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 146 If fixed assets have been sold or contributed within the Group, any gains and losses are eliminated in the consolidated financial statements. Fixed assets are later recognized at cost less total depreciation based on life span and total impairment. Maintenance and repair costs for fixed assets to restore or maintain the future economic benefits that the company can expect in terms of the estimated level of performance at the time of acquisition are recognized as an expense as incurred. Future expenditures are capitalized only on the assumption that the future economic benefits associated with the expenditure benefit the Group, for example, by an increase in the performance or effectiveness of the asset concerned. Assets under finance leases are recognized in property, plant and equipment at the lower of their fair value and the present value of minimum lease payments and depreciated on the basis of Group depreciation rates applicable to the same assets owned outright. They mainly concern leases on industrial buildings and major functional assemblies. DEPRECIATION Depreciation is calculated on a straight-line basis over the estimated useful lives: Buildings and fixtures 10 – 40 years Presses and transformation machines 7 – 10 years Machining, finishing and other equipment 3 – 10 years The Group applies the components approach to its property assets and major functional assemblies. IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are tested for impairment when decisions are made to cease production or to close a site. Investment property 1.1.15 The items in the “Investment property” section of the Group’s balance sheet assets are not included in ordinary operations. These assets, which belong to the Group, correspond to real estate: not occupied on the balance sheet date and whose use is undecided; ● or held by the Group for their long-term appreciation and which are ● leased to third parties under operating leases. The Group may, where appropriate, decide to use all or part of a property whose use is undecided (in which case the relevant part would be reclassified as being occupied) or lease them under one or more operating leases. Investment property is measured at fair value at the balance sheet date, with changes in fair value recognized in profit or loss. The land on which the buildings are constructed follow the same accounting treatment. An independent appraiser makes regular valuations as part of the year-end closing process. Between two valuations, the Group ensures that the real estate market has not undergone any significant change. The fair value determined by the expert is assessed by direct reference to observable prices in an active market (level 2 fair value). Properties or parts of properties previously classified under investment property and reclassified as operating property as the Group decides to use them for its own purposes, are recognized at their carrying amount at the date of transfer. When properties are moved from the “Property, plant and equipment” category to the “Investment property” category, any difference between the carrying amount and the fair value on that date is accounted for as a revaluation. Inventories and work in progress 1.1.16 RAW MATERIALS INVENTORIES AND OTHER SUPPLIES 1.1.16.1 Raw materials and supplies are measured at the lower of cost and net realizable value. At the end of the financial year, a provision for impairment is recorded when the estimated sales price of the related finished products in the normal course of business, less the residual estimated marketing, production and processing costs, is less than the carrying amount of the raw materials or supplies. FINISHED AND SEMI-FINISHED PRODUCT INVENTORIES 1.1.16.2 Finished and semi-finished products are valued on the basis of standard production costs, revised annually. Cost includes raw materials and direct and indirect production costs. These costs do not include any administrative overheads or IT not linked to production, Research and Development costs or sales costs. In addition, they do not include the cost of any below-normal capacity utilization. PROJECTS INVENTORIES – TOOLS AND DEVELOPMENT 1.1.16.3 These inventories correspond to costs incurred by the Group in order to satisfy a performance obligation in connection with automotive projects. The cost of inventories is compared at the balance sheet date to the net realizable value. If it exceeds the net realizable value, an impairment loss is recorded to bring the inventories to their net realizable value. Non-current and current borrowings 1.1.17 Current and non-current borrowings are valued using the amortized cost method using the effective interest rate. Provisions 1.1.18 Provisions are booked when there are obligations to third parties leading to a likely outflow of resources for the benefit of these third parties without at least equivalent value expected for the Group. Losses identified on onerous contracts, i.e. contracts whose unavoidable costs relating to their obligations are greater than the expected economic benefits, are subject to provisions. These provisions are recognized in current or non-current liabilities depending on whether they are short- or medium-long term in nature.