LISI GROUP - 2016 Financial report

LISI 2016 FINANCIAL REPORT

In view of the modifications to the external environment and the internal

organization, as from financial year 2016, to carry out impairment tests

on the goodwill, the Group has retained the strategic combination

of Business Units (B.U) corresponding to the segmentation and the

reporting structure of the LISI Group, namely, the three divisions LISI

AEROSPACE, LISI AUTOMOTIVE and LISI MEDICAL.

To carry out impairment tests on other intangible and tangible fixed

assets, the allocation to the CGUs remains unchanged:

The LISI AEROSPACE division is split into 8 CGUs:

–

Europe B.U;

–

USA B.U;

–

Special products B.U;

–

Engines and critical parts Europe B.U;

–

Engines and critical parts North America B.U;

–

Aerostructure and Aviation equipment B.U;

–

Technical components B.U - Extrusion, Forming and Sheet Metal;

–

Technical components B.U - Forging and casting.

The LISI AUTOMOTIVE division is split into 3 CGUs:

–

Threaded fasteners B.U;

–

Safety and Mechanical Components B.U;

–

Clipped solutions B.U.

The LISI MEDICAL division is composed of a single CGU.

2.2.8.6 Non-current financial assets

This item mainly includes capitalization contracts and equity method

investments. 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 and advances are recorded to the balance 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

| Cash and cash equivalents

Cash and cash equivalents include current bank accounts, cash

in hand, on-call deposits, securities and negotiable certificates of

deposit held by the Group. Adjustments of value are recognized in the

income statement.

2.2.12

Share capital

2.2.12.1 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 professionnal code of ethics recognized by the AMF (the

French financial market authority);

–

to grant stock options or free shares to employees and corporate

officers of the company and/or its Group;

–

to retain and use shares as consideration or payment for potential

acquisitions;

–

to cancel shares purchased, subject to the approval of the

Extraordinary General Meeting to be called at a later date.

Repurchased shares are classified as treasury shares and deducted

from shareholders’ equity.

2.2.12.2 Remunerations in shares (stocks options and conditional

award of so-called performance shares)

Refer to note 2.2.14 “Personnel benefits”.

2.2.13

Provisions

A provision is recognized on the balance sheet if the Group has a

current, legal commitment or an implicit one arising from a past event

and for which it is probable that there will need to be an outflow of

resources that represent economic advantages in order to eliminate

the commitment. They are measured at the estimated payment

amount. If the effect of capitalizing provisions is not significant,

capitalization is not carried out.

2.2.13.1 Non-current provisions

Non-current provisions are provisions not directly related to the

operating cycle, whose due date is generally within more than one year.

They also comprise provisions for environmental risks and provisions

for retirement.

CONSOLIDATED FINANCIAL STATEMENTS