Carrefour - 2017 Registration Document

5 CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2017 Notes to the Consolidated Financial Statements CARREFOUR | 2017 REGISTRATION DOCUMENT 223 Adopted for use in the European Union Standards, amendments and interpretations Effective date for the Group IFRS 9 – Financial Instruments, along with the amendments to IFRS 4 – Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts January 1, 2018 Main provisions and consequences for the Group: This new standard, which describes the principles to be applied for the classification and measurement of financial assets and liabilities, will replace IAS 39 – Financial Instruments: Recognition and Measurement. IFRS 9 notably introduces: – a new approach to classifying financial instruments based on the business model and contractual terms of financial instruments (first topic); – a new financial asset impairment (credit loss) model based on expected losses as opposed to the current model based on incurred losses (second topic); and – new hedge accounting principles, excluding macro hedge accounting (third topic). The Group is primarily concerned by the changes introduced by the second topic of IFRS 9 on financial asset impairment, which will mainly impact its banking and insurance business. It has developed a new methodological framework for this business, which notably defines rules for assessing an increase in credit risk, for determining expected losses (at one year and at maturity) and for taking information into account on a prospective basis. Applying these new provisions will result in an increase in impairment recognised against loans and credit granted by the Group’s banking subsidiaries. This increase will arise mainly from the recognition of expected losses on loans and credit for which there is no objective evidence of impairment within the meaning of IAS 39, and on undrawn loan commitments and credit facilities (expected losses recognised as from the signature of a lending agreement). Recognising this change in method will have a negative impact on equity at January 1, 2018 which is expected to amount between (200) million euros and (250) million euros net of corporate income tax (subject to control and audit work underway); comparative periods presented will not be restated pursuant to the option available in IFRS 9 transitional provisions. Applying the new expected loss impairment model to trade receivables and lease receivables will result in additional impairment at the transition date (expected credit losses at maturity on receivables not yet due, calculated based on the past due period). The impact on consolidated equity is not expected to be material. After its transition to IFRS 9, the Group does not expect any material recurring impacts on its income statement, except in the event of material new exposures or a financial crisis. The new principles for classifying and measuring financial instruments (first topic of the standard) and for hedge accounting (third topic) will not have a material impact on the Consolidated Financial Statements, since most financial assets, currently classified within “Loans and receivables”, will continue to be recorded at amortised cost under IFRS 9, and all transactions eligible for hedge accounting under IAS 39 will remain eligible for hedge accounting under the new standard. IFRS 15 – Revenue from Contracts with Customers (including Clarifications to IFRS 15 published in April 2016) January 1, 2018 Main provisions and consequences for the Group: IFRS 15, which replaces IAS 18 – Revenues and IAS 11 – Construction Contracts and the related interpretations, defines the revenue recognition model to be used in IFRS financial statements. IFRS 15 applies to all contracts with customers except for leases (rental revenue and sublease income), financial instruments (interest income) and insurance contracts, which are dealt with in other standards. IFRS 15 defines a single framework for recognising revenue. It introduces new concepts and principles with regard to revenue recognition, particularly in terms of identifying performance obligations and allocating the transaction price to performance obligations when there are several different performance obligations in a given contract. IFRS 15 also includes new disclosure requirements for the notes to financial statements. Since the bulk of the Group’s net sales (revenue) is derived from sales to end customers in stores and service stations (sales with no other performance obligation for which revenue is recognised when the customer pays at the check-out), the impacts of applying IFRS 15 to recognise net sales and other revenue at January 1, 2018 will not be material. IFRS 16 – Leases January 1, 2019 Main provisions and consequences for the Group: IFRS 16, which will replace IAS 17 – Leases and the related interpretations, sets out the principles for recognising leases and introduces major changes in the accounting for leases by lessees, since it eliminates the distinction for lessees between operating and finance leases. Under IFRS 16, all leases are to be brought onto the statement of financial position by recognising a right-of-use asset and a lease liability corresponding to the present value of the lease payments due over the reasonably certain term of the lease. IFRS 16 will therefore affect the presentation of lease transactions in the income statement (with rental expense replaced by a depreciation expense and interest expense) and in the cash flow statement (lease payments representing payment of interest and repayment of the outstanding liability will impact financing cash flows). Applying IFRS 16 will result in a significant increase in the Group’s total borrowings as well as a substantial improvement in recurring operating income and cash flow from operating activities. The lease commitments described in Note 6.5, calculated over the non-cancellable term of property leases taking into account the contractual or legal provisions enabling leases to be terminated before the end of the lease term, are not entirely representative of the lease liability to be recognised in accordance with IFRS 16. The Group began to prepare for IFRS 16 implementation in 2016 and will continue this project through to the effective date of the standard in 2019. It is currently in the process of identifying and analysing existing leases and lease provisions, and compiling all of the data necessary to accurately estimate the impact of first-time application (January 1, 2019) on equity. At this stage, the Group has not yet decided on its transition approach. In addition, IFRS Annual Improvements 2014-2016 Cycle (applicable in annual periods beginning on or after January 1, 2018) will have no impact on the Consolidated Financial Statements.