148 / 364
4.2 FINANCIAL STATEMENTS OF DANONE SA, THE DANONE PARENT COMPANY
Note 1. Accounting principles
DANONE
REGISTRATION DOCUMENT 2015
148
DANONE call options held by the Company
The DANONE call options (calls) held by the Company are alloca-
ted in full to hedge stock-option plans granted to certain Danone
employees and corporate officers. The premiums paid in respect
of these options are recognized in Marketable securities.
Hedging of out-of-the-money stock-option plans
In the case of call options allocated to plans that cannot be exercised
(the market value of DANONE shares is less than the option exercise
price set under the terms of the plan), a provision for impairment is
recognized when the market value of the call options, determined
by banks, is less than their carrying amount.
Hedging of in-the-money stock-option plans
In the case of call options allocated to plans that can be exercised
(the market value of DANONE shares exceeds the option exercise
price set under the terms of the plan), 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
to the difference between the exercise price set under the terms of
the stock-option plan and the call premium paid plus the forward
DANONE share price.
The provision is booked
prorata
to the rights vesting period. It is
recognized in Personnel costs in the income statement.
Loans and receivables
Loans and receivables are stated at their nominal value. An impair-
ment provision is recognized when the recoverable amount is less
than the carrying amount.
Recognition of transactions in foreign currencies
Expense and income in foreign currencies are recorded at their
exchange value in euros at the date of the transaction.
Liabilities, receivables and cash denominated in foreign currencies
are recorded in the balance sheet at their exchange value in euros
at the year-end rate. The differences resulting from translation at
this latter rate are recorded in the balance sheet in the line items
Deferrals and prepaid expense and Deferrals and accrued expense
in the case of liabilities and receivables. A provision for risks is
recognized for non-hedged unrealized exchange losses.
Marketable securities
Marketable securities comprise a portion of the treasury shares and
DANONE call options held by the Company and other investments
made by the Company.
The gross value of Marketable securities corresponds to the acquisi-
tion cost excluding acquisition-related costs. When themarket value
of each category of securities of the same nature is lower than the
acquisition cost, a provision for impairment is recognized equal to
the difference. For further information about treasury shares and
DANONE call options reclassified as Marketable securities, see the
above section DANONE shares recognized as Marketable securities.
Bonds
Bonds consist in borrowings raised by Danone, on debt and capital
markets, notably under its EMTN (EuroMediumTermNote) program,
through public issues and private placements, denominated in euros
or foreign currencies. Bonds denominated in foreign currenciesmay
be maintained in those currencies or swapped into euros:
•
foreign currency bonds that are not swapped into euros are
recognized at their nominal value, translated at the closing
exchange rate;
•
foreign currency bonds that are swapped into euros are reco-
gnized at their nominal value, which continues to be translated
at the historical exchange rate.
Derivatives
Danone hedges part of its bonds denominated in foreign currencies
by cross-currency swaps. For each bond hedged, Danone applies
hedge accounting, which involves recognizing at the historical rate
(hedged rate resulting from the implementation of the cross-currency
swap) the interest relating to the bond and the cross-currency swap.
Since Danone is not ultimately exposed to foreign exchange risk on
repayment of the bonds, said bonds are not revalued at the closing
rate. Conversely, unhedged bonds are revalued at the closing rate
at each balance sheet date.
In addition, Danone Corporate Finance Services, a wholly-owned
subsidiary, also carries out interest rate hedging transactions on
behalf of the Company in respect of certain borrowings and com-
mercial paper (
Billets de trésorerie
) issued by the Company.
Provisions for risks and charges
Provisions are recognized for identified risks and charges of uncertain
timing or amount, when the Company has an obligation to a third
party and it is certain or probable that this obligation will result in
a net outflow of resources for the Company.
For further information about provisions against stock-option plans
and Group performance share plans, see the above section
DANONE
shares recognized as Marketable securities
.
Retirement commitments
Supplementary retirement commitments and severance pay borne by
the Company are presented within Off-balance sheet commitments
(see Note 17 and Note 18 of the Notes to the financial statements of
the parent company Danone).