Econocom - 2019 Universal registration document

06 consolidated financial statements

notes to the consolidated financial statements

Refinancing with recourse In certain very limited cases, Econocom Group retains its exposure to the credit risk on its factored receivables. In this case, the Group transfers title to the equipment under the lease to the refinancing institution for the duration of the lease, as collateral for the transaction.

However, for the purposes of simplification, the Group recognised a financial liability equal to the total amount factored with recourse and recorded a gross asset (representing its “continuing involvement” as defined by IFRS ژ 9) in trade receivables for an amount of €90.3 million at 31 ژ December 2019 (€97.2 million at 31 ژ December 2018).

Information on transfers of assets associated with 21.3. refinancing – Derecognised assets NATURE OF CONTINUING 21.3.1. INVOLVEMENT Residual financial value involvement since it retains a portion of the risk associated with the contractual relationship and ownership of the assets;

outstandings assigned under finance • leases: Econocom has continuing involvement since it retains a portion of the risk associated with the contractual relationship. Risk from continuing involvement depends above all on Econocom’s relationship with its customers, and as such is considered, managed and, where appropriate, covered by provisions as an operational risk and not a financial risk. RECOGNITION IN INCOME 21.3.2. STATEMENT For Econocom Group, the cost of transferring outstandings is an operating expense included in the economic analysis of each transaction, and is included in profit (loss) from continuing operations accordingly. In contrast, costs relating to the factoring of trade receivables are of a financial nature and are classified within net financial expense. Gains and costs relating to unwinding the discount on the residual interest in leased assets and to gross commitments on residual financial assets are considered as operating costs and are included in “Financial income – operating activities”.

Outstanding amounts under the Group’s lease agreements with customers are refinanced on a non-recourse basis except in very rare cases. The Group’s active risk management policy is aimed at limiting both credit risk and any other continuing involvement. Accordingly, the Group derecognises outstanding amounts under leases refinanced on a non-recourse basis. However, the Group frequently sells, and commits to repurchase, the leased equipment at the same time as the outstandings under leases. These purchase obligations are classified within “gross commitments on residual financial assets” and recognised in statement of financial position liabilities. Other continuing involvement The main legal forms of refinancing contracts for lease outstandings are described below: outstandings assigned in full: Econocom • considers that it has no other involvement within the meaning of IFRS ژ 7; outstandings assigned as sales of • receivables: Econocom has continuing

249

2019 annual report