Danone // 2020 Universal Registration Document

DANONE UNIVERSAL REGISTRATION DOCUMENT 2020 68 4.1 Consolidated financial statements and notes to the consolidated financial statements Note 1. Accounting principles NOTE 1. ACCOUNTING PRINCIPLES Note 1.1. Bases for preparation The consolidated financial statements of Danone (the “Company”), its subsidiaries and associates (together, the “Group”) as of and for the year ended December 31, 2020 were approved by its Board of Directors on February 18, 2021 and will be submitted for approval to the Shareholders’ Meeting on April 29, 2021. The consolidated financial statements and the Notes to the consoli- dated financial statements are presented in euros. Unless indicated otherwise, amounts are expressed in millions of euros and rounded to the nearest million. Generally speaking, the values presented are rounded to the nearest unit. Consequently, the sum of the rounded amounts may differ, albeit to an insignificant extent, from the reported total. In addition, ratios and variances are calculated on the basis of the underlying amounts and not on the basis of the rounded amounts. The preparation of consolidated financial statements requires management to make estimates, assumptions and appraisals that affect the reported amounts in the consolidated balance sheet, consolidated income statement andNotes to the consolidated financial statements. The main such estimates and assumptions relate to: Notes Measurement of the impacts of Covid-19 on Danone 3 Measurement of intangible assets 10.3 Measurement of investments in associates 5.1, 5.4 to 5.7 Measurement of deferred tax assets 9.3 Determination of the amount of Other non-current provisions and liabilities 15.2, 15.3 Determination of the amount of rebates, trade supports and other deductions relating to agreements with customers 6.1 These assumptions, estimates and appraisals are made on the basis of information and conditions available at the end of the financial period presented. Actual amounts may differ from those estimates, particularly in the context of Covid-19 (see Note 3 of the Notes to the consolidated financial statements) and namely in view of the uncertainty on the magnitude and the duration of its impacts. In addition to the use of estimates, Danone’s management uses its judgment to define the accounting treatment for certain activities and transactions, when they are not explicitly addressed in IFRS and related interpretations, particularly in the case of the recognition of put options granted to non-controlling interests. Note 1.2. Accounting framework applied The Group’s consolidated financial statements have been prepared in accordance with IFRS (International Financial Reporting Standards) as adopted by the European Union, which are available on the website of the European Commission. Main standards, amendments and interpretations whose application is mandatory as of January 1, 2020 Amendment to IFRS 3 Business Combinations : this amendment has no significant impact on the consolidated financial statements for the year ended December 31, 2020. Main standards, amendments and interpretations published by the IASB whose application is not mandatory within the European Union as of January 1, 2020 Danone did not choose the early adoption of those standards, amend- ments and interpretations in the consolidated financial statements for the year ended December 31, 2020 and considers that they should not have a material impact on its results and financial situation. Note 1.3. Application of IAS 29 Accounting principles IAS 29 requires the non-monetary assets and liabilities and income statements of countries with hyperinflationary economies to be restated to reflect the changes in the general purchasing power of their functional currency, thereby generating a profit or loss on the net monetary position which is recognized in net income within Other financial income or Other financial expense. In addition, the financial statements of the subsidiaries in these countries are translated at the closing exchange rate of the reporting period concerned, in accordance with IAS 21. Application and main accounting implications Danone has applied IAS 29 to Argentina in its financial statements as from the year ended December 31, 2018 and to Iran in its financial statements as from the year ended December 31, 2020. As regards the standard’s application to Argentina, in 2020 Danone used the Consumer Price Index (CPI) to remeasure its income sta- tement items, cash flows and non-monetary assets and liabilities. This index was up 36% compared with 2019. The EURARS exchange rate used to translate the income statement was 103.0 (67.2 in 2019). The application of IAS 29 had a €38 million impact on consolidated equity and on non-monetary assets net of non-monetary liabilities as of December 31, 2020 (€52 million as of December 31, 2019) and had the following main impacts on the consolidated income statement for the period: • a €36 million decrease in consolidated Sales and a €23 million decrease in Recurring operating income (decrease of €15 million and €36 million respectively in 2019); • a loss of less than €1 million on the net monetary position re- cognized in Other financial income (expense), compared with a loss of €7 million in 2019;