Plastic Omnium - 2018 Registration Document

4 2018 CONSOLIDATED FINANCIAL STATEMENTS Consolidated financial statements at December 31, 2018 www.plasticomnium.com PLASTIC OMNIUM 2018 REGISTRATION DOCUMENT 144 Revenue/“Revenue from contracts with customers” 1.1.7 SALES OF PARTS Sales of parts are recognized when the significant risks and rewards of ownership of the goods are transferred to the buyer, usually upon delivery of the goods, and measured at the fair value of the consideration received, net of discounts, rebates and other taxes on sales and customs duties. SERVICES AND PERFORMANCE OF SPECIFIC TOOLING Automotive Business The Group has been applying IFRS 15 “Revenue from contracts with customers” since January 1, 2018. In this context, the accounting treatment selected until December 31, 2017 for costs and products related to activities carried out during the project phase of automotive contracts has been amended. The project phase corresponds to the period during which the Group is working on the development of the part to be produced, on the design and manufacture of specific tooling to be used in production as well as on the organization of future production processes and logistics. It begins with the appointment of the Group for the vehicle and the product concerned and is completed when the normal production volume is reached. The accounting treatment applied since January 1, 2018 is based on the identification by the Group in most cases of two performance obligations, distinct from the production of parts, under the Design business and certain specific tooling whose control is transferred to clients. The costs related to performance bonds are recognized in inventories during the project phase and then in expenses when their control is transferred to the client, i.e. when the series is launched.Products related to payments including those explicitly included in the part price, and therefore the negative or positive margin for these performance obligations, are recognized at the start of the series’ life. Payments received prior to the start of the series are recorded in customer advances. The Group has also examined the concepts specified or introduced by IFRS 15, such as the concept of “agent versus principal”, which does not have an impact on the principles applied until December 31, 2017. Agreements signed with customers in the context of the development and supply of parts do not meet the criteria of a contract within the meaning of IFRS 15; in general, only firm orders received from customers are analyzed as a contract evidencing a performance obligation. In addition, the practices for issuing orders vary from one manufacturer to another and in some cases these orders are issued just days before delivery. On this basis, it is not relevant to provide information on performance obligations not met at the balance sheet date. Receivables 1.1.8 individual basis for non-recovery risk. The application of IFRS 9 on financial assets has not had a significant impact on the Group accounts ( see Note 5.1.10 ). Receivables are recorded at their fair value when they are recorded. The fair value generally corresponds to the nominal value of the receivable as long as the sale has been carried out with normal payment terms. Impairment losses are booked to cover expected credit losses and identified risks of non-recovery. The amount of impairment is calculated on a statistical basis for credit risk and counterparty by counterparty on an Finance receivables correspond to development and tooling sales for which the Group has signed an agreement enabling customers to pay in installments (for example: “development unit” prices contractually agreed by customers). These receivables have initial payment periods of more than one year and may bear interest in the framework of an asset financing agreement agreed with the customer. The income related to these receivables is recognized in revenue. These finance receivables are deducted when calculating the Group’s net debt. Sold receivables, which are removed from the balance sheet, meet the following criteria: the rights attached to the receivables are transferred to third parties; ● substantially all the risks and rewards of ownership are transferred to ● third parties; The risks taken into account are the following: credit risk, ● risks related to payment arrears both for the duration and amounts, ● the transfer of interest rate risk, which is fully assumed by the buyer. ● Operating margin 1.1.9 Operating margin corresponds to the profit from fully consolidated companies before other operating income and expenses which mainly include: gains from disposals of property, plant and equipment and intangible ● assets; impairment losses on intangible assets and property, plant and ● equipment, including any impairment of goodwill; translation differences, corresponding to the difference between the ● exchange rates used to account for operating receivables and payables and the rates used to account for related settlements; income and expenses that are unusual in nature, frequency or amount, ● such as profits and losses related to changes in scope, the start-up costs of new plants, the costs of restructuring and downsizing costs. Amortization of contractual customer relationships acquired in business combinations is recognized as a separate item in the operating margin and entered alone on a separate line of the income statement. The share of profit/(loss) of associates and joint ventures is also recorded in the operating margin as a separate item. Thus, the Group has an operating margin before amortization of intangible assets acquired in business combinations and the share of profit/(loss) of associates and joint ventures and an operating margin after taking these factors into account. The operating margin after taking into account amortization of intangible assets related to acquisitions and share of profit/( loss) of associates and joint ventures is the main performance indicator used by the Group.