Assystem - 2018 Register document

5

BUSINESS REVIEW AND FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS

OPERATIONAL DATA

NOTE 5

5.1

Revenue and working capital requirement (WCR)

Revenue The Group’s consolidated revenue corresponds to the revenue generated by its two divisions – Energy & Infrastructure and Staffing – under two different types of contracts: ● time and materials contracts: the valuation of services rendered under these contracts depends on the resources used. Revenue is determined on a time-spent basis, agreed on with the client, and corresponding to an aggregate resulting from the multiplication of an hourly or daily rate; ● fixed-price contracts: these correspond to contracts under which the Group has a performance obligation and whose price is either (i) fixed at the outset for the project as a whole or (ii) set in a master agreement for each type of service ordered by the client. IFRS 15 states that revenue from contracts with customers must be recognised based on: ● when the entity satisfies the performance obligations in the contract, corresponding to when transfer of control over the service rendered passes to the customer; and ● the amount to which the seller expects to be entitled in exchange for the services rendered. Determining when transfer of control over a service passes to the customer is essential for recognising revenue. Control may be passed either over time (in which case the percentage-of-completion method is used) or at a point in time. Revenue from time and materials contracts is recognised on a regular – generally monthly – basis, by reference to time spent. Revenue from fixed-price contracts is mostly recognised over time using the percentage-of-completion method as the Group considers that (i) the client simultaneously receives and consumes all of the benefits of the services rendered as the Group performs them, or (ii) the Group has an enforceable right to payment for services rendered to date. The criterion generally used for determining the percentage of completion during the lifetime of a contract is the proportion that costs already incurred represents out of the total estimated costs at completion. The work carried out by the Group’s entities is systematically based on contracts entered into with clients. Where a framework agreement is in place, the Group considers that each successive order constitutes a contract with the meaning of IFRS 15 as it creates enforceable rights and obligations between the parties. Certain contracts signed by the Group include different types of service which may constitute separate performance obligations. In this case, revenue is recognised separately for each performance obligation that is considered to be distinct within the overall contract. Items of variable consideration in the Group’s contracts essentially correspond to penalties and volume discounts. As required by IFRS 15, these items are presented as a deduction from revenue. Variable consideration is not considered to have a material financial impact at Group level. In some cases, in order to propose an appropriate services offering, a Group entity may be required to set up a consortium with one or more other parties or to use one or more subcontractors. In this case, the entity ensures that it retains exclusive control over the services it provides to the client and that it does not play the role of agent or intermediary between the client and the third party. The costs of obtaining and fulfilling contracts are not material at Group level. Order book In applying IFRS 15, the Group has elected to use two of the practical expedients available in the standard, namely excluding from its order book disclosures (with “order book” corresponding to “remaining performance obligations” in IFRS 15) (i) contracts whose duration is less than one year, and (ii) services for which revenue will be recognised in the amount to which the entity has a right to invoice. Taking into account these two practical expedients, the total amount of the Group’s order book was not material at 31 December 2018. Impairment of trade receivables Trade receivables are initially recognised at fair value and subsequently measured at fair value less any accumulated impairment losses. Impairment losses are recognised based on the expected credit losses over the lifetime of the receivables. Provisions for losses on completion A provision is recognised when it is probable that contract costs will exceed contract revenue. The amount of the provision is calculated by reference to the stage of completion less the loss already recognised, and it is recorded under “Depreciation, amortisation and provisions for recurring operating items, net”.

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ASSYSTEM

REGISTRATION DOCUMENT 2018