Econocom - 2020 annual report

06 consolidated financial statements

notes to the consolidated financial statements

Full derecognition When a financial asset is derecognised in full, a gain or loss on disposal is recorded in the income statement for the difference between the book value of the asset and the consideration received or receivable, adjusted where necessary for any gains or losses recognised in other comprehensive income and accumulatedin equity. Partial derecognition When a financial asset is partially derecognised, the Group allocates the previous book value of the financial asset between the part that continues to be recognised in connection with the Group’s continuing involvement and the part that is derecognised, based on the relative fair values of those parts on the date of the transfer. The difference between the book value allocated to the part derecognisedand the sumof the considerationreceived for the part derecognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income, is recognised in profit or loss. A cumulative gain or loss carried in other comprehensive income is allocated between the part that continues to be recognisedand the part that is derecognised, based on the relative fair values of those parts. Factoring liabilities Certain subsidiaries of Econocomgroup use factoring to diversify financing sources and reduce credit risk. Factoringwith contractual subrogation involves the transfer of

ownership of trade receivables and all associated rights to the factor. This means transfer of the right to receivecash flows. As required under IFRS 9 “Financial instruments:Recognitionand Measurement”, these receivables are derecognised when substantially all the risks and rewards of ownership are transferred to the factor. Where this is not the case they are maintained in the balance sheet after the transfer and a financial liability is recordedas an offsetting entryfor the cashreceived. Reverse factoring Reverse factoring is a transactionfor the sale of trade receivables to a factor, organised by the debtor company of the receivables. Reverse factoring agreements involve three partieswho sign two contracts: a contract for the assignment of receivables between the supplier and the factor and an agreement between the factor and the customer who undertakes to pay the invoices assigned by the supplierto the factor. Under IFRS 9, the debt is not extinguished if it is not legally extinguished and its terms and conditions are not substantially modified. In this case, the debt remains classified as trade payables. In light of these provisions of the standard and the characteristics of the contracts, the Group analyses and makes a judgment on the accounting process for reverse factoring transactions.

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2020 annual report