Carrefour - 2017 Registration Document

5 CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2017 Notes to the Consolidated Financial Statements CARREFOUR | 2017 REGISTRATION DOCUMENT 229 Main changes in scope of consolidation 3.2 Changes in 2017 3.2.1 IPO of the Group’s Brazil operations The initial public offering of Grupo Carrefour Brasil shares took place on July 20, 2017 and consisted of: a primary offering of 205,882,353 shares issued by Grupo ● Carrefour Brasil; and a secondary offering of 125,631,365 Grupo Carrefour Brasil ● shares, of which 68,831,365 shares sold by Carrefour (including additional shares placed in respect of the secondary over-allotment option). Carrefour also sold 71,003,063 Grupo Carrefour Brasil shares to Península after the latter exercised its call option. After completion of the IPO and the exercise by Península of its call option, Carrefour holds a 71.8% interest in Grupo Carrefour Brasil, while Península holds 11.5% and Grupo Carrefour Brasil’s free float is 16.7%. These operations had no impact on the analysis of control over Group subsidiaries in Brazil, which therefore continue to be consolidated within Carrefour’s Consolidated Financial Statements. The primary offering resulted in (i) the recognition of non-controlling interests in an amount of 370 million euros, and (ii) an increase of 470 million euros in shareholders’ equity, Group share corresponding to the dilution gain. In accordance with IFRS 10 – Consolidated Financial Statements, Carrefour’s sale of Grupo Carrefour Brasil shares within the context of the secondary offering and following Península’s exercise of its call option, resulted in (i) a 274 million-euro disposal gain net of tax and directly related selling costs recorded within “Shareholders’ equity, Group share” and (ii) the recognition of non-controlling interests for 208 million euros. Absorption of Carmila by Cardety Carmila was absorbed by Cardety on June 12, 2017. Shares in the new entity, named Carmila, are listed on Euronext Paris. In addition, the Carmila group increased its share capital by 628.6 million euros in July 2017 in order to finance its 2017-2020 development plan. Having subscribed to the capital increase in an amount of 50 million euros, Carrefour now owns 35.76% of the shares and voting rights of Carmila. In parallel with the merger, the entity’s corporate governance rules were adapted, resulting in the restructuring of its administration and management bodies, and amendments to its Articles of Association and the Board of Directors’ internal rules. In light of the amended corporate governance rules, the Group considers that it has significant influence over the new entity, Carmila, which is accounted for using the equity method. The Group’s position is primarily based on the fact that the Carrefour group is not represented by a majority on the Board of Directors, which comprises 14 members, of which eight are independent and five are appointed by Carrefour. Therefore, the Group cannot alone impose decisions requiring the Board’s prior consent, which partly concern the relevant activities. Prior to the merger, both Cardety and Carmila were accounted for using the equity method. Accordingly, the only impact of this transaction on the Consolidated Financial Statements was the recognition of a non-material dilution gain. Acquisition of hypermarkets in Spain On February 29, 2016, the Carrefour group announced it had signed an agreement with the Eroski group to acquire 36 compact hypermarkets with a total sales area of 235,000 square metres, as well as 8 shopping malls and 22 service stations adjacent to the stores. The conditions precedent were met during the year for the acquisition of 31 stores. In accordance with IFRS 3 – Business Combinations, following the evaluation of the assets acquired and liabilities assumed carried out by the Group, the acquisition-date fair value of the net assets acquired, which correspond primarily to land and buildings included within “Property and equipment” and “Investment property”, was estimated at 78 million euros. Considering the 168 million-euro acquisition price, fully paid in cash during the year, goodwill of 90 million euros was recognised in the Consolidated Financial Statements. The effect of the acquisition on 2017 consolidated operating income and net income was not material. The revenue and profit attributable to the acquired operations (part of the Spain operating segment) recorded in the consolidated statement of comprehensive income for the period was not material. Changes in 2016 3.2.2 Acquisition of Billa Romania The acquisition of Billa Romania completed on June 30, 2016 led to the recognition of negative goodwill in accordance with IFRS 3, for a non-material amount. Acquisition of Rue du Commerce The acquisition of Rue du Commerce completed in January 2016 led to the recognition of negative goodwill in accordance with IFRS 3, for a non-material amount. Creation of Cargo Property Cargo Property Holding is a new real estate company set up with external investors to own logistics facilities. The company is 35.2%-owned by the Group with the remaining shares held by three co-investors. As well as being its largest shareholder, Carrefour is also the sole lessee of the assets held by Cargo Property Holding and its subsidiaries. In light of the rules governing the appointment and dismissal of Cargo Property’s legal manager, as specified in the shareholders’ agreement, Carrefour has the ability to direct decisions about the relevant activities. The Group therefore considers that it controls Cargo Property Holding and its subsidiaries and these companies have been fully consolidated in the 2017 and 2016 financial statements.