TELEPERFORMANCE_Registration_document_2017

CONSOLIDATED FINANCIAL STATEMENTS

7.6 Notes to the consolidated financial statements

G. Financial assets and liabilities

NOTE G.1 Accounting policies and methods

G.1.1 Financial assets Current and non-current financial assets comprise the following: ■ loans and receivables measured at amortized cost: this category principally includes advances to staff and guarantee deposits paid mainly in the context of commercial property leases. On initial recognition, these loans and receivables are stated at fair value plus directly attributable costs; at each reporting date, these assets are measured at amortized cost; ■ derivative financial instruments used to hedge exposure to foreign exchange and interest rate risks, measured at fair value at each reporting date; ■ net asset warranties obtained as part of an acquisition: when the warranty relates to a specific asset or liability of the target entity at the date of a business combination, it is recognized separately from goodwill and is measured using the same method as the item being warranted. G.1.2 Financial liabilities Non-current financial liabilities include loan transactions with banks or other financial institutions, bond issues and liabilities to certain minority interests. Current financial liabilities comprise similar transactions as those described above but with settlement expected within one year. Borrowings are recognized initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest- bearing borrowings are stated at amortized cost, with any difference between cost and redemption value being recognized in profit or loss over the period of the borrowings on an effective interest rate basis. Debt issuance costs are initially recorded as a reduction of the corresponding loan, and subsequently taken into account in calculating the effective interest rate and recognized in the income statement over the period of the loan. G.1.3 Cash and cash equivalents Cash and cash equivalents comprise cash balances, demand deposits and investments in mutual funds made with a short- term objective, measured at fair value, with changes in fair value recognized in the statement of income. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows, but are classified in the statement of financial position as Other current financial liabilities.

G.1.4 Financial income and expenses Financial income comprises interest receivable on funds invested, dividend income, fair value increases in financial assets at fair value through profit or loss and foreign exchange gains. Profits on hedging instruments covering revenues are recognized in operating profit. Interest income is recognized in profit or loss as it accrues, using the effective interest rate method. Dividends are recognized as soon as the Group acquires the right to receive the payment, i.e ., in the case of listed shares, on the ex-dividend date. Financial expenses comprise interest payable on borrowings, the effect of the unwinding of discounted provisions, foreign exchange losses, decreases in fair value of financial assets at fair value through profit or loss, and impairment losses recognized in respect of financial assets. All costs related to borrowings are recognized in profit or loss using the effective interest rate method. In the event that a loan may be reimbursed by anticipation, the probable residual duration of the loan is estimated at each reporting date and used to spread the any issue expenses under the effective interest rate method. G.1.5 Derivative financial instruments The Group uses derivative financial instruments to reduce its exposure to foreign exchange and interest rate risks arising from its activities. From time to time, the Group may use derivative financial instruments, contracted with high-grade financial institutions to reduce counterparty risk. Financial instruments used to hedge the fair value of financial borrowings are recognized as financial liabilities. Financial instruments used to hedge other transactions are recognized as other current or non-current assets and liabilities, depending on their maturity and accounting classification. They are measured at fair value at the date of transaction. Changes in the fair value of the instruments are recognized in profit or loss, except for cash flow hedges. The Group applies hedge accounting when the hedging relationship has been identified, formalized and documented from its inception, and that it has been shown to be effective. The accounting treatment of these financial instruments depends on the category into which they fall: ■ cash flow hedges: the effective portion is recognized through equity. The amounts recognized in equity are reclassified to profit or loss when the hedged items affect profit or loss, either in operating profit when they concern the cover of a commercial transaction or in financial result when they cover a financial operation. The ineffective portion of changes in fair value of cash flow hedges is recognized in profit or loss as financial income or expense; ■ fair value hedges: they are recognized in financial result.

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Teleperformance bb - bb Registration documentbb 2017