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LISI 2011 —
37
— financial report
Consolidated financial statements
The recoverable value is calculated for each asset individually, unless
the asset under consideration does not generate cash inflows
independently of the cash inflows generated by other assets or groups
of assets. In some cases, the recoverable value is calculated for a group
of assets.
Recoverable value is defined as: whichever is the higher out of the
realizable value (less the costs of disposal) and the value in use. The
latter is calculated by discounting future cash flows, using predicted
cash flows which are consistent with the most recent budget and
business plan approved by the Executive Committee and presented to
the Board of Directors. The discount rate applied reflects the market’s
current assessment of the time value of money and the risks specific
to the asset or the group of assets.
The realizable value is defined as the sum which could be obtained by
selling the asset or group of assets in conditions of normal competition
where all parties are fully informed and consenting, less the costs of
disposal. These figures are calculated frommarket values (comparison
with similar listed companies, value of recent deals and stock prices) or
failing that, from discounted future cash flows.
If the recoverable value is lower than the net book value for the asset
or group of assets tested, the discrepancy is recognized as a loss of
value. In the case of a group of assets, it should preferably be classified
as a reduction in goodwill.
Losses of value recognized under Goodwill are irreversible.
For the definition of Cash-Generating Units, the Group has retained
the strategic combination for Business Units (B.U.) corresponding
to the strategic segmenting and the reporting structure of the
LISI Group.
The LISI AEROSPACE division is split into 7 CGUs:
– Europe B.U.,
– USA B.U,
– Specialty Fasteners B.U.,
– Engines and critical parts Europe B.U.,
– Engines and critical parts North America B.U.,
– Aerostructure and Aircraft equipment B.U.,
– Engineered components B.U.
The LISI AUTOMOTIVE division is split into 3 CGUs:
– Threaded fasteners B.U.,
– Mechanical components B.U.,
– Clipped solutions B.U.
The LISI MEDICAL division is composed of a single CGU.
2.2.8.6 Long-term financial assets
This item is mainly comprised of capitalization contracts. It also
includes non-consolidated holdings. These are investments in
unlisted companies, for which fair value cannot be reliably estimated.
As a last resort, the Group values financial assets at their historic cost
less any potential loss of value, when no reliable fair value estimate is
possible through an evaluation technique, in the absence of an active
market.
2.2.9 Inventories
Stock is valued at whichever is the lower out of cost and net realizable
value.
The cost of materials and merchandise is calculated from their
acquisition cost plus the costs incurred to bring them to their current
location in their current condition. Finished products and work
in progress are valued at actual production cost over the period,
including an appropriate portion of general costs based on normal
production capacity.
The net realizable value equates to the estimated sales price in the
normal course of business, less the estimated cost of completion and
estimated costs necessary to make the sale.
Inventories are impaired when their net realization value is less than
their cost of production, when they are damaged, obsolete, as well
as each time there is a risk that they might not be disposed of under
normal conditions, or when there is a risk that they will be disposed of
over a period that is longer than what is generally accepted.
2.2.10 Trade and other receivables
Trade receivables, loans andadvances are recorded to thebalance sheet
at their initial value. In the event of risk of non-recovery, impairment is
fixed on a case-by-case basis using the probable collection flows; this
risk takes the age of the transaction into consideration.
2.2.11 Other short-term financial assets
Other short-term financial assets include marketable securities
and deposit certificates held by the Group. At each year-end, these
financial assets are recognized at fair value and offset against the
income statement.
2.2.12 Cash and cash equivalents
Cash and cash equivalents include current bank accounts, cash in
hand and on-call deposits. Adjustments of value are recognized in the
income statement.
2.2.13 Share capital
2.2.13.1 Treasury shares
The Group implements a policy of buying back its own shares, in
accordance with authorizations provided by the Shareholders’ General
Meeting to the Board of Directors. The main purposes of the share
buyback program are:
– to increase the activity of the stock on the market by an Investment
Services Provider via a liquidity contract in accordance with the AFEI
professional code of ethics recognized by the AMF (the French stock
markets authority),
– to grant stock options or free shares to employees and corporate
officers of the company and/or its consolidated Group,