CANVA_UK_OPERATIONS_LIMIT - Accounts

The directors of the company have elected not to include a copy of the profit and loss account within the financial statements.true

These financial statements have been prepared and delivered in accordance with the provisions applicable to companies subject to the small companies regime.

Canva UK Operations Limited is a private company limited by shares domiciled and incorporated in England and Wales. The registered office is Acre House, 11-15 William Road, London, NW1 3ER, United Kingdom.

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006 as applicable to companies subject to the small companies regime. The disclosure requirements of section 1A of FRS 102 have been applied other than where additional disclosure is required to show a true and fair view.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared on the historical cost convention. The principal accounting policies adopted are set out below.

The financial statements have been prepared on a going concern basis, with the directors concluding that the Company will be able to fulfil all obligations as and when they fall due for the foreseeable future.

Turnover represents amounts receivable for services net of VAT and trade discounts. Turnover largely relates to software license fees which are recognised and deferred proportionally over the period of time they relate to. The two main client streams are small monthly and large enterprise subscriptions.

Tangible fixed assets are initially measured at cost and subsequently measured at cost, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost of assets less their residual values over their useful lives on the following bases:

At each reporting period end date, the company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss.

The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs.

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

Equity-settled share-based compensation benefits are provided to employees. Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services.

The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined based on advice from a valuation expert.

The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the year is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods.

Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied.

If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification.

If the non-vesting condition is within the control of the Company or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the Company or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited.

If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification.

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leases asset are consumed.

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

Grant income

The grants are recognised at the fair value of the grant receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received. The income is recognised in other income in the period in which the grant becomes receivable.

In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.

As part of calculating the fair value of options at the grant date, management are required to make a number of judgements and estimates.

Management have exercised judgment in determining that the fair value of the share options granted during the year are commensurate to the share price of the parent company, Canva Inc. as at the date of issue of the options. Management have reached this conclusion based on the limited vesting conditions of the options granted and the exercise price being £nil.

Management of the parent company engaged a professional valuer to complete a valuation of the shares of the parent company at December 2020 and at December 2021. The professional valuer concluded that the valuation of the shares, at each of those dates, was commensurate to the price per share paid in precedent primary and secondary transactions. The price per share was adjusted for a lack of marketability in the shares in the parent company.

Where the grant date of options was not at the date of a professional valuation, management estimated the share price based on the most recent professional valuation, uplifted for the key metric for group performance being annual recurring revenue.

The share-based payment transactions relating to the share options are disclosed in note 8.

The average monthly number of persons (including directors) employed by the company during the year was:

Deferred tax assets and liabilities are offset where the company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:

The deferred tax asset set out above is expected to reverse within 12 months and relates to the utilisation of tax losses against future expected profits of the same period.

EMI Scheme

At 1 January 2021, the company had an Enterprise Management Incentive (EMI) Scheme with equity-settled share options granted to certain employees in previous periods. On 28 May 2021, all options under the EMI scheme were exercised. The weighted average exercise price of options in the EMI scheme at 1 January 2022 and 28 May 2021 was £25.88. No amounts have been recognised in the profit and loss account in the year.

Employee RSU Plan

The parent company, Canva Inc., maintains the Employee RSU plan. Equity-settled share option awards were granted to employees of the company under the Employee RSU plan at 27 May 2021 and 7 December 2021. The weighted average exercise price of options granted during the year was £nil. The vesting period of the options ranges from 1 month to 48 months. The options granted during the year have a total fair value at the grant date of £2,297,883 (2020: £nil). During the year, a share-based payment expense of £1,282,807 (2020: £nil) has been recognised in the profit and loss account.

The options granted during the year do not include a number of options where the grant date occurs subsequent to year end, but where vesting has commenced at the balance sheet date based on the employees service commencement. The company has used the vesting start date to estimate the grant date fair value. The total fair value of these options is £1,654,942 (2020: £nil). During the year, a share-based payment expense of £273,092 (2020: £nil) has been recognised in the profit and loss account.

At the year end, the carried forward share-based payment reserve for these options is £1,555,899 (2020: £nil).

During the year, the company recognised total share-based payment expenses of £1,555,898 (2020 - £-) which related to equity settled share based payment transactions.

On 28 May 2021 Seed Preferred shares have been converted to Ordinary shares.

On 28 May 2021 company has issued 13,062 Ordinary shares of 0.1p each for a total consideration of £338,396.

At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, as follows:

On 10 January 2022 the company acquired the subsidiary, Canva Spain Operations S.L., a company with registered office at Calle Principe De Vergara, 112, 28002, Madrid, Spain.

On 28 May 2021 the parent company and ultimate controlling party became Canva Inc, a company Incorporated in the USA with a registered office at 2140 S Dupont Hwy, Camden, Delaware 19934, USA.

It was found that the method used to calculate deferred income was using data exclusive of discounts and therefore was overstating the deferred portion of income, this totalled £110,777. A prior period adjustment has been made to include the costs in the correct period.

As the income statement has been omitted from the filing copy of the financial statements, the following information in relation to the audit report on the statutory financial statements is provided in accordance with s444(5B) of the Companies Act 2006:

The auditor's report was unqualified.