EXEL Industries // 2020 Universal registration document

Consolidated fi nancial statements 5

Notes to the consolidated fi nancial statements

1.8 Non-current fi nancial assets (see note 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 it with the estimated value based on the share of net equity, the market price or earnings growth prospects, after adjusting for the e ff ects 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. In accordance with IAS 2 – Inventories, inventories and work in progress are measured at the lower of cost and their net realizable value. Cost is measured according to the FIFOmethod. 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 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 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. 1.9 Inventories and work in progress (see note 8)

1.12 Corporate income tax (see note 22)

Deferred taxes In accordance with IAS 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 €21 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. French tax group provisions Under a tax sharing agreement, with EXEL Industries as head of the tax group, the Group’s French subsidiaries pay advances to EXEL Industries for taxes owed by them and EXEL Industries will settle the Group tax at the end of the fi scal year after any restatements provided for under this system. Given the purely fi scal nature of this provision, and possibilities that they will be subject to changes in line with changes in tax regulations mainly in France, research tax credits are recognized as a deduction from the income tax expense. 1.13 Foreign currency translation The fi nancial statements of foreign companies are converted using the closing rate method: assets and liabilities on the balance sheet are translated at the exchange rate at the year end and income statements at the average exchange rate. Translation di ff erences are recorded directly in equity under the heading “Foreign currency translation reserve”. Transactions by Group entities in a currency other than their functional currency are translated at the exchange rate prevailing on the transaction date. Assets and liabilities denominated in a currency other than the functional currency of the entity are translated at the closing exchange rate in force at the end of the fi scal year. Currency gains and losses are recognized directly under fi nancial income and expense. 1.14 Leases Under IFRS 16, a lessee recognizes a right-of-use asset and a fi nancial debt in the form of a lease liability. The right-of-use asset is depreciated over the lease term. The lease liability, initiallymeasured at the present value of fi xed lease payments over the lease term, is accreted at the rate implicit in the lease, if it can be easily determined, or at the Group’s incremental borrowing rate. Tax credits  Research tax credits (RTC)

EXEL Industries group I 2020 Universal Registration Document

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