
7. TRADE RECEIVABLES AND PAYABLES
Short-Term Trade Receivables
Details of short term trade receivables as of December 31st, 2018 and 2019 are as follows: 31.12.2019 31.12.2018
Trade Receivables from Related Parties (Note 6) 28.986.834 18.741.417
Trade Receivables from Related Parties 28.986.834 18.741.417
Buyers 3.098.062 2.102.438 Credit Card Receivables 4.143.819 3.551.145 Rediscount of Credit Card Receivables (-) (516.716) (636.424) Doubtful Trade Receivables 266.031 266.031 Provision for Doubtful Trade Receivables (-) (266.031) (266.031)
Other Trade Receivables 6.725.165 5.017.159
35.711.999 23.758.576
Movement table of provision for doubtful receivables is as follows: 31.12.2019 31.12.2018
Beginning of period (266.031) (697.707) Provision allocated in the period / adjustment (+) - (118.113) Provision collected in the period (-) - 549.789 Provision allocated in the period / adjustment (+) -
END OF PERIOD (266.031) (266.031) 91
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
Aging of doubtful trade receivables for which a provision is reserved is as follows: 31.12.2019 31.12.2018
Receivables overdue up to 90 days - - Receivables overdue more than 90 days - - Receivables overdue more than 180 days (266.031) (266.031)
END OF PERIOD (266.031) (266.031)
Long Term Trade Receivables
None. (31.12.2018 None.)
Short-Term Trade Payables
Details of short term trade payables as of December 31st, 2019 and December 31st, 2018 are as follows:
31.12.2019 31.12.2018
Trade payables to related parties 30.227.313 21.451.406
Trade payables to related parties 30.227.313 21.451.406
Suppliers 68.281.113 54.275.976 Cheques and notes payable 28.458.410 30.021.991 Deferred financing income (-) (1.437.597) (2.638.593)
Other trade payables 95.301.926 81.659.374
125.579.239 103.110.780
Long-term trade payables
None. (31.12.18 none.)
8. RECEIVABLES AND PAYABLES FROM FINANCIAL ACTIVITIES
None. (31.12.2018: None) 92
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
9. OTHER RECEIVABLES AND PAYABLES
Other Short-Term Receivables
Details of other short term receivables as of December 31st, 2018 and December 31st, 2019 are as follows:
31.12.2019 31.12.2018
Other receivables from related parties 2.112.057 2.659.486
Other receivables from related parties 2.112.057 2.659.486
Receivables from Tax Office 112.909 112.909 Deposits and guarantees given 103.349 103.349 Other Receivables 16.484 13.518 Receivables from Execution Office 3.250 3.250
Other receivables from non-related parties 235.992 233.026
2.348.049 2.892.512
Other Long-Term Receivables
Details of other long term receivables as of December 31st, 2019 and December 31st, 2018 are as follows:
31.12.2019 31.12.2018
Deposits and Guarantees Given 278.187 225.491
Other Receivables from Non-Related Parties 278.187 225.491
Other Short-Term Payables
Details of other short term payables as of December 31st, 2019 and December 31st, 2018 are as follows:
31.12.2019 31.12.2018
Other Payables to Related Parties 3.820.442 4.806.213
Other Payables to Related Parties 3.820.442 4.806.213
SSI Premium Payable (*) 2.561.051 2.167.566 Taxes and Funds Payable 2.219.074 1.514.483 Other Liabilities 1.276.015 1.343.728 Individual Pension System Deductions 50.660 37.450 Maturated, Delayed or Deferred Tax by Ins. and Other Liabilities - 15.375
Other Payables to Non-Related Parties 6.106.800 5.078.602
9.927.242 9.884.815 93
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
(*) It consist of SSI premiums payable for the period of December 2019. Total SSI premiums have been paid in full on January 31st, 2020, which is legal payment date.
Other Long-Term Payables
None (31.12.2018 None)
10. INVENTORIES
Details of inventories as of December 31st, 2019 and December 31st, 2018 are as follows:
31.12.2019 31.12.2018
Raw Materials and Supplies 38.397.467 39.083.207 Semi-Finished Goods 43.751.002 44.467.593 Finished Goods 49.013.716 50.702.513 Trade Goods 28.800.354 23.713.756 Other Inventories 1.214.122 9.378.542
161.176.661 167.345.611
Total insurance amount on inventories is TL 204.758.653 (December 31st, 2018 – TL 196.809.088).
11. BIOLOGICAL ASSETS
None. (December 31st, 2018: None.)
12. PREPAID EXPENSES AND DEFERRED INCOMES
Short-Term Prepaid Expenses
Details of short term prepaid expenses as of December 31st, 2019 and December 31st, 2018 are as follows:
31.12.2019 31.12.2018
Order advances given to related parties 10.095 16.469
Prepaid expenses of related parties (Note 6) 10.095 16.469
Order advances given to suppliers 3.327.541 3.327.178 Prepaid expenses for future months 899.540 1.180.919 Work advances 100.819 80.107 Advances given to personnel 144.573 89.169
Prepaid expenses of non-related parties 4.472.473 4.677.373
4.482.568 4.693.842 94
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
Long-Term Prepaid Expenses
None. (31.12.2018: None)
Short-Term Deferred Income
Details of short term deferred income as of December 31st, 2019 and December 31st, 2018 are as follows:
31.12.2019 31.12.2018
Order advances received to related parties 4.948.367 3.929.266
Order advances received from related parties (Note 6) 4.948.367 3.929.266
Order advances received 2.150.365 1.733.382
Other payables to non-related parties 2.150.365 1.733.382
7.098.732 5.662.648
13. INVESTMENT PROPERTIES
None. (December 31st, 2018 None.)
14. TANGIBLE FIXED ASSETS
Movements of tangible fixed assets as of December 31st, 2019 are as follows:
Cost 01.01.2019 Inflow Transfer Outflow Valuation 31.12.2019
Lands and Parcels 11.025.000 - - - - 11.025.000 Land improvements 12.703 - - - - 12.703 Buildings 31.172.285 - - - - 31.172.285 Machinery, Equipment 11.142.862 547.367 222.093 - - 11.192.322 Vehicles 1.492.993 123.762 - - - 1.616.755 Fixtures 21.225.441 1.361.526 - (26.040) - 22.590.927 Other Tangible Fixed Assets 28.293.674 1.493.326 - - - 29.787.000 Construction in progress 222.093 - (222.093) - - -
Total 104.617.051 3.525.981 - (26.040) - 108.116.992
Accumulated Depreciation (-) Land improvements 9.286 615 - - - 9.901 Buildings 3.885.549 190.926 - - 781.926 4.858.401 Machinery, Equipment 6.711.014 1.181.514 - - - 7.892.528 Vehicles 1.294.359 95.208 - - - 1.389.567 Fixtures 15.262.546 1.460.514 - (24.738) - 16.698.322 Other Tangible Fixed Assets 23.894.713 1.723.931 - - - 25.618.644
Total 51.057.467 4.652.708 - (24.738) 781.926 56.467.363 Net Value 53.559.584 51.649.629 95
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
Total insurance amount on fixed assets is TL 442.406.421 as of December 31st, 2019.
Movements of tangible fixed assets as of December 31st, 2018 are as follows:
01.01.2018 Inflow Transfer Outflow Valuation 31.12.2018 Cost Lands and Parcels 11.025.000 - - - - 11.025.000 Land improvements 12.703 - - - - 12.703 Buildings 31.172.285 - - - - 31.172.285 Machinery, Equipment 9.881.461 1.298.403 - (37.002) - 11.142.862 Vehicles 1.492.993 - - - - 1.492.993 Fixtures 19.006.304 2.251.030 - (1.893) - 21.255.441 Other Tangible Fixed Assets 26.780.993 1.512.681 - - - 28.293.674 Construction in progress 159.639 62.454 - - - 222.093
Total 99.531.378 5.124.568 - (38.895) 104.617.051
Accumulated Depreciation (-) 01.01.2018 Inflow Transfer Outflow Valuation 31.12.2018 Land improvements 8.649 637 - - - 9.286 Buildings 2.722.171 190.927 - - 972.451 3.885.549 Machinery, Equipment 5.754.627 990.315 - (33.638) - 6.711.014 Vehicles 1.242.375 51.984 - - - 1.294.359 Fixtures 14.442.028 821.023 - (505) - 15.262.546 Other Tangible Fixed Assets 21.924.834 1.969.879 - - - 23.894.713 Total 46.094.684 4.024.765 - (34.433) 972.451 51.057.467 Net Value 53.436.694 53.559.584
15. INTANGIBLE FIXED ASSETS
Movements of intangible fixed assets as of December 31st, 2019 are as follows:
01.01.2019 Inflow Outflow 31.12.2019 Cost
Rights 1.894.164 75.505 - 1.969.669
Total 1.894.164 75.505 - 1.969.669
Accumulated Depreciation (-) 01.01.2019 Inflow Outflow 31.12.2019
Rights 1.082.611 243.167 - 1.325.778
Total 1.082.611 243.167 - 1.325.778
Net Value 811.553 643.891 96
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
Movements of intangible fixed assets as of December 31st, 2018 are as follows:
01.01.2018 Inflow Outflow 31.12.2018 Cost Rights 1.527.230 366.934 - 1.894.164
Total 1.527.230 366.934 - 1.894.164
Accumulated Depreciation (-) 01.01.2018 Inflow Outflow 31.12.2018
Rights 871.271 211.340 - 1.082.611
Rights 871.271 211.340 - 1.082.611
Net Value 655.959 811.553
16. GOODWILL
None. (December 31st, 2018: None)
17. LEASING TRANSACTIONS
17.1 Financial Leasing Transactions
None. (December 31st, 2019: None)
17.2 Operational Leasing Transactions
Leases by the Company in the capacity of Tenant
31.12.2019 31.12.2018
Car Rental Expenses (*) 577.174 503.106 Shop Rental Expenses (*) 42.035.296 39.644.562 Administrative Buildings and Warehouses Rental Expenses (**) 1.761.078 1.755.386
Total 44.373.548 41.903.054
(*) On January 1st, 2019 or in annual reporting periods starting after this date, pursuant to TFRS 16, leasing liabilities to be paid in the future for all leasing agreements and an asset usage rights against this are included in the balance sheet.(Note:2).
(**) The term of contracts for leasing relating to administrative buildings is one year or less.
Leases by the Company in the capacity of Lessor
The total rental income arising from the operational leasing transactions realized by the Company in the capacity as lessor and collected within the period as well as reflected in the income statement is amounting to TL 3.197.303. (December 31st, 2018: TL 2.707.563). 97
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
18. IMPAIRMENT OF ASSETS d) The amount corresponding to five-point part of employer’s share from disability, old-age and death insurance premiums of Since Desa International Limited and Leather Fashion-which insured employers are paid by the Treasury under sub-clause are subsidiaries not consolidated due to their low turnover, have (ı) added to first clause of Article 81 of Social Securities and lost their equity capital, impairment has been calculated at the General Health Insurance Law No. 5510. In this context, the amount (TL 3.107.074) given in assets and reported in Financial five-point part of the Company’s employer’s share recorded as Investments account in previous years. revenue as of 2019 4.172.083 TL’dir. (31st, 2018: 3.215.237 TL) e) The subsidy for employer’s contribution to the minimum 19. GOVERNMENT INCENTIVES AND AIDS wage provided in order to lessen the burden of additional cost emanated as a result of increase in minimum wage by 30 % is a) The Company has Inward Processing Licenses. The Company covered by the Treasury pursuant to the article 17 of the Law has made imports in a total amount of USD 19.410.922 as of No.6661 on Amendment of Military Service Law and Some December 31st, 2019 under those licenses and benefited from Other Laws. In this context, the five-point part of the Company’s VAT incentive related to those purchases. (December 31st, 2018 – employer’s share recognized as revenue as of December 31st , USD 15.768.594). 2019 is TL 2.050.872 (December 31st ,2018: TL 1.890.877) b) Right to benefit from the Turquality incentive amounting to TL 158.586 has been obtained during the period of twelve months within the scope of the Communiqué No. 2006/4 on Branding 20. BORROWING COSTS of Turkish Products, Establishing Image of Turkish Products Abroad and Supporting Turquality. (Right to benefit from The total borrowings costs incurred as of December 31st, incentive amounting to TL 411.142 has been obtained as from 2019 amount to TL 27.855.174 (TL 2.419.218 of this amount December 31st, 2018.) is exchange difference) and have been recognized directly as c) Income taxes of minimum-wage workers employed in Düzce expenses. (December 31st ,2018: TL 25.374.395 recognized factory in the Organized Industrial Zone provide 5% exemption directly as expenses). (See Note 31) from payment of SSI premiums under Law No. 5084 on Amendments to Certain Laws by Encouragement of Investments 21. PROVISIONS, CONTINGENT ASSETS AND PAYABLES and Employment. Also the Company has been entitled to benefit from an additional incentive of 6% as from January 1st, 2013 Provision for Leaves in accordance with the decree no.2013/4966 of the Council of Ministers. The Company has been entitled to an incentive in As of December 31st, 2019 and 2018, the details of the provision the amount of TL 1.683.018 as from December 31st, 2019 and for payments for unused leaves are as follows: registered the same as revenue. (December 31st, 2018: TL 1.714.936)
31.12.2019 31.12.2018
Provision for Leaves 2.953.257 2.397.580
2.953.257 2.397.580 Movements of provisions for leave payments within the period are as follows: 31.12.2019 31.12.2018
Beginning of period 2.397.580 2.103.962 Increase within the Period (+) 555.677 293.618 Provisions cancelled within the Period (-) - - 2.953.257 2.397.580 Provisions for Short Term Payables The details of the provisions for short-term payables as of December 31st, 2019 and December 31st, 2018 are as follows: 31.12.2019 31.12.2018
Provision for Legal Cases 1.478.232 1.203.220 Provision for Other Costs (*) 24.241 457.824
1.502.523 1.661.044 Provisions for Severance Pay and Termination Indemnity The details of the provisions for severance pay as of December 31st, 2019 and December 31st, 2018 are as follows: 31.12.2019 31.12.2018
Provision for Severance Pay 4.152.893 5.437.074
4.152.893 5.437.074 98
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
According to the laws of Republic of Turkey, the Company is obliged to pay severance pay and termination indemnity to all employees who have retired after a 25-year service period by completing a minimum service period of one year in the Company (60 year-old for men and 58 year-old for women) or whose employment relationship has been terminated or who has been called for military service or has died. The indemnity payable equals to amount of one month’s wage for each year of service and such amount is limited to a maximum of TL 6.379,86 as of December 31st, 2019 (December 31stt, 2018: TL 5,434.42). The liability for severance pay and termination indemnity is not subject to any funding legally. The provision for severance pay and termination indemnity is calculated by estimating the present value of the future probable obligation of the Company arising from the retirement of the employees. IAS 19 (“Employee Benefits”) requires development of the company’s liabilities by using actuarial valuation methods under defined benefit plans. Accordingly, the following actuarial assumptions have been used in the calculation of total liabilities: The principal assumption is that the amount of the maximum liability for each year of service will increase in line with inflation. Therefore, the discount rate applied represents the expected real rate after adjusting the future inflation effects. Consequently, in the accompanying financial statements as at December 31st, 2019, the provision is calculated by estimating the present value of the future probable liability of the Company arising from the retirement of the employees. Provisions on the balance sheet date have been calculated using the real discount rate determined as 8,90 % approximately (December 31st,2018: 21,57 %) according to the assumptions of an annual inflation of 11,11 % (December 31st,2018: 22,39 %) and of a discount rate of 2,03 % (December 31st, 2018: 0,67 %). Estimated rate of termination indemnity which shall not be paid and retained by the Company due to voluntary leave of employment by the employee has also been taken into account.
Upper limit of the severance pay and termination indemnity is revised semi-annually.
31.12.2019 31.12.2018
Beginning of period 5.437.074 3.766.803 Service cost 2.846.209 3.220.353 Interest cost 36.674 154.999 Indemnities paid (4.984.542) (2.357.308) Actuarial (Gain) / Loss (Note 30/e) 817.478 652.227
4.152.893 5.437.074
Guarantees Received and Given As of December 31st, 2019 and December 31st, 2018, the details of the mortgages, guarantees and sureties received by the Company re as follows:
31.12.2019 31.12.2018
Letters of Guarantee 380.000 330.000 Surety Bonds 2.052.010 2.018.045
2.432.010 2.348.045
As of December 31st, 2019 and December 31st, 2018, the details of off-balance sheet none liabilities that are not included in the liabilities are as follows:
31.12.2019 31.12.2018
Letters of Guarantee TL 12.049.912 7.113.166 USD 380.500 2.114.424 EURO 31.709.561 56.664.264
Surety Bonds EURO 30.520.202 6.028.000
74.660.175 71.919.854 (*) For the loan amounting to Euro 4.191.892 (TL 27.878.597) extended by Eximbank, a letter of guarantee in the same amount has been given. 99
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
The Company’s guarantee/pledge/mortgage position table as of December 31st, 2019 and December 31st,2018 is as follows.
GPMs given by the Company 31.12.2019 31.12.2018
A. Total Amount of GPMs given on behalf of its own Legal Entity 74.660.175 71.919.854 B. Total Amount of GPMs given in favor of Ventures included in Full Consolidation - - C. Total Amount of GPMs given to Guarantee Liability of Other 3rd Parties for purposes of carrying out Ordinary Business Activities - - D. Total Amount of Other GPMs Given - - 1) Total Amount of GPMs given in favor of the Parent Company - - 2) Total Amount of GPMs given in favor of Other Group Companies not included in Items B and C - - 3) Total Amount of GPMs given in favor of 3rd Parties not included in Item C - -
Total 74.660.175 71.919.854
22. COMMITMENTS
None. (December 31st, 2018: None)
23. EMPLOYEE BENEFITS
The details of the employee benefits as of December 31st, 2019 and December 31st, 2018 are as follows:
31.12.2019 31.12.2018
Accrued Wages of Employees 6.289.965 5.149.555
6.289.965 5.149.555
24. EXPENSES BY THEIR NATURE Break down of significant expense items by their nature as of December 31st, 2019 and December 31st, 2018 are as follows:
31.12.2019 31.12.2018
For Production Cost 49.606.558 39.089.855 For General Management 10.823.662 10.345.525 For Marketing, Sales and Distribution 44.953.966 38.003.866 For Research and Development 699.782 753.446
Wage Expenses 106.083.968 88.192.692
For Production Cost 24.799.430 2.752.209 For General Management 1.457.609 2.129.769 For Marketing, Sales and Distribution 616.968 285.519 For Research and Development 3.544 6.255 For Service Production 414 371
Depreciation Expenses Production 26.877.965 5.174.123
132.961.933 93.366.815 100
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
25. OTHER ASSETS AND LIABILITIES Details of other current assets as of December 31st, 2019 and December 31st, 2018 are as follows:
31.12.2019 31.12.2018
Accrued Turquality Incentive Income 158.856 411.142 Other VAT 356.614 558.017
515.470 969.159
26. CAPITAL, RESERVES AND OTHER EQUITY ITEMS
26.1 Shareholder’s Equity
Equity of the Company as of December 31st ,2019 is TL 93.727.129 (December 31st ,2018 – TL 75.492.735) and its details are as follows:
31.12.2019 31.12.2018
Paid in capital 49.221.970 49.221.970 Adjustment Differences of Capital Accounts 5.500.255 5.500.255 Revaluation and Measurement Gains/Losses 27.549.294 28.245.208 Actuarial (Gain) / Loss relating to Employee Benefits (2.284.983) (1.647.352) Cash Flow Hedge Gains (Losses) - (1.324.671) Reserves on Retained Earnings 960.423 960.423 Previous Period Profit/Loss (5.463.098) (13.841.654) Net Profit/Loss for the Period 18.243.268 8.378.556
93.727.129 75.492.735
26.2 Paid in capital
The Company has switched to registered capital system in 2007 and its registered authorized stock amounts to TL 150.000.000. Its paid in capital is TL 49.221.970 (December 31st ,2018: TL 49.221.970) and has been divided into 4.922.196.986 (December 31st ,2018: 4.992.196.986) shares each of which has a nominal value of 1 Kr. 4 (Four) members of the Board of Directors and auditors are elected amongst the candidates to be nominated by Group (A) shareholders. In Ordinary and Extraordinary General Meetings, Group (A) shareholders have 15 voting rights for 1 share while other shareholders have 1 voting right for 1 share. There is no preference share in financial terms.
As of December 31st, 2019 and December 31st, 2018, issued and paid in capital amounts at their carrying value are as follows:
31.12.2019 31.12.2018
Name Surname/Title Share Rate Share Amount Share Rate Share Amount Çelet Holding A.Ş. 54,28% 26.717.682 54,28% 26.717.682 Melih Çelet 10,00% 4.922.197 10,00% 4.922.197 Public (*) 34,92% 17.188.312 34,92% 17.188.312 Other 0,80% 393.779 0,80% 393.779
TOTAL 100% 49.221.970 100% 49.221.970
(*) The share with a nominal value of TL 4.129.566 representing 8.39% of the share capital in the public belongs to Çelet Holding A.Ş. and the share with a nominal value of TL 4.103.569 representing 8,34% belongs to Melih Çelet as of 31.12.2019.
(*)The share with a nominal value of TL 4.129.566 representing 8.39% of the share capital in the public belongs to Çelet Holding A.Ş. and the share with a nominal value of TL 4.071.184 representing 8,27% belongs to Melih Çelet as of 31.12.2018. 101
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
26.3 Adjustment Differences of Capital Accounts
Inflation adjustment difference for capital accounts is TL 5.500.255 as of December 31st, 2019. (December 31st, 2018: TL 5.500.255)
26.4 Revaluation and Measurement Gains/Losses
The tangible fixed asset revaluation surplus of TL 27.549.294 on December 31st, 2019 has resulted from the revaluation of the factory and office buildings on 2012-2017 and its details are as follows: (Note 14)
Total Surplus Deferred Tax Impact Revaluation Surplus (Net) Factory Land - - - Factory and Office Building - - - Depreciation Impact as of January 01st, 2019 - - - Depreciation Impact as of December 31st, 2019 (781.926) 86.012 (695.914)
TOTAL (781.926) 86.012 (695.914) 01.01.2019 Opening 28.245.208
December 31st, 2019 Net 27.549.294
Total Surplus Deferred Tax Impact Revaluation Surplus (Net) Factory Land - - - Factory and Office Building - - - Depreciation Impact as of January 01, 2018 - - - Depreciation Impact as of December 31st,2018 (972.453) 95.538 (876.915)
TOTAL (972.453) 95.538 (876.915) 01.01.2018 Opening 29.122.123
31.12.2018 Net 28.245.208 102
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
26.5 Actuarial (Loss)/Gain relating to Employee Benefits
31.12.2019 31.12.2018
Opening balance (Net) (1.647.352) (1.138.613) Current Period Defined Benefit Plans - - Remeasurement Losses (Net) (637.631) (508.739) Current Period Actuarial Difference (817.476) (652.229) Deferred Tax of Current Period Actuarial Difference 179.845 143.490
(2.284.983) (1.647.352)
26.6 Reserves on Retained Earnings
31.12.2019 31.12.2018
Primary Legal Reserves 960.423 960.423
960.423 960.423
26.7 Previous Period Profit/Loss
31.12.2019 31.12.2018
Accumulated Profit / Loss Opening (13.841.654) (13.563.380) Transfer from Retained Net Profit / Loss 8.378.556 (186.146) Impact due to TFRS 9 Policy Change - (92.128)
(5.463.098) (13.841.654)
27. COST OF REVENUE AND SALES
Details of sales as of December 31st, 2019 and 2018 are as follows:
01.01.-31.12.2019 01.01.-31.12.2018
Domestic Sales 466.807.966 413.084.283 Export Sales 205.315.595 164.917.744 Other Sales 2.343.206 2.066.883
674.466.767 580.068.910
Returns from Sales (18.076.991) (12.659.115) Sales Discounts (227.016.936) (218.501.171) Discounts (1.260.025) (1.260.603)
Sales Revenue, (net) 428.112.815 347.648.021
Cost of Sales (-) 266.269.424 189.033.820
Gross Profit / (Loss) 161.843.391 158.614.201 103
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
DESA DERİ A.Ş. Cost Of Good Sold Table (TRY)
CURRENT PERIOD PREVIOUS PERIOD 31.12.2019 31.12.2018
COST OF PRODUCTION
A-Direct Raw Materials and Supplies Expenses 116.742.410 87.582.765
B-Direct Labour Expenses 49.606.558 39.089.855
C-General Production Expenses 26.551.591 18.080.912
D-Use of work in progress Goods 716.591 (2.258.705) 1.Inventory at the Beginning of Period (+) 44.467.593 5.113.984 2. Inventory at the End of Period (-) (43.751.002) (7.372.689)
COST OF GOODS MANUFACTURED 193.617.150 142.494.827
E-Change in Finished Goods Inventory 4.362.265 (9.124.540) 1.Inventory at the Beginning of Period (+) 50.702.513 37.108.801 Other Return (+) 2.673.468 4.469.172 4.Inventory at the End of Period (-) (49.013.716) (50.702.513)
I-COST OF GOODS SOLD 197.979.415 133.370.287
BUSINESS OPERATION
A- Stock in Trade at the Beginning of Period (+) 23.713.756 22.762.168 B- Purchases within the Period (+) 70.901.362 53.709.561 C- Stock in Trade at the End of Period (-) (28.800.354) (23.713.756)
II-COST OF TRADE GOODS SOLD 65.814.764 52.757.973
III-COST OF SERVICE SOLD 706.446 598.443
IV-COST OF OTHER SALES 1.768.799 2.307.117
COST OF SALES (I+II+III+IV) 266.269.424 189.033.820 104
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
28. GENERAL ADMINISTRATIVE EXPENSES, MARKETING EXPENSES, RESEARCH AND DEVELOPMENT EXPENSES
01.01.-31.12.2019 01.01.-31.12.2018
General Administrative Expenses 16.989.682 16.228.332 Marketing, Sales and Distribution Expenses 100.930.218 109.710.704 Research and Development Expenses 1.566.956 2.227.706
Operating Expenses 119.486.856 128.166.742
28.1 General Administrative Expenses (-)
The details of the general administration expenses pertaining to the periods of January 1st – December 31st, 2019 and January 1st – December 31st, 2018 by their features are as follows:
01.01.-31.12.2019 01.01.-31.12.2018
Personnel Expenses 10.823.662 10.345.525 Consultancy Expenses 1.332.924 1.689.890 Rental Expenses 1.542.071 1.704.781 Travel and Transport Expenses 539.068 610.654 Depreciation Expenses 616.968 285.519 Other 729.786 428.719 Insurance, Repair & Maintenance Expenses 238.661 248.508 Legal Case and Notarial Expenses 223.203 220.073 Taxes and Other Legal Duties 193.758 84.669 Utility and Fuel Oil Expenses 484.175 387.127 Communication Expenses 138.462 106.625 Stationery and Advertising, Announcement Expenses 71.785 70.052 Representation and Entertainment Expenses 51.159 27.261 Trademark Registration Expenses 4.000 12.263 Donations and Grants - 6.666
16.989.682 16.228.332 105
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
28.2 Marketing, Sales and Distribution Expenses (-)
The details of the marketing, sales and distribution expenses pertaining to the periods of December 31st, 2019 and 2018, by their features are as follows. 01.01.-31.12.2019 01.01.-31.12.2018
Real Estate Rental Expenses (*) - 39.644.562 Personnel Expenses 44.953.966 38.003.866 Advertising and Announcement Expenses 9.569.561 9.817.341 Bank Commission Expenses 5.646.002 5.770.831 Cargo Expenses 3.107.126 3.290.695 Depreciation Expenses 24.799.430 2.752.209 Other 6.501.351 3.193.967 Utility and Fuel Oil Expenses 2.792.819 2.263.045 Legal Case and Notarial Expenses 31.643 887.628 Product, Repair and Export Duty Expenses 1.044.836 838.510 Transport Expenses 532.843 637.701 Maintenance & Repair Expenses 457.616 524.722 Shelf, Sign and Printed Material Expenses 421.124 486.286 Travel Expenses 433.634 449.474 Insurance Expenses 55.169 500.125 Taxes, Duties and Charges 242.763 370.429 Phone, Fax and Data Line 236.373 189.112 Stationery Expenses 82.636 68.289 Representation and Entertainment Expenses 21.326 21.912
100.930.218 109.710.704
(*) On January 1st, 2019 or in annual reporting periods starting after this date, pursuant to TFRS 16, leasing liabilities to be paid in the future for all leasing agreements and an asset usage rights against this are included in the balance sheet.(Note:2).
28.3 Research and Development Expenses (-)
The details of the research and development expenses pertaining to the periods of December 31st, 2019 and December 31st, 2018, by their features are as follows: 01.01.-31.12.2019 01.01.-31.12.2018
Personnel Expenses 699.782 753.446 Design and Modeling Expenses 654.657 1.233.328 Travel Expenses 123.432 180.568 Other 51.332 10.415 Representation and Entertainment Expenses 31.666 40.091 Depreciation Expenses 3.544 6.255 Maintenance Repair Expenses 2.543 3.536 Utility and Fuel Oil Expenses - 67
1.566.956 2.227.706 106
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
29. OTHER OPERATING INCOMES AND EXPENSES
29.1 Other Operating Incomes
The details of other operating incomes pertaining to the periods of December 31st, 2019 and December 31st, 2018, are as follows:
01.01. - 31.12.2019 01.01. - 31.12.2018
Exchange Profits 2.899.300 6.762.696 Impairment of Trade Payables 2.159.517 2.681.213 Subsidy (SSI and Withholding) 7.905.973 6.821.050 Cargo Logistics Service Incomes 6.032.415 4.955.393 Cancelled Import 226.471 4.625.340 Rental Incomes 3.197.303 2.707.563 Financing Incomes Arising from Forward Sales 3.069.130 3.540.408 Other 2.256.858 468.090 Income from Damage Indemnity 267.422 308.935 Subsidy (Turquality and ITKIB) 108.957 443.987 Provisions for Legal Cases No Longer Required 393.274 140.502 Other Provisions No Longer Required 783.502 2.380.916 Provisions No Longer Required 1.478.130 - Interest Incomes 196.660 165.789 Expense Contribution Incomes 56.327 43.888
31.031.239 36.045.770
29.2 Other Operating Expenses (-)
The details of other operating expenses pertaining to the periods of December 31st, 2019 and December 31st, 2018, are as follows:
01.01. - 31.12.2019 01.01. - 31.12.2018
Financing Expenses Arising from Forward Purchases 14.929.338 17.448.536 Foreign Exchange Losses 6.778.264 9.836.106 Impairment of Trade Receivables 3.170.752 2.626.254 Provisions Expenses for Legal Cases 668.335 628.781 Other Provision Expenses 280.317 424.180 Other 173.489 239.280 Provision for Expected Credit Loss 12.746 12.746 Provision Expenses (Trade Receivables) - 717.356
26.013.241 31.933.239 107
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
30. INCOMES AND EXPENSES FROM INVESTING ACTIVITIES
30.1 Incomes from Investing Activities
The details of incomes from investing activities pertaining to the periods of December 31st, 2019 and December 31st, 2018, are as follows:
01.01. - 31.12.2019 01.01. - 31.12.2018
Income from Fixed Asset Sales 60.471 111.309 60.471 111.309
30.2 Expenses from Investing Activities (-)
None. (31.12.2018: None)
31. FINANCING EXPENSES AND INCOMES
31.1 Financing Expenses (-)
The details of financing expenses pertaining to the periods of December 31st, 2019 and December 31st, 2018, are as follows:
01.01. - 31.12.2019 01.01. - 31.12.2018
Exchange Difference Expenses 2.419.218 20.517.308 Interest From Leading Transactions 18.413.778 - Loan Interest Expense 4.267.563 2.383.069 Factoring Interest Expenses 686.635 656.125 Bank Charges 505.214 314.584 Bank Letter of Guarantee Commission 646.599 213.893 Credit Card Commission 879.493 438.177 Other Financing Expenses 36.674 155.089 Dues Expenses - 682.273 Maturity Interest Expense - 13.877
27.855.174 25.374.395 108
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
31.2 Financing Incomes
The detail of financing incomes pertaining to the periods of December 31st, 2019 and December 31st, 2018, is as follows:
01.01. - 31.12.2019 01.01. - 31.12.2018
Exchange Difference Incomes 1.272.675 -
1.272.675 -
32. FIXED ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
31.12.2019 31.12.2018
Fixed Assets held for Sale 2.722.277 2.772.277
2.722.277 2.772.277
33. INCOME TAXES (INCLUDING DEFERRED TAX ASSETS AND LIABILITIES)
Current Tax Liability 31.12.2019 31.12.2018
Provision for Current Corporate Tax (-) 3.639.435 (214.468) Prepaid Taxes and Funds within the Period (2.726.057) 3.798
Net Tax Asset/(Liability) of Current Period 913.378 (210.670)
01.01. - 31.12.2019 01.01. - 31.12.2018
Current Tax Expense/Income (3.639.435) (214.468) Deferred Tax Expense/Income (462.293) (2.350.975)
Total Tax Income/(Expense) (4.101.728) (2.565.443)
The Company is subject to corporate taxes applicable in Turkey. Necessary provisions are made in accompanying financial statements for the estimated tax charge based on the Company’s operating results for the current accounting period.
Corporate tax to be accrued on taxable corporate income is calculated over the tax base used in determination of business profit remaining after adding non-exempt expenses which cannot be deducted from the tax base to and deducting tax exempt income, non-taxable revenues and other deductions (losses from the previous years, investment allowances and R&D incentives, if any) from business income.
The corporate tax rate applicable in Turkey is 22%. (2018: 22%). In Turkey, advance tax returns are filled and advance tax is accrued on a quarterly basis. Advance tax at a rate of 22% over the corporate income has been calculated at the stage of taxing the corporate incomes for 2019 as of advance tax periods. (2018: 22%) 109
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
The provision stipulating that “the corporate tax rate of 20% specified in the first paragraph of the Article 32 of the Corporate Tax Law No.5520 is applied as 22% for corporate incomes pertaining to taxation periods of 2018, 2019 and 2020” has been brought by the Law No.7061 on “Amendments to Certain Tax Laws and Some Other Laws” adopted on November 28th, 2017 through a provisional article. Furthermore, the provision stipulating that “an exemption rate of 75% applied over the income derived by corporate taxpayers from the sales of immovable properties held in their assets for a period of two full years minimum” specified in subparagraph e of the first paragraph of the Article 5 of the Corporate Tax Law No.5520 has been amended as 50% also by the same “Omnibus Law”.
Movement table of deferred tax is as follows:
Movement table of deferred tax is stated below: 01.01. - 31.12.2019 01.01. - 31.12.2018
Opening Balance as of 1st January 55.909 1.768.246 Deferred Tax Income / (Expense) (462.293) (2.350.975) Actuarial (Gain) / Loss 179.845 143.490 Deferred Tax for Revaluation Surplus 86.012 95.538 Derivative Instruments (373.625) 373.625 TFRS 9 Mandatory Adjustment - 25.985
End of Period (514.152) 55.909
31.12.2019 31.12.2018
Total Temporary Deferred Tax Total Temporary Deferred Tax Differences Asset / Liability Differences Asset / Liability
Impairment of Trade Receivables 532.159 117.075 721.920 158.822 Derivative Instruments - - 1.698.296 373.625 Expense Accruals 2.507.469 551.643 3.886.873 855.112 Provision for Doubtful Receivables 136.240 29.973 136.240 29.973 Currency Valuation Differences 3.554 782 2.069 455 Provision for Leaves 2.953.257 649.717 2.397.580 527.468 Provision for Severance Pay and Termination Indemnity 6.021.815 1.324.799 5.437.074 1.196.156 Provisions for Liabilities/Expenses 280.317 61.670 770.317 169.470 Impairment of Financial Investments 3.107.074 170.889 3.107.074 170.889 Operating Lease Transactions 22.006.830 4.841.503 - - Legal case Provisions 1.478.281 325.222 1.203.220 264.708 Other - 528 116
Deferred Tax Asset 39.026.996 8.073.273 19.361.191 3.746.794
Impairment of Trade Payables (1.437.597) (316.271) (2.638.593) (580.490) Operating Lease Transactions (24.198.691) (5.323.713) - - Fixed Assets Depreciations 592.803 130.417 (31.041) (6.829) Fixed Assets Value Increment (21.213.754) 2.333.513 (21.995.680) (2.419.525) Finacial Investmets Value Increments (10.395.958) (571.778) (8.903.467) (489.691) Income Accruals (778.203) (171.205) (877.217) (192.988) Other (6.189) (1.362) (6.189) (1.362)
Deferred Tax Liability (57.437.589) (8.587.425) (34.452.187) (3.690.885)
Deferred Tax Asset (Net) - (514.152) - 55.909 110
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
34. EARNINGS PER SHARE Earnings per share disclosed in the income statement have been calculated by dividing the net profit of the current period by the weighted average number of shares that have been outstanding during the respective period.
Companies in Turkey can increase their capital by means of “bonus share” distribution to their existing shareholders from accumulated earnings and revaluation funds. Such “bonus share” distributions are considered as issued share in calculation of earnings per share. Accordingly, weighted average number of shares used in such calculations has been determined by calculating retrospective effects of share distributions.
Calculations of earnings per share have been made by dividing net profit by weighted average number of shares outstanding.
There is no financially preference share. Accordingly, earnings/loss per share on the basis of shares is as follows.
01.01. - 31.12.2019 01.01. - 31.12.2018
Net Profit / (Loss) for the Period 18.243.268 8.378.556 Weighted average number of shares outstanding (corresponding to a share of TL 1) 49.221.970 49.221.970
Earnings/loss per share having a nominal value of TL 1 0,3706 0,1702
35. EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES 01.01. - 31.12.2019 01.01. - 31.12.2018
Financing Expenses 2.419.218 20.517.308 Loan Exchange Difference Expenses (-) 2.419.218 20.517.308
Real Operation Income / Expense (3.878.964) (3.073.410) Foreign Exchange Gains 2.899.300 6.762.696 Foreign Exchange Losses (-) 6.778.264 9.836.106 111
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
36. FINANCIAL INSTRUMENTS
The details of financial instrıments as of December 31st, 2019 and December 31st, 2018, are as follows:
31.12.2019 31.12.2018
Short-Term Borrowings 43.110.899 4.995.324 - Bank Loans 21.449.859 4.975.430 - Credit Card Payables 25.248 19.894 - Borrows From Leasing Transactions 21.635.792 - Short-Term Parts of Long-Term Borrowings 15.545.778 32.386.507 - Bank Loans 15.545.778 32.386.507 Total Short-Term Borrowings 58.656.677 37.381.831 Long-Term Borrowings 47.088.863 27.486.005 - Bank Loans 11.084.333 27.486.005 - Borrows From Leasing Transactions 36.004.530 - Total Long-Term Borrowings 47.088.863 27.486.005
End of Period 105.745.540 64.867.836
Details of bank loans included in short-term borrowings are as follows: 31.12.2019 31.12.2018
Currency Amount in Amount in Foreign Effective Foreign Effective Currency Amount in TL Interest % Currency Amount in TL Interest % USD ------EURO 2.881.465 19.163.471 - - - - TL 2.286.388 2.286.388 14,00-14,75% - 4.975.430 22,39%
Total 21.449.859 4.975.430
Details of short-term parts of long-term borrowings are as follows: 31.12.2019 31.12.2018
Currency Amount in Amount in Foreign Effective Foreign Effective Currency Amount in TL Interest % Currency Amount in TL Interest % USD ------EURO 2.337.500 15.545.778 2,00-3,50% 5.372.679 32.386.507 3,71% TL ------
Total 15.545.778 32.386.507
Details of long-term borrowings are as follows: 31.12.2019 31.12.2018
Currency Amount in Amount in Foreign Effective Foreign Effective Currency Amount in TL Interest % Currency Amount in TL Interest % USD ------EURO 1.666.667 11.084.333 2,00-3,50% 4.559.722 27.486.005 3,71% TL ------
Total 11.084.333 27.486.005 112
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
37. DERIVATIVE INSTRUMENTS Details of the fair value of the derivative instruments related to the forward contracts entered into by the Company as of December 31st, 2019 and December 31st, 2018 are as follows:
Purchase Contract Value Sales Contract Value Assets Liabilities
Foreign Exchange - - - -
31.12.2019 End of Period - - - -
Purchase Contract Value Sales Contract Value Assets Liabilities
Foreign Exchange 14.849.620 - - 1.698.296
31.12.2018 End of Period 14.849.620 - - 1.698.296
Derivative financial instruments consist of forward foreign currency purchase / sale contracts.
38. NATURE AND LEVEL OF RISKS ARISING FROM FINANCIAL INSTRUMENTS
Main risks arising from financial instruments are credit risk, liquidity risk, market risk as well as interest rate and exchange risk.
38.1 Credit Risk: Credit risk consists of deposits kept at banks and customers exposed to credit risk including outstanding receivables and guaranteed transactions. Risk control evaluates credit quality of the customer considering financial position and past experiences of the customer and other factors. The Company management meets such risks by limiting average risk for counterparty in each agreement and obtaining collateral when necessary. The management is not expecting any loss due to nonperformance of the parties. 113
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
As of December 31st, 2019 and December 31st, 2018, the credit risks incurred by types of financial instruments are as follows:
Trade Receivables Other Receivables Cash and cash equivalent 31.12.2019 Related Other Related Other Deposit in Repo and Party Party Party Party Banks Funds Other
Maximum credit risk incurred as of reporting date (A+B+C+D+E) 28.986.834 6.725.165 2.112.057 514.179 18.870.187 - 247.691 Guaranteed part of maximum risk through security etc. ------
A. Net carrying value of financial assets undue or not impaired 28.986.834 6.725.165 2.112.057 514.179 18.870.187 - 247.691 B. Carrying value of financial assets of which conditions have been re-discussed, otherwise which would be considered as overdue or impaired ------C. Net carrying value of assets overdue, but not impaired ------D. Net carrying values of impaired assets ------Overdue (gross carrying value) ------Impairment (-) - 266.031 - - - - - Guaranteed part of net value through security etc. - (266.031) - - - - - Undue (gross carrying value) ------Impairment (-) ------Guaranteed part of net value through security etc. ------E. Elements involving off-balance sheet credit risk ------
Trade Receivables Other Receivables Cash and cash equivalent 31.12.2018 Related Other Related Other Deposit in Party Party Party Party Banks Other
Maximum credit risk incurred as of reporting date (A+B+C+D+E) 18.741.417 5.017.159 2.659.486 458.517 179.456 30.190 Guaranteed part of maximum risk through security etc. ------
A. Net carrying value of financial assets undue or not impaired 18.741.417 5.017.159 2.659.486 458.517 179.456 30.190 B. Carrying value of financial assets of which conditions have been re-discussed, otherwise which would be considered as overdue or impaired ------C. Net carrying value of assets overdue, but not impaired ------D. Net carrying values of impaired assets ------Overdue (gross carrying value) ------Impairment (-) - 266.031 - - - - Guaranteed part of net value through security etc. - (266.031) - - - - Undue (gross carrying value) ------Impairment (-) ------Guaranteed part of net value through security etc. ------E. Elements involving off-balance sheet credit risk ------114
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
38.1.2 Details and fair values of amount (TL 3.107.074) given in assets material stocks instead of purchasing collaterals obtained for receivables are and reported in Financial Investments new raw materials. as follows: account. The Company has been able to collect Total amount of collaterals obtained by 38.1.5 Aging table of financial assets its export and domestic revenues in cash the Company for its receivables is TL overdue, but not impaired during the periods ended on December 2.432.010 as of December 31st, 2019. 31st, 2019 and December 31st, 2018 in (December 31st, 2018: TL 2.348.045) None. (December 31st,2018: None) return for liquidity risk and to reduce its indebtedness level in Euro despite high 38.1.6 The assets acquired by the exchange differences during the said 38.1.3 Disclosures on credit quality of Company by taking over the ownership periods thanks to its export revenues. financial assets undue or not impaired of the collateral held as security or by The Company plans to reduce its as well as financial assets of which using other factors increasing the credit financial indebtedness also in 2019 as conditions have been renegotiated, reliability; it has managed during 2018 through its otherwise which would be considered as surplus liquidity acquired from its export overdue or impaired: - Nature and carrying value; activities and to carry out its liquidity management by focusing on its raw The Company has no financial asset of None. (December 31st, 2018: None) material stocks as well. which conditions have been renegotiated, otherwise would be considered as - In case such assets cannot be 38.2.1 Break down of derivative and overdue or impaired. There is no problem converted into cash currently, approach non-derivative financial liabilities by in collection of financial assets undue of the entity regarding disposal of or use their remaining maturities is as follows: and not impaired and average collection of such assets in business activities: time of trade receivables ranges between The following table has been prepared 30-365 days. (December 31st,2018: 30- None. (December 31st,2018: None) without discounting liabilities of the 365 days). Company and basing on the earliest 38.2. Liquidity Risk: Liquidity risk is due dates. Interests to be paid on these 38.1.4 Disclosures on which factors the possibility of the Company not liabilities have been included in the have been taken into account for fulfilling its net funding liabilities. following table. Average maturity of trade determination of provision for Occurrence of events resulting in payables is 174 days. (December 31st, impairment reserved for impaired decrease in fund resources such as 2018 – 140 Days) financial assets: deterioration in markets or decrease of credit rating cause liquidity risk to Since Desa International Limited and occur. The Company has been exposed Leather Fashion (Russia), which are to the liquidity risk as of December 31st, subsidiaries not consolidated due to 2019 and December 31st, 2018. The their low turnover, have lost their equity Company plans to carry out the liquidity capital as of December 31st, 2019, management by extending maturities of impairment has been calculated at the trade payables and focusing on to raw 31.12.2019 Total cash More than outflows as Maturities as per Carrying value Less than Between Between 5 years Agreement per agreement 3 months (I) 3-12 months (II) 1-5 years (III) (IV) (=I+II+III+IV)
Non-Derivative Financial Liabilities 241.252.021 242.689.618 141.157.204 54.443.550 47.088.864 -
Financial Payables 105.745.540 105.745.540 18.504.505 40.152.171 47.088.864 -
Trade Payables 125.579.239 127.016.836 112.725.457 14.291.379 - -
Other Payables 9.927.242 9.927.242 9.927.242 - - -
Derivative Financial ------Liabilities
Derivative Financial ------Instruments 115
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
31.12.2018 Total cash outflows as More than Maturities as per Carrying value Less than Between Between 5 years Agreement per agreement 3 months (I) 3-12 months (II) 1-5 years (III) (IV) (=I+II+III+IV)
Non-Derivative Financial Liabilities 177.863.431 180.238.115 85.899.479 66.852.630 27.486.006 -
Financial Payables 64.867.836 64.603.926 7.740.600 29.377.320 27.486.006 -
Trade Payables 103.110.780 105.749.374 68.274.064 37.475.310 -
Other Payables 9.884.815 9.884.815 9.884.815 - - -
Derivative Financial 1.698.296 1.698.296 - 1.698.296 - - Liabilities
Derivative Financial 1.698.296 1.698.296 - 1.698.296 - - Instruments
38.3 Market Risk: It is the possibility of incurring loss in positions held in the on-balance sheet and off-balance sheet accounts, due to risks resulted from interest, exchange differences and stock price changes arising from fluctuations in financial markets.
38.3.1. Exchange Risk: The effects resulting from exchange rate movements, in case of having assets, liabilities and off-balance sheet liabilities in foreign currency, are called exchange risk. 116
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
The Company’s foreign currency position in the original currency as of December 31st, 2019 and December 31st, 2018 is as follows:
December 31st, 2019
Equivalent in TL (Functional Currency) USD EUR CHF JPY GBP BGN CNY
1.Trade Receivables 32.087.502 83.968 4.586.690 26 - 139.435 - -
2a. Monetary Financial Assets 19.615.266 14.184 2.841.949 1.815 22 79.441 444 8 (including Cash and Bank Accounts)
2b. Non-Monetary Financial Assets ------
3.Other ------
4.Current Assets (1+2+3) 51.702.768 98.152 7.428.639 1.841 22 218.876 444 8
5.Trade Receivables ------
6a. Monetary Financial Assets ------
6b. Non-Monetary Financial Assets ------
7.Other ------
8.Fixed Assets (5+6+7) ------
9.Total Assets (4+8) 51.702.768 98.152 7.428.639 1.841 22 218.876 444 8
10.Trade Payables 55.729.020 910.339 7.545.335 15.451 2.650 5.932 - -
11.Financial Liabilities 34.709.250 - 5.218.965 - - - - -
12a.Other Monetary Liabilities 8.558.491 320.087 177.088 - - 704.606 - -
12b.Other Non-Monetary Liabilities ------
13. Derivative Financial Instruments ------
14.Short-Term Liabilities (10+11+12) 98.996.761 1.230.426 12.941.388 15.451 2.650 710.538 - -
15.Trade Payables ------
16.Financial Liabilities 11.084.336 - 1.666.667 - - - - -
17a. Other Monetary Liabilities ------
17b. Other Non-Monetary Liabilities ------
18. Long-Term Liabilities (14+15+16) 11.084.336 - 1.666.667 - - - - -
19. Total Liabilities 110.081.097 1.230.426 14.608.055 15.451 2.650 710.538 - - 20. Net asset / liability position of ------off-balance sheet derivatives (19a-19b) 20a. Total Amount of Hedged Assets ------
20b. Total Amount of Hedged Liabilities ------21. Net asset / liability position in (58.378.329) (1.132.274) (7.179.416) (13.610) (2.628) (491.662) 444 8 Foreign Currency (9-18+19) 22. Monetary Items Net asset / liability position in Foreign Currency (58.378.329) (1.132.274) (7.179.416) (13.610) (2.628) (491.662) 444 8 (IFRS 7.B23) (=1+2a+5+6a-10-11-12a- 14-15-16a) 23.Import (*) 120.028.318 726.422 17.308.322 36.493 784.985 43.403 - -
24.Export (*) 212.626.992 836.410 29.575.121 - - 1.410.178 - - (*) The equivalents in TL of the respective export and import amounts have been reported in foreign exchange buying rate of CBRT applicable on December 31st, 2019. 117
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
December 31st,2018
Equivalent in TL (Functional Currency) USD EUR GBP CHF BGN JPY DİĞER
1.Trade Receivables 18.253.165 182.092 2.750.478 107.501 26 - -
2a. Monetary Financial Assets 374.293 12.157 42.352 7.220 1.057 444 - 7 (including Cash and Bank Accounts)
2b. Non-Monetary Financial Assets ------
3.Other ------
4.Current Assets (1+2+3) 18.627.458 194.249 2.792.829 114.720 1.083 444 - 7
5.Trade Receivables ------
6a. Monetary Financial Assets ------
6b. Non-Monetary Financial Assets ------
7.Other -
8.Fixed Assets (5+6+7) ------
9.Total Assets (4+8) 18.627.458 194.249 2.792.829 114.720 1.083 444 - 7
10.Trade Payables 37.530.863 453.336 5.792.374 22.547 14.873 - 2.650 -
11.Financial Liabilities 32.386.507 - 5.372.679 - - - - -
12a.Other Monetary Liabilities 4.617.915 113.229 415.266 228.326 - - - -
12b.Other Non-Monetary Liabilities ------
13. Derivative Financial Instruments 1.698.299 - 281.735 - - - - -
14.Short-Term Liabilities (10+11+12) 76.233.584 566.565 11.580.318 250.873 14.873 - 2.650 -
15.Trade Payables ------
16.Financial Liabilities 27.486.006 - 4.559.722 - - - - -
17a. Other Monetary Liabilities ------
17b. Other Non-Monetary Liabilities ------
18. Long-Term Liabilities (14+15+16) 27.486.006 - 4.559.722 - - - - -
19. Total Liabilities 103.719.590 566.565 16.140.040 250.873 14.873 - 2.650 -
20. Net asset / liability position of ------off-balance sheet derivatives (19a-19b)
20a. Total Amount of Hedged Assets ------
20b. Total Amount of Hedged Liabilities ------
21. Net asset/liability position in For- (85.092.132) (372.316) (13.347.211) (136.153) (13.790) 444 (2.650) 7 eign Currency (9-18+19) 22. Monetary Items Net asset / liability position in Foreign Currency (IFRS (85.092.132) (372.316) (13.347.211) (136.153) (13.790) 444 (2.650) 7 7.B23) (=1+2a+5+6a-10-11-12a-14- 15-16a)
23.Import (*) 93.895.209 881.337 14.703.806 51.605 40.146 - 1.391.426 550
24.Export (*) 174.535.560 1.728.673 26.026.537 1.249.875 43.538 - - 7.150
(*) The equivalents in TL of the respective export and import amounts have been reported in foreign exchange buying rate of CBRT applicable on December 31st, 2018. 118
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
Currency Risk Sensitivity Analysis
If the TL changes by 20% against the following foreign currencies as of December 31st, 2019, the income statement will be affected as follows. When conducting analysis, it has been assumed that all other variables, especially interest rates, remain constant.
Exchange rate sensitivity analysis table as of December 31st, 2019 and December 31st, 2018 is presented hereunder:
Exchange Rate Sensitivity Analysis Table as of December 31st, 2019
Profit/Loss Equity
Appreciation Depreciation Appreciation of Depreciation of of Foreign of Foreign Foreign Currency Foreign Currency Currency Currency In case of change in value of USD against TL at a rate of 20%;
1- Net asset/liability in USD (1.345.187) 1.345.187 (1.345.187) 1.345.187
2- Amount protected from USD risk (-) - - - -
3- USD Net Effect (1+2) (1.345.187) 1.345.187 (1.345.187) 1.345.187
In case of change in value of EUR against TL at a rate of 20%; - - - -
4- Net asset/liability in Euro (9.549.485) 9.549.485 (9.549.485) 9.549.485
5- Amount protected from Euro risk (-) - - - -
6- Euro Net Effect (4+5) (9.549.485) 9.549.485 (9.549.485) 9.549.485
In case of change in value of GBP against TL at a rate of 20%;
7- Net asset/liability in British Pound (764.682) 764.682 (764.682) 764.682
8- Amount protected from British Pound risk (-) - - - -
9- British Pound Net Effect (7+8) (764.682) 764.682 (764.682) 764.682
In case of change in value of Bulgarian Leva against TL at a rate of 20%;
10- Net asset/liability in BGN 300 (300) 300 (300)
11- Amount protected from BGN risk (-) - - - -
12- BGN Net Effect (10+11) 300 (300) 300 (300)
In case of change in value of Chinese Yuan against TL at a rate of 20%;
13- Net asset/liability in Chinese Yuan 1 (1) 1 (1)
14- Amount protected from Chinese Yuan risk (-) - - - -
15- Chinese Yuan Net Effect (13+14) 1 (1) 1 (1)
In case of change in value of CHF against TL at a rate of 20%;
16- Net asset/liability in Swiss Franc (16.586) 16.586 (16.586) 16.586
17- Amount protected from Swiss Franc (-) - - - -
18- Swiss Franc Net Effect (16+17) (16.586) 16.586 (16.586) 16.586
In case of change in value of Japanese Yen against TL at a rate of 20%;
19- Net asset/liability in Japanese Yen (29) 29 (29) 29
20- Amount protected from Japanese Yen (-)
21- Swiss Franc Net Effect (19+20) (29) 29 (29) 29
TOTAL (3+6+9+12+15+18+21) (11.675.666) 11.675.666 (11.675.666) 11.675.666 119
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
Exchange Rate Sensitivity Analysis Table as of December 31st, 2018
Profit/Loss Equity
Appreciation Depreciation Appreciation of Depreciation of of Foreign of Foreign Foreign Currency Foreign Currency Currency Currency In case of change in value of USD against TL at a rate of 20%;
1- Net asset/liability in USD (391.743) 391.743 (391.743) 391.743
2- Amount protected from USD risk (-) - - - -
3- USD Net Effect (1+2) (391.743) 391.743 (391.743) 391.743
In case of change in value of EUR against TL at a rate of 20%; - - - -
4- Net asset/liability in Euro (16.091.398) 16.091.398 (16.091.398) 16.091.398
5- Amount protected from Euro risk (-) - - - -
6- Euro Net Effect (4+5) (16.091.398) 16.091.398 (16.091.398) 16.091.398
In case of change in value of GBP against TL at a rate of 20%;
7- Net asset/liability in British Pound (181.160) 181.160 (181.160) 181.160
8- Amount protected from British Pound risk (-) - - - -
9- British Pound Net Effect (7+8) (181.160) 181.160 (181.160) 181.160
In case of change in value of Bulgarian Leva against TL at a rate of 20%;
10- Net asset/liability in BGN 272 (272) 272 (272)
11- Amount protected from BGN risk (-) - - - -
12- BGN Net Effect (10+11) 272 (272) 272 (272)
In case of change in value of Chinese Yuan against TL at a rate of 20%;
13- Net asset/liability in Chinese Yuan 1 (1) 1 (1)
14- Amount protected from Chinese Yuan risk (-) - - - -
15- Chinese Yuan Net Effect (13+14) 1 (1) 1 (1)
In case of change in value of CHF against TL at a rate of 20%;
16- Net asset/liability in Swiss Franc (14.714) 14.714 (14.714) 14.714
17- Amount protected from Swiss Franc (-) - - - -
18- Swiss Franc Net Effect (16+17) (14.714) 14.714 (14.714) 14.714
In case of change in value of Japanese Yen against TL at a rate of 20%;
19- Net asset/liability in Japanese Yen (25) 25 (25) 25
20- Amount protected from Japanese Yen (-)
21- Swiss Franc Net Effect (19+20) (25) 25 (25) 25
TOTAL (3+6+9+12+15+18+21) (16.678.767) 16.678.767 (16.678.767) 16.678.767
38.3.2. Interest Risk: Fluctuations in financial instrument prices due to changes in market interest rates cause the Company to deal with interest rate risk. Sensitivity of the Company to interest rate risk is related to mismatch of maturities of asset and liability accounts. This risk is managed by meeting the assets affected by interest changes with the same type of liabilities. 120
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
Interest Position Table
Fixed rate financial instruments 31.12.2019 31.12.2018
Financial Liabilities Bank Loans 19.444.935 12.462.947 Financial Liabilities Credit Cards 25.248 19.894 Banks Time Deposits 17.158.548 -
Floating rate financial instruments Financial Liabilities Bank Loans 28.635.035 52.384.995
38.4 Sensitivity Analysis for Other Risks: 39.2 Hedge Accounting None. (December 31st, 2018: None) Hedge accounting requires recognition of hedging instruments (future contracts, option, forward and swaps) and hedged items 39. FINANCIAL INSTRUMENTS (FAIR VALUE DISCLOSURES AND (liabilities and reveivables subject to exchange rate, interest DISCLOSURES UNDER HEDGE ACCOUNTING) and price risk, included in financial statements as well as performance bonds subject to the same impacts, not included in 39.1 Fair Value financial statements) in financial statements as profit or loss by netting any change in their fair values with each other. Fair value is the amount that arises when an asset is exchanged or a liability is paid between a knowledgeable buyer and a There are three types of hedging relationship: knowledgeable seller in a mutual bargaining environment. - Fair value hedging Financial assets are valued at “Fair Value” for periods following - Cash flow hedging their inclusion in the balance sheet. - Net investment hedging (in foreign affiliates) Fair values of financial assets are determined by the company 39.3 Fair value estimation management using available market information and proper valuation methods. However, in order to determine the fair The Company’s various accounting policies and disclosures value, estimates should be used for interpreting market data. require the determination of the fair value of both financial and Accordingly, the estimates presented may not reflect the actual non-financial assets and liabilities. If applicable, additional amounts the Company could realize in the current market information about the assumptions used in determining the fair transaction. values are presented in the notes specific to the asset or liability. Fair value of the shares traded on the stock exchange is “Stock Valuation methods according to the levels are listed as follows. exchange rate”. Level 1: Quoted (unadjusted) prices in the active market for It is deemed that carrying value of cash and cash equivalents, Identical Assets or Liabilities; short-term trade receivables and payables is close to their fair value. Level 2: Data regarding prices other than quoted prices included in Level 1 which are observable directly (through prices) or Financial assets in foreign currency are valued at period-end indirectly (deriving from prices) for the asset or liability; exchange rate and therefore their fair values get close to their carrying values. Level 3: Data not basing on observable market data for assets or liabilities (unobservable data) Since affiliates and subsidiaries of the Company are not traded in an active market, their fair values could not be measured The Company’s assets and liabilities measured at fair value as of reliably. The Company does not intend to dispose of such financial December 31st, 2019 and December 31st, 2018 are as follows: instruments in the short term.
December 31st, 2019
Assets Level 1 Level 2 Level 3 Total Financial Investments - - 19.660.150 19.660.150 Total Assets - - 19.660.150 19.660.150
Liabilities Level 1 Level 2 Level 3 Total Hedging derivative financial instruments - - - - Total Liabilities - - - -
December 31st, 2018
Assets Level 1 Level 2 Level 3 Total Financial Investments - - 18.167.659 18.167.659 Total Assets - - 18.167.659 18.167.659
Liabilities Level 1 Level 2 Level 3 Total Hedging derivative financial instruments - 1.698.296 - 1.698.296 Total Liabilities - 1.698.296 - 1.698.296 121
DESA DERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE FINANCIAL STATEMENTS PERTAINING TO THE ACCOUNTING PERIOD ENDING ON DECEMBER 31ST, 2019 (All amounts expressed in Turkish Lira (“TL” ) unless otherwise stated.)
39.4 Fair Value 39.6 Financial Liabilities Fair value is the price at which an asset is traded in a current The fair values of trade payables and other monetary liabilities transaction between the willing parties. are considered to approximate their respective carrying values due to their short-term nature. Bank loans are stated Financial assets and liabilities denominated in foreign at discounted cost and transaction costs are added to the currencies have been translated at the exchange rates prevailing initial cost of loans. As the interest rates thereon are updated at the balance sheet date. taking into consideration the changing market conditions, it is considered that the fair values of loans denote the value they The following methods and assumptions have been used to carry. Due to their short-term nature, it is estimated that the estimate the fair value of each financial instrument when it is fair values of trade payables are approximate to their carrying possible to determine the fair value. values. 39.5 Financial Assets 40. EVENTS AFTER THE REPORTING PERIOD None. Due to their short-term nature and insignificant credit risk, the carrying values of cash and cash equivalents plus 41. OTHER ISSUES SIGNIFICANTLY AFFECTING THE FINANCIAL accrued interest and other financial assets are considered to STATEMENTS OR REQUIRED TO BE DISCLOSED FOR approximate their respective fair values. The carrying values of FINANCIAL STATEMENTS TO BE CLEAR, INTERPRETABLE AND trade receivables net of provisions for doubtful receivables are UNDERSTANDABLE considered to approximate their fair values. None. (December 31st, 2018: None) 42. DISCLOSURES ON CASH FLOW STATEMENT Cash and Cash Equivalents Details of cash and cash equivalents as of December 31st, 2019 and December 31st, 2018 are as follows: 31.12.2019 31.12.2018 Cash 227.854 123.960 - TL 218.407 109.211 - USD 5.977 7.029 - EUR 1.963 6.354 - BGN 1.500 1.360 - CNY 7 5 Banks 18.870.187 179.456 Time Deposit - - EUR 17.158.548 - Demand Deposit 1.711.639 179.456 - TL 129.044 164.593 - USD 17.639 3.824 - EUR 1.564.288 3.769 - GBP 613 7.246 - CHF 55 24 Other liquid assets 247.691 30.190 Barter cheques 247.691 30.190 Expected Credit Loss (12.746) (12.746)
TOTAL 19.332.986 320.860 Interest rediscount on cash and cash equivalents (54.576) - TOTAL 19.278.410 320.860 There is a blocked account of TL 8.000 in bank deposits of the Company as of December 31st, 2019. (December 31st, 2018 - TL 8.000). 43. DISCLOSURES ON THE STATEMENT FOR CHANGES IN EQUITY The Company’s statement of changes in equity has been reported in accordance with the financial statement and note presentation principles of which the application has been rendered compulsory with the announcement published in Weekly Bulletin issue no.2013/19 of the CMB dated 07.06.2013.
The effects of the changes in accounting policies explained in the Note 2 as well as the effects of the other retained earnings/expenses not to be reclassified in profit or loss and presented in the account of the retained earnings/losses and other comprehensive incomes have been reported in the statement of changes in equity. EVENTS AFTER THE REPORTING PERIOD It has been decided to close our branch titled “Desa Deri Sanayi ve Ticaret A.Ş. Carrefour shopping store” as of 02.01.2020. Totally one (1) new store titled “Desa Deri Sanayi ve Ticaret Anonim Şirketi Erasta Samsonite Kiosk” has been opened as of 11.01.2020. Totally one (1) new store titled “Desa Deri Sanayi ve Ticaret Anonim Şirketi İstanbul Capacity Samsonite branch” has been opened as of 12.02.2020. Totally one (1) new store titled “Desa Deri Sanayi ve Ticaret Anonim Şirketi Primemall Samsonite Kiosk” has been opened as of 09.02.2020. 122
Headquarters and Factory Düzce Factory Halkalı Cad. No:208 34295 Sefaköy / İstanbul İstiklal OSB – 1 Mahallesi 1inci Cadde No:13 T. (0212) 473 18 00 (pbx) / (0212) 698 98 12 – 697 57 96 Beyköy Beldesi / Merkez – Düzce T. (0380) 553 73 01 (7 Line) / (0380) 553 73 08 Çorlu Tannery Marmaracık OSB Mahallesi Kuzey 2.Sok. No:5/1 Ergene-Tekirdağ Desa Contact Line T. (0282) 686 31 39-40 / (0282) 686 40 11 444 33 72 (444 DESA) www.desa.com.tr – [email protected] 123
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