Compagnie des Alpes - 2017 Registration Document

5 FINANCIAL INFORMATION

Consolidated financial statements

1.22 BORROWINGS Borrowings are initially recognised at fair value, net of transaction costs incurred (less fees and issue or redemption premiums, these adjustments being factored into the calculation of the effective interest rate). Borrowings are subsequently recognised at amortised cost. Any difference between the income (net of transaction costs) and the redemption value is recognised in the income statement over the duration of the loan, in accordance with the effective interest rate method. The Group’s use of derivatives such as interest-rate swaps, caps or other equivalent futures contracts is designed to hedge against interest-rate and foreign exchange risk. For each cash flow hedge, the hedged financial liability is recognised in the balance sheet at amortised cost. Changes in the value of the derivative are recognised in shareholders’ equity. To the extent that financial expenses and income from the hedged item affect profit or loss in a given reporting period, the financial expenses and income from the derivative recognised in shareholders’ equity for the same reporting period are transferred to profit or loss. When a derivative does not meet the criteria for hedge accounting, changes in fair value are recognised in profit or loss. INCOME TAX AND DEFERRED TAXES Group income taxes are determined in accordance with tax laws in force in the country where the income is taxable. 1.24 1.23 DERIVATIVES AND HEDGING TRANSACTIONS

Deferred taxes A temporary difference between the book value of an asset or liability and its tax base gives rise to recognition of deferred tax by means of the liability method, using the most recent income tax rates enacted (or substantively enacted). A deferred tax liability is recognised for all taxable temporary differences. No deferred tax assets are recognised with respect to tax loss carryforwards unless it is likely they will be recovered within a reasonable time-frame (likelihood is calculated on the basis of available forecasts). Deferred tax assets and liabilities are offset for each tax entity. The income-tax expense is recognised in profit or loss unless it concerns items that were recognised directly in shareholders’ equity. In this case, it is also recognised in shareholders’ equity. SHARE-BASED PAYMENTS The Group has put in place equity-settled payment arrangements (stock options and bonus shares). The fair value of services rendered by employees in exchange for stock options and bonus shares is recognised in payroll costs. The total amount expensed over the vesting period is determined on the basis of the fair value of the options granted, as measured by the binomial model. At each reporting date, the Group re-examines the number of options that will likely be eligible for exercise. When appropriate, it recognises the impact of its revised estimates in profit or loss, with a corresponding entry in equity. 1.25

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Compagnie des Alpes I 2017 Registration Document