Groupe Renault - 2020 Universal Registration Document

365 GROUPE RENAULT I UNIVERSAL REGISTRATION DOCUMENT 2020 04 CONSOLIDATED FINANCIAL STATEMENTS GROUPE RENAULT GROUPE RENAULT: A COMPANY THAT ACTS RESPONSIBLY CORPORATE GOVERNANCE FINANCIAL STATEMENTS RENAULT AND ITS SHAREHOLDERS ANNUAL GENERAL MEETING OF RENAULT ON APRIL 23, 2021 ADDITIONAL INFORMATION Redeemable shares are listed subordinated debt instruments that earn a variable return indexed on consolidated revenues. They are carried at amortized cost, determined by discounting forecast coupons using the effective interest rate on borrowings. The estimated effective interest rate takes account of indexation, and the amortized cost recorded in financial result is re-estimated when there is a significant change in future sales prospects, particularly when medium-term business plans are released. Financial liabilities not concerned by specific hedge accounting methods (note 2-X) are generally recorded at amortized cost using the effective interest rate method. financial expense calculated in this way includes issuance expenses and issuance or redemption premiums, together with the impact of debt renegotiations when the old and new terms are not substantially different. Derivatives and hedge accounting 2 - X - Measurement and presentation Derivatives are initially stated at fair value. This fair value is subsequently reviewed at each closing date: the fair value of forward exchange contracts and currency swaps is P determined by discounting future cash flows, using closing-date market rates (exchange and interest rates); the fair value of interest rate derivatives is the amount the Group P would receive (or pay) to settle outstanding contracts at the closing date, taking into account interest rates forward curves and the quality of the counterparty to each contract at the closing date. This fair value includes accrued interest; the fair value of commodity derivatives is based on market P conditions. The Automotive segments’ derivatives are reported in the financial position as current if they mature within 12 months and non-current otherwise. All Sales Financing segment derivatives are reported in the financial position as current. Hedge accounting The treatment of derivatives designated as hedging instruments depends on the type of hedging relationship: fair value hedge; P cash flow hedge; P hedge of a net investment in a foreign operation. P The Group identifies the hedging instrument and the hedged item as soon as the hedge is set up, and documents the hedging relationship, stating the hedging strategy, the risk hedged and the method used to assess the hedge’s effectiveness. The Sales Financing segment documents hedging relationships concerning one or more homogeneous items to cover its risks. This documentation is subsequently updated such that the effectiveness of the designated hedge can be demonstrated. Hedge accounting uses specific measurement and recognition methods for each category of hedge: fair value hedges: the hedged item is adjusted to fair value up to P the risk hedged and the hedging instrument is recorded at fair value. As changes in these items are recorded in the income statement simultaneously, only the ineffective portion of the hedge has an impact on net income. It is recorded in the same income statement item as changes in the fair value of the hedged item and the hedging instrument; cash flow hedges: no adjustment is made to the value of the P hedged item; only the hedging instrument is adjusted to fair value. Following this adjustment, the effective portion of the change in fair value attributable to the hedged risk is recorded, net of taxes, in other components of comprehensive income, while the ineffective portion is included in net income. The cumulative amount included in shareholders’ equity is transferred to the income statement when the hedged item has an impact on net income; hedge of a net investment in a foreign operation: the hedging P instrument is adjusted to fair value. Following this adjustment, the effective portion of the change in fair value attributable to the hedged exchange risk is recorded, net of taxes, in other components of comprehensive income, while the ineffective portion is included in net income. The cumulative amount included in shareholders’ equity is transferred to net income at the date of liquidation or sale of the investment. The interest rate component of borrowings in yen used to hedge the investment in Nissan is considered as the ineffective portion, and is therefore recorded directly in financial income and expenses. Derivatives not designated as hedges Changes in the fair value of derivatives not designated as hedges are recognized directly in financial income, except in the case of derivatives entered into exclusively for reasons closely related to business operations. In this case, changes in the fair value of derivatives are included in the operating income (operating margin in the information by operating segment).