GECINA - REFERENCE DOCUMENT 2017

CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated financial statements

Pursuant to the IFRIC 21 interpretation, the following taxes are recognized (and their potential reinvoicing at the same time) at one time in the first quarter of the current year: property taxes; ■ household garbage removal taxes; ■ office taxes. ■ Ordinary law tax treatment 3.5.3.12.2 For companies not eligible to the SIIC system, deferred taxes resulting from timing differences on taxation or deductions are calculated under the liability method on all timing differences existing in the individual accounts or deriving from consolidation adjustments or eliminations of internal profits and losses. This happens when the book value of an asset or liability is different from its tax value. A net deferred tax asset is only recognized on loss carry-forwards provided that it is likely that it can be charged against future taxable income. Deferred tax is determined using the principles and tax rates of the finance laws in effect at the balance sheet date that are likely to be applied when the various taxes involved crystallize. The same rule applies for assets held abroad. Deferred tax assets and liabilities 3.5.3.12.3 Deferred tax arises from temporary differences between the tax base of assets or liabilities and their carrying amounts. They particularly result from the fair value revaluation of investment buildings held by companies who did not opt for the SIIC regime or from the cost related to the adoption of this regime. Deferred tax assets are recognized in respect of tax loss carry-forwards if their future realization is likely. SIIC tax treatment 3.5.3.12.4 Opting for the SIIC system means an exit tax immediately falls due at the reduced rate of 19% on unrealized capital gains related to properties and investments in entities not subject to income tax. Profits subject to the SIIC system are tax-exempt subject to certain distribution conditions. However, for newly acquired companies, a deferred tax liability is calculated at a rate of 19% corresponding to the amount of exit tax that these companies have to pay when opting for the SIIC system, this option coming under the acquisition strategy. The discounting of the exit tax liability due to opting for the SIIC system is only recognized when considered material. Recognition of rental income (IAS 17) 3.5.3.13 Rent is recorded in the income statement when invoiced. However, pursuant to IAS 17, benefits granted to tenants in the commercial real estate sectors (mainly rent franchises and stepped rents) are amortized straight-line over the probable, firm period of the lease. Consequently, rents shown in the income statement differ from rents paid. At the sale of an asset, the balance of the receivable arising from the straight-line recognition of benefits granted to tenants (mostly rent franchises and stepped rents) is fully reversed and posted in gain or loss on disposal.

Works carried out on behalf of tenants are capitalized and are not deferred over the probable term of the lease according to IAS 17.

Lessee loan contracts 3.5.3.14 Financial lease contracts are rental financing contracts recognized in the asset side of the balance sheet (according to IFRS standard IAS 40, Investment properties), and the corresponding loans are shown as financial debts in the liabilities side of the balance sheet. Accordingly, the fees are eliminated and the interest expense for financing and the fair value of the asset are recognized in accordance with the Group accounting principles, as if the Group were the owner. In the case of the acquisition of a financial lease contract, if the discrepancy between the fair value of the related debt and its nominal value represents a liability because of more favorable market conditions on the day of the acquisition, it is recorded in the balance sheet as a financial liability. This financial liability is recognized in income over the term of the contract and fully cleared through gain or loss in disposal if the contract is sold. Financial lease contracts 3.5.3.15 In a financial lease contract, the lessor transfers all of the risks and benefits of the asset to the lessee. It is treated as financing granted to lessee for the purchase of a property. The current value of payments due under the contract, increased, as necessary, by the residual value is entered as a receivable. The net income of the transaction for the lessor or the lessee corresponds to the amount of interest on the loan. It is entered in the income statement under the heading “Fees, advance fees, other income”. The rents received are divided over the duration of the financing lease contract by recognizing them in capital amortization and interest such that the net income represents a constant rate of profit over the residual outstanding. The rate of interest used is the implicit rate of interest in the contract. To establish the Consolidated financial statements, the Group uses estimates and formulates judgments which are regularly updated and are based on historic data and other factors, especially forecasts of future events considered reasonable in the circumstances. The significant estimates made by the Group mainly concern: the measurement of the fair value of investment ■ properties; the measurement of the fair value of financial instruments; ■ the measurement of equity interests; ■ the measurement of provisions; ■ the measurement of employee benefit commitments ■ (pensions and share plans). Key estimates and accounting 3.5.3.16 judgments

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GECINA - REFERENCE DOCUMENT 2017