Econocom - 2020 annual report

06 consolidated financial statements

notes to the consolidated financial statements

in accordance with IFRS 9 (to which • IFRS 16 refers) when the conditions for recognising a sale within the meaning of IFRS 15 between the lessee and Econocom are not met; in accordance with IFRS 16 (direct finance • lease) if the transfer of the asset to Econocom by the lessee meets the criteria set out in IFRS 15. In both cases, Econocom recognises a financial asset. Revenue is not recognised at the transaction date and financial income relating to operating activities is recognised over the entire lease term based on the interest rate implicit in the lease. In the case of a sale without recourse to a refinancing institution of a sale and leasebackagreement,only the corresponding margin isrecognisedat the dateof sale. Regardless if they are sale & lease-back contracts or not, Finance leases are recognised as follows: Balance sheet For each lease, the Group’s residual interest in the leased assets (see note 11.1) is recognised in assets and the gross liability for purchases of leased assets (defined in note 11.2) is recognisedin liabilities. Income statement Revenue on these contracts corresponds to the present value of future minimum lease payments (corresponding to the payments that the lessee is required to make throughout the realisation period and the lease term). Financial income not yet acquired from lease payments is recognised in the income statement when the contracts are refinanced. The impacts of discountingonly concern the “Gross liability for purchases of leased

assets” (see note 11.2) and the “Residual interest in leased assets”(see note 11.1) items. The cost of sales represents the purchase cost of the asset. The Group’s residual interest in the leased assets is deducted from the cost of sales When the Econocom group retains all the risks associated with the lease and there is no transfer of the main risks and benefits associated with the ownership of the asset, operating leases are recognised as follows: Balance sheet The leased equipment is recorded as an asset in the balance sheet and depreciated on a straight-line basis over the duration of the contract to write it down to its residual value, which represents the Company’s residual interest in the asset at the end of the lease term. Income statement Income statement entries are made on a periodic basis with the invoiced lease payments recorded as revenue and the depreciation described above recorded as an expense. Lease extensions 4.1.2.3. Revenue is recognised on lease extensions in line with the initial classification of the lease, i.e. : if the initial contract was classified as • an operating lease, revenue from the extension of the lease will be deferred over the period of the lease extension; if the initial contract was classified as • a finance lease, revenue from the extension of the lease will be recognised in full on the last day of the initial contract. based on its present value. Operating leases 4.1.2.2.

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2020 annual report