1.6 Use of judgments and estimates
The preparation of financial statements requires the use of estimates and assumptions to determine the reported amount of certain assets, liabilities, income and expenses, and to take into account the potential positive or negative effect of uncertainties existing at the balance sheet date.
Due to changes in the assumptions used and economic conditions different from those existing at the balance sheet date, the amounts in the Group’s future financial statements could be materially different from current estimates.
The Group has paid particular attention to the impacts of the Covid-19 health crisis when making material estimates, especially in the following areas:
- measurement of goodwill (Note 5.1) and intangible assets (Note 5.2). The Group has taken into account the uncertainties surrounding the Covid-19 health crisis in its measurement of the recoverable amounts of these assets;
- measurement of provisions for recoverable current assets (Note 10.2);
- measurement of deferred tax assets recognized on tax loss carryforwards (Note 7.2), taking into account any impacts of the Covid-19 health crisis on taxable income projections.
With regard to the impacts of the Covid-19 health crisis, the Group has used judgement to determine the applicable accounting treatment for non-recurring events presented in the financial statements under other income and expenses (Note 10.1). The direct expenses associated with the crisis have been recognized in EBIT (adaptations to workstation, purchases of masks, etc.).
The Covid-19 health crisis has also led the Group to exercise judgement to assess:
- whether there are any indications of impairment of goodwill and intangible assets;
- expected credit losses amid the uncertainty.
In addition, the Group has assessed the financial risks related to the effects of climate change and presented mitigation measures. Currently, their impact on the financial statements is not material. However, the shift towards a low-carbon economy or the introduction of carbon tax policies to regulate emissions could have an impact on some of the Group’s fleet and mobility solutions. The Group is therefore anticipating these transition issues by implementing risk mitigation measures.
Note 2 Acquisitions, development projects and disposals
In accordance with IFRS 10 – Consolidated Financial Statements, control over an entity has been determined based on a review of the criteria specified in the standard, which is not limited to the interest held in the entity (more than 50%); an investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
In the year following the acquisition of a consolidated company, fair value adjustments are made to the identifiable assets and liabilities acquired. For this purpose, fair values are determined in the new subsidiary’s local currency. In subsequent years, these fair value adjustments follow the same accounting treatment as the items to which they relate.
In accordance with IFRS 11 – Joint Arrangements, companies over which the Group exercises significant influence, either directly or indirectly, are accounted for by the equity method. Under the equity method, investments in associates and joint ventures are initially recognized at cost and adjusted thereafter for the post-acquisition change in the investor’s share of the investee’s net assets.
The Group has accounted for business combinations and changes in ownership interest that do not result in a loss of control in accordance with IFRS 3 (revised) – Business Combinations and IFRS 10 – Consolidated Financial Statements.
As part of certain acquisitions and/or business combinations, the Group has granted commitments to buy back minority shareholders’ interests. The exercise price of these options can be fixed or calculated using a predefined formula, and they can be exercised at any time or at a set date.
The Group records a financial liability at its present value for the puts granted to the minority shareholders of the entities concerned. Subsequent changes to the commitment’s value are recognized with adjustments to the equity attributable to owners of the parent.
All equity security transactions between controlling and non-controlling shareholders not involving a loss of control must be recognized directly in equity.