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4.2 FINANCIAL STATEMENTS OF DANONE SA, THE DANONE PARENT COMPANY
Note 1. Accounting principles
DANONE
REGISTRATION DOCUMENT 2015
147
NOTE 1. ACCOUNTING PRINCIPLES
The Company's financial statements are prepared in accordance with
French statutory and regulatory provisions and generally accepted
accounting principles.
The main accounting methods used are detailed hereafter.
Property, plant and equipment and intangible
assets
Property, plant and equipment and intangible assets are valued
at acquisition cost (including acquisition-related costs) and are
amortized or depreciated on a straight-line basis according to the
duration of their estimated use, as follows:
Buildings
15 to 20 years
Fixtures and fittings
8 to 10 years
Other property, plant and equipment
4 to 10 years
Software
1 to 7 years
Long-term financial assets
Financial assets comprise Equity interests and Other long-term
financial assets.
Equity interests are shares in companies, the long-term possession
of which is deemed to be useful for the Company's activity, notably
because it enables the Company to exercise an influence on or
control over the issuing company. Investments that do not meet
this definition are classified as Other long-term financial assets.
Equity interests are recognized at acquisition cost, including acqui-
sition-related costs, which are amortized over five years as of the
date of acquisition. For tax purposes, these assets are subject to
accelerated tax amortization rates. An impairment provision is
recognized when the recoverable amount of Equity interests is
below their carrying amount.
Recoverable amount is determined using various criteria including:
•
market value;
•
value in use based on forecast discounted cash-flows;
•
revalued equity.
The assumptions, estimates or appraisals used to determine the
net realizable value are made on the basis of available information
and conditions at the end of the financial period presented, which
may differ from the reality, particularly in an economically and
financially volatile context. Impairment provisions are recognized as
Other financial income (expense), with the exception of reversals of
impairment in connection with disposals of equity interests, which
are recognized as Non-recurring income (expense). Gains or losses
on disposals of equity interests are recognized as Non-recurring
income (expense).
Other long-term financial assets consist mainly of a portion of the
DANONE treasury shares held in connection with the authorizations
given by the Shareholders' Meeting (see hereafter) and long-term
loans and receivables granted by the Company.
DANONE treasury shares
DANONE shares repurchased by the Company are recognized
under the heading:
•
other long-term financial assets, when they are repurchased in
connection with corporate acquisitions, to be cancelled or to be
held under the terms of a liquidity contract;
•
marketable securities, when they are repurchased to hedge
stock-option plans or Group performance share plans under
which shares are allocated to certain Danone employees and
corporate officers.
They are recognized at acquisition cost, excluding acquisition-
related costs. On disposal, the cost of the DANONE shares sold is
calculated by allocation category in accordance with the weighted
average cost method, this cost being calculated individually for
each plan for the shares held to hedge stock-option plans or Group
performance share plans.
DANONE shares recognized as other long-term
financial assets
In the case of DANONE shares recognized as Long-term financial
assets that are not to be cancelled, an impairment provision is
recognized when their recoverable amount (assessed at the ave-
rage price for the last month of the fiscal year) falls below their
carrying amount.
DANONE shares recognized as Marketable
securities
Hedging of out-of-the-money stock-option and Group
performance share plans
In the case of treasury shares allocated to hedge plans that cannot
be exercised (the market value of DANONE shares is less than the
option exercise price in the case of the stock-option plans or it is
probable that the performance conditions will not be met in the case
of the Group performance share plans), a provision for impairment
is recognized when the market value of the shares (assessed at the
average price for the last month of the fiscal year) is less than their
carrying amount.
Hedging of in-the-money stock-option and Group performance
share plans
In the case of treasury shares allocated to hedge plans that can
be exercised (the market value of DANONE shares exceeds the
option exercise price in the case of the stock-option plans or it is
probable that the performance conditions will be met in the case of
the Group performance share plans), a provision for impairment is
not recognized. However, a provision for risks and charges is, where
necessary, recognized in respect of these plans and corresponds:
•
in the case of stock-option plans, to the difference between the
carrying amount of the shares allocated to these plans and the
exercise price set under the terms of the plan if lower;
•
in the case of Group performance share plans, to the carrying
amount of the shares allocated to said plans.
The provision is booked
prorata
to the rights vesting period. It is
recognized in Personnel costs in the income statement.