EXEL industries - 2019 Universal Registration Document

Consolidated fi nancial statements 4

Notes to the consolidated fi nancial statements

This test is performed on the cash generating unit (CGU) constituted by the assets or the smallest group of assets which include the asset to be tested and which generates cash in fl ows which are largely independent from those generated by the other assets or groups of assets. Goodwill and fi xed assets with indeterminate useful lives: The Group performs impairment tests at least once a year, during the fourth quarter of each fi scal year and whenever there is an indication of loss of value. This impairment test is performed on each CGU to which the goodwill or the tested assets are attached. Since fi scal year 2017, the Group has changed the de fi nition of its CGUs to take into account Management’s methods of managing and analyzing the Group’s performance. A CGU is now de fi ned as a legal entity or group of subsidiaries belonging to the same business sector which generate cash fl ows which are clearly independent of the cash fl ows generated by other CGUs. The goodwill was assigned to each CGU thus defined: Agricultural Spraying, Sugar Beet Harvesters, Garden Watering and Spraying and Industrial Spraying (note c 3). When the recoverable value of the CGU is below its net carrying amount, an impairment charge is recognized on the line “Non- recurring expenses”. The recoverable value of a CGU represents the higher of its fair value net of costs of disposal and value in use. Value in use is determined on the basis of the present value of future operating cash fl ows expected over a fi ve-year period and a terminal value based on a perpetuity growth rate for cash fl ow. Non-current fi nancial assets (see note c 7) Non-current financial assets include equity interests and other fi nancial assets. “Equity interests” refers to the Group’s investment in the capital stock of unconsolidated companies. These interests are accounted for as available-for-sale securities and recognized at fair value or their acquisition cost, which, according to the Group’s estimates, represents their fair value in the absence of an active market. Unrealized gains and losses on these items are recorded separately under shareholders equity. In the case of a permanent loss in value, the corresponding impairment charge is recognized in the income statement of the fi scal year. The permanent nature of impairment is determined by comparing the estimated value based on the share in net equity, the market price or earnings growth prospects, after adjusting for the effects of these holdings on the Group in terms of strategy, synergies or existing businesses. Recognition of this impairment loss in the income statement is not reversible if the estimated value is considered to develop positively in the future (in which case the unrealized pro fi t is recognized under the separate heading of equity mentioned above). Other fi nancial assets are recognized at amortized cost. A provision for impairment may be recorded when there exists an objective indication that they have been impaired. Securities held for trading are recognized at fair value and unrealized gains and losses on re-measurement are recognized in “pro fi t or loss under income from cash and cash equivalents”. All fi nancial assets are subject to tests once a year to determine if there exists an indication of impairment. 1.8

1.9

Inventories and work in progress (see c note c 8)

In accordance with IAS c 2 – Inventories, inventories and work in progress are measured at the lower of cost and their net realizable value. Cost is measured mainly according to the FIFO method. Net realizable value is de fi ned as the expected selling price in the ordinary course of business minus costs necessary for completion and disposal. Raw materials and trade goods are as a general rule measured according to the FIFO method. Inventory in progress and finished products are recognized at production cost that includes the cost of raw materials, direct labor costs and factory overheads. 1.10 Trade receivables and related accounts (see note c 9) Trade receivables have been measured at face value. Provisions for impairment are recorded according to the age of the receivable and the expected losses based on the lifetime of the receivable. 1.11 Cash and cash equivalents (see note c 11) Cash includes bank balances and highly liquid investments and cash equivalents with maturities of less than three months from their date of acquisition. Bank overdrafts are presented as a speci fi c line item under current liabilities. Deferred taxes In accordance with IAS c 12 – deferred tax, provisions for deferred tax are recorded using the balance sheet liabilitymethod and temporary di ff erences arising between the tax bases of assets and liabilities (including tax losses) and their carrying amounts in the financial statements. Deferred taxes are calculated at the prevailing tax rate in force. Deferred tax assets are recorded only if it is probable that they will be recovered from taxable pro fi t. In particular, no deferred tax asset has been recognized for losses of certain subsidiaries where recovery is not currently considered likely, for total deferred taxes of around €17 c million. Deferred tax assets and liabilities are not discounted. The Group o ff sets deferred tax assets and liabilities if the entity has the legal right to o ff set current income tax assets and liabilities and they relate to types of taxes levied by the same tax authority. 1.12 Corporate income tax (see note c 22)

EXEL Industries Group I 2019 Universal Registration Document

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