RUBIS - 2019 Universal Registration Document

8 FINANCIAL STATEMENTS - 2019 Consolidated financial statements and notes

4.5 FINANCIAL ASSETS

ACCOUNTING POLICIES Financial assets are recognized and measured in accordance with IFRS 9 “Financial Instruments”, which replaces IAS 39 “Financial Instruments: Recognition and Measurement”. Classification and measurement Financial assets are recognized in the Group balance sheet when the Group is a party to the instrument’s contractual provisions. The classification proposed by IFRS 9 determines how assets are accounted for and the method used to measure them. Financial assets are classified based on 2 cumulative criteria: the management model applied to the asset and the characteristics of its contractual cash flows. Based on the combined analysis of the 2 criteria, IFRS 9 distinguishes between 3 categories of financial assets, which are specific to each category: • financial assets at amortized cost as of the closing date; • financial assets at fair value through other comprehensive income; • financial assets at fair value through profit or loss. Financial assets at amortized cost mainly include bonds and negotiable debt securities, loans and receivables. Financial assets at fair value through other comprehensive income mainly include equity securities, previously classified as available-for-sale securities. Financial assets at fair value through profit or loss include cash, Sicav and other funds. The Group used the fair value hierarchy in IFRS 7 to determine the classification level of the financial assets: • Level 1: quoted prices in active markets for identical assets or liabilities; • Level 2: use of data other than the quoted prices listed in level 1, which are observable for the assets or liabilities in question, either directly or indirectly; • Level 3: use of data relating to the asset or liability which are not based on observable market data. Impairment of financial assets IFRS 9 introduces an impairment model based on expected losses. This model does not have a material impact on the estimate of the risk of impairment of financial assets. Measurement and recognition of derivative instruments The Group uses derivative financial instruments to manage its exposure to fluctuations in interest rates, foreign exchange rates and raw material prices. The Group’s hedging policy includes the use of swaps. It may also use caps, floors, and options. The derivative instruments used by the Group are valued at their fair value. Unless otherwise specified below, changes in the fair value of derivatives are always recorded in the income statement. Derivative instruments may be designated as hedging instruments in a fair value or future cash flow hedging relationship: • a fair value hedge protects the Group against the risk of changes in the value of any asset or liability, resulting from foreign exchange rate fluctuations; • a future cash flow hedge protects the Group against changes in the value of future cash flows relating to existing or future assets or liabilities. The Group only applies cash flow hedges. Hedge accounting is applicable if: • the hedging relationship is clearly defined and documented at the date it is set up; • the hedging relationship’s effectiveness is demonstrated from the outset and throughout its duration. As a consequence of the use of hedge accounting of cash flows, the effective portion of the change in fair value of the hedging instrument is recorded directly in other comprehensive income. The change in value of the ineffective portion is recorded in the income statement under “Other financial income and expenses”. The amounts recorded in other comprehensive income are recycled in the income statement during the periods when the hedged cash flows impact profit and loss.

238 i Rubis 2019 Universal Registration Document