LISI GROUP - 2017 Financial report

b) In July 2014, the IASB published standard IFRS 9, Financial

Instruments, intended to replace IAS 32 and IAS 39, the standards

currently in force for the presentation, recognition and evaluation

of financial instruments. This standard groups the three phases

which make up the project: classification and evaluation,

impairment and hedging accounting. The modifications made by

IFRS 9 concern:

–

the rules for classifying and evaluating the financial assets

which reflect the economic model in the context in which they

are managed as well as their contractual cash flows;

–

the rules for impairment of receivables, henceforth based on

“expected losses” and not on “realized losses”;

–

the treatment of the hedging accounting.

This standard, not yet adopted by the European Union, should come

into force for the financial years starting from January 1, 2018. The

analysis of the impacts of this standard is in progress.

c) In January 2016, the IASB published standard IFRS16, Lease

contracts. This standard will lead companies leasing significant

assets as part of their activity to recognize an asset and a financial

debt corresponding to the lease commitment.

This standard, not yet adopted by the European Union, should come

into force for the financial years starting from January 1, 2019. The

analysis of the impacts is in progress. The Group has identified

several types of leases that will be restated in accordance with IFRS

16. These mainly include industrial property leases for office use

and leases of company vehicles and rolling stock. The major impacts

expected at the start of 2019 involve net financial debt and EBITDA.

With regard to the assessment of restated aggregates used in the

calculation of covenants, there should be no breach of covenants.

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.

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.

These assumptions are broken down by division on the basis of

information drawn from independent experts (actuaries, etc.).

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 €11.6million.

LISI 2017 FINANCIAL REPORT

CONSOLIDATED FINANCIAL STATEMENTS