Groupe Renault - 2020 Universal Registration Document

358 GROUPE RENAULT I UNIVERSAL REGISTRATION DOCUMENT 2020 Find out more at group.renault.com 04 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS included in the Automotive (excluding AVTOVAZ) segment’s financial income. The indicator used to evaluate segment performance is the operating margin. Apart from taxes and the associates’ share in net income, income and expenses relating to Sales Financing are recorded as operating items. The tax effect inherent to the French consolidated taxation system is included in the tax expense of the Automotive (excluding AVTOVAZ) segment. Assets and liabilities are specific to each segment. Receivables assigned by the Automotive segments to the Sales Financing companies are treated as operating assets by the assignee when the risks and benefits are substantially transferred. These receivables are mostly receivables on the dealership network. Vehicles and batteries for which the Automotive (excluding AVTOVAZ) segment has a repurchase commitment are included in the segment’s assets. When these assets are financed by the Sales Financing segment, the Sales Financing segment recognizes a receivable on the Automotive (excluding AVTOVAZ) segment. Current and non-current assets and liabilities Sales Financing receivables, other securities, derivatives, loans and financial liabilities of the Sales Financing segment (other than redeemable shares and subordinated loans) are considered as current assets and liabilities, because they are used in this operating segment’s normal business cycle. For the Automotive segments, in addition to items directly related to the business cycle, all assets and liabilities maturing within one year are classified as current. Translation of the financial statements of 2 - E - foreign companies The Group’s presentation currency is the euro. For foreign companies, the functional currency is generally the local currency. In cases where most transactions are carried out in a different currency, that is adopted as the functional currency. Foreign companies’ accounts are established in their functional currency, and subsequently translated into the Group’s presentation currency as follows: financial position items other than components of shareholders’ P equity, which are stated at historical value, are translated at the closing exchange rate; income statement items are translated at the average exchange P rate for the period; the translation adjustment is one of the other components of P comprehensive income, and therefore has no impact on net income. Goodwill generated by a business combination with a foreign company is treated as an asset or liability of the entity acquired, as appropriate. It is therefore expressed in the relevant entity’s functional currency, and translated into euros at the closing rate. When a foreign company is sold, the accumulated translation adjustments on its assets and liabilities are transferred to other operating income and expenses in the income statement. In an exception to the above principles, the financial statements of entities in hyperinflationary economies are translated in accordance with IAS 29 “Financial reporting in hyperinflationary economies”. Non-monetary balance sheet items, income statement items, comprehensive income items and cash flow statement items are adjusted for inflation in their original local currency, then all the financial statements are translated at the closing exchange rate for the period. This hyperinflationary accounting leads to recognition of a gain or loss resulting from exposure to hyperinflation, which is classified as other financial income and expenses and thus included in reserves the following year. The effects of index-based restatement and translation of the equity of subsidiaries in Argentina are all included in the translation adjustment in other components of comprehensive income, since restatement based on price indexes is correlated with movements in the exchange rate between the Argentinian peso and the euro, and mitigates the effect of the peso’s devaluation. To determine whether a country is in hyperinflation, the Group refers to the list published by the International Practices Task Force (IPTF) of the Center for Audit Quality. The financial statements of the Group’s subsidiaries in Argentina are consolidated in accordance with the principles of IAS 29, which are applied from January 1, 2018. As operations in Iran are no longer consolidated, the Group has no other subsidiary in countries on the IPTF list. Translation of foreign currency transactions 2 - F - Transactions undertaken in a currency other than the functional currency of the entity concerned are initially translated to and recorded in the functional currency, using the rate applicable at the transaction date. For financial reporting purposes, monetary assets and liabilities in currencies other than the functional currency are translated at the closing rate. All resulting foreign exchange differences are recognized in the income statement, except for foreign exchange gains and losses on financial instruments designated as hedges of a net investment in a foreign entity (note 2-X). The following impacts are therefore recorded in net income: translation adjustments related to financial operations by the P Automotive segments are included in the net financial income; other translation adjustments are included in the operating P income (operating margin in the information by operating segment). Derivatives are measured and recorded as described in note 2-X. Revenues and margin 2 - G - Revenues comprise all proceeds from sales of the Group’s automotive goods, services related to these sales, and the various Sales Financing products marketed by the Group’s companies to their customers.