CFM INDOSUEZ Wealth Management - 2020 Annual Report

73 Foreign exchange differences on non-monetary items are recognised: - in the income statement, if the gain or loss on the non-monetary item is recorded in the income statement; - in other comprehensive income not recyclable to income if the gain or loss on the non-monetary item is recorded in other comprehensive income not recyclable to income. Revenue from Contracts with Customers (IFRS 15) Commission income and expenses are recorded in the income statement according to the type of services to which they relate. Commissions that are integral to the performance of a financial instrument are accounted for as an adjustment to the compensation of such instrument. For other types of commissions, their recognition in the income statement must reflect the rate at which control over the good or service sold is transferred to the client: • the result of a transaction associated with the provision of services is recognised under “Commissions” when transferringcontrol of theservice to theclient if it canbe reliably estimated. This transfer may occur as the service is rendered (ongoing service) or on a given date (one-time service); • Fees for ongoing services (means of payment fees, for example) are recorded in the income statement according to the degree of progress of the service rendered; • Fees received or paid for one-time services are, in turn, fully recognised in profit or losswhen the service is rendered. Commissions payable or receivable subject to the achievement of a performance obligation are recognised at the amount for which it is highly likely that the income thus recognised will not be subject to a significant downward adjustment when the uncertainty is resolved. This estimate is updated at each closing date. In practice, this conditionhas theeffect of postponing the recognition of certain performance fees until the expiry of the performancevaluationperiodanduntil theyaredefinitively acquired. Leases (IFRS 16) The Groupmay be lessor or lessee in a lease agreement. Leases under which the Group is lessor Leasing transactions are analysed according to their substance and financial reality. They are accounted for as appropriate, either as operating leases or finance leases. • For operating leases, the lessor records the leased assets under property, plant and equipment in its balance sheet and recognises the lease income on a straight-linebasis under “Income fromother activities” in the income statement. • CFM Indosuez Wealth Group does not manage any finance leases. Leases under which the Group is lessee Leases are recorded in the balance sheet on the date the leased asset ismade available. The lessee recognises an asset in property, plant and equipment representing the right to use the leased asset over the estimated term of the contract, and a liability for lease payments is recorded in Other liabilities over the same period of time. The lease termcorresponds to the non-cancellableperiod of the lease, adjusted to reflect (i) any option to extend the lease if the lessee is reasonably certain of exercising such option and (ii) any option to terminate the lease if the lessee is reasonably certain of not exercising such option. The lease term applied for 3/6/9 commercial leases is generally nine yearswith an initial non-cancellable period of three years. The lease term is recognised for an amount equal to the present value of lease payments over the life of the contract. These payments include fixed lease payments, variable lease payments based on an index or a rate and payments the lessee expects to pay in respect of residual value guarantees, purchase options or early termination penalties. Variable payments that do not depend on an index or rate and non-deductible VAT on lease payments are excluded from the liability calculation and are recognised as operating expenses. The discount rate applied to calculate the right-of-use asset and the lease liability is by default the lessee’s incremental borrowing rate over the life of the contract as of the date of signing the contract, when the implicit rate cannot be easily determined. The incremental borrowing rate takes into account the structure of lease payments. The expense corresponding to the lease payments is broken down into interest and principal repayments.