Compagnie des Alpes // 2020 Universal Registration Document

5 FINANCIAL INFORMATION

Consolidated financial statements

In other countries where the CDA Group operates (the Netherlands and Belgium in particular), retiring employees receive no retirement package from their employer. Therefore, no provision is required. However, companies contribute each year to provident funds (pension funds). The absence of the Group’s obligations with respect to these contracts is verified each year. Other provisions Provisions are recognised when, at the end of the reporting period, the Group has an obligation to a third party arising from a past event that is certain or likely to lead to an outflow of resources to the third party, with no equivalent consideration received. These provisions are estimated in accordance with their nature, with the most likely assumptions taken into account. Provisions for restructuring costs are recognised once the Group has a formal, detailed restructuring plan that has been communicated to the relevant parties. 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. 1.22

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. TAXES AND DEFERRED TAXES Group income taxes are determined in accordance with tax laws in force in the country where the income is taxable. 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 for the five years covered by the plan). 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 (bonus shares). The fair value of services rendered by employees in exchange for bonus shares is recognised in payroll costs. 1.24 1.25

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DERIVATIVES AND HEDGING TRANSACTIONS

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.

Note 2

Management of capital and risks

2.1 CAPITAL MANAGEMENT The Group’s primary objective for its capital management is to maintain a good credit risk rating and healthy capital ratios, in order to safeguard the long-term financing of its business and optimise shareholder value. Accordingly, the Group monitors the performance of its net debt-to- equity ratio. In its calculation of net debt, the Group includes loans and borrowings bearing interest plus cash and cash equivalents. Shareholders’ equity includes convertible preference shares, Group share of capital and unrealised gains and losses recognised directly in shareholders’ equity. The Group manages its capital structure and makes adjustments as economic conditions change. The Group may modify dividend payments to shareholders, return part of the capital or issue new shares.

2.2 RISK MANAGEMENT Cash-flow risk and risk of changes in value due to interest rate fluctuations The Group does not hold significant interest-bearing assets. The Group is exposed to interest rate risk on its overdrafts and medium- and long-term borrowings. At 30 September 2020, 87.4% of the Group’s debt is fixed (fixed rate or floating rate hedged) and the remaining 12.6% of debt is exposed to rate changes. This debt consists of bank debt (49%) and market debt (51%). As regards its floating-rate debt, the Group manages its interest rate risk by using floating-for-fixed swaps or rate cap purchases (see Note 6.12).

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Compagnie des Alpes I 2020 Universal registration document