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The book value of the participations in subsidiaries, held by the Group
or by third parties, are adjusted to reflect the changes in the respec-
tive levels of participation. Any difference between the amount by
which the minority interests are adjusted and the fair value of the
consideration paid or received is recognised directly under equity.
II Joint ventures
A joint venture is a joint agreement by which parties which exercise
a joint control have rights on the net assets of the agreement. Under
the equity accounting method, the consolidated income statement
includes the Group’s share in the result of associated companies
and joint ventures. This share is calculated from the date on which
the joint control begins until the date on which the joint control
ceases. The jointly-controlled entities’ financial statements cover the
same accounting period as that of the company.
III Transactions eliminated on consolidation
Intragroup balances and transactions, and any gains arising from
intragroup transactions, are eliminated in preparing the consoli-
dated financial statements. Gains arising from transactions with
jointly-controlled entities are eliminated to the extent of the Group’s
interest in the entities. Losses are eliminated in the same way as
gains, but only to the extent that there is no evidence of impairment.
A list of the Group companies is included in Note 43 to the consoli-
dated financial accounts.
D. Goodwill and business combinations
When the Group takes control of an integrated combination of
activities and assets corresponding to the definition of a business
according to IFRS 3 - “Business combinations”, the assets, liabilities
and contingent liabilities of the business acquired are recorded at
their fair value at the acquisition date. The goodwill represents the
positive difference between the acquisition costs (excluding acqui-
sition-related costs), plus any minority interests, and the fair value
of the acquired net assets. If this difference is negative (“negative
goodwill”), it is immediately recorded under the income statement
after confirmation of the values.
After its initial recording, the goodwill is not amortised but submitted
to an impairment test realised at least every year on the cash gen-
erating units to which the goodwill was allocated. If the book value
of a cash generating unit exceeds its value in use, the resulting writ-
edown is recorded under the income statement and first allocated
in reduction of the possible goodwill and then to the other assets of
the unit, proportionally to their book value. An impairment booked on
goodwill is not written back during a subsequent year.
In accordance with IFRS 3, the goodwill can be set temporarily at the
acquisition and adjusted within the 12 following months. This was
done for the goodwill of CIS.
In the event of the disposal of a cash generating unit, the amount of
goodwill that is allocated to this unit is included in the determination
of the gain or loss on the disposal.
E. Translation of foreign currencies
I Foreign entities
There is no subsidiary which financial statements are denominated
in a currency other than the Euro at the closing date.
II Foreign currency transactions
Foreign currency transactions are recognised initially at exchange
rates prevailing at the date of the transaction. Subsequently, at clos-
ing, monetary assets and liabilities denominated in foreign curren-
cies are translated at the then prevailing currency rate. Gains and
losses resulting from the settlement of foreign currency transactions
and from the translation of monetary assets and liabilities denomi-
nated in foreign currencies are included in the income statement as
financial income or financial charges.
F. Derivative financial instruments
The Group uses derivative financial instruments (Interest Rate
Swaps, purchase of CAP options, sale of FLOOR options) to hedge its
exposure to interest rate risks arising from its operational, financing
and investment activities. For more details about derivative financial
instruments, see Note 24.
Derivative financial instruments are recognised initially at cost and
are revalued at their fair value at subsequent reporting dates.
The fair value of Interest Rate Swaps, CAP options, FLOOR options
and other derivative instruments is the estimated amount the Group
would receive or pay to close the position at the closing date, taking
into account the then prevailing spot and forward interest rates, the
value of the option and the creditworthiness of the counterparties.
Revaluation is carried out for all derivative products on the basis
of the same assumptions as to rate curve and volatility using an
application of the independent provider of market data Bloomberg.
This revaluation is compared with the one given by the banks, and
any significant discrepancy between the two revaluations is docu-
mented. See also W below.
The accounting treatment depends on the qualification of the deriv-
ative instrument as a hedging instrument and on the type of hedg-
ing. A hedging relationship qualifies for hedge accounting if, and only
if, all the following conditions are met:
•
at the inception of the hedge, there is a formal designation and
documentation of the hedging relationship and the entity’s risk
management objective and strategy for undertaking the hedge;
•
the hedge is expected to be truly effective in offsetting
changes in the fair value or the cash flows attributable to the
hedged risks;
•
the effectiveness of the hedge can be reliably measured;
•
the hedge is assessed on an ongoing basis and is highly
effective throughout the financial reporting periods for which
the hedge was designated.
I Fair value hedges
Where a derivative financial instrument hedges the exposure to
changes in the fair value of a recognised asset or liability or a unrec-
ognised firm commitment, or an identified portion of such an asset,
liability or firm commitment that is attributable to a particular risk,
any resulting gain or loss on the hedging instrument is recognised
under the income statement. The hedged item is also stated at its
fair value for the risk being hedged, with any gain or loss being rec-
ognised under the income statement.
II Cash flow hedges
Where a derivative financial instrument hedges the exposure to
changes in cash flows that are attributable to a particular risk asso-
ciated with a recognised asset or liability, a firm commitment or a
highly likely forecasted transaction, the portion of the gain or loss on
the hedging instrument that is determined to be an effective hedge
is recognised directly under equity. The ineffective portion of the
gain or loss on the hedging instrument is immediately recognised
under the income statement.
When the firm commitment or the forecasted transaction sub-
sequently results in the recognition of a financial asset or liabil-
ity, the associated gains or losses that were recognised directly
under equity are reclassified under the income statement in the
same period or periods during which the asset acquired or liability
assumed affects the income statement.
When a hedging instrument or hedge relationship is (partially) termi-
nated, the cumulative gain or loss at that point is (partially) recycled
under the income statement.