SOMFY_ANNUAL_FINANCIAL_REPORT_2017

07 CONSOLIDATED FINANCIAL STATEMENTS

FINANCIAL ITEMS NOTE 7 — NET FINANCIAL INCOME/(EXPENSE) NOTE 7.1

Financial assets are initially recognised at historical cost, which corresponds to the fair value of the purchase price, increased by acquisition costs, with the exception of assets measured at fair value by way of the income statement, whose acquisition costs are recognised in the income statement. ASSETS HELD TO MATURITY These solely comprise fixed income securities purchased with the intent of holding them until maturity. They are measured at amortised cost using the effective interest rate method. Amortised cost is measured by taking into account any discount received or premium paid at acquisition, over the period running from the acquisition to the maturity date. Profits and losses are recognised in the income statement when assets are derecognised or their value is impaired. The same applies to writedown charges. The Group does not own any assets of this type to date. ASSETS MEASURED AT FAIR VALUE BY WAY OF THE INCOME STATEMENT These represent assets held for transaction purposes, meaning assets acquired by the company with a view to dispose of them in the short term. They are measured at fair value and fair value variances are recognised in the income statement. In particular, marketable securities complying with the definition of financial assets held for transaction purposes are measured at fair value at year-end and recognised as current financial assets. Fair value variances are recognised in the income statement. ASSETS AVAILABLE FOR SALE Group investments in companies over which it neither has control, nor significant influence, nor joint control, are recognised as financial assets available for sale in accordance with IAS 39. These assets are measured at fair value at the balance sheet date with changes in their fair value recorded in items of other comprehensive income and accumulated in the fair value reserve of shareholders’ equity, with the exception of losses in value. Amounts thus accumulated in equity are reclassified to the income statement on the derecognition of the assets. Corresponding dividends are recognised in financial income in the year they are paid. If the fair value of these assets available for sale happens to be lower than the acquisition cost, a provision for writedown is established and recognised in the income statement when there is an objective indication that the value of these assets available for sale may be impaired. Financial assets available for sale are classified as non-current financial assets, except for those with a maturity date of less than 12 months at year-end, which are classified as current financial assets. LOANS AND RECEIVABLES Loans and receivables correspond to deposits and guarantees and other non-current receivables, trade receivables, certain other current receivables and cash and cash equivalents not classified as assets held for trading (term deposits). They are measured at amortised cost using the effective interest rate method. Long-term loans and receivables, non-interest bearing or bearing a lower interest rate than market interest rate, are discounted if amounts are significant. Potential impairment losses are recognised in the income statement. In addition, writedown charges are established when there is an objective indication that the value of the asset may have been impaired as a result of an event arising after its initial recognition. This account primarily comprises guarantees and deposits paid to various lenders.

Net financial income/(expense) comprises the following two items: Net cost of financial debt – Includes all income/expense from net financial debt or cash surplus constituents over the period, including income/loss on interest rate hedges. Other financial income and expenses – These include income and expenses of a financial nature but neither of an operational nature nor a constituent of the cost of net financial debt.

€ thousands

31/12/17

31/12/16

Cost of net financial debt Financial income from – investments

–1,454

–845

1,631

1,980

Financial expenses –

–3,085

–2,825

related to borrowings

Effect of foreign currency translation

–7,371

3,233

Other

2,967

–4,505

NET FINANCIAL EXPENSE –2,117 Net financial expense was €5.9 million for the year to 31 December 2017, compared with a net expense of €2.1 million for the year to 31 December 2016. Restated for non-recurring items (€2.4 million reversal of provision on Garen financial assets), net financial expense for the year to 31 December 2017 was €8.3 million. Likewise, net financial expense to the end of December 2016 was €3.5 million if restated for the exchange gain of €0.3 million on the exit from Giga and the €1.1 million reversal of the provision on Garen financial assets. The deterioration in restated net financial expense between December 2016 and December 2017 was mainly due to unrealised exchange impacts on foreign currency denominated receivables and liabilities (BRL, TRY and USD in particular). The mandatory application of IFRS 9 – Financial Instruments from 1 January 2018, and the challenges that this standard poses to the Group are detailed in note 1.4.2. The Group did not opt for the early application of IFRS 9 in its 2017 consolidated financial statements. Financial assets Note 7.2.1 Financial assets are classified in the following categories according to their nature and purpose of ownership: assets held to maturity; – assets measured at fair value by way of the income – statement; –5,857 FINANCIAL ASSETS AND LIABILITIES NOTE 7.2

assets available for sale; – loans and receivables. –

95

SOMFY – ANNUAL FINANCIAL REPORT 2017