Saint-Gobain // Universal Registration Document 2021

8

Financial and accounting information 2021 Consolidated Financial Statements

Information concerning the Group’s operating activities NOTE 5

5.1 Revenue recognition 5.1.1

Income statement items

various targets over a given period. In this case, judgment is required based on historical data, past performance and future trends in order to determine the discount to be recognized in the income statement. Such judgment is exercised in a prudent manner and consistently from one period to the next. 5.1.3 Business income Business income includes all income and expenses other than financial income and expense, the Group’s share in net income of non-core business equity-accounted companies, and income taxes. Business income is detailed by type below:

Revenue generated by the sale of goods or services is recognized net of rebates, discounts and sales taxes when control of the goods or services has been transferred to the customer. Revenue generated by the sale of goods is primarily recognized at the time the goods are delivered. Revenue generated by the sale of services is recognized when the services have been rendered, or based on the stage of completion of the services, as calculated based on costs incurred. Similarly, within the Distribution entities, estimated returns are recognized as a deduction from revenue (sales) and reclassified within inventories for their net carrying amount, since there is a possibility that goods will be returned within the allotted timeframe. A liability relating to future refunds for goods returned is also recognized. Revenue generated under construction contracts is accounted for by the Group’s companies on a percentage-of-completion basis, as calculated based on costs incurred. The related costs are expensed as incurred. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized to the extent of contract costs incurred that it is probable will be recovered. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognized as an expense immediately. Construction contract revenues are not material in relation to total consolidated sales. Operating income 5.1.2 Operating income is a measure of the performance of the Group’s different reporting segments and has been used by the Group as its key external and internal management indicator for many years. Foreign exchange gains and losses are included in operating income, as are changes in the fair value of financial instruments that do not qualify for hedge accounting when they relate to operating items. The share of income of core business equity-accounted companies is also posted under operating income. Supplier discounts granted to entities in the Distribution business are included in operating income as a reduction of cost of sales. Contractual supplier discounts are customary practice in the industrial goods distribution sector. These discounts are mostly calculated by applying a contractually guaranteed rate by product type to volumes purchased. The calculation is made automatically, based on the supplier invoices. Consequently, little judgment is needed when determining the amounts to be recognized in the income statement for these discounts. Other discounts are calculated based on a step mechanism linked to specified targets, whereby the percentage discount increases as the entity achieves the

2021

2020

(in EUR millions)

SALES

44,160 38,128

Personnel expenses: Salaries and payroll taxes (1) Share-based payments (2) Pensions and employee benefit obligations (2)

(8,296)

(7,625)

(76)

(45)

(249)

(222)

Depreciation and amortization of property, plant and equipment, intangible assets and right-of-use assets (3) Share in net income of core business equity-accounted companies

(1,934)

(1,902)

52

13

Other (4)

(29,150) (25,492) 4,507 2,855

OPERATING INCOME Other business income Other business expense (3)

176

88

(747) (1,511) OTHER BUSINESS INCOME AND EXPENSE (571) (1,423) BUSINESS INCOME (EXPENSE) 3,936 1,432 The year-on-year increase in salaries and payroll taxes in 2021 is (1) attributable to the upsurge in trading during the period, whereas this item was lower in 2020 owing to the use of furlough schemes in response to the Covid-19 pandemic. Share-based payments (IFRS 2 expense) and changes in employee (2) benefit expenses are detailed in note 6 “Employees, personnel expenses and employee benefit obligations”. Total depreciation and amortization of property, plant and (3) equipment, intangible assets and right-of-use assets, along with amortization charged against intangible assets within the scope of purchase price accounting (PPA), represented €1,986 million in 2021 versus €1,948 million in 2020. The “Other” operating income line relates to cost of sales, supplier (4) discounts and selling expenses for Distribution entities, and to transport costs, raw materials costs, and other production costs for the other entities. This item also includes research and development costs recorded under operating expenses, amounting to €447 million in 2021 (2020: €429 million).

SAINT-GOBAIN UNIVERSAL REGISTRATION DOCUMENT 2021 290

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