5 _381 2023 UNIVERSAL REGISTRATION DOCUMENT_MICHELIN 5 FINANCIAL PERFORMANCE 2023 consolidated financial statements 3.25 Provisions Provisions are recognized when a legal or constructive obligation has been incurred that will probably lead to an outflow of resources that can be reasonably estimated. Provisions for reorganizations and adaptation of activities are recognized when the Group has a detailed formal plan that has been announced. Provisions are recorded at the net present value of the estimated cash outflows. 3.26 Trade payables Trade payables are recognized initially at fair value and are subsequently measured at amortized cost using the effective interest method. The Group has put in place paying agent agreements with several financial institutions. Under these agreements, the financial institution acts as a paying agent with respect to invoices due to suppliers who have entered into a bilateral agreement with the financial institution in order to be in position to factor their trade receivables from the Group. The agreements' classification in trade payables is supported by a multi-criteria analysis. In particular: ● the factoring transaction is completely independent from the commercial relationship; ● the supplier has full discretion to decide – on a case-by-case basis – whether to factor its receivables; ● the date of payment to the supplier or the bank, whichever is the case, corresponds to the payment date indicated on the invoice; ● the Group is not affected by the factoring cost because the discount is borne by the supplier and is paid directly to the bank. Trade payables concerned by the program are presented separately in the consolidated statement of financial position under “Trade payables covered by reverse factoring contracts”. In the consolidated statement of cash flows, these transactions are included in cash flows from operating or investing activities (note 31). Note 4. CHANGES IN SCOPE OF CONSOLIDATION 4.1 Transactions in 2023 4.1.1 Flex Composite Group On September 26, 2023, the Group completed the acquisition of all the outstanding shares of Flex Composite Group, Europe’s leading manufacturer of high-tech fabrics and films, for an enterprise value of €700 million. This acquisition marks a significant step forward in developing the Group beyond mobility and positioning it as a player in polymer composite solutions. The purchase price allocation process was launched during the period and provisional goodwill of €576 million was recognized at December 31, 2023, as shown in the following table: (in € millions) At the acquisition date Fair value of consideration transferred 554 Consolidated net assets 22 PROVISIONAL GOODWILL 576 The identification and measurement of the identifiable assets acquired and the liabilities assumed at their fair value at the acquisition date began in the second half of 2023 and will be completed within 12 months of the acquisition date, i.e., no later than September 26, 2024. In the period from its acquisition and full consolidation to the reporting date, Flex Composite Group contributed €46 million to consolidated sales and €9 million to segment operating income.
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