Groupe Renault - 2019 Universal Registration Document

04

CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

impact of this consolidation adjustment is recognized via deferred taxes. In the cash flow statement, cash flows from operating activities are impacted by interest expenses paid, and cash flows from financing activities are impacted by the reimbursed lease liability. Lease payments on short-term leases (12 months or less) and leases of low-value assets are treated as operating expenses and amortized on a straight-line basis. The term of the lease is the non-cancellable period of a lease contract during which the lessee has the right to use the leased asset, extended by any renewal options the Group is reasonably certain to exercise. Improvements to leased buildings are depreciated over a duration that is equal to or shorter than the lease term used to estimate the lease liability. When a lease contract contains a purchase option the Group is reasonably certain to exercise, it is in substance a purchase rather than a lease. The corresponding liability is considered as a financial liability under IFRS 9, and the asset as a tangible asset in compliance with IAS 16. Provisions for repairs required contractually by lessors are recognized at the start of the lease, with a corresponding tangible asset. The Group is a party to leases of real estate property (land, concessions, warehouses, offices, etc.) and movable property (IT and operating equipment, transport equipment). Depreciation In the Automotive (excluding AVTOVAZ) segment and the Sales Financing segment, depreciation is calculated on a straight-line basis over the following estimated useful lives: Other tangible assets  (2) 4 to 6 years Buildings in use before 1987 are depreciated over a period of up to 40 years. (1) Except for leased batteries, which are depreciated over periods of 8 to 10 years (2) depending on the models. Useful lives are regularly reviewed, and accelerated depreciation is recorded when an asset’s useful life becomes shorter than the initially expected period of use, particularly when it is decided to withdraw a vehicle or component from the market. Depreciation for the AVTOVAZ segment is calculated on a straight-line basis over useful lives that may be longer than those used in other Groupe Renault companies. Buildings  (1) Specific tools 15 to 30 years 2 to 7 years 5 to 15 years 20 to 30 years Machinery and other tools (other than press lines) Press lines and stamping installations

Property, plant and equipment and 2 – L – right-of-use assets The gross value of property, plant and equipment corresponds to historical acquisition or production cost. Design and preparation expenses are included in the asset’s production cost. The production cost for property, plant and equipment also includes financing costs borne during the construction phase, under the same method as for intangible assets. When a project is financed through a specific borrowing, the capitalization rate is equal to the interest rate on the borrowing. Investment subsidies received are deducted from the gross value of the assets concerned. Subsequent expenses for property, plant and equipment, except those incurred to increase productivity or prolong the life of an asset, are charged to expenses as incurred. Assets leased to customers include vehicles leased for more than one year from a Group finance company with a buyback commitment by the Group, and vehicles sold under an agreement including a clause for buyback after a minimum one year of use. Assets leased to customers also include batteries leased to electric vehicle users by Group finance companies (note 2-G). Right-of-use assets The following policies are applied in the 2019 financial statements, which comply with the standards applicable at January 1, 2019. The 2018 financial statements were prepared under the previous accounting policies: assets used by the Group under finance leases were treated as assets financed by credit, with recognition of a financial liability (note 23-A). A contract contains a lease if it gives the lessee the right to use an identified asset for a specified period of time in exchange for payment. At the contract’s commencement date, a lessee recognizes an asset related to the right of use, and a financial liability that represents the lease obligation. The right-of-use asset is amortized over the term of the lease. The lease liability is initially recognized at the present value of lease payments over the expected term of the lease. The discount is unwound using the implicit interest rate of the lease agreement if it can be readily determined, or at the incremental borrowing rate otherwise. As lessee, the Group uses the incremental borrowing rate, calculated for each monetary zone as the risk-free rate applicable in the zone, plus the Group’s risk premium for the local currency. In the income statement, amortization of the right-of-use asset is recorded in the operating margin, and a financial expense corresponding to the interest on the lease liability is recorded in financial income and expenses, replacing the lease payments previously charged to the operating margin. The tax

360 GROUPE RENAULT I UNIVERSAL REGISTRATION DOCUMENT 2019

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