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 148 Derivatives and hedge accounting 1.1.24 In order to manage its interest rate risk, the Group uses OTC derivative instruments. These hedging instruments are valued and recognized in the balance sheet at their fair value. Changes in the fair value of instruments described as “Cash-flow hedges” are recorded under “Other comprehensive income” (equity) for the efficient parts and in financial income for the inefficient parts. Changes in the fair value of derivatives that do not qualify for hedge accounting are recognized in profit or loss. IFRS 9 does not modify the accounting treatment of the different types of hedging used by the Plastic Omnium Group, nor the swap point treatment or the optional nature of hedge accounting. It softens the criteria for the eligibility of hedging instruments and the hedged elements and compliance with the effectiveness criteria. On these bases, and in view of the interest rate and forex risk hedging policy, the Group’s impacts are very limited (see Note 5.2.8.1 on “Interest rate hedges”). Cash and cash equivalents 1.1.25 Cash and cash equivalents presented in the statement of cash-flows include short-term, highly liquid cash items, readily convertibles into known amounts of cash and subject to a negligible risk of change in value. Cash comprises cash and cash equivalents, short-term deposits and bank balances, with the exception of those authorized to cover short- or medium-term cash needs arising from day-to-day operations. Cash equivalents correspond to short-term investments and are subject to a negligible risk of changes in value in the context of the temporary use of cash surpluses (money market funds, negotiable debt securities, etc.). Changes in the fair value of these assets are recognized in profit or loss. Assets held for sale and discontinued operations 1.1.26 The following items are classified as “Assets held for sale” on the balance sheet, as soon as the assets or groups of assets are available-for-sale in their current state and the sale is highly probable: non-current assets held pending their sale; ● a group of assets held for sale and not for continuing use; ● businesses or companies acquired with a view to subsequent sale. ● Liabilities related to these assets, group of assets, businesses and liabilities held for sale are also presented as a separate item under liabilities in the balance sheet, “Liabilities directly related to assets held for sale”. Assets (or asset groups) classified in this category are no longer depreciated. They are valued at the lower of their carrying amount and selling price, less selling costs. Any impairment losses are recognized by the Group under “Other operating expenses”. In the balance sheet, data related to “Assets held for sale” shown separately in the financial statements do not give rise to the restatement of prior years in terms of presentation. In the income statement, the profit/loss (from the period and from the sale) of business operations or entities that meet the definition of a discontinued operation are reported as a separate line item entitled “Net income from discontinued operations” in each of the fiscal years presented. Income taxes 1.1.27 The Plastic Omnium Group recognizes deferred taxes relating to temporary differences between the carrying amount of assets and liabilities on the balance sheet without discounting. Deferred taxes are calculated using the carryover method, applying the last tax rate enacted (or the quasi-adopted rate) at the balance sheet date and applicable to the period in which the temporary differences reverse. Tax credits and deferred tax assets on tax loss carryforwards and temporary differences are only recognized when the probability of their utilization within a relatively short period of time is proven. Estimates and judgements 1.2 In preparing its financial statements, the Plastic Omnium Group uses estimates and assumptions to assess some of its assets, liabilities, income, expenses and commitments. Senior management reviews these estimates and assumptions periodically. The amounts in the future financial statements of the Group may include changes in estimates or assumptions in the consideration of past experience and changes in economic conditions. In general, the estimates and assumptions used during the financial year were based on the information available at the balance sheet date. Estimates may be revised depending on changes in the underlying assumptions. These assumptions mainly concern: Deferred taxes Recognition of deferred tax assets depends on the probability of sufficient taxable earnings being generated to permit their utilization. This leads the Group to make regular estimates of future taxable earnings, particularly as part of the medium-term plans established within the Group. These estimates take into account the recurring or non-recurring nature of certain losses, expenses, etc. Provisions PROVISIONS FOR PENSIONS AND OTHER POST-EMPLOYMENT BENEFITS In the case of defined benefit plans, the Group, assisted by independent actuaries, adopts assumptions (see Notes 1.1.19 and 5.2.6 “Provisions for pensions and other post-employment benefits”) on: discount rates for pension and other long-term benefits; ● rates of growth in healthcare costs for the United States; ● employee turnover and future salary increases. ● OTHER PROVISIONS Estimates also cover provisions, particularly those relating to the workforce adjustments, litigation, customer guarantees, legal and tax risks for which in some cases the Legal Department may be required to employ specialized lawyers.