05 Financial performance 2024 consolidated financial statements 6.4 Trade receivables ACCOUNTING POLICIES Trade receivables are initially recognized at the amount unconditionally due by the customer. The Group manages its trade receivables in order to collect the contractual cash flows and measures its receivables at amortized cost, according to the effective interest rate method, after deduction of any impairment losses. When payment terms are less than one year, the initial fair value and the subsequent amortized cost are equal to the nominal amount to the extent that the receivable does not include a significant financial component. The Group applies the simplified approach provided under IFRS 9, which consists of calculating the expected credit loss over the life of the trade receivable. This model makes it possible to determine a credit loss expected at maturity for all trade receivables, as soon as they are recognized. Expected credit losses are based on customer payment patterns that have been observed over 36 months, and trade credit losses historically recorded during this period. An impairment loss is also recognized whenever there are objective indications that the Group will not be able to recover all amounts due under the terms of the original transaction. Bankruptcies, the use of legal procedures to protect against creditors, cases of known insolvency or disappearance of the debtor, late payments of more than six months, economic or political risks in the country of residence of the debtor, as well as the deterioration of the latter's solvency are all indicators that suggest that a trade receivable must be impaired. The amount of the impairment loss is the difference between the carrying amount of the asset and the present value of the estimated future cash inflows at the initial effective interest rate. Before recognizing an impairment loss, the quality of the guarantees potentially obtained must be assessed, as well as the capacity to implement them. The impairment loss is recognized in “Sales and marketing expenses”. When the receivable is irrecoverable, it is canceled by offsetting it against the previously recognized impairment loss. Any subsequent cash inflows corresponding to previously derecognized receivables are recorded by reducing “Sales and marketing expenses” in the income statement. The carrying amount of trade receivables is analyzed in the table below: (in € millions) December 31, 2024 December 31, 2023 Gross trade receivables 3,689 3,939 Impairment (94) (89) TRADE RECEIVABLES 3,595 3,850 All trade receivables are due within 12 months. The following table presents an aging analysis of trade receivables at December 31, 2024: (in € millions) Gross Impairment Net Trade receivables not yet due 3,359 (13) 3,346 Overdue n from less than three months 220 (7) 213 n between three and six months 26 (5) 21 n from more than six months 84 (69) 15 Overdue trade receivables 330 (81) 249 TRADE RECEIVABLES 3,689 (94) 3,595 373 2024 UNIVERSAL REGISTRATION DOCUMENT_MICHELIN
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