LISI GROUP - 2018 Financial report

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2.2.5 I 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
operatingcurrencyattherateofexchangeonthedateofthetransaction.
At the year-end, themonetary assets and liabilities in foreign currencies
are converted into the operating currency at the rate in force at the 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.Theyappearonthe incomestatementupontheexit
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
currencyisnottheeurohavebeenconvertedatratesineffectattheclose
of theperiod reported for thebalance sheet andat the averageexchange
ratefortheearningsandcashflowstatements.Exchangeratedifferences
arising from conversions appear in the conversion reserve, as a distinct
element of shareholders’ equity.
2.2.6 IFinancial 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-evaluationatfairvalueisimmediatelypostedtotheincomestatement.
When a derivative is designated as a hedge for cash flow variations of a
recognizedassetor liability,orofahighlyprobable,expectedtransaction,
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 IIntangible assets
2.2.7.1 - Goodwill
In linewith IFRS3,businesscombinationsarerecognized intheaccounts
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)shouldberecognizedattheiracquisition-datefairvalue.Atthis
point,goodwill isvaluedatcost,whichequatestothedifferencebetween
the cost of the business combination and LISI’s stake in the fair value of
the assets and identifiable liabilities.
ForacquisitionspriortoJanuary1,2004,goodwillremainsatitspresumed
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 isallocatedtocash-generatingunitsorgroups
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.
2.2.7.2 - Research and development
Research costs incurred in order to develop scientific knowledge and
understanding,orto learnnewtechniques,arerecognizedasanexpense
when they are incurred.
Under the IFRS framework, development costs (i.e., costs incurred by
applyingtheresultsofresearchtoaplanormodel inordertodevelopnew
or substantially improved products and processes) are recorded as fixed
assets if the Group can demonstrate that future economic benefits are
probable. The LISI Group’s development costs primarily relate mainly to
productswhicharebeingdevelopedthroughveryclosecollaborationwith
clients, rather than to improvements in processes.
Most expenses incurred do not meet the criteria for capitalization as
intangible assets and are therefore recorded as expenses. The Group
carries out regular assessments ofmajor projects inorder to identify any
costs which could be capitalized.
2.2.7.3 - Other intangible assets
Concessions, trademarks and software programs are recognized at
historic cost and are subject to a depreciation plan. Intangible fixed
assets acquired through a business combination are recognized at their
acquisition-date fair value. Intangible fixed assets with finite useful lives
are subject to depreciation over this period, while intangible fixed assets
withindefiniteuseful livesaresubjecttoanimpairmenttestforeverynew
balance sheet.
Depreciation is recognized as an expense using the straight-linemethod
over the estimated useful life of the intangible fixed assets except when
this is indefinite.
Estimated useful lives are as follows:
−− Trademarks: 10 years;
−− Software programs: 1 – 10 years.
2.2.8 ITangible assets
2.2.8.1 - Assets owned by the LISI Group
Tangible fixed assets are recorded at diminished cost with accumulated
depreciations and impairments. The cost of an asset produced by the
Groupfor itself includesthecostsofrawmaterials,directmanpower,and
anestimate, ifapplicable,ofcostsrelatedtotheremovalanddismantling
of the asset and the repair of the site at which it is located, along with an
appropriate share of the general production costs.