LISI GROUP - 2016 Financial report

LISI 2016 FINANCIAL REPORT

2.2.2

Basis for the preparation of the financial statements

Financial statements are given in thousands of euros, except where

otherwise indicated.

They are prepared on the basis of historical costs, with the exception

of the following assets and liabilities which have been measured at

their fair value: financial derivatives, financial instruments held for

trading purposes and financial instruments classified as held for sale

and liabilities from cash-settled share-based payment transactions.

Non-current assets held for sale are evaluated at the lower of their

book value and the fair value less costs of disposal.

According to IFRS standards, certain accounting options involve

taking positions based on judgment of assumptions that have an

impact on the amounts of assets or liabilities, income or expenses,

particularly regarding the following elements:

–

durations of depreciation of fixed assets (notes 2.2.7.3 and 2.2.8.4);

–

evaluations retained for impairment tests (note 2.2.8.5);

–

evaluation of pension provisions and obligations (notes 2.2.13 and

2.2.14);

–

valuation of financial assets at fair market value (notes 2.2.6,

2.2.8.6, 2.2.11 and 2.2.12);

–

valuation of share-based payments (note 2.2.14.2);

–

recognition of deferred tax assets (note 2.2.18.5).

These judgments and assumptions take into account the specific

risks of the sectors concerned by LISI’s activities, as well as

general risks related to the economic context. The current period

being characterized by greater volatility, the visibility is limited.

Consequently, the forecasts used as a basis for such judgment and

assumptions may differ from actual future achievements.

Management continuously reviews its estimates and assessments

based upon past experience and on factors considered reasonable

that form the basis of its assessment for the book values of assets

and liabilities. The impact of changes to accounting estimates is

recognized during the period of change only where it affects this

period or during the period of change and successive periods if these

are also impacted by the change.

The decisions made by the management regarding IFRS having

a significant impact on the financial statements and estimates

presenting a major risk of variation over subsequent periods mainly

concern provisions (notes 2.2.13 and 2.6.4), deferred tax assets

(note 2.6.7) and impairment tests on assets (notes 2.2.8.5 and 2.6.1.1).

Calculations for staff retirement provision and valuation tests are

based on valuation 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.).

Assessment of the major sources of uncertainty

Although the Group’s business sectors recorded different rates of

growth in recent years, this has not generated any major uncertainties.

Identified sensitivities

The main sensitivities identified and tracked by management concern

the data and assumptions related to the implementation of the

impairment tests. These assumptions are consolidated through a

collection process of forecast information from major players in the

sector (market assumptions) and actuaries (rate assumptions).

Accounting treatment of the CVAE

(Tax on Companies’ Added Value)

Following the release of the National Accounting Council of January 14,

2010, the Group decided to qualify the CVAE (contribution of the Added

Value of Businesses) as income tax that would fall within the scope of

IAS 12. This decision is based on an opinion of the IFRIC issued in 2006

stating that the term ‘taxable profit’ implies a notion of net rather than

gross amount without it being necessarily identical to the accounting

result. Moreover, this choice ensures consistency with the accounting

treatment applied to similar taxes in other foreign countries.

Treatment of the research tax credit

Revenues related to the research tax credit are classified in the

income statement under “Other income”.

Treatment of the tax credit for competitiveness

and employment (CICE)

The CICE has been presented in application of IFRS as a deduction

from the employment-related expenses for an amount of €9.7 million.

2.2.3

Consolidation principles

A subsidiary is an entity controlled by its parent company. Control exists

when the Group is able to direct the financial 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 2.3.3. At December 31, 2016 all the 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.

CONSOLIDATED FINANCIAL STATEMENTS