Econocom - 2020 annual report

06 consolidated financial statements

notes to the consolidated financial statements

The rental liability is recognised at the depreciated cost, using the effective interest rate method, and leads to the recognition, on the income statement, of an interest charge for the period and variable payments (not taken into account in the initial valuation). The liability may be revalued to offset the right of use in the following cases: revision of the term of the contract; • modification linked to the valuation of • the reasonably certain nature (or not) of the exercise of apurchase option; change in the amount of payment • expected under the residual value guarantee awardedto the lessor; adjustment of rates or indices on which • variable rents are based, when the latter are modified. Leases mainly relate to property assets and the vehicle fleet. The accounting exemptions set out in the standard for the short-termcontracts (termbelow or equal to 12 months), and leases on low value assets, have been applied. The rental term is determined on a lease-by-lease basis and corresponds to

the firm period of the commitment, taking into account optional periods that are reasonably certain to be exercised, except for vehicles for which Econocom will retain the portfolio approach, through simplification, given that the contracts are somewhat similar irrespective of the country and that this simplification does not give rise to material differences with regard to the recommended method set forth in IFRS 16. vehicles, the assumptions and measurement methods of this “portfolio” approach are as follows: a measurement is done at each period end, making it possible to update the lease liability and right of use; amortisations and financial expenses are then determined on a flat-rate basis based on an average term of use of the vehicles (amortisation) and on the rental payments actually paid forthe difference. The Econocom group applied IFRS 16 according to the simplified retrospective approach, which means the impacts are recorded in the opening balance sheet at 1 January 2019. The discount rate applied on the date of transition is based on the Group’s incremental borrowing rate. For

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2020 annual report