Universal Registration Document 2019

38 LISI 2019 UNIVERSAL REGISTRATION DOCUMENT Consolidated financial statements 2 Reconciliation of data provided under IAS 17 and the impacts of the application of IFRS 16: The information disclosed previously under IAS cannot be reconciledwith the amount generated from the 1 st application of IFRS 16. The impacts of rents restated under financial leases did not include the discount rates defined by an actuary. Furthermore, the lease term did not match the method used under IFRS 16, i.e. the period during which the lease cannot be terminated, increased by optional lease extension periods or periods during which early termination of the lease is not permitted. The amount shown under paragraph 2.5.1.2 c) (“Operating lease agreements”) indicates the annual real estate lease expense without taking into account a discounted and non- restated rate under IAS 17. IFRIC 23 “Uncertainties surrounding tax treatment”: Published by the IASB on June 7, 2017 This interpretation clarifies the accounting and valuation procedures for income taxes when there is uncertainty surrounding the tax treatment applied. Themethod usedmust be the one that provides the best forecast as to the outcome of fiscal uncertainty. The 1 st application of the January 1, 2019 interpretation did not have amaterial impact on theGroup’s financial statements. 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 fromcash- 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 3.4.1.1 b) and 3.4.1.2), ■ evaluations retained for impairment tests (Note 3.4.1.1 a), ■ evaluation of pension provisions and obligations (Note 3.4.4.2), ■ valuation of financial instruments at fair market value (Note 3.6.5), ■ valuation of share-based payments (Note 3.6.2), ■ recognition of deferred tax assets (Note 3.4.10). 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). Consolidation principles A subsidiary is an entity controlled by its parent company. In accordance with IFRS 10, an investor controls an investee if and only if all of the following conditions are satisfied: ■ it holds power over the investee; ■ it is exposed or entitled to variable returns because of its relationship with the investee; ■ it has the ability to exercise its power over the investee in such away as to affect the amount of returns that it obtains. The list of consolidated companies is provided in note 3.3.4. At December 31, 2019 all the companies are included in the consolidation scope in accordance with the full consolidation method. 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. Conversion methods for items in foreign currency ■ Transaction in foreign currency Transactions in foreign currencies are recorded in the books in the operating currency at the rate of exchange on the date of the transaction. At the year-end, the monetary 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 from conversions 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. They appear on the income statement upon the exit of that business.