LISI GROUP - 2018 Financial report

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Whenthecomponentsoftangiblefixedassetshavedifferentuseful lives,
they are recorded as separate tangible fixed assets, as per the
components method.
2.2.8.2 - Assets funded through finance leases
Leases which transfer virtually all the risks and benefits relating to the
ownership of an asset to the Group are considered as finance leases.
Assets funded through finance leases are recognized in the assets side
of the balance sheet at the fair value of the goods leased, or the present
value of the minimum lease payments if this is lower. These assets are
depreciated over the same period as goods of the same type which are
owned outright. The corresponding debt is entered on the liabilities side
of the balance sheet.
2.2.8.3 - Subsequent expenditure
When calculating the book value of a tangible fixed asset, the Group
recognizes the cost of replacing a component of this tangible fixed asset
at the time when the cost is incurred, if it is likely that future economic
benefitsassociatedwiththisassetwillflowtotheGroupandthecostcan
be reliably estimated. All ongoing servicing and maintenance costs are
recognized as an expense when they are incurred.
2.2.8.4 - Depreciation
Depreciation is recognized as an expense using the straight-linemethod
over the estimated useful life for each component of a tangible fixed
asset.
Land is not depreciated.
Estimated useful lives are as follows:
−− buildings: 20 – 40 years;
−− plant andmachinery: 10 – 15 years;
−− fixtures and fittings: 5 – 15 years;
−− transport equipment: 5 years;
−− equipment and tools: 10 years;
−− office equipment: 5 years;
−− office furniture: 10 years;
−− IT hardware: 3 years.
2.2.8.5 - Impairment of assets
Goodwill and intangible fixed assets of indefinite life-span are submitted
toan impairmenttestateachannualclose(seenote2.2.7.1)andeachtime
events or market-changing modifications indicate a risk of impairment.
Other intangible assets fixedand tangible fixedassets are also subject to
such a test at any time when there is a risk of loss of value.
Themethodusedinvolvescomparingtherecoverablevalueofeachofthe
Group’s cash-generating units with the net book value of the
corresponding assets (including the goodwill).
Therecoverablevalue iscalculatedforeachasset individually,unlessthe
assetunderconsiderationdoesnotgeneratecash inflows independently
ofthecashinflowsgeneratedbyotherassetsorgroupsofassets.Insome
cases, the recoverable value is calculated for a group of assets.
Recoverable value is defined as: whichever is the higher out of the
realizablevalue(lessthecostsofdisposal)andthevalue inuse.The latter
iscalculatedbydiscountingfuturecashflows,usingpredictedcashflows
which are consistent with the most recent budget and business plan
approved by the Executive Committee and presented to the Board of
Directors. The discount rate applied reflects the market’s current
assessmentofthetimevalueofmoneyandtherisksspecifictotheasset
or the group of assets.
The realizable value is defined as the sum which could be obtained by
selling the asset or group of assets in conditions of normal competition
where all parties are fully informed and consenting, less the costs of
disposal. These figures are calculated frommarket values (comparison
with similar listed companies, value of recent deals and stock prices) or
failing that, fromdiscounted future cash flows.
If the recoverable value is lower than the net book value for the asset or
group of assets tested, the discrepancy is recognized as a loss of value.
In the case of a group of assets, it should preferably be classified as a
reduction in goodwill.
Losses of value recognized under Goodwill are irreversible.
Asfromfinancialyear2016,tocarryout impairmenttestsongoodwill,the
Group has selected a strategic combination of Business Units (B.U) that
correspondtothesegmentationandreportingstructureoftheLISIGroup,
namely, the three divisions LISI AEROSPACE, LISI AUTOMOTIVE and
LISI MEDICAL.
To carry out impairment tests on the other intangible and tangible fixed
assets, analysis at Business Group (BG) level must be the rule.
2.2.8.6 - Non-current financial assets
This item mainly includes capitalization contracts relating to US
retirement investments and equitymethod investments. It also includes
non-consolidatedholdings.Theseareinvestmentsinunlistedcompanies,
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 IInventories
Inventory isvaluedatwhichever isthe loweroutofcostandnetrealizable
value.
Thecostofmaterialsandmerchandiseiscalculatedfromtheiracquisition
costplusthecosts incurredtobringthemtotheircurrent location intheir
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.
Thenetrealizablevalueequatestotheestimatedsalespriceinthenormal
courseof business, less the estimated cost of completion andestimated
costs necessary tomake the sale.