Universal Registration Document 2022

Accounting principles and methods

Financial assets comprise equity instruments (particularly non-consolidated investments), debt securities, loans and receivables at amortised cost, derivative assets (see note 18.7) and cash and cash equivalents (see note 18.2).

The classification and measurement of financial instruments depend on the business model and the instruments’ contractual characteristics. They are carried at amortised cost, fair value through other comprehensive income (OCI), or fair value through profit and loss.

Financial liabilities comprise loans and other financial liabilities, bank credit and derivative liabilities (see note 18.7).

Financial assets and liabilities are recorded in the balance sheet as current if they mature within one year and non-current if they mature after one year, apart from derivatives held for trading, which are all classified as current.

Derecognition of financial assets and liabilities

The Group derecognises a financial asset when:

• the contractual rights to the cash flows generated by the asset expire, or
• the Group transfers the rights to receive contractual cash flows related to the financial asset through the transfer of substantially all of the risks and rewards associated with ownership of the asset.

Any interest created or retained by the Group in transferred financial assets is recorded as a separate asset or liability.

The Group derecognises a financial liability when its contractual obligations are extinguished, cancelled or expire. When a debt is renegotiated with a lender the Group derecognises the debt and recognises a new liability when the new terms are substantially different; otherwise, the book value is recalculated. In either case, the impacts of the debt renegotiation are recorded in profit and loss.

Accounting principles and methods

Financial assets comprise debt and equity securities. The accounting treatment applied depends on their contractual characteristics and business model Financial assets carried at fair value through OCI with or without recycling Financial assets carried at fair value through OCI comprise:

• non-consolidated investments for which the Group has irrevocably opted to recognise subsequent fair value changes in OCI, with no recycling to profit and loss in the event of sale. Only dividends received from these investments are recognised in the income statement, under “Other financial income”;
• debt securities (such as bonds) invested under a mixed “collect and sell” business model for which contractual cash flows consist entirely of principal and interest payments reflecting the time value of money and the credit risk associated with the instrument (the IFRS 9 “SPPI” test – Solely Payment of Principal and Interest). Changes in fair value are recorded directly in OCI with recycling and transferred to profit and loss when the securities are sold. For these debt securities, interest income is calculated at the effective interest rate and credited to the income statement under the heading “Other financial income”.

Upon initial recognition, these financial assets are recorded at fair value plus transaction costs attributable to their acquisition.

At each reporting date, they are adjusted to fair value based on quoted prices where possible, or using the discounted future cash flow method or by reference to external sources otherwise. Changes in the fair value of these instruments are recorded directly in OCI with recycling (for debt securities) or OCI with no recycling (for equity instruments) in the income statement.

Financial assets carried at fair value through profit and loss

Financial assets carried at fair value through profit and loss comprise:

• assets acquired from inception with the intention of resale in the short term;
• derivatives not classified as hedges (derivatives held for trading) (see note 18.7);
• equity instruments (non-consolidated investments) which the Group has not irrevocably opted to classify as at fair value through OCI with no recycling;
• debt securities that do not meet the requirements of the SPPI test, regardless of their business model. This chiefly concerns shares in investment funds.

These assets are recorded at the transaction date at fair value, which is generally equal to the amount of cash paid out. Transaction costs directly attributable to the acquisition are recorded in the income statement.

At each reporting date, they are adjusted to fair value based on quoted prices where possible, or using recognised valuation techniques such as the discounted cash flow method or reference to external sources otherwise. Changes in the fair value of these instruments are recorded in the income statement under the heading “Other financial income and expenses”.

Financial assets carried at amortised cost

Loans and financial receivables are carried at amortised cost if the business model involves holding the instrument in order to collect contractual cash flows which consist entirely of principal and interest.

The interest received is calculated under the effective interest rate method and recorded in “Other financial income” in the income statement.

Loans and financial receivables that are not eligible for classification at amortised cost are carried at fair value through profit and loss, and recorded in “Other financial income and expenses” in the income statement.

Impairment model

The impairment model is based on expected credit loss (ECL). The Group applies a rating-based approach for counterparties with low credit risk. In application of the risk management policy, the Group’s bond portfolio consists almost entirely of instruments issued by low-risk counterparties rated “Investment Grade”.

In this situation, the ECL is estimated over a 12-month horizon following the year-end.