Groupe Renault - 2019 Universal Registration Document

04

CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

be held for a certain period. The share price volatility factor applied is implicit volatility at the grant date. The expected dividend used is determined by reference to the dividend payout schedule announced at the time each plan is valued. The total fair value calculated in this way is spread on a straight-line basis over the vesting period for the relevant plan. The cost is included in personnel expenses, with a corresponding adjustment to consolidated reserves. When the option is exercised, the cash amount received by the Group in settlement of the exercise price is booked in cash and cash equivalents, with a corresponding adjustment to consolidated reserves. Pensions and other long-term employee 2 – S – benefit obligations The Group’s payments for defined-contribution benefit plans are recorded as expenses for the relevant period. For defined-benefit plans concerning post-employment benefits, the Group uses the Projected Unit Credit Method to determine the present value of its obligations. Under this method, benefits are attributed to periods of service according to the plan’s benefit formula, principally on a straight-line basis over the years of service. The future payments for employee benefits are measured on the basis of future salary increases, retirement age, mortality and length of employment with the Company, and are discounted at a rate determined by reference to yields on long-term high-quality corporate bonds of a duration corresponding to the estimated average duration of the benefit plan concerned. The actuarial gains and losses resulting from revisions of the underlying assumptions and experience-based adjustments are included in other components of comprehensive income. The net expense for the year, corresponding to the current period service cost plus the past service cost where relevant, is charged to the operating margin. The interest expense on the net defined-benefit liability (asset) is recorded in the net financial income and expenses. Workforce adjustment measures 2 – T – The estimated cost of workforce adjustment measures, which for accounting purposes is treated as an employee benefit, is covered by a provision over the estimated residual employment period of the employees concerned. The estimated cost of termination indemnities is recognized as soon as a detailed plan has either been announced or is in progress. Financial assets 2 – U – The Group recognizes a financial asset when it becomes a party to the contractual provisions of a financial instrument. Financial assets comprise investments in non-controlled companies in which Renault does not exercise significant influence, marketable securities, negotiable debt instruments, loans, and derivative assets related to financial transactions (note 2-X).

Inventories 2 – O – Inventories are stated at the lower of cost or net realizable value. Cost corresponds to acquisition cost or production cost, which includes direct and indirect production expenses, a share of manufacturing overheads based on a normal level of activity and the results of any related hedges. The normal level of activity is assessed site by site, in order to determine the share of fixed costs to be excluded in the event of below-normal activity. Inventories of the Automotive (excluding AVTOVAZ) segment and the Sales Financing segment are valued under the FIFO (First In First Out) method. Inventories of AVTOVAZ are valued at weighted average cost. When the net realizable value is lower than the financial position value, impairment equal to the difference is recorded. Assignment of receivables 2 – P – Receivables assigned to third parties (through securitization, discounting, or factoring) are removed from Group assets when the associated risks and benefits are also substantially transferred to the third parties in question. The same treatment applies to assignments between the Automotive (excluding AVTOVAZ) and Sales Financing segments. Treasury shares 2 – Q – Treasury shares are shares held for the purposes of stock-option plans, performance share plans and other share-based payment arrangements awarded to Group managers and executives. They are recorded at acquisition cost and deducted from Group shareholders’ equity until the date of sale. When these shares are sold, the sale price is directly included in consolidated shareholders’ equity. Consequently, no gain or loss on treasury shares is included in the net income for the period. Stock-option plans/Performance share 2 – R – attribution plans and other share-based payments agreements The Group awards stock-option plans, performance share attribution plans and other share-based payments, all for Renault shares. The grant date is the date at which beneficiaries are informed of the decision to grant these options or performance shares, and the terms of the relevant plans. For plans subject to performance conditions, an estimate of achievement of those conditions is taken into account in determining the number of options or shares attributed. This estimate is reviewed annually based on changes in the probability of performance condition achievement. The final fair value of services rendered in return for attribution of options or shares is measured by reference to the fair value of those options or shares at their grant date, using a suitable binomial mathematical model that assumes exercise of the options is spread over the exercise period on a straight-line basis. Entitlements to attribution of performance shares are valued based on the share value at grant date less dividends expected during the vesting period. Where relevant, a discount is applied to reflect the fact that the shares must

362 GROUPE RENAULT I UNIVERSAL REGISTRATION DOCUMENT 2019

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