Cofinimmo - Annual Financial Report 2015

III Transactions eliminated on consolidation

Intragroup balances and transactions and any gains arising from

intragroup transactions are eliminated in preparing the consolidated

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 on 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

writedown is recorded on 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.

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 whose 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. At closing, monetary

assets and liabilities denominated in foreign currencies are trans-

lated 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 denominated in foreign

currencies are included on 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 documented.