39 / 164
CONSOLIDATED FINANCIAL STATEMENTS
39
LISI 2015 FINANCIAL REPORT
and operating policies of the entity (either directly or
indirectly) in order to obtain benefits from its activities.
The list of consolidated companies is provided in note 2.4.2.
As at December 31, 2015 in accordance with IFRS 11 "Joint
Arrangements", ANKIT Fasteners was consolidated by the
equity method. All the other companies are included in the
consolidation scope in accordance with the full consolidation
method.
2.2.4 Transactions excluded from the consolidated
financial statements
Balance sheet balances, unrealized profits and losses, and
income and costs arising from intra-group transactions
have been excluded in preparing the consolidated financial
statements.
Unrealized losses have been excluded in the same way as
unrealized profits, on condition that they do not represent a
loss of value.
2.2.5 Conversion methods for items in foreign currency
2.2.5.1 Transaction in foreign currency
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 rate differences
arising fromconversions are recognized in income or expenses,
with the exception of differences from foreign currency loans
that are a hedge on a net investment in a foreign entity, which
are recognized in the conversion reserve as a distinct element
of shareholders’ equity. They appear on the income statement
upon the exit of that business.
2.2.5.2 Translating financial statements of consolidated
subsidiaries and joint ventures
The financial statements of subsidiaries and affiliates whose
operating currency is not the euro have been converted at rates
in effect at the close of the period reported for the balance
sheet and at the average rate of exchange for the earnings and
cash flow statements. Exchange rate differences arising from
conversions appear in the conversion reserve, as a distinct
element of shareholders’ equity.
2.2.6 Financial instruments
2.2.6.1 Non-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, 2.2.15 and 2.2.16.
2.2.6.2 Financial derivatives
The Group uses derivative financial instruments to hedge its
exposure to foreign exchange and interest rate risks arising
from operational, financing and investment activities. In
accordance with its cash management policy, LISI S.A. neither
holds nor issues derivatives for trading purposes.
However, derivatives that do not meet the hedge criteria are
valued and recorded at fair value by earnings. The profit or
loss arising from the re-evaluation at fair value is immediately
posted to the income statement.
When a derivative is designated as a hedge for cash flow
variations of a recognized asset or liability, or of a highly
probable, expected transaction, the effective share of change
in fair value of the derivative is recognized directly in
shareholders’ equity. Accumulated, associated profits or losses
are taken out of shareholders’ equity and included in the
income statement of the period(s) during which the covered
transaction affects the profit or loss.
2.2.7 Intangible assets
2.2.7.1 Goodwill
In line with IFRS 3, business combinations are recognized in the
accounts using the acquisition method. This method requires
that at the first consolidation of any entity over which the
Group has direct or indirect control, the assets and liabilities
acquired (and any potential liabilities assumed) should be
recognized at their acquisition-date fair value. At this point,
goodwill is valued at cost, which equates to the difference
between the cost of the business combination and LISI’s stake
in the fair value of the assets and identifiable liabilities.
For acquisitions prior to January 1, 2004, goodwill remains at its
presumed cost, i.e. the net amount recognized in the accounts
under the previous accounting framework, minus depreciation.
For acquisitions after this date, goodwill is valued at cost, minus
the cumulative loss in value. It is allocated to cash-generating
units or groups of cash-generating units and is not amortized;
instead, it is subject to an impairment test at least once a year
following the method described in paragraph 2.2.8.5.
If the goodwill is negative, it is recognized directly as a profit in
the income statement.
2.2.7.2 Research and development
Research costs incurred in order to develop scientific knowledge
and understanding, or to learn new techniques, are recognized
as an expense when they are incurred.