32
I LISI FINANCIALREPORT2013
CONSOLIDATEDFINANCIALSTATEMENTS
3
2.2.3Consolidationprinciples
Asubsidiary isanentitycontrolledby itsparent company.Control exists
when theGroup is able todirect the financial andoperatingpolicies of
the entity (either directly or indirectly) inorder toobtainbenefits from
its activities. The list of consolidated companies is provided in Note
2.3.3. As at December 31, 2013, ANKIT Fasteners is consolidated via the
proportional integrationmethod. All theother companies are included
in the consolidation scope in accordance with the full consolidation
method.
2.2.4Transactionsexcludedfromtheconsolidatedfinancial
statements
Balance sheet balances, unrealized profits and losses, and income
and costs arising from intra-group transactions have been excluded in
preparingtheconsolidated financialstatements.
Unrealized losses have been excluded in the same way as unrealized
profits,onconditionthattheydonotrepresenta lossofvalue.
2.2.5Conversionmethodsforitemsinforeigncurrency
2.2.5.1Transaction in foreigncurrency
Transactions in foreign currencies are recorded in the books in the
operating currency at the rate of exchange at date of transaction.
At year-end, assets and liabilities recorded in foreign currencies are
converted into the operating currency at the rate of exchange at year-
end. Exchange ratedifferences arising from conversions are recognized
in income or expenses, with the exception of differences from foreign
currency loans that areahedgeonanet investment ina foreignentity,
which are recognized in the conversion reserve as adistinct element of
shareholders’equity.Theyappearonthe incomestatementupontheexit
ofthatbusiness.
2.2.5.2 Translating financial statements of consolidated
subsidiariesand joint ventures
The financial statements of subsidiaries and affiliateswhose operating
currency is not the euro have been converted at rates in effect at the
closeof theperiod reported for thebalance sheet andat themean rate
of exchange for the earnings and cash flow statements. Exchange rate
differencesarising fromconversionsappear in theconversion reserve,as
adistinctelementofshareholders’ equity.
2.2.6Financialinstruments
2.2.6.1Non-derivative financial instruments
Non-derivative financial instruments include investments in equity
instruments and debt securities, trade and other receivables, cash
and cash equivalents, loans and debts, and trade and other payables.
Non-derivative financial instruments are recognized in the accounts as
indicated in the specific notes below: 2.2.8.6, 2.2.10, 2.2.11, 2.2.12, 2.2.16
and2.2.17.
These judgmentsandassumptions take intoaccount thespecific risksof
thesectorsconcernedbyLISI'sactivities,aswellasgeneralrisksrelatedto
theeconomiccontext.Thecurrentperiodbeingcharacterizedbygreater
volatility, the visibility is limited. Consequently, the forecasts used as a
basis for such judgmentandassumptionsmaydiffer fromactual future
achievements.
Managementcontinuouslyreviews itsestimatesandassessmentsbased
upon past experience and on factors considered reasonable that form
the basis of its assessment for the book values of assets and liabilities.
The impactof changes toaccountingestimates is recognizedduring the
periodof changeonlywhere itaffects thisperiodorduring theperiodof
changeandsuccessiveperiods ifthesearealso impactedbythechange.
The decisions made by the management regarding IFRS standards
having a significant impact on the financial statements and estimates
presenting a major risk of variation over subsequent periods mainly
concernprovisions (notes2.2.14and2.5.4),deferred taxassets (note2.5.7)
and impairment tests on assets (notes 2.2.8.5 and 2.5.1.1). Calculations
for staff retirementprovisionandvaluation testsarebasedonvaluation
assumptions, the sensitivity of which can affect costs recognized as
provisions in the accounts. These assumptions are broken down by
division on the basis of information drawn from independent experts
(actuaries,etc.).
Accounting treatment of the CVAE (Tax on Companies’ Added
Value)
Following the releaseof theNational AccountingCouncil of January 14,
2010, theGroupdecided toqualify theCVAE (contributionof theAdded
ValueofBusinesses)as incometaxthatwouldfallwithinthescopeof IAS
12.Thisdecision isbasedonanopinionofthe IFRIC issued in2006stating
that the term 'taxable profit' implies a notion of net rather than gross
amount without it being necessarily identical to the accounting result.
Moreover, thischoiceensuresconsistencywiththeaccountingtreatment
appliedtosimilartaxes inother foreigncountries.
Correlatively, the deferred taxwas recorded as at January 1, 2010, for a
netamountof€1.4mtakenontheshareholders'equityoftheGroup.This
stockdeferredtax is includedasthedepreciationoffixedassets included
inthecalculation isrecordedtotheaccounts.AsatDecember31,2013,the
balanceofnetdeferredtaxconcernedstoodat€0.8million.
Treatmentof the research taxcredit
Revenues related to the research tax credit are classified in the income
statementunder "other income".
Treatment of the tax credit for competitiveness and employment
("CICE")
TheCICEhas beenpresented in applicationof the IFRS standards as a
deduction from the employment-related expenses for an amount of
€4.7m.
