SOMFY - Annual financial report 2018

07 CONSOLIDATED FINANCIAL STATEMENTS

BUSINESS COMBINATIONS NOTE 2.3

the appropriate level of management must be committed to – a disposal plan; an active programme to locate a buyer and complete the – plan must have been initiated; the asset must be actively marketed for sale at a price that is – reasonable in relation to its current fair value; the disposal must be reliably expected to be completed – within 12 months from the reclassification of the assets as held for disposal or exchange; the actions required to complete the plan must indicate that – it is unlikely that significant changes will be made or that the plan will be withdrawn. Prior to their reclassification as “Assets held for sale”, the non-current asset or assets and liabilities of the disposal group are measured in accordance with their respective applicable standards. Following their reclassification as “Assets held for sale”, the non-current asset or group of assets is measured at the lower of its net book value and its fair value less costs to sell, an impairment loss being recognised where relevant. On reclassification of a non-current asset as held for sale, the depreciation/amortisation of this asset ceases. In the case of a disposal resulting in a loss of control, the assets and liabilities of the entire subsidiary are classified as assets and liabilities “held for sale” in the “Assets held for sale” and “Liabilities related to assets held for sale” balance sheet items, as soon as the disposal meets the classification criteria of IFRS 5. Pursuant to the application of IFRS 5: in the case of balance sheet items reclassified as assets and – liabilities held for sale, no adjustments are made to comparative figures for prior periods; income statement and cash flow statement items relating to – the individual assets held for sale are not restated. DISCONTINUED OPERATIONS A discontinued operation is a component of Group activities whose business and cash flows are clearly separate from the remainder of the Group and: represents either a separate major line of business or a – geographical area of operations; is part of a single coordinated plan to dispose of a separate – major line of business or geographical area of operations; or is a subsidiary acquired exclusively with a view to resale. – Classification as a discontinued operation takes place at the time of sale or earlier if the activity meets the criteria for classification as held for sale. When an activity is classified as a discontinued operation, the comparative statement of comprehensive income is restated as if the entity had met the criteria for classification as a discontinued operation from the start of the comparative period. New rules of governance have been adopted at Dooya (see Highlights) without involving any changes to the capital structure but consolidating the minority shareholder’s role with joint control over the company. Pursuant to IFRS 10 and 11, these changes resulted in Dooya being excluded from full consolidation and its consolidation under the equity accounting method at its fair value as determined by an independent expert.

When a company is incorporated in the consolidation scope, the identifiable assets, liabilities and contingent liabilities of the acquired entity are measured at fair value measured at the date of acquisition, except for non-current assets classified as assets held for sale, which are recognised at the fair value net of disposal costs. Goodwill is measured as the difference between total identifiable assets, liabilities and contingent liabilities of the acquired entity, individually estimated at fair value, and the transferred consideration (acquisition price) measured at fair value of the assets received. At the date of the acquisition and for each business combination, the Group can opt for the partial goodwill method (limited to the equity interest acquired by the Group) or for the full goodwill method. If it opts for the full goodwill method, minority interests are measured at fair value and the Group recognises goodwill on all identifiable assets and liabilities. Business combinations prior to 1 January 2010 have been treated in accordance with the partial goodwill method, which was the only method applicable until that date. In the case of a business combination achieved in stages, the previously held equity interest is remeasured at fair value at the date control is acquired. The difference between the fair value and the net book value of this investment is recognised directly in operating profit. Restatements of asset and liability values relating to acquisitions recognised on a provisional basis (due to expertise work in progress or supplementary analyses) are recognised as retrospective restatements of goodwill if they occur within 12 months following the acquisition date. Beyond this deadline, the impacts of restatements are directly recognised in profit or loss for the financial year, except for error corrections. In addition, earnout payments are included in the acquisition cost at their fair value at the acquisition date and regardless of their probability. During the valuation period, subsequent adjustments are offset against goodwill where they relate to facts and circumstances that existed at the acquisition date. If not, and after the end of this period, adjustments to earnout payments are recognised directly in the income statement, unless the earnout payments are offset against an equity instrument. Newly-acquired companies are consolidated from the date effective control is assumed.

OPERATIONS TREATED IN ACCORDANCE NOTE 2.4 WITH IFRS 5

ASSETS HELD FOR SALE Pursuant to IFRS 5 – Non-current assets held for sale, a non-current asset or asset group must be classified in the balance sheet as held for sale if its book value will be recovered principally through a sale transaction rather than through continuing use. Within the meaning of the standard, “sale” includes sales, distributions and exchanges against other assets. The non-current asset or asset group held for sale must be available for immediate sale in their present condition subject only to terms that are usual and customary for sales of such assets and their sale must be highly probable. For a sale to be regarded as highly probable, the following criteria must be met:

83

SOMFY – ANNUAL FINANCIAL REPORT 2018